Daily Decisions: It Ain’t My (De)Fault!

Fowler v. Johnson (Division 1, April 9, 2012), is an interesting little case that creates a new rule for motions to vacate an entry of default or a default judgment. The new rule might open up a can of worms… but we’ll get to that in a moment.

First, just the facts: Amber Fowler (a dermatologist) used to work for Donald Johnson (another dermatologist) before she left to go it alone. When she left, she claimed Johnson owed her over $200,000 in unpaid wages. Fowler tried to work it out on her own, but when Johnson refused to pay she hired an attorney. Fowler’s attorney sent some demand letters and actually got a few five-figure checks from Johnson. They all bounced. Eventually, Johnson cut a good check for $45,000, but that still left Fowler with $165,000 in unpaid wages.

Johnson then hired his own attorney. The two attorneys exchanged correspondence, but that broke down and the dispute was not resolved. So Fowler sued.

Fowler asserted four causes of action against Johnson: (1) breach of contract for wages, (2) breach of contract for referral fees, (3) violation of RCW 49.48.010 for wrongful withholding of wages and of RCW 49.52.070 for willful withholding, and (4) violation of the UCC (for the bad checks). She served Johnson personally with the summons and complaint. Johnson claimed he did not open the documents. Fowler did not provide a copy to Johnson’s attorney.

Of course, Johnson did not answer. Fowler’s lawyer called Johnson’s lawyer and left a message. No response. No call back. So Fowler moved for an entry of default and mailed copies of the motion to Johnson by certified mail. Johnson claimed he never received the motion. Fowler did not provide a copy to Johnson’s lawyer.

Of course (again), Johnson did not show up for the hearing and the Judge entered an order of default against him. Following the entry of default, the Judge conducted a damages hearing and entered a default judgment against Johnson for $360,000. This number was higher than the amount actually due because the applicable wage statutes provide for an award of double damages and attorneys’ fees.

After more than three months of unresponsiveness, Johnson received a writ of garnishment based on the default judgment. That got his attention. (Amazing how that happens when someone actually start taking money from you.) At long last he got involved in the case and moved to vacate the entry of default and the judgment. His excuses? He thought his lawyer had worked everything out; he thought the summons and complaint looked like “informal negotiating documents” that he’d already received; he thought his lawyer would have also gotten the documents and was taking care of it.  Hmm.

The Superior Court granted Johnson’s motion to vacate after reconsideration and much consternation. One of the factors in determining whether to vacate a default is whether the defendant would have a defense to the claim. The Judge thought that Johnson had established a strong defense to Fowler’s “willful” withholding of wages claim — the statutory claim that permits double damages. The Court was therefore inclined to vacate the default as to that claim. But for the other claims, not so much.

The question, therefore, was whether the Judge could vacate the default as to that one claim, but not the others. The Superior Court thought it was an all-or-nothing proposition, and therefore vacated the entire default for all claims. Fowler appealed.

The Court of Appeals noted that it was writing on a blank slate, but held that a piece-by-piece vacatur by the Superior Court would have been permitted:

Although no authority expressly addressing this issue has been cited to us, nor could we find any, we hold that the trial court had the authority to vacate its default orders on only one claim.

The Court of Appeals’s reasoning was that motions to vacate are entrusted to the discretion of the trial court and are inherently equitable in nature. Moreover, the applicable rules “explicitly permit default orders to be vacated on such terms as are just.”

A few thoughts:

1. This is somewhat of a curious holding. There is usually a lot of overlap between the damages that would be awarded under the various causes of action asserted in a complaint. So the vacatur of one count in a twelve-count complaint might not mean that much to most defendants. Here, the fact that the vacated “claim” was for double damages makes it worth something. But I wonder when it would benefit a defendant to seek a selective vacatur.

2. I am not sure how much it matters, but it is unclear to me whether the “claim” for which the Court vacated the default was really an independent claim. Fowler pleaded a claim for unpaid wages (which is certainly a statutory claim) and then pleaded a right to double damages under RCW 49.52.070. My guess is that on remand the Judge maintains the default on the wage claim, but only continues discovery and trial on whether the withholding of wages was “willful” under the statute.

3. There could be some vigorous motion practice on whether the vacatur applies to the entire “wage claim” or just the “willfulness” part of the claim. Because the wage claim, regardless of willfulness, includes a right to attorneys’ fees. And if that aspect of the default is upheld, then Fowler may have a default judgment entitling her to her attorneys’ fees for the remainder of the action on the “willfulness” part of the case. (Since the “willfulness” inquiry is part of or related to the wage claim, my guess is that the attorneys’ fee award would cover that aspect of the case as well, but this is certainly a unique circumstance.)

4. And finally, we get to the can of worms. Once the Court of Appeals decides that it is within the Superior Court’s discretion to order a partial vacatur, the obvious next question is what standards should inform that discretion. For instance, if a Judge determines that there is a defense on one claim, but not others, such that in isolation a default on that claim would be subject to vacatur, how should the Judge decide whether or not to vacate the entire default? Or could the Judge decide in that instance not to vacate the default on any of the claims, despite one claim’s potential survival? The choices would be (1) partial vacatur for only the “good” claims, (2) complete vacatur of all claims, or (3) complete denial of the entire motion, leaving the entire default in tact. What’s a Judge to do?

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One thought on “Daily Decisions: It Ain’t My (De)Fault!

  1. Pingback: Monday Morning-ish Mash-up: April 16, 2012 | Ziff Blog

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