Opinion ID: 3015391
Heading Depth: 3
Heading Rank: 1

Heading: Petition to Open

Text: In order to succeed on a petition to open a default judgment under Pennsylvania law, “(1) the petition to open must be promptly filed; (2) the failure to appear or file a timely answer must be excused; and (3) the party seeking to open the judgment must show a meritorious defense.” McCoy v. Pub. Acceptance Corp., 305 A.2d 698, 700 (Pa. 1973); see also Balk v. Ford Motor Co., 285 A.2d 128, 130-31 (Pa. 1971); Seeger v. First Union Nat’l Bank, 836 A.2d 163, 165 (Pa. Super. Ct. 2003). The District Court concluded that a petition to open the default judgment in Coyler v. Nat’l Grange would have failed under the first two prongs of this standard. Regarding promptness, the length of delay in filing a petition to open is measured from the date the defendant receives the entry of default judgment. Ruczynski v. Jesray Constr. Corp., 326 A.2d 326, 328 (Pa. 1974). In this case, National Grange received notice of the entry of default early in May 2000. Even if Heslop had filed a petition to open on the day he was retained (July 19, 2000), filing would have been delayed approximately two and one-half months. As the District Court noted, we cannot say that a two and one-half-month delay is untimely as a matter of Pennsylvania law. Compare 8 McCoy, 305 A.2d at 699-700 (filing after two and one-half weeks not prompt); Allegheny Hydro No. 1 v. A. Line Bldrs., 722 A.2d 189, 194 (Pa. Super. Ct. 1998) (filing after 41 days not prompt); with Liberty Nat’l Bank & Trust Co. v. Yackovich, 99 F.R.D. 518, 520 (W.D. Pa. 1982) (filing after almost six months’ delay still prompt); Queen City Elec. Supply Co. v. Soltis Elec. Co., 421 A.2d 174, 175 (Pa. 1980) (filing after 21-month delay prompt under the circumstances). That said, the District Court concluded that the delay would have rendered a petition untimely under the circumstances in this case because National Grange could not provide a reasonable excuse for the delay. The District Court similarly determined that National Grange could not provide a sufficient excuse under the second prong for its failure to answer Coyler’s complaint in the first place. National Grange asserts the same excuse for both its failure to answer the complaint and its delay in filing a petition to open: the company relied on the misrepresentations of its “rogue employee,” Tracy Robinson, that she was handling the matter. National Grange argues that it reasonably entrusted Robinson to handle the Coyler litigation and was under a “justifiable belief” that the company’s interests were being protected. We note first that, even if Robinson’s actions could justify the company’s initial failure to answer Coyler’s complaint, they do not account for the delay in filing a petition to open. Coyler served all relevant papers on National Grange’s headquarters in New Hampshire in addition to sending separate copies to Robinson. It is undisputed that 9 National Grange’s legal department received notice of the default in early May 2000. Thus, even if management had believed that Robinson was protecting the company’s interests prior to the entry of default, they were on notice that Robinson had failed in her duties in May 2000. Still, National Grange delayed another two and one-half months before hiring Heslop and the Firm. Any delay that occurred after the legal department received notice of the default judgment cannot be justified by claims that National Grange reasonably believed Robinson was handling the litigation. Aside from the promptness issue, the District Court found that National Grange’s reliance on its “rogue employee” would not be sufficient justification for the company’s failure to appear and answer Coyler’s complaint. Under Pennsylvania case law, a petitioner may establish sufficient justification based on oversight, inadvertence, or clerical error by an employee. See, e.g., Balk, 285 A.2d at 132 (sufficient justification where defendant’s insurance company negligently lost the complaint); Fox v. Mellon, 264 A.2d 623, 625 (Pa. 1970) (excusable neglect where defendant’s insurance company mistakenly believed it had more time to respond and the defendant himself was not sophisticated enough to notice a problem); see also Campbell v. Heilman Homes, Inc., 335 A.2d 371, 373 (Pa. Super. Ct. 1975) (“where failure to answer was due to an oversight, an unintentional omission to act, or a mistake of the rights and duties of the appellant, the default judgment may be opened.”). We agree with the District Court that Robinson’s actions on behalf of National 10 Grange amounted to more than mere inadvertence or oversight. The Superior Court of Pennsylvania’s decision in Campbell provides an example of excusable neglect on the part of a company based on the inattentiveness of an employee. In that case, a complaint against Heilman Homes, a seller of mobile homes, was served on the manager of one of its sales lots. The lot manager did not forward the complaint to Heilman’s home offices, thereby failing to follow company procedure. In declining to “saddle” the company with a default judgment due to its employee’s inadvertence, the Superior Court noted that the company’s mistake was “not unlike a clerical error.” Id. at 373. Unlike the defendant in Campbell, National Grange was aware of Coyler’s action against the company and specifically delegated the responsibility for handling the matter to its employee, Robinson. The District Court thus determined that Campbell is inapposite and instead relied on the Superior Court’s decision in Autologic, Inc. v. Cristinzio Movers, 481 A.2d 1362 (Pa. Super. Ct. 1985). Like this case, Autologic involved the failures of an employee who was entrusted to handle claims against the defendant company. See id. at 1363. The Superior Court expressly distinguished Campbell and other cases involving mere inadvertence and clerical error: The fact remains that it was this type of employee that appellant chose to give responsibility to for handling damage claims. . . . Thus, appellant’s failure to respond to the complaint was not due to simply the inattentiveness of its employee, but to her conscious decision which it had empowered her to make. Id. at 1364. We agree with the District Court that National Grange’s asserted justification 11 for its failure to answer Coyler’s complaint is no closer to mere inadvertence than the excuse rejected by the Superior Court in Autologic. National Grange attempts to distinguish its excuse from the one asserted by the defendant in Autologic by labeling Robinson a “rogue employee.” As we understand it, the distinction that National Grange draws between this case and Autologic is that National Grange reasonably relied on Robinson, who had demonstrated reliability in the past,4 whereas the defendant in Autologic unreasonably relied on an unqualified employee. In other words, National Grange did not make the deliberate decision not to defend but rather reasonably believed that its interests would be protected by giving the case to Robinson, who unforeseeably misled the company and failed in her duties. This distinction is neither real nor meaningful. There was no suggestion in Autologic that the defendant’s entrusted employee was generally unqualified to handle her responsibilities. Moreover, like National Grange, the defendant company in Autologic apparently intended to defend the underlying litigation but was prevented from doing so by the mistakes of its employee. See id. at 1363. Thus, insofar as National Grange was prevented from defending the Coyler matter because it delegated responsibility to an employee who chose not to perform her duties by answering the complaint, this case is directly analogous to Autologic. 4 We note that the notion that Robinson had always been a stellar employee who had an unexpected lapse in character appears to be belied by her prior failure to follow company policy with respect to the Coyler v. Ebac matter. See Section I, supra. 12 However, National Grange claims that the District Court failed in its obligation to predict how the Supreme Court of Pennsylvania would have ruled on this case by relying on state intermediate appellate court decisions. Brief for Appellant at 14 (“[B]y simply determining that Autologic controlled, the District Court failed in its function to ‘predict’ the law of the highest court of the jurisdiction.”). National Grange argues that the Supreme Court of Pennsylvania has not addressed the specific issue of whether reliance on a “rogue employee” can constitute a sufficient excuse for failing to answer a complaint under the standards for reviewing a petition to open. Federal courts sitting in diversity “are to apply state law as interpreted by the state’s highest court. In the absence of guidance from that court we are to refer to decisions of the state’s intermediate appellate courts for assistance in determining how the highest court would rule.” McKenna v. Pacific Rail Serv., 32 F.3d 820, 825 (3d Cir. 1994) (citations omitted) (emphasis added). In this case, the District Court applied wellsettled law from the highest court in Pennsylvania regarding what factors must be considered in reviewing a petition to open a default judgment. Although the state’s highest court has not decided a case with the precise factual background presented here, the District Court correctly looked to decisions from the state’s intermediate appellate courts for guidance in applying the well-settled law to the undisputed facts of this case. Specifically, Pennsylvania law clearly requires that a party petitioning to open a default judgment must establish a sufficient excuse for failing to answer the underlying complaint 13 and provides that inadvertence or oversight may constitute a sufficient excuse. See Balk, 285 A.2d at 132; Fox, 264 A.2d at 625. The District Court properly looked to factually analogous decisions from the Superior Court of Pennsylvania to determine that the inaction of National Grange, through its employee, went beyond mere inadvertence. Contrary to National Grange’s assertions, Autologic and Campbell do not involve conflicting interpretations of state law. Rather these cases involve the application of the same legal principle to differing sets of facts.5 Our review of the District Court’s opinion reveals that the court properly reviewed both cases and was persuaded by the reasoning in Autologic, which was factually more similar to the case at hand. The District Court demonstrated an awareness of the proper approach to state law, and we will not find error merely because the District Court did not expressly “predict” that the Supreme Court of Pennsylvania would apply state law to the facts of this case in the same way. We will not elevate form over substance and find reversible error.