Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 88 C 10205 -- Charles R. Norgle, Sr., Judge.
Before CUMMINGS, CUDAHY, and FLAUM, Circuit Judges.
Henry Stafford, a former salesman for Purofied Down Products, Inc., sued the company, two of its shareholders, and his former supervisor, Kenneth Mesnik, for terminating him and refusing to pay him monies the corporation allegedly owed him. The district court entered a default judgment against Mesnik. We now reverse.
Brothers Louis and Arthur Puro owned the majority of Purofied, a manufacturer of down products, and acted as officers and directors of the corporation. Stafford began working for Purofied in 1979 as its Regional Manager of Midwest Sales and Special Markets. The corporation paid Stafford a yearly salary and a 1 percent commission on sales he generated. Stafford initially reported directly to Louis, the then Chairman of the Board. In 1987, Purofied hired Mesnik as Executive Vice President, and Stafford began reporting to him.
On August 2, 1988, Mesnik fired Stafford after Stafford landed a large account with the Home Shopping Network ("HSN"), which Purofied expected to purchase $9 million worth of products that year. Allegedly at the direction of the Puros, Mesnik refused to pay Stafford his 1987 commissions and reimburse his travel expenses, of which the corporation had promised and denied payment all year, unless Stafford signed a release relinquishing his right to commissions on all 1988 and future sales, as well as any other amounts Stafford thought were due him. Stafford declined to sign the release.
On September 30, 1988, Stafford's attorney sent letters to the Puros and Mesnik, requesting payment of all amounts Purofied owed his client. Purofied did not tender payment, whereupon Stafford initiated a lawsuit against Purofied, Louis, and Arthur. Stafford claimed that Purofied had breached his compensation agreement and converted his commissions and that the Puros had violated the Illinois Wage Payment and Collection Act (the "Wage Act"), had tortiously interfered with his compensation agreement, had terminated his employment in bad faith, and had tortiously interfered with his business relationship with Purofied. Purofied filed for bankruptcy in 1990, thereby staying the action against it. Shortly thereafter, on April 6, 1990, Stafford added Mesnik as a defendant on the bad faith termination, Wage Act, and tortious interference claims.
From the beginning, the parties encountered problems conducting discovery. Before Stafford added Mesnik to the suit, Stafford filed a motion to compel the defendants to answer certain interrogatories relating to Stafford's compensation and any contracts originally procured by Stafford that Purofied concluded after his termination. The motion involved Mesnik only to the extent it asked the court to compel the corporation to present Mesnik, then still one of its officers, for a deposition. The court ordered the defendants to comply with these requests in March and May, 1990, which they still had not done over one year later, although Mesnik did submit to a deposition after becoming a defendant.
In November, 1990, Stafford propounded interrogatories and requests for document production to Mesnik and Louis. When the defendants failed to reply within one month, Stafford filed motions to compel and for a default judgment. The court denied these motions but ordered Mesnik and Louis to respond to Stafford's discovery requests by January 30, 1991. They responded -- but refused to answer several questions as overly burdensome or not likely to lead to discoverable material. After further disputes over this discovery and the earlier interrogatories, Stafford filed another motion to compel on March 6, 1991. Rather than rule on this motion, the court, on January 31, 1992, ordered the parties to resolve their discovery disputes by holding a local rule 12 conference within 28 days. The court at the same time ordered the parties to file a final pre-trial order by April 30, 1992.
Counsel for all the individual defendants, Marc Smith, met with Stafford's attorney in February to attempt to settle the discovery conflicts. They did not discuss Mesnik's interrogatories because Mesnik had instructed Smith to cease working on his behalf. Smith subsequently filed a motion to withdraw as Mesnik's counsel, which motion the court granted, over Stafford's objection, on March 29, 1992.
After Smith's withdrawal, Mesnik did not contact Stafford to discuss the discovery requests *fn1 or participate in the drafting of the pre-trial order. The other parties filed a joint motion to extend the time to file the pre-trial order, which the court granted, giving the parties until June 5, 1992. On May 8, Mesnik, now acting pro se, drafted a letter to the court objecting to the Magistrate Judge's April 21 recommendations on the defendants' motion for summary judgment and seeking the appointment of counsel or permission to represent himself. The court did not receive Mesnik's letter until May 28. In the meantime, also on May 8, Stafford filed a motion for default judgment against Mesnik, sending notice to Mesnik in care of Smith. At the hearing on the motion on May 22, Smith appeared on Mesnik's behalf and sought reinstatement as his counsel, to which Stafford did not object. The court nonetheless denied Smith's request, stating: "[t]his is just playing games. . . . A motion for default judgment is entered, and now Mr. Mesnik is asking you to come back in. That's not dealing in good faith or appropriately in my opinion." After noting that Mesnik was not present, the court entered a default against him. Mesnik immediately retained ...