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FACING THE CONSEQUENCES: Court Recommends Denial of Motion to Set Aside Default Judgment and to Award Northeastern Power & Gas $106,591.58!
Wednesday, February 28, 2024

Hi TCPAWorld! The Baroness here and a big report and recommendation was just issued the other day.

Although this case stems from allegations regarding the TCPA, the focus of this blog is actually on indemnification provisions and default judgments.

The factual and procedural background is important.

Northeastern Power & Gas, LLC (NEPG) retained Electric Green Life, LLC (EGL) to provide inbound marketing services.

NEPG and EGL entered into an agreement which included an indemnification provision holding NEPG harmless, and requiring EGL to indemnify NEPG, for any claims, damages, settlement, or expenses (including attorney’s fees and litigation costs) arising out of EGL’s performance, non-performance, or breach of the Agreement. The indemnification obligation extended to, among others, EGL’s officers, directors, and employees and thus included EGL’s president Mark Bassali.

The plaintiff Eli Reisman filed suit against NEPG for alleged violations of the TCPA. More specifically, Reisman alleged that he had received unauthorized marketing calls from NEPG in violation of the TCPA.

In response, NEPG terminated its relationship with EGL (good) and sent an indemnification demand to EGL to which EGL never responded.

NEPG settled the suit against Reisman and then sought to recover the settlement amount, attorney’s fees and costs from EGL and Bassali.

NEPG then asserted a third party claim against EGL and its president, Bassali for contractual indemnification.

Neither EGL nor Bassali appeared, answered or responded to third party complaint despite Bassali having knowledge of it. Bassali also refused to provide an address for service and rather than cooperate, Bassali threatened, harassed, and disparaged NEPG throughout the process.

So NEPG sought entry of default against EGL and Bassali due to their failure to appear in the matter. Prior to entering the default, the Court held an order to show cause why the default judgment should not be entered against EGL and Bassali. Neither EGL nor Bassali appeared at the hearing. Talk about being completely evasive.

Accordingly, the Court found EGL and Bassali jointly and severally liable to NEPG “for any and all damages NEPG ultimately sustains in this litigation” and for “NEPG’s expenses incurred in this litigation, including all settlements and reasonable attorney’s fees and costs.”

Thereafter, NEPG filed its application for damages seeking $93,662.50 in attorney’s fee, $1,089.58 in costs, and the settlement amount to Reisman of $12,500 at a total of $107,252.08.

This is where things get interesting.

Out of nowhere, Bassali then files an appearance and letter requesting an extension to respond on the inquest for damages. He also moved to vacate the default judgment claiming that he: 1) had “no clue” about the lawsuit or the default judgment hearing; (2) had a “solid defense” to Reisman’s claims; and (3) had been “hacked” on April 24, 2023 such that “all data” was inaccessible until September 2023; he had no access to his personal email at markbassili9@gmail.com; and as a result, he experienced a “severe mental break.”

… What?

It just baffles me when I hear such crazy explanations.

And even better yet, after Bassali made this request from the Court, he doubled down and continued to harass NEPG stating, “You and I are meeting toe to toe very soon. Violence is unavoidable. I will be armed. Outcomes could prove fatal.”

Did Bassali just not think that he could get away scot-free?

Now to Bassali’s motion.

In determining whether to set aside a default judgment, there must be good cause. The Second Circuit has pointed to three factors in deciding a Rule 55(c) motion: (1) whether the default was willful; (2) whether the moving party has presented a meritorious defense; and (3) whether setting aside the default would prejudice the party for whom default was awarded.”

I don’t even have to walk through each factor to know which way the Court was going to rule.

In weighing the factors, the Court found that Bassali could not demonstrate good cause to vacate the default judgment. He acted willfully by evading service. He refused to appear in the case despite full knowledge of the third-party complaint. He could not show any meritorious defense and re-opening the litigation would certainly prejudice NEPG by exposing it to further costs and harassment.

As such, the magistrate judge recommended that Bassali’s motion to set aside the default judgment be denied.

Now, turning to the damages assessment.

As stated above, NEPG sought recovery for damages, fees, and costs consisting of $12,500 it paid to settle the case with Reisman, along with legal fees in the amount of $93,662.50 and $1,089.58 in costs.

NEPG put forth evidence regarding the attorneys’ hourly rates, hours worked, and costs spent in litigation.

The Court recommended that all three components be awarded, although the fees and costs were slightly reduced due to a missing explanation for some items. However, majority of the fees and costs were awarded.

In the end, the magistrate judge recommended that (1) Bassali’s motion to vacate be denied and (2) NEPG be awarded $106,591.58.

Because this is only a report and recommendation, the parties have 14 days to file any written objections to the report. As such, the parties have until March 11, 2024 to file any objections. It will be interesting to see if Bassali files an objection. I would assume he would.

So what does this case teach us?

First, indemnification provisions are extremely important in agreements, and it is important to understand them. Read them. Know your obligations. If you need help drafting an indemnification provisions or assistance in interpreting your current agreements, please feel free to reach out to us at Troutman Amin, LLP.

Second, if you get served with a summons and complaint or are aware of a filing against you please reach out to an attorney as soon as possible so that you can evaluate next steps. It is not fun to have a default judgment entered against you because as highlighted above, if you can’t show good cause, you will most likely have to pay a judgment which will be out of your hands.

That’s all for now.

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