The following is a reprint from "THE LEGAL INTELLIGENCER"
Judge, Citing Defendant's 'Delay Tactics' Leaves Default Judgment Standing

BY SHANNON P. DUFFY
U.S. Courthouse Correspondent

Finding that an employer didn't respond to a disability discrimination lawsuit until it was about to be subjected to a sheriff's sale of its property, a federal judge has refused to lift a default judgment of nearly $43,000.

Although most of the delay resulted directly from the misfiling of papers by a clerk at the company, the defendant continued to delay even after that, urging the plaintiff to put off the sheriff's sale while it raised money. Only then did the company ask the court to lift the default judgment.

"This case is not a case of excusable neglect, mistake or inadvertence," US District Judge J. Curtis Joyner wrote in his 11-page opinion in Kauffman v. Cal Spas.

In the suit, Daniel Kauffman claimed he was hired in 1993 by California Acrylic Industries, Inc. to work in its Chadds Ford, PA, Cal Spas retail store. But less than two years later, Kauffman said, he was fired due to his Cohn's disease in violation of the Americans With Disabilities Act.

Kauffman's lawyers, Mark S. Scheffer and George D. Walker of Larry Pitt & Associates, filed the suit in June 1997 and sent the summons and the complaint to Cal Spas' Chadds Ford facility in September 1997.

All materials related to Kauffman's case were forwarded to Cal Spas' office responsible for overseeing litigation. But an employee in that office filed away the material without notifying her superiors.

As a result, Cal Spas did not enter an appearance or answer the complaint. It also failed to respond to Kauffman's subsequent motion for default judgment.

On December 11, 1997, the court granted the motion and scheduled a hearing to determine damages. Cal Spas did not respond to the default judgment order.

The damages hearing was conducted in January 1998 after Kauffman's counsel twice telephoned Cal Spas' Chadds Ford office. That same day, the superiors at Cal Spas' "litigation" office first became aware of the Kauffman litigation. Their response was to notify Cal Spas' insurance carrier and request coverage.

But the insurance carrier quickly sent Cal Spas a letter denying coverage. The superiors at the litigation office were unaware of the letter because it, too, was misfiled.

Later that month, Senior US District Judge Joseph L. McGlynn awarded Kauffman $40,047 in damages and $2,910 in attorney fees. That order was also misfiled when it was sent to the Cal Spas litigation office.

Both of those investigations found the charges against Daniels unsubstantiated, said Burlington County Solicitor Evan Crook.

Daniels, who is also a lawyer, has denied the charges.

"This is the latest in a series of attempts for them to retaliate against me for taking action against them," Daniels said.

"Anyone who knoOn August 29, 1998 Cal Spas fired the employee who had misfiled the Kauffman case papers on other grounds, and the company still failed to discover the misfiled material. As a result, Cal Spas did not become aware of the case until Kauffman requested a levy on properties at its Chadds Ford facility in October 1998.

Cal Spas' Chief Administrative Officer, Lee Wendt, contacted Kauffman's counsel and told him to hold off on a sheriff's sale because a check would be sent within a week to satisfy the judgment. Wendt later asked the lawyers to be patient and wait for the completion of a trade show in which Cal Spas was taking part.

But despite those promises to pay, Cal Spas hired Philadelphia lawyers in November 1998 and asked Judge McGlynn to lift the default judgment. The case was reassigned to Joyner after McGlynn died last month.

Joyner found that when a court is asked to lift a default judgment, it must consider four factors:

Whether lifting the default would prejudice the plaintiff.
Whether the defendant has a meritorious defense.
Whether the defendant's conduct is excusable or culpable.
The possibility of effective alternative sanctions.
Default judgments "are greatly disfavored by the court," Joyner noted, "and in a close case, doubts should be resolved in favor of setting aside the default and reaching the merits."

Cal Spas' lawyer, Michael J. Barry of Schnader Harrison Segal & Lewis, argued that all four factors weighed in favor of opening the default judgment.

But Kauffman's lawyers argued that Cal Spas' inexcusable and culpable conduct outweighed all other factors.

Joyner found that the 3rd US Circuit Court of Appeals has so far provided "little guidance as to how to balance the four factors," but that one Eastern District Judge has ruled that a defendant's conduct was so inexcusable and culpable that it outweighed other factors that favored opening the judgment.

The prejudice prong weighed in Cal Spas' favor, Joyner found, because Kauffman would not lose evidence or suffer an impairment of his ability to pursue his claim.

The meritorious defense prong also favored Cal Spas, he said, because it was able to articulate one possible defense - that Kauffman's

ws me knows this is garbage. I will be vindicated."

George D. Walker, the Stefanonis' lawyer, could not be reached for comment.

Daniels has passed a polygraph test, indicating that he was being truthful, Crook said Tuesday.

Absenteeism and tardiness exhibited a failure to perform an essential function of his job.

But Joyner agreed with Scheffer and Walker that Cal Spas had engaged in "inexcusable" and "culpable" conduct that weighed against lifting the default.

"Cal Spas' reckless disregard for federal procedure and practice in this litigation overwhelmingly weighs in favor of allowing the default judgment to stand," Joyner wrote.

Joyner found that all material related to Kauffman's case reached Cal Spas' California office responsible for handling litigation and that one employee had misfiled all of the material.

"At this point, the misfiling of this material may have constituted excusable neglect. However, Cal Spas' subsequent actions foreclosed that interpretation ... and, furthermore, showed culpability," Joyner wrote.

When it first became aware that a default judgment had been entered, Joyner said, Cal Spas "requested insurance coverage and did nothing else." The company simply "assumed it was covered and never questioned this assumption for approximately nine months," he wrote, but "the assumption was wrong."

And when Cal Spas learned of the sheriff's sale of its property, it resorted to stall tactics, Joyner found.

"Cal Spas was on notice, as of Jan. 6, 1998, and knowingly chose not to appear until Kauffman attempted to collect the damages awarded in the default judgment on Oct. 9, 1998. Wendt's efforts to stall Kauffman and his counsel also show Cal Spas' conduct to be intentional. This factor, therefore, favors refusing to set aside the default judgment."

Joyner found that no other sanction would work as well as enforcing the default judgment.

"Alternative sanctions such as the reimbursement of Kauffman's counsel fees and costs would be an inappropriate sanction for a willfully defaulting commercial party like Cal Spas. To preserve the finality of the court's judgments and to secure the just, speedy and inexpensive determination of every action, this factor weighs in favor of refusing to set aside the default judgment," Joyner wrote.