Brock v. Unique Racquetball and Health Clubs, Inc.

• Decision Date: 11 March 1986
• Docket Number: D,No. 320,320
• Citation: 786 F.2d 61
• Parties: 27 Wage & Hour Cas. (BN 973, 104 Lab.Cas. P 34,755, 4 Fed.R.Serv.3d 482 William E. BROCK, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. UNIQUE RACQUETBALL AND HEALTH CLUBS, INC., Seyd Khayami and John Gerweck, Defendants-Appellants. ocket 85-6077.
• Court: U.S. Court of Appeals — Second Circuit

Page 61

786 F.2d 61

27 Wage & Hour Cas. (BN 973, 104 Lab.Cas. P 34,755,

4 Fed.R.Serv.3d 482

William E. BROCK, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. UNIQUE RACQUETBALL AND HEALTH CLUBS, INC., Seyd Khayami and John Gerweck, Defendants-Appellants.

No. 320, Docket 85-6077.

United States Court of Appeals Second Circuit.

Argued Oct. 23, 1985.

Decided March 11, 1986.

John E. Schaefer, Jr. and Robert S. Michaels, New York City, for defendants-appellants.

Claire Brady White, U.S. Dept. of Labor, Washington, D.C. (Francis X. Lilly, Sol. of Labor, Monica Gallagher, Acting Assoc. Sol., Linda Jan S. Pack, Counsel for Appellate Litigation, Patricia M. Rodenhausen, Acting Regional Sol., U.S. Dept. of Labor, Washington, D.C., on brief), for plaintiff-appellee.

Before OAKES, NEWMAN, and KEARSE, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

This appeal concerns the procedures to be followed in connection with the entry of a default during the course of a trial. Unique Racquetball and Health Clubs, Inc. and the two individuals who control the corporation's business, Seyd Khayami and John Gerweck, appeal from a default judgment entered by the District Court for the Eastern District of New York (Leonard D. Wexler, Judge) requiring them to pay their employees $257,709.63 for violations of the minimum wage, overtime, child labor, and recordkeeping provisions of the Fair Labor Standards Act, 29 U.S.C. Sec. 201 et seq. (1982). The default was entered because of the failure of appellants' counsel to attend a resumption of a bench trial. Though we agree that counsel's conduct may be properly found to justify a default and entry of a default judgment, we conclude, for reasons that follow, that the matter must be returned to the District Court to afford defendants an opportunity to be heard with respect to the contents of the judgment.

Since the issues considered on this appeal do not concern the factual basis for the violations prosecuted by the Secretary of Labor nor the correctness of the computations of wages due the various employees, the facts need not be recounted. It suffices to note that the record contains abundant evidence supporting the Secretary's contention that numerous persons working for the defendants were employees not paid minimum wages nor overtime payments and were not independent contractors, as claimed by the defendants.

The circumstances leading to the entry of a default may be summarized as follows. The suit was filed on March 15, 1982. Discovery proceedings ensued at a somewhat leisurely pace. After counsel for both sides had been alerted at a pretrial conference that a bench trial would begin in February or March 1985, counsel were specifically notified on February 1, 1985, that trial would begin on February 7. The District Court also scheduled a final pretrial conference for February 1 but was informed that counsel for defendants, John E. Schaefer, Jr., could not attend on that date. The conference was rescheduled for February 2. Schaefer told the Court he could not attend on that date because of a conference scheduled that morning in Queens. The Court contacted Schaefer's office in Manhattan on the morning of February 2 and learned that Schaefer was then in his office. The pretrial conference was rescheduled for February 4. Schaefer told the Court he could not attend on that date. Schaefer attended a pretrial conference on February 5 and requested a postponement of the February 7 trial date, which was denied. He contacted the Court on the afternoon of February 6 and reported that one of his clients, Khayami, was ill and would not be available at the start of the trial.

The trial began on February 7. Schaefer requested an adjournment because of the absence of both Khayami, who he claimed was ill, and Gerweck, whom he claimed he had been unable to contact. Judge Wexler, after recounting Schaefer's prior lack of diligence in readying the case for trial and his efforts to postpone the trial, ordered that the trial commence, but stated that an adjournment would be granted to permit Khayami, whose testimony Schaefer said was vital, to testify. The Court heard testimony from the Secretary's witnesses on February 7 and 8. At that point the Court adjourned the trial, after ascertaining that Schaefer would inform the Court by February 19 as to Khayami's availability to testify. On the 19th Schaefer told the Court that Khayami was now well enough to testify and was available any date other than February 25. On February 21, Schaefer was informed that the trial would be resumed but on a date other than February 25.

In the late afternoon of February 25, the Court notified Schaefer's office that trial would be resumed the following day, February 26. His office reported an inability to locate Schaefer. On the morning of the 26th, Schaefer's office was again contacted by the Court and reported that Schaefer had not appeared at his office nor called his office. Judge Wexler ordered the case to proceed at 1:00 p.m. At that time, the Court was again in contact with Schaefer's office, which reported that Schaefer had telephoned from Manhattan, that he had been made aware of the resumption of the trial, and that he "may" or "may not" attend by 1:00 p.m. The District Judge made one more contact with Schaefer's office and was again given the equivocal report that Schaefer "may" or "may not" attend. Judge Wexler waited until 1:45 p.m., by which time Schaefer neither showed up, sent someone to cover for him, nor contacted the Court. Judge Wexler at that point declared a default and proceeded to take testimony from the Secretary's witnesses then in attendance. Their evidence during the remainder of the afternoon completed the trial record. At the conclusion of the testimony, Judge Wexler called upon counsel for the Secretary to submit a judgment.

On March 15, 1985, the Secretary sent to the Court and to Schaefer a "notice of settlement" with a set of proposed findings of fact, conclusions of law, and judgment. The notice scheduled the settlement for March 21. Schaefer avers that he received these documents on March 18. He promptly prepared and submitted to the District Court a proposed order that would have directed the Secretary to show cause why the default entered on February 26 should not be set aside. The proposed order would also have stayed proceedings concerning entry of judgment until the application to set aside the default was ruled on. Schaefer also submitted an affidavit endeavoring to explain his absence on February 26. He alleged that he never received a message on February 25 from his office to appear before the District Court the following morning, that he attended a state court proceeding on the morning of February 26, and that he first became aware of the rescheduling for the resumption of the District Court action at 11:00 a.m. on February 26 when he called his office. He further stated that he told his office to tell the District Court he could not attend, that he called the District Court Clerk at 12:45 p.m. and got no answer, that he called again at 1:45 p.m. and 2:45 p.m. and received a busy signal on both occasions, and that he had "no choice but to assume my office had informed the Court of my schedule." Schaefer's proposed show cause order and accompanying affidavit were received by the District Court Clerk on March 20.

It is not clear whether anything occurred on March 21, the date scheduled for settlement of the judgment. On March 22, Judge Wexler signed the Secretary's proposed findings of fact, conclusions of law, and judgment, and the Clerk entered the judgment that day. On March 25 Judge Wexler denied Schaefer's application for a show cause order, thereby effectively denying his request to vacate the...