JDH Unlimited Inc v. Koehler ( 2023 )

22-1721-cv
JDH Unlimited Inc v. Koehler
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 27th day of September two thousand twenty-three.
PRESENT: JOSEPH F. BIANCO,
BETH ROBINSON,
ALISON J. NATHAN,
Circuit Judges.
JDH Unlimited Inc,
Plaintiff-Appellee,
v. 22-1721-cv
Jessica Rose Koehler,
Defendant-Appellant
APKZ Medical Inc., Western Med Supplies LLC,
Check Shih Shen,
Defendants.
FOR PLAINTIFF-APPELLEE: TOMAS R. DOMINCZYK, Maurice
Wutscher, LLP, Flemington, NJ.
FOR DEFENDANT-APPELLANT: SCOTT A. KORENBAUM, ESQ., New York,
NY.
Appeal from the judgment of the United States District Court for the Eastern District of
New York (Kuntz, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is VACATED, and the action is REMANDED
for further proceedings consistent with this order.
Defendant-appellant Jessica Rose Koehler (“Koehler”) appeals from the district court’s
grant of a default judgment, entered on February 1, 2022, to plaintiff-appellee JDH Unlimited, Inc.
(“JDH”) against Koehler, APKZ Medical Inc., Western Med Supplies LLC, and Check Shih Shen
(collectively, “the defendants”) in the sum of $475,870.85. We assume the parties’ familiarity
with the facts, procedural history, and issues on appeal, to which we refer only as necessary to
explain our decision.
On June 2, 2021, JDH commenced this action against the defendants, asserting claims for
fraud, breach of contract, conversion, and unjust enrichment. These claims arise from the
defendants’ alleged failure to return funds to JDH after a contract regarding the supply of nitrile
gloves was cancelled. Koehler was personally served with the complaint on July 8, 2021. Each
of the other defendants was served on or before July 30, 2021. By September 24, 2021, none of
the defendants had appeared in the action, and the clerk made an entry of default, pursuant to
Federal Rule of Civil Procedure 55(a). Two weeks later, JDH moved for a default judgment. The
district court scheduled a hearing on the default judgment for February 1, 2022. On that date, after
the defendants did not appear at the scheduled hearing, the district court entered the default
judgment, which awarded JDH the sum of $475,870.85 against the defendants.
On July 6, 2022, Koehler filed a proposed order to show cause requiring JDH to show
cause as to why the default judgment entered against her should not be vacated, pursuant to Federal
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Rule of Civil Procedure 60(b). Koehler argued that: (1) the district court lacked personal
jurisdiction, thus the default judgment was void; and (2) because her failure to appear was not
willful, she had a meritorious defense, and JDH would not be prejudiced by vacatur, the default
judgment was voidable. In an affidavit attached to her motion, Koehler stated that her “only
connection with this lawsuit is through [her] status as ex-girlfriend of defendant [Chek Shin Shen]”
and that it was her understanding that her ex-boyfriend’s attorney was representing her. Joint
App’x at 28. She further reported that $45,982.20 had been garnished from her bank account.
One week later, without any response from JDH, the district court denied—by docket entry
without any explanation—Koehler’s motion to vacate the default judgment. Koehler appealed.
On appeal, Koehler presents the same arguments that she made below, namely: (1) the
default judgment is void because the district court lacked personal jurisdiction; and (2) that the
district court abused its discretion in denying her motion for vacatur under Rule 60(b) because she
had established good cause to vacate the judgment. As set forth below, we conclude that the
district court’s failure to provide any reasoning to support its denial of Koehler’s motion to vacate
was an abuse of discretion that requires remand. 1
Federal Rule of Civil Procedure 55(c) provides that “[t]he court may set aside an entry of
default for good cause, and it may set aside a final default judgment under Rule 60(b).” In turn,
Rule 60(b) allows a district court to vacate a judgment for any of the following reasons:
(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered
evidence . . . ; (3) fraud . . . , misrepresentation, or misconduct by an opposing party;
(4) the judgment is void; (5) the judgment has been satisfied, released, or
discharged; it is based on an earlier judgment that has been reversed or vacated; or
1
Because we conclude that the district court failed to provide an adequate explanation for its denial of
Koehler’s motion to vacate the default judgment, we do not reach Koehler’s argument that the default
judgment is void for lack of personal jurisdiction or her challenge to the district court’s initial decision to
enter the default judgment in the alleged absence of such jurisdiction.
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applying it prospectively is no longer equitable; or (6) any other reason that justifies
relief.
Fed. R. Civ. P. 60(b). Where the appeal is from an order denying Rule 60(b) relief, we review
only the denial of that motion, not the merits of the underlying default judgment. Transaero, Inc.
v. La Fuerza Area Boliviana, 24 F.3d 457, 459 (2d Cir. 1994), as amended on reh’g in part, 38
F.3d 648 (2d Cir. 1994).
Our review of a district court’s denial of a motion to vacate a default judgment is for abuse
of discretion. State St. Bank & Tr. Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 166 (2d
Cir. 2004). Nevertheless, “we have expressed a strong preference for resolving disputes on the
merits.” New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005) (internal quotation marks omitted).
Thus, when a district court denies a motion to vacate a default judgment, “we may reverse” the
district court’s exercise of its discretion “even where the abuse of discretion is not glaring.” Brien
v. Kullman Indus., Inc., 71 F.3d 1073, 1077 (2d Cir. 1995). We have emphasized that “dismissal
is a harsh remedy to be utilized only in extreme situations.” Cody v. Mello, 59 F.3d 13, 15 (2d Cir.
1995) (internal quotation marks omitted).
To determine whether to relieve a party from default or a default judgment, the district
court must consider: “(1) whether the default was willful; (2) whether setting aside the default
would prejudice the adversary; and (3) whether a meritorious defense is presented.” Enron Oil
Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993). Accordingly, we have explained that “the
importance of an explanation by the district court for its denial of a motion to vacate . . . is self-
evident” and “[t]he absence of an explanation defeats intelligent appellate review.” Id. Thus, a
district court abuses its discretion when it fails to provide an explanation, unless “it is possible to
discern that the appropriate criteria have been satisfied.” Id.4
On the record before us, we cannot determine, with any confidence, the district court’s
rationale for denying Koehler’s motion to vacate. The district court denied the motion in a text
order on the docket without providing any rationale for the denial. Nor is it otherwise possible to
discern from the record whether “the appropriate criteria have been satisfied.” Id. We thus remand
so the district court can give JDH an opportunity to respond and provide a reasoned explanation
for its ruling on Koehler’s motion under Rule 60(b). See, e.g., id.; see also Weifang Xinli Plastic
Prod. Co. v. JBM Trading Inc., 553 F. App’x 42, 44 (2d Cir. 2014) (summary order) (concluding
that “the absence of an explanation defeats intelligent appellate review of the district court’s
exercise of its discretion, and we cannot discern with any confidence the district court’s reasons
for denying the motion to vacate the default judgment . . . .” (alteration adopted) (internal quotation
marks and citations omitted)). 2
* * *
Accordingly, the judgment of the district court is VACATED, and the action is
REMANDED for further proceedings consistent with this order.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
2
On appeal, JDH suggests that we should either infer that the district court denied Koehler’s motion due
to her failure to comply with Local Rule 6.1(b) for the United States District Court for the Eastern District
of New York and Federal Rule of Civil Procedure 5(a)(1)(D), or at least that we should affirm on that
alternative ground. Local Rule 6.1(b) provides, in relevant part, that “[o]n all civil motions, petitions, and
applications, . . . the notice of motion, supporting affidavits, and memoranda of law shall be served by the
moving party on all other parties that have appeared in the action . . . .” Rule 5(a)(1) requires, in relevant
part, that “a written motion, except one that may be heard ex parte” be served on every party. Fed. R. Civ.
P. 5(a)(1). However, because the district court gave no indication that its decision rested on noncompliance
with these procedural rules, we do not decide whether Koehler’s alleged failure to comply with these rules
would warrant denial of her motion to vacate.
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