Invesco Inv. Servs. v. Grossman
| Docket Number | 20-CV-4887 (ARR) (PK) |
| Decision Date | 15 September 2023 |
| Parties | INVESCO INVESTMENT SERVICES, INC., Plaintiff, v. JONATHAN GROSSMAN AND NORENE PFEFFER in her capacity as the Administrator of the estate of defendant Herschel Harry Pfeffer, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
NOT FOR ELECTRONIC OR PRINT PUBLICATION
I have received the Report and Recommendation on the instant case dated August 16, 2023, from the Honorable Peggy Kuo, United States Magistrate Judge. R. & R., ECF No. 49. Judge Kuo recommends that plaintiff's Motion for Default Judgment and Interpleader Relief be denied and that defendant Norene Pfeffer's Cross-Motion to Vacate the Entry of Default be granted. Id. at 1. Plaintiff filed objections to portions of the Report and Recommendation on August 30, 2023. Pl.'s Obj. to R. & R. (“Pl.'s Obj”) ECF No. 51.
After reviewing the record de novo, see 28 U.S.C § 636(b)(1), I find Judge Kuo's determinations reasonable and plaintiff's objections without merit. I also find no clear error in those portions of the Report and Recommendation to which plaintiff does not object. Accordingly, I hereby adopt the Report and Recommendation as the opinion of the court.
I assume familiarity with the underlying facts as detailed in Judge Kuo's Report and Recommendation and provide only a summary of the relevant facts here.
This case is an interpleader action arising out of uncertainty as to which defendant is the proper beneficiary of a Transfer-on-Death (“TOD”) brokerage account (the “Account”). Compl. ¶ 1, ECF. No. 1. Plaintiff, Invesco Investment Services, Inc., is the transfer agent for the Account. Id. The Account was originally held as two separate accounts (the “Predecessor Accounts”) at Oppenheimer Funds (“Oppenheimer”) by Jack Pfeffer, who died in 2019. Id. ¶¶ 11, 23-24. Plaintiff became the transfer agent of the consolidated Account when plaintiff's parent company indirectly acquired Oppenheimer's parent company in 2019. Id. ¶ 24.
As of 2011, prior to Jack Pfeffer's death, the designated TOD beneficiary of the Predecessor Accounts was Jack's brother, Herschel “Harry” Pfeffer. Id. ¶ 11. On November 22, 2011, Oppenheimer received a signed and guaranteed TOD Registration Form from Jack Pfeffer naming defendant Jonathan Grossman as the new beneficiary of the Predecessor Accounts. Id. ¶ 14, Ex. B, ECF No. 1-5. On March 15, 2012, the Supreme Court of New York, Kings County found Jack Pfeffer to be “a person in need of a guardian” and appointed the Vera Institute of Justice (“Vera”) as his “Guardian of the Property and Co-Guardian of the Person.” Id., Ex. C, ECF No. 16. Over the following years, conflicting actions by Jack Pfeffer and Vera created uncertainty as to whether Harry Pfeffer or Jonathan Grossman was the proper beneficiary of the Predecessor Accounts. Compl. ¶¶ 16-22.
Following Jack Pfeffer's death and plaintiff's designation as transfer agent of the consolidated Account, plaintiff initiated this interpleader action on October 9, 2020. See Compl. Jonathan Grossman was served on October 12, 2020. See Executed Summons, ECF No. 7. In his Amended Answer, Mr. Grossman asserts various counterclaims against plaintiff for failing to transfer the Account to him, as well as a counterclaim against plaintiff and a crossclaim against Harry Pfeffer seeking a declaratory judgment that Mr. Grossman is the correct beneficiary of the Account. Am. Answer to Interpleader Compl., Countercl. and Cross-cl., ECF No. 13.
Harry Pfeffer was served on October 28, 2020. See Executed Summons, ECF No. 8. By this time, Harry Pfeffer's health had “deteriorated significantly leaving him housebound and unable to read.” Decl. Norene Pfeffer in Supp. of her Cross-Mot. ¶ 3 (“Pfeffer Decl.”), ECF No. 48-9. His daughter, defendant Norene Pfeffer, was “acting as [her] father's round the clock nurse” during this period and eventually “discovered the lawsuit among his papers at some point late in 2020.” Id. ¶ 5. Though Ms. Pfeffer made several attempts to contact attorneys regarding the lawsuit, she was ultimately unsuccessful in securing legal representation for her father. Id. ¶¶ 8-9, 11. In her Declaration, Ms. Pfeffer explains that during this time she was “extremely busy caring for [her] father as he recovered from two strokes and pneumonia” and was herself “in excruciating pain” from a back injury sustained “carrying [her] father to his bed.” Id. ¶¶ 7, 10.
After Harry Pfeffer failed to answer or otherwise respond to the Complaint, plaintiff requested a certificate of default, which the Clerk of the Court entered on May 18, 2021. Req. for Certificate of Default, ECF No. 24; Clerk's Entry of Default, ECF No. 25. On September 27, 2021, plaintiff informed the court that Harry Pfeffer had died on May 2, 2021, and that Ms. Pfeffer had been declared administrator of his estate. Pl.'s Mot. Extension of Time 1, ECF No. 34. Judge Kuo permitted plaintiff to substitute Ms. Pfeffer, in her capacity as administrator of Harry Pfeffer's estate, as a defendant on October 18, 2021. Order Granting Mot. to Substitute Party, ECF No. 36. Counsel for Ms. Pfeffer entered an appearance on November 12, 2021, and, four days later, sought leave to file a motion to vacate the entry of default. Notice of Appearance, ECF No. 37; Def.'s Mot. for Extension of Time 1, ECF No. 39.
On March 2, 2022, the parties filed the following: Plaintiff's Motion for Default Judgment, ECF No. 48; Norene Pfeffer's Cross-Motion to Vacate the Entry of Default, ECF No. 48-7; Jonathan Grossman's Opposition to the Cross-Motion to Vacate the Entry of Default, ECF No. 4815; Plaintiff's Memorandum of Law in Further Support of its Motion for Default Judgment, ECF No. 48-19; and Norene Pfeffer's Reply Memorandum of Law in Support of her Cross-Motion, ECF No. 48-20.
I referred the motions to Judge Kuo on March 3, 2022. Docket Order Referring Motion, Mar. 3, 2022. On August 16, 2023, Judge Kuo recommended that plaintiff's Motion for Default Judgment and Interpleader Relief be denied and that Ms. Pfeffer's Cross-Motion to Vacate the Entry of Default be granted. R. & R. 1. Plaintiff timely filed objections to Judge Kuo's recommendation on August 30, 2023, Pl.'s Obj., and Ms. Pfeffer filed a Response to Plaintiff's Objections on September 10, 2023, Def.'s Mem. L. in Resp. to Pl.'s Obj., ECF No. 52.
A district court may “accept, reject, or modify, in whole or in part, the findings or recommendations” made by a magistrate judge. 28 U.S.C. § 636(b)(1). If a party timely objects to proposed findings or recommendations, the district court “shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” Id; see Fed.R.Civ.P. 72(b). Where no objections have been filed, “the district court need only satisfy itself that there is no clear error on the face of the record.” Finley v. Trans Union, Experian, Equifax, No. 17-CV-371 (LDH), 2017 WL 4838764, at *1 (E.D.N.Y. Oct. 24, 2017) (quotation omitted). I therefore review de novo those portions of the Report and Recommendation to which plaintiff objects and review the remaining portions for clear error.
Plaintiff objects to Judge Kuo's recommendation that Ms Pfeffer's cross-motion to vacate the entry of default be granted. Pl.'s Obj. 1, 10. A court may set aside an entry of default “for good cause.” Fed.R.Civ.P. 55(c). The Second Circuit has established three factors for determining whether “good cause” exists to set aside an entry of default: “(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). These factors are assessed less rigorously in the context of a motion to vacate an entry of default, because vacatur of an entry of default presents fewer issues of “finality and litigation repose” than does vacatur of default judgment. Id. Moreover, in the Second Circuit, “defaults are generally disfavored,” and doubts should be resolved in favor of the party seeking relief. Id.
In the Report and Recommendation, Judge Kuo determined that all three factors for determining “good cause” weighed in favor of vacating the entry of default. R. & R. 10. Plaintiff objects to this determination with respect to two of the three factors as they relate to defendant Norene Pfeffer, namely: (1) that Ms. Pfeffer's default was not willful; and (2) that plaintiff will not be prejudiced by setting aside the entry of default. Pl.'s Obj. 1.
Judge Kuo's finding that Ms. Pfeffer's default was not willful rested on two determinations. First, Judge Kuo concluded that Ms. Pfeffer did not have an obligation to respond to the Complaint until she was named as a party to the action, and there was “no evidence that Norene failed to participate in this litigation once she was named as a party,” given that Ms. Pfeffer appeared in the action within a month of being substituted as defendant and “quickly sought to vacate the default.” R. & R. 7-8. Second, Judge Kuo found that even if Ms. Pfeffer did have an obligation to respond to the action before being named as a party, she faced “hardships” at that time that “limited her ability to do so.” Id. at 7. These hardships included Ms. Pfeffer's role as her father's full-time caretaker, her severe pain from a back injury, and her “emotional dist[ress]” immediately following her father's death. Id.
Plaintiff raises two principal objections to these...
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