Mobile Investments, LLC, and The Broadway Group, LLC v. Corporate Pharmacy Services, Inc. (Appeal from Etowah Circuit Court: CV-20-900608).

• Court: Supreme Court of Alabama
• Decided: September 13, 2024
• Docket: SC-2024-0115
• Status: Published

Opinion

Rel: September 13, 2024

Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-0650), of any typographical or other errors, in order that corrections may be made before the opinion is printed in Southern Reporter.

SUPREME COURT OF ALABAMA

SPECIAL TERM, 2024

_________________________

SC-2024-0115

Mobile Investments, LLC, and The Broadway Group, LLC

v.

Corporate Pharmacy Services, Inc.

Appeal from Etowah Circuit Court (CV-20-900608)

COOK, Justice.

This appeal concerns a default judgment that was entered against SC-2024-0115

the defendants Mobile Investments, LLC, and The Broadway Group, LLC

("TBG"), by the Etowah Circuit Court as a sanction under Rule

37(b)(2)(C), Ala. R. Civ. P., after the defendants repeatedly failed to

comply with multiple discovery requests and orders.

For over two years, the plaintiff, Corporate Pharmacy Services, Inc.

("CPS"), sought to depose Robert Broadway, the corporate representative

for Mobile Investments and TBG. However, every time CPS was set to

depose Broadway, he would cancel the deposition with only a few days'

notice, allegedly due to scheduling conflicts.

Following Broadway's repeated failures to sit for a deposition, CPS

filed motions asking the trial court to (1) compel Broadway to sit for his

deposition, (2) impose monetary sanctions against Mobile Investments

and TBG, and (3) enter a default judgment against them as a sanction

under Rule 37(b)(2)(C). The trial court granted CPS's motion to compel

but denied its motion for sanctions.

After Broadway again failed to sit for a deposition, CPS once again

filed a motion asking the trial court to (1) impose monetary sanctions

against Mobile Investments and TBG and (2) enter a default judgment

against them as a sanction under Rule 37(b)(2)(C). Although the trial

2 SC-2024-0115

court granted CPS's second request for monetary sanctions, it did not

grant the request for the entry of a default judgment. It did, however,

warn the defendants that if Broadway again failed to make himself

available to be deposed, it would enter a default judgment against them

should CPS renew its request for that sanction.

After Mobile Investments and TBG failed to make Broadway

available for a deposition yet again, CPS renewed its motion asking the

trial court to enter a default judgment against them as a sanction under

Rule 37(b)(2)(C). Consistent with its earlier warning, the trial court

granted that motion.

Mobile Investments and TBG thereafter moved the trial court for

relief from the default judgment. After their motion was denied as a

matter of law, they appealed. For the reasons stated below, we affirm the

trial court's decision to enter a default judgment against Mobile

Investments and TBG as a sanction under Rule 37(b)(2)(C).

Facts and Procedural History

In 1995, William King agreed to lease his property on Broad Street

in Gadsden to CPS. Under the parties' lease agreement, King agreed to

lease the property to CPS for a one-year term, with the option for CPS to

3 SC-2024-0115

renew the lease "for five (5) successive years following the initial one (1)

year term." The lease agreement also contained a provision that gave

CPS the option to purchase the property from King "[s]hould … [King]

decide to sell the premises …." Although the lease agreement specifically

covered only six years, CPS remained in possession of the property until

2005, at which point, CPS contends, King executed a handwritten note

that extended the term of the lease indefinitely.1

King died in 2018. In 2019, King's estate sold the property to Mobile

Investments. Shortly thereafter, CPS discovered that King's estate had

sold the property to Mobile Investments when Mobile Investments

informed CPS that, according to Mobile Investments, CPS was leasing

the property on a month-to-month basis.

In October 2020, CPS commenced the present action against Mobile

Investments and TBG. In its complaint, CPS alleged that Mobile

Investments and TBG had breached the terms of the original lease

agreement between CPS and King and sought specific performance of the

1According to CPS, the handwritten note stated that CPS could lease the property for "as long as they like."

4 SC-2024-0115

lease agreement's option-to-purchase provision. 2

Mobile Investments and TBG moved to dismiss CPS's claims

against them, but that motion was denied. Mobile Investments and TBG

thereafter filed their answer to CPS's complaint, and the parties

proceeded to engage in discovery.

In March 2021, CPS served Mobile Investments and TBG with

interrogatories, requests for production, and requests for admissions.

After Mobile Investments and TBG failed to respond to CPS's initial

discovery requests, CPS filed a motion asking the trial court to compel

them to do so. The trial court granted CPS's request and ordered Mobile

Investments and TBG to respond to CPS's discovery requests.

After Mobile Investments and TBG failed to comply with that order,

CPS filed a "Motion to Have Requests for Admission Deemed Admitted."

The same day CPS submitted that motion, the trial court entered a

second order directing Mobile Investments and TBG to respond to CPS's

discovery requests.

Thereafter, Mobile Investments and TBG responded to CPS's

2CPS's complaint also asserted claims against King's estate. However, those claims were dismissed during the proceedings below and, thus, are not at issue in this appeal. 5 SC-2024-0115

interrogatories, requests for admissions, and requests for production.

Unsatisfied with their responses, CPS asked Mobile Investments and

TBG to supplement its responses and to provide CPS with dates on which

to depose their corporate representative, Broadway.

In May 2022, a second motion to compel was filed. In response to

that motion, in September 2022, the trial court ordered Mobile

Investments and TBG to provide full and complete responses to all

outstanding discovery requests. In light of that order, the parties agreed

to set Broadway's deposition for September 15, 2022. However, the day

before the deposition was set to take place, Mobile Investments and TBG

informed CPS that Broadway could not attend the deposition.

In October 2022, CPS filed its third motion to compel, in which it

asked the trial court to order Mobile Investments and TBG to respond to

its discovery requests and to compel Broadway to sit for a deposition. The

trial court granted CPS's motion.

Over the next several months, however, Mobile Investments and

TBG made no attempt to provide CPS with dates for Broadway's

deposition. They also made no further attempt to respond to CPS's

6 SC-2024-0115

In February 2023, CPS informed Mobile Investments and TBG that

it had set Broadway's deposition for February 13, 2023. In response,

Mobile Investments and TBG stated that they would make Broadway

available for a deposition if it were instead scheduled for February 22,

2023. CPS agreed to change the date of the deposition to the date

requested by Mobile Investments and TBG. However, two days before the

deposition was set to take place, Mobile Investments and TBG informed

CPS that Broadway was no longer available.

In March 2023, CPS filed its fourth motion to compel, which

included another request to compel the deposition of Broadway, along

with its first motion for monetary sanctions and for the entry of a default

judgment against Mobile Investments and TBG as a sanction under Rule

37(b)(2)(C). The trial court granted CPS's fourth motion to compel, but it

did not grant CPS's first motion for sanctions.

Mobile Investments and TBG then informed CPS that Broadway

would be available to sit for his deposition on April 10, 2023. However,

after Broadway failed to appear for his deposition that day, CPS filed its

second motion for sanctions against Mobile Investments and TBG. In

that motion, CPS asked the trial court to issue both monetary sanctions

7 SC-2024-0115

and to enter a default judgment against Mobile Investments and TBG as

a sanction under Rule 37(b)(2)(C) in light of their repeated failures to

comply with the trial court's previous discovery orders.

Around that time, Mobile Investments and TBG's attorney

withdrew from the case, and a new service address for Mobile

Investments and TBG was provided to the trial court. 3 Mobile

Investments and TBG did not file a response to CPS's second motion for

sanctions, but their former attorney nevertheless appeared at the

hearing on that motion to plead for leniency.

In June 2023, the trial court issued an order granting CPS's request

for monetary sanctions against Mobile Investments and TBG and

ordered the defendants to provide dates for Broadway's deposition within

30 days of the entry of its order. The trial court did not, however, enter a

default judgment against the defendants at that time. Instead, the trial

court's order warned Mobile Investments and TBG that "if Mr. Broadway

fails to appear for the deposition as noticed, … the Court, upon request

by [CPS], likely would enter judgment by default against [them]."

3The new service address for Mobile Investments and TBG appears

to be the business address for TBG. 8 SC-2024-0115

Despite the clear directives from the trial court, Mobile

Investments and TBG did not pay the monetary sanctions or provide CPS

with dates for Broadway's deposition. As result, CPS filed its third

motion for sanctions in which it asked the trial court to, among other

things, enter a default judgment against Mobile Investments and TBG

as a sanction under Rule 37(b)(2)(C). The trial court granted CPS's

motion and entered a default judgment against Mobile Investments and

TBG.

Thereafter, Mobile Investments and TBG filed a motion asking the

trial court to set aside the default judgment against them. According to

Mobile Investments and TBG, their failure to comply with the trial

court's multiple discovery orders was the result of their former attorney's

(1) failing to tell them about those orders and (2) failing to explain to

Broadway the consequences of not complying with the trial court's orders

compelling his deposition. In support of their motion, Mobile Investments

and TBG attached an affidavit from Broadway in which he admitted that

he had known about each of his scheduled depositions but maintained

that he had had to cancel each one due to a conflict. They also attached

to their motion the documents CPS originally had requested during

9 SC-2024-0115

discovery.

Mobile Investments and TBG's motion was denied by operation of

law. They now appeal.

Standard of Review 4

We review a trial court's decision to enter a default judgment under

Rule 37(b)(2)(C), Ala. R. Civ. P., as a sanction against a party who has

failed to comply with a discovery order by determining whether that court

has abused its discretion. See, generally, Ex parte Coale, 757 So. 2d 393,

396 (Ala. 1999).

4Mobile Investments and TBG contend that the trial court should

have set aside the default judgment entered against them in light of the factors set out in Kirtland v. Fort Morgan Authority Sewer Service, Inc., 524 So. 2d 600, 605 (Ala. 1988). However, the default judgment entered against them was not entered under Rule 55(b), Ala. R. Civ. P., for their failure to defend the action or to appear at trial -- scenarios that normally invoke the application of the Kirtland factors. See Hilyer v. Fortier, 227 So. 3d 13, 30 (Ala. 2017). Rather, the default judgment entered against them was entered as a discovery sanction under Rule 37(b)(2)(C), Ala. R. Civ. P. In cases such as this one, our appellate courts have stated that the Kirtland factors are inapplicable. See Pace v. Smith, 280 So. 3d 428, 435 (Ala. Civ. App. 2019) (noting that the default judgment entered in that case was not a typical Rule 55(b) default judgment entered for failing to defend an action or to appear at trial but was, instead, a default judgment entered as a discovery sanction under Rule 37(b)(2)(C) and, thus, that the Kirtland factors did not apply).

10 SC-2024-0115

Discussion 5

On appeal, Mobile Investments and TBG argue that the trial court

abused its discretion by entering a default judgment against them

because, they say, their former attorney (1) did not tell them about the

trial court's four orders compelling them to respond to discovery, and (2)

did not explain to Broadway the consequences of not complying with the

trial court's orders compelling his deposition. As explained below, we find

their arguments to be unpersuasive.

Rule 37(b)(2)(C), Ala. R. Civ. P., provides that, under the

appropriate circumstances, a trial court may enter "[a]n order …

rendering a judgment by default against the disobedient party." Our

5We note briefly that Mobile Investments and TBG first argue that

the default judgment against them is due to be set aside because, they say, CPS lacked standing to commence this action and, thus, the trial court lacked subject-matter jurisdiction over CPS's action. However, this Court has repeatedly explained that "the concept [of standing] appears to have no necessary role to play in respect to private-law actions." Ex parte BAC Home Loans Servicing, LP, 159 So. 3d 31, 41 (Ala. 2013). Although Mobile Investments and TBG argue that, "[i]f ever a case existed where the doctrine of standing should be applied in a 'private law' case, this is the case" because, they say, CPS "had absolutely no statutory authority nor authority derived from any case law of this State to enforce a clearly expired lease containing the expired option to purchase," Mobile Investments and TBG's brief at 21, they fail to successfully explain why we should now depart from the holding in Ex parte BAC. We therefore see no reason to do so here. 11 SC-2024-0115

Court has previously explained that any sanction rendered under Rule

37(b)(2)(C) must be "proportionate to and compensatory of the particular

discovery abuse committed." Ex parte Seaman Timber Co., 850 So. 2d

246, 258 (Ala. 2002). Our Court has specifically held that entry of a

default judgment against a party who fails to comply with a discovery

order is an appropriate sanction under that rule. See Ex parte Blake, 624

So. 2d 528, 532 (Ala. 1993) (recognizing that "Rule 37(b)(2)(C), Ala. R.

Civ. P., authorizes the trial court to enter a default judgment against a

party who fails to comply with a discovery order").

Because the entry of a default judgment for failure to comply with

a discovery order is the most severe sanction a court may apply, see

Ultracashmere House, Ltd. v. Meyer, 407 So. 2d 125 (Ala. 1981), our

Court has previously explained:

" 'Judicial discretion must be carefully exercised to assure that the situation warrants the imposition of such a sanction. Dismissal [and default-judgment] orders must be carefully scrutinized, and the plaintiff's conduct must mandate dismissal [or the entry of a default judgment]. We have held that "willfulness" on the part of the noncomplying party is a key factor supporting a dismissal [or the entry of a default judgment]. If one party has acted with willful and deliberate disregard of reasonable and necessary requests for the efficient administration of justice, the application of even so stringent a sanction as dismissal [or the entry of a default judgment] is fully justified and should not be disturbed.' " 12 SC-2024-0115

Ex parte Blake, 624 So. 2d at 532 (quoting Iverson v. Xpert Tune, Inc.,

553 So. 2d 82, 87 (Ala. 1989)) (emphasis added).

In addressing what level of conduct rises to the level of "willfulness"

in the context of discovery abuse, our Court has explained that

"willfulness" might be found when " 'a party intentionally or willfully

fail[s] to attend a deposition' " or does " 'not offer[] an explanation for his

failure to comply [with discovery requests].' " Ex parte Seaman Timber,

850 So. 2d at 256 (citations omitted).

Here, the record indicates that Mobile Investments and TBG failed

to respond to CPS's discovery requests on more than one occasion. The

record also shows that Broadway, Mobile Investments and TBG's

corporate representative, repeatedly failed to sit for a deposition despite

being ordered by the trial court to make himself available for one.

Although Mobile Investments and TBG explained each time that

Broadway had to cancel his depositions due to "scheduling conflicts," we

note that there was at least one occasion where CPS attempted to

accommodate Broadway's schedule by setting his deposition for a time

that was more convenient for him. Despite that change, Broadway still

failed to appear. Considering the repeated efforts to set Broadway's 13 SC-2024-0115

deposition, the extended period over which this conduct occurred, the

trial court's repeated orders compelling the defendants to respond to

discovery and the order for monetary sanctions, it is difficult for this

Court to imagine a clearer example of the "willfulness" that we have held

provides an appropriate basis for the entry of a default judgment as a

sanction under Rule 37(b)(2)(C) than the conduct presented here.

Nonetheless, Mobile Investments and TBG argue that their failure

to comply was justified because, they say, their former attorney (1) did

not tell them about the trial court's four orders compelling them to

respond to discovery, and (2) did not explain to Broadway the

consequences of not complying with the trial court's order compelling his

deposition.

First, it is well established that an attorney is the agent of his or

her client, and the knowledge of the attorney is imputed to the client even

if the client did not have actual knowledge of the facts and circumstances

at issue. For instance, our Court has previously explained:

" ' "[a]n attorney is the duly authorized agent of his client and his acts are those of his client. The client is, therefore, bound by the acts of his attorney in the course of legal proceedings in the absence of fraud or collusion, and knowledge of the attorney is imputed to the client, notwithstanding 14 SC-2024-0115

the client had no actual knowledge or notice of the facts and circumstances." '

"SouthTrust Bank v. Jones, Morrison, Womack & Dearing, P.C., 939 So. 2d 885, 903 (Ala. Civ. App. 2005) (quoting Ex parte Aaron, 275 Ala. 377, 379, 155 So. 2d 334, 335 (1963) (Merrill, J., concurring specially)). ' "It is elementary that omissions and commissions of an attorney at law are to be regarded as acts of the client whom he represents." ' SouthTrust Bank, 939 So. 2d at 903 (quoting Lawrence v. Gayle, 294 Ala. 91, 94, 312 So. 2d 385, 387 (1975))."

Pace v. Smith, 280 So. 3d 428, 436 (Ala. Civ. App. 2019).

As the legal principles quoted above make clear, any knowledge

Mobile Investment and TBG's former attorney may have had about the

trial court's orders is " ' " imputed to [them]," ' " regardless of whether they

had " ' " actual knowledge or notice of the facts and circumstances" ' " at

issue. Id. Mobile Investments and TBG "cannot hide behind the alleged

omissions of [their] former counsel." Id. We therefore see no reason to

hold that their willful disregard of the trial court's discovery orders could

be justified on this basis.

Additionally, the fact that Mobile Investments and TBG's former

attorney allegedly did not explain to Broadway the consequences of not

complying with the trial court's orders compelling his deposition is

likewise unavailing. In his affidavit, Broadway admitted that he knew of

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each deposition date and that he elected not to attend the depositions

because of scheduling conflicts, despite previously agreeing to the dates

before the dispositions were set. The record also shows that the trial

court's order awarding CPS monetary sanctions for Mobile Investments

and TBG's failure to make Broadway available for a deposition was sent

to Mobile Investments and TBG at TBG's place of business, not to their

former attorney. Furthermore, that order expressly warned Mobile

Investments and TBG that "if Mr. Broadway fails to appear for the

deposition as noticed, … the Court, upon request by [CPS], likely would

enter judgment by default against [them]." In light of the foregoing, we

cannot see how Broadway did not know of the consequences of not

complying with the trial court's orders directing Mobile Investments and

TBG to make him available for a deposition even if Mobile Investments

and TBG's former attorney did not expressly explain those consequences

to him or how such a failure to inform could matter under these facts.

Conclusion

Our discovery system is designed to operate through the good faith

and professionalism of the attorneys and parties involved in an action

without the need for intervention from our trial judges who are often very

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busy. Although attorneys for each side may properly argue about the

details and scope of discovery (for instance, about privilege issues or

dates for depositions or production of documents), ultimate compliance

with proper discovery requests is not optional. When compliance does

not occur, our Rules of Civil Procedure vest the trial court with the

authority to issue orders to compel compliance and, if necessary, to

sanction parties for noncompliance.

In particular, the trial judge's efforts in this case are a model to

follow; he was exceptionally patient and methodically escalated his

efforts to compel responses to the discovery promulgated by CPS.

Because Mobile Investments and TBG failed to demonstrate how the trial

court abused its discretion when it entered a default judgment against

them as a sanction under Rule 37(b)(2)(C), Ala. R. Civ. P., for their

repeated failure to comply with its discovery orders, we affirm that

decision.

AFFIRMED.

Parker, C.J., and Wise, Sellers, and Stewart, JJ., concur.