MARCY ZAITER V RIVERFRONT COMPLEX LTD
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STATE OF MICHIGAN
COURT OF APPEALS
MARY ZAITER,
UNPUBLISHED
January 25, 2000
Plaintiff-Appellee,
v
RIVERFRONT COMPLEX, LTD., and VIRGIL D.
RILEY,
No. 209212
Genesee Circuit Court
LC No. 96-051397 CL
Defendants-Appellants.
Before: Kelly, P.J., and Jansen and White, JJ.
PER CURIAM.
In this employment discrimination case, defendants appeal as of right from a default judgment
entered in plaintiff’s favor in the amount of $50,000 for defendants’ failure to comply with court orders
compelling discovery. We affirm.
I
Defendants first argue that the circuit court erred in denying their motion to set aside the default
and default judgment because they showed good cause and established a meritorious defense. We
disagree.
We review a circuit court’s ruling on a motion to set aside a default judgment for abuse of
discretion. Park v American Casualty Ins, 219 Mich App 62, 66; 555 NW2d 720 (1996). MCR
2.313(B)(2)(c) authorizes a default judgment as a sanction for discovery abuses, “but it is a drastic
measure and should be used with caution.” Mink v Masters, 204 Mich App 242, 244; 514 NW2d
235 (1994). Before imposing the sanction of default judgment, a court should consider whether the
failure to respond to discovery requests extends over a substantial period, whether there was a court
order directing discovery that was not complied with, the amount of time that elapsed between the
violation and the motion for default judgment, and whether willfulness has been shown. Id. at 244.
“The sanction of default judgment should be employed only when there has been a flagrant and wanton
refusal to facilitate discovery and not when failure to comply with a discovery request is accidental or
involuntary.” Id. Where the circuit court validly exercises its discretion in ruling on a motion to set aside
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a default judgment, appellate review is sharply limited. Alken-Ziegler, Inc v Waterbury Headers
Corp, __ Mich __ ; 600 NW2d 638, 642 (1999).
Under MCR 2.603(D), except when grounded on lack of jurisdiction over the defendant, a
motion to set aside a default should be granted only if good cause is shown and an affidavit of facts
showing a meritorious defense is filed1.
At the hearing on defendants’ motion to set aside the default judgment, the circuit court went
through the record in painstaking fashion, noting that the discovery requests were filed with plaintiff’s
complaint in October 1996, plaintiff’s first motion to compel was filed in April 1997, the court’s first
order compelling discovery was entered on April 14, 1997, and that defendants did not thereafter
provide the discovery requested. Plaintiff’s motion for default or in the alternative, sanctions, was filed
on June 24, 1997 and noted that plaintiff had communicated with defense counsel several times
regarding the outstanding discovery requests, but had not received responses, and that defense counsel
did not produce two persons for deposition at a pre-arranged date and time. The circuit court noted
that it signed the second order compelling defendants compliance on July 15, 1997. The court further
noted that plaintiff filed her motion for default on July 25, 1997, and noticed the hearing for August 25,
and again for September 8, 1997, that neither defense counsel nor defendants appeared at the
September 8 hearing, and that it granted a judgment of $50,000 but that “in fairness to everybody”
asked counsel to file the judgment under the seven-day rule. No objection was received and the court
entered the default judgment on September 22, 1997. Although the circuit court diplomatically avoided
a ruling on the question whether defense counsel’s inaction had been willful, we conclude that the court
properly and sufficiently considered the Mink factors.
Defendants argued below that the circuit court sent several documents to a former address of
defense counsel, that defense counsel received no correspondence from plaintiff’s counsel after May 9,
1997, and that defense counsel was unaware that default proceedings had been taken against
defendants until plaintiff’s counsel faxed her a copy of the default judgment on or about September 24,
1997. Defendants argued that their counsel “was actively defending this matter prior to entry of the
Default, and in fact had communicated with Plaintiff’s counsel regarding discovery.” Defendants alleged
that they had established good cause and that based on mistake, surprise, inadvertence, and excusable
neglect, the circuit court was empowered to set aside the default.
The record does not support defendants’ claims that they failed to receive the court’s orders
compelling discovery and did not learn of the default proceedings until late September 1997.2
However, assuming that defendants did not receive the motions, notices of hearing and the many letters
that the record indicates plaintiff’s counsel mailed to defense counsel’s proper address, defense counsel
admitted receiving by fax a letter from plaintiff’s counsel dated May 9, 1997. Plaintiff’s counsel referred
in that letter to, and enclosed a copy of, the circuit court’s first order compelling that defendants
produce discovery within ten days, i.e., no later than April 24, 1997, and also stated in the letter that the
order had been previously provided to defense counsel. 3 There is thus no dispute that defense counsel
knew in early May of 1997 that defendants were required to comply with a court order compelling
discovery and had already missed the due date.
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At the October 27, 1997 hearing on defendants’ motion to set aside the default judgment,
defense counsel stated that she thought she had answered the interrogatories and complied with the
circuit court’s discovery order by mailing the responses to plaintiff on May 12, 1997. Defense counsel
stated that she did not have the portion of the file containing the interrogatory answers with her in court,
but that she was unaware that plaintiff had not received the answers, and she could provide proof that
she answered the interrogatories upon returning to her office.
Upon returning to court on October 29, defense counsel explained that when she reviewed the
file, she discovered that the responses to plaintiff’s discovery were erroneously sent to the wrong court
and the wrong opposing counsel:
I searched my records when I returned to the office on Monday [October 27, 1997]
and did in fact discover some new information that I wanted to bring to the Court’s
attention.
It was my position Monday that in fact I had prepared and filed Answers to
Interrogatories. What I discovered were the completed Answers to Interrogatories.
However, the proof and the cover letter revealed information to me that I suppose in
many senses increases my culpability in this matter.
The cover letter and the proof of service in fact indicated service upon the – the proof
of service upon the 68th Judicial District Court at 630 South Saginaw. The proof of
service indicates service of the answers upon Stewart J. Rice at –on Telegraph Road in
Bingham Farms. That name is one that is recognized to me as being the attorney of
record for a plaintiff in a case that was pending in the 68th Judicial District Court, also
involving this very same defendant. It’s my belief, your Honor, that the proof and the
answers were filed in the wrong case. If they were returned to my office, they were not
brought to my attention.
I do recognize the initials of the person who prepared the cover letter and proof of
service. However, it apparently never got to Mr. Lenhoff’s [plaintiff’s counsel]
attention. The answers are dated May 12, as is the cover letter and the proof of
service. They are completed answers and, in addition, the complete personnel file of
the plaintiff was produced at that time. It’s with a great deal of dismay, however, that I
would indicate to the Court that they apparently were produced to an attorney unrelated
to this case.4
We conclude that defendants failed to establish the first prong of the “good cause” inquiry: a
substantial defect or irregularity in the proceeding on which the default was based. A substantial defect
or irregularity in procedure must have prejudiced the defendant to constitute good cause. Alycekay Co
v Hasko Construction Co, 180 Mich App 502, 506-507; 448 NW2d 43 (1989). The actual
irregularities in the instant case were insubstantial. The fact that the circuit court mistakenly sent a
scheduling order and trial date, and notice of mediation hearing to defense counsel’s former business
address did not prejudice defendants. Defense counsel admits that both were forwarded to her and the
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record is clear that mediation was not held in the instant case. Plaintiff concedes that her June 23, 1997
motion for default or for attorney fees, set for hearing June 30, should have been hand-delivered to
defense counsel under MCR 2.119(C)(1)(b), in order to reach defense counsel seven days before the
hearing, but was instead mailed first-class on June 23. This deviation from the court rule is irrelevant to
the issues before us as defense counsel asserts that she never received the motion, not that she received
it with inadequate time to respond.
Defendants also argue that it would have been impossible to comply with the circuit court’s
second discovery order, entered as a result of the June 30 hearing, even if they had received notice of it
because the court signed the order on July 15, 1997 and the order required compliance on or before
July 11. The circuit court’s July 15 order requiring that the interrogatories be answered by July 11, and
providing that a default judgment will be entered if the answers are not provided, was entered pursuant
to MCR 2.602(B)(3). The record indicates that plaintiff served a proposed order under the seven-day
rule on June 30, 1997, setting forth defense counsel’s proper address, the court received no objection,
the order was submitted to the court for signature on July 11, 1997, the court signed the order on July
15, 1997, and the order was entered on July 16, 1997. Defendants never responded to the order at all
and cannot now challenge the default on the basis that the date for providing answers preceded the date
the order was actually entered, although the compliance date was after the hearing and after the date the
proposed order was sent to defense counsel. Thus, we conclude that defendants did not show a
substantial defect or irregularity in the proceedings upon which the default was based.
Nor did defendants offer a reasonable excuse for failure to comply with the requirements that
created the default. Defense counsel answered plaintiff’s complaint in November 1996 and
undisputedly was contacted by telephone and by fax between that time and May 9, 1997. Defense
counsel admits that her former law firm forwarded the scheduling order and trial date to her in January
1997. The scheduling order provided that discovery had to be completed by May 1, 1997, and
witness lists and detailed damage specification filed by February 15, 1997, and that mediation would be
held after June 1, 1997, and trial on December 2, 1997. Defense counsel stated at the hearing on
defendants’ motion to set aside the default judgment that she received plaintiff’s counsel’s letters of
February 4, 1997 and March 7, 1997, she believed by fax. In the former, plaintiff’s counsel stated that
she had not received defendants’ responses to plaintiff’s first interrogatories and requests for production
of documents that had been served with the complaint, that the responses were long overdue, and that if
she did not receive them by February 14, 1997, she would file a motion to compel. Plaintiff’s counsel’s
March 7, 1997 letter reiterated not having received defendants’ responses and stated that defense
counsel had said in a phone conversation on March 6, 1997, that she would produce them no later than
March 14, 1997. Plaintiff’s counsel indicated that if she did not receive the responses by that date, she
would have no choice but to file a motion to compel. The motion was filed and an order was entered.
Plaintiff’s May 9 letter referring to the order and the need to provide answers was received by defense
counsel. Although defense counsel asserts that she believed she filed the answers in compliance with the
court’s order, and that she did not receive the motions and orders filed and entered from May through
the entry of judgment in September, the circuit court was not obliged to either accept defense counsel’s
assertions or conclude that the assertions constituted excusable neglect.
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Under these circumstances we conclude that the circuit court did not abuse its discretion in
finding that defense counsel unjustifiably neglected the instant case when she failed over a five-month
period to make contact with plaintiff’s counsel of any kind, or otherwise investigate the status of the
case.5 Defendants did not establish good cause existed to set aside the default judgment. See Harvey
Cadillac Co v Rahain, 204 Mich App 355, 358-359; 514 NW2d 257 (1994).
Defendants also argued that they showed a meritorious defense, and that the court could set
aside the default even absent good cause. Defendants filed two affidavits below, one of the individually
named defendant, in which he attested that he was the owner and sole shareholder of defendant, that
employment decision-making was handled by the staff at defendant company and not by him, and that
he had no knowledge of plaintiff’s pregnancy at the time she was terminated and had never met plaintiff.
The second affidavit was of defendant’s general manager, Vallorie Battin, in which she stated that
plaintiff had been employed as an x-ray technician at defendant company from June 22, 1994 until May
21, 1996, and that in early 1996 a “management decision was made to eliminate the full time position in
favor of a part time position” because it became apparent that the level of x-ray billings did not justify
the maintenance of a full-time position. The general manager averred that plaintiff was offered a part
time position but declined it, and that plaintiff’s pregnancy was not a factor in the decision to terminate
her.
Plaintiff’s brief in opposition to defendants’ motion to set aside the default judgment argued that
defendants had failed to state a meritorious defense because they presented no facts regarding why
plaintiff’s position needed to be eliminated other than a conclusory statement.
Assuming that defendants’ affidavits showed a meritorious defense, defendants failed to
establish good cause and they were thus not entitled to have the default judgment set aside. See AlkenZiegler, supra at 600 NW2d 644-645 (noting that the “meritorious defense” and “good cause”
requirements are separate and should not be blurred.)6 The circuit court did not abuse its discretion in
denying defendants’ motion to set aside the default judgment.
II
Defendants next argue that the circuit court erred in denying their motion for reconsideration
because they filed a reliance on demand for jury trial, did not waive the right to a jury trial, and were
thus entitled to a jury trial on the issue of damages.
MCR 2.508(D)(3) provides:
A demand for trial by jury may not be withdrawn without the consent, expressed in
writing or on the record, of the parties or their attorneys.
A default settles the question of liability as to well-pleaded allegations and precludes the defaulting party
from litigating that issue. Wood v DAIIE, 413 Mich 573, 578; NW2d (1982). A defaulting party who
has properly invoked his right to jury trial retains the right to a jury trial on the issue of damages if a
hearing is held to determine the amount of recovery. Id. at 583-584. The holding of further
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proceedings on the question of damages is within the trial court’s discretion. Id. at 585; MCR
2.603(B)(3)(b).7
Defendants in the instant case filed a reliance on plaintiff’s jury demand, preserving their right to
a jury trial, Wood, supra at 582-583, and did not thereafter waive that right. The circuit court’s opinion
and order denying reconsideration stated in pertinent part:
Defendants offer the case of Wood v. DAIIE, 413 Mich 573; 321 N.W.2d 653
(1982)[,] as a basis for Reconsideration. In that case, Plaintiff brought an action against
an insurer for personal injury protection benefits due him as a result of injuries incurred
in an accident with the defendant’s insured and demanded a jury trial. Defendant
answered and also demanded a jury trial. Id. at 576. A default judgment was entered
after defendant failed to answer interrogatories and comply with two orders of the court
compelling responses. Plaintiff notified defendant of a hearing on the default judgment
and defendant did not respond. Defense counsel answered interrogatories one day
before the hearing, attended the hearing, but was denied participation in the hearing
itself. Id.
The case was appealed and the Supreme Court of Michigan reviewed the case in order
to definitely decide if when a defaulting party has a right to participate in further
proceedings in order to determine the amount of damages whether the party also has a
right to a jury trial on the damages issue. Id. at 578.
The court stated that it is within the trial court’s discretion whether to hold further
proceedings on the question of damages. Id. However, should the court so decide,
then so long as the party has properly invoked his right to a jury trial, then the party has
a right to have a jury determine the issue of damages. Id. 589.
In the case at bar, it was within the court’s discretion to determine whether a hearing
was necessary to determine damages. Defendant did not attend the default
proceedings, the court did not find a hearing necessary and based damages on the
mediation award amount. Therefore, because the court did not find a hearing
necessary, pursuant to Wood, supra, a jury trial as to damages is not warranted.
Further, pursuant to the standards for a Motion for Reconsideration, an error which the
party seeks to correct must have been committed pursuant to an issue previously before
the court. Defendants have never raised the issue of a right to a jury trial prior to this
Motion for Reconsideration. Additionally, this court has concerns whether it has
jurisdiction to further decide this matter as Defendants have filed an appeal with the
Court of Appeals.
CONCLUSION
The Plaintiff’s [sic defendants’] cited authority of Wood, supra, does not change the
basis upon which the court made its decision regarding the Motion to Set Aside the
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Default Judgment. As such, the court finds that the Plaintiff has failed to demonstrate a
palpable error by which the court and parties have bene misled and can show that a
different disposition of the motion would result from correction of this error as required
by MCR 2.119(F). . . .
Although in ruling on defendants’ motion for reconsideration, the circuit court erroneously stated
that a hearing on damages had not been held and that it had awarded plaintiff an amount based on
mediation, we find no error in the court’s denial of the motion. No mediation was held in the instant
case. At the September 8, 1997 hearing on plaintiff’s motion for default judgment, defendants and
defense counsel did not appear and plaintiff’s counsel stated that plaintiff was present if the court wished
to take testimony regarding damages. The circuit court called plaintiff, who testified that she had
suffered approximately $18,000 in economic loss and suffered emotional distress as a result of her
termination. Plaintiff testified that since her termination she had been diagnosed with depression and that
the depression nearly caused her to miscarry. Plaintiff’s counsel then requested judgment in the amount
of $50,000, which the court granted. Under Wood, because the court heard evidence regarding
damages, defendants’ properly preserved right to a jury determination of the issue of damages must be
recognized. However, defendants were not present at the hearing, and did not assert the right to a jury
trial when the hearing was held. Further, defendants did not raise the issue of their entitlement to a jury
trial on damages in their motion to set aside the default judgment. Because defendants raised the jury
trial issue for the first time in their motion for reconsideration, we cannot conclude that the circuit court
abused its discretion in denying the motion for reconsideration. See Charbeneau v Wayne Co
General Hosp, 158 Mich App 730, 733; 405 NW2d 151 (1987).
Affirmed.
/s/ Kathleen Jansen
/s/ Helene N. White
1
The “good cause” and “meritorious defense” requirements under MCR 2.603(D)(1) are separate and
should not be blurred:
We are persuaded that the analytical difficulty that has arisen in this case and prior cases
is due, in large part, to rote recitation of the “good cause” inquiry that was articulated
by Honigman & Hawkins [Authors’ Comments to 2 Honigman and Hawkins, Michigan
Court Rules Annotated (2d ed), p 662 of GCR 1963, 520.4] to include (1) a
substantial irregularity or defect in the proceeding upon which the default is based, (2) a
reasonable excuse for failure to comply with the requirements that created the default,
or (3) some other reason showing that manifest injustice would result if the default is not
set aside. . . MCR 2.603(D)(1) and its predecessor state only that a party seeking to
set aside a default or a default judgment must both file an affidavit of meritorious defense
and show good cause.
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The first two prongs of the Honigman & Hawkins “good cause” test are unremarkable
and accurately reflect our decisions. It is the third factor, “manifest injustice,” that has
been problematic. The difficulty has arisen because, properly viewed, “manifest
injustice” is not a discrete occurrence such as a procedural defect or a tardy filing that
can be assessed independently. Rather, manifest injustice is the result that would occur
if a default were to be allowed to stand where a party has satisfied the “meritorious
defense” and “good cause” requirements of the court rule. When a party puts forth a
meritorious defense and then attempts to satisfy “good cause” by showing (1) a
procedural irregularity or defect, or (2) a reasonable excuse for failure to comply with
the requirements that created the default, the strength of the defense obviously will affect
the “good cause” showing that is necessary. In other words, if a party states a
meritorious defense that would be absolute if proven, a lesser showing of “good cause”
will be required than if the defense were weaker, in order to prevent manifest injustice.
[Alken-Ziegler, Inc v Waterbury Headers Corp, supra.]
2
Plaintiff’s complaint, which was served on defendants at their Flint address, was served on October 9,
1996, together with the interrogatories and requests to produce at issue. Defense counsel filed
defendants’ answer and affirmative defenses on November 4, 1996, setting forth defense counsel’s
address on Edward Avenue in Madison Heights. Although in early 1997 the circuit court sent a
scheduling order and trial date of December 2, 1997 to defense counsel at her previous work address
on Long Lake Road, defense counsel acknowledged receiving it in January 1997, as it was forwarded
to her by her former law firm. Plaintiff filed her witness list on February 13, 1997 and a motion to
compel answers to interrogatories on April 2, 1997, both of which state defense counsel’s proper
address. The lower court record contains the notice of hearing pertinent to plaintiff’s motion to compel,
stating that it was served on defense counsel at the Madison Heights address by first-class mail on
March 26, 1997. The circuit court’s order compelling defendants to answer interrogatories, entered on
April 14, 1997, also properly states defense counsel’s address in Madison Heights. The record also
contains a notice of hearing for June 30, 1997 for plaintiff’s motion for default or in the alternative
$2,500 in attorney fees, stating that defendant had failed to comply with the court’s order entered on
April 14, 1997 and had failed to produce its agents for deposition. The notice states it was sent first
class mail to defense counsel on June 23, 1997 at the Madison Heights address. A proposed order
submitted under the seven-day rule, filed July 2, 1997, also properly states defense counsel’s Madison
Heights address. The circuit court’s order compelling defendants to respond to plaintiff’s interrogatories
and requests to produce by July 11, 1997 to avoid entry of a default judgment, entered on July 16,
1997, properly states defense counsel’s address in Madison Heights. Plaintiff’s motion for default
judgment, filed on July 25, 1997, states defense counsel’s address in Madison Heights, as does the
notice of hearing, which states that it was sent by first-class mail to defense counsel at the Madison
Heights address. The order plaintiff served under the seven-day rule on September 10, 1997 and the
default judgment entered on September 22, 1997 do as well.
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3
Plaintiff’s counsel’s May 9, 1997 letter, sent via facsimile and regular mail to defense counsel’s
Madison Heights address, stated in pertinent part:
Pursuant to your request, I have adjourned the depositions set for Valerie [sic] Battin
and Trina McDaniel for today’s date. Also, it is my understanding that you have
adjourned the deposition of my client, Marcy Zaiter [,] on today’s date at 2:00 p.m.
You informed me during our telephone conversation on Thursday, May 8, 1997, that
you would be unable to produce one of the deponents on Friday for the depositions.
More importantly, you informed me that you would not be providing me with
Defendant’s [sic] Answers to Plaintiff’s First Set of Documents and Plaintiff’s
First Request for Production of Documents before the depositions. Accordingly,
the depositions of Trina McDaniel and Valerie [sic] Battin have been canceled . . . .
Also, during our telephone conversation, you reassured me that you would provide me
Defendant’s [sic] Responses to Plaintiff’s First Set of Interrogatories and Document
Requests, no later than Monday, May 12, 1997. As you know, on April 14, 1997,
Judge Beagle entered an Order in this case compelling Defendant [sic] to respond
to Plaintiff’s First Set of Interrogatories and Request to Produce within ten days
of the Order. I enclose herein a copy of the Order, which was provided to you,
compelling Defendant [sic] to respond . . . In other words, Defendant [sic] was
required under Court Order to provide these said discovery responses no later than
Thursday, April 24, 1997. As such, Defendant’s [sic] responses are long over due
[sic]. Thus, if Plaintiff is not in receipt of Defendant’s [sic] responses by Friday, May
23, 1997, I will have no other choice but to file a Motion under MCR 2.313(B) for
Defendant’s [sic] failure to comply with the Court Order to respond to Plaintiff’s
discovery requests.
4
The completed answers are not in the lower court record and there is no indication that they were
presented to the circuit court at the October 29 hearing.
5
The circuit court stated from the bench:
Now, it has been five months since defense counsel last made contact with the plaintiff,
and they have stated that the lack of mail failed to give them notice of events or her need
to contact plaintiff’s counsel. However, as the Court has gone through the file and
received oral argument Monday, plaintiff appears to have sent all the mail to the
Edwards Road address, which defendant [sic] claims is counsel’s correct address. It’s
exactly this long period of time without contact which should have at least put
defendant’s [sic] counsel on notice of a need to update itself with the status of the case,
even – or – either through placing a phone call to plaintiff’s counsel or to this court.
An attorney certainly has an ethical duty to act with reasonable diligence and
promptness in representing a client according to Michigan Rules of Professional
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Conduct. Defendant’s attorney allowed five months to pass without an attempt to
contact plaintiff or this court.
Defendant [sic defense counsel] offers as an explanation for her lack of contact that
control over this case, as nonreceipt of mail. She asserts that this is good cause and that
a meritorious defense exists. However, this Court is convinced that the receipt of mail
should not be the only method whereby an attorney should be prompted to keep
abreast of the progress and status of a case. The purpose of a default judgment is to
discourage attorneys from failing to represent their clients in a reasonably diligent and
prompt manner. Unfortunately, it has the effect of adjudicating matters not on the merits
alone. However, it is appropriate in specific circumstances and, unfortunately, the
Court believes that this is one of them.
This Court makes – takes no pleasure in denying a motion to set aside a default
judgment, and counsel has appeared here today and she has been candid enough to
indicate that the interrogatories appear to have been prepared and they may have
inadvertently been sent to another court and they may very well have been sent to
another attorney. Now, why those things didn’t come back to her office, or this court,
or the other attorney, I am not sure. It’s an unfortunate situation, and counsel has been
respectful each time she has appeared here.
It’s a difficult measure to be taken, but it is the ruling of the Court that the Motion to Set
Aside the Default Judgment should be denied.
6
See note 1, supra.
7
MCR 2.603(B)(3)(b) provides:
If, in order for the court to enter judgment or to carry it into effect it is necessary to
***
(ii) determine the amount of damages,
***
the court may conduct hearings or order references it deems necessary and proper, and
shall accord a right of trial by jury to the parties to the extent required by the
constitution.
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