Opinion
Case No. 2:03CV952 DS.
February 3, 2005
ORDER
I. INTRODUCTION
Defendant High Mountain has moved this court pursuant to Federal Rules of Civil Procedure Rule 60(b) for an order granting relief from the January 8, 2004 default judgment.
On or about October 31, 2003, Defendant High Mountain was served with a summons and complaint. Sometime in November or December of 2003, counsel for Defendant called counsel for Plaintiff and left a message regarding the case. According to Plaintiff, the message was not followed up with any written or verbal communication until December 6, 2003, when Plaintiff's counsel (Mr. Rampton) spoke with Defense counsel (Mr. Hoggan) by phone and learned that High Mountain's insurance carrier had not yet determined whether it would undertake defense of Plaintiff's claims in this matter.
On December 15, 2003, a default certificate was entered as to High Mountain. Then on January 8, 2004, default judgment was entered against High Mountain. Upon receiving notification of the default judgment, Mr. Hoggan immediately called Mr. Rampton. There is some dispute as to the content of that conversation. Mr. Rampton claims that the sole issue discussed during that phone conversation was whether High Mountain's insurance company would address settlement of Plaintiff's claims. Mr. Hoggan claims that he told Mr. Rampton that although it was his understanding that High Mountain's insurance company would be dealing with this matter, he intended to file an Answer in the meantime to insure that a default judgment would not get entered. He also claims that Mr. Rampton told him that he had filed the Certificate of Default to get High Mountain's attention.
Mr. Hoggan asserts that when he expressed concern that default judgment might be entered before he could get an answer filed, Mr. Rampton assured him that he would stipulate to have any default judgment set aside. According to Mr. Rampton, no such promise was ever made, nor would such a promise ever be made without Plaintiff's prior authorization, as doing so would be unethical and professionally questionable. Mr. Hoggan has not provided any confirming letter, written stipulation, or other documentation which purports to memorialize his professed belief concerning a stipulation to withdraw default judgment.
On January 12, 2004, the defendant filed an Answer, allegedly relying on Mr. Rampton's assurance that he would stipulate to have a default judgment set aside. Mr. Rampton has consistently refused to stipulate to any order setting aside the Default Judgment. On February 20, 2004, High Mountain declared bankruptcy. On September 23, 2004, Plaintiffs obtained an Order of the United States Bankruptcy Court, which lifted the automatic stay and permitted a nominal action against High Mountain in order to recover on its insurance coverage.
On October 4, 2004, Defendant's new counsel, Mr. Memmott, received a letter from High Mountain's Bankruptcy Trustee. The defendant argues that this letter finally allowed High Mountain to move to set aside the default. Plaintiff argues that this letter is simply an agreement to permit Mr. Memmott to proceed on behalf of the insurance carrier. On November 23, 2004, High Mountain filed this motion for relief from default judgment.
II. ANALYSIS
Defendant High Mountain has moved pursuant to Federal Rules of Civil Procedure Rule 60(b) for an order granting relief from the default judgment. According to the Tenth Circuit Court of Appeals, ". . . the trial court is vested with a great deal of discretion in determining whether to grant or deny a Rule 60(b)(1) motion. . . ." Otoe County National Bank v. W P Trucking, Inc, 754 F.2d 881, 883 (10th Cir. 1985). See also, Barta v. Long, 670 F.2d 907, 910 (10th Cir. 1982). Clearly the courts do not favor default judgment. The Utah Supreme Court recently stated, "Courts do not favor entry of default judgments and should grant relief where there is any reasonable excuse, unless it will substantially prejudice the adverse party." Cedar Surgery Center, L.L.C. v. Bonelli, 96 P.3d 911, (2004). In order to receive relief from default judgment, the defendant must show that 1) it acted within a "reasonable time," 2) there was good cause under Rule 60(b) to justify setting aside the default judgment, and 3) it has a meritorious defense to the allegations of the complaint.
A. The reasonable time requirement.
Rule 60(b) states that a motion under that section must be made "within a reasonable time, and . . . not more than one year after the judgment, order or proceeding was entered or taken." Rule 60(b), Fed.R.Civ.P. What constitutes a "reasonable time" turns on the facts of each case. In this case, the judgment by default was entered on January 8, 2004, and the motion for relief from that judgment was not filed until November 23, 2004 — over 11 months later. High Mountain states that its delay was reasonable because prior to filing bankruptcy on February 20, 2004, High Mountain was unaware that the default judgment was entered. And once the bankruptcy petition was filed, High Mountain could not move to set aside the judgment until the trustee of the bankruptcy gave it permission to do so. According to High Mountain permission was granted on October 4, 2004, and after obtaining necessary affidavits, High Mountain filed its motion on November 23, 2004. The defendant argues that motion was made within the one-year period, and was therefore timely.
The Tenth Circuit has held that "A motion is not timely merely because it has been filed within one year of the judgment." White v. American Airlines, Inc., 915 F.2d 1414 (10th Cir. 1990). The district court in the White case concluded that a Rule 60(b)(1) motion was not filed within a reasonable time, even though it was filed barely within the one-year time limit. On appeal, the 10th Circuit concluded that the district court had not abused its discretion in denying the motion, because, "American has not offered sufficient justification for this delay."
B. Good Cause Requirement Under Rule 60(b) to Justify Setting Aside Default Judgment
This court must now consider whether High Mountain has offered sufficient justification for its delay. High Mountain argues that its delay was justified because Counsel was taken completely by surprise by the entry of the default judgment. He believed he had an agreement with Plaintiff's Counsel regarding the stipulated withdrawal of any default. However, since the judgment was entered, Plaintiffs have refused to withdraw it. High Mountain claims that it relied to its detriment on Plaintiff's representations and statements. High Mountain also argues that the creation and filing of an answer by its counsel demonstrates his belief that there was an agreement and his reliance on that agreement.
Plaintiffs note that High Mountain received prompt notice of the entry of judgment by default on or about January 8, 2004. The only explanation High Mountain offers for waiting over 11 months to respond is a belief — by counsel not currently representing High Mountain's interests — that there was an unwritten agreement to set aside default judgment if requested. No such request was ever forthcoming, and this court never received any notice of this "agreement."
The local rules provide that no stipulation between parties has any effect unless it is approved by the court: "No stipulation between parties modifying a prior order of the court or affecting the course or conduct of any civil proceeding will be effective until approved by the court." DUCivR 83-6. Even if there actually was a stipulation between the parties regarding setting aside the default judgment, Counsel for High Mountain should have filed its motion for relief from default judgment and a stipulated order when he filed the Answer on January 12, 2004. Had the motion be filed in such a timely manner, it almost certainly would have been granted.
However, High Mountain chose to wait over eleven months to file its motion, causing substantial prejudice to the Plaintiffs' case. Plaintiffs state that because of the delay, "the matter has lain dormant and without discovery for over a year after its filing and service, and the intervening passage of time has made it all but impossible for Plaintiffs to reconstruct what would have been their case had High Mountain acted properly." The plaintiffs have been unable to conduct discovery, preserve evidence, obtain documentation, and otherwise structure their case for resolution on the merits. High Mountain has ceased to do business, turned its business records over to a bankruptcy trustee for liquidation, dismissed its employees, and essentially ceased to exist.
Although this motion was made within one year, the court finds that because of the prejudice to the plaintiffs and because the defendant could have easily resolved the matter with a timely motion, this motion does not meet the "reasonable time" requirement of Rule 60(b), Fed.R.Civ.P.
Because we have determined that the motion was not timely, we need not consider the issue of whether High Mountain has established a meritorious defense.
III. CONCLUSION
For the foregoing reasons, Defendant's Motion for Relief from Default Judgment is hereby denied.
SO ORDERED.