Paying the Piper When You Don’t Follow the Tune: Default Judgment Upheld Against Asbestos Defendant Paying the Piper When You Don’t Follow the Tune: Default Judgment Upheld Against Asbestos Defendant

Paying the Piper When You Don’t Follow the Tune: Default Judgment Upheld Against Asbestos Defendant in Marion County, Indiana after Company Overlooks Electronic Notification of New Lawsuit

The Underlying Case

Plaintiffs Larry and Loa Myers filed a complaint on April 30, 2014 in Marion Superior Court 2, alleging injuries caused by exposure to asbestos-containing products and jobsite exposures. In their lawsuit, Plaintiffs named a number of defendants, including Dalton Corporation. Dalton’s registered agent received service of process and forwarded it electronically to the corporate controller of Dalton’s parent company, Neenah Enterprises, Inc. The controller was designated as Neenah’s contact for receipt of service with the registered agent, and was responsible for then forwarding copies of lawsuits served on the company to Neenah’s general counsel, who managed litigation for all of Neenah’s subsidiaries, including Dalton. Unfortunately, the controller, who had been hired in that role in late 2013, had not been informed and was unaware that his immediate predecessor received service of process electronically and then forwarded paper copies of the lawsuit to Neenah’s general counsel.

In this case, after receiving service of process from the registered agent, the current controller did not forward notice of the lawsuit to Neenah’s general counsel, or to anyone else in the parent and subsidiary companies, not realizing he was the only one at either company receiving notice of new lawsuits. Because the general counsel was accustomed to receiving paper copies of new suits from the controller, he didn’t realize that they were actually arriving electronically and, as a result, was not aware that Dalton had been named in an asbestos personal injury lawsuit.

Dalton didn’t enter an appearance or respond to the complaint. Plaintiffs moved for a default judgment against Dalton on September 24, 2014, and the court granted the motion, entering a default judgment against Dalton on October 3, 2014. The case proceeded vigorously against a number of remaining defendants, and involved extensive discovery, substantive filings, voluntary dismissals and orders on summary judgment motions, some of which have been taken up on appeal. In October of 2015, over a year after the court entered the default judgment, Dalton happened to receive a paper copy of the service list from another defendant’s pleading in the case. Dalton moved to set aside the default judgment on December 23, 2015. The court denied Dalton’s motion for relief from default judgment on March 21, 2016.

Defendant’s Arguments Against Default Judgment

Dalton argued that it was entitled to relief from the default judgment under Indiana Trial Rule 60, noting long-standing case law for the proposition that Indiana prefers cases to be determined on their merits without “resort to procedural trap doors.” Appealing to the court’s discretion to set aside the default judgment on equitable grounds, Dalton described an “unprecedented confluence of circumstances” leading to the company being in default. Moreover, Dalton contended that it had meritorious defenses to Plaintiffs’ claims, citing Huntington Nat’l Bank v. Car-X Assoc. Corp., 39 N.E. 652, 655 (Ind. 2015) for the proposition that it only needed to make a prima facie showing of a meritorious defense. Among other facts, Dalton asserted that it (1) it had not been named as a defendant in any asbestos lawsuit related to its Warsaw, Indiana cast iron foundry in the last ten years, and (2) no employee had asserted a workers’ compensation claim regarding asbestos exposure at the foundry.

Plaintiffs’ Arguments for Upholding Default Judgment

Plaintiffs first pointed out that Dalton, as the moving party, had the burden to establish grounds to overturn the judgment. They also noted that, if the judgment were set aside, they would incur time and expense conducting discovery on Dalton, resulting in inequitable burdens on Mr. Myers, who was of advanced age and in dire health. Moreover, Dalton should have foreseen the issues with its internal lawsuit notification problem, which were entirely of its own making, and could have easily resolved it.

Dalton’s motion should be denied under Trial Rule 60(B) because it was filed more than one (1) year after the judgment was entered. Plaintiffs argued that Huntington was inapplicable here because, in that case, the motion was set aside three (3) weeks after it was issued and little to no activity had occurred in the case. Here, there had already been substantial discovery conduct, motions and other documents filed, and a trial date had been set.

Plaintiffs further contended that Dalton’s motion also failed under T. R. 60 because Dalton had failed to make even a prima facie showing that it had meritorious defenses to Plaintiffs’ claims. In Plaintiffs’ view, to meet this burden, Dalton would have needed to prove that it did not have any asbestos at its premises. Dalton’s ten (10) year search for prior asbestos claims was inadequate due to the 10 to 50 year latency period between asbestos exposure and asbestos-related disease. Further, it would not be uncommon for only one (1) person to make a claim for an asbestos-related disease because asbestos exposure resulting in disease is relatively rare.

The Court’s Decision

The Court first ruled that Dalton could not obtain relief under the grounds specified in T.R. 60(B) (1) – (4) (which includes mistake, surprise and excusable neglect), because relief requested under those grounds must be made within one year from the date of the judgment—a requirement Dalton failed to satisfy. Turning to the only remaining option for setting aside the default judgment—the catch-all provision of T.R. 60(B)(8)—the Court noted that this rule allows relief “for any reason” other than those specified in T.R.(B) (1) – (4), and because Dalton was pleading mistake and excusable neglect under sub-paragraph (B) (1), these grounds were not properly considered under T.R. 60(B)(8)’s catch-all provision. Nonetheless, turning to Dalton’s argument under 60(B)(8), the Court found that Defendant failed to present an equitable or other reason to set aside the default judgment, agreeing with Plaintiffs’ contention that Dalton’s failure to respond was solely of its making, or that of its parent company, Neenah. Balancing the respective hardships of all parties, the Court concluded that equitable reasons did not warrant setting aside the default judgment.
 
Take Aways
 
  • Based on this cautionary tale, it is imperative for companies, and particularly their legal departments, to periodically review and update, if necessary, the processes by which they receive and direct notifications of new lawsuits to avoid default judgments. Ideally, there should be multiple checks in place so that a personnel change does not result in the scenario described above.
  • Furthermore, in the above case, the Defendant’s chances of prevailing on its motion for relief from the default judgment would have been greatly enhanced—and in all likelihood would have succeeded—had it filed the motion within one (1) year from the date the default judgment was entered against it. Thus, if a company learns that it has overlooked a new lawsuit, sooner is definitely better in terms of rectifying the situation. If the defendant receives notices of filings from its agent registered to receive service of process, including and particularly motions and orders relating to default judgments, the defendant should act immediately.
Ice Miller's Asbestos Litigation Practice Group has developed significant experience in asbestos litigation, defending clients in these matters since the inception of asbestos litigation approximately thirty years ago. The Asbestos Team has been at the forefront of the laws, changes, rules, and technology of the Marion County Mass Tort Litigation - the hub of Indiana asbestos litigation. Over the years, Ice Miller has represented over 50 Defendants in Indiana and in other jurisdictions in what are often complex, multi-party matters, involving state, national and multi-national product manufacturers, distributors and premises owners. For more information, contact Kevin Knight or a member of our Litigation Practice Group.
 
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
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