Comerica Bank v. Esposito, Frank , 215 F. App'x 506 ( 2007 )

NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with
Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Argued November 9, 2006
Decided January 10, 2007
Before
Hon. DANIEL A. MANION, Circuit Judge
Hon. ILANA DIAMOND ROVNER, Circuit Judge
Hon. TERENCE T. EVANS, Circuit Judge
No. 06-1313
COMERICA BANK, Appeal from the United States District
Plaintiff-Appellee, Court for the Northern District of Illinois,
Eastern Division.
v.
No. 05 C 1319
FRANK ESPOSITO and LUCILLE
ESPOSITO, Charles R. Norgle, Sr.
Defendants-Appellants. Judge.
ORDER
Comerica Bank sought a default judgment against the Espositos after they
failed for three months to respond to Comerica’s complaint to collect on a note.
Appearing pro se at the default hearing, the Espositos admitted to defaulting on the
note “in a very strict sense,” but asked for additional time (two weeks) to retain a
new attorney and answer the complaint. They added that they failed to respond to
the complaint because their attorney had passed away. The district court entered
the default judgment—in the amount of $356,862.07—against the Espositos, and
later denied the Espositos’ motion to vacate the default judgment. The Espositos
appeal both the entry of the default judgment and the denial of their motion. We
vacate the entry of the judgment as an abuse of discretion and remand the case
back to the district court.
No. 06-1313 2
On March 4, 2005, Comerica Bank filed a complaint against Frank and
Lucille Esposito alleging a breach of guarantee. Three weeks later, Comerica
served its complaint on the Espositos, which required that the Espositos file their
answer by April 15th. Approximately two months after the date to answer, on July
1, 2005, Comerica filed a motion requesting a default judgment against the
Espositos.
On July 8, 2005, the district court held a hearing to rule on the motion. The
Espositos, appearing pro se, explained that the death of their attorney delayed their
response to the complaint:
I had an attorney who unfortunately passed away, Scott
Chase, and his firm Nigro, Westfall took up the
proceedings and we had some questions as to some of the
billings they that they had done on another case that they
were working on for us and I gave them the information
that was given to us to respond.
My belief was that they had responded and then I’m
finding, when I see this documentation that they did
not—there was no response. I’m more than willing to
make a response once I have an attorney—and I’m in the
process of getting another one—and we could make a
response within the next week or two.
The court responded, “The allegation is that you’ve defaulted on a note. What
would your response be?” Mr. Esposito answered, “I guess in a very strict sense I
defaulted on the note,” to which the court replied, “the motion for default judgment
is entered.”
On July 18, 2005—within 10 days of the entry of that judgment, and acting
through newly acquired counsel—the Espositos filed a motion seeking relief from
the default judgment. The Espositos repeated that their family attorney had
become ill and contended that Mr. Esposito’s “uncounseled admission should be
withdrawn” because they have a defense—and possibly a counterclaim—to the
lawsuit under the Equal Credit Opportunity Act, 15 U.S.C. § 1691(a), and 12 C.F.R.
202.7(d). The district court denied the motion. The Espositos now appeal.
On appeal, the Espositos contend that the district court abused its discretion
both in entering the default judgment and in denying their motion to vacate the
default judgment. We need only discuss the entry of the judgment itself.
No. 06-1313 3
The Espositos argue that the entry of the $356,862 default judgment against
them was an abuse of discretion because: (1) they had exhibited no willful disregard
for court rules, (2) they had a compelling reason—the death of their attorney and
his law firm’s subsequent neglect—for their failure to respond to the complaint, (3)
they asked for a brief (one- to two-week) extension of time to file an answer in a
case barely three months old, and (4) the so-called “admission” of liability that Mr.
Esposito made was qualified and uncounseled.
We review the entry of a default judgment under an “abuse of discretion
standard.” Stafford v. Mesnik, 63 F.3d 1445, 1450 (7th Cir. 1995). “While this
circuit no longer disfavors default judgments . . . a default judgment should not be a
considered a ready response to all litigant misbehavior.” Id. at 1450. In evaluating
the district court’s exercise of discretion, we examine whether the defaulting party
had “exhibited a willful refusal to litigate the case properly,” Davis v. Hutchins, 321
F.3d 641, 646 (7th Cir. 2003), the “proportionality of the sanction to [the defaulting
party’s] conduct, [and] the choice of a default judgment over other available
sanctions . . . .” See Jones v. Phipps, 39 F.3d 158, 162 (7th Cir. 1994). See also 10A
Wright, Miller, & Kane, Federal Practice and Procedure § 2685 (Civil 3d 1998)
(courts should examine the dollar amount involved, the nature of the default,
prejudice to the plaintiff, and whether the delay is excusable).
In addition, we analyze the district court’s denial of a request for additional
time to answer under an abuse of discretion standard. Raymond v. Ameritech
Corp., 442 F.3d 600, 606 (7th Cir. 2006). For this type of case, Fed. R. Civ. P. 6(b)(2)
gives courts discretion to extend already expired deadlines that were missed on
account of “excusable neglect.” Fed. R. Civ. P. 6(b)(2). In Pioneer Investment
Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380 (1993), the
Supreme Court identified several factors relevant to whether a party’s neglect of a
deadline is excusable:
[T]he danger of prejudice, the length of the delay and its
potential impact on judicial proceedings, the reasons for
delay, including whether it was within reasonable control
of the movant, and whether the movant acted in good
faith.
Pioneer, 507 U.S. at 395.
Here, the district court abused its discretion under both the factors that
apply to the entry of the default judgment and the request for additional time
because none of the relevant factors support the district court’s decision. First,
No. 06-1313 4
Comerica does not assert that the two-month delay prejudiced it or that the
requested two-week extension would have impacted the course of the still-new case.
Second, Comerica does not challenge the Espositos’ good faith or that their attorney
died and his firm neglected the case. Finally, it also does not dispute that the
district court did not consider any lesser sanction before imposing a six-figure
default judgment.
Rather, Comerica contends only that the “defendants failure to communicate
with their attorneys regarding the filing of an answer is not sufficient to constitute
good cause for the default.” But the cases that Comerica cite merely stand for the
proposition that a client’s insistence that his attorney failed to communicate with
him usually does not constitute grounds for granting postjudgment relief under Rule
60(b). See Tolliver v. Northrop Corp, 786 F.2d 316, 319 (7th Cir. 1986); Pretzel &
Stouffer v. Imperial Adjusters, Inc., 28 F.3d 42, 45-46 (7th Cir. 1994). See also
C.K.S. Engineers, Inc. v. White Mountain Gypsum Co., 726 F.2d 1202, 1206 (7th Cir.
1984) (“In order for the default judgment to be an effective deterrent against
irresponsible conduct in litigation, relief from a default judgment under Rule 60(b)
must be perceived as an exceptional remedy.”). But see Robb v. Norfolk & W. Ry.
Co., 122 F.3d 354, 359-60 (7th Cir. 1997) (concluding that after Pioneer, “attorney
carelessness” can constitute “excusable neglect” under Rule 60(b)(1)).
In contrast, we have held that a district court abuses its discretion when—as
was the case here—the court enters a default judgment knowing that the litigant’s
default is the result primarily of his attorney’s neglect. See Anilina Fabrique de
Colorants v. Aakash Chemicals and Dyestuffs, Inc., 856 F.2d 873, 878 (7th Cir.
1988) (judge abused his discretion in entering default judgment “in the absence of
any bad faith or willfulness without first employing lesser sanction”); Stafford, 63
F.3d at 1451 (entry of default judgment reversed because appellant’s belief that
counsel would attend hearing constituted an “acceptable excuse”). In fact, in
Tolliver—the Rule 60(b) case upon which Comerica relies so heavily—we noted that
the appellant might have had a “strong case on [direct] appeal” because “a court
would be hard pressed to call this default [her attorney had failed to file answers to
interrogatories] the sort of willful, bad faith conduct that is the usual precursor of
dismissal.” Tolliver, 786 F.2d at 318.
Rather than considering the relevant factors, none of which favor the district
court’s decision, the court based the entry of default on Mr. Esposito’s uncounseled
and equivocal response to the allegation in the complaint. But we have repeatedly
stated that pro se pleadings must be construed liberally. Jones, 39 F.3d at 163. A
liberal construction of the pro se oral pleading, “I guess in a very strict sense I
defaulted on the note” does not exclude the possibility of some defense to a technical
No. 06-1313 5
default. Mr. Esposito had, after all, offered just moments earlier to prepare an
answer.
Accordingly, we VACATE the entry of the default judgment against the
Espositos as an abuse of discretion and REMAND the case to the district court.