New York v. Green, Docket No. 04-4070-CV.

• Decision Date: 18 August 2005
• Docket Number: Docket No. 04-4070-CV.
• Citation: 420 F.3d 99
• Parties: State of NEW YORK and Erin D. Crotty, Plaintiffs-Appellees, v. Kevan M. GREEN and Polymer Applications, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

Page 99

420 F.3d 99

State of NEW YORK and Erin D. Crotty, Plaintiffs-Appellees, v. Kevan M. GREEN and Polymer Applications, Inc., Defendants-Appellants.

Docket No. 04-4070-CV.

United States Court of Appeals, Second Circuit.

Argued: July 14, 2005.

Decided: August 18, 2005.

COPYRIGHT MATERIAL OMITTED

Diane R. Tiveron, Esq., Hogan & Willig, PLLC, (Corey J. Hogan, of counsel), Amherst, New York, for Defendants-Appellants.

David A. Munro, Assistant Attorney General (Denise Hartman, Assistant Solicitor General on the brief; Lisa M. Burianek and Jane C. Cameron, Assistant Attorneys General, of counsel) for Eliot Spitzer, Attorney General of the State of New York, Albany, New York, for Plaintiffs-Appellees.

Before: STRAUB and SACK, Circuit Judges, and KRAVITZ, District Judge.^*

KRAVITZ, District Judge.

Defendant Polymer Applications, Inc. and its sole shareholder and president, Defendant Kevan M. Green, appeal from the District Court's refusal to vacate a default judgment against them. Defendants argue that the District Court should have set aside the default judgment as void under Rule 60(b)(4) of the Federal Rules of Civil Procedure. Alternatively, Defendants assert that the District Court should have vacated the default judgment under Rule 60(b)(6) because they did not willfully disregard their obligation to answer the complaint, they raised meritorious defenses, and plaintiffs would suffer no prejudice if the judgment were vacated. Defendants also seek a hearing on damages.

For the reasons that follow, we hold that the District Court did not err in refusing to set aside the default judgment, and accordingly, we affirm.

BACKGROUND

This appeal is the latest chapter in a decades-long struggle between state and federal environmental officials and Kevan Green and his company, Polymer Applications, Inc. ("Polymer"), over environmental clean-up and remediation at Polymer's phenolic resin manufacturing plant in the Town of Tonawanda, Erie County, New York (the "Site"). The history of events leading to this lawsuit is described in detail in the District Court's decision, and there is no need to repeat it at length here. See New York v. Green, 2004 WL 1375555, at *1-*2, (W.D.N.Y. June 18, 2005) 2004 U.S. Dist. Lexis 11624, at *2-*5. It suffices to say that the Site has a lengthy history of releases of hazardous substances dating from the 1970s. In July 1988, a fire destroyed a significant portion of Polymer's facility, resulting in the release of an estimated 70,000 gallons of phenol solution and solvents, and forcing Polymer to cease operations at the Site. During the next ten years, state and federal environmental authorities studied the Site to assess the extent of contamination. In 1996, after finding significant soil, surface water and ground water contamination, the State of New York developed a plan to remediate the Site. Then, in 1998, after having spent two unsuccessful years trying to get Polymer to implement the remediation plan on its own, the State decided to proceed with remediation using state funds. However, Defendants refused to allow the State access to the Site, preventing remediation of the Site and prompting this lawsuit.

On March 20, 2001, the State of New York and Erin D. Crotty, Commissioner of the New York State Department of Environmental Conservation (collectively, the "State") filed this action against Polymer and Mr. Green in the United States District Court for the Western District of New York. Suing under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq., and New York's common law of public nuisance and restitution, the State sought access to the Site for remediation and a determination that Defendants were liable for the costs of remediation. Defendants were personally served with the complaint on March 22, 2001. However, Defendants never filed an answer to the complaint or formally appeared in the lawsuit, even though they were represented by an attorney, Jeffrey Blum, at least until July 2001.

On May 23, 2001, the State moved under Rule 55(a) of the Federal Rules of Civil Procedure for entry of default against Defendants for their failure to appear or defend the lawsuit. The clerk of the court entered the default that same day, and on the following day, mailed notice of the entry of default to both Polymer and Mr. Green. Thereafter, for nearly a year, neither party took any further action in the lawsuit until the District Court issued an Order to Show Cause on February 4, 2002, requiring a written statement as to why the case should not be dismissed for failure to prosecute under the District Court's local rules. The District Court's order prompted the State to file a motion for default judgment on April 8, 2002.

The motion for default judgment sought an order granting the State access to the Site for remediation, requiring Defendants to pay the State's unreimbursed response costs to date of $1,334, 168.62 and declaring Defendants' liability for all future response costs incurred by the State in cleaning up the Site. The affidavit of counsel submitted with the State's motion for default judgment recited that Defendants had been served but had not responded to the complaint or submitted a motion for extension of time. The affidavit also described in detail the State's communications with Defendants and their lawyer, Mr. Blum, following the filing of the complaint and up until July 2001, when Defendants ceased all communications with the State and its counsel. It is undisputed that the State did not provide Defendants with written or oral notice that it had filed a motion for default judgment.

The District Court heard the State's motion for default judgment on May 10, 2002. Neither defendant nor any attorney on their behalf attended the hearing. The District Court inquired of counsel for the State whether she had heard at all from Mr. Green or anyone on behalf of Polymer, to which the State's counsel responded as follows:

We do get correspondence regarding efforts to float different remediation plans, things of that nature, but there has neither been a formal or informal request on the part of Kevan Green or Polymer Applications to extend the time to answer in this case, and we are not aware of any answer in this case.

Oral Argument Transcript, May 10, 2002, at 4.

That same day, May 10, 2002, the District Court granted the State's motion and entered a default judgment against Defendants. Among other things, the default judgment ordered Defendants to provide the State with access to the Site, entered judgment against Defendants in the amount of $1,872,846.80, and declared Defendants liable for all response costs incurred in the future in remediating the Site. On May 14, 2002, the clerk mailed notice of entry of the default judgment to both Defendants.

Nearly a full year passed before Mr. Green, proceeding pro se as "Defendant CEO of Polymer Applications, Inc." moved the District Court on May 7, 2003 to vacate the default judgment on grounds that Defendants had not received notice of the motion for default judgment and they had meritorious defenses to the State's complaint. The State opposed Defendants' motion, and Defendants ultimately retained counsel who filed appearances on their behalf. The District Court denied Defendants' motion in a lengthy opinion on June 18, 2004. This appeal followed.

DISCUSSION

I.

Rule 55 of the Federal Rules of Civil Procedure provides a two-step process for obtaining a default judgment. The first step is to obtain a default. When a party against whom affirmative relief is sought has failed to plead or otherwise defend, a plaintiff may bring that fact to the court's attention, and Rule 55(a) empowers the clerk of the court to enter a default against a party that has not appeared or defended. Having obtained a default, a plaintiff must next seek a judgment by default under Rule 55(b). Rule 55(b)(1) allows the clerk to enter a default judgment if the plaintiff's claim is for a sum certain and the defendant has failed to appear and is not an infant or incompetent person. See Fed.R.Civ.P. 55(b)(1). "In all other cases," Rule 55(b)(2) governs, and it requires a party seeking a judgment by default to apply to the court for entry of a default judgment.

A court may set aside any default that has entered for good cause shown, and if a judgment has entered on the default, the court is authorized to set the judgment aside in accordance with the provisions of Rule 60(b). Fed.R.Civ.P. 55(c). Under Rule 60(b), a district court may vacate a judgment for any of the following reasons:

(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence . . .; (3) fraud . . ., misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.

Fed.R.Civ.P. 60(b). A motion to vacate a default judgment is "`addressed to the sound discretion of the district court.'" State Street Bank & Trust Co. v. Inversiones Errazuriz Limitada, 374 F.3d 158, 166 (2d Cir.2004) (quoting SEC v. McNulty, 137 F.3d 732, 738 (2d Cir.1998)). However, we have expressed a strong "preference for resolving disputes on the merits." Powerserve Int'l, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir.2001) (citation omitted). As the District Court rightly recognized in its opinion denying Defendants' motion to vacate, a default judgment is "the most severe sanction which the court may apply." Cody v. Mello, 59 F.3d 13, 15 (2d Cir.1995) (citations omitted). A "trial court's desire to move its calendar should not overcome its duty to do justice." Id. Accordingly, in ruling on a motion to vacate a...