Court Opinion

ID: 2814925
Source: CourtListenerOpinion
Date Created: 2015-07-07 19:02:49.251797+00
Date Added: 2024-06-11T12:08:35.675251
License: Public Domain

In the

      United States Court of Appeals
                     For the Seventh Circuit
                          ____________________  

No.  14-­‐‑3294  
CHOICE  HOTELS  INTERNATIONAL,  INC.,  
                                                                Plaintiff-­‐‑Appellee,  
                                          v.  

ANUJ  GROVER,  ARJUN  GROVER,  and  DHARAM  PUNWANI,  
                                       Defendants-­‐‑Appellants.  
                          ____________________  

          Appeal  from  the  United  States  District  Court  for  the  
           Northern  District  of  Indiana,  Hammond  Division.  
         No.  2:11-­‐‑CV-­‐‑290-­‐‑JVB  —  Joseph  S.  Van  Bokkelen,  Judge.  
                          ____________________  

          ARGUED  MAY  28,  2015  —  DECIDED  JULY  7,  2015  
                   ____________________  

    Before  BAUER,  EASTERBROOK,  and  RIPPLE,  Circuit  Judges.  
     EASTERBROOK,   Circuit   Judge.   Choice   Hotels   sued   SBQI,  
Inc.,   plus   several   of   its   managers   and   investors,   seeking  
damages  for  a  breach  of  a  franchise  agreement.  The  defend-­‐‑
ants  did  not  answer  the  complaint,  and  the  clerk  of  court  en-­‐‑
tered   a   default.   One   of   the   defendants,   Tarranpaul   Chawla,  
an   attorney   admitted   to   practice   in   Illinois,   represented   the  
others   but   did   so   poorly,   which   led   to   the   default.   Three   of  
the   defendants—Anuj   Grover,   Arjun   Grover,   and   Dharam  
2                                                                  No.  14-­‐‑3294  

Punwani   (collectively   the   Investors)—asked   Chawla   to   find  
a  new  attorney.  They  assert  that  until  this  suit  was  filed  they  
had   been   unaware   that   their   signatures   were   on   the   fran-­‐‑
chise  agreement  as  parties,  which  could  make  them  person-­‐‑
ally   liable,   and   they   insist   that   the   signatures   are   forgeries.  
Chawla  told  the  Investors  that  Elton  Johnson  had  agreed  to  
represent  their  interests  by  trying  to  vacate  the  default,  nego-­‐‑
tiate   a   settlement,   and   if   necessary   defend   against   Choice  
Hotels’  demand  for  damages.  
      Johnson   filed   an   appearance   and   took   some   steps   in   the  
litigation,  such  as  attending  a  conference  under  Fed.  R.  Civ.  
P.  16.  But  he  did  not  answer  the  complaint  or  file  a  motion  to  
vacate  the  default,  engage  in  discovery  concerning  damages,  
respond  to  Choice  Hotels’  request  for  admissions,  or  reply  to  
its   motion   for   summary   judgment   on   damages.   In   response  
to  email  requests  from  Anuj  Grover,  Johnson  insisted  that  he  
was  trying  to  settle  the  litigation.  But  he  did  not  say  what  he  
was   doing   or   share   with   the   Investors   any   documents   he  
filed   in   the   suit.   He   did   not   return   phone   calls.   Eventually  
the  district  court  set  damages  at  $430,286.75,  and  on  June  26,  
2013,  the  court  entered  a  final  judgment  in  that  amount.  
     The   default   judgment   led   the   Investors   to   hire   a   new  
lawyer,   who   filed   a   motion   seeking   to   set   aside   the   judg-­‐‑
ment.   Because   it   was   filed   more   than   a   year   after   the   judg-­‐‑
ment,  however,  it  fell  into  Fed.  R.  Civ.  P.  60(b)(6),  the  residu-­‐‑
al  clause,  which  covers  “any  other  reason  that  justifies  relief”  
(that  is,  any  reason  other  than  ones  in  Rule  60(b)(1)  to  (5)).  A  
motion   under   Rule   60(b)(6)   is   addressed   to   the   district  
court’s   discretion,   and   appellate   review   is   correspondingly  
deferential.   See   Metlyn   Realty   Corp.   v.   Esmark,   Inc.,   763   F.2d  
826  (7th  Cir.  1985).  As  a  substantive  matter,  relief  under  Rule  
No.  14-­‐‑3294                                                                3  

60(b)(6)  requires  the  movant  to  establish  that  “extraordinary  
circumstances”   justify   upsetting   a   final   decision.   See   Gonza-­‐‑
lez  v.  Crosby,  545  U.S.  524,  535–38  (2005).  
     The  district  court  thought  these  circumstances  to  be  short  
of   “extraordinary.”   Lawyers   sometimes   fail   to   protect   their  
clients’   interests,   and   the   district   judge   observed   that   the  
remedy  for  legal  neglect  lies  in  a  malpractice  suit  against  the  
lawyer,  rather  than  continuing  the  original  litigation  and  up-­‐‑
setting   the   adversary’s   legitimate   expectations   based   on   a  
final   judgment.   Litigants   who   choose   a   poor   lawyer   may  
bear   the   costs   themselves,   or   shift   them   to   the   lawyer,   but  
cannot  shift  them  to  an  adversary  who  bore  no  fault  for  the  
problem.  (Johnson  unquestionably  is  a  poor  lawyer.  The  Su-­‐‑
preme   Court   of   Indiana   suspended   him   from   practice   on  
March   20,   2014,   less   than   four   years   after   his   admission   to  
the   bar,   following   five   disciplinary   complaints   against   him.  
His  suspension—for  failure  to  cooperate  in  the  investigation  
of   these   grievances—is   of   indefinite   duration,   and   he   has  
been  removed  from  the  roll  of  attorneys  authorized  to  prac-­‐‑
tice  in  the  Northern  District  of  Indiana.)  
    The   district   court’s   approach   is   well   grounded   in   deci-­‐‑
sions   of   the   Supreme   Court   and   this   circuit.   Link   v.   Wabash  
R.R.,   370   U.S.   626   (1962),   holds   that   litigants   are   bound   by  
the  acts  and  omissions  of  their  chosen  agents,  including  law-­‐‑
yers,   and   that   legal   bungling   therefore   does   not   justify   reo-­‐‑
pening  a  judgment.  The  Supreme  Court  added  in  Societe  In-­‐‑
ternationale  v.  Rogers,  357  U.S.  197  (1958),  and  National  Hockey  
League   v.   Metropolitan   Hockey   Club,   Inc.,   427   U.S.   639   (1976),  
that  the  intentional  misconduct  of  lawyers  likewise  is  imput-­‐‑
ed  to  their  clients.  And  when  a  client  aggrieved  by  counsel’s  
inept   handling   of   a   suit   contended   that   “gross   negligence”  
4                                                                              No.  14-­‐‑3294  

should  be  treated  differently  from  ordinary  negligence  (Link)  
and   intentional   misconduct   (National   Hockey   League),   we   re-­‐‑
jected  the  argument  and  held  that  labels  do  not  matter.  Unit-­‐‑
ed   States   v.   7108   West   Grand   Avenue,   15   F.3d   632   (7th   Cir.  
1994).   When   lawyers   fail,   the   remedy   is   malpractice   litiga-­‐‑
tion   against   the   wrongdoer,   not   more   litigation   against   an  
innocent  adversary  in  the  original  litigation.  We  summed  up  
in   Bakery   Machinery   &   Fabrication,   Inc.   v.   Traditional   Baking,  
Inc.,  570  F.3d  845,  848  (7th  Cir.  2009):  
      The   rule   is   that   all   of   the   attorney’s   misconduct   (except   in   the  
      cases  where  the  act  is  outside  the  scope  of  employment  or  in  cas-­‐‑
      es  of  excusable  neglect  [and  covered  by  Rule  60(b)(1)])  becomes  
      the  problem  of  the  client.  A  lawyer  who  inexcusably  neglects  his  
      client’s  obligations  does  not  present  exceptional  circumstances.  

    That   conclusion   cannot   be   avoided   by   calling   an   attor-­‐‑
ney’s   failure   to   file   critical   documents   “nonfeasance”   rather  
than   “misfeasance.”   That   would   be   just   another   exercise   in  
labeling.   Link   and   most   of   its   successors   involved   one   or  
more   omissions—things   not   done   at   all—in   addition   to  
things  done  badly.  Indeed,  both  7108  West  Grand  Avenue  and  
Bakery   Machinery   were   about   inaction;   the   opinion   in   7108  
West  Grand  Avenue  arises  from  the  sort  of  inaction  that  John-­‐‑
son  displayed.  Our  conclusion  that  labels  do  not  matter  ap-­‐‑
plies   to   any   other   proposed   relabeling.   Tolliver   v.   Northrop  
Corp.,  786  F.2d  316  (7th  Cir.  1986),  another  case  in  which  the  
lawyer   did   nothing   to   protect   the   client   (and   which   the   In-­‐‑
vestors  therefore  would  call  a  case  of  nonfeasance),  explains  
why   it   is   important   to   visit   the   consequences   on   the   bad  
lawyer  rather  than  the  innocent  adversary:  
      Holding   the   client   responsible   for   the   lawyer’s   deeds   ensures  
      that  both  clients  and  lawyers  take  care  to  comply.  If  the  lawyer’s  
      neglect  protected  the  client  from  ill  consequences,  neglect  would  
No.  14-­‐‑3294                                                                               5  

    become   all   too   common.   It   would   be   a   free   good—the   neglect  
    would  protect  the  client,  and  because  the  client  could  not  suffer  
    the  lawyer  would  not  suffer  either.  The  court’s  power  to  dismiss  
    a  case  is  designed  both  to  elicit  action  from  the  parties  in  the  case  
    at  hand  and  to  induce  litigants  and  lawyers  in  other  cases  to  ad-­‐‑
    here   to   timetables.   A   court   cannot   lightly   excuse   a   litigant   be-­‐‑
    cause  of  the  lawyer’s  neglect  without  abandoning  the  pursuit  of  
    these  objectives.  

Id.  at  319  (citation  omitted).  
    But   the   Investors   tell   us   that   the   Supreme   Court   has  
abandoned   the   pursuit   of   these   objectives   and   disapproved  
the   holdings   of   Bakery   Machinery   and   the   earlier   decisions  
that   we   have   cited.   They   rely   on   Holland   v.   Florida,   560   U.S.  
631   (2010),   and   Maples   v.   Thomas,   132   S.   Ct.   912   (2012).   Hol-­‐‑
land  holds  that  abandonment  by  counsel  can  justify  tolling  of  
the  statute  of  limitations  for  filing  a  federal  collateral  attack  
on  a  state  conviction,  and  Maples  holds  that  abandonment  by  
counsel  during  a  state  collateral  attack  can  constitute  a  justi-­‐‑
fication  for  a  procedural  default,  and  thus  permit  federal  re-­‐‑
view  of  an  issue  that  was  not  properly  presented  in  the  state  
proceeding.  
    Both  Holland  and  Maples  were  capital  cases.  Being  put  to  
death   is   a   disproportionate   penalty   for   having   a   bad   law-­‐‑
yer—especially  when  as  a  practical  matter  persons  on  death  
row   (and   for   that   matter   other   prisoners)   have   only   limited  
opportunity   to   choose   their   own   counsel.   They   must   accept  
volunteers,   and   if   they   fire   a   volunteer   they   cannot   be   sure  
that   someone   else   will   step   in,   for   they   lack   funds   to   hire  
counsel.  (Holland  suggested  that  the  prisoner  had  tried  to  dis-­‐‑
charge  his  lawyer  but  that  neither  counsel  nor  the  state  judi-­‐‑
ciary  had  honored  his  request.)  A  malpractice  suit  against  a  
nonperforming  lawyer  is  cold  comfort  to  someone  no  longer  
6                                                                 No.  14-­‐‑3294  

alive.   Abandonment   severs   the   agency   relation,   see   Maples,  
132  S.  Ct.  at  922–23;  Holland,  560  U.S.  at  659–60  (Alito,  J.,  con-­‐‑
curring)   (a   view   adopted   by   a   majority   in   Maples),   so   that  
counsel’s   (in)action   is   not   imputed   to   the   client.   In   normal  
civil   litigation   a   litigant   whose   lawyer   has   left   him   in   the  
lurch  can  hire  a  new  one,  or  represent  himself,  but  people  on  
death  row  can’t  replace  their  lawyers  so  easily.  
     Although   Maples   and   Holland   were   capital   cases,   we   do  
not  doubt  that  their  holdings  apply  to  all  collateral  litigation  
under   28   U.S.C.   §2254   or   §2255.   See   Gibbs   v.   LeGrand,   767  
F.3d   879,   893   (9th   Cir.   2014);   Cadet   v.   Florida   Department   of  
Corrections,   742   F.3d   473,   482   (11th   Cir.   2014).   All   prisoners  
face   difficulties   in   obtaining   and   monitoring   the   perfor-­‐‑
mance   of   counsel,   and   damages   for   malpractice   are   a   poor  
substitute  for  time  in  prison,  just  as  they  are  no  substitute  for  
one’s   life.   But   these   considerations   are   inapplicable   to   nor-­‐‑
mal  civil  litigation,  and  the  Supreme  Court  has  not  suggest-­‐‑
ed   that   Holland   or   Maples   has   any   bearing   on   suits   about  
torts,  contracts,  and  other  economic  matters.  
     For   litigants   such   as   the   Investors,   monetary   compensa-­‐‑
tion  via  a  malpractice  action  is  an  adequate  recompense  for  
an   adverse   judgment.   (Litigants   who   fear   that   lawyers   may  
not  have  the  wealth  to  pay  for  their  mistakes  can  decline  to  
hire   counsel   who   lack   adequate   insurance.)   Civil   litigants  
can  hire  replacement  counsel  freely,  and  it  is  much  easier  for  
them   than   for   prisoners   to   monitor   how   their   lawyers   are  
performing   (or   not   performing).   And   although   abandon-­‐‑
ment   by   counsel   ends   the   agency   relation—a   consideration  
relevant   to   all   litigation,   not   just   to   collateral   review,   see  
Sneed   v.   Shinseki,   737   F.3d   719,   726–28   (Fed.   Cir.   2013)—the  
fact  remains  that  civil  litigants  are  responsible  for  their  own  
No.  14-­‐‑3294                                                                7  

choices   and   their   own   inaction.   Litigants   who   know   or  
strongly  suspect  that  their  lawyers  are  asleep  on  the  job  must  
act  to  protect  their  own  interests  by  hiring  someone  else.  
    The  Investors  recognized  that  Chawla  was  not  protecting  
their  interests,  and  they  sensibly  insisted  that  he  find  some-­‐‑
one   who   would.   When   they   began   to   suspect   that   Johnson  
likewise   was   not   protecting   their   interests,   they   did   not   re-­‐‑
place   him.   Sending   him   emails,   and   making   unreturned  
phone   calls,   is   no   substitute   for   action.   They   readily   could  
have   consulted   the   docket   in   the   litigation   and   learned   that  
Johnson  was  not  filing  essential  documents,  but  they  didn’t.  
Johnson  did  not  abandon  the  investors;  he  performed  some  
legal   tasks,   though   not   enough,   and   responded   to   three   of  
Anuj  Grover’s  inquiries.  Unlike  the  attorneys  in  Thomas  and  
Maples,  he  had  not  cut  off  all  communication  with  his  clients  
and  walked  away  from  the  litigation.  But  even  if  we  were  to  
treat  the  Investors  as  abandoned  by  Johnson,  still  they  must  
bear  the  consequences  of  their  own  inaction.  They  were  sued  
and   did   not   defend   the   litigation,   personally   or   by   counsel.  
They   were   able   to   monitor   the   proceedings   yet   did   not   fol-­‐‑
low   through.   The   district   judge   therefore   did   not   abuse   his  
discretion  in  denying  their  motion  for  relief  from  judgment.  
                                                                    AFFIRMED