Opinion ID: 476702
Heading Depth: 2
Heading Rank: 1

Heading: jurisdiction

Text: 8 The plaintiffs argue that this is an appeal from an interlocutory order which should be dismissed for lack of jurisdiction. That argument is based on the premise that the October 15, 1985 default order was not certifiable under Rule 54(b) because it did not qualify as a judgment. Plaintiffs, however, concede that the original ex parte default minute order of April 12, 1985, would have been the proper subject of a Rule 54(b) certification. Plaintiffs rely on McKinney v. Gannett Co., 694 F.2d 1240, 1247 (10th Cir.1982). McKinney notes the necessity of strict adherence to the final judgment rule, stating that if there is a jurisdictional defect it cannot be cured simply by a Rule 54(b) certification. We know of no court which quarrels with that general principle, but McKinney applied that reasoning to a finding of liability only, with damages or other relief yet to be determined. The appeal therefore was dismissed. We do not have such a clear-cut case. 9 What we have jurisdictionally is an appeal from an adverse ruling on a Rule 60(b) motion to vacate a default judgment. Because that ruling left other parties in the litigation with pending claims, the adverse ruling was not appealable unless certified under Rule 54(b), and it was. We have already plainly held that denial of a Rule 60(b) motion is itself an appealable judgment, even when the thirty-day time under Fed.R.App.P. 4(a)(1) for appealing the underlying default judgment has expired. Inryco, Inc. v. Metropolitan Engineering Co., 708 F.2d 1225, 1232 (7th Cir.), cert. denied, 464 U.S. 937, 104 S.Ct. 347, 78 L.Ed.2d 313 (1983). Even if the original default order of April 12, 1985, could have been timely certified as suggested by plaintiffs, it would leave this court in the difficult position of trying to review the default order without having before it the claims of Taylor's 60(b)(1) motion or having the benefit of the district judge's view after the opportunity to reconsider his own default order. We accept jurisdiction. The Default Judgment 10 We begin consideration of the merits by reiterating our view enunciated in Inryco, 708 F.2d at 1232, that default judgments are not favored by modern courts. The district judge expressed it well when he stated that he was aware of the precious balance which must be stricken between the policy favoring litigation on the merits and the need to promote efficiency in the administration of justice and avoid prejudice to parties who have conducted themselves responsibly. The district judge also considered this court's comments in C.K.S. Engineers, 726 F.2d at 1206, that [i]n order for the default judgment to be an effective deterrent against irresponsible conduct in litigation, relief from default judgment under Rule 60(b) must be perceived as an exceptional remedy. In C.K.S. Engineers it was, however, added that defaults should be entered only when absolutely necessary, such as where less drastic sanctions have proven unavailing. Id. We also noted in C.K.S. Engineers that these decisions are subject to an abuse of discretion standard, but this discretion of the district court on these matters is not unbounded. Id. In Inryco, 708 F.2d at 1234, we referred to Boughner v. Secretary of Health, Education and Welfare, 572 F.2d 976, 978-979 (3d Cir.1978). In Boughner the court found no Rule 60(b)(1) excusable neglect, as it found the attorney's neglect so gross as to be inexcusable. The court then applied Rule 60(b)(6), which permits vacating a judgment for any other reason justifying relief, and set aside the default. We need not, however, invoke 60(b)(6) in this case, but the Boughner court's summary is well stated: 11 [W]e are not unmindful of the need for judicial eagerness to expedite cases, to fully utilize the court's time, to reduce overcrowded calendars and to establish finality of judgments. However, these commendable aspirations should never be used to thwart the objectives of the blind goddess. 12 The charges in the complaint are substantial and include a RICO count. The default judgment entered is in excess of $250,000. The size of the judgment is not controlling, but it deserves to be considered, particularly where, as here, under RICO actual damages are to be trebled and attorney's fees added. C.K.S. Engineers, 726 F.2d at 1208. Taylor also filed an affidavit in which he disclaims any liability, factually disputes many of plaintiffs' allegations, and claims to have a meritorious defense to each of plaintiffs' claims. 13 Taylor for instance denies any connection with the plaintiffs' commodities trading except that he introduced plaintiffs to one of the other parties. He denies that he received any compensation for this introduction. He also denies he induced plaintiffs to invest and denies that he was an employee or agent of any of the other defendants. He further denies that he had any control over the funds invested by plaintiffs. Taylor's actual likelihood of prevailing on his defenses is not the measure of whether he has a meritorious defense, which is one element to be considered in vacating a default. United Coin Meter Co. v. Seaboard Coastline Railroad, 705 F.2d 839, 845 (6th Cir.1983). A defense is meritorious if it is good at law so as to give the factfinder some determination to make. Whether Taylor states the truth in his denials of any substantial connection with or responsibility for the alleged fraud is not for this court to determine. 14 We note that initially when there was no response forthcoming from Taylor the plaintiffs did not inquire, by mail or otherwise, about Taylor's intentions, nor did they raise the question with any other defendant with whom they claim he was associated. They proceeded only with the ex parte accomplishment of default. In many ordinary cases resulting in default judgments, the defaulted parties were given various chances and warned; but, when they persisted in being unresponsive, they were then properly defaulted. The present case is not such a clear example of a continuing disregard for the litigation. Inryco, 708 F.2d at 1228. Plaintiffs themselves were likewise guilty of a default of some nature when they ignored the trial court's order to prepare and submit a draft of the default judgment they seek now to enforce. 15 There is nothing in the record to show that Taylor deliberately and wilfully defied the court or disregarded the litigation. When wilfulness is clearly apparent, the liberal attitude of vacating default judgments is sharply modified. Textile Banking Co. v. Rentschler, 657 F.2d 844, 854 (7th Cir.1981). At most in this case it was neglect--excusable under the circumstances--mistake, inadvertence or possibly a misunderstanding that someone would purportedly handle Taylor's interests. In regard to the claimed mailing of the responsive affidavit to the court, possibly it could have been a failure of the mail, or even negligence in the clerk's office. Even the plaintiffs themselves had a similar problem as they also claim they sent a draft of their default judgment to the court which, along with Taylor's affidavit, does not appear in the record. 16 Taylor was not an American citizen and was shortly leaving this country permanently to reside in Europe according to prior plans. It is not suggested that Taylor's leaving was to avoid suit or its consequences. For Taylor to ignore the suit deliberately could only result in a default judgment which would not be vacated. When Taylor belatedly found out what had happened, he did retain counsel promptly and tried to make up for whatever had happened. No great amount of time elapsed between April 1985 when the default order was entered and August 1985 when Taylor moved to vacate the default. Since then Taylor has demonstrated considerable interest in being permitted to try this case on the merits. 17 The parties tell us that the litigation is still pending as to the remaining defendants. At time of oral argument discovery had not yet been completed. To set Taylor back into this case, which has yet to be tried, should not cause undue hardship. Were the other defendants to be acquitted of all the charges at trial and yet this default judgment be permitted to remain against Taylor, great unfairness, not justified by the reasons for sustaining the default, could possibly result. When it appears, as here, that there is a genuine dispute concerning material facts, it weighs in favor of a trial to decide those factual disputes in preference to judgment by default in which facts cannot be disputed and decided. Ellingsworth v. Chrysler, 665 F.2d 180, 185 (7th Cir.1981); Newberry v. Cohen, 374 F.2d 320, 323 (D.C.Cir.1967). 18 We do not defend Taylor's handling of his case, but we do defend his right to a trial on the merits if his neglect is excusable. Considering all these circumstances we must find an abuse of discretion by the trial judge in declining to set aside the default, but we do so without intending any criticism of the trial judge. We believe, however, that the purposes of entering a default judgment in these circumstances do not justify the possible harshness of the result. Taylor's neglect should be excused, but not without a price. 19 Taylor shall pay the costs of this appeal including reasonable attorneys' fees for plaintiffs, and the district court on remand may, in its discretion, impose additional other reasonable sanctions for the impact of Taylor's excusable neglect in that court. Further neglect by Taylor will not be tolerated. 20 The default judgment is vacated and the cause is remanded for further proceedings in conformity with this opinion. Circuit Rule 18 shall not apply. All costs to appellant.