UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
OHIO HOSPITAL ASSOCIATION,
Plaintiff,
v.
H*QUOTIENT, INC., et al.,
Defendants.
Case No. 02: 01-CV-1245
JUDGE GREGORY L. FROST
Magistrate Judge Abel
OPINION AND ORDER
This matter is before the Court on Defendants’ Motion For Relief from Judgments and,
Alternatively, to Alter or Amend the Judgments (Doc. # 46);
Plaintiff’s Memorandum in Opposition to Defendants’ Motion For Relief from Judgments and,
Alternatively, to Alter or Amend the Judgments (Doc. # 51);
and, Defendants’ Reply to Memorandum Contra Motion for Relief From Judgment (Doc. # 52).
For the following reasons Defendants’ Motion (doc. # 46) is DENIED.
As a preliminary matter, Plaintiff’s Motion to Strike the Affidavit Filed with Defendants’
Memorandum In Support of Motion for Relief From Judgments, or, In the Alternative, for Leave to File Sur-Reply Memorandum Instanter (Doc. # 57) is GRANTED as to the motion to strike
Mr. Cohn’s second affidavit and Defendants’ Motion to Strike Plaintiff’s Sur-Reply (Doc. # 57) is therefore DENIED AS MOOT.
I. NATURE OF PROCEEDINGS
Defendants H*Quotient, Inc. and Douglas A. Cohn (“Defendants”) move the Court to set
aside and vacate the judgments rendered against the Defendants July 1, 2003 and August 27, 2003. In the alternative, Defendants move the Court to alter or amend these judgments.
Defendants argue that the judgments resulted from the egregious conduct of attorney Paul
Goodman (“Mr. Goodman”). According to Defendants, Mr. Goodman’s behavior amounted to an “extraordinary circumstance” justifying relief under Fed. R. Civ. P. 60(b)(6).
Plaintiff opposes Defendants’ motion, arguing that Defendants’ actions which led to the
default judgment were done willfully and in an attempt to thwart judicial proceedings.
II. STANDARD OF REVIEW
For good cause shown the court may set aside an entry of default and, if a judgment by
default has been entered, may likewise set it aside in accordance with Rule 60(b)." Fed. R. Civ. P. 55(c).
Fed.R.Civ.P. 60(b), provides, in relevant part: (b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud, Etc. On motion and upon such terms as are just, the court may relieve a party or a party's legal representative from a final judgment, order, or proceeding for the following reasons:
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence which by due diligence could not have
been discovered in time to move for a new trial under Rule 59(b);
(3) fraud ...misrepresentation, or other misconduct of an adverse party;
(4) the judgment is void;
(5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or
(6) any other reason justifying relief from the operation of the judgment.
Fed. R. Civ. P. 60(b); Sullivan v. Coca-Cola Bottling Co., 2003 WL 1338214, *2 (S.D. Ohio March 3, 2003).
Defendants assert that there are exceptional circumstances in this case justifying relief
under Rule 60(b)(6). With such a claim, the Court must consider: (1) whether the plaintiff will be prejudiced; (2) whether the defendant has a meritorious defense; and, (3) whether culpable conduct of the defendant led to the default. See United Coin Meter Co., Inc. v. Seaboard
1 Defendants argue that the Court Order allowing Mr. Murphy to withdraw as Defendants’
counsel on July 3, 2002, did not comply with Local Rule 83.5, and effectively left Defendants without counsel. Mr. Murphy’s motion to withdraw as counsel (doc. # 16) was served upon Mr. Goodman and Mr. Cohn on June 25, 2002. The Court allowed Mr. Murphy to withdraw on the basis that Mr. Goodman was corporate counsel for the Defendants and would continue to represent it in this litigation. Mr. Murphy’s motion and the Court’s Order granting the motion (doc. # 17) comply with Local Rule 83.5(e)(2).
Coastline Railroad, 705 F.2d 839, 846 (6th Cir.1983); Shepard Claims Service, Inc. v. Witham Darrah & Assoc., 796 F.2d 190, 193 (6th Cir.1986).
The Sixth Circuit has found that an attorney’s gross negligence may provide his client
relief under Rule 60(b)(6). See Valvoline Instant Oil Change Franchising, Inc. v. Autocare Associates, Inc., 173 F.3d 857 (Table), 1999 WL *98590 (6th Cir. 1999). However, this is an exception to the general rule that a client should be bound by the omissions of his or her duly selected agent. See Pioneer Investment Services Co. v. Brunswick Associates LimitedPartnership, 507 U.S. 380 (1993); Link v. Wabash R. Co., 370 U.S. 626, 633-34 (1962) (noting that a client voluntarily chooses his or her counsel and “cannot avoid the consequences of the acts or omissions of this freely selected agent [because] [a]ny other notion would be wholly inconsistent with our system of representative litigation...”). The Sixth Circuit has explained that when deciding whether an attorney’s gross negligence can provide defendants a basis for relief from judgment under Rule 60(b)(6), the court must focus on the neglect of defendants themselves as well as on the neglect of their counsel. See Valvoline, 1999 WL 98590, * 4 (citing Pioneer Investment Serv. Co., 507 U.S. at 397.)
Thus, in the instant case, the Court must determine whether Mr. Goodman’s conduct is an
exceptional circumstance as could afford Defendants relief under Rule 60(b)(6) and, if so, then whether the defendants have met the criteria set forth in United Coin Meter.1
III. DISCUSSION
Defendants aver that Mr. Goodman’s actions were grossly negligent, that Mr. Goodman
intentionally misled Defendants, and that Defendants themselves were not negligent. Mr.
Goodman’s negligence is undisputed and well-documented throughout the case file. Whether Defendants were aware of Mr. Goodman’s behavior remains unclear. Mr. Cohn has submitted an affidavit, swearing that he was unaware of Mr. Goodman’s conduct as described by the Court in its entries filed from June 2002 through July 2003. (Cohn September 5, 2003 Aff.) Furthermore, Mr. Cohn claims not to have known that Mr. Goodman was not admitted to practice before this Court and that he discovered this, along with the fact that Defendants had been without local counsel since July 3, 2002, on August 28, 2003. (Cohn September 5, 2003 Aff.) Mr. Cohn also submits that Mr. Goodman never informed him that a default judgment was entered against Defendants and that he was unaware of the damages hearing held on August 18, 2003. Id.
Mr. Goodman’s affidavit affirms that he “always told Douglas Cohn that matters with
respect to the case were being properly handled.” (Goodman September 4, 2003 Aff.) Mr.
Goodman further states that he was responsible for retaining local counsel in Ohio for this case, that he was paid a retainer by Mr. Cohn for purposes of, among other things, retaining local counsel, and that Mr. Goodman did not inform the Defendants that no local counsel had been substituted after Mr. Murphy withdrew on July 3, 2002. Id. Finally, Mr. Goodman submits that he did not disclose to Mr. Cohn the “significance of the default judgment entered on July 1, 2003 or defendants’ right to appear and testify at the damages’ hearing.” (Goodman September 5, 2003 Aff).
A. Local Counsel
Mr. Goodman’s affidavit supports Mr. Cohn’s contention that Mr. Cohn had no idea that
Mr. Goodman was not able to practice in Ohio and that Mr. Cohn believed he was represented by local counsel at all times. However, these statements are undermined by Mr. Goodman’s October 20, 2003 deposition testimony. There, Mr. Goodman testified that he discussed the need to hire Ohio counsel with Mr. Cohn. (Goodman Dep. at 33, Lines 16-20.) In fact, when asked if Mr. Goodman informed Mr. Cohn that he was not admitted to practice law in Ohio, Mr. Goodman responded: “I don’t recall that specific conversation. I believe it was known but I don’t know if I had a specific conversation.” (Goodman Dep. at 33, Lines 23-25.) Further, Mr. Goodman testified that Mr. Cohn provided Mr. Goodman with shares of H*Quotient stock, and that “there was an understanding” that as Mr. Goodman sold some of the stock, the cash could be used to then pay Ohio counsel. (Goodman Dep. at 36, Lines 9-12.) These facts lead the Court to
conclude that Mr. Cohn was aware of the need for counsel in Ohio; indeed he admits to paying Mr. Goodman a large retainer, in part, to obtain local counsel in Ohio for this case. (Cohn September 5, 2003 Aff. ¶ 3).
Additionally, a copy of Mr. Murphy’s June 26, 2002 Motion to Withdraw From
Representation of the Defendant (Doc. # 16) was sent via certified mail, return receipt requested to “Douglas A. Cohn, H*Quotient, Inc., 8150 Leesburg Pike, Suite 503, Vienna, VA 22182."
Thus, Mr. Cohn had, at the very least, constructive knowledge that Mr. Murphy moved the Court to withdraw as Mr. Cohn’s attorney. Despite these facts, Mr. Cohn asks this Court to find that from the time that Mr. Murphy withdrew as counsel until August 28, 2003 (a period of well over one year) he believed that Mr. Goodman was admitted to practice before this Court and that Mr. Goodman had secured local counsel “to preform administrative functions.” (Cohn September 5, 2003 Aff. ¶ 9.) The facts simply do not support such a conclusion.
At the very least, the facts show that Mr. Cohn had cause to inquire as to local counsel
and what would become of the situation once Mr. Murphy withdrew. To do nothing for well over one year is negligent. While Mr. Goodman was grossly negligent in this instance, the facts show that Mr. Cohn was not reasonably diligent in his own case.
B. Cohn’s notice of events leading to default, the Order of Default Judgment and the
Damages Hearing
Mr. Cohn contends that he spoke with Mr. Goodman throughout the case and Mr.
Goodman always assured Mr. Cohn that all case matters were under control. (Cohn September
5, 2003 Aff. ¶ 4.) Mr. Goodman’s affidavit repeats this: “I always told Douglas Cohn that
matters with respect to the case were being properly handled.” (Goodman Aff. ¶ 1). These statements are called into doubt by Mr. Goodman’s deposition testimony.
During the deposition Mr. Goodman was asked whether, at the time Plaintiff filed the
September 12, 2002 motion to compel the production of documents, Mr. Goodman told Mr. Cohn that; “[plaintiff] were asking for documents and we [plaintiff] were complaining to the court about not getting documents from H*Quotient.” Mr. Goodman responded “Yes.”
(Goodman Dep. at 41, Lines 8-14.) Additionally, when Mr. Goodman was asked if he informed Mr. Cohn that the Court issued an Order granting plaintiff’s motion to compel documents on October 31, 2002, Mr. Goodman stated: “He [Mr. Cohn] was aware of it.” (Goodman Dep. At 43, Lines 16-17).
Mr. Cohn states that he was never informed by attorney Paul Goodman that a default judgment was entered against defendants on July 1, 2003. (Cohn September 5, 2003 Aff. ¶ 2.)
Mr. Cohn avers that Mr. Goodman “downplayed the court’s decision filed July 1, 2003, a copy of which he never provided me.” Id. ¶ 4. Mr. Goodman’s affidavit states; “I [Mr. Goodman] did not disclose to Mr. Cohn the significance of the default judgment entered on July 1, 2003...” (Goodman Aff. ¶ 5).
Again, Mr. Goodman’s deposition testimony contradicts these statements. Mr. Goodman
was asked “[a]nd did you tell him [Mr. Cohn] that a default judgment had been granted?”
(Goodman Dep. at 89, 24-25.) Mr. Goodman answered “He was aware.” Id. at 90, Line 1.
Later, Mr. Goodman testified that he told Mr. Cohen “[j]ust generally that there was an order of default or there was a default or the court found the default.” (Goodman Dep. at 94, Lines 6-8).
Similarly, Mr. Cohn submits that he was “unaware that there was a hearing for damages
held on August 18, 2003.” (Cohn Sept. 5, 2003 Aff.) However, Mr. Goodman testified that:
“He [Mr. Cohn] was aware that a damages hearing was set” (Goodman Dep. at 100, Lines 11-12) and that Mr. Cohn was made aware of the damages hearing at a time prior to the date of the damages hearing. Id. at Lines 19-20.
Again, Mr. Goodman’s conduct throughout his representation of Defendants was grossly
negligent. His behavior evidences a complete and utter lack of respect for both this Court and the legal profession. Mr. Goodman’s actions, however, cannot be considered grounds for relief pursuant to Rule 60(b)(6) due to Mr. Cohn’s own negligence. See Valvoline, supra; see also Inryco, Inc. v. Metropolitan Engineering Co., Inc., 708 F.2d 1225, 1234 (7th Cir. 1983) (finding the defendants were not diligent in pursuing their case and therefore would not prevail even if gross negligence qualified as another Rule 60(b) ground for relief, because courts allowing such relief uniformly require a diligent, conscientious client.)
All evidence before the Court supports an inference that Mr. Cohn was not without fault.
Mr. Cohn states that he had no idea that the Court had issued various orders compelling
defendants’ production of documents from October 31, 2002 through April 11, 2003.
Additionally, Mr. Cohn swears that he had no knowledge of Mr. Goodman’s actions or inactions in this case. Mr. Cohn further states that he was unaware that a default judgment was entered in the case against both himself and the corporation for which he is Chief Executive Officer, nor that a damages hearing was held after the default entry. Finally, and perhaps most disturbing, is Mr. Cohn’s statement that he had no idea, from the time that Mr. Goodman represented Defendants in the Franklin County Court of Common Pleas case filed December 3, 2001, until the time August 28, 2003, that Mr. Goodman was not licensed to practice in this Court. In fact, Mr. Cohn claims that until August 28, 2003 he was unaware of the July 1, 2003 Court Order barring Mr. Goodman from serving as counsel on this case.
The above facts, established by Mr. Cohn’s affidavit, can only be explained as Mr. Cohn’s "inadvertence, indifference, or careless disregard of consequences." Klapprott v. United States, 335 U.S. 601, 613, (1949). The facts of Mr. Cohn’s case are analogous to factual situations where courts have found that a defaulting party willfully chose not to conduct its litigation responsibly.
For example in Inryco, Inc. v. Metropolitan Engineering Co., Inc., 708 F.2d 1225 (7th
Cir. 1983), the defendants had virtually no contact with their lawyer for more than a year. In the twenty months between filing the complaint and the default judgment, the defendants contacted their lawyer fewer than a half a dozen times, and at no time knew the precise procedural status of the case. There, the court determined that the defendants' neglect precluded Rule 60(b)(6) relief.
Id. See S.E.C. v. McNulty, 137 F.3d 732, 740 (2nd Cir.), cert. denied sub nom, Shanklin v.
S.E.C., 525 U.S. 931 (1998) (affirming a finding that excusable neglect had not been shown when a default was granted due to an attorney's inaction, but the defaulting party made no attempt to contact his attorney over an 11 month period); Harmon v. CSX Transportation, Inc., 110 F.3d 364, 368-69 (6th Cir.), cert. denied 522 U.S. 868 (1997) (dismissal warranted, despite no consideration of lesser sanctions, where attorney's conduct was "contumacious"); Florida Physician's Ins. Co., Inc. v. Ehlers, 8 F.3d 780, 784 (11th Cir. 1993) (finding plaintiff made extensive efforts to notify defendant and finding that defendant had a duty to act with some diligence to ensure that his attorney was protecting his interests).
Perhaps more telling is the stark contrast between Mr. Cohn’s case and cases where
courts have granted Rule 60(b)(6) relief based on an attorney’s gross negligence. For instance, in Sullivan, supra, this court set aside a default judgment based upon the undisputed facts that showed the negligence of counsel and the diligence of the party. Facts before the court established that the Sullivan plaintiff made numerous, unreturned, phone calls to her attorney and that counsel failed to appear for his client’s pretrial conference. Sullivan, 2003 WL 1338214, *1.
Thereafter, the plaintiff filed a notice with the court alleging that counsel had failed to represent her. Additionally, the Sullivan plaintiff filed an ethics complaint against the attorney. Id. The Court granted the plaintiff’s Rule 60(b)(6) request, stating: “This case...presents the extraordinary circumstance of a client, through no fault of her own, suffering the dismissal of an action because of the egregious negligence of her counsel.” Sullivan, supra 2003 WL 1338214, *4. See also U.S. v. Cirami, 563 F.2d 26, 33 -34 (2nd Cir. 1977) (granting Rule 60(b)(6) motion where client was frequently inquiring about the status of his lawsuit and was met on each occasion by assurances from his attorney, relayed by his accountant, that the matter was in hand.
Only after a judgment in default had been entered against them did they discover that their attorney had not, in fact, been representing them.) Unlike the Sullivan plaintiff, Mr. Cohn failed to act in a diligent manner; Defendants’ request for Rule 60(b)(6) relief is not well-taken.
Application of the United Coin Meter criteria supports this conclusion. As the proceeding discussion shows, Defendant Cohen willfully chose to disregard the litigation in which he was a party. According to Cohen, for over one year he had absolutely no idea what Mr. Goodman was doing in his case, except that Mr. Goodman “assured him that matters were under control.” (Cohn September 5, 2003 Aff.) Conversely, Mr. Goodman’s deposition testimony alleges that Mr. Cohn “was aware” of the various orders compelling discovery, the default judgment entry against defendants, and the hearing on damages. Regardless of what Mr. Cohen actually knew, it is clear that Mr. Cohn disregarded his responsibilities to opposing counsel and to the Court. Mr. Cohen’s situation is not an unusual and extreme situation where principals of equity mandate relief. See Olle v. Henry & Wright Corp., 910 F. 2d 357, 365 (6th Cir. 1990); see also Valvoline, supra at * 3.
Furthermore, Mr. Cohn’s motion to alter or amend the judgments is not well-taken. Mr.
Cohn and H*Quotient Inc. are both Named Defendants in this action. Each and every pleading in this case has been filed against both Defendants Mr. Cohn and H*Quotient, Inc. Each and every order and opinion issued by the Court was issued against both Defendants Cohn and H*Quotient, Inc. Mr. Cohn argues that the discovery dispute, which served as the basis for the default judgment entry against defendants, was directed only at H*Quotient, Inc. Mr. Cohn, however, is the Chief Executive Officer of H*Quotient, Inc. As a corporation, H*Quotient, Inc. can only act through its agents, employees, and officers. See A & B-Abell Elevator Co. v. Columbus/Cent.
Ohio Bldg. & Const., 73 Ohio St.3d 1 (1995).
Thus, Mr. Cohn is responsible for the corporation’s action, or inaction. Defendants’ attorney exemplified this concept by testifying that he received H*Quotient’s files responsive to Plaintiff’s discovery request from Mr. Cohn. (Goodman Dep. at 81, 2.) Mr. Cohn was very much a part of the discovery failure that lead to the Court’s default judgment.
CONCLUSION
For the above reasons, Defendants Motion for Relief From Judgments And,
Alternatively, to Alter or Amend the Judgments (Doc. # 46) is DENIED.
IT IS SO ORDERED.
/s/ Gregory L. Frost
Gregory L. Frost
United States District Judge
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