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Judge: Default judgment of $7.5M stands

Judge James P. Jones

Judge James P. Jones

Despite the defendant’s protest that its failure to respond to a workplace accident lawsuit was a result of “excusable neglect,” a federal judge refused to set aside a jury’s verdict worth at least $7.5 million.

The case presented a choice between upholding the finality of judgments and affording both sides a chance to try the case on the merits, as one lawyer put it.

The defendant’s failure to follow up after sending suit papers to its insurance broker was key to the ruling by U.S. District Judge James P. Jones. His Oct. 27 opinion is Russell v. Northern Management Services Inc. (VLW 020-3-531).

Plaintiff Donald Russell was a fire equipment inspector on the job at the U.S. Courthouse in Roanoke in 2017 when he walked out on a metal grate covering a concrete well. The grate gave way and Russell fell 20-25 feet into the well.

His injuries were devastating. As described in a report by U.S. Magistrate Judge Pamela Meade Sargent, Russell suffered a traumatic brain injury with loss of brain function and associated changes in personality and behavior, permanent nerve injury causing sexual and urinary dysfunction and several broken bones.

The government declined to accept Russell’s Federal Tort Claims Act claim, saying the grating and building maintenance at the Poff Federal Building were handed by a private company, Northern Management, according to Jones’ opinion.

Russell sued Northern Management in April 2019, Jones said. The suit papers were served on a registered agent who forwarded them to the company. A company officer sent the papers by email to three company officials and to the company’s insurance broker.

Afterward, the company made no further inquiries of either its insurance broker or its liability insurance company, Jones said. The company president “simply assumed” that the broker had forwarded the papers to the liability carrier as “standard practice.”

The insurer never received the notice of the lawsuit and never retained defense counsel. Russell obtained a default judgment as to liability.

Jury verdict vacated

Despite the absence of a defendant, or perhaps because of that absence, the case took a twisted path toward judgment. Russell consented to have the case decided under control of the magistrate judge, who presided over a one-day jury trial. The jury returned a verdict of $6 million.

Russell moved to reduce the verdict to the $5 million demand and the judge agreed. Then, Russell moved to have the amended judgment set aside entirely because the magistrate judge lacked jurisdiction. Only one party had agreed to the referral to the magistrate judge. Sargent agreed in a Jan. 23 order.

With the case now under control of Jones, Sargent was asked to prepare a report and recommendation on damages. Her May 4 report detailed evidence of Russell’s extensive damages and recommended a $5 million award with $2.5 million in prejudgment interest and added post-judgment interest.

Jones approved and final judgment was entered May 15.

Motion to vacate

Northern Management received the disturbing news of its exposure by letter from Russell’s counsel dated June 22. The company sought to vacate the default judgment in a motion filed July 17.

Jones explained the case required a balancing act. Rule 60(b) of the Federal Rules of Civil Procedure allows relief from default judgment under certain circumstances. The 4th U.S. Circuit Court of Appeals has taken an “increasingly liberal view” of the rule when default judgments are involved, Jones said, reviewing case law.

“Nevertheless, the rule is not toothless,” he said. “Courts must balance the call for liberal construction along with the need for finality.”

Jones rejected Northern Management’s proffer that it might have defenses, including actions by others that could have rendered the grate defective or the plaintiff’s possible awareness of the hazard.

The company also contended it had no actual or constructive knowledge of any defect and owed no duty as an owner or contract partner with the plaintiff.

Those defenses “appear weak” in light of Northern Management’s duties under its federal contract, Jones said.

Absence of due diligence

Even with a possible meritorious defense, the company’s conduct fell short, Jones said. The inexplicit email to the broker, the lack of proof that the broker confirmed receipt and the lack of follow-up for a year “constitutes an absence of due diligence that I cannot find to be excusable,” Jones said.

The key factor was the company’s failure to follow up with its insurer to confirm pursuit of a defense.

“This failure spanned the course of one year, despite the fact that multiple responsible officers of the defendant knew of the accident and the suit. This complete lack of follow-up for such a substantial amount of time weighs heavily against relief,” Jones wrote.

“Finally, the fact that the defendant is a sophisticated corporate party that has been involved in numerous other legal matters also weighs heavily against relief,” Jones said.

Russell was represented by Matthew W. Broughton, Travis J. Graham and Caley A. Degroote of Roanoke.

Graham said a plaintiff has to tread carefully when approaching a possible default judgment.

“You have to follow the rules explicitly. Don’t try to be slick; don’t try to cut corners,” Graham said.

“Because we did that, there was no doubt in the judge’s mind we were complying with the procedure,” he added.

Broughton said Northern Management played it straight, as well.

“To their credit, they didn’t lie. They didn’t try to come up with some excuse. They admitted they just didn’t follow up,” Broughton said.

Northern Management was represented by Heather S. Deane of Washington. She was not available for comment.