ALLSTATE FLORIDIAN INS. v. RONCO INVENT.

• Decision Date: 03 December 2004
• Docket Number: No. 2D03-5900.,2D03-5900.
• Citation: 890 So.2d 300
• Parties: ALLSTATE FLORIDIAN INSURANCE CO., an Illinois corporation, a/s/o Tom Metzger, Appellant, v. RONCO INVENTIONS, LLC, a California corporation; and Popeil Inventions, Inc., a Nevada corporation, Appellees.
• Court: Florida District Court of Appeals

890 So.2d 300

ALLSTATE FLORIDIAN INSURANCE CO., an Illinois corporation, a/s/o Tom Metzger, Appellant, v. RONCO INVENTIONS, LLC, a California corporation; and Popeil Inventions, Inc., a Nevada corporation, Appellees.

No. 2D03-5900.

District Court of Appeal of Florida, Second District.

December 3, 2004.

Mark A. Greenberg of Powers, McNalis & Torres, West Palm Beach, for Appellant.

Jeffrey D. Kottkamp of Henderson, Franklin, Starnes & Holt, Fort Myers, for Appellees.

DAVIS, Judge.

Allstate Floridian Insurance Company ("Allstate") appeals the order entered by the trial court setting aside the final default judgment previously entered against Ronco Inventions, LLC ("Ronco"), and Popeil Inventions, Inc. ("Popeil"). We reverse.

Ronco is a California corporation engaged in manufacturing and selling consumer products throughout the United States. Popeil is a Nevada corporation that is engaged in a similar business. One of the products made and distributed by Ronco and Popeil is the Showtime Rotisserie and BBQ Oven.

The instant action commenced when a consumer, Tom Metzger, purchased a Showtime Rotisserie and BBQ Oven, which he claimed was defective, causing him to suffer a fire loss at his residence. As the insurer of Metzger's residence, Allstate became subrogated to Metzger's rights of recovery against Ronco and Popeil (collectively "Appellees").

Allstate filed its complaint in Lee County on May 7, 2003. Popeil's resident agent was served on May 21, 2003, and Ronco's resident agent was served on June 4, 2003. On June 27, 2003, neither Ronco nor Popeil having filed an answer, Allstate moved for default and mailed copies of the motion to each Appellee's resident agent. On June 30, 2003, the clerk entered a default against each Appellee as to liability. The face of each of the defaults indicates that a copy of the default was mailed to each Appellee's resident agent. On July 30, 2003, Allstate filed affidavits in support of the damages it claimed. Notices of filing these affidavits were served by mail on Appellees' respective resident agents. The trial court entered final default judgment on August 7, 2003, a copy of which was mailed to each of the Appellee's respective resident agents. On September 25, 2003, seven weeks after the August 7, 2003, entry of final default judgment, Ronco and Popeil filed a motion to vacate the final judgment.¹ In their motion, Appellees alleged that they had followed their normal corporate policy of delivering the complaint to their insurance carrier, assuming that the carrier would commence immediate representation of their interests. They further alleged that they had no notice that the insurance company had not assigned an attorney to file a responsive pleading until they received a copy of the final default judgment entered on August 7, 2003. They argued that they had a meritorious defense and that they acted diligently after they learned that the default had been entered.

For a trial court to grant a motion to set aside a default final judgment, the defaulted party must show three things: (1) that the failure to file a responsive pleading was the result of excusable neglect; (2) that it has a meritorious defense; and (3) that it acted with due diligence in seeking relief from the default. Goodwin v. Goodwin, 559 So.2d 109 (Fla. 2d DCA 1990). Here, Allstate conceded that Appellees' answers raised a meritorious defense; however, it argued that Appellees did not demonstrate excusable neglect or show that they acted with due diligence once they learned of the default.

The trial court ruled in favor of Appellees and set aside the default, concluding that their neglect was excusable since they followed their normal policy and depended upon the insurance carrier to defend them. The trial court also concluded that Appellees' act of filing the motion some seven weeks after learning of the entry of final judgment was sufficient to establish that they had acted with due diligence. While we agree with the trial court's conclusion that Appellees demonstrated excusable neglect, we disagree with its finding that they demonstrated due diligence.

For this court to reverse an order granting a motion for relief from a default, the appellant must show a gross abuse of discretion by the trial court. Marshall Davis, Inc. v. Incapco, Inc., 558 So.2d 206 (Fla. 2d DCA 1990). This extremely high standard of review reflects the implementation of the "principle of liberality" in setting aside defaults so that lawsuits may be decided on their merits. Lindell Motors, Inc. v. Morgan, 727 So.2d 1112, 1113 (Fla. 2d DCA 1999) (citing Bland v. Viking Fire Protection, Inc. of the Southeast, 454 So.2d 763 (Fla. 2d DCA 1984)). The troublesome nature of our review here is the admittedly high "gross abuse of discretion" standard. The definition of an abuse of discretion has been provided by the Florida Supreme Court in Canakaris v. Canakaris, 382 So.2d 1197, 1203 (Fla.1980):

Discretion ... is abused when the judicial action is arbitrary, fanciful, or unreasonable, which is another way of saying that discretion is abused only where no reasonable man would take the view adopted by the trial court. If reasonable men could differ as to the propriety of the action taken by the trial court, then it cannot be said that the trial court abused its discretion.

However, we have no definition of what a "gross" abuse of discretion includes or how it differs from an abuse of discretion.² We can only assume that it is more egregious than a typical abuse of discretion.

In this case, Appellees successfully established the existence of two of the three factors required to set aside a default final judgment. First, Allstate does not contest the fact that Appellees raised a meritorious defense. Second, Appellees' claims of excusable neglect were sufficient to overcome the gross abuse of discretion standard of review given the fact that they claimed to have followed their normal corporate practice of submitting the complaints to their insurance carrier, which then failed to file timely answers. See Mercury Marine Indus., Inc. v. Dillon, 779 So.2d 356 (Fla. 2d DCA 2000)

; Kapetanopoulos v. Herbert, 449 So.2d 947 (Fla. 2d DCA 1984). But see Westinghouse Credit Corp. v. Steven Lake Masonry, Inc., 356 So.2d 1329, 1330 (Fla. 4th DCA 1978) ("Negligence by a litigant's representative may be grounds for an independent suit, but it will not support the setting aside of a default judgment save under exceptional circumstance.").

However, the third prong of the test, whether Appellees acted with due diligence, is a more troublesome issue. At the hearing on the motion to set aside the final judgment and default, the trial court found that the motion was filed seven weeks after the entry of the final judgment. Appellees' counsel agreed with that finding. Accordingly, we must determine whether, in light of all the circumstances of this case, the trial court's conclusion that Ronco and Popeil acted with due diligence was a gross abuse of discretion. See Apolaro v. Falcon, 566 So.2d 815 (Fla. 3d DCA 1990)

. We conclude that it was.

At the hearing on the motion, trial counsel for Ronco and Popeil argued that Techvend, Inc. v. Phoenix Network, Inc., 564 So.2d 1145 (Fla. 3d DCA 1990), supported their claim that they had demonstrated due diligence. However, Appellees completely misconstrued Techvend. Appellees argued that Techvend and Garvin v. South Carolina Insurance Co., 528 So.2d 929 (Fla. 2d DCA 1988), which was cited with approval in Techvend, stood for the proposition that any delay of up to six months was acceptable in the Second District. In reality, Techvend found a three-month delay to be unacceptable. It cited Garvin as support because Garvin had found a six-month delay to be unacceptable, not acceptable, as argued by Appellees. Thus, not only can Techvend not be read to set the upper limit of reasonable delay at six months, it stands for the proposition that a three-month delay is unreasonable and that, pursuant to Fischer v. Barnett Bank, 511 So.2d 1087 (Fla. 3d DCA 1987), even a five-week delay may be considered unreasonable. Therefore, any reliance that the trial court placed on Appellees' interpretation of Techvend as allowing a six-month delay was misplaced.

Moreover, most of the recent cases out of this court that have found the existence of due diligence have involved time periods of but a few days. For example, in Coquina Beach Club Condominium Ass'n v. Wagner, 813 So.2d 1061 (Fla. 2d DCA 2002), a one-week delay from the time the defendant learned of the existence of the default until it filed a motion to set it aside was considered due diligence. In Lindell Motors, 727 So.2d 1112, a three-day delay was determined to be reasonable. Likewise, six days was found to constitute due diligence in Goodwin, 559 So.2d 109. In Marshall Davis, 558 So.2d 206, the accepted delay was fifteen days; in Ponderosa, Inc. v. Stephens, 539 So.2d 1162 (Fla. 2d DCA 1989), a next-day filing was considered reasonable.

In sum, it appears that although this court has found that a fifteen-day delay constitutes due diligence while a six-month delay does not, we have enunciated no "bright line" rule by which to measure the seven weeks that expired in this case. In the absence of such a rule, we must measure this period of time by the standard of reasonableness, which necessarily requires us to consider not only the duration of the delay, but also any other factors that might bear upon the issue of reasonableness.

In examining the reasonableness of a delay in seeking relief from a default and resulting final judgment, Techvend suggested that as a "rule of thumb," we might start with the period in which a defendant must file his answer after initially being served, i.e., twenty days.

While the theoretical underpinning of the due diligence requirement has perhaps not so far been fully explicated, it would appear that the requirement that one move

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