Emcasco Ins. Co. v. Sambrick, 87-1145

Decision Date27 November 1987
Docket NumberNo. 87-1145,87-1145
PartiesEMCASCO INSURANCE COMPANY v. Louis SAMBRICK, Appellant.
CourtU.S. Court of Appeals — Third Circuit

Patrick J. Connors (argued), Media, Pa., Austin J. McGreal, Philadelphia, Pa., for appellant.

Joanne S. Faul (argued), James W. Hennessey, Sherr & Zuckerman, P.C., Norristown, Pa., for appellee.

Before SLOVITER and STAPLETON, Circuit Judges, and BROTMAN, District Judge. *

OPINION OF THE COURT

SLOVITER, Circuit Judge.

The issue presented by this appeal is whether the district court's order denying defendant's motion to set aside a default judgment constituted an abuse of discretion. Because the procedure followed in the district court failed to accord with that established by this court, we conclude that the order appealed from must be reversed.

I.

Appellant Louis Sambrick, who was the defendant in the district court, was sued in separate actions in September, 1986 in Pennsylvania state court by Donna Joann Selvoski and Timothy F. Duggan. Selvoski and Duggan both alleged that they were injured by Sambrick on September 19, 1985, when he, while visibly intoxicated, assaulted them in a bar.

Sambrick carried homeowners insurance with EMCASCO Insurance Company covering, inter alia, claims made for bodily injury and the defense of such lawsuits. Excluded from coverage was injury or damage "expected or intended by the insured." App. at 13.

EMCASCO filed a diversity suit in the United States District Court for the Eastern District of Pennsylvania shortly after the Selvoski suit was filed seeking a declaratory judgment that the injuries incurred by Selvoski, if proven, were "expected and intended" by Sambrick and therefore excludable from coverage under Sambrick's policy. EMCASCO filed an amended complaint on November 6, 1986, seeking a similar declaration of nonliability as to the claims of Duggan as well.

Even though Sambrick had not yet been served with either the complaint or the amended complaint, District Judge Weiner held a telephone conference on December 1, 1986, with counsel for EMCASCO and Ralph M. Russo, counsel for Selvoski in state court. Russo identified Selvoski as a "proposed intervenor." Shortly after the telephone conference EMCASCO's counsel sent a letter dated December 4, 1986 to the court, with a copy to Russo, which confirmed the following arrangements:

1. "[I]t is [the] responsibility [of EMCASCO's counsel] to serve ... Sambrick ... and file an Affidavit of Service with the Court as soon as service has been effectuated";

2. EMCASCO's attorney "will file the appropriate Motion to bring this matter before the Court for disposition on or before December 30, 1986";

3. EMCASCO's discovery "will be completed by January 30, 1987 and after conclusion of Plaintiff's discovery, the Court will allow any appropriate amendment to whatever Motion has been filed on behalf of the Plaintiff";

4. "Defendant's [Sambrick's] discovery will be completed by February 20, 1987"; and;

5. "The pretrial conference in this matter scheduled for December 5, 1986 ... has been cancelled."

App. at 47.

EMCASCO served Sambrick with its amended complaint on December 2, 1986 the day following the telephone conference with the district court in which Sambrick was not represented. Sambrick did not file a timely answer, and on December 31, 1986 EMCASCO filed an affidavit requesting default judgment, which was served on Sambrick. After Russo learned of this requested default from Sambrick, he referred Sambrick to an attorney, Patrick J. Connors. Also, Russo, the attorney for the "proposed intervenor" who had not yet taken any steps to intervene, requested a second telephone conference with the district court. Judge Weiner held such a conference with Russo and counsel for EMCASCO on January 14, 1987, but again without Sambrick or anyone representing him. There is no indication on the record that Sambrick was notified of this conference.

Once again, a letter from EMCASCO's counsel to the district court with a copy to Russo served to confirm the arrangements reached at the January 14 telephone conference. By letter of January 16, 1987, counsel for EMCASCO wrote:

If no Answer is filed on behalf of Defendant, Louis Sambrick, by January 16, 1987, Your Honor will enter the Order which was filed with the Clerk of the Court on December 31, 1986 entering judgment in favor of Plaintiff, EMCASCO Insurance Company. Mr. Russo, the attorney for Donna Selvoski, will file a Motion for Interpleader if he intends to interplead in this case.

The discovery deadline set down by Your Honor on December 1, 1986 will continue to be in effect.

App. at 48. This letter was not served on Sambrick nor on his attorney Patrick Connors, who had entered his appearance for Sambrick on January 15, 1987.

The district court, by order dated January 16, 1987 (the date of EMCASCO's confirmation letter), which was filed January 20, 1987, entered judgment for EMCASCO against Sambrick, declaring specifically that EMCASCO is not required to indemnify Sambrick for Selvoski's or Duggan's claims; that EMCASCO is not responsible to provide a defense for Sambrick against those claims; and that Selvoski, Duggan, and Sambrick are prohibited and enjoined from garnishing any of EMCASCO's assets as a result of any judgment or award against Sambrick. App. at 42-43. 1

Sambrick filed a motion on February 3, 1987 to set aside the default judgment together with a proposed answer. The motion was supported by an affidavit of Russo stating: "Mr. Russo's recollection of the conference was that Mr. Patrick Connors was to Enter his Appearance by January 16, 1987, in order to avoid Default Judgment being entered against Defendant, Louis Sambrick. With this understanding, Mr. Connors entered his appearance on January 15, 1987." App. at 46. The district court denied Sambrick's motion to set aside the entry of default judgment, and the matter is before us on Sambrick's appeal.

II.

This court has time and again reiterated that "[i]n exercising our appellate function to determine whether the trial court has abused its discretion in dismissing, or refusing to lift a default, we will be guided by the manner in which the trial court balanced [certain enumerated] factors." Poulis v. State Farm Fire and Casualty Co., 747 F.2d 863, 868 (3d Cir.1984). The applicable factors that the district court must consider are: (1) whether lifting the default would prejudice the plaintiff; (2) whether the defendant has a prima facie meritorious defense; (3) whether the defaulting defendant's conduct is excusable or culpable; and (4) the effectiveness of alternative sanctions. See Zawadski De Bueno v. Bueno Castro, 822 F.2d 416, 419-20 (3d Cir.1987); Scarborough v. Eubanks, 747 F.2d 871, 875-78 (3d Cir.1984); Hritz v. Woma Corp., 732 F.2d 1178, 1181 (3d Cir.1984); United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194-95 (3d Cir.1984); In re MacMeekin, 722 F.2d 32, 35 (3d Cir.1983); Gross v. Stereo Component Systems, Inc., 700 F.2d 120, 122 (3d Cir.1983); Feliciano v. Reliant Tooling Co., Ltd., 691 F.2d 653, 656 (3d Cir.1982); Farnese v. Bagnasco, 687 F.2d 761, 764 (3d Cir.1982); Donnelly v. Johns-Manville Sales Corp., 677 F.2d 339, 342 (3d Cir.1982).

In order that we may properly exercise our function of reviewing for abuse of discretion, we have further required the district court to make explicit findings concerning the factors it must consider in rendering judgment by default or dismissal, or in declining to reopen such judgment. See Farnese, 687 F.2d at 765-66; see also Ali v. Sims, 788 F.2d 954, 957 (3d Cir.1986); In re MacMeekin, 722 F.2d at 34-36; Madesky v. Campbell, 705 F.2d 703, 705 (3d Cir.1983); Donnelly, 677 F.2d at 341 n. 2; Quality Prefabrication, Inc. v. Daniel J. Keating Co., 675 F.2d 77, 81 (3d Cir.1982); Harris v. Cuyler, 664 F.2d 388, 390 (3d Cir.1981).

It is patently clear that the district court did not pursue the analysis mandated by our precedent. For example, there was no consideration given to whether Sambrick's proffered answer raised a potentially meritorious defense. In that answer, Sambrick denies that he "expected and intended" the injuries sustained by Selvoski and Duggan within the meaning of his insurance policy, "since [Sambrick's] intoxication precluded him from having the mental state necessary to 'expect or intend' the results of his alleged actions." App. at 51. Although EMCASCO argues that the defense of intoxication will not be sustained by the Pennsylvania courts, it cites no Pennsylvania authority to support its argument. Sambrick, on the other hand, relies on the Pennsylvania Superior Court's opinion in Nationwide Mutual Insurance Co. v. Hassinger, 325 Pa.Super. 484, 473 A.2d 171 (1984). In that case, which also involved an action brought by an insurer on a similar policy, the Superior Court approved jury instructions charging that the intoxicants imbibed by the insured were to be considered in determining if he had the ability to formulate an intent, and that if one does not have the ability to formulate an intent, the resulting act is not intentional. The Superior Court commented that the charge was "a fair statement of the law of Pennsylvania." Id. at 493, 473 A.2d at 176.

This language used by the Superior Court suggests that the allegations of Sambrick's proffered answer, if established at trial, may constitute a complete defense to the action. See Poulis, 747 F.2d at 870. We need not decide the legal issue at this time; it is sufficient that Sambrick's proffered defense is not "facially unmeritorious." Gross, 700 F.2d at 123.

Another relevant factor which the district court did not address was whether EMCASCO would be prejudiced if the default judgment were vacated. Sambrick's motion to set aside the default judgment was filed two weeks after its entry. EMCASCO has not argued that it was prejudiced because its ability to pursue the...

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