Employment Law Daily Too little too late for limo company owners to avoid default judgment in FLSA suit
Friday, October 27, 2017

Too little too late for limo company owners to avoid default judgment in FLSA suit

By Lorene D. Park, J.D.

Affirming the denial of motions to vacate default judgments against a limo service company and its two owners, the Seventh Circuit in this consolidated appeal found that the district court judges reasonably rejected the owners’ excuses—a move out of state, poor health, and a presumption that all was being handled by counsel. The owners offered no evidence to corroborate that health issues precluded the attention to business matters and it was their responsibility to check to see if their attorney was taking actions in the case. The owners’ delay in responding to the default despite knowing about it for months also precluded the relief they requested (Acosta v. DT & C Global Management, LLC dba Town & Country Limousine, October 25, 2017, per curiam).

This consolidated appeal addressed two lawsuits—one filed by two former employees and the other filed by the Secretary of Labor—against DT & C Global, a ground transportation company operating in Chicago, and two owners (only one of whom was named as a defendant in both suits). The plaintiffs claimed that the defendants violated the FLSA and Illinois Minimum Wage Act by failing to pay overtime. They also claimed that the defendants took unauthorized wage deductions in violation of Illinois’s Wage Payment and Collection Act.

Default judgments. When the defendants didn’t respond to discovery requests in the employees’ suit, the court granted a motion to compel. A year later, the plaintiffs requested sanctions because the defendants did not comply. Defense counsel withdrew and, because the company could not represent itself, the court ordered an owner to appear. He did not show and the court entered sanctions, striking the defendants’ answer, awarding plaintiffs their attorneys’ fees, and entering a default. In November 2015, the court granted the plaintiffs’ motion for a default judgment. The Secretary of Labor’s suit followed a similar course, with the defendants’ failure to respond to discovery, withdrawal of the same defense counsel, and entry of default.

Excuses, excuses. Eleven months later, the defendants moved to vacate the judgments under Rule 60(b)(1). The owner named as a defendant in both suits claimed he hadn’t received any notices from the last few months of the case, including counsel’s motion to withdraw, or the court order directing him to appear, because he moved to Indiana and his business closed and no longer received mail. He also said his emails were “forwarded to another company.” He claimed that, as a result, he was unaware of the default judgment until the summer of 2016. He offered a second excuse as well, saying he couldn’t keep in contact with his lawyers due to poor health. He explained that surgeries in 2011 and 2014, medication, and hospitalization in April 2016 for “unspecified neurological issues” created “difficulty attending to business affairs.”

The owner acknowledged meeting several times in the summer of 2015 with an attorney in Chicago, but after hiring the attorney he had no further contact with the attorney’s office until around “late March, early April” of 2016, when he learned the attorney had died.

The second owner, who was named defendant only in the Secretary of Labor’s case, claimed he relied on the first owner to keep him apprised of the case. Both owners admitted seeing a press release from the Department of Labor announcing the default judgment in January 2016. They claimed they believed they were not individually liable and weren’t worried about the company’s liability because they had closed the business.

The district court denied the motions to vacate the default judgments, ruling that the defaults were the result of “inattention to litigation” and that the defendants failed to offer a legitimate excuse or meritorious defense.

No good cause to vacate default. Affirming, the Seventh Circuit noted that to have a default judgment set aside under Rule 60(b)(1), the defendants had to show “good cause, quick action to respond to the default, and a meritorious defense to the underlying allegations.” Also, parties are generally bound to the actions of their attorneys, even when the actions are errors are omissions.

Here, the district court judges reasonably found that the defendants did not show good cause for their default. It was within the judges’ discretion to reject the health issues as an excuse, given the timeline and lack of corroboration. The owner remained inattentive to the case years after his surgeries and provided no medical opinion suggesting his medications impaired his ability to conduct business. He also met with an attorney in the summer of 2015 and it was his duty to check and see if his lawyer was doing something to represent him. Had the owner simply looked at the docket or called his lawyer once after the fall of 2015, he would have learned his former lawyers had withdrawn and he needed to act promptly. He could also have simply notified the court of his new address.

No quick action either. The appeals court also found it reasonable for the district court judges to find that the defendants did not respond quickly after learning of the default judgment. They did not explain how a hospital stay in April 2016 disabled the owner from filing a motion to vacate until six months later. Moreover, they claimed to have learned of the default in the summer of 2016 and waiting two or three months to vacate was not “quick,” said the court. Their argument also conveniently ignored the DOL’s January 2016 press release they both admittedly read.

No meritorious defense. Finally, the defendants failed to proffer a meritorious defense to the complaint, which was also a requirement to vacate a default judgment under Rule 60(b)(1). All they did was argue that the owner has “defenses of good faith and that the amounts awarded are excessive and he has not received all credits he and other defendants should have with respect to the judgment amount.” The defendants did not elaborate and did not provide any support for this argument, which on its own was simply not enough.

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