Court Opinion

ID: 4857978
Source: CourtListenerOpinion
Date Created: 2021-08-26 00:01:13.805142+00
Date Added: 2024-06-11T08:11:56.375283
License: Public Domain

Case: 20-10775      Document: 00515994597         Page: 1     Date Filed: 08/25/2021

              United States Court of Appeals
                   for the Fifth Circuit                              United States Court of Appeals
                                                                               Fifth Circuit

                                                                             FILED
                                                                       August 25, 2021
                                   No. 20-10775                         Lyle W. Cayce
                                                                             Clerk

   Matthew Vaughn,

                                                              Plaintiff—Appellee,

                                       versus

   Nebraska Furniture Mart, L.L.C.; TXFM, Incorporated,
   doing business as Nebraska Furniture Mart,

                                                         Defendants—Appellants.

                   Appeal from the United States District Court
                       for the Northern District of Texas
                            USDC No. 3:19-CV-1220

   Before Owen, Chief Judge, Smith and Graves, Circuit Judges.
   Per Curiam:*
          The question is whether appellants’ neglect, which resulted in the
   entry of default judgment against them, amounted to willful neglect because
   they sent just one email in a nine-month span to outside counsel regarding
   this lawsuit. The district court found it willful. We agree and affirm.

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-10775        Document: 00515994597         Page: 2    Date Filed: 08/25/2021

                                     No. 20-10775

                                          I.
          Mr. Matthew Vaughn sued defendants-appellants for employment
   discrimination and retaliation. He alleged that appellants fired him “because
   of his race (Black) . . . and national origin (African American).” He also
   alleged that his termination was in retaliation for “complaining about and
   opposing illegal race, color, and national origin discrimination . . . .” Because
   he was unemployed for seven weeks and underemployed for six months, he
   sought damages for lost wages, lost earning capacity, back pay, front pay, lost
   employee benefits, mental anguish, emotional pain and suffering, and
   attorney’s fees.
          On June 28, 2019, Vaughn, using a process server, served appellants
   with summons and complaint by delivering them to the employee designated
   to receive process and appellants’ general counsel. Appellants failed to file
   an answer.
          The district court then issued an order instructing Vaughn to seek
   default judgment or risk dismissal. So Vaughn filed for default judgment, and
   the clerk of court entered default. The district court held an evidentiary
   hearing to determine damages and concluded that there was sufficient
   evidence to award approximately $54,000 in damages for back pay ($16,821),
   front pay ($27,350), and attorney’s fees ($10,000). On April 7, 2020, over
   nine months after service of process, the court entered default judgment
   against appellants accordingly.
          Appellants filed a motion to vacate the default judgment under
   Federal Rule of Civil Procedure 60(b)(1) in which they tried to explain their
   failure to answer. Appellants admit that both their designated representative
   and general counsel received the summons and complaint. And their general
   counsel avers that he passed the information along to an HR representative,
   who avers that she sent a single email on July 1, 2019, to outside counsel about

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Case: 20-10775       Document: 00515994597           Page: 3    Date Filed: 08/25/2021

                                      No. 20-10775

   Vaughn’s lawsuit. But outside counsel claims that he never received the
   email, and he cannot provide a record of having received it. Outside counsel
   also says that he has no billing entries related to it.
          No one can pinpoint where the breakdown occurred. What is certain
   is that appellants’ HR representative never followed up with outside counsel
   after sending the one email. The district court concluded that “diligence
   requires more than just one email from a client to its attorney” over the
   course of nine months. Consequently, the court found appellants’ neglect
   inexcusable and their failure to answer willful and denied their motion to
   vacate the final judgment. This appeal followed.
                                           II.
          The panel reviews the entry of default judgment for abuse of
   discretion. Lacy v. Sitel Corp., 227 F.3d 290, 291–92 (5th Cir. 2000). Any
   underlying factual determinations, including a finding of willful default, are
   reviewed for clear error. Id. at 292. “No clear error exists if the factual
   findings are ‘plausible in light of the record as a whole.’ In other words, ‘[w]e
   will find clear error only if a review of the record results in a definite and firm
   conviction that a mistake has been committed.’” United States v. Lima-
   Rivero, 971 F.3d 518, 520 (5th Cir. 2020) (quoting United States v. Zuniga,
   720 F.3d 587, 590 (5th Cir. 2013)) (internal citations omitted).
                                          III.
          We look to three factors to determine whether good cause to set aside
   default judgment exists: whether default was willful, whether setting it aside
   would prejudice the adversary, and whether a meritorious defense is
   presented. Wooten v. United Transit Assocs., Inc., 788 F.3d 490, 500 (5th Cir.
   2015). But a “finding of willful default ends the inquiry, for when the court
   finds an intentional failure of responsive pleadings there need be no other
   finding.” Id. (internal quotations omitted). Willfulness is defined as an

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Case: 20-10775      Document: 00515994597           Page: 4    Date Filed: 08/25/2021

                                     No. 20-10775

   intentional failure to respond to litigation. In re OCA, Inc., 551 F.3d 359, 370
   n.32 (5th Cir. 2008).
          The district court here stopped after the willfulness inquiry, which
   raises the question of whether it committed clear error when it determined
   that appellants’ neglect was inexcusable and amounted to willful neglect
   because they sent one lone email to outside counsel about Vaughn’s lawsuit.
   When, as here, a defendant’s neglect causes its failure to respond, the
   defendant has the burden to convince the court that its neglect was excusable,
   rather than willful, by a preponderance of the evidence. In re Chinese
   Manufactured Drywall Prod. Liab. Litig., 742 F.3d 576, 594 (5th Cir. 2014).
          The district court compared this case to Wooten v. United Transit
   Assocs., where we found the default willful because the defendant could
   provide no reason for it. 788 F.3d at 500–01. While appellants here offered a
   reason, the district court viewed it as unacceptable, or perhaps unbelievable,
   and concluded that appellants did not show that their mistake was excusable.
   Reaching this conclusion was within the district court’s discretion.
          For example, in Matter of Dierschike, 975 F.2d 181 (5th Cir. 1992), we
   affirmed the district court’s finding of willful default where the appellant said
   he failed to answer because he was confused. Id. at 184–185. He was involved
   in another suit when served and, as a result, did not understand that he had
   been served in a new and different suit. Id. at 184. Appellant also failed to
   follow up with his lawyer, who had sent him a copy of the complaint.
   Likewise, in Chinese Manufactured Drywall Products, we concluded that
   appellant’s actions were inexcusable where it claimed that it had not
   understood the legal implications and the significance of the complaint and
   did not seek legal advice. 742 F.3d at 593–95.
          The misunderstandings, claimed confusion, and failures to follow up
   with a lawyer or seek legal advice seen in Dierschike and Chinese Manufactured

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Case: 20-10775      Document: 00515994597           Page: 5    Date Filed: 08/25/2021

                                     No. 20-10775

   Drywall Products are similar to the facts of this case. Here, appellants received
   a complaint and allegedly sent one email to outside counsel, who never
   responded. Over nine months passed from the date the email was allegedly
   sent to the entry of default judgment. During that time, no one followed up
   with outside counsel, no one inquired about a bill from outside counsel, and
   no one asked the HR representative about the proceedings. This
   inattentiveness and lack of procedures for handling lawsuits support the
   district court’s inference that appellants acted willfully and essentially
   provided no reason for their failure to answer the complaint. After all,
   diligence requires more than sending one email to a lawyer. And appellants’
   failure to follow up after receiving no response from outside counsel makes
   them culpable in the default.
          AFFIRMED.

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