Crop Production Services, Inc. v. Keeley (In re Grabanski)

691 F. App'x 159
Court of Appeals for the Fifth Circuit·Decided June 20, 2017·No. No. 16-40830·Published·Cited by 3 cases

Opinion

PER CURIAM: *

Below, creditors of a farming business obtained a default judgment relating to unpaid invoices. Liability for the obligations recognized in the default judgment extends to the business’s former partners, two of whom seek relief in this appeal. The former partners, John and Dawn Keeley, argue that the default judgment should not have been entered, should not have been extended to render them personally liable for the damages it recognized, and should have been vacated. Perceiving no abuse of discretion, we AFFIRM.

BACKGROUND

John and Dawn Keeley, the appellants, were general partners of G&K Farms from January 1, 2008, until September 2009. G&K Farms is a North Dakota general partnership, and exists for the purpose of farming land in Texas. Thomas Grabanski, another general partner, ran G&K Farms’s day-to-day operations.

Crop Production Services (“CPS”), the appellee, is an agricultural wholesaler that sold goods and services to G&K Farms. G&K Farms failed to pay CPS $642,669.55, a figure reflecting goods and services G&K Farms obtained from January to September 2009. CPS billed portions of the goods and services it provided across several different invoices. With one exception, the invoices were due on or before July 31, 2009. The exception relates to an invoice dated August 17, 2009, which became due on September 5,2009.

On September 15-16, 2009, the Keeleys assigned their interest in G&K Farms to another general partner, Thomas Graban-ski. About four years later, on July 29, 2013, Grabanski filed for bankruptcy in the [161] Eastern District of Texas, and G&K Farms became property of the bankruptcy estate. CPS filed a lawsuit related to G&K Farms’s unpaid debt against Grabanski and John Keeley two days later in Texas state court.

In September 2013, John Keeley removed the state court case to the Eastern District of Texas’s bankruptcy court. In April 2014, CPS amended its complaint, adding G&K Farms and Dawn Keeley as parties and adding various claims.1 The Keeleys filed a joint answer in their individual capacities on May 6,2014.

On August 13, 2014, the Keeleys moved for transfer of the case from the bankruptcy court to the district court. The district court granted that motion and took over the case on August 26, 2014. In the weeks immediately before the district court took the case from the bankruptcy court, both the bankruptcy trustee and the Keeleys filed objections in the bankruptcy court to a “proof of claim” CPS submitted. CPS’s proof of claim implicated a 2008 credit application submitted to CPS by Graban-ski and John Keeley on behalf of G&K Farms, and both the trustee and the Kee-leys premised their objections at least in part on the argument that statute of limitations defenses existed.

CPS requested entry of default against G&K Farms on October 16, 2014, after G&K Farms failed to respond to CPS’s amended complaint. CPS’s request for entry of default came on the same day that CPS deposed Grabanski. During the deposition, which the Keeleys’ attorney attended by telephone, Grabanski acknowledged that he received service on behalf of G&K Farms and said he “[did] not believe” that G&K Farms intended to retain a lawyer to represent it. The Keeleys filed no objection to CPS’s request for default, and the court clerk entered default against G&K Farms on October 27,2014.

In early November 2014, CPS filed a motion for default judgment against G&K Farms. The Keeleys filed no objection to CPS’s motion, and on January 8, 2015, the court entered a default judgment against G&K Farms totaling over $1.3 million.

CPS moved for partial summary judgment on April 30, 2015. In the motion, CPS argued that (1) the Keeleys were jointly and severally liable for the default judgment against G&K Farms; and (2) John Keeley was individually liable as a guarantor of G&K Farms’s obligations.

While CPS’s motion for partial summary judgment remained pending, the Keeleys moved to vacate the default judgment against G&K Farms. The district court denied the Keeleys’ motion to vacate on July 24, 2015.

Three weeks later, on August 14, 2015, the district court issued an order granting, in part, CPS’s motion for partial summary judgment. The district court found that the Keeleys are “jointly and severally liable for the entire default judgment against G&K Farms” under Texas general partnership law.2

CPS’s claims against John Keeley moved forward in a bench trial conducted on September 22, 2015.3 On October 14, [162]*1622015, the district court issued findings of fact and conclusions of law concerning those claims, which it rejected.

The district court issued a final judgment in favor of CPS against the Keeleys on October 27,2015. On November 3, 2015, the Keeleys filed a motion relating to both the default judgment against G&K Farms and the final judgment against the Kee-leys. The motion sought vacatur of the default judgment under Federal Rules of Civil Procedure 55 and 60, and sought alteration or amendment of the final judgment under Federal Rule of Civil Procedure 59. The district court denied the motion on May 12, 2016. This appeal followed.

STANDARD OF REVIEW

This court reviews both the entry of a default judgment and the district court’s refusal to set aside a default judgment “for abuse of discretion.” Wooten v. McDonald Transit Assocs., Inc., 788 F.3d 490, 495 (5th Cir. 2015) (citations omitted). “Because of the seriousness of a default judgment, and although the standard of review is abuse of discretion, even a slight abuse of discretion may justify reversal.” Id. (quoting In re Chinese-Manufactured Drywall Prods. Liab. Litig., 742 F.3d 576, 594 (5th Cir. 2014)).

“Review of a default judgment puts competing policy interests at play. On one hand, ‘[this court has] adopted a policy in favor of resolving cases on their merits and against the use of default judgments.’ ” Id. at 496 (quoting In re Chinese-Manufactured Drywall, 742 F.3d at 594). “On the other, this policy is ‘counterbalanced by considerations of social goals, justice and expediency, a weighing process that lies largely within the domain of the trial judge’s discretion.’ ” Id. (quoting In re Chinese-Manufactured Drywall, 742 F.3d at 594).

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Crop Production Services, Inc. v. Keeley (In re Grabanski), 691 F. App'x 159 (5th Cir. 2017).

691 F. App'x 159 (Crop Production Services, Inc. v. Keeley (In re Grabanski)) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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