Not All Neglect Is Excusable; K.R. Calvert Co., LLC v. Sandys

Some attorneys are careless, and many times they can get away with that carelessness.But careless attorneys can really hurt their clients, particularly when their mistakes are inexcusable.

Medex is a company that provides non-emergency medical transportation services. K.R. Calvert is an affiliate of Medex, and it operates the Medex franchise business. The Sandyses entered into a franchise agreement with Medex in March 2014. By December 2014, the relationship had broken down, and the Sandyses’ franchise agreement was mutually terminated. The agreement terminating the relationship contained a mutual non-disparagement clause.

Despite the non-disparagement clause, K.R. Calvert’s management sent an email to its other franchisees which informed them that the Sandyses’ franchise was closing, and indicated that the Sandyses had not been working hard enough to make the franchise successful and were behind on their payments.

The Sandyses filed a suit against a number of entities related to Medex, including K.R. Calvert. Attorney P. Adam Davis entered an appearance for some of those entities, but not for K.R. Calvert. Later, Attorney Davis acted as counsel for K.R. Calvert. The Sandyses sought discovery from K.R. Calvert and addressed correspondence to Attorney Davis as K.R. Calvert’s counsel. But K.R. Calvert did not respond to the discovery, even after a court order. The Sandyses then amended their complaint, but Attorney Davis still did not file an answer on behalf of K.R. Calvert.

At this point, counsel wrote to Attorney Davis, notifying him that he had neither answered nor produced discovery on behalf of K.R. Calvert. Attorney Davis responded to that email the same day, but did not correct those errors. 29 days later, the Sandyses moved to default K.R. Calvert, and the trial court granted that motion.

K.R. Calvert (through Attorney Davis) moved to vacate the default judgment, but neither set forth a basis for doing so under Rule 60(B) nor a meritorious defense. So the trial court denied the motion, set a damages hearing, and ordered that K.R. Calvert produce its discovery. K.R. Calvert said it had no responsive documents.

The next series of events cannot be easily paraphrased:

On October 20, 2017, as requested by the trial court, the Sandyses filed their initial petition for damages and attorney’s fees. K.R. Calvert filed its response on November 9, 2017, after filing four motions for extension of time within ten days. On November 13, 2017, the trial court issued an order regarding the requests for extensions of time in which it “strongly admonishe[d] counsel to be more appreciative of not only opposing counsel’s time, but also the time of the Court.”

The trial court eventually ordered Attorney Davis personally to pay attorneys’ fees to the Sandyses’ attorney, K.R. Calvert to pay damages and attorney’s fees, and found Attorney Davis in contempt for not paying the required fees. K.R. Calvert and Attorney Davis appealed.

On appeal, K.R. Calvert argued that Attorney’s Davis’s failure to appear and respond to the lawsuit was a “clerical error” that is excusable. It further argued that Attorney Davis only discovered this error upon the entry of default judgment. But the Court noted that in order for neglect to be excusable, it must be “something that can be explained by an unusual, rare, or unforeseen circumstance, for instance.” That was not the case here.

We think that Attorney Davis and K.R. Calvert are largely missing the point here. The problem is not that K.R. Calvert initially failed to appear or answer the amended complaint due to an error—the problem is that K.R. Calvert failed to answer the amended complaint even after it was informed that it had not already answered and that a failure to promptly do so would cause the Sandyses to move for default judgment.

And Attorney Davis’s argument that he did not notice this warning did not sway the Court.

The email in question was from opposing counsel in a pending lawsuit, something to which prompt and thorough attention should have been paid. Moreover, the section of the email addressing K.R. Calvert’s failure to answer the amended complaint directly followed the section about K.R. Calvert’s failure to provide requested documents pursuant to an order to compel, so it was abundantly clear that the email was about business. Finally, the section in question was in the main body of a somewhat short email, not buried in a postscript or footnote where it might not be noticed. In short, there was nothing rare, unusual, or unforeseen that would excuse such an oversight.

Thus, the trial court did not err when it denied the motion to set aside the default judgment.

K.R. Calvert argued that damages were not proper because there was no proof of causation. “Those particular ships, however, have sailed” because of the default judgment. Likewise, K.R. Calvert was not entitled to a set-off based on the Sandyses’ settlement with other defendants because it did not present “any … evidence to support a right to a set-off.”

In the end, the Court affirmed the trial court in all respects including finding that K.R. Calvert had litigated in bad faith and ordered Calvert to pay $106,000 in attorney’s fees.

Lessons:
1. Not all neglect is excusable.
2. If opposing counsel brings a procedural failing to your attention, you should correct it, rather than ignore it.
3. It may be good practice to bring procedural errors to opposing counsel’s attention, as their failure to correct the error may lead to bigger sanctions.

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