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OAH 15-1901-17636-2 MN |
STATE OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE DEPARTMENT OF LABOR AND INDUSTRY
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Commissioner of Labor and Industry v. Budget Towing, Inc. of |
ORDER DENYING MOTION FOR DEFAULT JUDGMENT |
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Appearances: Tricia L. Matzek, Assistant Attorney General, 445 Minnesota Street, Suite 900, St. Paul, MN 55101-2127, on behalf of the Commissioner of Labor and Industry (Commissioner). Patrick M. Connor, Dudley and Smith, P.A., 2602 US Bank Center, 101 East Fifth Street, St. Paul, MN 55101-1896, on behalf of Budget Towing, Inc. of St. Paul (Respondent).
On November 27, 2006, the Commissioner filed the following: Notice and Order for Prehearing Conference, Notice of Appearance, Notice of Motion and Motion for Default Judgment, Memorandum of Law, and supporting documents. On November 29, 2006, the Respondent filed a Notice of Appearance and Answer. On December 22, 2006, a date agreed upon by the parties, Respondent filed its Memorandum of Law in Opposition to Motion for Default Judgment and supporting documents.
Based on the file herein, and for the reasons set forth in the Memorandum, attached hereto and incorporated herein,
IT IS HEREBY ORDERED:
1. The Commissioner’s Motion for Default Judgment is DENIED.
2. The Prehearing Conference will be held as scheduled on February 7, 2007, at 1:30 p.m., at the Office of Administrative Hearings.
Dated this _8th_ day of January, 2007
_/s/
Beverly Jones Heydinger_
BEVERLY
JONES HEYDINGER
Administrative
Law Judge
Along with the Notice and Order for Prehearing Conference, the Commissioner filed a Motion for Default Judgment on November 27, 2006, alleging that a summons and complaint had been served on the Respondent, that the Respondent had twenty days to file an answer to the complaint, and that the Respondent had failed to do so. Failure to serve an answer within the established time period is grounds for the entry of an order affirming the citation and notification of penalty.[1] Accordingly, the Commissioner requested that an order be issued granting default judgment, finding that the Respondent had violated certain standards at its work site, set forth in the Complaint’s Citation and Notification of Penalty issued on October 10, 2005, that the penalties were properly calculated and classified, that the abatement dates were properly set, and that default judgment should enter.
In its supporting affidavit, the Commissioner showed that the Summons, Notice to Respondent and Complaint had been served on the Respondent and its counsel on February 7, 2006, that the Answer was due by March 2, 2006, and that the Respondent failed to file an Answer or request an extension to file the Answer as of the date that the Commissioner filed the Motion on November 27, 2006.
Upon receipt of the Notice and Order of Prehearing Conference and Motion for Default Judgment and supporting documentation, the Respondent immediately filed its Answer, on November 29, 2006. By agreement of the parties, the Respondent’s time to respond to the Motion for Default Judgment was extended, and it was filed on December 21, 2006.
In its response, Respondent concedes that the Answer was not filed by March 2, 2006. However, the Affidavit of Counsel states that a Citation and Notification of Penalty was issued to Respondent on October 26, 2005, and the Respondent served its Notice of Contest on or about November 10, 2005. On or about February 6, 2006, the Commissioner’s representative requested a settlement meeting with the Respondent, and that meeting was scheduled for March 21, 2006. The Summons, Notice to Respondent and Complaint were served after the call, but prior to the scheduled settlement meeting. Counsel for the Respondent was also sent a letter dated February 8, 2006, that notified the Respondent of the informal conference scheduled for March 21, 2006, and indicated that a Summons and Complaint would issue if settlement was not reached within 90 days.[2]
An Answer was drafted but counsel inadvertently failed to serve it. Efforts were made to settle the matter and Respondent submitted a written proposal to the Commissioner on March 30, 2006.
On June 6, 2006, the Commissioner’s staff representative notified the Respondent by telephone that an impasse had been reached in the negotiations and that the Commissioner would request a hearing. Apparently the Respondent’s failure to file an Answer was not raised at any point during the settlement discussions or in the conversation on June 6, 2006. The Respondent received no further contact from the Commissioner until five months later when the Notice and Order of Prehearing Conference and Motion for Default Judgment with accompanying documentation were received.
Respondent argues that default judgment should not be entered under the facts presented because such an order is in the discretion of the administrative law judge, and is not warranted by the facts presented here. The applicable rule states:
If the complaint is not served or the answer is not filed and served within the time prescribed by this part, the administrative law judge, upon a motion by a party, may enter an order affirming or vacating the contested citation and notification of penalty or notification of failure to abate.[3]
The decision to issue a default judgment is discretionary and should take into account the facts presented. Four factors must be considered in determining the appropriateness of entering a default judgment over objection of the adversely affected party. The four factors are:
1. Does the Respondent have a reasonable defense on the merits?
2. Does the Respondent have a reasonable excuse for failing to answer?
3. Did the Respondent act with due diligence upon receiving notice of the failure to file the answer?
4. Will denying the default result in substantial prejudice to other parties?[4]
In this case, the overall weight of the factors favors the Respondent and does not support the Commissioner’s request for a default judgment.
Defense
on the Merits
Although the case has yet to be litigated, it is apparent that the Respondent objects to the Commissioner’s actions on the merits, and has attempted to resolve the matter through negotiation. In its Answer, the Respondent denies several of the allegations and raises affirmative defenses. Although it is premature to determine the case on the merits, there is no suggestion from the Commissioner that the Respondent entered into sham negotiations for the sole purpose of delay or that there is no dispute about the facts or the law.
Reasonable
excuse for failure to file the answer
Counsel has stated in the affidavit filed in opposition to the motion that the Answer was drafted but that he inadvertently failed to file the Answer on time. In general, courts have excused defaults caused by action or inaction of the attorney rather than by the party himself.[5] That principle would logically apply here where the Respondent retained counsel and relied upon counsel to handle the matter appropriately. Counsel has admitted that it was his error, not the fault of the Respondent, that the Answer was not filed. In addition, the letter mailed to the Respondent on February 8, 2006, stated that a Summons and Complaint would issue if settlement negotiations failed. Arguably this implied that the Summons and Complaint would reissue, and the time to answer recommence.
Responding
with due diligence upon learning of the failure to file the Answer
Apparently the Respondent first learned that the Commissioner intended to seek a default for failure to file the Answer upon receipt of the Commissioner’s motion which was mailed on November 27, 2006. By November 29, 2006, the Answer was filed and served.[6] The prompt response suggests that the Answer may have been drafted previously, as counsel for the Respondent asserted, but regardless; it was a prompt response to the Commissioner’s motion.
Substantial
prejudice to other parties
The Respondent has explained that, although no Answer was filed, the Commissioner was well aware of the Respondent’s objections to the Complaint, that settlement proposals were exchanged, and that a staff representative notified the Respondent’s counsel that the matter would be set on for hearing. There is no suggestion that the Commissioner’s representative raised the failure to file an Answer as a bar to further negotiations, or suggested that the right to hearing was waived by the failure to file the Answer. There was is no indication that the Commissioner was prejudiced in the efforts to resolve the matter by the Respondent’s failure to file the Answer. The Commissioner was aware that Respondent opposed the citations that were issued and intended to defend against them. There was no prejudice to the Commissioner from the Respondent’s failure to file the Answer on time.
Under the circumstances, it is not appropriate to grant the Commissioner’s motion for a default judgment. It is preferable to allow the case to proceed to the merits under circumstances such as these where the failure to file the answer was inadvertent, and did not hamper the Commissioner’s efforts to go forward.
The prehearing conference will be held as scheduled.
B.J.H.
[1]
[2] A copy of the February 8, 2006, letter is attached as Ex. 1 to the Affidavit of Patrick M. Connor.
[3]
[4] Coller v. Guardian Angels Roman Catholic
Church, 294 N.W.2d 712, 715 (
[5]
[6] The cover letter accompanying the Respondent’s filing was dated November 29, 2006, and was received at the Office of Administrative Hearings on November 30, 2006.