Choice Hotels International In v. Anuj Grover, et al
Filing
Filed opinion of the court by Judge Easterbrook. AFFIRMED. William J. Bauer, Circuit Judge; Frank H. Easterbrook, Circuit Judge and Kenneth F. Ripple, Circuit Judge. [6675767-1] [6675767] [14-3294]
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Case: 14-3294
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Pages: 7
In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-‐‑3294
CHOICE HOTELS INTERNATIONAL, INC.,
Plaintiff-‐‑Appellee,
v.
ANUJ GROVER, ARJUN GROVER, and DHARAM PUNWANI,
Defendants-‐‑Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Indiana, Hammond Division.
No. 2:11-‐‑CV-‐‑290-‐‑JVB — Joseph S. Van Bokkelen, Judge.
____________________
ARGUED MAY 28, 2015 — DECIDED JULY 7, 2015
____________________
Before BAUER, EASTERBROOK, and RIPPLE, Circuit Judges.
EASTERBROOK, Circuit Judge. Choice Hotels sued SBQI,
Inc., plus several of its managers and investors, seeking
damages for a breach of a franchise agreement. The defend-‐‑
ants did not answer the complaint, and the clerk of court en-‐‑
tered a default. One of the defendants, Tarranpaul Chawla,
an attorney admitted to practice in Illinois, represented the
others but did so poorly, which led to the default. Three of
the defendants—Anuj Grover, Arjun Grover, and Dharam
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Punwani (collectively the Investors)—asked Chawla to find
a new attorney. They assert that until this suit was filed they
had been unaware that their signatures were on the fran-‐‑
chise agreement as parties, which could make them person-‐‑
ally liable, and they insist that the signatures are forgeries.
Chawla told the Investors that Elton Johnson had agreed to
represent their interests by trying to vacate the default, nego-‐‑
tiate a settlement, and if necessary defend against Choice
Hotels’ demand for damages.
Johnson filed an appearance and took some steps in the
litigation, such as attending a conference under Fed. R. Civ.
P. 16. But he did not answer the complaint or file a motion to
vacate the default, engage in discovery concerning damages,
respond to Choice Hotels’ request for admissions, or reply to
its motion for summary judgment on damages. In response
to email requests from Anuj Grover, Johnson insisted that he
was trying to settle the litigation. But he did not say what he
was doing or share with the Investors any documents he
filed in the suit. He did not return phone calls. Eventually
the district court set damages at $430,286.75, and on June 26,
2013, the court entered a final judgment in that amount.
The default judgment led the Investors to hire a new
lawyer, who filed a motion seeking to set aside the judg-‐‑
ment. Because it was filed more than a year after the judg-‐‑
ment, however, it fell into Fed. R. Civ. P. 60(b)(6), the residu-‐‑
al clause, which covers “any other reason that justifies relief”
(that is, any reason other than ones in Rule 60(b)(1) to (5)). A
motion under Rule 60(b)(6) is addressed to the district
court’s discretion, and appellate review is correspondingly
deferential. See Metlyn Realty Corp. v. Esmark, Inc., 763 F.2d
826 (7th Cir. 1985). As a substantive matter, relief under Rule
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60(b)(6) requires the movant to establish that “extraordinary
circumstances” justify upsetting a final decision. See Gonza-‐‑
lez v. Crosby, 545 U.S. 524, 535–38 (2005).
The district court thought these circumstances to be short
of “extraordinary.” Lawyers sometimes fail to protect their
clients’ interests, and the district judge observed that the
remedy for legal neglect lies in a malpractice suit against the
lawyer, rather than continuing the original litigation and up-‐‑
setting the adversary’s legitimate expectations based on a
final judgment. Litigants who choose a poor lawyer may
bear the costs themselves, or shift them to the lawyer, but
cannot shift them to an adversary who bore no fault for the
problem. (Johnson unquestionably is a poor lawyer. The Su-‐‑
preme Court of Indiana suspended him from practice on
March 20, 2014, less than four years after his admission to
the bar, following five disciplinary complaints against him.
His suspension—for failure to cooperate in the investigation
of these grievances—is of indefinite duration, and he has
been removed from the roll of attorneys authorized to prac-‐‑
tice in the Northern District of Indiana.)
The district court’s approach is well grounded in deci-‐‑
sions of the Supreme Court and this circuit. Link v. Wabash
R.R., 370 U.S. 626 (1962), holds that litigants are bound by
the acts and omissions of their chosen agents, including law-‐‑
yers, and that legal bungling therefore does not justify reo-‐‑
pening a judgment. The Supreme Court added in Societe In-‐‑
ternationale v. Rogers, 357 U.S. 197 (1958), and National Hockey
League v. Metropolitan Hockey Club, Inc., 427 U.S. 639 (1976),
that the intentional misconduct of lawyers likewise is imput-‐‑
ed to their clients. And when a client aggrieved by counsel’s
inept handling of a suit contended that “gross negligence”
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should be treated differently from ordinary negligence (Link)
and intentional misconduct (National Hockey League), we re-‐‑
jected the argument and held that labels do not matter. Unit-‐‑
ed States v. 7108 West Grand Avenue, 15 F.3d 632 (7th Cir.
1994). When lawyers fail, the remedy is malpractice litiga-‐‑
tion against the wrongdoer, not more litigation against an
innocent adversary in the original litigation. We summed up
in Bakery Machinery & Fabrication, Inc. v. Traditional Baking,
Inc., 570 F.3d 845, 848 (7th Cir. 2009):
The rule is that all of the attorney’s misconduct (except in the
cases where the act is outside the scope of employment or in cas-‐‑
es of excusable neglect [and covered by Rule 60(b)(1)]) becomes
the problem of the client. A lawyer who inexcusably neglects his
client’s obligations does not present exceptional circumstances.
That conclusion cannot be avoided by calling an attor-‐‑
ney’s failure to file critical documents “nonfeasance” rather
than “misfeasance.” That would be just another exercise in
labeling. Link and most of its successors involved one or
more omissions—things not done at all—in addition to
things done badly. Indeed, both 7108 West Grand Avenue and
Bakery Machinery were about inaction; the opinion in 7108
West Grand Avenue arises from the sort of inaction that John-‐‑
son displayed. Our conclusion that labels do not matter ap-‐‑
plies to any other proposed relabeling. Tolliver v. Northrop
Corp., 786 F.2d 316 (7th Cir. 1986), another case in which the
lawyer did nothing to protect the client (and which the In-‐‑
vestors therefore would call a case of nonfeasance), explains
why it is important to visit the consequences on the bad
lawyer rather than the innocent adversary:
Holding the client responsible for the lawyer’s deeds ensures
that both clients and lawyers take care to comply. If the lawyer’s
neglect protected the client from ill consequences, neglect would
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become all too common. It would be a free good—the neglect
would protect the client, and because the client could not suffer
the lawyer would not suffer either. The court’s power to dismiss
a case is designed both to elicit action from the parties in the case
at hand and to induce litigants and lawyers in other cases to ad-‐‑
here to timetables. A court cannot lightly excuse a litigant be-‐‑
cause of the lawyer’s neglect without abandoning the pursuit of
these objectives.
Id. at 319 (citation omitted).
But the Investors tell us that the Supreme Court has
abandoned the pursuit of these objectives and disapproved
the holdings of Bakery Machinery and the earlier decisions
that we have cited. They rely on Holland v. Florida, 560 U.S.
631 (2010), and Maples v. Thomas, 132 S. Ct. 912 (2012). Hol-‐‑
land holds that abandonment by counsel can justify tolling of
the statute of limitations for filing a federal collateral attack
on a state conviction, and Maples holds that abandonment by
counsel during a state collateral attack can constitute a justi-‐‑
fication for a procedural default, and thus permit federal re-‐‑
view of an issue that was not properly presented in the state
proceeding.
Both Holland and Maples were capital cases. Being put to
death is a disproportionate penalty for having a bad law-‐‑
yer—especially when as a practical matter persons on death
row (and for that matter other prisoners) have only limited
opportunity to choose their own counsel. They must accept
volunteers, and if they fire a volunteer they cannot be sure
that someone else will step in, for they lack funds to hire
counsel. (Holland suggested that the prisoner had tried to dis-‐‑
charge his lawyer but that neither counsel nor the state judi-‐‑
ciary had honored his request.) A malpractice suit against a
nonperforming lawyer is cold comfort to someone no longer
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alive. Abandonment severs the agency relation, see Maples,
132 S. Ct. at 922–23; Holland, 560 U.S. at 659–60 (Alito, J., con-‐‑
curring) (a view adopted by a majority in Maples), so that
counsel’s (in)action is not imputed to the client. In normal
civil litigation a litigant whose lawyer has left him in the
lurch can hire a new one, or represent himself, but people on
death row can’t replace their lawyers so easily.
Although Maples and Holland were capital cases, we do
not doubt that their holdings apply to all collateral litigation
under 28 U.S.C. §2254 or §2255. See Gibbs v. LeGrand, 767
F.3d 879, 893 (9th Cir. 2014); Cadet v. Florida Department of
Corrections, 742 F.3d 473, 482 (11th Cir. 2014). All prisoners
face difficulties in obtaining and monitoring the perfor-‐‑
mance of counsel, and damages for malpractice are a poor
substitute for time in prison, just as they are no substitute for
one’s life. But these considerations are inapplicable to nor-‐‑
mal civil litigation, and the Supreme Court has not suggest-‐‑
ed that Holland or Maples has any bearing on suits about
torts, contracts, and other economic matters.
For litigants such as the Investors, monetary compensa-‐‑
tion via a malpractice action is an adequate recompense for
an adverse judgment. (Litigants who fear that lawyers may
not have the wealth to pay for their mistakes can decline to
hire counsel who lack adequate insurance.) Civil litigants
can hire replacement counsel freely, and it is much easier for
them than for prisoners to monitor how their lawyers are
performing (or not performing). And although abandon-‐‑
ment by counsel ends the agency relation—a consideration
relevant to all litigation, not just to collateral review, see
Sneed v. Shinseki, 737 F.3d 719, 726–28 (Fed. Cir. 2013)—the
fact remains that civil litigants are responsible for their own
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choices and their own inaction. Litigants who know or
strongly suspect that their lawyers are asleep on the job must
act to protect their own interests by hiring someone else.
The Investors recognized that Chawla was not protecting
their interests, and they sensibly insisted that he find some-‐‑
one who would. When they began to suspect that Johnson
likewise was not protecting their interests, they did not re-‐‑
place him. Sending him emails, and making unreturned
phone calls, is no substitute for action. They readily could
have consulted the docket in the litigation and learned that
Johnson was not filing essential documents, but they didn’t.
Johnson did not abandon the investors; he performed some
legal tasks, though not enough, and responded to three of
Anuj Grover’s inquiries. Unlike the attorneys in Thomas and
Maples, he had not cut off all communication with his clients
and walked away from the litigation. But even if we were to
treat the Investors as abandoned by Johnson, still they must
bear the consequences of their own inaction. They were sued
and did not defend the litigation, personally or by counsel.
They were able to monitor the proceedings yet did not fol-‐‑
low through. The district judge therefore did not abuse his
discretion in denying their motion for relief from judgment.
AFFIRMED
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