Charles E. BUCK, et al., Plaintiffs-Appellants, v. U.S. DEPARTMENT OF AGRICULTURE, FARMERS HOME ADMINISTRATION, et al., Defendants-Appellees.
No. 91-3597.
United States Court of Appeals, Sixth Circuit.
Argued Jan. 31, 1992. Decided April 6, 1992.
960 F.2d 603
Albert Ritcher, Office of the U.S. Atty., O. Charles Hosterman, Columbus, Ohio (argued and briefed), for defendants-appellees.
Before: KENNEDY and GUY, Circuit Judges; and LIVELY, Senior Circuit Judge.
LIVELY, Senior Circuit Judge.
The plaintiff Charles E. Buck1 appeals from an order of the district court denying his motion pursuant to
I.
A.
From 1980 through 1984 Charles and Carol Buck, husband and wife, applied for and received operating loans from the Farmers Home Administration (FmHA), secured by an interest in “crops, livestock, supplies, other farm products, and farm and other equipment” and real estate. FmHA perfected this interest by filing a number of financing statements in Champaign and Logan Counties, Ohio. All but one of the financing statements were later released by FmHA as the Bucks paid off portions of their debt. Because the remaining financing statement was due to lapse under Ohio law on September 5, 1985, FmHA sent the Bucks a “Request for Continuation Statement Filing Fee” on August 14, 1985. The Bucks never remitted the $5.00 filing fee, and FmHA subsequently debited the Bucks’ FmHA account $5.00 on December 31, 1985.
The $5.00 was apparently intended to cover the filing cost of a continuation statement in Logan County, which was never filed. After the Bucks complained, FmHA promised to remove the charge from their account. When FmHA officials realized the 1980 financing statement had lapsed, they filed a new financing statement in Champaign County on September 2, 1986, which provided:
This financing statement is signed by secured party only and covers the collateral in which perfected security interest was previously secured by financing statement # 28597 which lapsed on 9/5/85. This collateral is listed on a Security Agreement signed by borrower on May 16, 1984 available at the Bellefontaine FmHA office.
In their original complaint, the plaintiffs charged that during the year in which the financing statement was lapsed “[t]hroughout its correspondence and implicit [in] its dealings” with the Bucks, FmHA represented that it had a perfected security interest in the collateral. They contended that the 1986 financing statement was void because it was filed under the “guise of a Continuation Statement” without notice to the Bucks or a request for their signatures, thereby constituting fraud and misrepresentation. They also charged FmHA with violations of
The original complaint was filed in an Ohio state court in August 1989 and was removed to the district court in September. The complaint named the United States Department of Agriculture, FmHA, and two FmHA officials in Ohio as defendants. The complaint sought a declaratory judgment that the 1980 financing statement had lapsed on August 25, 1985 and that the financing statement filed on September 2, 1986 was void, and an injunction to prevent the defendants from enforcing or attempting to enforce the lapsed financing statement.
Following removal, the district court permitted the plaintiffs to file an amended complaint. The amended complaint repeated the claim of the original complaint as Count I. There followed seventeen additional counts containing a litany of complaints concerning alleged actions and inactions of the defendants that caused the Bucks to suffer financial losses. In addition to the declaratory and injunctive relief prayed for in the original complaint, in the amended complaint the Bucks requested that the court declare void all loans affected by FmHA‘s allegedly unlawful acts and sought a refund of all amounts paid on the affected loans. Finally the Bucks sought approximately $10,000,000.00 (an aggregate of the itemized damages for each count of the amended complaint) in damages, plus attorney fees and court costs.
The magistrate judge to whom the case was referred for pretrial proceedings held a status conference on November 8, 1990.
B.
Both parties filed the required discovery documents on November 26, and the defendants also filed an answer on that date. In addition to responding to 141 paragraphs of the amended complaint, the defendants asked that it be dismissed for failure to state a claim, lack of subject matter jurisdiction, immunity of the FmHA, failure to exhaust administrative remedies, and the bar of the applicable statute of limitations.
The plaintiffs’ attorney contacted counsel for the defendants and asked for an extension of time to file the required jurisdictional statement, and the defendants’ attorney agreed to a ten-day extension. Plaintiffs’ attorney failed to file a motion or any entry regarding this extension, and he did not file the jurisdictional statement within the extended time. On November 28, 1990, the defendants filed a motion to dismiss the action or, in the alternative, to strike the amended complaint. On December 4 the magistrate ordered the plaintiffs to show cause within ten days why the action should not be dismissed for the plaintiffs’ failure to comply with the order to file the previously ordered statement of the court‘s jurisdiction. When the plaintiffs failed to respond to the show cause order, the district judge signed and entered an order of dismissal. The judgment dismissing the action was filed on January 7, 1991. Seven weeks later, on February 26, 1991, the plaintiffs filed a motion for relief from judgment relying on “excusable neglect” under
The plaintiffs’ attorney filed an affidavit with the motion. He acknowledged that he was aware of the deadline for the jurisdictional statement, but claimed that he was unable to file an entry regarding the ten-day extension because of a sudden, severe illness. He stated that he was precluded from working “under medical order” until January 5, 1991. The affidavit also stated that the affiant had moved his office, and had never received a copy of the dismissal, but had learned of it from the defendants’ attorney. The affiant claimed to have informed the court of his change of address. In the motion, the attorney stated that other affidavits would be filed, but no additional affidavits appeared.
C.
District Judge Graham denied the Bucks’ motion for relief and denied their request for an oral hearing. In his order Judge Graham found that the Bucks’ argument that their counsel‘s failure to comply with the magistrate‘s orders was the result of excusable neglect or inadvertence was unpersuasive because: counsel was present at the status conference when the magistrate ordered him to submit a short jurisdictional statement; counsel never filed a motion with the court stating that he was ill and that he needed an extension of time; counsel never filed written notice informing the clerk of his address change; and the defendants’ service of their “Motion to Dismiss/Strike Pleading” on the plaintiffs’ attorney at his proper business address provided adequate notice that the Bucks’ case was in jeopardy. The district court added that counsel‘s filing of the “Plaintiffs’ Statement of Deposition Discovery Upon Oral Examination” eleven days after the jurisdictional statement was due indicated that he was not completely incapacitated and observed: “[i]f he was going to prepare and file a document, it should have been the jurisdictional statement, not a discovery document.” The court noted that counsel had still not filed the required jurisdictional statement as of May 29, 1991,
The district court then applied the three-part test adopted by this court in United Coin Meter v. Seaboard Coastline Railroad, 705 F.2d 839, 845 (6th Cir.1983) to determine whether granting the plaintiffs’
II.
The appellant, Charles E. Buck, argues that the district court erred in holding that his attorney‘s sudden illness did not satisfy the “excusable neglect” provision of
Actually, the amended complaint, filed following removal, contained new claims that raised subject matter jurisdiction questions that were quite different from any raised by the original complaint. The plaintiffs’ attorney stated in his motion that an amended complaint was necessary because the original complaint stated a cause of action under state law only. The magistrate‘s order requiring a
The defendants maintain that the district court acted well within its discretion in denying the plaintiffs’ motion for relief. Echoing the reasons given by the district court, they argue that the plaintiffs’ counsel informed neither the court nor opposing counsel of the duration of the “sudden, serious” illness and never notified the court in writing of his change of business address.
The motion to dismiss was not filed until 14 days after the jurisdictional statement was due. The plaintiffs’ attorney admitted receiving a copy of the motion. The order dismissing the case was entered on January 7, 1991, five weeks after entry of the show cause order. When the plaintiffs’ attorney indicated to counsel for the defendants on January 10, 1991, that he had not received a copy of the order of dismissal, the defendants’ counsel “faxed” a copy to him. Nevertheless, the plaintiffs’ counsel waited another seven weeks before filing the
The defendants acknowledge that the plaintiffs’ counsel‘s wife informed their attorney by telephone on December 11, 1990, that her husband was ill. On this basis, counsel for the defendants agreed to postpone taking the depositions of the plaintiffs, which were scheduled for the following day. Neither the plaintiffs’ attorney nor anyone acting for him ever advised opposing counsel or the court of the nature or extent of the lawyer‘s illness. At no time did the plaintiffs’ attorney file a physician‘s statement or hospital record with the court. And, as has been noted, during the very period in which the jurisdictional statement was due, counsel filed a discovery statement, negating any claim that he was too ill to comply with the magistrate‘s order.
Buck responds to these arguments by contending that he would have been able to satisfy the court that this neglect was excusable rather than culpable if he had been granted an oral hearing on the motion for relief. As to the fact that he filed the discovery document on November 26, eleven days after the jurisdictional statement was due, counsel states that an associate filed that document, but was not sufficiently acquainted with the entire case to prepare the statement of subject matter jurisdiction.
III.
A.
The district court applied the three-part test adopted by the court in United Coin Meter v. Seaboard Coastline Railroad, 705 F.2d 839 (6th Cir.1983), in determining to deny the
- whether the plaintiff will be prejudiced;
- whether the defendant has a meritorious defense; and
- whether culpable conduct of the defendant led to the default.
Id. at 845. The district court applied these tests in the present case upon concluding that a
There are differences in the two situations, however, and the United Coin construct is not followed precisely in cases of dismissal for failure to prosecute. A default occurs at the very beginning of a case. Because courts favor trials on the merits, id. at 846, special care is taken to make certain that a party with a meritorious defense is not deprived of an adjudication because of counsel‘s failure to file a timely response. Without an inquiry into the merits of any available defense, the court would run the risk of cutting short an action that in all justice should be permitted to proceed in the absence of flagrantly egregious conduct by counsel. In a case such as the present one, however, the plaintiff has set forth his claims in a pleading from which the trial court may determine on the face of the record whether the plaintiff has presented a meritorious claim for relief. In a typical case of dismissal for want of prosecution, the case has proceeded beyond the initial pleading stage and the issues have been joined, and there is less risk of dismissal being based upon an unstated meritorious claim or defense. Thus, in such cases we do not make a separate inquiry as to the existence of a meritorious claim.
Clearly analogous to the present case are those in which a party fails to comply with a district court‘s order requiring particular steps to be taken within a stated time. In Carter v. City of Memphis, 636 F.2d 159, 161 (6th Cir.1980), we stated:
Though not without dissent, panels of this court have continued to apply the Carter formula in cases where a party‘s attorney fails to appear for a conference or proceeding, or fails to comply with an order. See Coston v. Detroit Edison Co., 789 F.2d 377, 379 (6th Cir.1986); Harris v. Callwood, 844 F.2d 1254, 1256 (6th Cir.1988), and cases cited therein.
The Supreme Court has clearly held that a district court may dismiss a case for failure to prosecute, either on its own motion, or on motion of a party pursuant to
There is certainly no merit to the contention that dismissal of the petitioner‘s claim because of his counsel‘s unexcused conduct imposes an unjust penalty on the client. Petitioner voluntarily chose this attorney as his representative in the action and he cannot now avoid the consequences of the acts or omissions of this freely selected agent.
Id. at 633-34, 82 S.Ct. at 1390.
Despite the Supreme Court‘s unequivocal language, this court, like many others, has been extremely reluctant to uphold the dismissal of a case or the entering of a default judgment merely to discipline an errant attorney because such a sanction deprives the client of his day in court. Shepard Claims Service v. William Darrah & Associates, 796 F.2d 190, 195 (6th Cir.1986). The Shepard Claims Service court explained:
[t]o be treated as culpable, the conduct of a [movant] must display either an intent to thwart judicial proceedings or a reckless disregard for the effect of its conduct on those proceedings.
Id. at 194. Hence, misunderstandings between the parties’ counsel or diligent, timely efforts to have a case reinstated have often led this court to reverse dismissals or default judgments. E.g., Fuller v. Quire, 916 F.2d 358 (6th Cir.1990) (new counsel‘s diligent efforts on client‘s behalf merit the reinstatement of a case despite original counsel‘s culpable behavior); Harris v. Callwood, 844 F.2d 1254, 1256 (6th Cir. 1988) (“in the absence of notice that dismissal is contemplated a district court should impose a penalty short of dismissal unless the derelict party has engaged in ‘bad faith or contumacious conduct’ “).
B.
There are few factors present in this case that militate in favor of reversing the district court‘s denial of relief under
In his affidavit, the plaintiffs’ attorney stated that two days after entry of the January 7, 1991, judgment dismissing the case, he discussed the matter with Judge Graham‘s law clerk, who advised him that the case had not been dismissed and that a one-week extension of time to file a response to the motion to dismiss and the jurisdictional statement was acceptable to the judge if defendants’ counsel approved. The record contains no indication that the plaintiffs’ attorney ever attempted to obtain approval of this further one-week extension. In fact, the next filing on behalf of the plaintiffs was the February 26 motion for
Some of our cases indicate that when either derelict counsel or new counsel moves quickly to cure the delinquency this court is more likely to give the non-complying party another chance, even when no excusable neglect is found. E.g., Fuller v. Quire, supra. In such a case prejudice to the other party is minimal and the court‘s management of its docket is not seriously affected. No such mitigating factor exists in this case. Not only did counsel not move promptly to cure the delinquency, seven weeks after entry of the judgment, when he filed his
Reluctant as we are to penalize a party for his attorney‘s failings, we cannot find in this case that the district court abused its discretion in denying the
IV.
Although we find no abuse of discretion in the trial court‘s dismissal of this case for failure to prosecute, we also conclude that it was subject to dismissal under the defendants’ motion to dismiss. Thus, the plaintiffs suffered no prejudice.
Counts II through XVIII sought money damages for FmHA‘s alleged violations of its own regulations promulgated pursuant to the Consolidated Farm and Rural Development Act (CFRDA). This court held in Ashbrook v. Block, 917 F.2d 918 (6th Cir.1990), that a farmer did not have a private right of action against FmHA under CFRDA‘s general enabling statute,
With respect to the sole claim in the original complaint, repeated as Count I in the amended complaint, even assuming the district court had subject matter jurisdiction, we find that it failed to state a claim upon which relief may be granted. Buck appears to claim that he suffered injury because the 1986 financing statement filed by FmHA did not satisfy the Uniform Commercial Code‘s requirements for a “continuation statement.”
As we see it, FmHA was at risk for about one year that some other creditor would perfect a security interest in the collateral while the original financing statement was lapsed. We can find no harm to Buck from these circumstances, however; he and his co-plaintiffs were still indebted to FmHA and the collateral remained pledged to secure the indebtedness. The only significance by the failure to file a continuation statement was that for approximately one year FmHA held an unperfected security interest. The plaintiffs were not entitled to a declaratory judgment that the 1986 financing statement was void or to an injunction prohibiting FmHA from enforcing it. The claim that somehow FmHA‘s actions “unconstitutionally encumber[ed]” the plaintiffs’ private property was totally without merit and subject to dismissal for failure to state a claim.
The judgment of the district court is affirmed.
KENNEDY, Circuit Judge, concurring.
I concur in the result reached by the panel. This Court reviews a denial of a
Under this Court‘s decisions in Ashbrook v. Block, 917 F.2d 918 (6th Cir.1990) and Lundstrum v. Lyng, 954 F.2d 1142 (6th Cir.1991), plaintiffs in this case cannot demonstrate that they have a meritorious claim. The District Court does not have subject matter jurisdiction over these claims. For this reason, the District Court did not abuse its discretion in denying the