Appeal from a default judgment entered in the United States District Court for the Southern District of New York, Carter, J., in an action brought under the district court's diversity jurisdiction. Reversed and remanded.
Before: MANSFIELD, MESKILL and NEWMAN, Circuit Judges.
This is an appeal from a default judgment entered against a pro se defendant in the United States District Court for the Southern District of New York, Carter, J. Judgment was entered against D'Lela Zuck after she failed to file a timely answer or to obtain counsel within the time allotted her by the court for that purpose. For the reasons set forth below, we reverse and remand the case for further proceedings on the merits.
This case arises from a dispute between Fred Traguth and Otto Handtke, author and illustrator respectively, of the book Modern Jazz Dance, and D'Lela Zuck, erstwhile American distributor of the book. Traguth and Handtke are West German citizens who live in West Germany and occasionally travel to the United States on business. Under the name of Dance Motion Press, they published the book in a German language edition in 1976 and in an English language edition in 1978. In 1979 they hired Zuck to act as agent for Dance Motion Press in the United States and Canada, and to promote and distribute the American edition of the book.
Disagreements apparently arose over the scope of Zuck's authority and the compensation to which she was entitled, and on September 11, 1981 Traguth and Handtke filed the instant diversity action in conversion. Their complaint alleged that Zuck had failed to account to them for her receipts from sales of the book, that she had paid them only $6,000 of the proceeds, that she had refused to return to them the book production materials and unsold copies and that she had asserted exclusive publication rights to the book, hampering their efforts to publish a second American edition. On September 17, 1981 plaintiffs moved for a preliminary injunction to restrain Zuck from disposing of the unsold copies and the production materials.
On October 9, 1981 Zuck wrote to the district judge to request an extension of time to answer the complaint and assistance in securing counsel. She explained her view of the dispute, described her efforts to obtain an extension from Henry Leichter, plaintiffs' counsel, and expressed her willingness "to come to court and cooperate in order to resolve the matter." On October 22, 1981 a conference was held in chambers with Zuck and Leichter present. In a conversation following the conference, Zuck rejected a settlement proposed by Leichter and offered a counterproposal. Leichter later telexed Zuck's offer to the plaintiffs in Germany. On October 26 Zuck wrote to the court to report that while no agreement had been reached, she remained hopeful that they would settle. She added that, on the court's recommendation, she was continuing to seek counsel. That same day, Leichter wrote to the court to say that plaintiffs had telexed their rejection of Zuck's offer the day before and that a settlement appeared unlikely.
On November 9, 1981, in response to the October 26 letters, the judge wrote Zuck and Leichter a letter which included the following:
Since Ms. Zuck does need legal representation, I am willing to give her until December 1, 1981, to secure counsel. If on or before December 1, counsel does not put in an appearance on Ms. Zuck's behalf, Mr. Leichter may renew his motion for default judgment.
Counsel never appeared for Zuck. On November 28, however, Zuck filed an answer in which she denied the bulk of plaintiffs' allegations and asserted, as an affirmative defense, lack of subject matter jurisdiction for failure to meet the jurisdictional amount in controversy. On December 2 Leichter wrote to the court, acknowledging receipt of Zuck's answer on December 1, but arguing that Zuck had failed to comply with the November 9 directive by answering pro se instead of retaining counsel. In a letter to the court dated December 9, Zuck responded to Leichter's letter and requested that the court entertain her motion to dismiss for lack of jurisdiction. That motion was received in the Southern District pro se office December 9, filed December 10, and received in Judge Carter's chambers December 11.
In an endorsement order dated December 10, 1981 and filed December 11, the court agreed with Leichter:
The November 9 extension was quite specific. It gave defendant additional time to secure counsel. It did not extend time to answer pro se after the initial failure to make a timely response to the complaint. The court was of the view that Ms. Zuck's interest could best be protected if she employed counsel. That was the only justification for not acting on plaintiffs' motion for default. Although the court desires defendant to proceed with professional help, it cannot be overlooked that plaintiffs' rights have a claim on the court's attention. Accordingly, since defendant has ...