Recently, United States District Judge Jose L. Linares agreed to set aside a default judgment in a suit against Rubin & Rothman LLP. The judgment was entered in December after the firm failed to meet the deadline to respond to the summons and complaint. However, in February the firm urged the New Jersey District Court to set aside the entry of default and dismiss the suit.
The suit began in November 2015 and was brought by plaintiff, Richard Dickon. Dickon alleged that Rubin & Rothman LLP engaged in illegal debt collection practices on behalf of Toyota’s auto lending arm. He claimed that the firm filed “hundreds” of lawsuits annually and employing aggressive and abusive tactics to collect on the debts owed to Toyota. Additionally, he alleged that the firm tricked him into believing that the creditor pursuing his debt was incurring legal expenses and that he would responsible for such fees and other attorney-related expenses. Dickson proposed a class consisting of “all consumer in New Jersey to whom the firm mailed a letter attempting to collect a debt, in which the communication failed to state the amount of debt or that it was accruing late charges and potential attorneys’ fees.”
Under Rule 55 of the Federal Rules of Civil Procedure, a court may set aside an entry of default for “good cause.” As cited by the court in its opinion, when considering a motion to vacate an entry of default the courts must consider (1) whether the plaintiff will be prejudiced; (2) whether the defendant has a meritorious defense; and (3) whether the default was the result of the defendant’s culpable conduct. The court found that Dickon would not be prejudiced by the court’s decision to set aside the judgment and resolve the suit on its merits. The court found that the first prong was satisfied because the plaintiff did not suggest that his ability to pursue his claims would be hindered by the court’s decision to set aside the judgment. Additionally, the defendant was found to have satisfied the second prong and sufficiently argued that it could present evidence of a meritorious defense to the Plaintiff’s claims. In particular the defendant asserted that it would be able to show that the demand letter sent to the Plaintiff was reviewed by an attorney and that the firm did not violate the Fair Debt Collection Practices Act.
As to the third prong, the court found that Rubin & Rothman LLLP reasonably believed that plaintiff, Richard Dickon, lacked standing to bring suit because of his filing for Chapter 7 bankruptcy. According to 11 U.S.C § 323(a), once a debtor files for Chapter 7 bankruptcy, a trustee is appointed as a representative of the debtor’s estate. Essentially, filing for Chapter 7 bankruptcy disallows debtors from pursuing such litigation in their own right. Therefore, the court held that, while the defendant should have presented such an argument before it filed its motion in February, it reasonably believed that Plaintiff lacked standing to sue in this case.