Choice Hotels International, Inc. v. Grover
792 F.3d 753 (2015)
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Rule of Law:
In ordinary civil litigation, a lawyer's negligence, gross negligence, or even abandonment is imputed to the client and does not constitute an 'extraordinary circumstance' under Federal Rule of Civil Procedure 60(b)(6) to justify setting aside a final judgment. The client's proper remedy is a malpractice action against the negligent attorney, not reopening the case against an innocent adversary.
Facts:
- Choice Hotels entered into a franchise agreement with SBQI, Inc., which was also signed by Anuj Grover, Arjun Grover, and Dharam Punwani (the Investors), making them personally liable.
- The Investors contend that their signatures on the franchise agreement were forgeries.
- After their initial attorney performed poorly, the Investors hired a new attorney, Elton Johnson, to vacate a default entry and defend them in the lawsuit brought by Choice Hotels.
- Johnson filed an appearance and attended a conference but failed to file an answer to the complaint, move to vacate the default, or respond to motions for summary judgment.
- While Johnson assured the Investors via email that he was working on a settlement, he did not share any documents he filed and did not return their phone calls.
- The Investors suspected Johnson was performing poorly but did not hire a replacement attorney or check the public court docket to monitor the case's progress.
- Johnson's inaction ultimately resulted in a substantial default judgment being entered against the Investors.
Procedural Posture:
- Choice Hotels sued SBQI, Inc., and the Investors in the U.S. District Court for the Northern District of Indiana for breach of a franchise agreement.
- The defendants failed to file an answer, and the clerk of court entered a default.
- The defendants' new attorney, Johnson, failed to take required actions to defend the suit.
- The district court granted summary judgment on damages and entered a final default judgment against the defendants for $430,286.75.
- More than a year later, the Investors, through a new attorney, filed a motion under Federal Rule of Civil Procedure 60(b)(6) to set aside the judgment.
- The district court denied the motion for relief from judgment.
- The Investors (as appellants) appealed the denial to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does a lawyer's gross negligence and failure to defend a case constitute an 'extraordinary circumstance' under Federal Rule of Civil Procedure 60(b)(6) sufficient to set aside a default judgment in ordinary civil litigation?
Opinions:
Majority - Easterbrook, Circuit Judge
No, a lawyer's gross negligence does not constitute an 'extraordinary circumstance' under Rule 60(b)(6) to set aside a judgment in ordinary civil litigation. The established rule, articulated in cases like Link v. Wabash R.R., is that litigants are bound by the acts and omissions of their chosen attorneys. A client's remedy for an attorney's failure lies in a malpractice suit against that attorney, not in continuing the original litigation against an innocent opposing party. The court rejected the Investors' argument that the 'attorney abandonment' exception from Supreme Court cases like Holland v. Florida and Maples v. Thomas should apply. Those cases involved capital habeas petitioners who have limited ability to choose or monitor counsel and for whom a malpractice award is not an adequate remedy for the ultimate penalty of death. In contrast, civil litigants can freely hire and fire counsel, can monitor their case through public dockets, and can be made whole through monetary damages in a malpractice suit. Furthermore, the court found that even if Johnson had abandoned the Investors, they were not blameless, as they suspected his poor performance but failed to take action to protect their own interests.
Analysis:
This decision reinforces the principle of finality in civil judgments and clarifies the high bar for relief under FRCP 60(b)(6). It sharply distinguishes between the standards applied in ordinary civil litigation and those in capital habeas corpus cases regarding attorney performance. The court effectively contains the 'attorney abandonment' exception from Holland and Maples to the unique context of collateral review for prisoners, preventing its expansion into general civil practice. The ruling places a significant affirmative duty on civil litigants to monitor their counsel's performance and act decisively if they suspect neglect, underscoring that the risk of choosing a poor lawyer falls squarely on the client.
