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Note: John F. Chase (Victim) filed a complaint alleging that ten named defendants, acting in various roles, promoted an investment opportunity promising a USD 10,000,000 return for every USD 250,000 invested in standby letters of credit. As part of this scheme, Victim, Robert Cloutier (Alleged Fraudster 1) and Mark Cloutier (Alleged Fraudster 2) entered into an “Irrevocable 17.5% Success Fee Participation & Payorder Agreement” whereby Victim would pay them and other defendants a 17.5% fee on proceeds Victim received. Pursuant to a separate agreement, Victim wired USD 500,000 into the attorney trust account of another named defendant on the basis that none of the wired money would “be disbursed from the trust account until [defendant] provided [Victim] proof that two banking instruments, including a standby letter of credit, had been issued and transmitted.” The wired money, however, immediately left the trust account and Victim was neither provided proof that a standby letter of credit was issued nor returned any of the USD 500,000.

Victim sued the defendants for fraud and conspiracy to commit fraud. Alleged Fraudster 1 was served a complaint and summons seven days prior to that of Alleged Fraudster 2. Alleged Fraudster 1 and Alleged Fraudster 2 later began discussions on how to respond to the complaints. After failing to secure representation due to a conflict of interest, Alleged Fraudster 1 and Alleged Fraudster 2 had several conversations with Victim’s attorney regarding requests to extend the deadline to respond. After the deadline for Alleged Fraudster 1 to file an answer had passed, but prior to the same deadline for Alleged Fraudster 2, counsel appeared for Alleged Fraudster 1 and moved for additional time to answer nunc pro tunc. The same day, Victim moved for an entry of default and default judgment against Alleged Fraudster 1. The United States District Court for the District of Maine, Rich, J., granted Alleged Fraudster 1’s motion.

U.S. Fed. R. Civ. P. 6(b)(1)(B), applicable to the question of whether to extend Alleged Fraudster 1’s deadline to respond, provides: “When an act may or must be done within a specified time, the court may, for good cause, extend the time…on motion made after the time has expired if the party failed to act because of excusable neglect.” The Judge noted that Alleged Fraudster 1’s failure to answer within the proscribed time “was not the result of indifference to the matter of the need to respond to the complaint.” The Judge concluded that “[Alleged Fraudster 1] made a good-faith effort to comply with his deadline to answer [Victim]’s complaint, any delay in the case or prejudice to [Victim] is minimal, and the denial of the motion is not in the interests of justice in view of the size of the default judgment sought and [Alleged Fraudster 1]’s representation that he has substantial defenses to the sole claim against him.” Accordingly, the Judge granted Alleged Fraudster 1’s motion and dismissed Victim’s motion for default judgment as moot.

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