Opinion
Docket No.: CL17007123-00
11-14-2017
JOEL HENSON and ASHLEY HENSON, Plaintiffs, v. DDG II, INC., and LEE CHAKLOS, Defendants.
ORDER DENYING PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT
Plaintiffs Joel Henson and Ashley Henson filed a motion for default judgment against Defendant DDG II, Inc. ("DDG"). Plaintiffs allege that because Defendant Lee Chaklos filed an answer on behalf of DDG in his representative capacity, they are entitled to default judgment against DDG. DDG requests that the Court grant it relief from default and leave to file a late answer. Chaklos also requests leave to amend his answer. The Court heard argument from the parties at a hearing on October 11, 2017, after which the parties submitted post-hearing briefs. Based on Defendants' demonstrated good cause and the lack of prejudice to Plaintiffs, the Court finds that the relief Defendants seek serves the ends of justice. Chaklos is GRANTED leave to amend his answer within fourteen days, and DDG is GRANTED leave to file a late answer within fourteen days. The Court therefore DENIES Plaintiffs' motion for default judgment.
BACKGROUND
Plaintiffs filed their complaint on June 26, 2017, and served it on Defendants on July 13, 2017. On August 2, 2017, Chaklos filed an answer with the Court but apparently did not serve it on or send it to Plaintiffs. (Pls.' Mem. Supp. Mot. Default J. 1-2.) Chaklos signed the answer, pro se, in both his personal and corporate capacity. (Answer 3.) Apparently unaware of Defendants' answer, Plaintiffs filed a motion for default judgment on August 10, 2017, asserting that "Defendants have failed to file any responsive pleadings with the Court." (Mot. Default J. 1.) At some point after the answer was filed, Defendants retained counsel, who on the day before the scheduled default judgment hearing filed a "Notice of Hearing"—without an associated motion or proposed amended pleading—indicating that "Defendants will move the Court for the entry of an order allowing to file [sic] an Amended Answer and other responsive pleadings to the Complaint." On October 11, 2017, the Court heard Plaintiffs' motion for default judgment, as well as Defendants' motions related to their responsive pleadings. Following the hearing, the Court took the matter under advisement and granted the parties leave to file post-hearing briefs.
Plaintiffs originally moved for default judgment against both DDG and Chaklos because they did not receive an answer from either defendant. After realizing that Chaklos in fact had filed an answer—but failed to provide a copy to Plaintiffs—Plaintiffs withdrew their motion for default judgment as to Chaklos. Of note, the motion for default judgment did not assert the invalidity of DDG's alleged answer on the ground that Chaklos—despite not being a Virginia-licensed attorney—signed on behalf of DDG, although Plaintiffs advanced that argument at the hearing.
Plaintiffs argue that the Court should "find defendant DDG in default for failure to timely file a response to the Complaint" because, as a non-attorney, Chaklos was not authorized to answer on behalf of DDG. (Pls.' Mem. Supp. Mot. Default 2 (emphasis added).) They assert that "[a]lthough it is unclear when DDG retained counsel, one thing is clear—to this very day, no legally valid answer has been filed on behalf of DDG." (Id. at 3.) Defendants, on the other hand, request leave to file an amended answer on behalf of Chaklos and a late answer on behalf of DDG, claiming that Chaklos—as a pro se litigant—had a good-faith belief that he was filing a proper answer on behalf of DDG and that Plaintiffs will not be prejudiced by late and amended answers. (Mem. Law Supp. Mot. File Am. Answer 1-2.)
STANDARD OF REVIEW
The standard for filing an amended pleading is stated in the Rules of Supreme Court of Virginia:
No amendments shall be made to any pleading after it is filed save by leave of court. Leave to amend shall be liberally granted in furtherance of the ends of justice. Unless otherwise provided by order of the court in a particular case, any written motion for leave to file an amended pleading shall be accompanied by a properly executed proposed amended pleading, in a form suitable for filing.Va. Sup. Ct. R. 1:8. Although "amendments are not a matter of right, . . . a trial court's decision refusing leave to amend after a showing of good cause is, in ordinary circumstances, an abuse of discretion." Ford Motor Co. v. Benitez, 273 Va. 242, 252, 639 S.E.2d 203, 208 (2007). Factors courts have used to analyze the requisite "good cause" include whether the requesting party previously filed an amendment, whether the request was timely made, and whether an amendment would prejudice the opposing party. See, e.g., Ogunde v. Prison Health Servs., 274 Va. 55, 67, 645 S.E.2d 520, 527 (2007).
"[A] pleading, signed only by a person acting in a representative capacity who is not licensed to practice law in Virginia, is a nullity." Shipe v. Hunter, 280 Va. 480, 483, 699 S.E.2d 519, 520 (2010). "If a pleading, written motion, or other paper is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the pleader or movant." Va. Code § 8.01-271.1 (2015 Repl. Vol.).
Rule 3:8 of the Rules of Supreme Court of Virginia provides that "[a] defendant shall file pleadings in response within 21 days after service of the summons and complaint upon that defendant." Va. Sup. Ct. R. 3:8. If a responsive pleading is not timely filed, the defendant is in default. Id. R. 3:19(a). However, "[p]rior to the entry of judgment, for good cause shown the court may grant leave to a defendant who is in default to file a late responsive pleading." Id. R. 3:19(b). The Supreme Court of Virginia has analyzed "good cause" in this context as follows:
[C]ircumstances that support the exercise of discretion to extend the time for filing include lack of prejudice to the opposing party, the good faith of the moving party, the promptness of the moving party in responding to the opposing parties' decision to progress with the cause, the existence of a meritorious claim or substantial defense, the existence of legitimate extenuating circumstances, and justified belief that the suit has been abandoned or will be allowed to remain dormant on the docket.AME Fin. Corp. v. Kiritsis, 281 Va. 384, 392, 707 S.E.2d 820, 824 (2011).
Rule 1:9 of the Rules of Supreme Court of Virginia similarly allows for the filing of late pleadings, providing that "[t]he time allowed for filing pleadings may be extended by the court in its discretion and such extension may be granted although the time fixed already has expired." Va. Sup. Ct. R. 1:9. The decision whether good cause exists to allow filing of a late responsive pleading "rests within the sound judicial discretion of the trial court, it being impossible to lay down a rule which will be binding in all cases." Eagle Lodge, Inc. v. Hofmeyer, 193 Va. 864, 870, 71 S.E.2d 195, 198 (1952).
ANALYSIS
Having considered the pleadings, the evidence and oral argument presented at the hearing, and applicable authorities, the Court now issues its ruling. A. Granting Chaklos Leave to Amend His Answer Serves the Ends of Justice.
As an initial matter, the Court notes that, contrary to the requirement of Rule 1:8, Chaklos failed to file a motion—or an accompanying proposed amended answer—related to the "Notice of Hearing" he filed the day before the scheduled default judgment hearing. The Court nevertheless elected to hear his motion for leave to amend his answer while recognizing that Plaintiffs did not have the benefit of reviewing a proposed amended answer. At the hearing, Plaintiffs objected to Chaklos being granted leave to amend his answer to the extent such amendment involved Chaklos changing his position on any issue. Plaintiffs did not address in their post-hearing brief Chaklos's motion for leave to amend his answer, although they admittedly still did not have a copy of Chaklos's proposed amended answer at that time.
Defendants subsequently filed a Motion to File an Amended Answer—with an accompanying proposed amended answer—on October 18, 2017.
Rule 1:8 states that "[l]eave to amend shall be liberally granted in furtherance of the ends of justice." Va. Sup. Ct. R. 1:8. The Supreme Court of Virginia has pursued several inquiries to determine whether it is appropriate to allow a party to amend its pleading. These include whether the moving party previously sought to amended its pleading, whether the motion was timely filed, and whether the opposing party would be prejudiced by the amendment. Ogunde v. Prison Health Servs., 274 Va. 55, 67, 645 S.E.2d 520, 527 (2007).
Based on the facts here, these inquiries support granting Chaklos leave to amend his complaint. Chaklos has not previously sought to amend his complaint. Chaklos timely filed his motion, as the litigation is in its infancy and the motion was filed shortly after Chaklos retained counsel. Regarding potential prejudice, the Court notes that the parties are not yet fully at issue, a scheduling order has not yet been filed, and a trial date has not been set. There also is no element of unfair surprise, as the parties have ample time to respond through discovery to any amended responses. Because the Court finds that good cause exists and that granting leave to file an amended answer furthers the ends of justice, Chaklos is GRANTED leave to file an amended answer within fourteen days. Because Chaklos had not filed a proposed amended answer prior to the default judgment hearing, the Court's ruling does not alter any rights Plaintiffs might have to argue at trial or elsewhere that responses in Chaklos's amended answer are inconsistent with those in his original answer. B. Granting DDG Leave to File a Late Answer Serves the Ends of Justice.
As discussed infra, DDG's answer is a nullity.
The parties in their written briefs appear to agree that because Chaklos—a non-attorney—signed the answer in a representative capacity on behalf of DDG, the answer as to DDG is a nullity. (See Mem. Law Supp. Mot. File Am. Answer 1 ("The Defendants filed a Notice of Motion requesting the right to file an amended Answer, along with the right to file a response by an attorney for DDG, II, Inc." (emphasis added)).) The Court agrees that because Chaklos is not a Virginia-licensed attorney, DDG's alleged answer is a nullity. See Shipe v. Hunter, 280 Va. 480, 483, 699 S.E.2d 519, 520 (2010). Further, because DDG's alleged answer was not signed promptly by an attorney after the omission was called to the attention of DDG, DDG's alleged answer is stricken. See Va . Code § 8.01-271.1 (2015 Repl. Vol.).
The remaining question is whether DDG should be granted leave to file a late answer under Rule 3:19(b). Defendants argue that the Court has discretion to grant DDG leave to file a late answer. (Mem. Law Supp. Mot. File Am. Answer 2.) Plaintiffs, on the other hand, state that "[t]he only remedial measures [sic] that DDG could have taken was to get a licensed attorney to sign on its behalf once the omission was brought to its attention," and "Va. Code § 8.01-271.1 only allows such a remedy if the pleadings were promptly signed after the omission was brought to DDG's attention." (Pls.' Mem. Supp. Mot. Default J. 3 (first emphasis added).) Thus, Plaintiffs essentially argue that because DDG's alleged answer is a nullity, a dismissal with prejudice is the sole remedy.
As discussed supra, the Court agrees that DDG's alleged answer is a nullity and therefore must be stricken. The Court disagrees, however, with Plaintiffs' conclusion regarding available remedies. Rather, the Court holds that it has discretion to grant DDG the relief it seeks. Rule 3:19(b) provides that "[p]rior to the entry of judgment, for good cause shown the court may grant leave to a defendant who is in default to file a late responsive pleading." Va. Sup. Ct. R. 3:19(b). The Supreme Court of Virginia outlined factors a court should review prior to exercising its discretion, and the Court finds the following factors relevant here: the lack of prejudice to the opposing party, the good faith of the moving party, and the promptness of the moving party in responding to the opposing parties' decision to move forward with the suit. AME Fin. Corp. v. Kiritsis, 281 Va. 384, 392, 707 S.E.2d 820, 824 (2011).
The Supreme Court of Virginia also recognized the following factors, which either do not apply here or are incapable of evaluation by the Court at this point in the proceedings: the existence of a meritorious claim or substantial defense, the existence of legitimate extenuating circumstances, and the justified belief that the suit has been abandoned or will be allowed to remain dormant on the docket. AME Fin. Corp., 281 Va. at 392, 707 S.E.2d at 824.
1. Granting DDG leave to file a late answer does not prejudice Plaintiffs.
As discussed supra, amended pleadings—like new pleadings—will not prejudice Plaintiffs under the circumstances present here. This litigation has only recently commenced, the parties are not yet fully at issue, a scheduling order has not yet been filed, and a trial date has not been set. There also is no element of unfair surprise, as the parties have ample time to respond through discovery to any new claims.
2. DDG's alleged answer was filed in good faith.
DDG asserts that its alleged answer was filed in good faith. In support thereof, it argues as follows:
The pro se Defendant in this matter, Lee Chaklos, innocently filed an Answer on behalf of DDG, II, Inc. He was unaware that he could not represent the corporation in Circuit Court. In the past, he has represented the corporation in General District Court, which is allowed.(Mem. Law Supp. Mot. File Am. Answer 2.) No contrary evidence was presented at the default judgment hearing.
AME Financial Corp. is easily distinguishable from the instant case. There, the defendant failed to file a proper responsive pleading despite having knowledge of the pertinent requirements. See AME Fin. Corp., 281 Va. at 393-394, 707 S.E.2d at 825 ("AME had notice that its answer to the complaint needed to be filed by an attorney licensed to practice law in Virginia. Despite this notice, AME's vice president signed and filed a pro se answer on behalf of the corporation.").
There is no indication here that Chaklos knew that DDG's answer needed to be signed by a Virginia-licensed attorney; rather, he apparently had signed pleadings on behalf of DDG previously, albeit in general district court. Under the circumstances, the Court finds that DDG's alleged answer—signed by Chaklos—was filed in good faith.
Under certain circumstances, pro se parties can represent corporate entities in general district court in Virginia. See, e.g., Va. Code § 16.1-81.1 (2015 Repl. Vol.).
3. DDG promptly responded to Plaintiffs' motion for default judgment by obtaining counsel and continuing with the litigation.
It is undisputed that DDG's alleged answer was timely filed. A responsive pleading to Plaintiffs' complaint was required to be filed on or before August 3, 2017, and DDG's alleged answer was filed on August 2, 2017. As discussed supra, Chaklos failed to serve or otherwise provide a copy of Defendants' answer to Plaintiffs. In fact, Plaintiffs apparently were unaware that an answer had been filed until October 10, 2017, the day before the hearing on their motion for default judgment. When the requirement for DDG to have counsel was brought to Chaklos's attention, DDG apparently retained counsel within a relatively brief time frame. Additionally, no evidence was offered to indicate that Chaklos has any history of filing untimely responses or not appearing at Court proceedings to participate in litigation. The Court therefore finds that DDG promptly responded to Plaintiffs' intent to move forward with default judgment by obtaining counsel.
No evidence was offered or proffered at the hearing regarding exactly when DDG retained counsel. --------
Based on the totality of the circumstances, the Court finds that DDG has demonstrated the good cause necessary to justify the filing of a late answer under Rule 3:19(b).
CONCLUSION
Based on the foregoing, Plaintiffs' motion for default judgment is DENIED. Chaklos's motion for leave to amend his answer is GRANTED, and DDG's motion for leave to file a late answer is GRANTED. Chaklos's amended answer and DDG's late answer shall be filed within fourteen days.
Any objections to this Order shall be submitted to the Court within fourteen days. Endorsements are waived pursuant to Rule 1:13. The Clerk shall mail or email copies of this Order to all counsel of record.
IT IS SO ORDERED this 14th day of November, 2017.
/s/_________
David W. Lannetti
Circuit Court Judge