Project Posner

Lead opinion by PELL

    874 PELL, Senior Circuit Judge.

   Aakash Chemicals and Dyestuffs, Inc., appeals from the default judgment against it and the denial of its motion to vacate the default. BACKGROUND

   Anilina Fabrique de Colorants filed this diversity suit^[1] against Aakash on April 10, 1986 claiming that Aakash owed it over $ 18,000 for goods which had been shipped to but had not been paid for by Aakash. At a court-ordered status hearing in July, the parties notified the judge that they were attempting to negotiate a settlement. Aakash's counsel also informed the court that the exhibits attached to the complaint were not sufficient to verify the accuracy of Anilina's claim and that Aakash might bring counterclaims.

   At an October 29 status hearing, Anilina's counsel advised the court that negotiations were continuing but were complicated by the fact that Anilina was located in Belgium and it was therefore difficult to schedule meetings and conference calls between 875 the parties and their principals. The court set another status hearing for November. When a scheduled conference between the parties could not be held, the court, at the request of both parties, rescheduled the hearing to December.

   In December, the court set the case for trial on March 5, 1987, after the parties agreed that negotiations had broken down. Both parties indicated that discovery would be necessary. Aakash advised the court that it had not yet filed its answer or any counterclaims because of the negotiations. Late in January, at Aakash's request, its counsel sought and was granted leave to withdraw. Acting without counsel, Aakash continued to communicate with Anilina in efforts to resolve the dispute.

   On the scheduled March 5 trial date, Anilina sought entry of default against Aakash, citing its failure to file an answer or other responsive pleading. Aakash claims, and Anilina does not dispute, that prior notice of the motion for default judgment was not given to Aakash and that it never received copies of Anilina's motion and supporting affidavits. An officer of Aakash appeared and requested additional time to obtain counsel. The court granted Aakash until March 17 to "either try to get a lawyer in here to try to persuade me to continue this case, and that's very uphill, or to settle the case." The judge warned Aakash that it was "headed for a default judgment." At the same time, Anilina's counsel expressed his concern that his client would not have sufficient time to make arrangements to travel from Belgium for the trial. The court stated, "There is no way [Aakash] can go to trial [on March 17]" and later, ". . . I wouldn't bring your client in from Belgium. There can't be a trial." At the close of the hearing, the court reiterated to Aakash's officer that it had "to have a lawyer either come in and try to persuade me to give more time to you, or you have to settle this case." The court's minute order, however, indicates that trial had been reset to March 17. Notices were not sent to the parties. Anilina concedes on appeal that it was clear on March 5 that the case would not go to trial on March 17.

   Aakash retained counsel who appeared on its behalf at the March 17 hearing. Counsel requested a continuance, indicating that he had been retained the previous day, had been unable to contact opposing counsel, and had not had an opportunity to review the court file or the files of Aakash's prior attorney. The court indicated to Aakash's new counsel that the case was set for trial that morning.^[2] Counsel nonetheless asked for a continuance, indicating that Aakash desired to file an answer. Counsel further indicated that the complaint was insufficient because the transactions referred to were not set out in separate counts, calling specific paragraphs of the complaint to the court's attention. At the close of the hearing, the court entered a default judgment, commenting that it would be unfair to the plaintiff to grant another continuance "on the morning of trial" and that the case was a "collection case for $ 18,000." Although at one point the court expressed the view that Aakash was stalling, the court also stated, "I don't know of any defenses to these claims," and instructed counsel that he had "10 days in which to file a motion to ask me to set it aside . . . . And what your burden is on asking me to set it aside is to show me that you have a good and meritorious defense." 876 The default judgment was entered on March 19, 1987.

Footnotes

[1]

   Anilina's principal place of business is in Belgium, while Aakash's is in Illinois.

[2]

   MR. JAROS [Counsel for Aakash]: Your honor, I was retained yesterday afternoon by Aakash Chemicals. He indicated that there was something set for today.

Dissent by POSNER

   POSNER, Circuit Judge, dissenting.

   The district judge did not exceed her authority in granting a default judgment and then refusing to set it aside. In deciding otherwise, my brethren cross the line that separates the powers and responsibilities of an appellate court from those of a trial court. This decision will be resented by our district judges and is a setback to the cause of efficient judicial administration. The threat of default is one of the district judges' most important tools for obtaining compliance with litigation schedules. We blunt it by our decision today.

   This is a routine commercial suit, filed in April 1986 by a Belgian company to collect the $ 18,000 purchase price of goods sold and delivered to the defendant but not paid for. Commercial suits in federal court for such modest amounts are rarely tried; generally, after some stalling, either they are settled or the defendant defaults. The defendant in this case did not file an answer when it was supposed to, and Judge Getzendanner gave it an extension to July 7. This was a generous extension (a defendant in federal court has only 20 days in which to answer the complaint), but no answer was filed on July 7. Judge Getzendanner could have entered a default judgment then and there, but instead she let this deadline pass without comment and, indeed, later gave the defendant until December 7 to answer. Another generous gesture -- another deadline ignored. Meanwhile trial had been scheduled to begin on March 5, 1987. In January, Judge Getzendanner allowed the defendant's counsel to withdraw (the defendant had fired him) but stated that the March 5 trial date would stand. The defendant did not complain that it was being rushed unduly, yet when March 5, the day set for trial, rolled round, it had failed to obtain new counsel. Instead, an executive of the defendant appeared and pleaded for more time. There had been no forewarning, and the judge was properly dismayed. She gave the defendant till March 17 to persuade her not to hold it in default. Instead of filing anything -- even the long overdue answer -- newly appointed counsel for the defendant appeared before Judge Getzendanner on March 17 and asked her for a continuance. He had been hired the previous day, had not had time to review the file, and therefore was not prepared to offer reasons why his client should not be held in default. (The defendant, after almost a full year, still had not filed its answer.) This was too late, and Judge Getzendanner directed the entry of a default judgment, and having done so refused later to exercise her discretion under Fed. R. Civ. P. 60(b) to set it aside.

   For a corporate litigant to show up in court on the day of trial and announce (without forewarning) that it cannot proceed because it has not retained counsel (a corporation cannot proceed pro se, of course) is inexcusable conduct that merits swift and sharp punishment up to and including the entry of a default judgment. If condoned, such conduct would make it impossible for our overburdened trial courts to manage their dockets. Having fired its old counsel in January, and knowing that trial was scheduled to begin on March 5, the defendant was obliged either to retain new counsel promptly or to advise the court promptly of its inability to do so. The defendant took neither course and as a result its appearance without counsel on March 5 came as a bolt from the blue. The defendant never has explained why it waited till March 16 to obtain new counsel.

   Some judges would have given the defendant another chance; others would have imposed a sanction, but a lesser one than a default judgment (though since the entire stakes in this case are only $ 18,000, the 883 difference between a lesser sanction and the sanction of default might be slight). Judge Getzendanner, one of the ablest district judges in this circuit before her recent and much regretted resignation from the bench, ran a tight ship, and it was her prerogative to do so. She reacted to the defendant's shenanigans more harshly than some judges would have done; more harshly, obviously, than a majority of this panel would have done (or thinks it would have done); but she did not exceed the limits of her authority as a trial judge to manage her docket.

   The question for this court is not whether we agree with what Judge Getzendanner did; it is whether she acted unreasonably. The blurring of this distinction is the fundamental flaw in the majority opinion. Cases that we are not free to ignore emphasize the breadth of the district court's discretion to use the default sanction as a device for preventing parties from disregarding orders essential to the management of the court's caseload. "This court has moved away from the traditional position . . . that [default] judgments are strongly disfavored. We are increasingly reluctant to reverse refusals to set them aside." Dimmitt & Owens Financial, Inc. v. United States, 787 F.2d 1186, 1192 (7th Cir. 1987). "The judge [in deciding whether to enter a default judgment and, if he has already entered it, whether to set it aside] is weighing imponderables -- the burden on his docket (which is to say the inconvenience to other litigants), the disturbance of expectations legitimately created by the default judgment, and the inroads on the general and essential principle that litigation must end, on the one hand, and on the other hand the injustice of allowing the default judgment to stand, which in turn is a function of both the merits of the movant's substantive claims and the strength of his excuse for committing the default. With the standard of decision so multifaceted, the appellate court's ability to fault the district judge's application of the standard is quite limited, and the scope of effective judicial review is therefore slight." Id. at 1193. We can set aside the district judge's refusal to vacate a default judgment only if "no reasonable person could agree with the district court's decision." Tolliver v. Northrop Corp., 786 F.2d 316, 318 (7th Cir. 1986). "Despite the harshness of the sanctions of dismissal or default, federal courts have consistently affirmed in the absence of a good excuse for the dilatory conduct." Patterson v. Coca-Cola Bottling Co., 852 F.2d 280, 284 (7th Cir. July 15, 1988).

   I find no recognition of these principles in the majority's opinion in this case. Nor does that opinion cite any case in which a district judge was reversed for using the default sanction in circumstances similar to those of the present case. The failure to appear for trial on the day scheduled is a particularly serious default, because it leaves the judge with a hole in his trial calendar; if, instead of being dismissed, the case is rescheduled for trial, it will compete with other cases for the judge's limited trial time. A federal judge's civil trial time is especially tight, because of the pressures of the Speedy Trial Act, which governs criminal trials.

   But while my brethren have not found a case in which a default judgment entered in circumstances similar to those of this case was reversed, it is easy, without even looking to any other circuit, to find cases where default judgments were affirmed even though the provocation was considerably less than in the present case. For example, in Chrysler Credit Corp. v. Macino, 710 F.2d 363, 367-68 (7th Cir. 1983), we upheld -- in an opinion written by a member of the majority in the present case -- the district judge's refusal to vacate a default judgment that he had entered when, two months after the answer had been due, the defendant still had not filed it. In Breuer Electric Mfg. Co. v. Toronado Systems of America, Inc., 687 F.2d 182 (7th Cir. 1982), we upheld the refusal to vacate a default judgment in circumstances almost identical to those in Macino. Most remarkably, in North Central Illinois Laborers' District Council v. S.J. Groves & Sons Co., 842 F.2d 164 (7th Cir. 1988), we upheld a default judgment (and, again, a refusal to set it aside) entered only one or two days after the 20-day period for answering the complaint 884 had passed without the defendant's filing its answer. A month later, upon discovering the plaintiff 's complaint (which had been mislaid in the defendant's offices), the defendant moved to set aside the default judgment -- to no avail. The default was inadvertent rather than willful, yet we upheld the district court. Here we cannot even say that the default was inadvertent rather than willful, for the defendant has yet to explain its delay in retaining new counsel after it fired its original one. The defendant has not only failed to give "a good excuse for the dilatory conduct," Patterson v. Coca-Cola Bottling Co., supra, at 284; it has yet to indicate the cause of the dilatory conduct. In none of the cases I have cited did the default affect the district judge's trial calendar.

   My brethren are not able to distinguish these cases. The observation in the majority opinion that "no case is exactly like any other case on the facts" is either a truism or a rejection of stare decisis. This case comes down to a disagreement between the trial court and the appellate court in a matter committed to the trial court's discretion, and such a disagreement is not a proper ground for reversal.