Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst v. Louisiana Hydrolec

• Decision Date: 23 August 1988
• Docket Number: Nos. 86-5592,86-6424,s. 86-5592
• Citation: 854 F.2d 1538
• Parties: NILSSON, ROBBINS, DALGARN, BERLINER, CARSON & WURST, Plaintiff-Appellee, v. LOUISIANA HYDROLEC; John W. Marmoulides, Defendants, and Samuel W. Ethridge; Aqualec, Inc., Defendants-Appellants. NILSSON, ROBBINS, DALGARN, BERLINER, CARSON & WURST, Plaintiff-Counterclaim-Defendant, Appellee, v. AQUALEC, INC., Defendant-Counter-Claimant-Appellant, v. Samuel W. ETHRIDGE, Defendant-Cross-Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1538

854 F.2d 1538

11 Fed.R.Serv.3d 1219

NILSSON, ROBBINS, DALGARN, BERLINER, CARSON & WURST,Plaintiff-Appellee, v.LOUISIANA HYDROLEC; John W. Marmoulides, Defendants, andSamuel W. Ethridge; Aqualec, Inc., Defendants-Appellants.

NILSSON, ROBBINS, DALGARN, BERLINER, CARSON & WURST, Plaintiff-Counterclaim-Defendant, Appellee, v.AQUALEC, INC., Defendant-Counter-Claimant-Appellant, v.Samuel W. ETHRIDGE, Defendant-Cross-Defendant-Appellant.

Nos. 86-5592, 86-6424.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 6, 1987.

Decided Aug. 23, 1988.

Samuel W. Ethridge, Kenner, La., for defendants-appellants.

Leonard D. Messinger, Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst, Los Angeles, Cal., for plaintiff-appellee.

Richard L. Grimwade, Steven M. Cischke, Barton, Klugman & Oetting, Los Angeles, Cal., for cross-defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before SCHROEDER^* and NELSON, Circuit Judges, and KAY.^**District Judge.

PER CURIAM:

This case consists of two appeals arising from a civil action initiated by Nilsson, Robbins, Dalgarn, Berliner, Carson & Wurst ("Nilsson" or "plaintiff") in the United States District Court for the Central District of California, against defendantsSamuel W. Ethridge("Ethridge"), a citizen of, and attorney practicing in Louisiana; Aqualec, Inc., a Louisiana corporation; and Louisiana Hydrolec and John W. Marmoulides, Louisiana citizens (Ethridge and Aqualec, Inc., appellants herein, are collectively referred to as "defendants").

BACKGROUND

Plaintiff in the action below is a law firm that performed various legal services for defendants, a corporate entity and its president, between June of 1979 and August of 1981.The legal services were rendered in connection with a lawsuit for patent infringement that was brought by defendants against a party who is not involved in the instant appeal.Pursuant to its usual billing policy, the plaintiff law firm sent monthly statements to defendants.

This action was brought as a result of the nonpayment of the principal sum of $41,119.58 for plaintiff's legal services.

In January of 1982, plaintiff sent the defendants a "Notice of Client's Right to Arbitrate" as required by California law.This notice advised defendants of their outstanding balance for legal services, requested immediate payment, and advised defendants that if they disputed the bill, they had a right to arbitrate under California law.The defendants never responded to this notice.

Plaintiff thereafter, in March of 1983, filed a complaint in federal court seeking its fees.Plaintiff sought recovery on the basis of quantum meruit and open book account against all defendants, and on the basis of account stated, breach of contract, and fraud against Ethridge and Aqualec.

Defendants failed to answer the complaint.Consequently, a default judgment was entered against them.When they moved to vacate the default, the motion was denied because of failure to comply with local rules requiring sworn evidence of a meritorious defense.Upon resubmission of the motion, the default was vacated with the conditions that defendants pay to plaintiff the reasonable value of plaintiff's attorneys' fees and costs incurred in opposing the motion and resubmission of the motion to set aside entry of default, and that defendants promptly and completely respond to all discovery and fully obey the Federal Rules of Civil Procedure and the court's Local Rules in further proceedings in this case.In March of 1984, plaintiff filed an amended complaint and defendants again failed to answer.Once again, a default judgment was entered.This judgment was also followed by a motion to vacate the default, which was denied because of failure to provide verified answers.The default was later vacated upon resubmission of the motion.Similar conditions for vacating the default were imposed.

In June of 1984, plaintiff moved for partial summary judgment.The motion was based on the "account stated" cause of action and also sought a piercing of the corporate veil to hold Ethridge personally liable for Aqualec's corporate debts.Plaintiff's motion complied with all pertinent local rules and the Federal Rules of Civil Procedure.Defendants' memorandum in opposition to the motion for summary judgment, however, was deficient since it contained only argument and did not contain any evidentiary material.Because of the second default of the defendants, the hearing on the motion for partial summary judgment was continued from June 26, 1984 until April 24, 1985.One week prior to that hearing, the trial judge advised defendants that their opposition was inadequately supported and that on the basis of the memoranda in support of and in opposition to the motion for partial summary judgment, she planned to grant the motion.When defendants stated that they had not received this ruling, the hearing on the motion was continued for another week.During this week, defendants failed to buttress their argument against the entry of summary judgment with any evidentiary materials, even though they had been advised that their failure to do so had inclined the district court judge to grant the motion for partial summary judgment.Accordingly, the district court judge granted the motion based upon plaintiff's memoranda and supporting evidence.Defendants appeal from the grant of partial summary judgment.

Throughout the proceedings, defendants repeatedly refused to conform to the Local Rules and the Federal Rules of Civil Procedure.Defaults, orders to compel defendants to comply with discovery rules and prior court orders, and monetary sanctions did not alleviate this behavior.After considering the parties' arguments regarding plaintiff's motion to compel production and for sanctions, Magistrate Brown ultimately found that Ethridge and Aqualec were guilty of willfully disregarding their discovery obligations and court orders, and that this virtually demanded sanctions under Rule 37.The magistrate also found that Ethridge had violated local discovery rules by his refusal to provide his portion of the discovery motion, and recommended the striking of all of Aqualec's pleadings and entry of judgment for Nilsson, as sanctions to be imposed on Aqualec and Ethridge.Defendants never objected to nor sought reconsideration or review of the magistrate's ruling as required by the Local Rules.

In her December 31, 1985 order, Judge Rymer adopted the magistrate's findings and conclusions.After lifting three entries of default against the defendants, imposing four orders for monetary sanctions against Ethridge for failure to comply with discovery requests and court orders, and holding numerous hearings on motions to compel, defendants' failure to comply with the May 1, 1985court order, which required defendants to submit fully responsive answers and to identify documents requested, led the district court judge to conclude that sanctions were warranted under Fed.R.Civ.P. 37(b)(2)(C).Accordingly, the court ordered Aqualec's Second Amended Counterclaim dismissed with prejudice, and entered default judgment for Nilsson on its First Amended Complaint.Defendants also appeal from this order.

DISCUSSION

A.Partial Summary Judgment

Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law."Fed.R.Civ.P. 56(c)."If the party moving for summary judgment meets its initial burden of identifying for the court the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact [citations omitted], the nonmoving party may not rely on the mere allegations in the pleadings in order to preclude summary judgment."T.W. Electrical Service v. Pacific Electrical Contractors Association, 809 F.2d 626, 630(9th Cir.1987).Instead, Rule 56(e) requires that the nonmoving party set forth, by affidavit or as otherwise provided in Rule 56, specific facts showing that there is a genuine issue for trial.Id.At least some "significant probative evidence tending to support the complaint" must be produced.Id.[citations omitted].

We review the district court's grant of summary judgment de novo.Richards v. Neilsen Freight Lines, 810 F.2d 898, 902(9th Cir.1987).The record made on summary judgment controls, not that record plus speculative inferences a trier of fact might add.Id.Viewing the evidence in the light most favorable to the nonmoving party, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law.Ashton v. Cory, 780 F.2d 816, 818(9th Cir.1986).

We must first determine whether plaintiff adequately supported its motion for summary judgment.To answer this, we must consider two claims: first, whether a claim for account stated had been made by the plaintiff; second, whether on the basis of the evidence presented, Ethridge could be held individually liable for the debts of Aqualec, Inc.

1.Account Stated

Through the declarations of Mr. Dalgarn, an attorney in the plaintiff law firm, and of Ms. Rinen, the bookkeeper for the firm, plaintiff established that at the initiation of the representation, defendants were informed that they would receive monthly statements; defendants agreed to pay promptly for legal services, and did in fact receive monthly bills; defendants paid for services prior to August of 1980 without complaining about the amount; that as a result of failure to pay for legal services, plaintiff terminated its representation of defendants; that plaintiff sent a certified letter to defendants demanding payment of the outstanding balance, and that the return of service...