Chicago Downs Ass'n, Inc. v. Chase, s. 90-2078

Citation944 F.2d 366
Decision Date26 September 1991
Docket Number90-2672,Nos. 90-2078,s. 90-2078
PartiesCHICAGO DOWNS ASSOCIATION, INC., Plaintiff-Appellee, v. Dennis R. CHASE, doing business as Sports Achievements Association, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Thomas D. Nash, Jr. (argued), Nash & Lalich, Chicago, Ill., for plaintiff-appellee.

Wayne F. Plaza (argued), Edward Dismukes, Rooks, Pitts & Poust, Chicago, Ill., for defendant-appellant.

Before COFFEY, MANION and KANNE, Circuit Judges.

MANION, Circuit Judge.

Dennis R. Chase appeals the district court's entry of summary judgment against him in a breach of contract action brought by Chicago Downs Association, Inc. Chicago Downs owns and operates a parimutuel horse racing track in Illinois. Chase had sold Chicago Downs what is in essence risk insurance, protecting the race track from loss in the event the track had not collected a sufficient amount of funds to cover the guaranteed payout of $50,000 to the winner of a multiple race wager called the "Super Bet." Chicago Downs filed suit, and, during the course of this case, submitted a variety of other motions and memoranda, finally filing a motion for summary judgment. Chase's attorney, Thomas J. Royce, repeatedly failed to file responsive pleadings, communicate with opposing counsel, or attend status conferences or prove-ups. Summary judgment was entered against Chase for $136,807 plus costs. The court also permitted Chicago Downs to register its judgment in Chase's domicile of California to forestall purposeful asset liquidation.

Chase appeals, claiming he should be spared from the default entry of summary judgment that resulted from Attorney Royce's apparent negligence. He furthermore insists that there are insufficient facts to support a registration of the judgment in California.

We affirm the district court in all respects.

A. Facts

Chicago Downs Association, Inc., an Illinois corporation licensed by the Illinois Racing Board, conducts pari-mutuel harness racing at a racetrack called Sportsman's Park. Dennis R. Chase is a California businessman who owns and operates an unincorporated enterprise called Sports Achievements Association. Chase provides risk reimbursement coverage on special promotional sporting events like hole-in-one contests at golf courses, fishing derbies, bingo games, and "300" games (a perfect score) bowled in bowling tournament league play. In 1980, one of his first years in business, Chase "insured" 1,200 such events which offered prizes worth a total of $10 million. He collected $360,000 in gross premiums and fees and paid off 19 winners worth $160,000.

Beginning in 1985, Chicago Downs offered at its Sportsman's Park track a pari-mutuel wagering pool called the "Super Bet." In order to win the Super Bet, the bettor was required to select the first two horses to finish in exact order in both the fifth and sixth races and the first three horses to finish in exact order in the seventh race. The wager was $1.00. In the event there was more than one winner on a particular evening, the pool was divided evenly among the winning tickets. The Super Bet pool increased rapidly because unawarded amounts from one night's betting were added to the next night's purse. Between the years 1985 and 1988, it was not uncommon for the collectable Super Bet pool to exceed several hundred thousand dollars.

In 1988 Chicago Downs decided that they wanted to establish a $50,000 minimum payout to the winner of the Super Bet. Chicago Downs received permission from the Illinois Racing Board to supplement the Super Bet pool by $50,000. Therefore, Chicago Downs was able to offer a daily minimum of $50,000 regardless of whether that amount had been independently created by patrons' wagers and the rollover of existing pools.

Through a broker Chicago Downs determined Chase provided the most competitive premium for risk reimbursement coverage for the $50,000 minimum payout. Chase agreed to provide coverage and drafted an "Agreement of Reimbursement." The Agreement, effective between July 30 and December 31, 1988, provided in part that any time Chicago Downs was required to pay a Super Bet winner the guaranteed minimum of $50,000 when less than that amount was in the Super Bet pool, Chase was obligated to reimburse Chicago Downs in an amount equal to $50,000 minus the amount then in the pool. The Agreement imposed liability limits on Chase of $150,000 in the aggregate, with no single occurrence payment to exceed the sum of $50,000. In consideration for potential future reimbursement, Chicago Downs paid Chase $15,000.

Unfortunately for Chase, on three occasions the bettors beat the track and won the $50,000 minimum when the Super Bet pool had accumulated far less. The total deficit subject to reimbursement under the Agreement exceeded $125,000. Immediately following each of the payouts to each of the winning Super Bet tickets, Chicago Downs alerted Chase of that fact, furnished Chase with proof of payment to the winners, and complied with the other reporting procedures required by the Agreement. Chicago Downs made demand on Chase for reimbursement with respect to each of the covered occurrences pursuant to the terms of the Agreement. Chase refused to make such payments to Chicago Downs.

Chicago Downs filed in U.S. District Court a breach of contract suit against Chase (d/b/a Sports Achievement Association) in an effort to recover the contracted-for reimbursement of its losses for three Super Bet payouts inadequately capitalized by the accumulated wagering pool. Chicago Downs filed a one-count complaint seeking liquidated damages for the three occurrences covered by the Agreement equal to $126,432.75. Chicago Downs also asked for an award of prejudgment interest as permitted by Illinois law on liquidated contract damages and costs of the suit. This complaint was dismissed by the district court for lack of jurisdiction because Chicago Downs failed to properly plead diversity of the parties. The complaint was amended and refiled August 22, 1989.

On August 25, 1989, Attorney Thomas J. Royce filed an appearance with the court on behalf of Dennis Chase. Soon thereafter the court vacated the earlier dismissal of the complaint and ordered Chase to respond to the amended complaint by September 21, 1989. A status hearing for September 25, 1989 was also established.

On September 25, 1989, the district court entered a default judgment against Chase because "[d]efendant failed to appear for the status hearing," and "[d]efendant failed to respond to the complaint." The judge remarked at the status hearing: "I have got no alternative, I think, except to default him to see if that gets some action out of [Chase and Royce]." The judge was surprised at the lack of any response to the complaint and the failure of the defense to appear at the status conference. The judge noted: "[t]his is not like Tom Royce[ ]. He is a very good dependable lawyer and he hasn't shown up and he hasn't answered, and unless somebody is not paying him or something, and he hasn't communicated with [plaintiff's counsel]." The judge at that time set October 4, 1989 as the date for the parties to appear and prove-up damages. On October 4, Royce once again failed to appear at the proveup, nor did he file any motions with the court in the meantime asking for relief. Counsel for Chicago Downs appeared with a witness and was successful in getting default judgment damages on the Agreement of $126,432.75 plus costs of $266.05. The court entered judgment for this amount. In so awarding, the court remarked: "[I] was surprised that Mr. Royce did not show up because he is a very, very dependable lawyer. I cannot presume that his absence is an accident."

A few days later, on October 12, the district court finally did "get some action out of" Royce. On that day Royce filed a Motion to Vacate Default Judgment. Royce, in support of his motion, appeared before the court to explain that his failure to file a response to Chicago Downs' complaint, or appear at the status hearing or appear at the prove-up was due to the fact that he had not received the amended complaint or any of the proper notices for the hearing and prove-up in the mail. Royce also confessed to having misunderstood a posted bulletin concerning the date by which the amended complaint was to be filed. Royce prefaced the hearing with a public announcement: "First of all, I would like to spread of record that it is public knowledge that I have been charged with a misdemeanor complaint. I have conferred with my client relative to this matter and he believes that it would have no effect on my representation of him in this case." This comment is the only record reference of Chase's assessment of Royce's representation. The court vacated the prove-up, vacated the default judgment and ordered Royce to answer the complaint by October 19, 1989. Status conference was set up for November 13, 1989.

Royce did not file an answer to the complaint on behalf of the defendant until October 31, 1989--twelve days late. He also failed to attend the previously scheduled status conference of which he was personally notified by the district court judge. Nevertheless, the court reset the status hearing for January 16, 1990, and established a discovery cutoff for January 16 as to all written discovery and depositions of the "principals." The judge's ire at being ignored by Royce again was tempered as indicated by his comment: "Mr. Royce isn't here ... I think he's on trial isn't he?" and "[I] know he has been beset with a host of difficulties of recent weeks. I think I will take that into consideration."

At the January 1990 status conference, Royce was given leave to file Chase's affirmative defenses to Chicago Downs' complaint. These were filed January 17, 1990. Also, Chicago Downs was given leave to file a Motion for Summary Judgment by February 5, 1990, with the...

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