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Inryco Inc. v. Metropolitan Engineering Co.

decided: May 23, 1983.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 80 C 2256 -- George N. Leighton, Judge.

Bauer, Coffey, Circuit Judges, and Holder, District Judge.*fn*

Author: Bauer

BAUER, Circuit Judge.

The district court entered a judgment of default against the defendants in the amount of $225,316.93. The defendants argue that the default judgment should have been vacated pursuant to Federal Rule of Civil Procedure 60(b), and appeal from denial of that motion.

The district court entered its judgment of default on December 4, 1981. On February 10, 1982, the defendants filed their Rule 60(b) motion to vacate entry of default, which the district court denied on April 13, 1982. The defendants within ten days filed a Rule 59(e) motion to alter or amend that ruling. Because the plaintiff raised objections to the propriety of the Rule 59(e) motion, the defendants filed a notice of appeal from the Rule 60(b) judgment while the Rule 59(e) motion was pending. This court stayed proceedings in that appeal pending resolution of the defendants' motion to alter or amend.

The district court on June 18, 1982, denied the motion for reconsideration; a second notice of appeal was filed in this court on July 16, 1982. We affirm.


The procedural history of this case is lengthy, but a review is needed to understand why the district court entered the default judgment. Most of the events set out below were chronicled in the district court's memorandum order denying the motion to vacate. The defendants dispute some of the facts.

A. Events leading to default judgment.

Plaintiff Inryco, Inc., sued Defendants Metropolitan Engineering Company (MECO) and American Fidelity Fire Insurance Company, MECO's surety, for breach of contract. Inryco had contracted with the University of Illinois to build a parking garage at that university's Chicago campus. Inryco subcontracted part of the work to MECO. In its complaint, Inryco claimed that MECO breached the subcontract by failing either to complete the work or to pay its vendors, forcing Inryco to hire another subcontractor to finish the job. Inryco also sought performance on the subcontractor bond from American Fidelity.

The defendants were personally served with process and copies of the complaint in May 1980. Shortly thereafter, Inryco filed interrogatories and production requests.

On June 17, 1980, the defendants, through their retained counsel Thomas J. Royce, moved for a stay of the proceedings pending arbitration. Royce, however, did not file an appearance and the defendants did not answer the complaint. The district court set a briefing schedule on the motion to stay.

Inryco was granted leave to file an amended complaint on July 17. The district court ordered the defendants to answer or otherwise plead by August 6. No such pleading was filed.

On August 22, the district court, under 9 U.S.C. ยง 3 (1947), granted the defendants' motion to stay the proceeding pending arbitration. Neither Royce nor any other person appeared to represent the defendants.

On its own motion, the district court on October 29 set the case for a status hearing on December 12. The defendants were not represented at that status hearing. The court conducted four additional status hearings on January 26, February 27, April 10, and May 8, 1981. The defendants did not appear at any of the hearings.

On May 15, 1981, Inryco filed a motion to lift the stay of proceedings. Although the motion was personally served on Royce at his office, Royce did not appear in court when the motion was called, and did not file any written objection or response to the motion. The court granted the motion.

Inryco then served Royce with the interrogatories and requests to produce that were filed originally a year before. Additionally, Inryco filed notices of depositions. Responses to these pleadings were due by June 15. On June 19, when no responses were forthcoming, Inryco's counsel telephoned Royce to request discovery compliance. Royce promised a quick reply. Nevertheless, the discovery request remained unanswered until July 6, when Inryco's counsel again telephoned Royce. This time, Royce promised satisfaction by July 20, and the parties rescheduled a deposition of James Dooley, president of MECO, for July 28. When Royce did not respond on July 20, Inryco's counsel called Royce to request compliance. Royce said that the defendants refused to comply with the onerous requests. Notably, Royce never filed objections to the discovery requests with the court.

On August 21, Inryco filed a motion for sanctions under Federal Rule of Civil Procedure 37(d). This time, Royce responded immediately, filing a response stating that the defendants would answer all interrogatories by September 25. In court Royce said that his clients would send all requested documents to Royce's office in early September, and that he would have answers by September 28. The district court therefore continued the motion for sanctions to October 9. Not until October 7 did Royce send seven folders of materials to Inryco's counsel. None of the interrogatories was answered. Inryco's counsel immediately telephoned Royce to complain that the materials were insufficient to satisfy the outstanding discovery requests. Royce made no further attempts to comply.

When the motion for sanctions was called on October 9, Inryco's counsel told the court that Royce's responses were inadequate. Royce did not appear. The court ordered the defendants to comply with all discovery requests within seven days, and set a status hearing for October 30. Inryco's counsel sent a copy of the order to Royce.

Because two weeks passed without response from Royce, Inryco initiated the action which culminates in this appeal. On October 28, Inryco's counsel personally served Royce with a motion for entry of default on the grounds that the defendants had failed to answer or otherwise plead since May 15, 1981. Royce told the lawyer that he was on trial in another matter. The district court continued both motions -- for sanctions and for default -- to November 6. Despite the substantial threat to the defendants' interests posed by the pending motions, Royce did not appear in court on November 6. The court entered a continuance to November 13, and ordered Inryco to serve Royce with notice and a copy of a proposed judgment order against the defendants before the next motion call.

Inryco's counsel personally served Royce with the pleading on November 11. Royce explained in a telephone conversation with Inryco's counsel on November 13 that Royce was experiencing difficulty in getting documents from his clients. Inryco's counsel indicated that Royce should explain his situation to the court, but Royce did not appear when the motions were called that day. The court entered the default order and set December 4 for proof of damages.

When Inryco appeared on December 4, with affidavits attesting to the damages it had incurred, the court entered judgment against the defendants for $225,316.93. Royce did not appear.

B. Inryco's arguments.

Inryco characterizes the facts above as clearly indicating the defendants' disregard for this litigation, which Inryco argues was inexcusable. Inryco notes that its lawyers repeatedly told Royce about pending pleadings and the defendants' allegedly insufficient responses, but got virtually nothing in return. For example, in its memorandum in opposition to the defendants' motion to ...

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