How to Abandon Your Complaint in New York (and Kiss Your $22,000 Subro Claim Goodbye)

SUBROGATION – CPLR § 3215(C) – DEFAULT PROCEEDINGS NOT TAKEN WITHIN ONE YEAR 

Selective Auto. Ins. Co. of NJ a/s/o Pine v. Nesbitt
(1st Dept., 5/17/2018)

New York CPLR § 3215(c) states:

(c) Default not entered within one year.  If the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed.  A motion by the defendant under this subdivision does not constitute an appearance in the action.

On March 6, 2014, Selective, as subrogee of its insured, served on defendants a complaint dated February 25, 2012 for $21,705.90 paid in collision damage to its insured's vehicle that was sustained in a July 22, 2011 accident.  Defendants never appeared or answered the complaint and were in default in pleading as of May 14, 2014.  More than a year later, on June 22, 2015, Selective's subrogation counsel wrote to Allstate, the defendants' auto insurer, advising that the defendants had been sued and were in default, and asking that Allstate contact counsel to discuss settlement.  The letter also advised that if counsel did not hear from Allstate and receive defendants' answer to the complaint within 10 days, "we will have no alternative other than to file a default motion."  Counsel wrote again to a different person at Allstate on October 11, 2016, saying nothing about moving or having moved for a default judgment.

By notice of motion dated February 1, 2017, defendants moved for an order pursuant to CPLR § 3215(c) dismissing Selective's complaint as abandoned.  Selective opposed and cross-moved for a default judgment on liability.  Supreme Court DENIED defendants' motion and GRANTED Selective's cross motion.  Defendants (by Allstate) appealed.

In unanimously REVERSING Supreme Court's order and dismissing Selective's complaint, the Appellate Division, First Department, noted:

Under CPLR 3215(c), if a plaintiff fails to seek entry of a judgment within one year after default, the court "shall dismiss the complaint as abandoned ... unless sufficient cause is shown why [it] should not be dismissed." Here, plaintiff failed to show sufficient cause to defeat defendant's dismissal motion because it neither set forth a viable excuse for the delay nor demonstrated a meritorious cause of action (Hoppenfeld, 220 AD2d at 303; Gavalas v Podelson , 297 AD2d 535 [1st Dept 2002]).

Sending "please contact me to discuss settlement" letters to defendants' auto insurer 13 and 29 months after defendants' default and more than one and 17 months after CPLR § 3215(c)'s one-year deadline to take default proceedings does not constitute a "viable excuse for the delay" in moving for a default judgment, at least in the opinion of the First Department.  $22,000 subrogation claim dismissed.

No Good Deed Goes Unpunished

COMMERCIAL PROPERTY – INDEFINITE EXTENSION TO ANSWER – TIME LIMIT ON TAKING DEFAULT JUDGMENT – CPLR 3215(C)
Zenzillo v. Underwriters At Lloyd's London
(4th Dept., decided 11/12/2010)

If an insured's attorney grants and then terminates an indefinite extension for a defendant insurer to answer the insured's complaint, but no answer is forthcoming and the action lies dormant for two years, what happens?

a.  default judgment is granted against defendant insurer; or
b.  complaint is dismissed. 

Believe it or not, the correct answer is "b".  The complaint is dismissed. 

Plaintiff sued defendant for amounts allegedly owed plaintiff under her insurance policy with defendant.  On June 1, 2006, the parties' counsel stipulated to an indefinite extension of time for defendant to answer the complaint.  By letter dated January 19, 2007, plaintiff's counsel requested that defendant answer the complaint so that plaintiff could prosecute the action.  Defendant never did so but, on February 3, 2009, more than two years later, it moved to dismiss the complaint pursuant to CPLR 3215(c), which provides:

(c) Default not entered within one year. If the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed. A motion by the defendant under this subdivision does not constitute an appearance in the action.

Oneida County Supreme (Bernadette T. Romano, JSC) denied defendant's motion but the Appellate Division, Fourth Department, REVERSED, finding that plaintiff had failed to demonstrate "sufficient cause" for not treating the complaint as abandoned:

In opposition to the motion, plaintiff included an affirmation from plaintiff's counsel, who agreed that the January 19, 2007 letter terminated the stipulation extending defendant's time to answer.  Defendant therefore defaulted 20 days after January 19, 2007 by failing to appear in the action (see CPLR 320 [a]), and plaintiff failed to demonstrate sufficient cause why the complaint should not be dismissed (see CPLR 3215 [c]).

Although this outcome may seem harsh, plaintiff's two-year inaction after requesting an answer may imply a level of disinterest in prosecuting the action (as opposed to mere inattention by the insured's counsel).  Sometimes insureds sues their insurers hoping that the mere filing and service of a complaint will prompt a settlement offer on a declined claim.  But was this a calculated strategy by defense counsel of not answering the complaint and waiting just over two years to make a CPLR 3215(c) motion to dismiss?  The short memorandum decision does not indicate why no answer was served within 20 days of the indefinite extension's termination. 

Diary those answer due dates, folks.  Now add one year and circle that date in red. That's the drop-dead deadline to move for a default judgment.  A default not timely taken (i.e., within one year of the default date) can result in the action's dismissal.