Title: Fluor Daniel (NPOSR), Inc. v. Seward

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Fluor Daniel (NPOSR), Inc. v. Seward1998 WY 50956 P.2d 1131Case Number: 97-18Decided: 04/10/1998Supreme Court of Wyoming
 
FLUOR 
DANIEL (NPOSR), INC., a Delaware corporation, Appellant (Defendant),

v.

David G. SEWARD, Appellee 
(Plaintiff).

 

Appeal from the District 
Court, Natrona County, Dan Spangler, J.

Bruce N. 
Willoughby & Donn J. McCall of Brown, Drew, Massey & Sullivan, Casper, 
for Appellant.

Mark W. Gifford 
of Gifford & Bonner, Casper, for Appellee.

Before 
TAYLOR, C.J., and THOMAS, MACY, GOLDEN and LEHMAN, JJ.

THOMAS, 
Justice.

[¶1]      The critical 
question presented in this case is whether the mysterious disappearance of suit 
documents within a corporate headquarters constitutes "mistake, inadvertence, 
surprise, or excusable neglect" that results in an abuse of discretion by a 
trial court in finding culpable conduct on the part of the defendant and 
refusing to set aside an entry of default and a default judgment. Collateral 
issues are presented with respect to fraudulent misrepresentations concerning 
damages and public policy considerations justifying a conclusion of abuse of 
discretion. David G. Seward (Seward) filed this action, claiming wrongful 
termination in breach of his employment contract and seeking lost wages, lost 
employment benefits, court costs, attorney fees and other relief deemed to be 
just and proper. Fluor Daniel (NPOSR), Inc. (Fluor Daniel) failed to answer the 
Complaint within the time permitted by the Wyoming Rules of Civil Procedure, and 
Seward sought and obtained an Entry of Default and a Default Judgment in the 
amount of $562,489.00. When Fluor Daniel sought by motion to have the Default 
Judgment and the Entry of Default set aside, the trial court ruled that culpable 
conduct by Fluor Daniel led to the Entry of Default and the Default Judgment; 
the neglect claimed by Fluor Daniel was not excusable; Fluor Daniel had not 
established fraud, misrepresentation or other misconduct by Seward that would 
justify relief under WYO. R. CIV. P. 60(b)(3); and neither the Default Judgment 
nor the Entry of Default should be set aside. We hold that the trial court did 
not commit an abuse of discretion with respect to its ruling, and the judgment 
in favor of Seward is affirmed.

[¶2]      In the 
Appellant's Brief, Fluor Daniel articulates the issues to be considered in this 
way:

1. Whether the 
district court erred in not setting aside the entry of default and default 
judgment entered against appellant where appellee had fraudulently 
misrepresented the amount of damages to which he was allegedly 
entitled.

2. Whether the 
district court erred in not setting aside the entry of default and default 
judgment entered against appellant as required by public 
policy.

3. Whether the 
district court erred in not setting aside the entry of default and default 
judgment entered against appellant where its failure to timely answer the 
complaint was the result of excusable neglect.

In the Brief of 
Appellee, filed by Seward, only one issue is set forth:

Did the district 
court abuse its discretion in refusing to set aside the entry of default and 
default judgment?

No additional 
issues were stated in the Appellant's Reply Brief, filed by Fluor 
Daniel.

[¶3]      On September 6, 
1996, Seward commenced an action against Fluor Daniel by filing a Complaint in 
which he alleged wrongful termination of an employment contract by Fluor Daniel 
in May of 1996. He alleged that he had suffered damage in the form of lost wages 
and lost employment benefits because of the breach of the employment contract, 
and he sought relief in the form of special damages "representing the amount of 
compensation and benefits" which he would be entitled to under his contract of 
employment; costs of the action and reasonable attorney's fees; and "such other 
and further relief as the Court deems just and proper." Personal service was 
made upon Fluor Daniel on September 9, 1996, by serving its registered agent for 
process in Cheyenne pursuant to WYO. R. CIV. P. 4(d)(4). The Summons and 
Complaint were forwarded by the agent for process to Fluor Daniel's headquarters 
in Irvine, California on the same day by Federal Express. The agent for service 
of process determined that the Summons and Complaint were received at Fluor 
Daniel's headquarters the following day, September 10, 
1996.

[¶4]      The twenty days 
for Fluor Daniel to answer or otherwise plead with respect to Seward's 
Complaint, pursuant to WYO. R. CIV. P. 12(a), expired on September 30, 1996, and 
no responsive pleading was filed. On October 2, 1996, Seward filed a Motion for 
Entry of Default supported by the affidavit of his attorney, and the clerk of 
the district court, having found that Fluor Daniel had failed to answer or 
otherwise respond to the complaint within the required time, entered an Entry of 
Default. On October 7, 1996, Seward filed a Motion for Entry of Default 
Judgment, praying for judgment in the sum of $562,489.00, which motion was 
supported by Seward's affidavit and the affidavit of a certified public 
accountant. On the same day, Default Judgment was entered in favor of Seward and 
against Fluor Daniel in the sum of $562,489.00 with interest at the legal rate 
until paid.

[¶5]      An initial Entry 
of Appearance was made for Fluor Daniel on October 24, 1996, and on October 25, 
1996, a Notice of Intent to File Motion to Vacate Default Judgment was filed as 
well as an Answer. On October 28, 1996, a Motion to Withdraw As Counsel of 
Record was filed by the initial attorney, and an Entry of Appearance was filed 
by another attorney. On October 29, 1996, a second answer was filed. Then on 
November 5, 1996, the Defendant's Motion to Set Aside Entry of Default and 
Default Judgment Pursuant to Wyoming Rules of Civil Procedure 55(c) and 60(b) 
was filed. In that motion, Fluor Daniel contended that its failure to answer or 
otherwise appear was the result of mistake, inadvertence and excusable neglect; 
the amount of the judgment was entered because of misrepresentations by the 
plaintiff and the plaintiffs expert witness; and that Fluor Daniel had 
meritorious defenses to the claims contained in the Complaint. In a memorandum 
filed in support of the motion to set aside default judgment and entry of 
default, Fluor Daniel asserted that Seward was an at-will employee who had 
voluntarily resigned from his employment. Fluor Daniel also contended that the 
large default judgment was obtained by misrepresentations of fact and was 
speculative in nature.

[¶6]      A hearing on 
[Fluor Daniel]'s Motion to Set Aside Entry of Default and Default Judgment 
Pursuant to Wyoming Rules of Civil Procedure 55(c) and 60(b) was held on 
November 25, 1996, and in a decision letter filed on December 3, 1996, the 
motion was denied. The Order that was entered by the court on December 12, 1996, 
contained these specific findings:

1. Culpable 
conduct by the Defendant led to the entry of default and default judgment. 
Considering the inexcusable neglect of Defendant in this instance, relief cannot 
be granted under Rule 60(b)(1) or (6).

2. Defendant has 
not met its burden of proving fraud, misrepresentation or other misconduct by 
Plaintiff which would entitle Defendant to relief under Rule 
60(b)(3).

Fluor Daniel 
appealed from the Order denying its motion.

[¶7]      The procedure 
relating to judgment by default is set forth in WYO. R. CIV. P. 55, and the 
grounds for setting aside the default and the default judgment are articulated 
in WYO. R. CIV. P. 55(c), which provides:

For good cause 
shown the court may set aside an entry of default and, if a judgment by default 
has been entered, may likewise set it aside in accordance with Rule 
60(b).

The grounds for 
relief from a final judgment as set forth in WYO. R. CIV. P. 60(b), alluded to 
in WYO. R. CIV. P. 55(c), are:

(b) Other 
reasons. On motion, and upon such terms as are just, the court may relieve a 
party or a party's legal representative from a final judgment, order, or 
proceeding for the following reasons: (1) mistake, inadvertence, surprise, or 
excusable neglect; (2) newly discovered evidence which by due diligence could 
not have been discovered in time to move for a new trial under Rule 59(b); (3) 
fraud (whether heretofore denominated intrinsic or extrinsic), 
misrepresentation, or other misconduct of an adverse party; (4) the judgment is 
void; (5) the judgment has been satisfied, released, or discharged, or a prior 
judgment upon which it is based has been reversed or otherwise vacated, or it is 
no longer equitable that the judgment should have prospective application; or 
(6) any other reason justifying relief from the operation of the judgment. * * 
*

Good cause for 
setting aside an entry of default, pursuant to WYO. R. CIV. P. 55(c), is to be 
found in the justifications for relief from a final judgment articulated in WYO. 
R. CIV. P. 60(b). Vanasse v. Ramsay, 847 P.2d 993, 999 (Wyo. 
1993).

[¶8]      Decisions 
resolving motions for setting aside the entry of default or a default judgment 
are made in the exercise of sound discretion by the trial court. Lee v. Sage 
Creek Refining Co., 947 P.2d 791, 793 (Wyo. 1997); Whitney v. McDonough, 892 P.2d 791, 794 (Wyo. 1995); Vanasse, 847 P.2d  at 996; Claassen v. Nord, 756 P.2d 189, 193 (Wyo. 1988). The discretion that is invoked is defined in Martin v. 
State, 720 P.2d 894, 897 (Wyo. 1986):

Judicial 
discretion is a composite of many things, among which are conclusions drawn from 
objective criteria; it means a sound judgment exercised with regard to what is 
right under the circumstances and without doing so arbitrarily or 
capriciously.

[¶9]      The analytical 
process to be invoked by the trial court in the exercise of its discretion is 
summarized in Whitney, 892 P.2d  at 794. The court first must consider whether 
the filed motion articulates a reason for relief under WYO. R. CIV. P. 60, and 
that is a question of law to be reviewed for correctness. In this instance, the 
district court recognized the adequate articulation of reasons for relief under 
WYO. R. CIV. P. 60. When an appropriate reason is set forth, the exercise of 
discretion in granting or denying relief depends upon the facts of the case. In 
making that decision, the trial court is to consider whether the moving party 
established the articulated grounds for relief and demonstrated a meritorious 
defense. Even if these conclusions are in the affirmative, the trial court still 
must determine whether the plaintiff will be prejudiced and whether culpable 
conduct on the part of the defendant resulted in the default. Our review of this 
sequence of determinations by the trial court is limited to a determination of 
whether in resolving these questions the trial court abused its discretion. 
Carlson v. Carlson, 836 P.2d 297, 301 (Wyo. 1992); followed in Whitney, 892 P.2d  
at 794; Vanasse, 847 P.2d  at 996.

[¶10]   Fluor Daniel urges that its failure 
to answer the Complaint within the time provided in the rules was the result of 
excusable neglect and that the default should have been set aside pursuant to 
WYO. R. CIV. P. 60(b)(1). For these purposes, excusable neglect is "such 
behavior as might be the act of a reasonably prudent person under the 
circumstances." Booth v. Magee Carpet Co., 548 P.2d 1252, 1255 (Wyo. 1976); 
quoted in Carlson, 836 P.2d  at 303. The evidence offered by Fluor Daniel of 
excusable neglect was the affidavit of the paralegal responsible for receiving 
service of process at the California headquarters. The paralegal stated that the 
standard practice for receiving service of process was for her office to 
date-stamp the documents, route them to an attorney, and internally docket them. 
She further stated that in this instance, the Seward Complaint and Summons 
somehow bypassed the system and mysteriously disappeared until October 17, 1996, 
ten days after the Entry of the Default Judgment, when the documents were 
discovered on her desk.

[¶11]   Fluor Daniel did not question that 
the process was received at its corporate headquarters on September 10, 1996, 
but asserts that because of a clerical or other unknown error it did not 
discover the Summons and Complaint until some thirty-eight days later. The 
explanation for the deficiency in handling was a very hectic and busy schedule 
described by the paralegal in her affidavit. The district court found that this 
explanation failed to demonstrate excusable neglect and that the culpable 
conduct of Fluor Daniel lead to the Entry of Default and the Default Judgment. 
Even though Fluor Daniel vigorously asserts that this is the first time it ever 
failed to answer a complaint on time, we do not review the business practices of 
Fluor Daniel but only the prospect of the abuse of discretion by the trial 
court.

[¶12]   We hold that the trial court could 
view the unexplained failure of Fluor Daniel's business practice with respect to 
service of process as careless and within Fluor Daniel's control, and its 
finding does not constitute an abuse of discretion. See Whitney, 892 P.2d  at 794 
("[s]ufficient grounds for relief do not exist when a party is dilatory in 
obtaining legal counsel and default judgment is entered against him."); Vanasse, 
847 at P.2d 998 (primary argument that ongoing settlement negotiations 
constituted "excusable neglect" held insufficient); Matter of Injury to Seevers, 
720 P.2d 899, 903 (Wyo. 1986) ("failure to consult an attorney for nearly two 
months is not such excusable neglect as would justify relief * * *."); Booth, 
548 P.2d  at 1254 (failure to employ an attorney until 53 days following the 
service of process would not constitute excusable neglect).1 We do not discern any evidence in 
this record that would qualitatively distinguish Fluor Daniel's neglect from the 
styles of neglect found insufficient to constitute excusable neglect in our 
prior decisions. We hold that the trial court did not abuse its discretion in 
concluding that the neglect was not excusable and that Fluor Daniel's culpable 
conduct lead to the Entry of Default and the Default 
Judgment.

[¶13]   We turn to the argument by Fluor 
Daniel that this Default Judgment should be set aside because of fraud, 
misrepresentation, or other misconduct by Seward in connection with the proof of 
damages. Fluor Daniel relies upon the provisions of WYO. R. CIV. P. 60(b)(3) in 
submitting this argument. A higher standard of proof is applicable when this 
ground is asserted because in order to prevail the party in default must 
establish the Plaintiff's misconduct by clear and convincing 
evidence:

Where fraud and 
misrepresentation is relied upon as a ground for relief sought pursuant to a 
Rule 60(b) motion, it must be proved by clear and convincing evidence. Fraud is 
never presumed, and the burden of proof to clearly establish such fraud or 
misrepresentation is upon the party seeking relief.

Stevens v. 
Murphy, 680 P.2d 78, 79 (Wyo. 1984). This provision in the rule is not intended 
to permit the defendant to litigate the factual matters already established 
pursuant to WYO. R. CIV. P. 55. See 11 CHARLES A. WRIGHT ET AL., FEDERAL 
PRACTICE AND PROCEDURE § 2860 at 310-17 (1995).

[¶14]   In invoking WYO. R. CIV. P. 
60(b)(3), Fluor Daniel advances a litany of alleged "misrepresentations" by 
Seward. It claims, among other things, that Seward resigned and was not 
terminated. Fluor Daniel also argues that Seward never was offered the promotion 
that his computation of damages assumed he would have received. Further, Fluor 
Daniel insists that the "environmental coordinator" position, that Seward 
contended he was offered, does not exist, and that even if he were promoted, 
Seward's pay scale would have remained constant.

[¶15]   On the record, Seward responded to 
all of these contentions. He directed attention to the deposition of a Fluor 
Daniel manager who admitted offering Seward the choice to resign or be 
terminated. The manager also testified by deposition that Seward's former 
supervisor served in the role of "environmental coordinator" and appears in that 
role on an organization chart of the company. The manager also revealed that he 
had discussed that coordinator position with Seward, but he denied ever offering 
the position to Seward. Finally, Seward points to evidence in the record that 
the company had, in the past, placed that position at a higher pay 
scale.

[¶16]   The trial judge heard arguments of 
both of the parties and articulated his decision in a letter in this 
way:

Defendant offers 
evidence which conflicts with some of the claims of Plaintiff. However, I am not 
persuaded that these factual disagreements rise to the level of demonstrating 
fraud or misrepresentation by Plaintiff. Factual disagreements do not 
necessarily demonstrate fraud or misrepresentation. There is a reasonable basis 
for the positions taken by Plaintiff. Therefore, I do not find that Defendant 
has met its burden of proving fraud or misrepresentation.

The opinion of 
the trial judge is reasoned and manifests a sound judgment exercised with regard 
to what is right under the circumstances. We do not perceive it to be arbitrary 
or capricious. We acknowledge a temptation to review the damage award because of 
the amount awarded, but we are foreclosed from any review other than assessing 
the denial of the motion for relief under the abuse of discretion 
standard.

[¶17]   A final argument presented by Fluor 
Daniel is that it is entitled to relief under the provision of WYO. R. CIV. P. 
60(b)(6) that permits relief for "any other reason justifying relief from the 
operation of the judgment." In Vanasse, 847 P.2d  at 998, we espoused the concept 
that this provision of WYO. R. CIV. P. 60(b) should be invoked only under 
extraordinary circumstances. For example, we have held that grossly negligent 
representation by counsel does not entitle a litigant to relief under this 
provision. Hochhalter v. Great Western Enterprises, Inc., 708 P.2d 666, 669-70 
(Wyo. 1985). The award in this case is significant, and the Default Judgment was 
entered very expeditiously, but the Wyoming Rules of Civil Procedure were 
complied with at all times. This is not a situation involving extraordinary 
circumstances entitling Fluor Daniel to relief under this 
provision.

[¶18]   Fluor Daniel has failed to 
establish its claimed grounds for relief under WYO. R. CIV. P. 60(b). This also 
demonstrates a lack of "good cause" under WYO. R. CIV. P. 55(c) to set aside the 
Entry of Default. Lee, 947 P.2d at 793-94; Vanasse, 847 P.2d  at 999. In light of 
the failure to establish a meritorious ground for relief, we do not need to 
consider the elements of prejudice to the plaintiff, and we agree with the trial 
court that the culpable conduct lead to the Entry of Default and Default 
Judgment.

[¶19]   The Order denying relief under the 
provisions of WYO. R. CIV. P. 55(c) and 60(b) is affirmed.

Footnotes

1 In 1993 the 
Supreme Court of the United States made the concept of "excusable neglect" under 
the federal rules substantially more liberal. Pioneer Inv. Services Co. v. 
Brunswick Associates Ltd. Partnership, 507 U.S. 380, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (U.S.Tenn. 1993). We elect to continue to follow our Wyoming 
rule.