Rains, In re, 91-6032

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Writing for the CourtBefore ANDERSON, TACHA and BRORBY; PER CURIAM
Citation946 F.2d 731
PartiesIn re Bill W. RAINS, also known as Billy Wayne Rains, Debtor. Dale A. RUPLINGER, Plaintiff-Appellee, v. Bill W. RAINS, also known as Billy Wayne Rains, Defendant-Appellant.
Docket NumberNo. 91-6032,91-6032
Decision Date07 October 1991

Kenneth G. Mayfield, Oklahoma City, Okl., for defendant-appellant.

James S. Matthews, Jr. (Jay Self with him on the brief), Oklahoma City, Okl., for plaintiff-appellee.

Before ANDERSON, TACHA and BRORBY, Circuit Judges.


At issue in this case is whether the district court abused its discretion in entering a default judgment against a defendant who had delayed executing a settlement agreement. Because the district court did not make findings regarding the defendant's willfulness, bad faith or other fault and has not explained why some lesser sanction was not appropriate in this case, we remand for further action by the district court.

Plaintiff Ruplinger was a former Mr. Universe who, in June 1985, brought a tort action against Dr. Rains, an Oklahoma chiropractor, for wrongful appropriation of Mr. Ruplinger's image and endorsement. The case, scheduled for jury trial in August 1987, was preempted when Dr. Rains filed a petition in bankruptcy and was administratively closed pending the conclusion of the bankruptcy proceeding.

Mr. Ruplinger then filed an adversary complaint in the bankruptcy court to determine the dischargeability of his claim against Dr. Rains. Mr. Ruplinger's subsequent motion to withdraw reference of the case from the bankruptcy court was granted, and in May 1989 the case was transferred to the district court. Approximately five months later, in October 1989, the parties appeared at a settlement conference where an oral settlement agreement was reached. Under the terms of that agreement, Dr. Rains would confess a nondischargeable judgment in favor of Mr. Ruplinger in the amount of $50,000.00 and would assign to Mr. Ruplinger a 17.5% interest in an unfiled malpractice claim against Dr. Rains' former attorney.

What followed next, according to Mr. Ruplinger, was a series of delays, missed appointments, broken promises and generally intransigent behavior on the part of Dr. Rains which prevented the settlement agreement from being reduced to written form and executed. Finally, in June 1990, Mr. Ruplinger filed a motion requesting an order to enforce the settlement agreement or for entry of default against Dr. Rains. Dr. Rains did not respond to this motion but did appear with counsel at a hearing to show cause as to why the agreement should not be enforced.

During the show cause hearing it became apparent that Dr. Rains was pursuing his malpractice claim pro se rather than with the assistance of counsel as had been the prior understanding between the parties. Because of this change in strategy, the district court deemed Dr. Rains' attempted assignment of the malpractice claim to Mr. Ruplinger to be illusory, Ruplinger v. Rains, No. CIV-89-777-A, Order at 2 (W.D.Okla. Oct. 19, 1990) (Default Order), and Mr. Ruplinger's counsel withdrew his motion to enforce the settlement agreement. 1 Finding that Dr. Rains had offered no excuse for his failure to comply with the terms of the settlement agreement and citing H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C.Cir.1970), the court determined that a default judgment was warranted "lest Mr. Ruplinger's right in this suit remain tenuous." Default Order at 2. Dr. Rains' request for a new trial was denied.

After entering the default judgment against Dr. Rains, the district court held a hearing on damages at which it determined that Dr. Rains was liable to Mr. Ruplinger in a total amount of $950,000.00. Because the court further found that Dr. Rains' conduct was "a wilful and intentional infliction of injury to the plaintiff's property," it ruled that the judgment was nondischargeable in bankruptcy under 11 U.S.C. § 523(a)(6). Rains v. Ruplinger, No. CIV-89-777-A, Order at 5 (W.D.Okla., Dec. 12, 1990). It is from this order that Dr. Rains appeals. 2

Dr. Rains argues that the court "lacked the authority" to enter default judgment on the full amount of liability for failure to comply with the terms of the settlement agreement. A court's determination to enter default judgment is reviewed for abuse of discretion. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 642, 96 S.Ct. 2778, 2780, 49 L.Ed.2d 747 (1976); Ikerd v. Lacy, 852 F.2d 1256, 1258 (10th Cir.1988). Abuse of discretion will be found only if the reviewing court has "a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors." United States v. Sumitomo Marine & Fire Ins. Co., 617 F.2d 1365, 1369 (9th Cir.1980). The district court's dismissal will be viewed in the totality of the circumstances, Toma v. City of Weatherford, 846 F.2d 58, 61 (10th Cir.1988), and "considerable deference is given the trial judge's determination regarding the default judgment since he is the person most familiar with the circumstances of the case and, thus, is in the best position to evaluate the good faith and credibility of the parties at the hearings." Nikwei v. Ross Sch. of Aviation, Inc., 822 F.2d 939, 941 (10th Cir.1987).

Default judgments are a harsh sanction. M.E.N. Co. v. Control Fluidics, Inc., 834 F.2d 869, 872 (10th Cir.1987).

[S]trong policies favor resolution of disputes on their merits: "[T]he default judgment must normally be viewed as available only when the adversary process has been halted because of an essentially unresponsive party. In that instance the diligent party must be protected lest he be faced with interminable delay and continued uncertainty as to his rights. The default judgment remedy serves as such a protection."

H.F. Livermore, 432 F.2d at 691, quoted in Cessna Fin. Corp. v. Bielenberg Masonry Contracting, Inc., 715 F.2d 1442, 1444 (10th Cir.1983).

We do not favor default judgments because the court's power is used to enter and enforce judgments regardless of the merits of the case, purely as a penalty for delays in filing or other procedural error. However, a workable system of justice requires that litigants not be free to appear at their pleasure. We therefore must hold parties and their attorneys to a reasonably high standard of diligence in observing the courts' rules of procedure. The threat of judgment by default serves as an incentive to meet this standard.

Cessna Fin. Corp., 715 F.2d at 1444-45 (citations omitted); see also Gomes v. Williams, 420 F.2d 1364, 1366 (10th Cir.1970).

Although a default judgment is an appropriate sanction in some instances, without more elaboration from the district court we cannot say that it acted here within its discretion. We note the case of M.E.N. Co., 834 F.2d 869, in which the district court refused to set aside the defendants' default after the defendants failed to provide discovery or appear for noticed and court ordered depositions, failed to file a pretrial memorandum and refused to pay sanctions to the plaintiffs. On appeal, this court held that because default is such a harsh...

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