McClain v. Kissler
39 Cal.App.5th 399, 251 Cal. Rptr. 3d 885 (2019)
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Rule of Law:
Discretionary relief from default under Code of Civil Procedure § 473(b) is not available for a knowing and deliberate failure to file a responsive pleading, even if the party claims to have misinterpreted a court order. Mandatory relief based on an attorney's affidavit of fault is unavailable when the attorney is also the sole owner, officer, and director of the client entity, as they are considered one and the same party.
Facts:
- Katie McClain and Jonothan Harrell entered into a written contract with Karen Kissler and her medical marijuana collective, Alternatives, to grow marijuana plants on Kissler's property.
- The contract stipulated that McClain and Harrell would be paid for raising and trimming the plants.
- A dispute arose when, according to McClain and Harrell, agents of Kissler removed the marijuana plants and growing equipment from the property.
- McClain and Harrell alleged they were paid only $14,000 of the $158,500 they were promised under the contract.
- During this period, Kissler was actively pursuing two separate lawsuits against McClain and Harrell, one for unlawful detainer to remove them from her property and another for breach of the same contract at issue in this case.
Procedural Posture:
- Katie McClain and Jonothan Harrell sued Karen Kissler and Alternatives in California superior court (trial court) for breach of contract.
- Plaintiffs served the summons and complaint on defendants via substituted service in January 2016.
- Defendants, represented by Kissler, participated in the case by successfully moving to expunge a lis pendens but failed to file an answer to the complaint.
- At a Case Management Conference in June 2016, the trial court ordered the plaintiffs to request a default against defendants by July 22, 2016, if no answer was filed.
- On June 29, 2016, plaintiffs requested, and the court clerk entered, a default against defendants.
- Defendants filed multiple motions to set aside the default under § 473(b), claiming both discretionary relief (excusable mistake) and mandatory relief (attorney fault for Alternatives).
- After several hearings, the trial court denied defendants' motions for relief from default on all grounds.
- A default judgment for $169,353 was entered against defendants.
- Defendants (appellants) appealed the judgment to the California Court of Appeal.
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Issue:
1. Does a practicing attorney's failure to file a timely answer, based on an allegedly mistaken interpretation of a court's case management order setting a deadline for the opposing party to take a default, constitute excusable neglect for discretionary relief under Code of Civil Procedure section 473(b)? 2. Is a business entity entitled to mandatory relief from default under Code of Civil Procedure section 473(b) based on an attorney's affidavit of fault when the attorney is also the sole owner, officer, and director of that entity?
Opinions:
Majority - Stewart, J.
1. No. An attorney's failure to file a timely answer does not constitute excusable neglect for discretionary relief when the record shows the failure was knowing, deliberate, and based on an unreasonable interpretation of a court order. The court found that Kissler, a practicing attorney, was not credible in her claim that she misunderstood the trial court's order. The order clearly set a deadline for the plaintiffs to take a default, not an extension for the defendants to respond. The court determined Kissler's failure to answer was a knowing and deliberate strategic choice, not an honest mistake. Even if it were a mistake, it was inexcusable for a practicing attorney who was actively litigating other related cases and had demonstrated a capacity to understand and use legal rules to her advantage. 2. No. A business entity is not entitled to mandatory relief based on an attorney's affidavit of fault when the attorney and the entity are effectively the same party. The court found no real distinction between Kissler and Alternatives, as she was its founder, CEO, CFO, and sole director. The purpose of the mandatory relief provision is to protect an 'innocent client' from their attorney's inexcusable neglect. Because Kissler and Alternatives were 'one and the same,' there was no innocent client to protect, and applying mandatory relief would undermine the statute's purpose and give an unfair advantage to self-represented attorneys.
Dissenting - Richman, J.
1. Yes. The trial court abused its discretion because the law strongly favors trial on the merits, and any doubts should be resolved in favor of granting relief from default. The dissent argued that the trial judge's case management order was confusing, ambiguous, and reasonably subject to misinterpretation. Given this confusion, and Kissler's active participation in the litigation, her neglect should be considered excusable. The majority ignored the guiding principles that require courts to scrutinize denials of relief carefully and favor trial on the merits, especially where there is a risk of inconsistent judgments, as another judge had ruled Kissler was not a party to the contract. 2. Yes. The business entity was entitled to mandatory relief because it is a separate legal corporation, and its attorney, Kissler, filed an affidavit of fault. The dissent argued that Alternatives was a legitimate nonprofit corporation with thousands of members, making it a distinct client. Kissler's mistake was made in her capacity as the corporation's attorney, directly causing the default. Therefore, under the plain language of § 473(b), relief was mandatory, and the trial court erred in concluding Kissler and the corporation were 'one and the same' for the purposes of this statute.
Analysis:
This case clarifies the boundaries of 'excusable neglect' under CCP § 473(b), reinforcing that relief from default is not a remedy for strategic delay or a litigant's deliberate disregard for procedural rules, particularly when the litigant is a practicing attorney. It establishes a significant precedent for denying mandatory 'attorney fault' relief to corporate entities that are alter egos of their attorneys, preventing lawyers who represent their own one-person-company from claiming their own mistake to get a mandatory do-over. The decision signals that trial courts have strong discretion to deny relief to litigants who appear to be 'playing fast and loose' with the rules, prioritizing judicial efficiency and fairness to compliant parties over the policy of trial on the merits in cases of knowing and inexcusable conduct.
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