CHOICE HOTELS INTERNATIONAL, INC., Plaintiff-Appellee, v. Anuj GROVER, Arjun Grover, and Dharam Punwani, Defendants-Appellants.
No. 14-3294.
United States Court of Appeals, Seventh Circuit.
Argued May 28, 2015. Decided July 7, 2015.
792 F.3d 753
Matthew James Anderson, Attorney, Wruble & Associates, South Bend, IN, for Defendants-Appellants.
Before BAUER, EASTERBROOK, and RIPPLE, Circuit Judges.
EASTERBROOK, Circuit Judge.
Choice Hotels sued SBQI, Inc., plus several of its managеrs and investors, seeking damages for a breach of a franchise agreement. The defendants did not answer the complaint, and the clerk of court entered a default. One of the defendants, Tarranpaul Chawla, an attorney admitted to practice in Illinois, represented the others but did so poorly, which led to the default. Three of the defendants—Anuj Grover, Arjun Grover, and Dharam Punwani (сollectively the Investors)—asked Chawla to find a new attorney. They assert that until this suit was filed they had been unaware that their signatures were on the franchise agreement as parties, which could mаke them personally liable, and they insist that the signatures are forgeries. Chawla told the Investors that Elton Johnson had agreed to represent their interests by trying to vacate the default, negotiatе a settlement, and if necessary defend against Choice Hotels’ demand for damages.
Johnson filed an appearance and took some steps in the litigation, such as attending a conference under
The default judgment led the Investors to hire a new lawyer, who filed a motion seeking to set aside the judgment. Because it was filed more than a year after the judgment, however, it fell into
The district court thought these circumstances to be short of “extraordinary.” Lawyers sometimes fail to protect their clients’ interests, and the district judge observed that the remedy for legal neglect lies in a malpractice suit against the lawyer, rather than continuing the original litigation and upsetting the adversary‘s legitimate expectations based on a final judgment. Litigants who choose a poor lawyer may bear the costs themselves, or shift them to the lawyer, but cannot shift them to an adversary who bore no fault for the prоblem. (Johnson unquestionably is a poor lawyer. The Supreme Court of Indiana suspended him from practice on March 20, 2014, less than four years after his admission to the bar, following five disciplinary comрlaints against him. His suspension—for failure to cooperate in the investigation of these grievances—is of indefinite duration, and he has been removed from the roll of attorneys authorized to practice in the Northern District of Indiana.)
The district court‘s approach is well grounded in decisions of the Supreme Court and this circuit. Link v. Wabash R.R., 370 U.S. 626, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962), holds that litigants are bound by the acts and omissions of their chosеn agents, including lawyers, and that legal bungling therefore does not justify reopening a judgment. The Supreme Court added in Societe Internationale v. Rogers, 357 U.S. 197, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958), and National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976), that the intentional misconduct of lawyers likewise is imputed to their clients. And when a client аggrieved by counsel‘s inept handling of a suit contended that “gross negligence” should be treated differently from ordinary negligence (Link) and intentional misconduct (National Hockey League), we rejected the argument and held that labels do not matter. United States v. 7108 West Grand Avenue, 15 F.3d 632 (7th Cir.1994). When lawyers fail, the remedy is malpractice litigation against the wrongdoer, not more litigation against an innocent adversary in the original litigation. We summed up in Bakery Machinery & Fabrication, Inc. v. Traditional Baking, Inc., 570 F.3d 845, 848 (7th Cir.2009):
The rule is that all of the attorney‘s misconduct (except in the cases where the act is outside the scope of employment or in cases of excusable neglect [and covered by
Rule 60(b)(1) ]) becomes the problem of the сlient. A lawyer who inexcusably neglects his client‘s obligations does not present exceptional circumstances.
Holding the client responsible for the lawyer‘s deeds ensures that both clients and lawyers take care to comply. If the lawyer‘s neglect protected the client from ill consequences, neglect would become all too common. It would be a free good—the neglect would protect the client, and beсause the client could not suffer the lawyer would not suffer either. The court‘s power to dismiss a case is designed both to elicit action from the parties in the case at hand and to induce litigants and lawyers in other cases to adhere to timetables. A court cannot lightly excuse a litigant because of the lawyer‘s neglect without abandoning the pursuit of these objectives.
Id. at 319 (citation omitted).
But the Investors tell us that the Supreme Court has abandoned the pursuit of these objectives and disapproved the holdings of Bakery Machinery and the earlier decisions that we have cited. They rely on Holland v. Florida, 560 U.S. 631, 130 S.Ct. 2549, 177 L.Ed.2d 130 (2010), and Maples v. Thomas, 565 U.S. 266, 132 S.Ct. 912, 181 L.Ed.2d 807 (2012). Holland holds that abandonment by counsel can justify tolling of the statute of limitations for filing a federal collateral attack on a state conviction, and Maples holds that abandonment by counsel during a state collateral attack can constitute a justification for a procedural default, and thus permit federal review of an issue that was not properly presented in the state proceeding.
Both Holland and Maples were capital cases. Being put to death is a disproportionate penalty for having a bad lawyer—especially when as a practical matter persons on death row (and for that matter other prisoners) have only limited opportunity to choose their own counsel. They must accept volunteers, and if they fire a volunteer they cannot be sure that someone else will step in, for they lack funds to hire counsel. (Holland suggested that the prisoner had tried to discharge his lawyer but that neither counsel nor the state judiciary had honored his request.) A malpractice suit against a nonperforming lawyer is cold comfort to someonе no longer alive. Abandonment severs the agency relation, see Maples, 132 S.Ct. at 922-23; Holland, 560 U.S. at 659-60, 130 S.Ct. 2549 (Alito, J., concurring) (a view adopted by a majority in Maples), so that counsel‘s (in)action is not imputed to the client. In normal civil litigation a litigant whose lawyer has left him in the lurch can hire а new one, or represent himself, but people on death row can‘t replace their lawyers so easily.
Although Maples and Holland were capital cases, we do not doubt that their holdings apply to all сollateral litigation under
For litigants such as the Investors, monetary compensation via a malpractice action is an adequate recompense for an adverse judgment. (Litigants who fear that lawyers may not have the wealth to pay for their mistakes can decline to hire counsel who lack adequate insurance.) Civil litigants can hire replacemеnt counsel freely, and it is much easier for them than for prisoners to monitor how their lawyers are performing (or not performing). And although abandonment by counsel ends the agency relation—a consideration relevant to all litigation, not just to collateral review, see Sneed v. Shinseki, 737 F.3d 719, 726-28 (Fed.Cir.2013)—the fact remains that civil litigants are responsible for their own choices and their own inaction. Litigants who know or strongly suspect that their lawyers are asleep on the job must act to protect their own interests by hiring someone else.
The Investors recognized that Chawla was not protecting their interеsts, and they sensibly insisted that he find someone who would. When they began to suspect that Johnson likewise was not protecting their interests, they did not replace him. Sending him emails, and making unreturned phone calls, is no substitute for action. They readily could have consulted the docket in the litigation and learned that Johnson was not filing essential documents, but they didn‘t. Johnson did not abandon the investors; he performеd some legal tasks, though not enough, and responded to three of Anuj Grover‘s inquiries. Unlike the attorneys in Holland and Maples, he had not cut off all communication with his clients and walked away from the litigation. But even if we werе to treat the Investors as abandoned by Johnson, still they must bear the consequences of their own inaction. They were sued and did not defend the litigation, personally or by counsel. They were able to monitor the proceedings yet did not follow through. The district judge therefore did not abuse his discretion in denying their motion for relief from judgment.
AFFIRMED
EASTERBROOK
CIRCUIT JUDGE