Hotels, Inc. v. Kampar Corp.

• Decision Date: 17 March 1998
• Docket Number: No. 2,No. 89400,89400,2
• Citation: 964 P.2d 933,1998 OK CIV APP 93
• Parties: 1998 OK CIV APP 93 HOTELS, INC., an Oklahoma corporation, d/b/a Howard Johnson-Remington Park Lodge, Appellee, v. KAMPAR CORPORATION, a California corporation, Appellant, and Brenda McLean, Peak Entertainment International, a partnership, Pentacle Peak Enterprises, Inc., a Texas corporation, Elite Arts International, a texas corporation, Khazar Investments Corporation, J. Gordon Lunn, Liberty Foundation, Latonya Swinney, and Fred Stella, Defendants. Court of Civil Appeals of Oklahoma, Division
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Civil Appeals of Oklahoma

Page 933

964 P.2d 933

1998 OK CIV APP 93

HOTELS, INC., an Oklahoma corporation, d/b/a Howard Johnson-Remington Park Lodge, Appellee, v. KAMPAR CORPORATION, a California corporation, Appellant and Brenda McLean, Peak Entertainment International, a partnership, Pentacle Peak Enterprises, Inc., a Texas corporation, Elite Arts International, a texas corporation Khazar Investments Corporation, J. Gordon Lunn, Liberty Foundation, Latonya Swinney, and Fred Stella, Defendants.

No. 89400.

Released for Publication by Order of the Court of Civil Appeals of Oklahoma, Division No. 2.

Court of Civil Appeals of Oklahoma Division No. 2.

March 17, 1998.

Rehearing Denied April 13, 1998.

Certiorari Denied June 24, 1998.

Appeal from the District Court of Oklahoma County; Bryan Dixon, Trial Judge.

REVERSED AND REMANDED WITH INSTRUCTIONS.

Tom L. King, Linda P. Brown, Scott F. McKinney, King Law Firm, Oklahoma City, for Appellee.

Jerome S. Sepkowitz, Gary L. Levine, Derryberry, Quigley, Solomon & Naifeh, Oklahoma City, for Appellant.

OPINION

BOUDREAU, Judge.

¶1 Defendant Kampar Corporation (Kampar) appeals an order of the trial court refusing to vacate a default judgment previously entered against it as a sanction for discovery misconduct. The issue on appeal is whether the trial court abused its discretion in denying Kampar's timely-filed 12 O.S.Supp.1997 § 1031.1 plea to vacate. After a review of the record on appeal, we find that it did and reverse the trial court order refusing to vacate the default judgment.

I

¶2 Plaintiff Hotels, Inc. (Hotels) filed an action against Kampar, a California corporation, alleging Kampar and other defendants were liable to it for lodging expenses incurred by a touring group known as Russian Ballet on Ice (RBI). Hotels alleged Kampar was liable on the basis that Hotels was third-party beneficiary of tour financing contracts which Kampar allegedly entered into with other defendants.

¶3 Kampar filed an answer pro se. In its answer, Kampar denied all liability to Hotels and denied it had entered into any contract with other defendants to finance the RBI tour.

¶4 On April 10, 1996, Hotels served Kampar with a set of interrogatories and requests for production of documents. Kampar failed to respond to the discovery requests within 30 days. On December 6, 1996, Hotels filed a motion to compel production of discovery against Kampar. The court set a hearing on the motion to compel for December 13, 1996. On that date, the trial court granted the motion to compel, in Kampar's absence, giving Kampar until December 23, 1996, to comply with Hotel's discovery requests.

¶5 On February 12, 1997, Hotels filed a motion for default judgment. On February 21, 1997, the trial court granted default judgment in favor of Hotels and against Kampar in the amount of $69,406.19 with costs of $79 and attorney fees of $2,500. In the order granting default judgment, the trial court made no finding that Kampar's failure to comply with the order compelling discovery was willful or in bad faith.

¶6 Within 30 days of the filing of the default judgment, Kampar secured local counsel and filed a motion to vacate the default judgment. Kampar attached the overdue discovery responses to its motion to vacate. Nevertheless, the trial court denied Kampar's motion to vacate the default judgment. Kampar appeals from this order.

II

¶7 The test for measuring the legal correctness of a trial court's response to a timely-filed section 1031.1 plea is "whether sound discretion was exercised upon sufficient cause shown to vacate, modify, open or correct the earlier decision, or to refuse the relief sought." Advanced Machining & Fabricating, Inc. v. Doty, 1994 OK CIV APP 172, p 6, 894 P.2d 1139, 1140.

III

¶8 Title 12 0.S.Supp.1997 § 3237(B)(2) of the Oklahoma Discovery Code permits a court to issue a variety of sanction orders "if a party ... fails to obey an order to provide or permit discovery." Section 3237(B)(2)(c) provides that one such order may include "[a]n order ... rendering a judgment by default." The task of determining a correct sanction for a discovery violation is a fact-specific inquiry that the trial court is best qualified to make. Therefore, we review the trial court's decision to enter a default judgment under an abuse of discretion standard. See Moor v. Babbitt Products, Inc., 1978 OK 22, 575 P.2d 969.

¶9 At the outset, we recognize that Oklahoma views default judgments with disfavor and has an affirmative policy of affording "every party to an action a fair opportunity to present his side of a cause." Burroughs v. Bob Martin Corp., 1975 OK 80, p 23, 536 P.2d 339, 342. As a sanction, default judgments have been granted only when the discovery misconduct has been willful and extreme. Amoco Production Co. v. Lindley, 1980 OK 6, p 18, 609 P.2d 733, 738. Accordingly, the granting of a default judgment as a sanction should be a method of last resort, rather than first resort.

¶10 Section 3237(B)(2)(c) of the Oklahoma Discovery Code is identical to Rule 37(b)(2)(C) of the Federal Rules of Civil Procedure. A number of federal circuit courts of appeal have addressed the issue of the factors that should be considered by the trial court when reviewing a lower court's dismissal of a plaintiff's complaint as a sanction for willful violation of the court's discovery orders. Bank One of Cleveland v. Abbe, 916 F.2d 1067 (6th Cir.1990); Archibeque v. Atchison, Topeka and Santa Fe Ry. Co., 70 F.3d 1172 (10th Cir.1995). Because Oklahoma's section 3237(B)(2)(c) was adopted from the federal discovery rules, the decisions of the federal courts interpreting the discovery rules are persuasive authority for this court. See Vanderslice v. Vanderslice, 195 Okla. 496, 159 P.2d 560, 562 (1945).

¶11 In Bank One of Cleveland, the Sixth Circuit Court of Appeals identified four factors which should be considered prior to choosing dismissal as a sanction: (1) whether the party's failure to cooperate in discovery is due to willfulness, bad faith, or fault; (2) whether the adversary was prejudiced by the dismissed party's failure to cooperate in discovery; (3) whether the dismissed party was warned that failure to cooperate could lead to dismissal; and (4) whether less drastic sanctions were imposed or considered before dismissal was ordered. 916 F.2d at 1073. In Archibeque, the Tenth Circuit Court of Appeals added a fifth factor to the analysis--the amount of interference with the judicial process. 70 F.3d at 1174. These factors are not a "rigid test" and the correct sanction is a fact-specific inquiry that the district court is in the best position to make. Id.

IV

¶12 After considering the factors enumerated above as they are reflected in the record on appeal, we conclude the trial court abused its discretion in entering a default judgment. Neither the Journal Entry of Default Judgment nor other portions of the record reveal whether the trial judge explicitly considered the first factor, Kampar's culpability. The journal entry makes no finding that Kampar's failure to cooperate in discovery was due to willfulness, bad faith, or fault. The trial court's failure to address this issue in the order or elsewhere in the record causes us concern in view of the fact that it is not clear from the record...