Koerner v. CMR Constr.

• Decision Date: 07 December 2018
• Docket Number: No. 18-30019,18-30019
• Citation: Koerner v. CMR Constr., 910 F.3d 221 (5th Cir. 2018)
• Parties: Louis R. KOERNER, Jr., Individually and as Assignee of Jean McCurdy Meade, Plaintiff-Appellant v. CMR CONSTRUCTION & ROOFING, L.L.C., Defendant-Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

910 F.3d 221

Louis R. KOERNER, Jr., Individually and as Assignee of Jean McCurdy Meade, Plaintiff-Appellant

v.CMR CONSTRUCTION & ROOFING, L.L.C., Defendant-Appellee

No. 18-30019

United States Court of Appeals, Fifth Circuit.

FILED December 7, 2018

Louis Roy Koerner, Jr., Koerner Law Firm, Michael Allen Mahone, Jr., Mahone Firm, L.L.C., New Orleans, LA, for Plaintiff-Appellant.

Stephen Thomas Perkins, Paul Joseph Politz, Esq., Taylor, Wellons, Politz & Duhe, A.P.L.C., New Orleans, LA, for Defendant-Appellee.

Before JONES, CLEMENT, and SOUTHWICK, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

This case is about a roof. A perpetually leaky roof that Louis Koerner could never seem to get CMR Construction & Roofing LLC to fix. Koerner challenges the district court's decision setting aside CMR's default, its grant of summary judgment in CMR's favor, and its denial of his Rule 59(e) motions for reconsideration. These three challenges call upon this court to answer a myriad of sub-issues. But in the end, we find no error and affirm.

I.

In the aftermath of Hurricane Katrina, in late 2005 and early 2006, CMR sold a Slate 2.0 roof to Koerner and installed it. CMR periodically returned to perform warranty and repair work in 2006, 2007, 2011, and early 2012. And despite CMR's contention that its workmanship was not to blame, it paid a contractor to conduct additional repairs in November 2012.

In April 2016, Koerner sued his insurer, Vigilant Insurance Company, in state court alleging that his home required several repairs. The case was removed to federal court. Thereafter, Vigilant denied Koerner's claim for roof repairs by citing the faulty-workmanship exclusion to his policy, which implicated CMR. Koerner moved to join CMR as a defendant, and the district court granted the motion.

Koerner served CMR with a complaint and summons; however, the cover sheet misnamed CMR. When CMR failed to respond to the complaint, Koerner was granted an entry of default and a partial default judgment against CMR for nearly $500,000. Finally roused to action, CMR successfully moved to set aside the default, claiming that (1) it did not willfully ignore the complaint, (2) Koerner would suffer no harm or prejudice if the default were set aside, and (3) it had meritorious defenses. After several months of discovery, CMR filed a motion for summary judgment, which was granted. That same day, the district court entered final judgment dismissing all of Koerner's claims.

Koerner timely filed two motions under Rule 59(e), one to amend the district court's interlocutory ruling setting aside the entry of default and partial default judgment, and another to amend the summary-judgment order. Koerner's motions introduced new evidence to impeach CMR's denial of willfully failing to respond to the initial complaint and to contest the summary-judgment order. On November 15, 2017, the district court summarily denied Koerner's motion to amend the entry of default and partial default judgment. And on January 4, 2018, the court denied the motion to amend the summary-judgment order. This appeal followed.

II.

Koerner first challenges the district court's decision to set aside the entry of default and vacate the partial default judgment.

Under Rule 55(c), a district court "may set aside an entry of default for good cause." Fed. R. Civ. Pro. 55(c). To decide if good cause exists, courts consider three non-exclusive factors: "whether the default was willful, whether setting it aside would prejudice the adversary, and whether a meritorious defense is presented." Lacy v. Sitel Corp ., 227 F.3d 290, 292 (5th Cir. 2000) (internal quotation mark omitted). "A finding of willful default ends the inquiry, for ‘when the court finds an intentional failure of responsive pleadings there need be no other finding.’ " Id . (quoting In re Dierschke , 975 F.2d 181, 184 (5th Cir. 1992) ).

Defaults are "generally disfavored." Mason & Hanger-Silas Mason Co. v. Metal Trades Council of Amarillo, Tex. & Vicinity, AFL-CIO , 726 F.2d 166, 168 (5th Cir. 1984). "Unless it appears that no injustice results from the default, relief should be granted." In re OCA, Inc. , 551 F.3d 359, 370–71 (5th Cir. 2008). We review a district court's decision to set aside an entry of default or a default judgment for an abuse of discretion. Lacy, 227 F.3d at 291–92. Determining whether a defendant willfully defaulted is a factual finding that we review for clear error. Wooten v. McDonald Transit Associates, Inc. , 788 F.3d 490, 495 (5th Cir. 2015).

The district court dutifully applied these good-cause factors. Koerner challenges only the analysis of the willfulness factor, so we too will evaluate only that factor.

The district court held that "CMR was not intentionally failing to respond to litigation or trying to be uncooperative or obstructionist." The court based this holding on an affidavit from CMR's President, Steven Soulé. According to Soulé, he believed that it was too late for Koerner to sue CMR because the allegations dated from 2005 and 2006. He also believed that CMR was not actually involved in the lawsuit because the only defendant named in the caption was Vigilant and because the cover sheet sent to CMR by its registered agent was incorrectly addressed to "CMR Construction & Roofing of Texas, LLC" instead of "CMR Construction & Roofing, LLC." Upon confirming that the cover sheet misnamed CMR, the district court held, "[a]lthough Soul[é] certainly acted unwisely in failing to contact an attorney upon receiving the summons for this litigation, under the circumstances Soul[é]'s negligence is insufficient to warrant a finding of willfulness."

Koerner objects to the characterization of CMR's conduct as negligent. Specifically, Koerner argues that Soulé was dishonest in his affidavit and that CMR had sufficient notice of the lawsuit to infer that its failure to respond was intentional, notwithstanding the cover sheet. Koerner grounds this claim in a series of communications between himself and Soulé in February 2016. These consisted primarily of one-way demands by Koerner via email, phone, and text in which Koerner told Soulé there was a lawsuit pending against CMR and that CMR would be in default if it failed to respond. Given these repeated contacts, he insists that CMR's "supposedly good faith error" does not justify setting aside the entry of default and partial default judgment.

While we agree that Koerner's proffered evidence could support a willfulness inference, Soulé's affidavit, if believed, supports the contrary inference. Given the record as a whole, we cannot say the district court clearly erred when it chose to credit Soulé's affidavit over Koerner's evidence. Consequently, the district court did not abuse its discretion in setting aside the entry of default and partial default judgment.

III.

Koerner next challenges the district court's summary denial of his Rule 59(e) motion to reconsider the order setting aside the entry of default and partial default judgment. That motion contained additional evidence impeaching Soulé's affidavit—the only evidence supporting the non-willfulness finding.

"Reconsideration of a judgment after its entry is an extraordinary remedy that should be used sparingly." Templet v. HydroChem Inc ., 367 F.3d 473, 479 (5th Cir. 2004). "There is no requirement that reasons be stated for the denial of a motion for reconsideration under Rule 59(e)," especially if "valid—indeed compelling—reasons for denying the motion are obvious and apparent on the face of the record." Briddle v. Scott , 63 F.3d 364, 381 (5th Cir. 1995).

Koerner was not entitled to this extraordinary relief, and there is an obvious reason on the face of the record why this is so. To be granted, a Rule 59(e) motion " ‘must clearly establish either a manifest error of law or fact or must present newly discovered evidence’ that was not available before the judgment issued." Molina v. Equistar Chemicals LP , 261 F. App'x 729, 733 (5th Cir. 2008) (quoting Schiller v. Physicians Res. Grp. Inc. , 342 F.3d 563, 567 (5th Cir. 2003) ). The district court set aside the default in May 2017. The evidence that Koerner attached to his Rule 59(e) motion came to light after Soulé's deposition on August 25, 2017. The court entered final judgment on October 18, 2017. Thus, because the evidence came to light before final judgment was entered, relief under Rule 59(e) was improper.

Koerner should have instead filed a Rule 54(b) motion while the case was still open. Under that rule, district courts can amend interlocutory orders for any reason they deem sufficient before final judgment is entered. Austin v. Kroger Tex., L.P. , 864 F.3d 326, 336–337 (5th Cir. 2017) (describing the differences between Rule 59(e) and Rule 54(b) ). But in the interest of finality, Rule 59(e) sets a much higher threshold for relief once judgment is entered. Id.

Koerner actually admits that he could have filed a Rule 54(b) motion, but he says that he did not do so because they are disfavored for having the potential to interfere with the underlying case's progress. He cites no cases for this perplexing proposition. We fail to see how sitting on potentially dispositive evidence until the district court completes more work and enters final judgment on a summary-judgment motion is preferable to correcting error as soon as possible.

Koerner made a poor tactical decision by waiting until after final judgment to bring the new evidence forward. But the fact remains: the evidence was available before final judgment was entered, so he is not entitled to the extraordinary relief that Rule 59(e) provides.

IV.

Finally, Koerner argues that the district court erred in granting summary judgment on (1) the fraud claim stemming from the 2006 purchase of his roof, (2) the claims related to the 2011 repairs, and (3) the negligence, fraud, and detrimental-reliance claims surrounding the 2012 repairs. After reviewing the district court's grants of summary judgment de novo, we find...