8 F.3d 600 (7th Cir. 1993), 92-3155, Philips Medical Systems Intern. B.V. v. Bruetman

Docket Nº:92-3155, 93-1308 and 93-1901.
Citation:8 F.3d 600
Party Name:PHILIPS MEDICAL SYSTEMS INTERNATIONAL B.V., et al., Plaintiffs-Appellees, v. Martin E. BRUETMAN, et al., Defendants-Appellants.
Case Date:November 01, 1993
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 600

8 F.3d 600 (7th Cir. 1993)




Martin E. BRUETMAN, et al., Defendants-Appellants.

Nos. 92-3155, 93-1308 and 93-1901.

United States Court of Appeals, Seventh Circuit

November 1, 1993

Argued Sept. 13, 1993.

Rehearing Denied Jan. 10, 1994.

Page 601

Robert J. Rubin, Darren B. Watts (argued), David A. Cerda, Altheimer & Gray, Chicago, IL, for plaintiffs-appellees.

James A. McGurk, Dennis A. Bell, Bell & McGurk, Donald L. Metzger (argued), Metzger & Associates, Chicago, IL, Howard A. Shalowitz, St. Louis, MO, for defendants-appellants.

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Before POSNER, Chief Judge, and CUDAHY and KANNE, Circuit Judges.

POSNER, Chief Judge.

These appeals arise out of a $19 million default judgment against Dr. Martin Bruetman and several corporations that he controls. The judgment itself was before us in Philips Medical Systems International, B.V. v. Bruetman, 982 F.2d 211 (7th Cir.1992), and the interested reader is referred to that opinion for the details leading up to its entry; we shall simplify a lot to keep this opinion to a manageable length. A physician of U.S. citizenship but Argentine origin who divides his time between the United States and Argentina, Bruetman is engaged through his corporations in the supply of high-tech medical equipment to clinics and other medical facilities in South America. In 1991, Philips, a Dutch manufacturer of such equipment, brought this suit, claiming that Bruetman, in violation of the RICO statute, had used his corporations to defraud Philips by obtaining equipment from it on the basis of a false promise to pay for the equipment. On February 18, 1992, the district judge entered a default judgment against all the defendants because of Bruetman's refusal to cooperate in discovery and his other contumacious behavior, reviewed in our previous opinion. We affirmed the judgment. But noting that Bruetman had flown to Argentina on February 17, 1992 (precipitating the default judgment), and had remained there ever since, we said that "Bruetman is free to avoid the present contempt and default judgments ... by returning to the United States within thirty days from now for the continuation of the deposition and compliance with the district court's orders." 982 F.2d at 215. He would have to "cooperate fully" in discovery. Id. at 212.

Bruetman returned, responded to a document request by Philips that was pending, and asked the district court to vacate the default judgment. The court refused, primarily because Bruetman had not complied with an order the court had entered, in the course of proceedings to enforce the default judgment, requiring him to deposit in the court the proceeds (more than $800,000) from a sale of Philips equipment that he or one of his corporations had made to a clinic in Chile. The court added that "Dr. Bruetman's chaotic eleventh hour in court document production and its concomitant confusion" had "violated the spirit, if not the substance, of the Seventh Circuit's order that Dr. Bruetman return within 30 days and cooperate fully." Bruetman argues, in the main appeal before us, that the district court abused its discretion by refusing to vacate the default judgment.

A default judgment is the mirror image of a dismissal of a suit for failure to prosecute, a ground of dismissal that we discussed at length in Ball v. City of Chicago, 2 F.3d 752 (7th Cir.1993). Default is failure to defend; failure to prosecute is a plaintiff's default; both a default judgment and a dismissal for failure to prosecute are sanctions for disruptive or dilatory conduct in litigation. The standard for whether to impose them should, therefore, be the same, and a comparison of decisions articulating the standard for the entry of a default judgment with the standard set forth in Ball for dismissals for failure to prosecute indicates that they are the same. Crown Life Ins. Co. v. Craig, 995 F.2d 1376, 1381-82 (7th Cir.1993); Profile Gear Corp. v. Foundry Allied Industries, Inc., 937 F.2d 351, 353-54 (7th Cir.1991). The standards are explicitly merged in Beeson v. Smith, 893 F.2d 930, 931 (7th Cir.1990), and Anchorage Associates v. Virgin Island Bd. of Tax Review, 922 F.2d 168, 177 (3d Cir.1990), although Buck v. Dept. of Agriculture, 960 F.2d 603, 607 (6th Cir.1992), suggests a qualification: since a default judgment tends to be entered earlier in a litigation than a dismissal for want of prosecution, particular care must be taken that the judge does not, in the former case, jump the gun. Nevertheless the standards for the two sorts of sanctioning terminations are very close.

Since dismissals for failure to prosecute and judgments of default are sanctions, they must be analyzed as such. Notice is important, and sanctioning the right party is important--but there was plenty of notice here, and the right party is Bruetman; this is not a case of the lawyer's mistakes being visited on the client. Since sanctions should be proportionate

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to wrongdoing, the district judge should compare the size of the default judgment, discounted by the probability of collection, with the gravity of the defendant's procedural lapses or other misconduct, in deciding whether to enter such a judgment. A $19 million dollar default judgment must therefore give pause, just as a $19 million dollar fine would give pause. The figure exaggerates the realistic size of the sanction, as it is most unlikely that the assets of Dr. Bruetman and the corporations he controls come close to $19 million; and Bruetman's behavior was egregious. Yet the panel that decided the previous appeal was sufficiently impressed by the magnitude of the judgment to rule that Bruetman must be given a second chance, upon certain conditions.

Still, the court affirmed the default judgment without modification. The most sensible interpretation of the affirmance and accompanying opinion, we believe (no member of this panel was a member of the earlier one), is that in an effort (futile, as...

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