EASTERN CRANE, INC. v. KENTUCKY POWER COMPANY
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JANUARY 6, 2006; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2004-CA-001676-MR
EASTERN CRANE, INC.
v.
APPELLANT
APPEAL FROM LAWRENCE CIRCUIT COURT
HONORABLE C. DAVID HAGERMAN, SPECIAL JUDGE
ACTION NO. 97-CI-00264
KENTUCKY POWER COMPANY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
COMBS, CHIEF JUDGE; JOHNSON AND McANULTY, JUDGES.
JOHNSON, JUDGE:
Eastern Crane, Inc. has appealed from a final
order and judgment of the Lawrence Circuit Court entered on July
16, 2004, sustaining the motion of Kentucky Power Company (KPC)
to dismiss, with prejudice, Eastern's breach of contract
complaint pursuant to CR 1 41.02(1) for failure to prosecute.
Having concluded that the circuit court did not abuse its
discretion in dismissing the complaint, we affirm.
Due to the nature of the argument on appeal, a
detailed discussion of the procedural timeline of this case, as
well as a related bankruptcy action, is necessary.
1
Kentucky Rules of Civil Procedure.
In February
1993 KPC contracted with Eastern to remove ash from the
settlement ponds at the Big Sandy Power Plant in Lawrence
County, Kentucky.
Several months later, Eastern subcontracted
the work to Choo-Choo City Dredging, and the work was completed
in September 1993.
After the completion of the job, Eastern
sent KPC a statement indicating the balance due and this amount
was paid in full by KPC.
Although Eastern believed it had been
shorted by the way KPC measured the ash ponds, Eastern never
submitted another bill to KPC.
Instead, on December 30, 1997, over four years after
KPC's final payment, Eastern filed the complaint in the
underlying action, naming as defendants KPC and Mitch Thomas,
the plant manager of the Big Sandy Power Plant.
Eastern was
represented by attorneys Marrs Allen May 2 and John Doug Hays.
The complaint alleged: 1) that beginning on January 17, 1993,
Eastern entered into a series of contracts with KPC, and despite
fully performing under those contracts, KPC failed to pay sums
due Eastern; and 2) that KPC and Thomas conspired to compel
Eastern to enter into agreements with two separate labor unions,
despite no requirement in the contract to do so, by threatening
2
One year prior to the filing of this action, Johnny Lequire, Eastern's
president and sole shareholder, filed a personal Chapter 7 bankruptcy
petition. 11 U.S.C.A. § 301 (Supp. 2004); In Re: Johnny Michael Lequire and
Deborah L. Stacy, No. 96-70983 (Bankr. E.D. Ky. filed October 22, 1996).
Several months after filing the complaint for Eastern in the Lawrence Circuit
Court, Mr. May was appointed counsel for the bankruptcy trustee in Lequire’s
personal bankruptcy.
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to terminate present and future contracts.
The complaint
requested compensatory and punitive damages.
In the two years following the filing of the
complaint, the record indicates that Eastern sought an order to
compel discovery, deposed three KPC witnesses, filed a
supplemental request for production of documents, and filed a
motion for pretrial conference and to set trial.
One month
short of the two-year filing anniversary, a trial was scheduled
for June 6, 2000.
In the months leading up to the trial date, the
parties filed witness and exhibit lists, took three depositions,
and Lequire gave the first of five depositions.
On the eve of
trial, on joint motion of the parties, the trial was continued
subject to rescheduling by motion of either party.
A couple of months after the continuance, in August
2000, Eastern's request for a trial date was converted to a
status conference.
The case was referred to mediation.
Mediation did not occur until March 2001, and was not
successful.
In the months before mediation occurred, Lequire
gave four depositions.
In May 2001, the month following the unsuccessful
mediation, Eastern again moved for a trial date.
court set the matter for trial on March 11, 2002.
The circuit
The case lay
dormant for nine months, from May 2001 until January 2002, when
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both defendants filed motions for summary judgment.
On the eve
of trial, all parties agreed to postpone the March 11, 2002,
trial date, and the circuit court granted partial summary
judgment to both defendants, dismissing the conspiracy claims
against KPC and Thomas as being outside the statute of
limitations, leaving only Eastern's claim for breach of
contract.
A flurry of activity occurred in May 2002.
At
Lequire's request, Eastern's attorneys were allowed to withdraw
as counsel.
The order entered on May 10, 2002, gave Eastern 30
days to obtain new counsel and for new counsel to enter an
appearance.
Eastern.
The order was served on Lequire, as president of
Three days later, both judges of the Lawrence Circuit
Court recused from further proceedings in the case, and Lequire
filed a pro se motion for continuance, citing the search for new
counsel.
The case remained without a judge for over two months
until a special judge was appointed on July 25, 2002.
In August 2002 there was another flurry of activity.
KPC filed a motion to dismiss the remaining claim for breach of
contract pursuant to CR 41.02(1) for Eastern's failure to secure
new counsel by the circuit court’s ordered deadline.
The motion
was served on Lequire, and the order granting partial summary
judgment was attached as an exhibit.
Lequire sent a letter to
the circuit court on behalf of Eastern, asking for additional
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time to obtain counsel, stating that he had been unaware of the
summary judgment until June 2002, when he personally reviewed
the case record.
Several days later, Lequire, pro se, responded
to KPC's motion to dismiss, asking for his day in court.
On November 21, 2002, six months after Eastern's
counsel was allowed to withdraw, and five months after the
circuit court ordered deadline for Eastern to obtain counsel,
Jennifer S. Whitlock entered an appearance as counsel for
Eastern.
With the exception of this entry of appearance, no
activity occurred in the circuit court case from August 2002
until August 2003.
While the circuit court case lay dormant, the
bankruptcy case was active from August to October 2003.
During
this time frame, May was replaced as counsel for the bankruptcy
trustee, and on August 29, 2003, the new counsel for the
bankruptcy trustee filed in the circuit court case, on behalf of
Eastern, an appearance motion and a motion to intervene as the
true party in interest, stating as a basis the protection of the
interest of Lequire's bankruptcy estate.
This new counsel also
filed a response to KPC's motion to dismiss, arguing that it was
moot as counsel had now been retained.
In September 2003 KPC filed in the circuit court
action another motion to dismiss the original complaint, citing
lack of prosecution and Eastern's failure to comply with the
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June 10, 2002, deadline for obtaining counsel.
Bankruptcy
counsel objected to KPC's motion, and filed an affidavit from
the bankruptcy trustee.
The affidavit indicated the trustee had
retained May as counsel for Eastern in the circuit court action,
that it did not know he had withdrawn from the case the previous
year, and that it employed new counsel for Eastern as soon as it
secured approval from the bankruptcy court.
Less than one month later the bankruptcy trustee
served notice of abandonment of the bankruptcy estate's interest
in the circuit court case, upon determining that pursuit of the
case would not be cost-effective “due to the complexity of this
matter and Mr. Lequire's deposition testimony in the record . .
. .”
The trustee stated that it also had “grave concerns about
the likelihood of success on the merits and believe[d] that Mr.
Lequire [was] in the best position to proceed on behalf of
Eastern Crane, Inc.”
The case was thereafter abandoned by an
order in the bankruptcy action entered on October 21, 2003, and
an order was entered in the circuit court allowing counsel for
the bankruptcy trustee to withdraw from the circuit court case.
Following the bankruptcy court's abandonment, the
circuit court directed the parties to prepare a memorandum
outlining the time it would take to have the action ready for
trial.
KPC indicated that it would take six to nine months to
get ready for trial, with ten to 12 witnesses still needing to
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be deposed.
Also, KPC reported that the location of one
undeposed witness was unknown, that nine of 21 witnesses
designated by KPC in 2000 were either retired or no longer with
KPC, and, that the president of Choo-Choo City Dredging had
reported that he did not know if he any longer had any of the
records pertaining to the 1993 Big Sandy Power Plant ash
removal.
Eastern likewise indicated that it would need six
months to prepare for trial, and during that time it would need
to take a minimum of six depositions.
Eastern also filed a
response to KPC's motion to dismiss.
On July 14, 2004, the circuit court sustained KPC's
motion to dismiss for failure to prosecute and stated as
follows:
[T]he record in the case at bar demonstrates
that: (1) Eastern Crane's work at KPC's Big
Sandy Plant occurred eleven (11) years ago
in 1993; (2) Eastern Crane filed its
complaint commencing this action six and
half (sic) (6 1/2) years ago in 1997; (3)
Eastern Crane requested its prior counsel to
withdraw in April, 2002; (4) Eastern Crane
knew sometime prior to April 11, 2002, that
it needed to obtain new counsel to prosecute
the subject action because it asked its
former counsel to withdraw; (5) Eastern
Crane did not comply with the order of May
10, 2002, as it failed to secure new counsel
by June 10, 2002; (6) Eastern Crane neither
sought relief from the order of May 10,
2002, nor requested an extension of time to
secure new counsel; (7) More than fifteen
(15) months passed from May 10, 2002, to
August 28, 2003, before Eastern Crane
secured new counsel (which, in fact, was
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actually counsel for the bankruptcy trustee
of Johnny Lequire, the sole shareholder and
officer of Eastern Crane); (8) the case is
still not ready for trial and will require
at a minimum six (6) months to be readied
for trial with significant discovery still
needing to be accomplished; (9) many of
KPC's witnesses are no longer employed by
KPC or its affiliates and the whereabouts of
at least one (1) undeposed witness is now
unknown; and, (10) six (6) to twelve (12)
depositions remain to be taken of witnesses
who will be questioned about their
recollections of events and conversations
which occurred more than eleven (11) years
ago.
It is a well recognized principal [sic]
in Kentucky law that a trial court is vested
with a broad discretion in determining the
question of whether an action should be
dismissed for want of diligent prosecution.
Modern Heat & Sup. Co. v. Ohio Bank Bldg. &
Equip. Co., Ky., 451 S.W.2d 401 (1970). See
also Jenkins v. City of Lexington, Ky., 528
S.W.2d 729 (1975). Kentucky Rule of Civil
Procedure 41.02(1) specifically authorizes
and empowers a trial court to dismiss an
action as the result of the failure of a[ ]
plaintiff to prosecute his action. What
constitutes a failure to prosecute so as to
warrant a dismissal must be determined by
the circumstances of each particular case.
A lengthy delay may result in dismissal with
prejudice by the trial court. Kurt A.
Phillips, Kentucky Practice, Vol. VII, Rules
of Civil Procedure Annotated, (5th ed.,
1995), at 53. Accordingly, taking into
consideration the foregoing matters as shown
by the record, and recognizing the broad
discretion vested in Kentucky trial courts
to dismiss for want of prosecution,
IT IS HEREBY ORDERED that defendant
Kentucky Power Company's motion to dismiss
the complaint is SUSTAINED and the complaint
filed herein against the aforesaid defendant
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shall be, and hereby is DISMISSED for
failure to prosecute pursuant to C.R.
41.02(1) with prejudice . . . .
This appeal followed.
Eastern argues that the circuit court abused its
discretion in dismissing the complaint for failure to obtain
counsel and for failure to prosecute.
A close reading of these
two arguments reveals, however, that while conceding that there
was a delay in prosecution of the case, Eastern essentially
presents one argument, that the delay was due to attorney May's
failure to keep the bankruptcy trustee aware of the circuit
court case status, specifically that he had withdrawn as
counsel.
Also, a close reading of the final order and judgment
indicates that while KPC argued in their motion to dismiss the
failure of Eastern to follow the circuit court's order in
obtaining counsel in a timely fashion, and the circuit court
considered this argument, it amounted to only one factor in the
circuit court's final decision to dismiss for failure to
prosecute.
We, therefore, will address Eastern's arguments
together.
The circuit court granted dismissal of Eastern's
complaint pursuant to CR 41.02(1) which provides as follows:
For failure of the plaintiff to
prosecute or to comply with these rules or
any order of the court, a defendant may move
for dismissal of an action or of any claim
against him.
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Dismissal pursuant to CR 41.02(1) is an extreme remedy as it
operates as an adjudication on the merits. 3
It is incumbent on
the trial court to consider each case in light of the particular
circumstances involved; length of time alone is not the test of
diligence. 4
Our standard for review of a trial court's dismissal
for lack of prosecution is whether the trial court abused its
discretion. 5
Our responsibility is to review the trial court's
exercise of discretion for arbitrariness, unreasonableness,
unfairness, or if it was unsupported by sound legal principles. 6
In Ward v. Housman, 7 a divided panel of this Court recommended
guidelines for reviewing the dismissal of a case as a sanction
for dilatory conduct of counsel.
While that specific factor is
not the main issue herein, it is helpful to consider the Ward
guidelines:
“1) the extent of the party's personal
responsibility; 2) the history of dilatoriness; 3) whether the
3
See CR 41.02(3).
4
Polk v. Wimsatt, 689 S.W.2d 363, 364-65 (Ky.App. 1985); Gill v. Gill, 455
S.W.2d 545, 546 (Ky. 1970).
5
See Jenkins v. City of Lexington, 528 S.W.2d 729, 730 (Ky. 1975) (standard
of review is abuse of discretion); Nall v. Woolfolk, 451 S.W.2d 389, 390 (Ky.
1970) (power of court to dismiss for want of prosecution is inherent power of
the court); Modern Heating & Supply Co. v. Ohio Bank Building & Equipment
Co., 451 S.W.2d 401, 403-04 (Ky. 1970) (unless trial court abuses its
discretion by dismissing, appellate court will not interfere).
6
Goodyear Tire & Rubber Co. v. Thompson, 11 S.W.3d 575, 581 (Ky. 2000).
7
809 S.W.2d 717, 719 (Ky.App. 1991).
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attorney's conduct was willful and in bad faith; 4)
meritoriousness of the claim; 5) prejudice to the other party;
and 6) alternative sanctions.” 8
Having reviewed the record and arguments of counsel,
we find no abuse of discretion by the circuit court in
dismissing Eastern's complaint.
Eastern blames the delay on the
bankruptcy trustee's failure to secure counsel for the action,
but this argument fails to pass muster under the Ward
guidelines.
First, despite Eastern's argument shifting blame
for the delay in obtaining counsel to the bankruptcy trustee,
the record establishes that the bankruptcy trustee was not
responsible for obtaining counsel for Eastern because 1)
although Eastern had filed its complaint after Lequire filed for
bankruptcy, the breach of contract action was filed by Eastern
before the bankruptcy trustee appointed counsel for purposes of
the bankruptcy; and 2) the bankruptcy trustee ultimately moved
to intervene in the breach of contract action, after counsel had
withdrawn, demonstrating that it was not the “real party in
interest” representing Eastern and Lequire up to that time.
Additionally, the record establishes that Lequire, as president
and sole shareholder of Eastern, was personally responsible for
withdrawal of Eastern's counsel and, although knowing he was
8
Ward, 809 S.W.2d at 719 (citing Scarborough v. Eubanks, 747 F.2d 871, 875-78
(3d Cir. 1984)).
-11-
responsible for retaining new counsel by the deadline, he failed
to do so.
Second, there is a history of dilatoriness.
Eastern
sought or agreed to several continuances since May 2000, and
although Lequire filed several pro se documents in the summer of
2002, these ended in August 2002.
Although Whitlock entered an
appearance for Eastern on November 21, 2002, the case stayed
dormant for nine more months until the bankruptcy trustee
attempted to resurrect it in August 2003, with a motion to
intervene.
Furthermore, as late as fall of 2003, Eastern
indicated that it still needed six months to get ready for
trial.
Third, the merits of Eastern's claim are suspect, if
for no other reason than the bankruptcy trustee abandoned its
claim because of Lequire's deposition testimony and grave
concerns about the likelihood of success on the merits.
Fourth, prejudice to KPC from the delay in prosecuting
a 1993 contract on a case filed in 1997 was evident from the
loss of potentially important documents and unknown whereabouts
of one undeposed witness as well as almost one-half of KPC's
witnesses who had either retired or left KPC.
Next, while attorney conduct in the delay is not
totally applicable, we do note that there were no pleadings
filed by Eastern's counsel following her entry of appearance in
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November 2002, until after the bankruptcy trustee abandoned the
case in October 2003.
And insofar as the sixth factor of
consideration of alternative sanctions, the desirability of an
alternative sanction is lessened by the prejudice shown by KPC. 9
In summary, this is a 1997 action arising from a 1993
contract which moved along slowly for four and one-half years.
At one point during that time frame, the case lay dormant for
ten months, awaiting trial.
Following entry of summary
judgment, Eastern's counsel was allowed to withdraw per
Lequire's request.
Despite being under a court order to obtain
counsel, the case remained without counsel for seven months.
After counsel entered an appearance, the case remained dormant
for eight more months until the three-month period of attempted
bankruptcy court intervention.
Although length of time is only
a factor, dismissal for failure to prosecute has been held
proper due to dormancies of two and one-half years, 10 two years, 11
and three and one-half years, 12 which equal or exceed the
dormancies in this case.
We cannot conclude that the circuit
court acted arbitrarily, unfairly, or unreasonably, nor was its
9
Polk, 689 S.W.2d at 364-65.
10
Nall, 451 S.W.2d at 390.
11
Jenkins, 528 S.W.2d at 730.
12
Modern Heating, 451 S.W.2d at 403-04.
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decision unsupported by sound legal principles.
Thus, its
dismissal was not an abuse of discretion.
For the foregoing reasons, the order and judgment of
the Lawrence Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Jennifer S. Whitlock
Ashland, Kentucky
Wendell S. Roberts
Donald R. Yates, II
Ashland, Kentucky
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