Hwag, LLC v. Racine Car Dealer LLC
| Decision Date | 19 December 2017 |
| Docket Number | Case No. 17-CV-821 |
| Parties | HWAG, LLC, Plaintiff, Counterclaim Defendant v. RACINE CAR DEALER LLC, Crossclaim Defendant, and SHAWN MONTY, Defendant, Counterclaimant, Crossclaimant. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Having relatively recently purchased the assets and goodwill of a Hyundai car dealership located in West Allis, Wisconsin from BMR No. 1 LLC d/b/a Arrow Hyundai, plaintiff HWAG, LLC commenced this lawsuit on June 13, 2017, against Shawn Monty, a former Arrow Hyundai employee, and the entity that it believed to be his then-current employer, Home Run Auto Group, LLC d/b/a Racine Hyundai. (ECF No. 1.) The complaint alleged that Monty was continuing to access his former employer's trade secrets and confidential business information.
HWAG subsequently learned that Monty's new employer was actually Racine Car Dealer, LLC, and sought leave to file an amended complaint substituting Racine Car Dealer as a defendant for Home Run Auto Group (ECF No. 13), which motion was granted on July 25, 2017. (ECF No. 17.) HWAG's amended complaint alleges misappropriation and wrongful use of confidential information and trade secrets, computer fraud, deceptive trade practices, and tortious interference with business relationships by Racine Car Dealer and Monty. (ECF No. 18, ¶¶ 1, 9.)
On August 17, 2017, Monty filed an answer to the amended complaint along with a counterclaim against HWAG and a cross-claim against Racine Car Dealer, by whom he was at that point no longer employed. (ECF No. 27.) Monty's counterclaim against HWAG included six causes of action: one count of defamation by libel, four counts of defamation by slander, and one count of tortious interference with prospective economic advantage. (ECF No. 43 at 25-31.) Racine Car Dealer filed an answer to Monty's cross-claim. (ECF No. 31.) On September 19, 2017, HWAG and Racine Car Dealer entered into a settlement agreement and HWAG's claims against Racine Car Dealer were dismissed. (ECF No. 41.)
On September 28, 2017, HWAG filed a motion to dismiss all six counts of Monty's counterclaim under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. (ECF No. 42.) Monty filed a brief in opposition to the motion to dismiss (ECF No. 44), and separately and simultaneously filed an amended answer and counterclaims. (ECF No. 43.) The amended counterclaims add several allegations (although no new counts), apparently in an attempt to remedy some of the alleged shortcomings raised in the motion to dismiss. In reply, HWAG stated that, for purposes of judicial economy, its reply was to serve not only as a reply in support of its motion to dismiss but also as its response to the amended counterclaims. (ECF No. 46 at 2, n. 1.)
Approximately one week later, Monty filed a motion for entry of default on the ground that HWAG failed to answer Monty's amended counterclaims. (ECF No. 48.) The motion argues that HWAG's reply in support of the motion to dismiss the original counterclaims is not a proper pleading in response to the amended counterclaims.
Both motions have been fully briefed. All parties have consented to have this court resolve this case. (ECF Nos. 16, 23, 29.) The court has jurisdiction under 28 U.S.C. §§ 1331 and 1367.
Monty's motion for entry of default is not well received. Twenty five years ago the Seventh Circuit Court of Appeals adopted standards for professional conduct for those lawyers and judges practicing within the Seventh Federal Judicial Circuit. Thestandards were "designed to encourage us, judges and lawyers, to meet our obligations to each other, to litigants and to the system of justice, and thereby achieve the twin goals of civility and professionalism, both of which are hallmarks of a learned profession dedicated to public service." Standards for Professional Conduct Within the Seventh Federal Judicial Circuit, Preamble. The standards are to be "reviewed and followed by all judges and lawyers participating in any proceeding in this Circuit." Id. The standards set forth certain duties that lawyers have to other counsel. One of those duties states: "We will not cause any default or dismissal to be entered without first notifying opposing counsel, when we know his or her identity." Standards for Professional Conduct Within the Seventh Federal Judicial Circuit, Lawyers' Duties to Other Counsel, ¶ 18.
It does not appear that counsel for Monty contacted counsel for HWAG prior to filing its motion for default judgment. Had they done so, this motion very likely would have been avoided. Among other things, one of the matters that counsel for Monty could have cleared up was the confusion they created by filing amended counterclaims while simultaneously, and separately, filing a brief in opposition to HWAG's motion to dismiss. Monty's position is that the amended counterclaims superseded the original counterclaims (ECF No. 50 at 2) and rendered the motion to dismiss moot (ECF No. 48 at 5). The problem is that, by separately filing a brief in opposition to the motion to dismiss, Monty did not treat the motion to dismiss as moot. Indeed, nowhere in hisresponse to the motion to dismiss does Monty state that the motion is moot or that the original counterclaims have been superseded by the amended counterclaims.
Under Rule 55(a), "When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default." Fed. R. Civ. P. 55(a). In response to the amended counterclaims, HWAG could have withdrawn its motion to dismiss the original counterclaims and filed a new motion to dismiss the amended counterclaims--the same arguments that support the motion to dismiss the original counterclaims apply just as much to the amended counterclaims. But in the interest of "judicial economy" (ECF No. 46 at 2, n. 1) it chose to simply go forward with the already-pending motion to dismiss rather than start over. Thus, HWAG did "otherwise defend" against the amended counterclaims by referring to and discussing them as part of its reply in support of its pending motion to dismiss.
In short, default judgment is not appropriate. See Schmidt v. Hudec, 486 F. Supp. 2d 821, 825-26 (E.D. Wis. 2007) (). Monty's motion for entry of default is denied.
After careful consideration, HWAG's request for costs and fees in having to respond to Monty's motion for entry of default is also denied. However, counsel isexpected to be familiar with the Standards for Professional Conduct discussed above and conduct themselves accordingly. Zealous representation of one's client, on the one hand, and the civil and professional treatment of one's adversary, on the other, need not be mutually exclusive.
"To state a claim, a complaint must first provide 'a short and plain statement of the claim showing that the pleader is entitled to relief.'" Bonnstetter v. City of Chi., 2016 U.S. App. LEXIS 1795, 7 (7th Cir. Feb. 3, 2016) (quoting Fed. R. Civ. P. 8(a)(2)). "A pleader's responsibility is to state a claim for relief that is plausible on its face." Huri v. Office of the Chief Judge of the Circuit Court of Cook Cnty., 804 F.3d 826, 832-33 (7th Cir. 2015). In deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim the court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the non-moving party. Id. "In an action for slander, 'the particular words complained of shall be set forth in the complaint.'" Schindler v. Seiler, 474 F.3d 1008, 1010 (7th Cir. 2007) (citing Wis. Stat. § 802.03(6)).
In opposing the motion to dismiss, Monty raises two preliminary arguments that can be dealt with quickly. He alleges that HWAG has not complied with the local rules of this court in two ways. First, he says that HWAG did not comply with Civil Local Rule 7(a)'s requirement that the motion to dismiss be accompanied by a separatememorandum. Second, he says that HWAG did not comply with Civil Local Rule 7(d) () when it failed to file and serve a copy of several unpublished cases upon which it relies in its motion to dismiss. He argues that both warrant denial of the motion to dismiss. (ECF No. 44 at 1-2.)
It is true that Civil Local Rule 7(a) requires that every motion be accompanied by a supporting memorandum or a certificate stating that no memorandum will be filed. The use of the term "accompanied" implies that the motion and the memorandum are to be separate, although the rule does not expressly say so. HWAG's motion included nine pages of argument explaining the basis for the motion, and Monty does not contend that he has been prejudiced by the memorandum not being in a separate document from the motion itself.
As to HWAG's failure to file and serve a copy of those unpublished cases upon which it relied in its motion to dismiss, Civil Local Rule 7(j) does require parties to file a copy of any "unreported" (not unpublished, as Monty says) decisions upon which they rely. Ironically, as HWAG points out, Monty did not comply with Rule 7(j) in his submission. More importantly, as with the argument above, Monty does not contend that he could not find the unreported cases cited by HWAG and that he has been prejudiced by not having them at the time he was responding to the motion to dismiss. HWAG subsequently provided copies of the unreported cases with its reply brief.
The local rules "are intended to be enforced primarily upon the Court's own initiative, and the filing of motions alleging noncompliance with a rule may be reserved...
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