Knox v. Genx Clothing, Inc.

• Jurisdiction: Oregon
• Citation: Knox v. Genx Clothing, Inc., 168 P.3d 1251, 215 Or. App. 317 (Or. App. 2007)
• Docket Number: A130874.,040808651.
• Parties: Charita KNOX, Plaintiff-Respondent, v. GENX CLOTHING, INC., Defendant-Appellant, and Timothy L. Saenz and Tabitha V. Saenz, Defendants.
• Court: Oregon Court of Appeals
• Decision Date: 03 October 2007

168 P.3d 1251

215 Or. App. 317

Charita KNOX, Plaintiff-Respondent, v.GENX CLOTHING, INC., Defendant-Appellant, and Timothy L. Saenz and Tabitha V. Saenz, Defendants.

040808651.

A130874.

Court of Appeals of Oregon.

Argued and Submitted January 12, 2007.

Decided October 3, 2007.

Paul R.J. Connolly, Salem, argued the cause for appellant.With him on the briefs was Connolly & Goldian, LLP.

Curtis D. Kinsley, Portland, argued the cause for respondent.With him on the brief was Kinsley & Chaudoin, P.C.

Before EDMONDS, Presiding Judge, and BREWER, Chief Judge,^* and Wollheim, Judge.

WOLLHEIM, J.

DefendantGenX Clothing, Inc., appeals an order denying a motion to set aside a default judgment.Defendant argues that the trial court abused its discretion in failing to set aside the judgment on the ground of excusable neglect.We affirm.

We review a trial court's denial of a motion to set aside a default judgment for abuse of discretion.Wood v. James W. Fowler Co.,168 Or.App. 308, 311, 7 P.3d 577(2000).If the facts are in dispute, we accept the trial court's findings if there is evidence in the record to support those findings.Hiatt v. Congoleum Industries,279 Or. 569, 575, 569 P.2d 567(1977);see alsoBall v. Gladden,250 Or. 485, 487, 443 P.2d 621(1968).

Defendant is an Oregon corporation with its headquarters in Los Angeles, California.Defendant's two corporate officers-its president and its chief financial officer (CFO)-work at the Los Angeles corporate office.Defendant owns and operates several retail clothing stores in Oregon, including a store in Portland.

The underlying dispute arose out of an alleged shoplifting incident that led to an altercation between plaintiff and security personnel at defendant's Portland store.Plaintiff initiated this action for assault and battery, intentional infliction of severe emotional distress, negligent hiring, and negligent training.At the time of the alleged shoplifting incident, West Coast Security Specialist provided security services to the Portland store.West Coast Security Specialist is an assumed business name of Timothy Saenz.Tabitha Saenz was an employee of West Coast Security Specialist.¹

Initially, plaintiff sent two demand letters to defendant.Defendant did not respond; instead, it forwarded the letters to Timothy Saenz.After receiving no response from defendant, plaintiff filed a complaint.On August 24, 2004, plaintiff initiated office service by delivering a true copy of the summons and complaint to defendant's Portland store, to an individual identifying himself as "Shane Kim, the assistant manager" and the "person in charge."Plaintiff completed office service when she mailed, by first-class mail, a true copy of the summons and complaint to defendant's president and registered agent at the Portland store, where he maintains an office.ORCP 7 D(2)(c).

Employees at the Portland store subsequently forwarded the envelope containing the summons and complaint, unopened, to defendant's corporate office in Los Angeles, which was defendant's corporate practice at that time.Defendant's CFO testified that he received and opened the summons and complaint on or about September 13, 2004.The CFO testified that the president had designated him as the person responsible for overseeing lawsuits against the corporation.After reviewing the documents, the CFO faxed them to the corporation's outside counsel, a California attorney.On September 15, the California attorney advised the CFO to retain Oregon counsel, and the CFO subsequently telephoned the Oregon district manager to discuss retaining an Oregon attorney.

In support of its motion, the CFO and the district manager testified that each believed the other would hire an Oregon attorney.The CFO stated that he thought he had directed the district manager to hire an Oregon attorney, and the district manager testified that he thought that the CFO was merely informing him about the lawsuit and that the CFO would handle the lawsuit at the corporate level.Defendant acknowledges that that conversation between the CFO and the district manager was in Korean, their native language, in which both individuals are fluent.Defendant also acknowledges that the CFO did not forward a copy of the summons and complaint to the district manager, and that neither the CFO nor the district manager took any action on the lawsuit until April 2005.Additionally, the district manager averred that, in his native country, it was customary to have litigation extend for long periods without the parties having to formally respond, and both the CFO and the district manager testified that their experience with the American legal system was extremely limited.

Plaintiff moved for a default order after defendant failed to appear.On December 17, 2004, the trial court entered a default judgment in favor of plaintiff for $250,000 in noneconomic damages and $2,857.64 in economic damages.Plaintiff attempted to enforce the judgment by delivering a writ of garnishment.The district manager testified that since his September 15, 2004, conversation with the CFO, the district manager had not heard or done anything about the lawsuit until approximately April 20, 2005, when he received a writ of garnishment that plaintiff delivered to defendant's Hillsboro store a few weeks earlier.According to the district manager, he managed the Hillsboro store in addition to the Portland store.In this capacity, he would visit the Hillsboro store every two to three weeks and would collect and open the mail at that time.The employees of the Hillsboro store were not authorized to process the mail received at that store beyond collecting and holding it for the district manager.²

During the hearing on the motion to set aside the judgment, the district manager testified that, immediately upon seeing the writ of garnishment, he faxed it to the CFO in Los Angeles.The CFO then telephoned the district manager to again discuss hiring an Oregon attorney.Since the district manager did not know any Oregon attorneys, the CFO spoke with the president, who recommended an Oregon attorney who had represented defendant in another matter.The CFO then forwarded the Oregon attorney's contact information to the district manager on or about April 22, 2005, and by April 25, 2005, defendant retained that Oregon attorney.

Defendant advances two separate, yet related, explanations as to why its failure to appear was the result of excusable neglect.First, it explains that there was an unfortunate series of miscommunications within its corporate chain of command.Second, it argues that its corporate officers and employees were inexperienced with the American legal system and its strict time requirements.

Defendant filed its first motion to set aside the judgment on the ground of improper service.After a hearing, the trial court denied defendant's motion on the ground of improper service, but allowed defendant to supplement its motion on the ground of excusable neglect.In addition to its renewed motion to set aside the default judgment, defendant filed an answer setting forth seven affirmative defenses to plaintiff's original complaint.The trial court denied defendant's renewed motion after a hearing in which the CFO, the district manager, and the process server testified, and after considering additional authorities submitted by both parties.

Defendant challenges that ruling, arguing that its failure to timely respond to plaintiff's complaint was excusable neglect as defined by ORCP 71 B(1), which provides, in part:

"On motion and upon such terms as are just, the court may relieve a party or such party's legal representative from a judgment for the following reasons: (a) mistake, inadvertence, surprise, or excusable neglect[.]"

The parameters of excusable neglect, according to defendant, are identified in a trilogy of cases decided by this court.In each if those cases, we reversed the respective trial courts' denials of motions to set aside default judgments on the ground that the defendant had established excusable neglect as a matter of law.In Reitz v. Coca-Cola,36 Or.App. 487, 584 P.2d 791(1978), the plaintiff served a product liability complaint on the defendant's president and registered agent.The president then handed the papers to the defendant's comptroller adding, "Here is another [product liability] case.Take care of it."Id. at 490, 584 P.2d 791.The president assumed that the comptroller would forward the papers to an industry association that had previously assumed responsibility for the defense of such matters or that the association had been separately informed of the lawsuit and would respond appropriately.³The comptroller, on the other hand, understood the president's instructions to mean that he should place the complaint in "the products liability file," and nothing more.Id.Eventually, the plaintiff obtained a default judgment that the trial court refused to set aside.We reversed, holding that, while the president was negligent in failing to follow up with the association, his actions—or lack thereof—did not rise to the level of inexcusable neglect.Id. at 495, 584 P.2d 791.

Defendant next cites Hackett v. Alco Standard Corp.,71 Or.App. 24, 691 P.2d 142(1984), rev. den.,298 Or. 822, 698 P.2d 963(1985), in which the plaintiff brought a product liability action against the product's manufacturer, its parent corporations, and the distributor.The plaintiff served the complaint on the defendant distributor's president and registered agent.The president did not take timely action because he mistakenly believed that the defendant distributor's interests would be protected by the defendant manufacturer as well as one of the defendant parent companies.Id. at 32, 691 P.2d 142.The plaintiff obtained a default judgment against the distributor, and the trial court denied the distributor's motion to set aside the judgment.We reversed,...