North Cent. Illinois Laborers' Dist. Council v. S.J. Groves & Sons Co., Inc.

• Decision Date: 19 May 1988
• Docket Number: No. 87-1885,87-1885
• Citation: 842 F.2d 164
• Parties: NORTH CENTRAL ILLINOIS LABORERS' DISTRICT COUNCIL, Plaintiff-Appellee, v. S.J. GROVES & SONS COMPANY, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 164

842 F.2d 164

10 Fed.R.Serv.3d 783

NORTH CENTRAL ILLINOIS LABORERS' DISTRICT COUNCIL, Plaintiff-Appellee, v. S.J. GROVES & SONS COMPANY, INC., Defendant-Appellant.

No. 87-1885.

United States Court of Appeals Seventh Circuit.

Argued Jan. 14, 1988.

Decided March 10, 1988.

As Amended on Denial of Rehearing and Rehearing En Banc May 19, 1988.

Robert L. Jackstadt, Suelthaus & Kaplan, P.C., St. Louis, Mo., for defendant-appellant.

David W. Stuckel, Harvey & Stuckel, Peoria, Ill., for plaintiff-appellee.

Before FLAUM and RIPPLE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

FLAUM, Circuit Judge.

On June 13, 1986, the United States District Court for the Central District of Illinois entered a default judgment in favor of North Central Illinois Laborers' District Council, Local 1203 ("North Central") and against S.J. Groves & Sons Company, Inc. ("S.J. Groves"). S.J. Groves filed a motion seeking to have the default judgment set aside under Federal Rules of Civil Procedure 60(b)(1) and 55(b)(2). The district court denied the motion. We affirm.

I.

On July 8, 1985, North Central filed a grievance alleging that S.J. Groves violated the parties' collective bargaining agreement. Specifically, North Central alleged that crews which included non-union employees performed "dismantling" work on the "LaSalle Bridge Project." The parties' collective bargaining agreement specified that only union members were to perform this type of work. On April 8, 1986, attorneys for S.J. Groves and North Central appeared before an arbitrator to resolve the grievance. S.J. Groves' attorney, Mr. Kaplan, contested the arbitrability of the grievance. Evidence was presented to the arbitrator, including the testimony of four witnesses, on the issue of the arbitrability of the grievance. On May 5, 1986, S.J. Groves moved for dismissal of the grievance on the grounds that the arbitrability of the grievance was a question to be resolved by the federal courts.

On May 8, 1986, North Central's counsel, Mr. Stuckel, agreed to stay the arbitration proceedings pending a judicial decision on the arbitrability of the grievance. On the same day, North Central filed suit in federal district court seeking to compel S.J. Groves to submit the grievance to arbitration. S.J. Groves was properly served with a copy of the complaint and the summons in accordance with Federal Rule of Civil Procedure 4(d)(3) on May 21, 1986. S.J. Groves' in-house legal staff overlooked the notice and took no action in response to it. On June 13, 1986, the district court entered a judgment and an "order for default" directing S.J. Groves to submit the grievance to arbitration. ¹ Mr. Stuckel mailed a copy of the default judgment to the company's registered agent on June 18, 1986. On July 9, 1986, S.J. Groves discovered the default judgment and notified Mr. Kaplan. Five days later ² Mr. Kaplan filed a motion for relief from the default judgment under Rules 60(b) and 55(c). On May 18, 1987, the district court denied this motion. S.J. Groves appeals.

II.

A.

S.J. Groves' motion to vacate the default judgment was predicated in part on Rule 60(b)(1) of the Federal Rules of Civil Procedure. ³ Rule 60(b)(1) states that a court, upon motion by the party against whom judgment is entered, "may relieve [the] party or [the] party's legal representative from a final judgment" for "mistake, inadvertence, surprise, or excusable neglect...." (emphasis added). ⁴ S.J. Groves argues that its in-house counsel's failure to take action was due to mistake, inadvertence and excusable neglect within the scope of Rule 60(b)(1). The company states:

It is to be noted that the in-house legal staff of S.J. Groves was small, consisting of only two attorneys. At the time in question, one of the attorneys was disabled, and the entire burden of disposing of incoming legal documents devolved on one individual, Michael P. Katz. Amid the pressure, confusion, and increased workload caused by this situation [North Central's] [c]omplaint was inadvertently overlooked by the clerical staff until it was brought to Mr. Katz' attention on July 9, 1986.

Appellant's Brief at 7. The district court, however, concluded that S.J. Groves was not entitled to relief under Rule 60(b)(1). The court reasoned that "[S.J.] Groves' in-house counsel's failure to discover North Central's properly executed service of process and ensure that an appearance was entered on behalf of Groves for a period of seven weeks may have been inadvertent, but is not excusable." ⁵ North Central Illinois Laborers' District Council, Local 1203 v. S.J. Groves & Sons Co., No. 86-1133, slip op. at 6 (C.D.Ill. May 18, 1987) (order denying motion to set aside default judgment) (emphasis in original). The district court therefore denied the company's motion for relief.

B.

Motions to set aside a default judgment under Rule 60(b) require a court to reconcile the goal of permitting the defaulting party an opportunity to contest the merits of the dispute with the practical requirements of judicial administration. "A default judgment, like a dismissal, is a harsh sanction which should usually be employed only in extreme situations, or when less drastic sanctions have proven unavailable." Ellingsworth v. Chrysler, 665 F.2d 180, 185 (7th Cir.1981). We have recently re-affirmed that "this circuit has a well-established policy favoring a trial on the merits over a default judgment." Passarella v. Hilton Int'l Co., 810 F.2d 674, 675 (7th Cir.1987). District courts, however, have a responsibility to keep their court calendars as current as possible. Kagan v. Caterpillar Tractor Co., 795 F.2d 601, 608 (7th Cir.1986) (setting forth statistics as to caseload of district courts). This responsibility requires compliance with the rules of procedure and finality of judgment. Tolliver v. Northrop Corp., 786 F.2d 316, 318 (7th Cir.1986). "In order for the default judgment to be an effective deterrent against irresponsible conduct in litigation, relief from a default judgment under Rule 60(b) must be perceived as an exceptional remedy." C.K.S. Engineers, Inc. v. White Mountain Gypsum Co., 726 F.2d 1202, 1206 (7th Cir.1984). Because the balancing of these competing interests is best done by the district court, our review of the district court's decision to grant or deny relief under Rule 60(b)(1) is confined to determining whether the district court abused its discretion. Dimmitt & Owens Financial, Inc. v. United States, 787 F.2d 1186, 1193 (7th Cir.1986). See also Kagan, 795 F.2d at 607; C.K.S. Engineers, 726 F.2d at 1205.

The crux of this case is the proper characterization of S.J. Groves' in-house error which resulted in S.J. Groves' failure to respond to North Central's complaint. We have often stated that "neither ignorance nor carelessness on the part of the litigant or his attorney provides grounds for relief under Rule 60(b)(1)." E.g., Ellingsworth, 665 F.2d at 184 (citation omitted) (emphasis added). We have also observed, however, that the "willfulness" of the defaulting party's actions is the "common thread" which runs through our decisions addressing Rule 60(b) motions to vacate default judgments. C.K.S. Engineers, 726 F.2d at 1205. "Rule 60(b) is applied liberally in the default judgment context only in the exceptional circumstances where the events contributing to the default judgment have not been within the meaningful control of the defaulting party, or its attorney." Id. at 1206 (emphasis added).

S.J. Groves states that its staff was operating short-handed and that North Central's complaint "was inadvertently overlooked." This explanation is not contested. Given S.J. Groves' efforts to defend against the grievance before the arbitrator, it would be difficult to find that its actions were "willful" and the district court made no such finding. The company's conduct did not demonstrate the blatant disregard for the district court's orders or rules that typifies most of our decisions which affirm an order denying Rule 60(b)(1) relief. See, e.g., Hal Commodity Cycles Management Co. v. Kirsh, 825 F.2d 1136 (7th Cir.1987); Tolliver, 786 F.2d 316.

The district court, however, could reasonably view the error as careless and within S.J. Groves' meaningful control. S.J. Groves' internal procedures simply broke down. ⁶ The company received the notice, but because of a filing or clerical error failed to notify its outside counsel who was handling the grievance defense. We cannot find that an abuse of discretion has occurred on the facts of this case. ⁷ See Tolliver, 786 F.2d at 319 ("[t]he decision under Rule 60(b) is discretion piled upon discretion, and ... such doubly discretionary decisions stand unless the judge was very far off base--if the judge relied on forbidden factors or omitted to consider some important relevant factor."). Although "rule 60(b) gave the district court more than enough latitude to give the appellants another chance, we do not enjoy the same latitude." C.K.S. Engineers, 726 F.2d at 1209. We hold therefore that the district court did not abuse its discretion in denying S.J. Groves' motion under Rule 60(b)(1) to set aside the default judgment.

III.

S.J. Groves supplements its theory that the district court erred in denying the company's motion under Rule 60(b)(1) by arguing that North Central was required under Rule 55(b)(2) to give notice to S.J. Groves' counsel of its application for a default judgment and failed to do so. ⁸ Rule 55(b)(2) states in part:

If the party against whom judgment by default is sought has appeared in the action, the party (or, if appearing by representative, the party's representative) shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application.

Fed.R.Civ.P. 55(b)(2) (emphasis added). S.J. Groves argues that it had appeared in the action through its counsel, Mr. Kaplan, and that Mr. Kaplan therefore had to be given notice of North Central's...