Universal Film Exchanges, Inc. v. Lust

• Decision Date: 11 June 1973
• Docket Number: No. 72-2466.,72-2466.
• Citation: 479 F.2d 573
• Parties: UNIVERSAL FILM EXCHANGES, INC., Appellee, v. Bernard LUST, trading as Sydney Lust Theatres, and Independent Theatres, Inc., Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

479 F.2d 573 (1973)

UNIVERSAL FILM EXCHANGES, INC., Appellee, v. Bernard LUST, trading as Sydney Lust Theatres, and Independent Theatres, Inc., Appellant.

No. 72-2466.

United States Court of Appeals, Fourth Circuit.

Argued April 2, 1973.

Decided June 11, 1973.

Robert E. Sher, Washington, D. C. (Robert E. Sharkey, Baltimore, Md., on brief), for appellant.

J. Cookman Boyd, Jr., Baltimore, Md. (Rob Ross Hendrickson, Baltimore, Md., on brief) for appellee.

Before SOBELOFF, Senior Circuit Judge, and FIELD and WIDENER, Circuit Judges.

SOBELOFF, Senior Circuit Judge:

The question presented in this appeal is whether the District Court properly denied a Rule 60(b)(1), F.R.Civ.P., motion to vacate a summary judgment entered against the appellant, Independent Theatres, Inc. Rule 60(b)(1) reads, in pertinent part:

On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order or proceeding for the following reasons: (1) mistake, inadvertence, surprise or excusable neglect * * *.

Appellant's attorney contends that although his manner of advocacy in this case well might be termed negligent, it nonetheless should be treated as excusable neglect. To do otherwise, he argues, would impose upon his client a $25,000 judgment on a claim to which he insists there is a meritorious defense.

The issue thus posed presents us with a serious dilemma. The more Boeotian and flagrant we deem counsel's conduct in the case, the greater is his professional negligence; correspondingly, the behavior becomes less "excusable" under Rule 60(b)(1). On the other hand, the more indefensible the attorney's behavior, the greater is one's natural sympathy for the ultimate victim—the client. Yet the rule is quite specific and unless there is found mistake, inadvertence, surprise or excusable neglect, relief cannot be granted regardless of our sympathies.

Factual Background

This litigation arose out of the alleged failure of Independent Theatres, Inc., a booking agent of films, to pay Universal Film Exchanges, Inc., a distributor of films, for the rental of films procured by it for Sydney Lust Theatres, a small movie house chain. The original complaint filed in the District Court for the District of Maryland named both Bernard Lust, trading as Sydney Lust Theatres, and Independent as defendants.

Stanley Frosh, Lust's attorney, filed answers to the complaint and interrogatories for both defendants. The answers denied that Lust had exhibited Universal films, denied that Independent had entered into any contracts with Universal for the exhibition of motion pictures and denied that either defendant owed any sum of money to the plaintiff.

Independent's contention in its 60(b)(1) application diametrically contradicts the answer filed on its behalf. We are now told that Independent had entered into a contract with Lust whereby it agreed to obtain films for Lust but was to undertake no personal obligation to pay any rental fees for the films— monetary responsibility would rest with Lust. This information was relayed in a letter to a group of film distributors, including Universal, on Independent stationery over the signature of Bernard Lust. Thus, Independent now claims that any unpaid bills resulting from films rented by it for Lust Theatres are the sole obligation of the theatre management.

The potential conflict of interest between the two defendants was recognized early in the litigation by Harley Davidson, Independent's president. As a consequence, he retained Robert E. Sher, an attorney, to provide his corporation with separate representation and counsel.

Initially, Sher contacted Universal's attorney and explained his client's position—that Lust alone was liable for any unpaid film rentals. After an exchange of correspondence. Universal's attorney wrote the following to Sher on December 7, 1971:

* * * In the light of obvious confusion arising out of the formal appearance and pleadings filed in behalf of both defendants by Stanley Frosh, Esquire, under date of November 22nd, containing a denial that either defendant is indebted to our client in any amount (Mr. Frosh having told us by phone yesterday that he was unaware of the assumption of responsibility by the defendant Lust), we must defer consideration of any change in parties until promised clarification is received.

Perhaps you have been, or will be, in touch with Mr. Frosh, but in any event, please understand that we have no desire even to appear uncooperative. When the posture of Mr. Lust becomes more clear, it may very well be that we can accede to your request.

Mr. Sher now tells the court that on the basis of this message he assumed that Universal would work things out with Lust and that he could remain a passive bystander. We agree with counsel for the appellee that the letter meant what it said, namely, that it was the obligation of attorneys Sher and Frosh to clear up the matter.

Sher also contacted Frosh, who allegedly assured him that Independent had nothing to fear since Lust would pay the debt in the near future and the matter "in all likelihood" would never come to trial. Additionally, Frosh is said to have promised to keep Sher abreast of all developments in the case. Relying on these assurances, Mr. Sher tells us, he deliberately chose not to enter an appearance, chose not to file an answer that would have made known to the court his client's defense, and allowed Frosh to continue on as Independent's sole counsel of record. He followed this course of action with full knowledge that service of motions and documents and notice of the entry of orders and judgments are given only to a party's attorney of record. See Rules 5(b) and 77(d), Federal Rules of Civil Procedure.

Months passed and Sher heard from no one. Nonetheless, he continued heedlessly to assume that all was well. It was not. Universal's attorneys filed motions for summary judgment against both defendants and a hearing date of April 7, 1972, was set. Notice was sent to Frosh—the only counsel of record for both defendants. Frosh failed to appear at the hearing, sending instead to Universal's counsel the following letter, which although dated April 6, 1972, did not reach counsel's office until April 10, three days after summary judgment had been granted:

I am sorry for the long hiatus in our correspondence. I am not opposing your motion for summary judgment and you may so advise the Court on the hearing this week.

In the absence of a contesting party, Judge Northrop signed two orders granting summary judgment, one against Bernard Lust and the other against Independent, each for approximately $25,000. Notice and copies of the judgments were sent Frosh as the attorney for both defendants. However, Frosh never informed either his putative client, Independent, or Sher of the judgments. It was not until July 11 that Sher learned of the entry of summary judgment against his client and filed a motion for relief from the judgment.

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