Court Opinion

ID: 2666707
Source: CourtListenerOpinion
Date Created: 2014-04-04 12:32:34.486367+00
Date Added: 2024-06-11T13:02:30.112167
License: Public Domain

UNITED STATES DISTRICT COURT
                      FOR THE DISTRICT OF COLUMBIA

REUVEN GILMORE, et al.,       )
                              )
          Plaintiffs,         )
                              )
     v.                       )           Civil Action No. 01-853 (GK)
                              )
PALESTINIAN INTERIM SELF-     )
GOVERNMENT AUTHORITY, et. al.,)
                              )
          Defendants.         )

                             MEMORANDUM OPINION

       Plaintiffs, who are various family members of Esh Kodesh

Gilmore, the deceased victim of an alleged terrorist shooting in

Jerusalem, Israel on October 30, 2000, bring this action against

Defendants Palestinian Interim Self-Government Authority (“PA”) and

Palestinian     Liberation    Organization      (“PLO”)   under   the    Anti-

Terrorism Act of 1991 (“ATA”), 18 U.S.C. § 2331, et seq.                    On

January 29, 2007, after Defendants failed for nearly ten months to

file   an   Answer   to   Plaintiffs’    Complaint,   this   Court      granted

Plaintiffs’ Motion to Enter Default against Defendants PA and PLO

[Dkt. No. 92].       This matter is presently before the Court on

Defendants’ Motion to Vacate Clerk’s Entry of Default [Dkt. No.

107]    under   Federal    Rule   of    Civil   Procedure    55(c).       Upon

consideration of the Motions, Oppositions, Replies, and the entire

record herein, and for the reasons set forth below, the Motion to

Vacate is granted.
I.   BACKGROUND

     This action was filed on April 18, 2001 by various family

members and the estate of U.S. citizen Esh Kodesh Gilmore.     Mr.

Gilmore was killed on October 30, 2000 in a shooting at the

National Insurance Institute--the equivalent of the United States’

Social Security Administration--in East Jerusalem.   At the time of

his death, Mr. Gilmore was twenty-five years old, married, and the

father of an infant daughter.   Plaintiffs allege that the shooting

was planned and carried out by a terrorist cell consisting of

officers in a PA security unit known as “Force 17” and members of

the armed PLO faction known as “Tanzim.”    Plaintiffs also allege

that the cell was operated and controlled by Defendants PA and PLO.

See Complaint ¶¶ 17-30.

     The instant Motion follows years of protracted filings in this

case.   The first default was entered against Defendants PA and PLO

on December 20, 2001 [Dkt. No. 18], after Defendants failed to file

a timely Answer.   On January 29, 2002, more than five months after

service and forty days after entry of the default, Defendants filed

a Motion to Vacate Default, which was granted “in light of the

strong preference in this jurisdiction for rulings on the merits,

and in the absence of any prejudice suffered by Plaintiffs.” April

17, 2002 Order [Dkt. No. 28].   Defendants had also filed a Motion

to Dismiss with their Motion to Vacate, which--due in part to the

many requests made by both parties for leave to file additional

                                -2-
briefs and for extensions of time,1 and due in part to the demands

of the Court’s calendar--was not decided until March of 2006.

March 7, 2006 Order [Dkt. No. 73].      The Motion to Dismiss was

granted as to certain individual Defendants no longer named in this

case, and denied as to Defendants PA and PLO.

     On April 24, 2006, after the Motion to Dismiss was denied,

Defendants filed an Answer through their attorney, Maher Hanania.

At a December 5, 2006 status conference, Defendants’ other counsel,

Ramsey Clark, then informed the Court that Mr. Hanania had filed

the Answer without proper authorization from Defendants, that he

had since been fired by Defendants, and that Defendants intended to

proceed without responding to the Complaint, but would raise post-

judgment challenges on jurisdictional grounds.      Defs.’ Mot. to

Vacate at 8-9 [Dkt. No. 107].   After Mr. Hanania confirmed that he

lacked the proper authority to file an Answer, Plaintiffs’ Motion

to Strike the Answer from the record was granted.   Minute Order of

January 7, 2007.    Thus, by January 2007--ten months after the

Motion to Dismiss was denied with respect to Defendants PA and

PLO--no Answer had been filed and none was expected.

     1
          It is worth noting that, after being granted leave to
file a supplemental memorandum in support of their Motion to
Dismiss in September 2004 [Dkt. No. 59], Defendants filed
successive motions for extension of time that delayed briefing for
another three months. In addition, at the close of the extended
time granted Defendants, they failed to file their supplemental
memorandum.

                                -3-
       In light of these facts, a second default was entered against

Defendants PA and PLO on January 29, 2007.        January 29, 2007 Order

[Dkt. No. 92].       The case was then referred to Magistrate Judge

Robinson for a hearing on damages.        [Dkt. No. 92].    The hearing,

which was spread out between June and December 2007, lasted a total

of six days, and Defendants fully participated in it.

       Defendants represent that, about the same time that the second

default was entered, Defendant PA--under the authority of President

Mahmoud Abbas and then-Finance Minister Salam Fayyad (who is

currently the Prime Minister)--consulted with the U.S. Department

of State on whether to appear in U.S. courts to defend against

suits such as this one.     After being encouraged by U.S. Secretary

of State Condoleezza Rice to participate in legal proceedings,

Defendants committed to litigating the claims against them and

obtained new counsel in May 2007.         Mot. to Vacate at 9.        Prime

Minister Fayyad issued a declaration to that effect, noting that

“the    importance   of   [litigating    these   cases]   was   not   fully

appreciated by the PA government, as a whole, until recently.”

Declaration of Prime Minister Salam Fayyad at 3-4, Ex. C to Defs.’

Mot. to Vacate.

       Six months later, in November 2007, after five of the six days

spent on the damages hearing but before Magistrate Judge Robinson

had reached any decision, Defendants filed the present Motion to

Vacate Clerk’s Entry of Default.         The Court then requested the

                                   -4-
United States file a statement of interest regarding the issues

presented in Defendants’ Motion.          The Government to declined to

file such a statement, and cautioned that no inference should be

drawn from its decision not to participate.         Notice of the United

States [Dkt. No. 151].

II. STANDARD OF REVIEW

     Under Federal Rule of Civil Procedure 55(c), a court “may set

aside an entry of default for good cause.”         Fed. R. Civ. P. 55(c)

(“Rule 55(c)”). The court must balance three factors in evaluating

whether a party has demonstrated good cause: (1) whether the

default was willful; (2) whether a decision to set aside the

default   would   prejudice   the   plaintiffs;    and    (3)   whether   the

defendant has presented a meritorious defense.           Keegel v. Key West

& Caribbean Trading Co., Inc., 627 F.2d 372, 373 (D.C. Cir. 1980),

Capital Yacht Club v. Vessel Aviva, 228 F.R.D. 389, 393 (D.D.C.

2005); see also Jackson v. Beech, 636 F.2d 831, 836 (D.C. Cir.

1980) (describing approach as requiring balancing of factors). In

applying this standard, all doubts shall be resolved in favor of

the party moving to set aside the default. Capital Yacht Club, 228

F.R.D. at 393.

     While the decision to set aside an entry of default falls

within the Court’s sound discretion, in this Circuit there are

“strong policies favoring the resolution of genuine disputes on

their merits.”    Jackson, 636 F.2d at 835.       When the defendant is a

                                    -5-
foreign      sovereign,2    default    is     especially    disfavored    because

“[i]ntolerant adherence to default judgments against foreign states

could adversely affect [the United States’] relations with other

nations and undermine the State Department’s continuing efforts to

encourage foreign sovereigns generally to resolve disputes within

the United States’ legal framework.”                Practical Concepts, Inc. v.

Republic of Bolivia, 811 F.2d 1543, 1551 n. 19 (D.C. Cir. 1987).

III. ANALYSIS

      First, the Court will consider, pursuant to Rule 55(c), the

Defendants’ willfulness, any prejudice resulting to Plaintiffs from

an   order    vacating     the   default,     and    any   meritorious   defenses

asserted      by   Defendants.        Second,    the    Court   will    weigh   the

significant public interest and foreign policy issues presented in

this case.

      A.      Defendants’ Default Was Willful

      The first factor to be considered in determining whether there

is “good cause” for vacating a default is whether the defendant’s

conduct      was   willful.      Because    “[d]efault      judgments    were   not

designed as a means of disciplining the bar at the expense of the

      2
          Although the United States does not recognize the
Palestinian Authority as a foreign sovereign, it continues to
maintain diplomatic relations with it and has actively encouraged
it to resolve disputes within the United States’ legal framework.
See Letter from Condoleezza Rice, U.S. Secretary of State, to
Mahmoud Abbas, President of the Palestinian Authority (Jan. 12,
2007), attached as Exhibit B to Defs.’ Mot. to Vacate.        The
reasoning in Practical Concepts thus applies in this case.

                                        -6-
litigants’ day in court,” a finding of willfulness requires that

defendants, and not just their attorneys, were responsible for the

default.     Jackson, 636 F.2d at 837.

      Defendants argue that the political turmoil in the PA from

2004-2006 “directly impeded Defendants’ ability to act in as timely

and responsive a manner as the Court otherwise has a right to

expect.”     Defs.’ Mot. to Vacate at 24.                However, this explanation

is flatly contradicted by the record.                    As Defendants themselves

note in their Motion to Vacate, their counsel represented at the

December 5, 2006 status conference that Defendants had chosen not

to   file   an    answer,    and    to    file     post-judgment       jurisdictional

challenges;       Defendants       said   nothing        about   political      turmoil

preventing a decision from being made.3                       Defendants offer no

support     for   their     statement      that    “at    crucial     stages    of   the

litigation,       defense     counsel       were     unable      to    obtain     clear

instructions about whether to limit the defense to jurisdictional

challenges or to defend on the merits.”                  Id. at 25.

      Moreover, Defendants did not challenge the default in a timely

manner.      The Motion to Vacate was filed eleven months after

Secretary    Rice’s    letter       to    Defendants,      and   six    months    after

      3
       Defendants’ counsel stated at the December 5, 2006 status
conference that, pursuant to the instructions he had received from
the PA and PLO, “we are not to appear or participate in any further
proceedings in the case. We will appeal on the decisions of the
court on jurisdiction when the case is over.” Pls.’ Opp’n at 8
(quoting Tr. 12/05/06 at 4).

                                           -7-
Defendants obtained new counsel.   Defendants also waited until the

damages hearing--in which their new counsel fully participated--had

nearly concluded before raising this issue in their Motion to

Vacate.

     Thus, this is not a case of mere delay, but a case where

Defendants’ deliberate litigation strategy was to refuse to defend

on the merits.   Without deciding the broader issue of whether the

failure to file an answer in this case reflected a global legal

strategy, as Plaintiffs argue, it is clear that, at a minimum,

Defendants’ default in this case was willful.        See Biton v.

Palestinian Interim Self-Government Authority, 252 F.R.D. 1, 2

(D.D.C. 2008) (finding that Defendants PA and PLO were willful in

second default because of earlier “deliberate choices,” despite

subsequent correspondence with Secretary Rice concerning decision

to litigate proceedings in U.S. courts).

     B.   Plaintiffs Will Be Prejudiced if the Motion to Vacate Is
          Granted

     Any prejudice to Plaintiffs resulting from vacatur of the

default must be considered as well.    Delay in and of itself does

not constitute prejudice.   Keegel, 627 F.2d at 374; KPS & Assocs.,

Inc. v. Designs By FMC, Inc., 318 F.3d 1, 15 (1st Cir. 2003).

Instead, “[t]he issue is . . . its accompanying dangers: loss of

evidence, increased difficulties of discovery, or an enhanced

opportunity for fraud or collusion.” Federal Deposit Ins. Corp. v.

Francisco Inv. Corp., 873 F.2d 474, 479 (1st Cir. 1989).

                                -8-
     In    an    effort     to   mitigate      any    prejudice     to   Plaintiffs,

Defendants have stipulated that the testimony from the damages

hearing can and should be utilized if the default is vacated, that

Plaintiffs will be reimbursed for “reasonable costs unnecessarily

incurred in the damages hearing,” and that Defendants will post a

$1 million bond, payable to Plaintiffs, if “after the Court vacates

the January 29, 2007 entry of default . . . the Defendants again

default.”       Defs.’ Mot. to Vacate at 30-33.

     Plaintiffs respond that prejudice will still result because

(1) a “crucial” witness--Force 17 commander Mahmoud Damara--has

become unavailable for deposition; (2) Defendant PA is only a

temporary   governing        authority      incapable     of     binding   a   future

Palestinian state; and (3) the testimony given at the damages

hearing will become stale as a result of any further delay.                    Pls.’

Opp’n at 12-37.

     Mr.    Damara     is    currently       in      Israeli    custody,    although

Plaintiffs concede he could be made available for deposition.

Pls.’ Opp’n at 31.        However, Plaintiffs argue that any deposition

testimony would be “utterly useless” at trial because it could not

be attributed to Defendants.          Id.      They offer no support for this

statement, or why the fact of his incarceration would affect

attribution of his testimony to Defendants.                    In sum, they fail to

explain why the deposition testimony of a man they claim to have

led the terrorist cell that shot and killed Mr. Gilmore would be

                                         -9-
“utterly useless” at trial.   Given Plaintiffs’ close ties to legal

advocacy groups in Israel4 and their admission that a deposition is

possible, the Court very much doubts that Mr. Damara will prove

unavailable for such a deposition, and so finds no prejudice

stemming from his incarceration.

      Plaintiffs also argue that, because Defendant PA is an interim

authority, it could cease to exist in the time it would take to

complete discovery and trial.      Plaintiffs argue that the action

against Defendant PA would then be “pointless at best, and very

possibly summarily extinguished for lack of a defendant.”    Id. at

35.   This argument is totally speculative, especially since the

details of the relationship between the PA and any hypothetical

successor state are unknown, and so does not support a finding of

prejudice.5

      4
           Defs.’ Mot. to Vacate at 15-16.
      5
          Whether an independent Palestinian state would succeed to
the debts and obligations of the PA is a complicated question under
international law. Still, as a general rule, a successor state’s
liability for the debts and obligations of the predecessor state is
controlled by agreement between the two states or, in cases where
territory secedes from a state to form a new state, the debt of the
predecessor state is passed to the successor state in equitable
proportion. See Report of the International Law Commission to the
General Assembly, reprinted in [1981] 2 Y.B. Int’l L. Comm’n 2,
(Draft Articles on Succession of States in Respect of State
Property, Archives and Debts). Thus, it is far from clear that the
existence of an independent Palestinian state would foreclose the
possibility of Plaintiffs collecting any judgment against
Defendants PA and PLO.

                                -10-
     However,       Plaintiffs’      last       argument--that            they    will    be

prejudiced because the testimony presented at the damages hearing

will become stale if proceedings are further delayed--is far more

persuasive.       Findings of fact must be made “while the testimony is

fresh in the judge’s mind.”             Advance Business Systems & Supply Co.

v. SCM Corp., 287 F.Supp. 143, 163 (D.Md. 1968).                                 Defendants

trivialize the injury to Plaintiffs by assuming that the cold

written record made before the Magistrate Judge will have the same

meaning   and     impact   to    a   fact-finder        when    read       years     later.

Defendants also ignore the enormous emotional cost to Plaintiffs

should they be forced “to undergo the excruciating process of

testifying about their loss all over again.”                    Pls.’ Opp’n at 37.

In light of the serious prejudice to Plaintiffs that would result

from their proceeding with stale testimony or undergoing the

wrenching process of testifying again, the Court concludes that

vacating the Motion to Default will prejudice Plaintiffs.

     C.      Defendants Have Raised Defenses Which, if Proven, Are
             “Meritorious” within the Meaning of Rule 55(c)

     A defense is meritorious if it “contain[s] even a hint of a

suggestion which, proven at trial, would constitute a complete

defense.”       Keegel,    627    F.2d     at    317;   Candido       v.    District      of

Columbia, 242 F.R.D. 151, 157 (D.D.C. 2007).                   Defendants deny that

they were responsible for the October 2000 shooting, and argue that

there   is   no    reliable      evidence       linking   them       to    this     murder.

Defendants      also   argue     that    the     shooting      was    not    an     act   of

                                          -11-
“international terrorism” under the ATA, and so jurisdiction is

lacking.

      Plaintiffs’ response goes to the merits of these defenses.

However, the actual merits are not at issue in a motion to vacate;

instead, they will be fully examined at trial.                 In any event,

“[w]hen moving to set aside a default, defendant is not required to

prove a defense, but only to assert a meritorious defense that it

may prove at trial.”        Whelan v. Abell, 48 F.3d 1247, 1259 (D.C.

Cir. 1995).      Defendants’ asserted defenses, if proven at trial,

would      constitute   a   complete    defense,      and     therefore    are

“meritorious” within the meaning of Rule 55(c).

      D.     Foreign Policy and Public Interest Concerns

      In addition to the three factors which have already been

discussed, the Court may, under Rule 55(c), also consider any other

“good cause” for setting aside a default. In this case, Defendants

argue that there are foreign policy concerns which weigh in favor

of granting them relief.      Defs.’ Mot. at 3, 18-30.        While the Court

is not convinced that Defendants have provided sufficient evidence

to   support    their   claims   that   denial   of   their    Motion     would

significantly, and negatively, impact foreign policy in the Middle

East,6 there is an issue which is of great public concern, and is

      6
          It is fair to say that making any predictions about
developments in the Middle East is a risky and speculative
undertaking, far beyond the competence of federal judges.

                                   -12-
more concrete and far-reaching than speculation about an immediate

impact on events in that troubled area.7

     The Middle East is now and has long been an area in which deep

hostilities and tensions exist between nations, ethnic groups, and

religions.     Despite     patient    and   prolonged    efforts   by   many

governments   (including    our   own),     prominent    individuals,   and

international institutions, it has not proved possible to bring

peace and prosperity to the area as a whole.            While those efforts

to achieve peace are quiescent at this time, negotiations have by

no means been abandoned.      Given the long and violent history in

this area of the world, the Court is reluctant to take any action

that might hinder the progress of such negotiations, tedious and

drawn out as they have been, or to exacerbate existing tensions

between adversaries in the region who may now desire to defuse

those tensions.

     7
           The Executive Branch of the United States has been
particularly unhelpful in resolving this difficult Motion.     The
Court requested that the State Department file a Statement of
Interest in order to understand the international ramifications of
any order it might enter, and to be apprised of our Government’s
position about such ramifications. In this case, as in Knox v. The
Palestinian Liberation Organization, 2009 U.S. Dist. LEXIS 56210,
*29 (S.D.N.Y. Mar. 26, 2009), the State Department declined to do
so. Instead it filed the identical mealy-mouthed Notice there as
it did in this case. That Notice, for all practical purposes, said
nothing and certainly provided no substantive guidance whatsoever
to the Court regarding the Government’s position or concerns about
any impact a decision might have on the delicate situation in the
Middle East.

                                     -13-
     For example, Defendants claim that any large default judgment

against them will worsen their existing economic plight, with

consequences for the region as a whole.              Plaintiffs claim that

there is no merit to Defendants’ description of their economic

crisis.8    This is simply untrue.           Defendant PA relies heavily on

foreign    aid,    and   “the   economic     situation   in   the   Palestinian

territories is dire.”           See Notice of the United States (noting

concern    about   “the   potentially      significant    impact    that   these

default cases may have on the defendants’ financial and political

viability”); U.S. Dep’t of State, Press Conference with Palestinian

Authority     Prime       Minister     Salam      Fayyad,      available     at

http://www.state.gov/secretary/rm/2009a/july/126444.htm (Ex. 6 to

Defs.’ Reply) (describing budget support as “the very type of

external assistance [the PA] need[s] most”); European Commission,

European Union Assistance to the Palestinian Authority 2009 Budget

Reaches €207 Million (Oct. 8, 2009) (Ex. 7 to Defs.’ Reply)

(stating that “budget support from donors was equivalent to roughly

30% of [the PA’s] GDP in 2008”).        Imposing a judgment on Defendants

which might well be for millions of U.S. dollars would only worsen

the existing economic situation, and might well heighten tensions

and animosities in the region.

     8
          According to Defendants, Plaintiffs are seeking well over
$4 billion in damages. That figure seems to be highly exaggerated.

                                      -14-
      Plaintiffs allege that the PA and PLO are directly responsible

for the killing of Esh Kodesh Gilmore, and that his murder was part

of   an   official   policy   of   terrorism    and    murder.    Defendants

vigorously deny that they played any part in his killing, that they

provided any support to those responsible for it, or that they knew

anything about its planning.       Both parties have presented evidence

in their Motion papers to support their contentions.             None of this

evidence has been subjected to presentation in open court or the

glare of cross-examination. Given the far-reaching implications of

a public airing of the evidence, the Court concludes that it will

serve the interest of many segments of the public “to reach the

truth and set the record straight,” and that “such a course would

better comport with the ends of justice that reflect the greater

range of relevant concerns.”         Knox v. The Palestine Liberation

Organization, 248 F.R.D. 420, 431-32 (S.D.N.Y. 2008).

      In Knox, Judge Marrero identified those segments of the public

with an interest in learning the truth:               “the interests of the

people whose welfare Defendants supposedly serve as empowered

representatives,” i.e., their constituents and “members of the

international    community--including          this    country--which   have

recognized Defendants as legitimate leaders of a governmental

entity.”    Id. at 431.       Judge Marrero noted that they “would be

interested in knowing whether the public institutions and officials

they have accorded their recognition and have dealt with at arms

                                    -15-
length are what they purport to be, and that any funds they

provided Defendants to support valid public purposes in the areas

within Defendants’ authority have been employed solely for the

intended use, and not, as Plaintiffs’ allegations suggest to

finance terrorism.”         Id.

      Finally and most significantly, Judge Marrero concluded that

“there     are   many     other    persons   who   for    various    personal        or

professional reasons may have some valid stake in the truth of the

historical record as regards the issues raised by Plaintiffs’

allegations in this case, including the general public’s right to

know the facts relating to matters of great moment that may affect

their own public or private interests.”                  Id.    This Court is in

total agreement.          Given “the transcendental scope of these issues

and   interests,      a    judgment      concerning   such     questions     .   .    .

ordinarily should not be decided by default.”                  Id.

      For all these reasons, the Court concludes that there is a

strong public interest in permitting the parties’ claims to see the

light     of   day   and    face   the    oft-time    harsh     light   of   trial.

Therefore, on balance, vacatur is warranted under Rule 55(c), and

the Motion to Vacate Clerk’s Entry of Default is granted.9

      9
          Plaintiffs rely on a case in which the district court,
faced with a strikingly similar factual background, denied the
defendants’ motion to vacate. Biton v. Palestinian Interim Self
Government Authority, 252 F.R.D. 1 (D.D.C. 2008). While there are
indeed great similarities between these cases, the decision to
vacate an entry of default can be difficult and complex. District
                                                    (continued...)

                                         -16-
       E.        Minimizing Prejudice to Plaintiffs

       Plaintiffs argue that if the default is set aside, this case

will drag on without end.            Because Defendants have demonstrated a

commitment to bringing an end to litigation in other, similar

cases,      this    argument      does   not    change   the   decision   to   grant

Defendants’ Motion.             See Knox v. PLO, No. 1:03-cv-4466 (S.D.N.Y.

Oct.       22,   2009)   (order     noting      that   settlement    agreement    was

reached); Bucheit v. PLO, No. 1:00-cv-1455 (D.D.C. filed June 5,

2008) (giving notice that judgment against Defendants PLO and PA

has, finally, been fully satisfied).

       Still, Plaintiffs’ concerns are not to be taken lightly--the

Court is keenly aware that they will suffer prejudice as a result

of this decision and the attendant delay. In addition, those cases

that have been resolved reached that point only after considerable

delay.      See, e.g. Knox, 248 F.R.D. at 432-33 (discussing delays in

satisfying Bucheit judgment).              Thus, there is some question as to

Defendants’ commitment to resolving this dispute.

       Defendants        have    offered   to     reimburse    the   Plaintiffs   for

reasonable costs, i.e., court costs and attorney fees, incurred as

a result of the default.             Payment of such costs will be required

as a condition of granting the Motion.

       9
      (...continued)
Courts may reasonably disagree as to the correct outcome, as is
evidenced by other district court decisions which are in accord
with this Court’s analysis.      See Saperstein v. Palestinian
Authority, 2008 WL 4467535 (S.D. Fla. Sept. 29, 2008).

                                           -17-
     Defendants have also agreed that Plaintiffs need not testify

again and that their testimony from the damages hearing may be read

into the trial record.     This too will be required as a condition of

granting the Motion.

     Finally, Defendants have stated that they “do not believe that

any bond is necessary in this case for purposes of security,”

Defs.’ Mot. at 32, but “would agree to post a $1 million bond,

payable to the Plaintiffs if--after the Court vacates the January

29, 2007 entry of default so that the Defendants can litigate on

the merits--the Defendants again default.”        The Court rejects both

parts of Defendants “offer” as flatly ridiculous.10

     First, given the precariousness of Defendants’ economy and

finances, what may be the difficulties of collecting any judgment

if it is obtained, and the prejudice and delay that Plaintiffs will

suffer from the granting of Defendants’ Motion, there is absolutely

no   question   that    Plaintiffs    are   entitled   to   posting   of   a

substantial bond.

     Second, it is hard to believe that Defendants are suggesting

that this Court should wait until they default a third time before

imposing a bond.       The preposterousness of this suggestion cannot

help but cast doubt upon the many pages Defendants spent in their

Motion and Reply assuring the Court that they had truly “changed

     10
          The Court is sorely tempted to describe Defendants’
“offer” as unmitigated “chutzpah,” but will refrain from doing so
in the interests of judicial formality.

                                     -18-
their spots” and would be litigating in an efficient, professional,

and good faith manner.

     Parties acknowledge that the Court has “inherent power to

impose a reasonable condition on the vacatur in order to avoid

undue prejudice to the opposing party.”        Capital Yacht Club, 228

F.R.D. at 395 (quoting Powerserve Int’l Inc. v. Lavi, 239 F.3d 508,

515-16 (2d Cir. 2001)); see also Thorpe v. Thorpe, 364 F.2d 692,

694 (D.C. Cir. 1966); Knox v. PLO, 2009 U.S. Dist. LEXIS 52610

(S.D.N.Y. Mar. 26, 2009) (upholding magistrate judge’s decision to

require that Defendants post bond in similar case).

     Given the past history of this case and the willfulness of

Defendants’   prior   conduct,    as   well   as   the   difficulties   of

collecting any judgment if collection is fought, Defendants are

hereby ordered to post a bond in the amount of $1 million no later

than February 1, 2010, to demonstrate their good faith and to

protect Plaintiffs’ rights.      An Initial Scheduling Conference will

be held on February 16, 2010, at 10:30 a.m.; Rule 16 Statements are

due at noon on February 11, 2010.

     Third, and finally, the Court advises all parties that this

case will now proceed apace, that frivolous motions and “Rambo

tactics” will not be tolerated, that counsel will cooperate on

logistical and procedural matters, and that a firm trial date will

be set at the time of the Initial Scheduling Conference on February

16, 2010.

                                   -19-
IV.   CONCLUSION

      For the reasons set forth above, and subject to the posting of

a bond of $1 million, no later than February 1, 2010, Defendants’

Motion to Vacate Clerk’s Entry of Default is granted.

      An Order will accompany this Memorandum Opinion.

                                        /s/
December 28, 2009                      Gladys Kessler
                                       United States District Judge

Copies to: attorneys on record via ECF

                                -20-