Corporate Registered Agent’s Inaction Not Binding On Corporation: Court Vacates One-Year Old Default Judgment

West Bend Mut. Ins. Co. v. 3RC Mechanical and Contracting, Inc., 2014 IL App (1st) 123213, presents a recent and detailed illustration of the prevailing Section 2-1401 (735 ILCS 5/2-1401) standards to vacate judgments that are between 30 days and two years old.

The plaintiff (as subrogee of its insured) filed suit against a mechanical contractor – an Illinois LLC – for breach of an oral construction contract.  But before plaintiff filed suit, and without plaintiff’s knowledge, the contractor filed for bankruptcy protection.  When plaintiff learned of the contractor’s bankruptcy, it got permission from the bankruptcy court to continue the breach of contract suit against the contractor in state court.

Over the next several months, the contractor was a no-show at several (breach of contract suit) court hearings.   The plaintiff sent two motions for default and a default order to the contractor’s former registered agent and to the contractor’s former business address – an address from which the contractor moved before the lawsuit was filed.  The registered agent never notified the contractor’s managing partner of the state court case’s status and never sent the managing partner court orders or motions even though the partner’s identity and address was listed in the corporate bankruptcy filings.  The trial court entered an approximately $80,000 default judgment against the contractor.   About five months later, when the contractor learned of the default, it filed a Section 2-1401 petition to vacate the default judgment.  The contractor’s petition to vacate was granted and the plaintiff appealed.

Held: Affirmed.

Rules/Reasoning:

Code Section 2-1401 provides a mechanism for someone to vacate a judgment more than 30 days old.  The party moving to vacate a 30-plus days’ old judgment must support the petition with an affidavit and show (1) a meritorious defense; (2) due diligence in raising the defense in the underlying case; and (3) due diligence in filing the section 2-1401 petition for relief from the judgment.  3RC, ¶ 11.

Due diligence in bringing the 2-1401 motion is established as long as it’s filed within two years of the judgment.  2-1401(c), (¶ 12).  A meritorious defense is one that raises a question of law that deserves to be factually investigated.  As for the second element – due diligence in raising a defense – the court looks to whether the 2-1401 petitioner had a reasonable excuse for failing to timely act as opposed to simple oversight or negligence.  The petitioner must show that his failure to defend the suit was an “excusable mistake” and that he acted reasonably in initially failing to defend the suit. (¶ 14).

Here, the contractor defendant established due diligence in filing the petition since it brought the petition to vacate some five months after the judgment entered – well within the two-year statutory cut-off.  The contractor also established a meritorious defense: it asserted that there was no written or verbal contract between it and the plaintiff and filed a supporting, sworn affidavit.

On the due diligence in presenting a defense element, the court noted that plaintiff repeatedly sent court papers to the corporation’s former registered agent and to the wrong address – the corporation’s former place of business that had been closed for more than a year.  The corporation’s ex-registered agent failed to notify the corporate managing partner of the lawsuit and the default order.

The Court also noted that plaintiff failed to send court orders directly to the corporate managing partner, even though the managing partners’ address was prominently listed in various corporate bankruptcy filings.  Because of this, the Court agreed with the trial court and found that defendant demonstrated a reasonable excuse for not appearing in and defending the underlying case.  (¶¶ 14-16).

Take-aways: This case presents a good snapshot of Section 2-1401 motion practice including the required showings necessary to vacate a dated judgment (between 31-730 days old).  It also shows the perils of not properly serving default orders on a corporate defendant.

When dealing with a defunct or financially foundering corporation that’s not represented by counsel, I always try to serve the corporation at its registered office or, failing that, I serve a corporate officer.  If necessary, I hire a process server to skiptrace the corporate principals so I can show the court I did all I could to notify the corporate defendant of a default order or judgment.

Discovery Sanctions and Getting Medical Records Into Evidence – Illinois Case Note

In Fraser v. Jackson, 2014 IL App (2d) 130283, the Second District affirmed a $600K-plus jury verdict for the personal injury plaintiff.  The Court also upheld the trial court’s exclusion of defendant’s medical expert testimony at trial and found that the defendant failed to answer plaintiff’s request to admit medical records in good faith.

Discovery Sanctions: Rule 219 and 213 Interplay

Illinois Supreme Court Rule 213(f)(3) requires a party, upon written interrogatory to identify controlled expert witnesses and provide testimonial subjects, conclusions, opinions, qualifications and any written reports.  SCR 213(f)(3).  The rule demands strict compliance.  Rule 219 provides a trial judge with an array of sanctions options including barring testimony from a party or its expert where it fails to comply with discovery rules or orders.  SCR 219(c)(iv).  Sanctions are committed to the trial court’s discretion and the purpose of sanctions is not to punish; but to motivate discovery compliance. (¶¶ 28-29).

 The Court found that the trial court properly barred defendant’s medical expert from testifying.  The defendant violated several discovery orders and its retained expert failed to respond to a documents subpoena despite repeated requests.  The trial judge gave defendant many chances to comply with discovery and entered progressive sanctions before barring outright the defendant’s expert from testifying.

Medical Records: Evidentiary Foundation Rules

The Court also held that plaintiff laid a sufficient foundation for the admission of his medical bills in evidence.

In Illinois, the evidentiary foundation for admitting medical records can be established by a doctor’s deposition testimony or through testimony of a non-doctor employee familiar with the medical practice’s billing methods and reasonableness of the charges. (¶40).

At trial, the plaintiff offered evidence deposition testimony of several treating physicians and a medical billing specialist – all of whom testified that plaintiff’s medical treatment and bills were reasonable and commensurate with the type of injury that plaintiff suffered in the car crash.  This testimony cumulatively satisfied the foundation requirements for admitting medical bills into evidence.

 Costs and Attorneys’ Fees (Rule 219(b) and 216 interplay)

 The Court upheld the trial court’s $4,000 plus sanctions award against defendant for failing to respond in good faith to plaintiff’s request to admit that the medical bills were reasonable and necessary. 

Illinois law allows a plaintiff to utilize a Rule 216 Request to Admit to seek admissions that his medical treatment and related expenses were reasonable and necessary in view of the plaintiff’s injury. 

Rule 219(b) allows a plaintiff to recover fees and costs where he proves a requested fact that the defendant denies where the denial isn’t in good faith, based on privilege or some other permissible reason – even if the defendant doesn’t have a specific intent to obstruct the litigation process.  SCR 219(b), ((¶¶44-46).

The court found the defendant’s failure to admit the reasonableness and amount of plaintiff’s medical bills was not in good faith.  Because of the defendant’s denial, the plaintiff had to open up a case in another state (Wisc.) and subpoena a medical records agent to testify telephonically at trial.  The Court found that because defendant made plaintiff jump through so many logistical hoops to get a billing agent to testify on a mundane issue, the trial court’s fees and costs award was proper.  (¶47).

 Take-aways:

– A trial court has wide latitude to assess discovery sanctions including barring witnesses;

– A request to admit a fact that’s not subject to meaningful dispute should be admitted by the opposing side.  Otherwise, the party denying the requested fact or document will have to pay the requesting party’s fees and costs incurred in proving that fact/document.

 

I Think I Lost My Headache: Album Review, “Rated R”, Queens of the Stone Age

After more than a decade of robotically calling Appetite for Destruction the “best album ever!!” I was jonesing for something fresh.  A friend turned me on to Queens of the Stone Age in the Y2K era and to this day, I’m glad he did.
While QOTSA’s “cocaine pop,” “stoner metal,”, “doom metal” and “desert metal,” (oh – let’s not forget, a “poppier” Soundgarden(!)) labels intrigued me, what really piqued my interest was the band’s rock pedigree.  Front man Josh Homme’s former association with early 90s’ sludge-metal monolith, Kyuss, probably my all-time favorite musical act, set my expectations at an almost impossible level. I expected Rated R to wow me and it did. But not at first and not in the way I anticipated.
Expecting to hear down-tuned Sabbath-like riffs on every track, I was surprised by Rated R’s dearth of saturnine molten guitar chords that were Kyuss’s signature.
It took about six full listens to truly appreciate Rated R musical depth and reach.  The album defies pithy categorization, with nearly each song demonstrating a different genre.
There’s the punkish/garage-band jams “Feel Good Hit of the Summer”- an ode to recreational pharmaceuticals – and “Quick and to the Pointless” – a Ballroom Blitz-type number complete with electro handclaps and a “yeah yeah yeah” cheerleader chorus.
The album also offers pseudo-psychedelic offerings “Auto Pilot”and “Better Living Through Chemistry” – a trippy track with aural fits and starts that’s suffused with fuzz guitar and meandering bass lines.  “Better Living”‘s polished and timeless percussion stands out, too.
There’s the Top-40 pop confection “The Lost Art of Keeping a Secret.”  It’s the one you’d likely karaoke to and, to me, evokes Disraeli Gears-era Cream; what with it’s fat guitar chords and a catchy chorus.
“In the Fade” is an atonal, darkly-tinged track sung hauntingly by the haunting Mark Lanegan (he of Screaming Trees fame). ” Leg of Lamb” features a quirky guitar hook that serves as counter-point to the song’s hypnotic vocals and disturbing lyrics.
“Monsters in the Parasol,” often QOTSA’s live opener, plays as a straight-forward rocker complete with non-sequitur lyrics that are apropos of the song’s acid trip aesthetic. (“Paul’s dead, he’s warped and bubbly; oh well.”)
After choking down the acoustic filler “Lightning Song,” I settled in for what I now know is the album’s crowning moments.
When the UK rock magazine NME called Tension Head one of the greatest rock songs ever “realised,” I dismissed it as across-the-pond hyperbole.  But it’s actually not. ‘Tension’ starts with a biting, down-tuned guitar intro (think accelerated “Into the Void”) then morphs into all-out death-metal cochlear assault overlaid by bassist Nick Oliveri’s guttural howls. The song’s searing fretwork and frenzied bass runs make this Rated R‘s high point.
I Think I Lost My Headache the final track, is the record’s second shining moment.  The track begins with a clean, haunting riff reminiscent of early Soundgarden/late Sabbath and features brilliant use of steel drums. ‘Headache’ also features flawless off-note percussion (think A-game Neil Peart), a crunchy guitar hook and Josh Homme’s signature falsetto.
It’s a pity “Headache”‘s final moments are hijacked by a monotonous horn section playing on a continuous loop.  This questionable recording studio gambit detracts from a song that has all the makings of a (pre-horns) magnum opus.  By my count, Rated R features eleven songs with about as many musical styles. It lives up to the hype that precedes it and showcases the band’s varied talents and influences.
While QOTSA isn’t Kyuss (a sui generis band imho), Rated R stakes out some unique territory in rock ecosystem.  Josh Homme and crew clearly cement their status as top-level rock architects.