Litwin v. O.T. Mining Corp.
| Decision Date | 24 March 2020 |
| Docket Number | DA 19-0329 |
| Citation | 459 P.3d 878 (Table),2020 MT 63 N,399 Mont. 553 |
| Court | Montana Supreme Court |
| Parties | Michael LITWIN, Columbia-Buffrey Investments, Inc., and Chodos Investments, Ltd, Plaintiffs, Appellees, and Cross-Appellants, v. The O.T. MINING CORPORATION, a Montana Corporation, Rosemary L. Christensen, Arthur Seligman, Thomas H. Fitzgerald, Jr., Piere Yves Le Dilicocq and John Does Nos. 1-20, Defendants and Appellants. |
For Appellants: John C. Doubek, Doubek, Pyfer & Storrar, PC, Helena, Montana
For Appellees: Frederick F. Sherwood, Morrison, Sherwood, Wilson & Deola, PLLP, Helena, Montana
¶1 Pursuant to Section I, Paragraph 3(c), Montana Supreme Court Internal Operating Rules, this case is decided by memorandum opinion and shall not be cited and does not serve as precedent. Its case title, cause number, and disposition shall be included in this Court’s quarterly list of noncitable cases published in the Pacific Reporter and Montana Reports.
¶2 The O.T. Mining Corporation ("OTMC") appeals a September 26, 2018 Default Judgment entered in Montana’s Fifth Judicial District Court in favor of Michael Litwin, et al. ("Litwin Group"). OTMC also appeals the District Court’s January 9, 2019 order denying its motion to vacate default judgment. The Litwin Group cross-appeals a May 7, 2019 Amended Judgment removing prejudgment interest from the judgment. We affirm.
¶3 In February 2014, the Litwin Group, whose members are residents of Quebec, Canada, signed voting and investment agreements for the purchase of $375,000 in stock shares in OTMC1 stock, subject to a one-year trading restriction. At the time of the purchase, OTMC had in its possession a letter from the Autorite des Marches Financiers ("AMF"),2 received in December 2013, notifying OTMC that a Cease Trade Order was pending. OTMC did not disclose the letter to the Litwin Group prior to the investment or that the Cease Trade Order would be issued to all shares of Quebec residents. In July 2014, the Cease Trade Order became permanent, preventing Quebec residents from trading shares of the company, thus rendering Litwin’s OTMC shares arguably valueless and illiquid.
¶4 In June 2015, the Litwin Group filed a Complaint and Application for Appointment of a Receiver in District Court, alleging: (1) fraud and fraudulent inducement; (2) negligent misrepresentation; (3) rescission; (4) breach of contract; and (5) breach of fiduciary duty. In July 2015, OTMC retained Robert Cummins, a Montana attorney, as counsel. In March 2017, the Litwin Group filed a motion for summary judgment on all counts of the complaint. In August 2017, the District Court granted the Litwin Group’s motion against OTMC for breach of contract and granted requests for sanctions against OTMC for discovery abuses for failure to comply with scheduled depositions.
¶5 On February 21, 2018, the District Court issued a scheduling order setting a final pretrial conference for August 15, 2018, and a trial date of September 26, 2018. On July 27, 2018, Cummins sought to withdraw from representing OTMC because OTMC had not paid Cummins since May 2017.3 The court ordered OTMC or its new counsel to appear at the final pretrial conference on August 15.
¶6 On August 2, 2018, Dillon Erickson filed a notice of limited appearance and request to continue the trial on behalf of OTMC for the exclusive purpose of filing the motion to continue at the pretrial conference. At the August 15 conference, Erickson was given until August 17, later extended to August 21, 2018, to inform the court if he intended to be fully retained by OTMC. The court order stated, On August 21, 2018, Erickson informed the court he would not be representing OTMC. At the status conference the following day, OTMC did not appear in person or through counsel. The District Court held OTMC in contempt for failure to appear and set another status conference for September 20, 2018. The District Court required OTMC
¶7 On August 30, 2018, the Litwin Group moved for sanctions against OTMC in the form of judgment for $375,000, plus prejudgment interest, attorney’s fees, and costs. On September 19, 2018, the day before the status conference, Rosemary Christensen of OTMC emailed the Clerk of Court and requested the following email be submitted to the court:
Further to the Order of August 22, 2018, we have attempted to comply with said Order and obtain suitable representation. We have spoken to several attorneys who would be suitable but are unavailable at this time. We have spoken to two attorneys who seem most suitable but who require rather large fees that we cannot face at this time because our funds that were to be wired from Hong Kong this Monday have not been transmitted due to the disastrous typhoon. Should the Court require it, I am prepared to file a Notice to proceed Pro-Se. I apologize for this inconvenience and pray that the Honorable Judge will exercise forbearance and understanding.
The following day at the September 20 hearing, OTMC was not represented in any capacity.
¶8 On September 24, 2018, the court granted the Litwin Group’s request for sanctions, signing an Order and Entry of Default pursuant to M. R. Civ. P. 16(f) and 37(b)(2)(A).4 On September 26, 2018, the court entered judgment for $375,000, plus prejudgment interest of $128,758.57, in addition to costs and attorney’s fees to be later determined.
¶9 On October 24, 2018, OTMC’s new attorney, Philip Chiaviello, appeared on OTMC’s behalf and filed a Motion to Vacate Default Judgment, requesting relief pursuant to M. R. Civ. P. 55(c), 59(e), and 60(b)(6).5 On January 9, 2019, the District Court denied OTMC’s motion in part, declining to set aside default judgment, including the award of damages and attorney’s fees, but invited further briefing on the applicability, amount, and timing of the prejudgment interest awarded. On April 10, 2019, the court removed prejudgment interest from its award and issued an Amended Judgment on May 7, 2019. OTMC appeals the September 2018 entry of default judgment and the January 9, 2019 order declining to vacate default judgment. The Litwin Group cross-appeals the May 2019 order to set aside the inclusion of prejudgment interest in the award.
¶10 We review a district court’s decision to impose sanctions for failure to comply with an M. R. Civ. P. 16(b) order for an abuse of discretion and the sanction imposed for an abuse of discretion, noting that the district court is in a better position to consider the circumstances of each case and determine which sanction is the most appropriate. Watson v. West , 2009 MT 342, ¶ 17, 353 Mont. 120, 218 P.3d 1227 ; Xin Xu v. McLaughlin Research Inst. for Biomedical Sci., Inc. , 2005 MT 209, ¶ 17, 328 Mont. 232, 119 P.3d 100. We review a district court’s decision to deny a motion to set aside a default judgment for only a slight abuse of discretion. Whitefish Credit Union v. Sherman , 2012 MT 267, ¶ 7, 367 Mont. 103, 289 P.3d 174. An award of prejudgment interest is a question of law which we review for correctness. Am. Music Co. v. Higbee , 2004 MT 349, ¶ 13, 324 Mont. 348, 103 P.3d 518.
¶11 OTMC argues that the District Court erred in entering the default judgment because the abandonment by its attorney prior to trial created significant hardship for OTMC regarding travel arrangements to Montana and its ability to secure substitute counsel. We disagree.
¶12 M. R. Civ. P. 16(f), authorizes a district court to award sanctions, on motion or on its own accord, including those authorized by M. R. Civ. P. 37, if a party or its attorney fails to appear at a scheduling or other pretrial conference or fails to obey a scheduling or other pretrial order. Stafford v. Fockaert , 2016 MT 28, ¶ 18, 382 Mont. 178, 366 P.3d 673. Further, "instead of or in addition to any other sanction, the court must order the party, its attorney, or both to pay reasonable expenses – including attorney fees – incurred because of any noncompliance with the rule, unless the noncompliance was substantially justified or other circumstances make an award of expenses unjust." Mont. R. Civ. P. 16(f)(2) ; Serrania v. LPH, Inc., 2015 MT 113, ¶ 31, 379 Mont. 17, 347 P.3d 1237. M. R. Civ. P. 37 expressly provides a court with the authority to render a default judgment against the disobedient party. Stafford , ¶ 18.
¶13 In a case involving entry of a default judgment as a sanction, sanctions are appropriate where counsel or a party has acted willfully or in bad faith in failing to comply with the rules of discovery, with court orders enforcing the rules, or in flagrant disregard of those rules. Stokes v. Ford Motor Co. , 2013 MT 29, ¶ 18, 368 Mont. 365, 300 P.3d 648. The party requesting a default judgment must show prejudice. Stokes , ¶ 18.
¶14 Here, undermining its theory that default judgment stemmed solely from its counsel’s unexpected abandonment prior to trial, OTMC had affirmative knowledge of Cummins’s potential withdrawal from representation long before July 2018. OTMC signed a consent form for Cummins to withdraw if he was not paid in full back in May 2017. Nonetheless, Cummins continued to actively represent OTMC in the litigation until July 27, 2018, even after suing OTMC in May 2018. Throughout this, OTMC and Cummins did not disclose to the court or the Litwin Group of Cummins’s potential withdrawal before the February 2018 status conference when the case was set for trial, or at any time thereafter. OTMC’s attempt to castigate the District Court for unnecessarily punishing OTMC based on...
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