Watson v. West

• Decision Date: 20 October 2009
• Docket Number: No. DA 08-0640.,DA 08-0640.
• Citation: 218 P.3d 1227,353 Mont. 120,2009 MT 342
• Parties: John WATSON, Plaintiff and Appellee, v. Devra WEST, Defendant and Appellant.
• Court: Montana Supreme Court

218 P.3d 1227

2009 MT 342

353 Mont. 120

John WATSON, Plaintiff and Appellee, v. Devra WEST, Defendant and Appellant.

No. DA 08-0640.

Supreme Court of Montana.

Submitted on Briefs September 16, 2009.

Decided October 20, 2009.

For Appellant: James C. Bartlett, Attorney at Law, Kalispell, Montana.

For Appellee: David M. McLean, Ryan C. Willmore, Browning, Kaleczyc, Berry & Hoven, P.C., Missoula, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 Devra West appeals the Twenty-First Judicial District Court's imposition of a default as a sanction under M.R. Civ. P. 16(f) (Rule 16(f)) and its award of damages to John Watson. We affirm in part and vacate and remand in part.

ISSUES

¶ 2 A restatement of the issues on appeal is:

¶ 3 Did the District Court abuse its discretion by striking, as a sanction, West's answer to Watson's complaint and entering a default judgment in favor of Watson?

¶ 4 Did the District Court err in awarding $730,000 in damages to Watson?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 5 John Watson and Devra West have been litigating this case for over six years. The origin of Watson's claims is a purported January 2002 agreement in which West asked Watson to help her establish a new corporation to be named Millennia Mind, Inc. The for-profit corporation was to have three stockholders — West, Watson and a co-worker of West's, Corinne Coffin. Coffin was to be the financial backer, agreeing to invest $1,000,000 into the corporation for start-up costs. West was to hold 55% of the shares, Coffin 23% and Watson 22%. Watson agreed to a salary of between $50,000 and $60,000 for the first year the corporation was operating and a salary of approximately $120,000 per year for the following four years. Watson performed various start-up tasks such as setting up the corporation, working with professionals on developing an image and logo, and preparing a business plan and strategy. However, in June 2002 West informed Watson that she no longer wanted to operate the corporation under a stockholder arrangement. She and Watson were unable to agree on how to go forward and West and Watson severed their relationship. It does not appear that Coffin ever provided any financial backing.

¶ 6 In April 2003, Watson brought suit against West for breach of contract, fraud, constructive termination, constructive fraud and unjust enrichment. The trial was scheduled and continued three times on motion of Watson's counsel — twice due to trial date conflicts and once for replacement of counsel. Watson's counsel also submitted a fourth motion to continue but this motion was on behalf of West because her third attorney had withdrawn from the case and pretrial order deadlines were approaching. In November 2007, the District Court granted this last motion to vacate the scheduled trial and, rather than reschedule the trial, ordered a telephonic status conference for December 20, 2007.

¶ 7 In late November, a non-lawyer assistant to West, Geoff Reynolds, contacted the District Court administrator and requested a continuance, on behalf of West, of the December 20 conference call, explaining that West would be out of the country at that time. He requested that the status conference be rescheduled to January 16, 2008. The administrator explained that a formal request for a continuance must be submitted. No formal request was received by the court.

¶ 8 On December 13, Reynolds again contacted the court administrator asking that the status conference be rescheduled for February 27, 2008, to further accommodate West's travel schedule. The court administrator again informed Reynolds that a formal request was required to vacate and reschedule the December 20 status conference. On December 16, Reynolds faxed an unsigned request to the District Court administrator seeking a continuance. The court administrator contacted Reynolds and notified him that such a formal request had to be signed by West or her attorney. As of December 20, the District Court did not receive a signed formal request to vacate the hearing. The court administrator spoke with Reynolds on December 20 and he indicated that West was going to fax the request from Mexico. No request was received but the record reveals that the court did not conduct the status conference on December 20.

¶ 9 On January 3, 2008, the court administrator and Reynolds spoke by telephone again regarding the lack of a formal request to vacate and reschedule the December 20 conference. Later that day, West faxed a letter dated December 26, 2007, to the court requesting that the conference be rescheduled for February 27, 2008. The court granted the request, set the conference call for 3 p.m., and issued a Minute Entry into the record.

¶ 10 On February 26, Reynolds notified the court and Watson's attorney that West would not be available for the February 27 conference call. He requested that the status conference be rescheduled to March 27, 2008. Watson's attorney agreed to the request but objected to any further delays. The District Court granted the request and rescheduled the conference call to March 27 at 9:00 a.m. The District Court sent West written confirmation, by certified mail, of the March 27 conference date and time, using the same address it had used to notify West of previous rescheduled dates. While Reynolds had signed for the previous certified letters, the letter confirming the March 27 conference was returned to the District Court unopened after three failed attempts at delivery. However, on March 26, Reynolds called the court administrator to confirm the telephone instructions for participating in the March 27 conference call.

¶ 11 The telephone conference call began, as scheduled, on March 27 at 9:00 a.m. Watson's counsel was present; however, West did not call. The District Court ordered the setting of new pretrial and trial dates. It also discussed with Watson's counsel the possibility of sanctions against West if she failed to meet further scheduled deadlines. At 1:45 p.m. that day, Reynolds called the court administrator to confirm the call-in procedures. He was informed that the conference call had occurred at 9:00 a.m. that morning and West had not participated. He expressed surprise that "he" had missed the call and gave no indication that West had intended to participate.

¶ 12 The District Court issued its fourth trial preparation order on March 31, 2008, setting forth deadlines for pretrial filings and setting the jury trial for July 28 through August 1, 2008. West was given a June 5, 2008 deadline for submitting her proposed pretrial order to Watson's counsel, and a June 19 deadline for submission of her final pretrial order. The court set the Pretrial Conference for July 3. West did not submit a proposed pretrial order; therefore, on June 18, Watson moved for Rule 16(f) sanctions against her. The motion cited both West's failure to appear at the March 27 telephone status conference and her failure to submit her proposed pretrial order. West did not respond to Watson's sanction motion. The court scheduled a hearing on the motion for July 1, 2008.

¶ 13 At the July 1 hearing, both West and Watson's attorney appeared and presented arguments. West maintained that she fully intended to participate in the March 27 conference call but had been misinformed by the court administrator of the time of the call. She was prepared to participate at 3:00 p.m. West also argued that she was without an attorney because she did not have the funds to pay her third and last attorney. West attempted to persuade the court that this attorney would continue to represent her once she paid him and that funds for such payment were forthcoming. She reported that she had intended that this attorney comply with the court's scheduling order and prepare her proposed pretrial order. The court noted that her last attorney had withdrawn in October 2007 citing a deteriorated relationship, and that this attorney withdrew long before the scheduling order had been issued in March 2008. Taking the matter under advisement, the District Court vacated the July 3 pretrial conference and the July 28 trial date.

¶ 14 On July 15, 2008, the District Court issued its Opinion & Order (Opinion) in which it concluded that West had proper notice of the correct time for the March 27 status call but, nonetheless, failed to participate. The court noted that the March 31, 2008 trial preparation order was a M.R. Civ. P. 16(b) (Rule 16(b)) scheduling order. Additionally, the District Court took judicial notice of another case that was before it in which West also was a party, and in which West likewise failed to comply with scheduling orders. The court held that failure to appear at the conference call and failure to comply with the scheduling order justified the imposition of Rule 16(f) sanctions against West. The court struck West's answer to Watson's complaint and entered a default against West. The court also scheduled a hearing on damages to be held on October 2, 2008. West did not respond to this Opinion nor did she attend the October 2 hearing on damages.

¶ 15 On October 23, 2008, the District Court entered its Findings of Fact, Conclusions of Law and Judgment (Judgment) awarding Watson $730,000 in damages based on evidence presented by Watson at the October 2 hearing. Watson claimed that he would have earned at least $510,000 in income over the first five years that the corporation was operating and that each of his 22 shares in the corporation was worth $10,000, or a total of $220,000.¹ He therefore requested a total of $730,000 in damages from West personally. The District Court entered judgment in the sum of $730,000 in compensatory damages, and assessed $6,209.27 in attorney fees incurred in preparing the pretrial order and in filing the motion for sanctions.

¶ 16 West appeals the court's July 15 Opinion imposing sanctions and entering a default against her, and the court's October 20...