Opinion ID: 2320756
Heading Depth: 1
Heading Rank: 4

Heading: Mickalis Pawn's Default

Text: On February 13, 2008, Larry Mickalis, the principal of Mickalis Pawn, was indicted by a federal grand jury in South Carolina for knowingly selling a firearm and ammunition to a convicted felon in violation of 18 U.S.C. §§ 922(d)(1) and 924(a)(2). [6] On February 27, Mickalis Pawn again moved to stay all litigation with the City pending resolution of the criminal case against Mr. Mickalis; the court denied that motion in early March. See City of New York v. A-1 Jewelry & Pawn, Inc., No. 06-CV-2233, 2008 WL 630483, 2008 U.S. Dist. LEXIS 16708 (E.D.N.Y. Mar. 4, 2008). About one week later, on March 12, 2008, each of the three law firms representing Mickalis Pawn simultaneously moved to withdraw as counsel, citing the indictment of Mr. Mickalis and his decision to concentrate his financial resources on defending himself in the criminal action. Counsel asserted in their withdrawal motions that Mickalis Pawn would continue to assert its defense of lack of personal jurisdiction and did not intend to waive that defense. The City opposed the motions, arguing that such withdrawal of counsel would frustrate discovery and substantially delay the proceedings. On March 18, the district court (Cheryl L. Pollak, Magistrate Judge ) held a status conference to discuss, among other things, the motions of counsel to withdraw. At the conference, counsel for Mickalis Pawn confirmed that their client consented to their withdrawal. Counsel also announced, however, that Mickalis Pawn has decided that it does not intend to further defend this case. Transcript of Proceedings at 14 (Mar. 18, 2008). Counsel advised the court that Mr. Mickalis, acting on behalf of Mickalis Pawn, understands that [default] is an obvious consequence of his decision to no longer defend the lawsuit. Id. When the City argued that Mickalis Pawn's failure to defend would lead to entry of default judgment and the imposition of injunctive relief, one of Mickalis Pawn's attorneys stated that his client does understand the consequences. Id. at 15. At the suggestion of counsel, Mr. Mickalis then joined the conference before the magistrate judge by telephone. Mr. Mickalis confirmed to the court that Mickalis Pawn had no intention of retaining substitute counsel or of further participating in the litigation. Magistrate Judge Pollak warned Mr. Mickalis: [I]f you do not have an attorney to represent Mickalis Pawn, then the City is going to move for a default and because corporations cannot appear in court without counsel, a default will enter. . . . [T]hat means that the injunctive relief that the City has requested will in all likelihood be granted. Id. at 17. Mr. Mickalis indicated that he understood this, but nonetheless reaffirmed his desire to withdraw from the case. When Magistrate Judge Pollak suggested that she might not permit all three of Mickalis Pawn's law firms to withdraw, one of Mickalis Pawn's attorneys protested that [t]here's not a whole lot to defend if [Mr. Mickalis is] prepared to go into default. Id. at 18. Although counsel for Mickalis Pawn conceded that default was the likely result of its decision to withdraw, id. at 22, Mickalis Pawn did not expressly consent to entry of a default. But in a March 18 letter to the court, counsel for Mickalis Pawn confirmed that they had advised their client that if the motions to withdraw as counsel . . . are granted[,] th[e] defendant will be without counsel and the Court will enter default judgment against it. Letter to Magistrate Judge Pollak from Renzulli Law Firm, LLP (Mar. 18, 2008). As a result of what the City perceived to be Mickalis Pawn's acquiescence to a default, the City agreed to abandon the taking of a deposition of Larry Mickalis scheduled to be held shortly thereafter, as well as other pending discovery. The City advised Magistrate Judge Pollak that it would seek a default judgment if Mickalis Pawn's counsel's motions to withdraw were granted, and the City detailed the precise injunctive relief that it would request. On March 27, 2008, the magistrate judge granted the pending motions for withdrawal of counsel. The City then formally requested that a default be entered against Mickalis Pawn pursuant to Federal Rule of Civil Procedure 55(a). The Clerk of Court entered the default on April 2, 2008. Two months later, in June 2008, the City moved for a default judgment against Mickalis Pawn pursuant to Federal Rule of Civil Procedure 55(b)(2). Mickalis Pawn, putatively representing itself pro se, opposed the motion by submitting a list of objections. After reviewing both parties' submissions, the magistrate judge issued a report and recommendation suggesting that the City's motion be granted and that the City's proposed findings of fact and conclusions of law be adopted in their entirety. On September 19, 2008, the district court (Jack B. Weinstein, Judge ) adopted the magistrate judge's recommendation and issued the City's proposed findings of fact and conclusions of law as its own. See City of New York v. A-1 Jewelry & Pawn, Inc., No. 06-CV-2233, 2008 WL 4298501, 2008 U.S. Dist. LEXIS 87236 (E.D.N.Y. Sept. 19, 2008). [7] Default judgment against Mickalis Pawn was entered on March 24, 2009. The district court also entered a permanent injunction against Mickalis Pawn. See City of New York v. Mickalis Pawn Shop, LLC ( Mickalis Pawn Inj. ), No. 06-CV-2233, 2009 WL 792042, at  (E.D.N.Y. Mar. 23, 2009). [8] The injunction provided for, among other things, the appointment of a special master and the implementation of remedial measures to abate the public nuisance created by Mickalis Pawn's illegal firearms sales. See id.