Ringgold Corp. v. Worrall

880 F.2d 1138, 14 Fed. R. Serv. 3d 984, 1989 U.S. App. LEXIS 10860, 1989 WL 81926
CourtCourt of Appeals for the Ninth Circuit
DecidedJuly 27, 1989
DocketNo. 87-2045
StatusPublished
Cited by51 cases

This text of 880 F.2d 1138 (Ringgold Corp. v. Worrall) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ringgold Corp. v. Worrall, 880 F.2d 1138, 14 Fed. R. Serv. 3d 984, 1989 U.S. App. LEXIS 10860, 1989 WL 81926 (9th Cir. 1989).

Opinion

PER CURIAM:

Ringgold Corporation, Thomas Devine, Michael Conti, and Framing Supplies Company, Inc. (“appellants”), appeal the district court’s entry of a default judgment in favor of Holly and Douglas Worrall (“the Worralls”).

BACKGROUND

In 1982, Ringgold sued the Worralls in the United States District Court for the Southern District of Texas, alleging breach of a franchise license agreement and failure to pay franchise royalties from operation of a do-it-yourself picture framing franchise. The Worralls counterclaimed against Ringgold, and brought third-party claims against Devine and Conti, both officers of Ringgold, and Framing Supplies Company, a partnership in which Devine and Conti were partners. The Worralls alleged that appellants defrauded them in connection with the franchise agreement. The litigation was soon transferred to Hawaii, where it continued until the events at issue in this appeal.

In 1984, appellants’ first local counsel, Roy Konani, withdrew from representing them. Appellants retained the law firm of Carlsmith, Wichman, Case, Mukai & Ichiki. In February, 1986, that firm withdrew because appellants were uncooperative, not returning phone calls or responding to discovery requests, and not paying their legal fees. After the Carlsmith firm withdrew, appellants were represented by Peter A. Lee and Oliver, Lee, Cuskaden & Ogawa. On April 25, 1986, a Scheduling Conference was held, and on May 13, 1986, an order prepared by Lee was entered setting the final pretrial conference for October 9, 1986, and trial for October 21, 1986.

On September 9, 1986, Lee moved to withdraw as counsel, citing failure of Ring-gold to pay expenses, legal fees, or a $10,-000 retainer as promised in his fee agreement, as well as difficulty in obtaining responses to written correspondence or telephone calls. There had been a “breakdown of communication between [Lee] and Ring-[1140]*1140gold,” which “severely and detrimentally” affected the ability of Lee to represent Ringgold. Lee’s affidavit also states that he wrote to Devine and Conti on August 29, 1986, to inform them that he planned to withdraw as counsel, that he informed Ringgold of “the urgency needed in obtaining new counsel and of the possible consequences to Ringgold if it fails to appear in any future proceedings herein.” The affidavit also states that trial had been set for the week of October 20, 1986. A certificate of service notes that on September 9, 1986, the motion and accompanying affidavit were mailed to appellants at Ringgold’s business address: 9605 Dalecrest, Houston, Texas 77080.

The accompanying Notice of Hearing on Motion to Withdraw as Counsel states on its cover: “TRIAL: Week of 10/20/86.” That notice of hearing was also sent to Ringgold’s Houston, Texas address on September 9, 1986, and informed appellants that Lee’s motion to withdraw would be heard at 2:00 p.m. on September 15, 1986. The record gives no indication that appellants responded to these events in any way. Lee’s motion to withdraw was granted at the hearing, effective September 19, 1986, and a written order to that effect was filed October 2, 1986. No one other than Lee appeared on behalf of appellants at the September 15, 1986, hearing. The court was “satisfied that actual notice of th[e] hearing had been received by [appellants].” The order also stated that no continuances would be allowed, and required that appellants appear with local counsel by October 3, 1986, “failing which appropriate sanctions, including default or dismissal, may be issued by the Court.”

The order provided that Lee notify the Worralls “of the last known addresses and telephone numbers of the [appellants] for the purpose of affecting [sic] further service of any pleadings or papers in this matter.” Lee provided the Houston business address. Lee also transmitted a copy of the Order Granting Motion to Withdraw as Counsel to Ringgold, though not until October 16, 1986.

Appellants failed to retain new counsel or otherwise appear. On October 7, 1986, counsel for the Worralls served the Wor-ralls’ pretrial statement on appellants at their Houston address by certified mail. Appellants failed to attend a pretrial conference scheduled for October 9, 1986. Also on October 9, 1986, the court issued an order confirming the trial date and procedures, which was served on all parties of record. The order specified a trial date of October 21, 1986, as had both the Motion to Withdraw sent to Ringgold on September 9, 1986, and the Scheduling Conference Order of May 13, 1986.

The pretrial conference was continued to October 14, 1986. On October 14, appellants again failed to appear, and the district court directed the Worralls to file a motion for default with a hearing set for the originally scheduled trial date, October 21, 1986 at 9:00 a.m. On October 15, 1986, the Worralls filed a motion for entry of default and default judgment, which they mailed to appellants at the Houston address on October 16, 1986.

On October 21, 1986, appellants failed to appear and the district court held a hearing on the motion for entry of default and default judgment. The court also heard evidence on the amount of damages the Worralls had sustained on their counterclaim and third-party claims. On October 31, 1986, the court granted the Worralls’ motion for an entry of default and default judgment. It assessed over $800,000 in damages and attorneys fees against appellants. A final judgment was entered on November 24, 1987. In addition, the court dismissed Ringgold’s complaint against the Worralls on October 31, 1986, nunc pro tunc as of October 21, 1986.

On November 14, 1986, the appellants filed a motion to set aside the default judgment alleging they received inadequate notice of the October 21, 1986, hearing date. On February 19, 1987, construing appellants' motion to set aside the default judgment as a Rule 59(e) motion for reconsideration, the district court denied reconsideration.

[1141]*1141 Conti’s Motion to Dismiss

After oral argument, Conti moved to have his appeal dismissed as moot. Appellants’ counsel informs the court that Conti has filed for bankruptcy and that the Bankruptcy Court for the Central District of California has discharged the default judgment of November 24, 1986 as to Con-ti. We grant Conti’s motion and dismiss his appeal.

Notice of the Default Judgment

Appellants argue that the district court erred in granting the Worralls’ motion for entry of default and default judgement because of the Worralls’ failure to comply with the notice requirements of Fed.R.Civ.P. 55(b)(2). A failure to satisfy the notice requirement specified in Rule 55(b)(2) is considered a serious procedural error that usually justifies reversal on appeal or setting aside of a default. Wilson v. Moore & Associates, Inc., 564 F.2d 366, 369 (9th Cir.1977).

Rule 55(b)(2) requires that “the party entitled to a judgment by default shall apply to the court.... If the party against whom judgment by default is sought has appeared in the action, the party (or, if appearing by representative, the party’s representative) shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application.” Id. (emphasis added).

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880 F.2d 1138, 14 Fed. R. Serv. 3d 984, 1989 U.S. App. LEXIS 10860, 1989 WL 81926, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ringgold-corp-v-worrall-ca9-1989.