OPINION AND ORDER Plaintiff Select Harvest USA LLC (“Plaintiff” or “Select Harvest”) moves, pursuant to Federal Rule of Civil Procedure 55(b), for default judgment against defendant Indian Overseas Bank (“Defendant” or “IOB”), Dkt. No. 16, and Defendant moves, pursuant to Federal Rule of Civil Procedure 55(c), to vacate the Clerk’s entry of default, Dkt. No. 22.1 For the following reasons, Plaintiff’s motion for default judgment is denied and Defendant’s motion to set aside the default is granted. BACKGROUND The following facts are taken from the submission of the parties. Select Harvest entered into twelve contracts to sell fifty-eight loads of almonds for $4,186,519.77 to Agson Global Pvt. Ltd (“Agson”), a company existing under the laws of India. Dkt. No. 17 (“Greenwald Decl.”) 8. The contracts called for payment by “net cash against documents, presentation buyer bank” or “documents against payment.” See Dkt. Nos. 17-9-17-20 (cleaned up); see also Dkt. No. 17-5 (instructing IOB that the terms of payment for one load were “Documents Against Payment”). “Documents against payment” transactions are a documentary collection, which are used to facilitate international commerce in goods by mitigating counterparty risk. See Dkt. No. 25 at 3; 1 Alan S. Gutterman, Corporate Counsel’s Guide to Strategic Alliances §4:23 (Dec. 2022) (hereinafter, “Guide to Strategic Alliances”). In cash against document collection transactions, each party appoints a bank to act on its behalf; the exporter appoints a “remitting bank” while the importer appoints a “collecting bank.” See Uniform Rules for Collection, International Chamber of Commerce Publication No. 522 (“URC 522″), Art. 3. The exporter sends goods to a location designated by contract. See 1 Alan S. Gutterman and Robert L. Brown, Going Global: A Guide to Building an International Business §11:6 (2022-2023 ed.) (hereinafter, “Going Global”). The seller also presents the required documents (including bills of lading, invoices, and certificates of origin) to the remitting bank, who forwards the documents to the collecting bank. Id. The goods are held by customs and the shipper until the required documents are presented by the collecting bank, which can only be released once the collecting bank has received payment from the buyer. Id.; 1 Guide to Strategic Alliances §4:23. In this way, the parties solve some of the risks inherent in cross-border transactions — the seller gains assurances that payment will be made before the buyer takes possession and the buyer need not make payment and take possession until she has inspected the goods in her home country. See 1 Going Global §11:6 (“[I]n essence, the goods remain in escrow until payment has been made.”). Select Harvest appointed Wells Fargo Bank, N.A. (“Wells Fargo”) as its remitting bank, and Agson appointed IOB as its collecting bank. Dkt. No. 1 16. Between April and July 2021, Wells Fargo sent IOB collection instructions with the required documents, including the originalbills of lading, certificates of origin, and phytosanitary certificates. Greenwald Decl. 8. Based on the evidence submitted to the Court, Wells Fargo appears to have sent separate collection instructions to IOB for each of the fifty-eight orders. See Dkt. No. 17-5 at ECF p. 1 (noting that the collection instructions were for order number 2956.010 only). The instructions indicated that the collection was “subject to the Uniform Rules for Collection, International Chamber of Commerce Publication No. 522.” See id. URC 522 is a set of rules promulgated by the International Chamber of Commerce that specifies certain duties for parties to a documentary collection. URC 522, Preface. URC 522 is not independently binding international law; it only applies if its rules are incorporated into the collection instructions. URC 522, Art. 1; see also Inox Wares Pvt. Ltd. v. Interchange Bank, 2008 WL 4691906, at *4 (D.N.J. Oct. 22, 2008) (stating that a collecting bank becomes bound by URC 522 if it agrees to handle a collection that incorporates URC 522). URC 522 places the burden on the collecting bank to reject obligations imposed by the transmittal of collecting instructions. See URC 522, Art. 1(c) (“If a bank elects, for any reason, not to handle a collection or any related instructions received by it, it must advise the party from whom it received the collection or the instructions by telecommunication or, if that is not possible, by other expeditious means, without delay.”). If URC 522 applies, then each bank is bound to “act in good faith and exercise reasonable care.” Id. at Art. 9. In a documentary collection, the remitting and collecting banks are not liable if the importer refuses to pay. See Monarch Gems v. Malca-Amit USA, 2007 WL 2892636, at *9 (N.D. Ill. Sept. 27, 2007) (“Banks involved in a documentary collection do not guarantee payment or assume credit risks.”); Texful Textile Ltd. v. Cotton Exp. Textile, Inc., 891 F. Supp. 1381, 1388 (C.D. Cal. 1995) (“Even a brief review of the nature of documentary collections shows that by definition, banks operate solely as conduits in these transactions.”). In the case of nonpayment, the collecting bank should send the remitting bank notice of the nonpayment. URC 522, Art. 26(c)(3). The remitting bank must then give instructions as to how to handle the nonpayment within sixty days. Id. If such instructions are not given, then the collecting bank may return the documents to the remitting bank and will bear no further responsibility. Id. The contracts between Select Harvest and Agson called for delivery of the almonds in India, with a final destination of “ICD Faridabad or in some cases Nhava Sheva.” See Greenwald Decl. 9; Dkt. Nos. 17-9-17-20. The collecting instructions request that IOB “acknowledge receipt of [the instructions] to use via SWIFT.” Dkt. No. 17-5 at ECF p. 3. The record is silent as to whether IOB acknowledged receipt of the collecting instructions for any of the fifty-eight orders in 2021. However, on March 18, 2022, IOB sent to the Wells Fargo branch in Philadelphia, Pennsylvania a SWIFT message, indicating that it had received all fifty-eight sets of original documents. Dkt. No. 17-6; Dkt. No. 21-13. The shipments arrived at the port of Nhava Sheva, India between April and July 2021. Greenwald Decl. 9. Select Harvest claims that the shipments were discharged after IOB “wrongfully allowed the original bills of lading, certificates of original and phytosanitary certificates to be presented to the carrier and to Indian customs officials” without receiving payment from Agson and remitting the payments to Wells Fargo. Id.
9, 11. Since then, Wells Fargo and IOB have sent several SWIFT messages to each other concerning the remittance of the required payments or return of the original documents. Each message that the parties provided the Court was either sent from or sent to Wells Fargo’s Philadelphia, Pennsylvania branch. See Dkt. Nos. 17-6, 17-7, 21-4, 21-5, 21-7, 21-8, 21-9. On March 18, 2022, IOB sent a SWIFT message to Wells Fargo indicating that it had received a message from Wells Fargo on March 10, 2022, demanding payment or return of all original documents. Dkt. No. 17-6 at ECF p. 1. IOB confirmed that “we are holding the original documents with us and as requested by you we will return the documents if the bills remain unpaid by 31 March 2022.” Id. (cleaned up). Agson apparently did not pay the bill and IOB did not return the documents by the March 31, 2022 deadline. On April 4, 2022, IOB requested via SWIFT message confirmation “whether the documents have to be returned to Select Harvest” and stated that it was “holding the documents at our counter on your risk and responsibility till your further instruction.” Dkt. No. 17-7 at ECF p. 2 (cleaned up). On May 21, 2022, Wells Fargo sent a SWIFT message to IOB stating that “[w]e have been informed by [Select Harvest], they are demanding your bank to send all the original and duplicate documents including drafts for” all fifty-eight orders. Dkt. No. 21-4 at ECF p. 1 (cleaned up). IOB responded on May 24, 2022, requesting that Wells Fargo confirm that payments for three of the orders were received by Select Harvest and that Wells Fargo “allow us to return the remaining original 55 bills to you.” Dkt. No. 21-5. Wells Fargo confirmed payment of three of the orders and again demanded payment in full or a return of the original documents on June 10, 2022. Dkt. No. 21-8 at ECF p. 1. On June 14, 2022, IOB sent several packages via DHL to Wells Fargo’s offices in El Monte, California. See Dkt. No. 21-10. IOB stated in a June 15 SWIFT message that the packages contained original bills of lading for the fifty-five unpaid orders. Dkt. No. 21-9 at ECF p. 2; see also Dkt. No. 17-75 (letter from IOB, dated June 14, 2022, indicating that IOB was returning the “Original Documents” for certain of the fifty-five unpaid orders); Dkt. No. 22-1 (“Sahu Decl.”) 4 (declaring that the bills of lading were returned to Wells Fargo). DHL confirmed that the packages were delivered to the California offices of Wells Fargo on June 16 and June 17, 2022. Dkt. No. 21-10 at ECF pp. 2, 5. Wells Fargo also confirmed that it received the documents and returned them to Select Harvest; the return letters indicate that the certificates of origin and phytosanitary certificates were copies, not originals. See Dkt. Nos. 17-21-17-74. To date, payment has been remitted for only four of the fifty-eight loads, totaling $278,255.96. See Greenwald Decl. 8. Each payment was made to a Wells Fargo branch in Philadelphia, Pennsylvania. See Dkt. No. 21 at 11; Dkt. No. 25 at 18. PROCEDURAL HISTORY Plaintiff commenced this action by complaint on May 13, 2022. Dkt. No. 1 (“Complaint”). On May 20, 2022, Plaintiff served in New York IOB’s authorized agent for service of process, Global Payment Advisory Group (“GPAG”).2 Dkt. No. 6; Dkt. No. 1, Ex. 1 (certifying that GPAG “is authorized to accept service of legal process…from the Secretary of the Treasury or the Attorney General of the United States”). On June 9, 2022, Rajiv Mallick, an Assistant General Manager at the Defence Colony Branch of IOB, sent an email to John Santopietro, a Director of Agent Services at GPAG, with its “Reply” to Select Harvest’s summons and requested that he arrange delivery of the reply to Select Harvest or its attorney Clyde & Co. US LLP “within the stipulated timeliness i.e., 10th June 2022.” Dkt. No. 17-1 at ECF p. 1 (cleaned up). Both a representative of Select Harvest and Select Harvest’s attorney were copied on the email. See id. Santopietro responded that GPAG’s role as process agent was to deliver the summons to Select Harvest “which we have done.” Id. On June 10, 2022, the day that IOB’s answer was due, Plaintiff’s counsel received a voicemail from Joe Schmit, Esq. of Phillips Lytle LLP. Greenwald Decl. 5. Schmit indicated that he was not representing IOB in this action, but he requested consent for an extension of time to respond to the Complaint; Plaintiff responded that it would consent to an extension of thirty days if IOB consented to this Court’s jurisdiction and the adequacy of service of process by voicemail and email to Schmit. Id. Schmit did not reply. Id. The Court issued a notice of initial pretrial conference on July 19, 2022 (the “Initial Pretrial Conference”), Dkt. No. 7, which Plaintiff’s counsel forwarded to Mallick, Dkt. No. 17-3 at ECF p. 1. By separate letter on July 19, 2022, Plaintiff’s counsel advised Mallick that “Select Harvest intends to commence default proceedings against IOB immediately.” Dkt. No. 17-4 at 1. Plaintiff’s counsel notified the Court by letter on August 4, 2022, that it intended to obtain a certificate of default and default judgment, Dkt. No. 11; the Clerk of Court entered a certificate of default on August 5, 2022, Dkt. No. 12; and at the Initial Pretrial Conference on August 10, 2022, the Court gave Select Harvest until August 12, 2022 to file its motion for default judgment after no counsel appeared for Defendant, see Minute Entry, August 10, 2022. Plaintiff submitted its motion for default judgment, along with a supporting declaration, on August 16, 2022.3 Dkt. Nos. 16-17. The Court held a hearing on Plaintiff’s motion for default judgment on August 29, 2022, at which no counsel appeared for Defendant. See Minute Entry, August 29, 2022. The Court took the motion for default judgment under advisement. Id. On November 22, 2022, counsel for Defendant entered a notice of appearance. Dkt. No. 20. The Court held a status conference on December 8, 2022. See Minute Entry, December 8, 2022. The Court gave Defendant until December 22, 2022, to file a motion in opposition to the motion for default judgment, expressing concern that it did not have personal jurisdiction over Defendant. See December 8, 2022, Transcript (“Tr.”) 7, 9. Defendant filed a motion to dismiss for lack of jurisdiction and a memorandum of law in opposition to Plaintiff’s motion for default judgment on December 22, 2022. Dkt. Nos. 21-22.4 Plaintiff filed a memorandum of law in opposition to both motions and a supporting declaration on February 17, 2023, Dkt. Nos. 25-26, to which Defendant replied on March 14, 2023, Dkt. No. 32. DISCUSSION Under Federal Rule of Civil Procedure 55(c), a “court may set aside an entry of default for good cause.” The Second Circuit has held that, in determining whether good cause has been shown, a district court should weigh three “widely accepted factors”: “(1) whether the default was willful; (2) whether setting aside the default would prejudice the adversary; and (3) whether a meritorious defense is presented.” Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993). “Other relevant equitable factors may also be considered,” including “whether the failure to follow a rule of procedure was a mistake made in good faith and whether the entry of default would bring about a harsh or unfair result.” Id. “Although the factors examined in deciding whether to set aside a default or a default judgment are the same, courts apply the factors more rigorously in the case of a default judgment, because the concepts of finality and litigation repose are more deeply implicated in the latter action.” Id. (citation omitted). The decision whether to set aside a default is “committed to the discretion of the district court.” Traguth v. Zuck, 710 F.2d 90, 94 (2d Cir. 1983) (citation omitted). The Second Circuit “has expressed on numerous occasions its preference that litigation disputes be resolved on the merits, not by default.” Cody v. Mello, 59 F.3d 13, 15 (2d Cir. 1995); see also Brien v. Kullman Indus., Inc., 71 F.3d 1073, 1077 (2d Cir. 1995) (noting that there is a “limitation on the scope of the district court’s discretion” because of the Second Circuit’s “preference for resolving disputes on the merits”). It has “described default judgments as ‘the most severe sanction which the court may apply.’” Id. (quoting Sec. & Exchange Comm’n v. Mgmnt Dynamics, Inc., 515 F.2d 801, 814 (2d Cir. 1975)). These considerations drive the principle that, “in ruling on a motion to vacate a default judgment, all doubts must be resolved in favor of the party seeking relief.” New York v. Green, 420 F.3d 99, 104 (2d Cir. 2005); see also Powerserve Int’l, Inc. v. Lavi, 239 F.3d 508, 514 (2d Cir. 2001) (“Because there is a preference for resolving disputes on the merits, doubts should be resolved in favor of the defaulting party.” (internal quotation marks and citation omitted)). I. Willfulness Willfulness “refer[s] to conduct that is more than merely negligent or careless.” Bricklayers & Allied Craftworkers Loc. 2, Albany, N.Y. Pension Fund v. Moulton Masonry & Const., LLC, 779 F.3d 182, 186 (2d Cir. 2015) (quoting SEC v. McNulty, 137 F.3d 732, 738 (2d Cir. 1998)). “Even gross negligence does not lead to a finding of willfulness.” Fischer v. Forrest, 2014 WL 2717937, at *3 (S.D.N.Y. June 16, 2014). Instead, the conduct must be “egregious and…not satisfactorily explained.” Moulton Masonry & Const., LLC, 779 F.3d at 186 (quoting McNulty, 137 F.3d at 738). The Second Circuit has indicated that “a finding of bad faith is [not] a necessary predicate to concluding that a defendant acted willfully. Rather, it is sufficient to conclude that the defendant defaulted deliberately.” Id. at 187 (internal quotation marks omitted) (quoting Gucci Am., Inc. v. Gold Ctr. Jewelry, 158 F.3d 631, 635 (2d Cir. 1998)). However, the defaulting party’s good or bad faith is relevant in determining whether the entry of default should be excused for good cause. See Enron Oil Corp., 10 F.3d at 96. Whether Defendant’s default was willful is a close question. IOB proffers two explanations for why it did not appear in this case until after default had been entered. First, IOB thought that “no cause of action needed to be adjudicated” because it had returned the original documents and bills of lading to Wells Fargo. Dkt. No. 22 at ECF p. 7. Second, IOB claims that it is a government bank and that internal processes and the impact of COVID-19 delayed its response. See id. at ECF p. 7-8; Dkt. No. 32 at ECF p. 9; Sahu Decl.
