Wisconsin Carpenters Pension Fund et al v. Jokipii Demolition LLC et al

Filing 43

ORDER signed by Judge Rudolph T Randa on May 2, 2007 granting 37 Motion to Reopen Case; granting 37 Motion to Vacate. Mary Jokipii MAY file an answer or other responsive pleading on or before May 25, 2007. The caption and docket in this action ar e CORRECTED to delete Reimers name. The portions of the Courts prior orders directing that entry of judgment in favor of Reimer against Jokipii LLC and Larry Jokipii (Docket Nos. 33 & 35) are VACATED. In all other respects those orders for judgment remain in full force and effect. The Clerk of Court SHALL enter amended judgments against Jokipii LLC and Larry which do not include Reimer in their caption and do not award him any relief. (cc: all counsel; via US Mail to Richard Jacobson)(Randa, Rudolph)

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Wisconsin Carpenters Pension Fund et al v. Jokipii Demolition LLC et al Doc. 43 Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 1 of 10 Document 43 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN W I S C O N S I N CARPENTERS PENSION FUND, W I S C O N S I N CARPENTERS HEALTH FUND, N O R T H E R N WISCONSIN REGIONAL COUNCIL O F CARPENTERS VACATION FUND, N O R T H E R N WISCONSIN CARPENTERS A P P R E N T I C E S H I P & JOURNEYMAN TRAINING FUND, L A B O R MANAGEMENT COOPERATION TRUST FUND, C O N T R A C T ADMINISTRATION FUND, N O R T H E R N WISCONSIN REGIONAL C O U N C I L OF CARPENTERS, and B R I A N GENTRY, W I S C O N S I N LABORERS HEALTH FUND, W I S C O N S I N LABORERS PENSION FUND, W I S C O N S I N LABORERS VACATION FUND f/k /a KENOSHA LABORERS LOCAL 237 VACATION FUND, WISCONSIN LABORERS L E C E T FUND, WISCONSIN LABORERS D I S T R I C T COUNCIL, and MICHAEL R. RYAN, K E N O S H A BUILDING & CONSTRUCTION T R A D E S HEALTH FUND, and KENOSHA LABORERS LOCAL 237 P E N S I O N FUND, P l a i n t if fs , v. Case No. 06-C-0550 J O K I P I I DEMOLITION LLC, L A R R Y J. JOKIPII, and M A R Y JOKIPII, D e f e n d a n t s. DECISION AND ORDER Dockets.Justia.com Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 2 of 10 Document 43 B AC KG RO U N D T h e above-listed Plaintiff employee benefit funds, labor organizations and their tru s te e s commenced this action on May 5, 2006, to collect unpaid fringe benefit contributions f ro m Defendants Jokipii Demolition LLC ("Jokipii LLC"), Larry J. Jokipii ("Larry")1 and M a ry Jokipii ("Mary") (collectively the "Defendants"). The complaint claims that the D e f en d a n t s failure to pay fringe benefit payments as required under certain collective b a rg a in i n g agreements, trust plans, and trust agreements violated the Labor Management R e latio n s Act of 1947 ("LMRA"), 29 U.S.C. 185; the Employee Retirement Income Security A c t of 1974 ("ERISA"), as amended, 29 U.S.C. 1132; and the Wisconsin common law. (C o m p l. 1.) Invoking this Court's supplemental jurisdiction,2 the complaint also includes c la im s against Larry, as the owner and an agent of Jokipii LLC, and Mary, as an agent of J o k ip ii LLC, for misappropriation of trust funds in violation of Section 779.02(5) of the W is c o n s in Statutes. Upon application by the Plaintiffs, default was entered by the Clerk of Court on J u n e 13, 2006, as to each Defendant. Subsequently, on July 28, 2006, the Court entered o rd e rs for default judgment against the Defendants and the Clerk of Court entered judgments a g a in s t each Defendant. Judgment was entered against Mary in the amount of $62,117.54 to g e th e r with interest at the rate allowed by law. The Court's usual practice is to refer to natural persons by their surnames. However, to distinguish between L a r r y and Mary Jokipii, the Court refers to them by their given names. The complaint refers to ancillary jurisdiction. (See Compl. 2.) However, ancillary jurisdiction was s u p e r c e d e d by supplemental jurisdiction for actions commenced after December 1, 1990. See 28 U.S.C. 1367, H is to r ic a l and Statutory Notes. 2 1 2 Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 3 of 10 Document 43 M O T I O N TO REOPEN DEFAULT Mary seeks to reopen the default judgment against her and to dismiss the action a g a in s t her and vacate the judgment against her. The Plaintiffs oppose the motion. The time h a s passed for the filing of any reply by Mary. Mary does not identify the rule pursuant to which she brings her motion. See C iv il L.R. 7.1(a) (E.D. Wis.)(stating "Every motion must set forth the rule pursuant to which it is made.") (emphasis added). Citation of the pertinent rule is required so that the movant p re se n ts information relevant to the relief sought, frames legal arguments properly, and p ro v id e s a framework for response and analysis. Despite the missing citation, because Mary's motion follows the entry of default ju d g m e n t, Rule 60(b) of the Federal Rules of Civil Procedure applies. See Pretzel & Stouffer, C h a r te re d v. Imperial Adjusters, Inc., 28 F.3d 42, 45 (7th Cir. 1994) (A request to vacate a d e f a u lt judgment is controlled by Rule 60(b).) The requirements that must be met under Rule 6 0 (b) to set aside a default judgment are the same as those of Rule 55(c), but they are more s tric tly applied. O'Brien v. R. J. O'Brien & Assoc., Inc., 998 F.2d 1394, 1401 (7th Cir. 1993) (q u o tin g United States v. Di Mucci, 879 F.2d 1488, 1495 (7th Cir. 1989)). Federal Rule of Civil Procedure 55(c) provides: "For good cause shown, the c o u rt may set aside an entry of default and, if judgment by default has been entered, may lik e w is e set it aside in accordance with Rule 60(b)." Recently, discussing this provision, the a p p e als court stated that the "good cause" refers to "good cause" for the judicial action, not " g o o d cause" for the defendant's error. See Sims v. EGA Prods., 475 F.3d 865, 868 (7th Cir. 2 0 0 7 ). Sims does not discuss the well-established case law in this circuit that to obtain "the 3 Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 4 of 10 Document 43 v a c a tio n of a default order under Rule 55(c), the defendant must show: `(1) good cause for its d ef au lt, (2) quick action to correct it, and (3) a meritorious defense to the plaintiff's c o m p la in t.'" See O'Brien, 998 F.2d at 1401 (citing Di Mucci, 879 F.2d at 1495.) 3 T h e appeals court has explained that the defaulting party must show good cause f o r its default or the default order will not be vacated. Pretzel & Stouffer, 28 F.3d at 45. The "g o o d cause" prong of the test to obtain vacation of a default order "focuses on the litigant's c o n d u c t preceding the entry of default." Jones v. Phipps, 39 F.3d 158, 165 (7th Cir. 1994). " E x c u s a b le neglect" can serve as a basis for the default. See Robb v. Norfolk & W. Ry. Co., 1 2 2 F.3d 354, 359 (7th Cir. 1997); Calumet Lumber, Inc. v. Mid-Am. Indus, Inc., 103 F.3d 6 1 2 , 614 (7th Cir. 1997). The "willfulness" of the defaulting party's action should also be considered. See A n ilin a Fabrique de Colorants v. Aakash Chem. & Dyestuffs, Inc., 856 F. 2d 873, 879 (7th Cir. 1 9 8 8 ); Passarella v. Hilton Int'l Co., 810 F.2d 674, 675-76 (7th Cir. 1987). Although tra d it io n a l ly default judgments were strongly disfavored, courts are moving away from the tra d itio n a l position. O'Brien, 998 F.2d at 1401; see also, Dimmitt & Owens Fin., Inc. v. U n ite d States, 787 F.2d 1186, 1192 (7th Cir. 1986). "Parties seeking to set aside default ju d g m e n ts face a formidable task." Zuelzke Tool & Eng'g Co. v. Anderson Die Castings, Inc., 9 2 5 F.2d 226, 229 (7th Cir. 1991). The Court notes its difficulty reconciling the two viewpoints of "good cause." But, regardless of whether t h e Court must find "good cause" for its action or whether the defaulting party must establish "good cause" for its in a c t io n prior to the default, the outcome in this case would not be changed. 3 4 Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 5 of 10 Document 43 Q u ic k Action W ith respect to "quick action," Rule 60(b) provides that a motion for relief from a judgment by reason of mistake, inadvertence, surprise or excusable neglect, "shall be made w ith in a reasonable time," but "not more than one year after the judgment, order or proceeding w a s entered or taken." Fed. R. Civ. P. 60(b). Default was entered by the Clerk of Court on J u n e 13, 2006. The Court issued its order for default judgment on July 28, 2006, and the d e f a u lt judgment was entered by the Clerk of Court on July 28, 2006. "[W]hat constitutes " r ea so n a b le time" for a filing under Rule 60(b) depends on the facts of each case." Ingram v . Merrill Lynch, Pierce, Fenner & Smith, Inc., 371 F.3d 950, 952 (7th Cir. 2004). Although " [ t]h e re is no hard and fast rule as to how much time is reasonable for the filing of a Rule 6 0 (b )(6 ) motion," courts look at "the interest in finality, the reasons for the delay, the practical a b ility of the litigant to learn earlier of the grounds relied upon, and the consideration of p re ju d ic e , if any, to other parties." Kagan v. Caterpillar Tractor Co., 795 F.2d 601, 610 (7th C ir. 1986) (internal citations omitted). M a ry took no action until December 13, 2006 six months after default was e n te re d and more than four months after the default judgment was entered. Except for stating th a t she was unable to afford counsel, Mary's bare bones motion does not explain the reason f o r the delay. While Mary has not provided a basis for this Court to conclude her action was " q u ic k ," the delay was less than the one year allowed by the rule. 5 Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 6 of 10 Document 43 G o o d Cause W ith respect to good cause, Mary's motion, which relies upon her affidavit,4 s t a te s that she was unable to afford an attorney and consequently received no advice or re p re s e n ta tio n by counsel until December of 2006. Mary does not further elaborate. However, there is no indication that her default was wilful -- it was due to a lack of assets to obtain representation. One district court within this circuit found that the lack of financial resources to obtain representation may constitute good cause to vacate a default. See Allen Russell Pub., In c . v. Levy, 109 F.R.D. 315, 317 (N.D. Ill. 1985).5 The defaulting party provided an affidavit in f o rm in g the court that it had contacted three law firms about representation, and that two f irm s had declined based on conflicts of interest and one firm could not represent the party at a n yth in g other than at a cost which would have been prohibitive. Id. The affidavit further in f o rm e d the court that, at the time, the defaulting party had funds of no more than a few h u n d re d dollars and had no expectation of getting any more funds. Id. Thereafter, one of the la w firms which had claimed a conflict of interest informed the defaulting party that the c o n f lic t no longer existed and it would be willing to provide legal representation. Id. Paragraph eight of Mary's affidavit is incomplete. It contains one sentence and the phase "hire a lawyer for a d v i c e or representation in this matter." (Mary Aff. 8.) The Court has evaluated Mary's motion based on the s ta t e m e n t in paragraph eight of her motion. (Mot. Reopen Case 8.) 4 The Court recognizes that the decision of a parallel trial court lacks precedential authority, but due to the s c a r c i t y of opinions addressing analogous situations, Levy is helpful. (Levy considered Daly v. Stratton, 304 F.2d 666 ( 7 t h Cir. 1962) and McKnight v. United States Steel Corp, 726 F.2d 333,338 (7th Cir. 1984)). This Court also c o n s id e re d Barry Howard & Associates, Inc. v. Indiana Transportation Museum, 125 F.R.D. 487, 489-91 (S.D. Ind. 1 9 8 9 ) , addressing a motion to vacate default judgment and distinguishing Levy. 5 6 Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 7 of 10 Document 43 In this case, Mary simply states that she could not afford counsel. She does not p r o v id e any additional details regarding her financial situation, what enabled her to obtain c o u n se l in December 2006, or her prior efforts to obtain representation. She has made a lesser s h o w in g than made in Levy. However, Levy was decided in 1985. The Supreme Court's 1993 decision in P io n e e r Investment Services Co. v. Brunswick Associates Limited Partnership, 507 U.S. 380 (1 9 9 3 ) effected a change in the relevant legal landscape. Pioneer emphasizes the equitable n a tu re of a court's "excusable neglect" determination and clarifies that "excusable neglect" m a y "encompass situations in which the failure to comply with a filing deadline is attributable to negligence." Id. at 394. Pioneer holds that "for purposes of Rule 60(b), `excusable neglect' is understood to encompass situations in which the failure to comply with a filing deadline is a ttrib u ta b le to negligence." Id. Pioneer states that the determination of what amounts to " e x c u s a b le neglect" under Rule 60(b) is: a t bottom an equitable one, taking account of all the relev an t circumstances surrounding the party's o m is s io n . These include . . . the danger of prejudice to the [non-movant], the length of the delay and its p o te n tia l impact on judicial proceedings, the re a so n s for the delay, including whether it was w i th in the reasonable control of the movant, and w h e th e r the movant acted within good faith. Id. at 395. D e sp ite Mary's lack of assets, her conduct upon receiving the legal documents in this action is rightly characterized as negligent. But, is her negligence excusable? The P la in tif f s do not contend that they will be prejudiced. The delay and its potential impact on ju d ic ia l proceedings are not a significant factor. There is no indication that the lack of funds 7 Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 8 of 10 Document 43 to hire an attorney was within Mary's reasonable control. There is also no evidence that Mary d id not act in good faith. Thus, under the liberalized excusable neglect standard, the Court f in d s "good cause" to vacate the default judgment. Meritorious Defenses Mary maintains that she is not liable under the Wisconsin theft by contractor's s ta tu t e because she was only an employee of Jokipii LLC and she has no ownership interest in the business. Mary has set forth a potentially meritorious defense. See Phipps, 39 F.3d at 1 6 5 (holding that a "meritorious defense is not necessarily one which must, beyond a doubt, s u c c ee d in defeating a default judgment, but rather one which at least raises a serious question re g a rd in g the propriety of a default judgment and which is supported by a developed legal and f a c tu a l basis"). Based on the foregoing, in the exercise of its discretion, the Court grants Mary's m o t io n to reopen the case (Docket No. 37). The Court's order for entry of judgment against M a ry (Docket No. 31) and the default judgment against Mary (Docket No. 32) are vacated. M a ry may file an answer or other responsive pleading by May 25, 2007. COURT'S REOPENING OF ORDERS FOR JUDGMENT AND JUDGMENTS In considering Mary's motion, the Court has noticed an error in the orders for ju d g m e n t and judgments. The Court included Steve Reimer ("Reimer") as a plaintiff on the o r d e r s for judgment and judgments and awarded him relief against the Defendants. W h e n a default judgment is entered against a defendant, the facts alleged in the c o m p la in t are deemed true. Black v. Lane, 22 F.3d 1395, 1402 (7th Cir. 1994). Reimer is listed as a plaintiff in the caption of the complaint. But, the body of the complaint is devoid 8 Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 9 of 10 Document 43 o f any factual allegations about Reimer; there are no facts before the Court upon which Reimer is entitled to relief from the Defendants. See e.g. id. at 1401 n. 1. The inclusion of Reimer as a judgment plaintiff was an error. Rule 60(a) provides relief from final judgments "infected" by clerical error. See W e sc o Prod. Co. v. Alloy Auto. Co., 880 F.2d 981, 983 (7th Cir. 1989). Rule 60(b) contains f iv e clauses setting forth specific grounds for relief as well as a final catch-all clause in Rule 6 0 (b )( 6 ). Id. Motions to correct clerical errors which seek changes that "implement the result in te n d e d by the court at the time the order was entered" are proper under Rule 60(a). Id. at 9 8 4 . However, another avenue must be used if the motion seeks changes that "alter the o rig in a l legal meaning to correct a legal or factual error." Id. In this instance, the Court ordered judgment and entry of judgment in favor of 1 7 plaintiffs, including Reimer. However, it erred because the complaint does not include any f a ctu a l basis upon which Reimer is entitled to relief. The error arguably is a clerical one b e c a u s e the Court did not intend to award relief without any factual basis for the relief. See id .; see also Wallace v. Mulholland, 957 F.2d 333, 335 (7th Cir. 1992) (mistake in stating co m p en sato ry damage award against wrong officer could be corrected under Rule 60(a)). A lte rn a tiv e ly, the error falls within the scope of a mistake which may be corrected under u n d e r Rule 60(b)(1). Both provisions provide authority for the correction. Therefore, the Court sua sponte vacates those portions of its prior orders against J o k ip ii LLC and Larry which direct the entry of judgments in favor of Reimer and directs that th e Clerk of Court enter amended judgments against Jokipii LLC and Larry which do not 9 Case 2:06-cv-00550-RTR Filed 05/02/2007 Page 10 of 10 Document 43 in c l u d e his name in the caption and do not afford any relief to Reimer. The Court has also a m e n d e d the case caption to delete Reimer's name since he is not a party to this action. NOW, THEREFORE, BASED ON THE FOREGOING, IT IS HEREBY O R D E R E D THAT: M a ry's motion to reopen case, dismiss, vacate judgment (Docket No. 37) is G R A N T E D as follows the Court's order for judgment against Mary (Docket No. 31) and the judgment against Mary (Docket No. 32) are VACATED. Mary MAY file an answer or other responsive pleading on or before May 25, 2007. The caption and docket in this action are CORRECTED to delete Reimer's nam e. The portions of the Court's prior orders directing that entry of judgment in favor o f Reimer against Jokipii LLC and Larry (Docket Nos. 33 & 35) are VACATED. In all other re s p e c ts those orders for judgment remain in full force and effect. The Clerk of Court SHALL enter amended judgments against Jokipii LLC and L a rr y which do not include Reimer in their caption and do not award him any relief. Dated at Milwaukee, Wisconsin this 2nd day of May, 2007. BY THE COURT s / Rudolph T. Randa Hon. Rudolph T. Randa C h ie f Judge 10

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