560 F.2d 805 (7th Cir. 1977), 76-2151, Ben Sager Chemicals Intern., Inc. v. E. Targosz & Co.

Docket Nº:76-2151.
Citation:560 F.2d 805
Party Name:BEN SAGER CHEMICALS INTERNATIONAL, INC., Plaintiff-Appellee, v. E. TARGOSZ & CO., Defendant-Appellant, and Thorson Chemical Corp., Defendant-Appellee.
Case Date:August 17, 1977
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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560 F.2d 805 (7th Cir. 1977)

BEN SAGER CHEMICALS INTERNATIONAL, INC., Plaintiff-Appellee,

v.

E. TARGOSZ & CO., Defendant-Appellant,

and

Thorson Chemical Corp., Defendant-Appellee.

No. 76-2151.

United States Court of Appeals, Seventh Circuit

August 17, 1977

Argued April 19, 1977.

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David J. Griffin, Chicago, Ill., for defendant-appellant.

Peter B. Freeman, Lionel Gross, John C. Loring, Chicago, Ill., for plaintiff-appellee.

Before PELL, TONE and WOOD, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

Defendant-appellant E. Targosz and Company (hereinafter referred to as defendant) appeals from the district court's denial of relief from a final judgment pursuant to Fed.R.Civ.P. 60(b)(1) and (6). 1 Defendant

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also asserts that this case was improperly removed from state court. For the following reasons, we affirm the judgment of the district court.

The facts are as follows.

Plaintiff-appellee Ben Sager Chemicals, International, Inc. (hereinafter referred to as plaintiff) filed a two count complaint in the Circuit Court of Cook County, Illinois against defendant and Thorson Chemical Corporation (hereinafter referred to as Thorson). Plaintiff alleged in Count 1 that defendant breached a contract requiring defendant to purchase 300,000 gallons of methanol from plaintiff at 76cents per gallon. Plaintiff in Count 2 sought declaratory relief against Thorson. Specifically, plaintiff requested in Count 2 that the court find that an oral conversation between plaintiff and Thorson did not create a contract requiring plaintiff to accept delivery of 300,000 gallons of methanol from Thorson.

On April 11, 1975, Thorson filed a Petition for Removal pursuant to 28 U.S.C. § 1441(a) and (c). 2 Thorson thereafter filed an answer and counterclaim in federal court. A copy of this answer and counterclaim with the caption "United States District Court, Northern District of Illinois, Eastern Division" was sent to defendant's office. Defendant did not then contest the propriety of Thorson's petition for removal.

Thorson on June 4, 1975, filed a motion requesting that defendant produce documents for inspection and copying. Similarly, plaintiff on July 9, 1975, served interrogatories on defendant and also requested that defendant produce documents. A copy of the above discovery requests were sent to Alan Edelstein, attorney for defendant.

On July 28, 1975, Thorson filed a motion pursuant to Fed.R.Civ.P. 37 to compel defendant to produce documents. Thorson alleged that defendant had failed either to produce documents or state objections to the requested discovery. Thorson also alleged that defendant's lawyer had ignored and refused to answer any of the telephone inquiries made by counsel for Thorson. The district court on August 5, 1975, granted Thorson's motion to compel production of documents.

After defendant continued to fail to comply with Thorson's discovery request, Thorson on September 15, 1975, filed a motion pursuant to Fed.R.Civ.P. 37(d)(2) seeking to impose sanctions against defendant. On September 16, 1975, Salvatore Abbene, an attorney acting on behalf of Edelstein, turned over copies of some of the requested documents. Abbene also delivered a letter from Edelstein to Thorson which stated that defendant was still searching its records for the remainder of the requested documents. The district court on September 17, 1975, held a hearing on Thorson's Rule 37 motion. Defendant's attorney did not attend the hearing. The district court in granting Thorson's motion on September 19, 1975, required defendant to pay Thorson the sum of $525.50 as reasonable expenses caused by defendant's failure to produce the requested documents.

Plaintiff on September 23, 1975, filed a motion pursuant to Fed.R.Civ.P. 37(d) for judgment and costs against defendant for failure to comply with discovery requests. Although defendant's attorney was notified that the motion would be presented in court on October 1, 1975, defendant's attorney failed to attend the court proceeding. The

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district judge, therefore, entered judgment against defendant in the amount of $137,118.66, together with interest and costs.

Thereafter, plaintiff and Thorson entered into a settlement agreement. Pursuant to the settlement agreement, plaintiff assigned its judgment against defendant to Thorson. The settlement further set forth a schedule for dividing proceeds collected from the judgment between plaintiff and Thorson. Because of this settlement agreement, the district judge on February 19, 1976, dismissed the remainder of plaintiff's suit and Thorson's counterclaim.

Thorson on August 18, 1976, sought to execute the judgment against defendant. Defendant on August 26, 1976, filed a motion pursuant to Fed.R.Civ.P. 60(b)(1) and (6) for relief from the judgment.

Defendant asserted in support of its Rule 60(b)(1) and (6) motion that the neglect of Edelstein resulted in entry of the default judgment. Defendant submitted affidavits from Eugene Targosz, an officer of and shareholder in defendant, and Nancy Targosz, corporate secretary of defendant, to support this argument. Through the affidavits, defendant made the following contentions. First, the affidavits asserted that Edelstein failed to inform defendant about the following: 1) that the case had been removed to federal court; 2) that requests for defendant to produce documents and answer interrogatories had been submitted by the other parties in the suit; and 3) that court ordered sanctions and a default judgment had been imposed because of noncompliance with the discovery requests. Defendant also claimed diligence in determining the status of the case. Defendant through the affidavits contended that during the summer of 1975 and in September and October of 1975, while consulting with Edelstein on other legal matters, Edelstein assured defendant that all was proceeding normally in the case at bar. Defendant further claimed that it was first informed that a default judgment had been entered when a citation to discover assets was served on defendant on August 16, 1976. Defendant stated that after learning of the default judgment and after attempting without success to contact Edelstein, defendant retained a new attorney, David J. Griffin. Defendant further claimed that it learned for the first time on August 19, 1976, through Griffin's efforts that Edelstein had been disbarred on January 26, 1976.

The district court denied defendant's Rule 60(b) motion. In denying defendant's contention that relief was proper under Rule 60(b)(1), the district judge concluded that Edelstein's actions in failing to represent the interests of his client did not constitute excusable neglect. The district judge relying on L. P. Steuart, Inc. v. Matthews, 117 U.S.App.D.C. 279, 329 F.2d 234 (1964), cert. denied, 379 U.S. 824, 85 S.Ct. 50, 13 L.Ed.2d 35, then assumed that relief could be available under Rule 60(b)(6) to a diligent client where the attorney's actions are grossly inexcusable. The district court, however, after balancing the equities also denied relief under Rule 60(b)(6). The district judge placed emphasis on the reliance of plaintiff and Thorson on the default judgment in entering into the settlement agreement. The district judge also indicated that it was not fully convinced of the diligence of defendant:

From the affidavits and the briefs it is apparent that Targosz was content to consult with Edelstein once or twice a year with regards to a substantial contract claim filed against it. Indeed it seems that Targosz did not attempt to obtain information on the case for over nine months between October, 1975, and August, 1976. Targosz seemed content to rely upon the probability that the suit was stagnating in the overcrowded dockets of the state courts. Furthermore, a commercial enterprise that engages in large-scale business transactions should be held to a higher standard of diligence * * * At some point even clients who have been deceived by their counsel must be held to have knowledge of judgments entered in their case * * * (Citations omitted).

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Finally, the district judge noted that defendant was not left without remedy since defendant could sue Edelstein for malpractice.

A district court will not be reversed for a denial of a Rule 60(b) motion in the absence of an abuse of discretion. Beshear v. Weinzapfel, 474 F.2d 127, 130 (7th Cir. 1973); Sadowski v. Bombardier Ltd., 539 F.2d 615 (7th Cir. 1976). "Rule 60(b) provides for extraordinary relief and may be invoked only upon a showing of exceptional circumstances." DiVito v. Fidelity and Deposit Company of Maryland, 361 F.2d 936, 938 (7th Cir. 1966).

Relief from a judgment entered due to error of counsel is generally sought pursuant to Rule 60(b)(1) on the theory that counsel's error constitutes mistake or excusable neglect. United States v. Cirami, 535 F.2d 736 (2d Cir. 1976). In order to qualify for Rule 60(b)(1) relief, the "movant must demonstrate that he has a meritorious defense and that arguably one of the four conditions for relief applies mistake, inadvertence, surprise or excusable neglect." Universal Film Exchanges, Inc. v. Lust, 479 F.2d 573, 576 (4th Cir. 1973); Accord Gomes v. Williams, 420 F.2d 1364, 1366 (10th Cir. 1970). Neither ignorance nor carelessness on the part of a litigant or his attorney provide grounds for relief under Rule 60(b)(1). Bershad v. McDonough, 469 F.2d 1333, 1337 (7th Cir. 1972).

Defendant admits that its former attorney, Edelstein, was guilty of neglect. Defendant asserts, however, that Edelstein's conduct was excusable since Edelstein was preoccupied with other legal matters and beset with personal problems such as disbarment. There is, however, nothing in the record to...

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