Opinion
Case No. 02-2227-JWL
January 9, 2003.
MEMORANDUM ORDER
Plaintiff filed suit against defendant alleging violations of the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. (the "ADA"); the Kansas Act Against Discrimination, K.S.A. § 44-1001 et seq. (the "KAAD"); the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq. (the "FMLA"); and the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA"). After defendant failed to file an answer or otherwise respond to plaintiff's complaint, the clerk entered default pursuant to Federal Rule of Civil Procedure 55(a).
Thereafter, plaintiff requested and the court held a hearing to determine the appropriate amount of plaintiff's damages. Defendant did not appear at the hearing. At that time, plaintiff expressly abandoned her ADA, KAAD and FMLA claims and proceeded solely with respect to her ERISA claim. After hearing evidence with respect to plaintiff's damages, the court, pursuant to Federal Rule of Civil Procedure 55(b)(2), entered default judgment in favor of plaintiff on her ERISA claim in the amount of $141,892.80.
This matter is presently before the court on defendant's motion to set aside default judgment and for stay of execution (doc. #13) and plaintiff's motion for leave to file a surreply (doc. #20). On December 17, 2002, the court granted the motion with respect to defendant's request for stay of execution and otherwise retained the motion under advisement. After carefully considering the parties' papers, the court, as explained fully below, now grants defendant's motion to set aside the default judgment and denies plaintiff's motion for leave to file a surreply.
Setting Aside the Default Judgment
Defendant moves to set aside the default judgment on the grounds that it made a "technical" appearance in this case by virtue of defending itself in a related case and that, based upon this technical appearance, plaintiff was required under Rule 55(b)(2) to provide defendant with written notice that plaintiff was seeking a judgment by default at least three days prior to the hearing on the motion for default judgment. As it is undisputed that plaintiff failed to provide notice to either defendant or defendant's counsel that it was seeking default judgment, the default judgment must be set aside if the court determines that defendant's "technical" appearance entitled it to notice under Rule 55(b)(2). See Meeker v. Rizley, 324 F.2d 269, 271 (10th Cir. 1963) (regardless of whether the particular default judgment at issue was considered void or voidable under Rule 60(b), "the failure to give the required 3-day notice constitutes cause for setting it aside").
Rule 55(b)(2) states, in relevant part, as follows: "If the party against whom judgment is sought has appeared in the action, the party (or, if appearing by representative, the party's representative) shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application." In interpreting this particular provision of Rule 55(b)(2), both parties direct the court to the Tenth Circuit's opinion in Gomes v. Williams, 420 F.2d 1364 (10th Cir. 1970). In Gomes, the defendant, Mr. Gomes, appealed the district court's refusal to set aside a default judgment entered against him. Id. at 1366. Mr. Gomes urged that his attorney's formal appearance in a related state court case was sufficient to trigger the defendant's duty under Rule 55(b)(2) to provide notice to Mr. Gomes' attorney prior to the default judgment. Id. at 1367. In support of his argument, Mr. Gomes relied on Press v. Forest Laboratories, Inc., 45 F.R.D. 354 (S.D.N.Y. 1968). See id. at 1367. According to the Tenth Circuit, the Press case stands for the proposition that where two actions have been filed and plaintiff knows that counsel who appeared for the defendants in the first action also represents the same defendants in the second action where no formal appearance is made, by legal construction, there is a technical appearance under Rule 55(b)(2) requiring notice.
Id. at 1367-68.
Ultimately, the Circuit concluded that the rule set forth in Press simply did not apply to the facts presented by Mr. Gomes because Mr. Gomes' attorney in the state court action, Mr. Duhigg, affirmatively told the plaintiff's counsel that he was not representing Mr. Gomes in the federal court action. According to the Circuit, the defendant's counsel was not "required to anticipate future representation of Gomes by Duhigg and thereby was not under a duty to serve notice on either Gomes or Mr. Duhigg." Id. at 1368.
While the Tenth Circuit in Gomes did not adopt or even endorse the rule set forth in Press, both parties urge the court to apply it and, thus, the court does so without deciding whether in fact the rule is an appropriate one. In large part, the parties agree on the facts relevant to the court's resolution of defendant's motion. Plaintiff in this suit, Ms. Caldwell, is a named plaintiff in another action filed against defendant Deluxe and currently pending before Judge Murguia of this District. See Aikens et al. v. Deluxe Fin. Servs., Inc., Case No. 01-2427-CM. The plaintiffs in the Aikens case, including Ms. Caldwell, are represented by Ms. Caldwell's counsel in this suit. Moreover, defendant's counsel here, the Stinson Morrison Hecker firm (hereinafter "Stinson"), is also representing Deluxe in the Aikens case. Defendant contends, and plaintiff does not dispute, that the two cases are closely related and that evidence central to the claims in this case is the same evidence that defendant is relying on in its defense in Aikens. Finally, it is undisputed that plaintiff's counsel and defendant's counsel had been in regular contact concerning the Aikens case (and Ms. Caldwell's claims in that case) during the time period in which Ms. Caldwell sought default judgment in this case.
Turning back to the Press rule, then, it is clear (indeed, it is undisputed) that Stinson has formally appeared for Deluxe in the Aikens case and that Aikens is closely related to this case. The only remaining question, then, is whether plaintiff's counsel knew that Stinson, defendant's counsel in Aikens, also represented Deluxe for purposes of this case — and this is the point on which the parties' views diverge. According to plaintiff, her counsel "reasonably assumed" that Stinson was not representing the defendant in this action because plaintiff's counsel sent to Stinson via facsimile a courtesy copy of the file-stamped complaint in this case and Stinson simply never acknowledged the complaint in any way. Based on Stinson's "silence," then, plaintiff's counsel assumed that different counsel would be handling this case on behalf of defendant. According to plaintiff's counsel, then, the facts of this case fall squarely within the Gomes case and just as the rule in Press was not triggered in Gomes, the rule is not triggered here.
Of course, Gomes is different from this case in at least two significant aspects — Mr. Gomes' attorney in the state court action affirmatively told the plaintiff's counsel that he was not representing Mr. Gomes in the federal court action and there is no indication from the Gomes decision that the plaintiff's counsel had any regular or ongoing communications with Mr. Gomes' counsel. Here, Ms. Caldwell's counsel received no express indication that Stinson was not representing Deluxe in this case. Moreover, it is undisputed that Ms. Caldwell's counsel and Stinson have been in regular contact for more than two years in connection with multiple matters. In addition to the Aikens case, Ms. Caldwell's counsel represents plaintiffs in two other lawsuits against defendant Deluxe and Stinson has represented Deluxe in all of those cases. It is further undisputed that Ms. Caldwell's counsel has represented other clients in connection with the mediation of those clients' charges of discrimination against Deluxe; in each instance, Deluxe was represented by Stinson. Finally, it is undisputed that Ms. Caldwell's counsel knows the identity of Deluxe's in-house counsel and that he and Deluxe's in-house counsel have had regular contact over the past two years in connection with at least seven mediations.
Based upon the significant, ongoing contacts between Stinson and Ms. Caldwell's counsel over the course of two years in connection with multiple matters, including another matter in which Ms. Caldwell is a named plaintiff, the court concludes that Ms. Caldwell's counsel's assumption that Stinson would not be representing Deluxe in this action was simply unreasonable. Stinson's failure to acknowledge Ms. Caldwell's complaint, at a minimum, should have caused Ms. Caldwell's counsel to wonder whether some type of miscommunication between Stinson and Deluxe had occurred or to wonder whether Stinson had ever even received the facsimile. In short, in light of the relationship between Stinson and Ms. Caldwell's counsel, and Ms. Caldwell's counsel's knowledge that Stinson had represented and was currently representing Deluxe in related matters, it was unreasonable (or, at best, premature) for Ms. Caldwell's counsel to believe that Deluxe would be represented by any counsel other than Stinson in connection with Ms. Caldwell's complaint. Under the rule in Press, then, Stinson and/or Deluxe was entitled to notice of the default judgment hearing at least three days prior to the hearing. As it is undisputed that no such notice was provided, the default judgment must be set aside. See Meeker v. Rizley, 324 F.2d 269, 271 (10th Cir. 1963).
Setting Aside the Clerk's Entry of Default
Plaintiff contends in her papers that even if this court sets aside the default judgment, the court must still ascertain whether it is appropriate to set aside the clerk's entry of default. According to plaintiff, because Rule 55 mandates a two-step process for obtaining a default judgment, "the issue of whether an entry of default should be set aside is separate and apart from the issue of whether a default judgment should be set aside." Pl. Br. at 6. In that regard, plaintiff urges that the court may set aside an entry of default only "for good cause" and that defendant simply has not met the good cause standard.
The court readily concludes that the entry of default should be set aside as the standards for setting aside a clerk's entry of default are more liberal than the standards for setting aside a default judgment. See 10A Charles Alan Wright, Arthur R. Miller Mary Kay Kane, Federal Practice and Procedure §§ 2694 ("[A]ny showing sufficient to justify relief under Rule 60(b) should qualify as "good cause" for purposes of reopening a default entry.") 2692 ("good cause" standard for setting aside default entry gives district court greater freedom in granting relief than is available in the case of default judgments) (1998).
Plaintiff's motion for leave to file a surreply — a surreply in which plaintiff seeks to challenge defendant's efforts in its reply brief to show "good cause" for purposes of setting aside the clerk's entry of default — is denied because the court, in its resolution of this issue, has not relied on defendant's arguments or evidence concerning "good cause."
IT IS THEREFORE ORDERED BY THE COURT THAT defendant's motion to set aside default judgment (doc. #13) is granted. The entry of default and the default judgment are hereby set aside and the clerk is directed to file the answer attached as Exhibit 13 to the memorandum filed in support (doc. #14) of the motion to set aside default judgment.