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United States v. Mucci

decided: July 13, 1989.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 84 C 8632 -- William T. Hart, Judge.

Posner, Manion, and Kanne, Circuit Judges.

Author: Kanne

KANNE, Circuit Judge

Appellants in this case, the Di Mucci brothers, appeal the district court's entry of a default judgment against them in this case, the district court's refusal to set that judgment aside, and the district court's order ordering affirmative injunctive relief. For the reasons discussed below, we affirm.

I. Background

On October 4, 1984, the United States filed its complaint in federal district court against the three Di Mucci brothers: Salvatore, Robert and Anthony. The Di Muccis own four apartment buildings in the suburbs of Chicago: the Cottonwood, Alpine and Mt. Shire complexes in Mount Prospect, Illinois, and the English Valley complex in Palatine, Illinois. The United States' complaint charged the defendants with being engaged in a "pattern or practice" of making apartments unavailable to persons because of their race in violation of the Fair Housing Act of 1968, 42 U.S.C. ยง 3601 et seq.

On January 17, 1985, the United States served its first Rules 33 and 34 interrogatories and document requests. These requests and interrogatories sought the names and addresses of the buildings defendants owned, information about their managers, occupants and potential occupants, and information about how the apartments were managed. Defendants did not respond until March, 1985, when they produced some documents but answered none of the interrogatories. On five occasions, the district court ordered the defendants to respond to all outstanding discovery requests: March 26, April 10, May 2, June 5 and June 20, 1985.*fn1 At no time did defendants fully comply with these orders. In the fall of 1985, defendants asked for, and the United States agreed to, three postponements of defendants' depositions. The government only agreed to the last postponement in exchange for defendants' agreement to produce certain subpoenaed materials and all outstanding discovery by September 27, 1985. When the outstanding discovery was not produced, the government moved on October 9, 1985, to have defendants held in civil contempt. On October 16, 1985, the defendants did not appear for their depositions. Counsel for defendants was reached by telephone. He claimed that he assumed no depositions would be held because the documents sought prior to them had not been produced.*fn2

On the same day, the government went to the district court with an emergency motion to compel defendants' attendance at the deposition. At that time, the district court struck defendants' pleadings and entered a default pursuant to Rules 37 and 55(a) of the Federal Rules of Civil Procedure. The court also invited the United States to move for entry of a default judgment. On October 25, 1985, the government moved for entry of such a judgment pursuant to Rule 55(b)(2). Defendants moved on November 1, 1985, to have the default set aside pursuant to Rule 55(c).*fn3 Defendants subsequently changed attorneys and moved to stay decision on the proposed default judgment. The district court granted a stay to December 5, 1985, but the judgment was not in fact entered for another four months.

During this time, the Di Muccis' former attorney, John L. Gubbins, filed a lengthy response and affidavit at the court's invitation. In this affidavit, he maintained that he had been instructed to deal solely with Salvatore Di Mucci, that he had done so diligently, that Salvatore had but "grudgingly" given him the information and documents for the government that he did turn over, and that Mr. Di Mucci categorically refused to provide any information which would lead to identifying his former employees. Gubbins also claimed that he had warned him repeatedly that the court was likely to hold the defendants in default.

Salvatore Di Mucci's responding affidavit presented a different version of the facts. He claims that he met and spoke with Gubbins only infrequently. Di Mucci claims that he had not been kept informed of the progress of the case, that he had not been made aware of the contempt or default proceeding, and that he had not been told that the court had warned that it would impose sanctions for the defendants' failure to produce discovery. This affidavit, however, did not deny knowledge of the discovery requests, and did not claim to have fully complied with them. Rather, it stated that it had been Salvatore Di Mucci's opinion that Gubbins should have taken a "vigorous defensive position" to the discovery requests of the government, which he felt were too broad and addressed to the wrong parties. Di Mucci also claims not to have received any written communications regarding motions for contempt or default or to compel. Defendants did not request a hearing on the opposing affidavits, although they claimed at oral argument that they were entitled to one.

At a status hearing on January 9, 1986, defendants tendered a large box of W-4 forms, going back many years, that did not identify which of the employees named on the forms were rental agents. The government rejected this "proffer" as essentially too little too late.

On April 3, 1986, the district court granted the United States' motion for entry of default judgment, and asked the government to submit a proposed order together with an affidavit in support of relief. The district judge's accompanying memorandum opinion noted two independent, viable legal bases for entry of default pursuant to Rule 55(a): defendants' disobedience of five successive court orders to produce answers and documents in response to discovery requests, and defendants' failure to appear for their depositions. The district court also held that there was no justification for setting aside the default, because defendants had not shown good cause for their actions.

On April 10, 1986, the United States submitted a proposed order to the court. This order enjoined the defendants from further violations of the Fair Housing Act. In addition, it required the defendants to take certain affirmative steps to ensure future fair and open housing.

Defendants moved the district court on April 14, 1986 to reconsider its April 3 order and filed an opposition to the government's proposed order. On April 29, 1986, the district court entered an opinion denying reconsideration. It also decided to enter the proposed decree, but treated defendants' opposition to it as a motion under Rule 59(e) of the Federal Rules of Civil Procedure to amend or alter judgment. The court referred the matter to a magistrate to consider whether the affirmative provisions of the order were appropriate. On July 17, 1986, the magistrate issued a report recommending that the original decree, with minor modifications, be entered. The district court entered an amended decree on September 10, 1986 but again stayed the affirmative parts of the order on defendants' motion. On October 9, 1986, the court vacated the affirmative parts of the injunction and referred the matter to the magistrate a second time, ordering that an evidentiary hearing be held as to the propriety of affirmative relief.

This evidentiary hearing was held in November and December of 1986. As appellants admitted at oral argument, this "hearing" essentially was a trial of the case "through the back door." At the evidentiary hearing, the magistrate heard the testimony of Robert Di Mucci and of three property managers. The government offered the testimony of Tina Meadows, a former rental agent employed by the Di Muccis for a few months in 1983. She testified that she was instructed by two of the property managers not to give the normal telephone sales pitch if she suspected the caller was black or a member of another minority group and to give less than the normal sales pitch (or none at all) when showing a model apartment to a black person.*fn4

The United States also presented testimony regarding six incidents in which black apartment seekers or testers acting on behalf of the Leadership Council for Metropolitan Open Communities ("Leadership Council") were treated discriminatorily.*fn5 Two of these incidents involved refusals to rent to bona fide apartment seekers.*fn6 In other cases, defendants' agents told black testers that apartments of the size they wanted were unavailable while telling white testers that such apartments were in fact available.*fn7 In two of these cases, defendants' agents treated black testers differently from the way they treated white testers, making greater efforts to rent apartments to the white testers.*fn8 The government also presented testimony from Kale Williams, the Leadership Council Executive Director, on the need for affirmative relief in cases such as this.

On March 10, 1987, the magistrate issued a report containing findings of fact and conclusions of law. She concluded that although in the case of a default, the facts alleged are taken as true, the government still had to show that the violations amounted to a "pattern or practice" of discrimination, and that there was a likelihood that the violations would recur. In her report, she found that "defendants intentionally discriminated against black persons in the rental of apartments," and that the incidents of race discrimination were not simply isolated incidents but "formed a pattern and practice of discrimination carried out by defendants and their agents." The magistrate also concluded that both prohibitory and affirmative remedies were necessary.

On October 7, 1987, the district court adopted the magistrate's report and recommendations and reentered the injunction vacated earlier. In summary, the affirmative relief ordered by the court was as follows: (1) that defendants' employees sign statements that they understood the order and would comply with it, and that they understood that failure to comply could lead to court action against them; (2) that defendants engage in extensive instruction of present and future employees and agents in the requirements of the law and of the order itself; (3) that defendants make the public in general, and the minority population in particular, aware of the fair housing policy they would be following; (4) that defendants implement uniform and objective nonracial standards for rental of all apartments; and (5) that defendants maintain certain records and report certain data to the United States for three years. Defendants appeal.

II. Discussion

A. Default Judgment Against Defendants*fn9

1. Entry of Default/Default Judgment

Defendants argue that the district court abused its discretion in entering a default against them. Their primary argument is that it has been the practice in this circuit not to enter a default unless lesser sanctions have ...

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