Sandra Boyd Williams
ATTORNEYS FOR AMICUS CURIAE
Karen B. Neiswinger
Todd J. Kaiser
Mary Ruth Feldhake
Defense Trial Counsel of Indiana
Leonard E. Eilbacher
James P. Fenton
Fort Wayne, Indiana
James D. Johnson
Evansville, Indiana ATTORNEY FOR APPELLEE
Sandra Boyd Williams
ATTORNEYS FOR AMICUS CURIAE
Karen B. Neiswinger
Johnston filed suit against Smith and Smith Surgical Group in the Marion Superior Court.
When Neiswinger returned from the courthouse after filing the suit, she found in her mail
a letter from Locke Reynolds rejecting her settlement demand.
The relevant facts are not in dispute. Smith and Smith Surgical were served with the complaint by certified mail on January 11, 1996, at their place of business. Cindy Smith, a scrub nurse, signed for the summonses. No appearance was filed on behalf of Smith. Johnston moved for a default judgment on February 20, 1996, approximately six weeks after filing the complaint. Neiswinger had made no effort at any time after sending her settlement demand to communicate with Locke Reynolds. In a sworn affidavit to the trial court, she stated that:
I certify that no pleading has been delivered to Plaintiffs or to their counsel by the Defendants or any attorney appearing for Defendants, nor to the knowledge of the undersigned has any attorney entered an appearance since the filling of this cause, nor has any attorney contacted undersigned regarding entering their appearance on behalf of Defendants in this case since the filing of this cause.
The court granted a default judgment on liability one day later and set a hearing on damages
for March 22, 1996, thirty days later. Judgment was entered on the day of the damages
hearing in the amount of $750,000 and costs of $2,407.See footnote
The judgment was served on Smith,
but not Locke Reynolds.
Six days after the $750,000 judgment was entered, Locke Reynolds entered an
appearance and filed a notice of intent to petition to set aside the default judgment. Smith
moved to set aside the default judgment under Trial Rule 60(B)(1) for excusable neglect
based on a breakdown in communication and under Trial Rule 60(B)(3) for misconduct
by Johnston's attorney. Smith contended that Neiswinger was obligated to provide a copy
of the complaint and subsequent papers to Smith's attorneys when she knew Smith was
represented by counsel. Smith also alleged a meritorious defense as required in seeking to
set aside a default judgment. The trial court, relying on Bonaventura v. Leach, 670 N.E.2d
123 (Ind. Ct. App. 1996), denied Smith's motion to set aside. Smith appealed the denial of
his motion to set aside the judgment, the Court of Appeals affirmed, and we granted Smith's
petition to transfer.
We agree that the trial court's ruling was consistent with applicable precedent, including the case relied on by the trial court in its order. We also agree that the trial court was within its discretion to conclude that Smith's failure to read his mail is not excusable neglect under Rule 60(B)(1). However, we conclude that the overriding considerations of confidence in our judicial system and the interest of resolving disputes on their merits preclude an attorney from inviting a default judgment without notice to an opposing attorney where the opposing party has advised the attorney in writing of the representation in the matter. Accordingly, we hold that a default judgment obtained without communication to the defaulted party's attorney must be set aside where it is clear that the party obtaining the default knew of the attorney's representation of the defaulted party in that matter.
court entered the default judgment. Because the office manager was away, the scrub nurse,
who did not normally receive mail, placed the summonses on Smith's desk. Smith did not
see the summonses until after the default judgment was entered.
This is neglect, but not excusable neglect as the term appears in Rule 60(B)(1). Smith was aware that the person who normally handled legal mail was no longer doing that job. Nonetheless, Smith ignored his mail, including the summonses and motion for default. We do not agree that the failure of Smith to read his mail amounts to a breakdown in communication sufficient to qualify as excusable neglect under Trial Rule 60(B)(1). Smith's case is distinguishable from our previous decisions finding excusable neglect for a breakdown in communication. In those cases the defendants did all that they were required to do but subsequent misunderstandings as to the assignments given to agents of the defendants resulted in the failure to appear. In Whittaker, the insurance adjuster believed she had employed an attorney to defend the insured but the attorney thought he was to institute a declaratory judgment against the insured. 584 N.E.2d at 1086; see also Boles v. Weidner, 449 N.E.2d 288, 290 (Ind. 1983) (breakdown in communication between the independent agent and the insurance agency). Here, Smith knew his mail was unattended and accepted the risk of adverse consequences. The judicial system simply cannot allow its processes to be stymied by simple inattention. There may be cases where a trial court will find excusable neglect based on similar omissions due to external pressures on a sympathetic defendant, but it was not an abuse of the trial court's discretion to refuse to do so here.
Yet after the panel proceeding Neiswinger sent a settlement demand to Locke
Reynolds. It is obvious that she assumed, consistent with normal practice, that Locke
Reynolds continued to represent Smith after panel proceedings ended. Certainly there was
no indication to the contrary. This assumption was confirmed in writing by a letter from
Locke Reynolds rejecting the settlement demand. Apparently this letter arrived the same day
suit was filed. In any event, it confirmed Smith's continued representation by Locke
Reynolds after the panel proceedings. Nonetheless, when Neiswinger did not receive a
response to the complaint, she did not place a call to the attorneys she knew represented
Smith. Neiswinger's conduct is consistent with Trial Rules 4 and 5 but, as explained below,
is unacceptable under the Rules of Professional Conduct. To the extent that Bonaventura v.
Leach, 670 N.E.2d 123 (Ind. Ct. App. 1996), can be read to permit this conduct by an
attorney, it is disapproved.See footnote
Johnston argues that the Rules of Professional Conduct do not impose a duty to provide a copy of the complaint or the motion for default to counsel who have not appeared,
and therefore his attorney engaged in no misconduct.See footnote
This Court has a particular
constitutional responsibility with respect to the supervision of the practice of law. Fire Ins.
Exchange v. Bell by Bell, 643 N.E.2d 310, 312 (Ind. 1994). Accordingly, although this is
not a disciplinary proceeding, we look to the Rules of Professional Conduct for guidance in
evaluating a lawyer's responsibilities. See id.
The Rules are guidelines for lawyers and do not spell out every duty a lawyer owes to clients, the court, other members of the bar and the public. The preamble to the Rules is clear that [t]he Rules, do not, however, exhaust the moral and ethical considerations that should inform a lawyer, for no worthwhile human activity can be completely defined by legal rules. Thus lawyers' duties are found not only in the specific rules of conduct and rules of procedure, but also in courtesy, common sense and the constraints of our judicial system. As an officer of the Court, every lawyer must avoid compromising the integrity of his or her own reputation and that of the legal process itself. These considerations alone demand that Neiswinger take the relatively simple step of placing a phone call to Locke Reynolds before seeking a default judgment.
In addition, Rule 8.4(d) explicitly states that it is professional misconduct for a lawyer to engage in conduct that is prejudicial to the administration of justice. The administration of justice requires that parties and their known lawyers be given notice of a lawsuit prior to
seeking a default judgment. A default judgment is appropriate only where a party has not
appeared in person or by counsel and, if there is a lawyer known to represent the opposing
party in the matter, counsel had made reasonable effort to contact that lawyer.See footnote
Neiswinger filed an affidavit in support of the motion for default which stated that no attorney contacted [her] regarding entering their appearance on behalf of Defendants in the cause since the filing of this cause. Although the letter from Smith's attorneys rejecting settlement did not specifically address their appearance in the suit, it clearly indicated that they still represented Smith's interests in the matter. The representation that Neiswinger had not been contacted by Smith's lawyers regarding entering their appearance is literally true. However, it would be easy for a busy trial judge to take this as a statement that Neiswinger had not been contacted at all by Smith's attorneys, not that they had contacted her regarding settlement, but not their appearance. This statement may not be a direct misrepresentation, but it certainly creates a potential for misperception on the part of the trial court, and to that extent was also prejudicial to the administration of justice.
Neiswinger argues that she had a duty to her client to seek the default judgment after
Smith failed to respond. Whether or not she had duty to file for default as soon as the time
limit expired, that duty did not preclude her from notifying Smith's attorneys of the suit at
the time of filing or when she moved for default. Any lawyer's duty to advance her client's
interest is circumscribed by the bounds of the law and her ethical obligations.
Finally, Neiswinger argues that if a claimant's attorney is required to provide notice to defendant's counsel it will make it nearly impossible to obtain a default judgment health care providers. We hope so. A default judgment against a health care provider or any other party is an extreme remedy and is available only where that party fails to defend or prosecute a suit. It is not a trap to be set by counsel to catch unsuspecting litigants. It may be too strong, as the Court of Appeals put it, to say that Neiswinger's failure to provide notice of the pending lawsuit and motion for default to Locke Reynolds smack[s] of chicanery and unfair advantage. McGee v. Reynolds, 618 N.E.2d 40, 41 (Ind. Ct. App. 1993). Nonetheless it is at least unacceptable, and we reject the gaming view of the legal system represented by Neiswinger's prediction.
For these reasons, we conclude that the default judgment was obtained by actions that were prejudicial to the administration of justice and therefore constitute misconduct warranting relief under Trial Rule 60(B)(3).
583 N.E.2d 161 (Ind. Ct. App. 1991). In the context of this case, Smith must present
evidence that, if credited, demonstrates that a different result would be reached if the case
were retried on the merits and that it is unjust to allow the default to stand. See Welchel, 629
N.E.2d at 903; Chelovich v. Ruff & Silvian Agency, 551 N.E.2d 890, 892 (Ind. Ct. App.
1990). The trial court made no finding or comment with respect to Smith's proffered
Smith offered the affidavit of a general surgeon, Dr. Larry Micon, in support of his meritorious defense. Micon's affidavit states that Smith's actions were within the standard of care and that none of Smith's decisions about Mrs. Johnston's care were a factor in the damages Johnston seeks to recover. [R. 159-61] This testimony is in direct conflict with the findings of the medical review panel.
A prima facie showing is one that will prevail until contradicted and overcome by other evidence. Black's Law Dictionary 1189 (6th ed. 1990). Because, if credited, Micon's testimony would defeat Johnston's claim, Micon's affidavit raises a prima facie showing of a meritorious defense. This conclusion is consistent with other decisions finding a sufficient showing of a meritorious defense. See Welchel, 629 N.E.2d at 903 (affidavit stating that bill from plaintiff contained duplicate billing, inappropriate billing and excessive billing was a sufficient showing of a meritorious defense in a suit to collect the bill); Van Keppel, 583 N.E.2d at 164 (affirmative defense of absence of a contractual relationship supported by contract that did not, on its face, disclose a contractual relationship, was a sufficient showing of a meritorious defense to action for non-payment of fees); Sanders v.
Kerwin, 413 N.E.2d 668, 671 (Ind. Ct. App. 1980) (allegation that defendant received bill
for $350 and paid $75 is a sufficient showing of a meritorious defense to claim for $475).
Micon's testimony also states that Smith's actions were not a factor in the damages Johnston seeks. This conclusion, if credited, would affect the significant damage award of $750,000 that was entered without an opportunity for Smith to be heard on the amount of damages. The medical review panel expressed no opinion as to the appropriate amount of damages. In sum, Smith has provided a prima facie showing of a meritorious defense.
SHEPARD, C.J., and DICKSON, SULLIVAN and SELBY, JJ., concur.
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