Court Opinion

ID: 5322
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:04:43+00
Date Added: 2024-06-11T13:30:42.498285
License: Public Domain

United States Court of Appeals,

                                             Fifth Circuit.

                                            No. 91–1681.

              SECURITIES AND EXCHANGE COMMISSION, Plaintiff–Appellee,

                                                   v.

          FIRST HOUSTON CAPITAL RESOURCES FUND, INC., et al., Defendants,

                             Michael F. Dermer, Defendant–Appellant.

                                            Dec. 21, 1992.

Appeal from the United States District Court For the Northern District of Texas.

Before WISDOM, JOLLY, and DEMOSS, Circuit Judges.

        WISDOM, Circuit Judge:

        When Michael Dermer, a pro se defendant, failed to appear at a pre-trial conference the

district court entered a default judgment against him. We vacate the order and remand the case for

trial. After closely reviewing the record, the Court is convinced that Dermer's conduct was not

contumacious. Moreover, the district judge did not provide factual findings and conclusions that a

lesser sanction would be insufficient. We have concluded that the interests of justice would be served

if the defendant were granted another opportunity to assert his rights in court. We reach this result

without in any way reflecting on the ability or integrity of the district judge.

                                                   I.

        The Securities and Exchange Commission (SEC) charged Michael F. Dermer with several

violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC alleged

that Dermer and several others engaged in a scheme to sell unregistered stock to the public and to

sell that stock through false or misleading statements. All the other individual co-defendants

consented to the entry of a permanent injunction against them.

        Dermer, pro se, contested his case. On January 29, 1990, the district judge issued a

scheduling order setting December 28, 1990 as the date by which discovery must be concluded and

stated, "If a pre-trial conference is needed, it is set for 9:30 a.m. on January 9, 1991."
       On January 2, 1991, the SEC filed an unopposed motion to extend the discovery period. At

the end of its motion, it noted that, "This request also prefigures a short postponement of the pretrial

conference...."

       On January 3, 1991, the district judge ext ended the discovery period but "[found] that the

pretrial conference and trial setting should remain the same".

       At 9:55 a.m. on January 9, 1991, twenty-five minutes after the pretrial conference was to

begin, Dermer had not appeared in court. The district judge stated: "We need to move our cases,

and this is one that really needs to be moved. It's been hanging around long enough." He entered

a default judgment (permanent injunction) against Dermer.

       Dermer sought relief by requesting the court to vacate the default judgment. This was denied.

Dermer appealed.

                                                  II.

       It is not entirely clear whether the district court entered the default judgment pursuant to

Fed.R.Civ.P. 551 or Fed.R.Civ.P. 162, although in denying the motion to vacate the district judge

stated his reasons in the language of rule 55. Because sanctions were imposed for failure of the

defendant to attend a pretrial conference, rule 16(f) provides the appropriate rubric under which

sanctions should have been dealt. This rule permits the judge to order sanctions "if no appearance

is made on behalf of a party at a scheduling or pretrial conference".

                                                  III.

   1
     Rule 55. DEFAULT (a) Entry. When a party against whom a judgment for affirmative relief
is sought has failed to plead or otherwise defend as provided by these rules and that fact is made
to appear by affidavit or otherwise, the clerk shall enter the party's default.
   2
     Rule 16. PRETRIAL CONFERENCES; SCHEDULING; MANAGEMENT (f) Sanctions.
If a party or party's attorney fails to obey a scheduling or pretrial order, or if no appearance is
made on behalf of a party at a scheduling or pretrial conference, or if a party or party's attorney is
substantially unprepared to participate in the conference, or if a party or party's attorney fails to
participate in good faith, the judge, upon motion or the judge's own initiative, may make such
orders with regard thereto as are just, and among others any of the orders provided in Rule
37(b)(2)(B), (C), (D). In lieu of or in addition to any sanction, the judge shall require the party or
the attorney representing the party or both to pay the reasonable expenses incurred because of any
noncompliance with this rule, including attorney's fees, unless the judge finds that the
noncompliance was substantially justified or that other circumstances make an award of expenses
unjust.
          The standard of review for the entry of sanctions under 16(f) is abuse of discretion.3

           Twenty-five years ago in Durham v. Florida East Coast Railway Co. this Court held that

although the sanction of dismissal is a discretionary matter, courts "have generally permitted it only

in the face of a clear record of delay or contumacious conduct by the [party]"4. This test for

determining whether the punishment fits the crime is alive and well in the Fifth Circuit.

           Further, even if the record teems with instances of delay or other egregious behavior, a

district court cannot impose the extreme sanction of dismissal "unless the court first finds that a lesser

sanction would not have served the interests of justice"5 A silent record is inadequate. We shall not

infer that the district judge weighed alternative sanctions; he must have "expressly considered" them.6

                                A. Evidence of Contumacious Conduct

           There is very little evidence of improper conduct by Dermer. He had at one time asserted

his Fifth Amendment Right and had declined to be deposed. Later he decided to testify at trial, and

because of this the SEC requested an extension of the discovery period. It appears that the SEC was

not notified of his change of mind until three days after the discovery period closed, but they made

no protest except to request additional time so as to depose Dermer.

          The other asserted incident of improper behavior is Dermer's failure to attend the pretrial

conference. There is some evidence that while he received the SEC's motion to extend discovery

(which included the postponement of the pretrial conference), he did not receive the district court's

order which extended discovery but adhered to the original schedule for the pretrial conference.

During the course of proceedings in the district court, Dermer moved his residence three times, and

there is unrefuted testimony that the court clerk sent the order to the wrong address. Dermer should

have checked with the court before concluding that the date of the pretrial conference had been

   3
   Price v. McGlathery, 792 F.2d 472, 474 (5th Cir.1986). See Link v. Wabash, 370 U.S. 626,
633, 82 S.Ct. 1386, 1390, 8 L.Ed.2d 734 (1962).
   4
       385 F.2d 366, 368 (5th Cir.1967).
   5
       McNeal v. Papasan, 842 F.2d 787, 793 (5th Cir.1988).
   6
       Callip v. Harris County Child Welfare Dept., 757 F.2d 1513, 1521 (5th Cir.1985).
changed. This Court, however, held in E.F. Hutton v. Moffatt that, "The single mistake of counsel

as to the pre-trial conference date certainly will not suffice for such a showing [of contumacious

conduct]."7 In that case, the defendant waited five months before retaining new counsel seven days

before the pretrial conference at which neither defendant nor his counsel appeared.

          Dermer's behavior clearly does not rise to the level of the "brazen defiance" displayed by the

pro se litigant in Brinkmann8, nor does it resemble the failure to attend the pretrial conference in Price

after the district judge had warned Price that she had only "one last opportunity" to comply with the

judge's orders9. Although Dermer should have checked with the court if he had any confusion as to

the correct date, the extreme punishment of a default judgment seems inappropriate for a first offense

blunder by a pro se litigant.

                                B. Consideration of Alternate Sanctions

           Although the district judge stated in open court and noted in his order that the default

judgment was the "appropriate sanction", in neither place does he indicate why it is appropriate or

whether he considered any other disciplinary measure. There is also nothing in his order to show that

he considered any other sanction.

          This Court in Callip10 has excused the absence of express findings concerning alternative

sanctions when the district court had previously imposed lesser sanctions and had issued an

ultimatum, although we noted in that case that express findings are required.11 That is not this case.

Here, there is nothing in his order to show that the district judge contemplated any sanction but the

most severe one. He swung the axe less than one half-hour after Dermer had failed to appear. Even

if Dermer had been habitually obstreperous or contumacious, the harshness of the sanction imposed

requires that the district judge first contemplate less drastic measures.

   7
       460 F.2d 284, 285 (5th Cir.1972).
   8
       Brinkmann v. Dallas County Deputy Sheriff Abner, 813 F.2d 744, 749 (5th Cir.1987).
   9
       Price v. McGlathery, 792 F.2d 472, 474 (5th Cir.1986).
   10
        See note 6.
   11
        Callip at 1521–22.
                                              IV.

       Because the district judge did not appear to consider alternatives to ordering a default

judgment and because the record suggests that Dermer's conduct is insufficient to support such a

severe sanction, we VACATE the judgment and REMAND the case for further proceedings in

accordance with this opinion.