L.A. Pub Ins Adjusters v. Nelson, 17 F.4th 521

Background

Nelson was hired by L.A. Public Insurance Adjusters (LAPIA) as a public adjuster and fired after 79 days amid a dispute over unpaid commissions.
LAPIA sued Nelson in Texas state court; Nelson answered and filed counterclaims for unpaid commissions, then removed the case to federal court.
LAPIA failed to file a federal answer to Nelson’s counterclaim within the Rule 81(c)(2) deadline; the district court noted the omission at a hearing.
While cross-motions for summary judgment were pending (LAPIA argued lack of licensing; Nelson moved under Rule 8(b)(6) that LAPIA’s allegations were admitted), LAPIA obtained new counsel and, 22 months after the counterclaim, moved for leave to file a late answer that asserted a new probationary-period defense.
The district court accepted the late answer, allowed LAPIA to press the probationary defense in a second summary-judgment motion, denied Nelson’s motion, and entered summary judgment for LAPIA.
The Fifth Circuit reversed: the district court abused its discretion by permitting the untimely answer because LAPIA did not show excusable neglect, the late-filed defense was prejudicial and improperly pleaded, and LAPIA’s failure to answer resulted in deemed admissions under Rule 8(b)(6).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the district court abused its discretion by allowing LAPIA to file an untimely answer under Fed. R. Civ. P. 6(b)(1)(B) (excusable neglect)?	Nelson: LAPIA’s long delay, prior court warning, and counsel’s mistake do not constitute excusable neglect; client is charged with acts of counsel.	LAPIA: prior counsel reasonably (but mistakenly) relied on Texas Rule 92, so company shouldn’t be penalized for counsel’s error.	Reversed — no excusable neglect. Attorney misunderstanding and lengthy, prejudicial delay weigh against relief; client is bound by counsel.
Whether LAPIA could assert the probationary-period defense at summary judgment without pleading it earlier (Rule 9(c) and Rule 8(b)(6) implications)?	Nelson: LAPIA failed to timely deny condition precedent; under Rule 8(b)(6) allegations are admitted if not denied and Rule 9(c) requires particularized denial of nonoccurrence of conditions precedent.	LAPIA: the defense was part of its proposed answer and should be considered once leave granted.	Reversed — LAPIA could not rely on an unpleaded denial of a condition precedent; without a timely responsive pleading, allegations are admitted and the new defense was improper.
Whether district court’s grant of summary judgment to LAPIA was proper given procedural posture?	Nelson: Summary judgment was improper because LAPIA’s answer was untimely and its probationary defense was a surprise not previously pled.	LAPIA: merits straightforward; contract plainly excludes commissions during probation, so judgment for LAPIA was appropriate.	Reversed — summary judgment for LAPIA and denial of Nelson’s partial summary judgment were erroneous because of the prior procedural errors; case remanded.

Key Cases Cited

Pioneer Inv. Servs. Co. v. Brunswick Assocs. LP, 507 U.S. 380 (1993) (sets equitable multi-factor test for "excusable neglect")
Link v. Wabash R. Co., 370 U.S. 626 (1962) (party bound by acts/omissions of chosen counsel)
Midwest Emps. Cas. Co. v. Williams, 161 F.3d 877 (5th Cir. 1998) (attorney misunderstanding of rules weighs against excusable neglect)
Halicki v. Louisiana Casino Cruises, Inc., 151 F.3d 465 (5th Cir. 1998) (similar treatment of counsel error in excusable-neglect analysis)
E.E.O.C. v. Serv. Temps, Inc., 679 F.3d 323 (5th Cir. 2012) (Rule 9(c) requires particularized denial of nonoccurrence of conditions precedent)
Solar Applications Eng’g, Inc. v. T.A. Operating Corp., 327 S.W.3d 104 (Tex. 2010) (explains condition precedent concept under Texas law)
Baldwin Cty. Welcome Ctr. v. Brown, 466 U.S. 147 (1984) (equity does not excuse lack of diligence)
Geiserman v. MacDonald, 893 F.2d 787 (5th Cir. 1990) (standard of review for Rule 6(b) extension decisions)