Dalton v. Racific Rim Capital, Inc. ( 2020 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
TERRY DALTON, )
)
Plaintiff, )
)
v. ) C.A. No. N19C-10-221 VLM
)
PACIFIC RIM CAPITAL, INC., )
TOYOTA MATERIAL )
HANDLING NORTHEAST INC., )
SG EQUIPMENT FINANCE USA )
CORP., CBRE GWS LLC, THE )
RAYMOND CORPORATION )
and ARBOR MATERIAL )
HANDLING, INC. )
)
Defendants. )
ORDER
Submitted: June 1, 2020
Decided: October 20, 2020
Upon Consideration of Defendant’s Motion to Vacate Default Judgment,
GRANTED.
Vincent J.X. Hedrick, II, Esquire of Bove & Hedrick, Attorneys at Law,
Wilmington, Delaware. Attorney for Plaintiff.
C. Scott Reese, Esquire of Cooch and Taylor, P.A., Wilmington, Delaware.
Attorney for the Defendant.
MEDINILLA, J.
AND NOW TO WIT, this 20th day of October, 2020, upon consideration of
Defendant Toyota Material Handling Northeast, Inc.’s Motion to Vacate Default
Judgment, Plaintiff Terry Dalton’s Response in Opposition, oral arguments heard on
June 30, 2020, and the record in this case, IT IS HEREBY ORDERED that
Defendant’s Motion is GRANTED for the following reasons:
1. Plaintiff Terry J. Dalton (Plaintiff) claims he suffered injuries to his
right hand, including a finger amputation, while operating a “pallet jack” during the
course and scope of his employment. On October 25, 2019, Plaintiff filed a
Complaint against various Defendants, including Toyota Material Handling
Northeast, Inc. (Toyota).1 He alleges negligence, breach of implied warranty of
merchantability, breach of implied warranty of fitness for a particular purpose,
breach of express warranty, and strict liability. 2
2. On November 4, 2019, Plaintiff served Toyota though its registered
agent, Corporation Service Company (CSC).3 CSC forwarded the Summons and
Complaint to James Petrucci, Esquire—a New York attorney, listed as Toyota’s
primary contact on the CSC Notice of Service of Process in the records of Toyota or
Toyota Material Handling, Inc. (TMH), formerly Toyota Material Handling U.S.A.,
1
Defendants include Pacific Rim Capital, Inc., SG Equipment Finance USA Corp., CBRE GWS
LLC, the Raymond Corporation, and Arbor Material Handling, Inc.
2
See Plaintiff’s Complaint, D.I. 1.
3
Plaintiff’s Opposition to Defendant’s Motion for an Order Vacating Default Judgment, D.I. 52
¶ 1 [hereinafter Plaintiff’s Opposition].
1
Inc. (TMHU). 4 Toyota’s Answer was due on or before November 25, 2019.5 Toyota
failed to file its Answer.6
3. On January 13, 2020, Plaintiff moved for Default Judgment against
Toyota under Superior Court Civil Rule 55 and, on that same date, Plaintiff’s counsel
served Toyota through CSC with a copy of Plaintiff’s Motion.7
4. On January 28, 2020, this Court held a hearing to consider Plaintiff’s
Motion for Default Judgment. Toyota failed to appear or oppose, and this Court
granted Plaintiff’s Motion. 8 Plaintiff’s counsel sent a letter to Toyota through CSC
informing it that this Court had granted Plaintiff’s Motion for Default Judgment and
enclosed a copy of this Court’s Order. 9
5. In March of 2020, Toyota first learned of the judgment against it
through another defendant.10 Toyota contacted CSC after it performed a check of
their records and was unable to locate the CSC transmittal or the Summons and
Complaint.11 It learned that the transmittal had been forwarded to Mr. Petrucci listed
4
See Defendant’s Motion for an Order Vacating Default Judgment, D.I. 39 at Ex. A ¶ 3
[hereinafter Defendant’s Motion].
5
Id.
6
Remaining Defendants filed Answers and Cross Claims between December 3, 2019, and
January 10, 2020.
7
Plaintiff’s Opposition ¶ 2.
8
See Terry J. Dalton v. Pacific Rim Capital, Inc., et al., No. N19C-10-221 VLM (Del. Super.
Jan. 28, 2020) (ORDER).
9
Plaintiff’s Opposition at Ex. A ¶ 4.
10
Defendant’s Motion ¶ 4.
11
Id.
2
as the proper primary contact for Toyota or TMH/TMHU.12 General Counsel for
TMHU conducted a search of corporate records for the Summons and Complaint
transmitted by either CSC or Mr. Petrucci, and found no evidence that Mr. Petrucci
sent the transmittal to Toyota or TMH/TMHU. 13
6. Mr. Petrucci is an attorney licensed to practice law in the State of New
York and has been associated with the firm of Gibbons, PC for fifteen years. 14
Through an affidavit, Mr. Petrucci states he incorporated Toyota in February of 2012
but has not represented Toyota since 2013.15 When first contacted by Toyota for the
CSC transmittal or Summons and Complaint, he advised he had no recollection of
having received anything. 16 A later search of his records revealed he received the
CSC transmittal while on a business trip in Chicago and that his assistant informed
him about it.17
7. Through his affidavit, he further explains that because of a mistaken
belief that the transmittal was merely a courtesy copy that had already been sent to
Toyota “and in accordance with prior instructions, [he] did not forward the
transmittal to [Toyota].” 18 He further states this belief was based on a prior
12
Id. ¶ 2.
13
Id. ¶ 3.
14
See Defendant’s Motion at Ex. B ¶1.
15
See id. at Ex. B ¶¶ 2, 4.
16
Id. at Ex. B ¶ 5.
17
Id. at Ex. B ¶ 6.
18
Id.
3
experience that occurred shortly after Toyota’s creation in 2012 where, after
receiving a notice directed to Toyota, he contacted its General Counsel19 and was
informed that Toyota had received the same notice, and no action was required from
him.20
8. After Toyota learned of Mr. Petrucci’s failure to act, counsel for both
sides were in communications in April and May of 2020, including on at least two
occasions—on April 20 and May 6.21 During their communications, Toyota
provided information and documents to Plaintiff’s counsel regarding the product in
the underlying lawsuit, and requested Plaintiff consider voluntarily vacating the
default against it. Plaintiff’s counsel declined to do so on May 6, 2020.
9. On May 13, 2020, C. Scott Reese, Esquire filed his Entry of
Appearance on behalf of Toyota as Delaware counsel and, and on June 1, filed this
Motion under Rule 60(b).22 Plaintiff’s Opposition followed on June 24, 2020.23 The
Court heard oral arguments on June 30, 2020. Having considered the pleadings, the
authority in support, and oral arguments presented, the motion is ripe for review.
19
Id. at Ex. B ¶ 3.
20
Id.
21
Plaintiff’s counsel maintains Toyota did not contact him until April 20 and he notified Toyota
on May 6 that he would not voluntarily lift the default. Toyota’s counsel suggests more
communications took place but did not provide specific dates.
22
See Defendant’s Motion.
23
See Plaintiff’s Opposition.
4
Standard of Review
10. A motion to vacate a default judgment under Rule 60(b) is addressed to
the sound discretion of the trial court.24 Our courts favor Rule 60(b) motions, as they
“promote Delaware's strong judicial policy of deciding cases on the merits and
giving parties to litigation their day in court.” 25 In furtherance of this policy, any
doubts should be resolved in favor of the moving party. 26 Because courts favor Rule
60(b) motions to allow each party to be heard on the merits of the case, 27 the rule is
liberally construed. 28 Yet this liberal policy is “counterbalanced by considerations
of social goals, justice and expediency, a weighing process [that is] largely within
the domain of the trial judge’s discretion.” 29
Contentions of the Parties
11. Toyota moves to vacate under both under 60(b)(1) and (6). Toyota
argues first that Mr. Petrucci’s failure to forward the Complaint and Summons to
Toyota constitutes excusable neglect under Rule 60(b)(1) because he reasonably
believed it was a courtesy copy, it has a meritorious defense and no prejudice will
24
Watson v. Simmons, 2009 WL, 1231145, at *1 (Del. Super. Apr. 30, 2009).
25
Id. (quoting Verizon Delaware, Inc. v. Baldwin Line Constr. Co., Inc., 2004 WL 838610, at *1
(Del. Super. Apr. 13, 2004)).
26
Id. (citing Verizon Delaware, 2004 WL 838610, at *1).
27
Apartment Communities Corp. v. Martinelli, 859 A.2d 67, 69 (Del. 2004) (citing Pelican Prod.
Corp. v. Marino, 893 F.2d 1143, 1146 (10th Cir. 1990)).
28
Verizon Del., Inc. v. Baldwin Line Constr. Co., Inc., 2004 WL 838610, at *1 (Del. Super. Apr.
13, 2004).
29
Apartment Communities Corp, 859 A.2d at 69.
5
be suffered by Plaintiff. In the alternative, Toyota argues relief is warranted under
Rule 60(b)(6) where the ability to respond timely was hampered by Mr. Petrucci and
the COVID-19 pandemic.
12. Plaintiff argues that Toyota’s failure to answer the Complaint, respond
to the Motion for Default Judgment, and not timely respond to the entry of default
do not constitute excusable neglect nor extraordinary circumstances under Delaware
law.
Discussion
A. Toyota does not establish Excusable Neglect under Rule 60(b)(1)
13. The court may set aside a default judgment for “[m]istake,
inadvertence, surprise, or excusable neglect.”30 Under 60(b)(1), Toyota must show
that: (1) their conduct in failing to respond was the product of excusable neglect; (2)
they have a meritorious defense that would allow for a different result if the case
was heard on the merits; and (3) the plaintiff will not suffer substantial prejudice if
the motion is granted. 31
14. In exercising its discretion under Rule 60(b)(1), the Court, with
deference to the policy favoring disposition of cases on their merits, generally favors
30
DEL. SUPER. CT. CIV. R. 60(b)(1).
31
Verizon Del., 2004 WL 838610, at *1.
6
such motions upon almost any reasonable excuse. 32 At the core of these
considerations is an examination of whether the conduct of the moving party was
the conduct of a reasonably prudent person,33 and the Court must first find excusable
neglect before considering the elements of whether there is a meritorious defense or
substantial prejudice. 34 Excusable neglect is “neglect which might have been the act
of a reasonably prudent person under the circumstances.” 35 “A mere showing of
negligence or carelessness without a valid reason may be deemed insufficient.” 36
15. Toyota asks this Court to follow the rationale in Williams v. Delcollo
Electric, Inc.37 because the neglect should not be attributable to Toyota. In Williams,
the Court vacated a default judgment against a defendant company where the neglect
was not attributable to the defendant,38 but rather to the defendant’s insurer.39 There,
the defendant had knowledge of the complaint and forwarded a copy to the insurer.
The insurer subsequently forwarded the complaint to the defendant’s law firm. 40
However, the insurer incorrectly addressed the envelope and the law firm never
32
Keith v. Melvin L. Joseph Const. Co., 451 A.2d 842, 846 (Del. Super. 1982) (citing Vechery v.
McCabe, 100 A.2d 460 (Del. 1953)).
33
Id.34
Langston v. Exterior Pro Sols., Inc., 2020 WL 1970536, at *3 (Del. Super. Apr. 22, 2020).
35
Apartment Communities Corp., 859 A.2d at 70 (citing Battaglia v. Wilm. Savs. Fund Soc., 379
A.2d 1132, 1135 n. 4 (Del. 1977)).
36
Watson v. Simmons, 2009 WL 1231145, at *2 (Del. Super. Apr. 30, 2009) (quoting Cohen v.
Brandywine Raceway Ass’n, 238 A.2d 320, 325 (Del. Super. 1968)).
37
Williams v. Delcollo Electric, Inc., 576 A.2d 683 (Del. Super. 1989).
38
Id. at 686.
39
Id.40
Id. at 684.
7
received it.41 The failure to file an answer resulted in default judgment entered
against it.42 The Court held that the defendant company acted reasonably and the
insurer’s neglect would not be imputed on the defendant. 43
16. Williams is distinguishable from the facts here. Toyota listed Mr.
Petrucci as the primary contact on the CSC Notice of Service of Process in the
records of Toyota. Unlike Williams, legal documents reached the intended person.
When service of a complaint is “complete and legal, it is immaterial ... that the agent
does not communicate the fact of service to [the] principal.” 44 Moreover, where case
law makes clear that it is unreasonable not to seek legal counsel upon receiving
notice of a complaint,45 it is even more inexplicable how a fifteen-year practitioner
ignored or failed to act upon such notice. His mistakes were careless at best,
negligent, at worst. And just as in Sanders v. Cseh46 where an employee of
defendant’s law firm mistakenly assumed a filed complaint was related to a different
41
Id.42
Id.43
Id. at 686.
44
Apartment Communities Corp. v. Martinelli, 859 A.2d 67, 71–72 (Del. 2004) (quoting Cohen
v. Brandywine Raceway Ass’n, 238 A.2d 320, 324 (Del. Super. 1968)).
45
Watson v. Simmons, 2009 WL, 1231145, at *3 (Del. Super. Apr. 30, 2009) (citing Murzyn v.
Locke, 2006 WL 1195628, at *2 (Del. Super. Mar. 13, 2006); Keith v. Melvin L. Joseph Constr.
Co., 451 A.2d 842, 846 (Del. Super. 1982)).
46
Sanders v. Cseh, 2006 WL 2742337 (Del. Super. Sept. 22, 2006).
8
matter, this Court must consider that “[c]arelessness and negligence are not
necessarily ‘excusable neglect.”47
17. A closer look at Mr. Petrucci’s vague and inconsistent explanation only
raises more questions. First, he had no recollection of having received the
transmittal. His affidavit is unclear as to when he received notice of the litigation in
Delaware as he provides no dates as to when he learned that a Summons and
Complaint came into his office, except to say that he recalls getting information
while attending a conference in Chicago at a date/time unknown. The affidavit is
also silent as to when he received or what he did as to the other notices, including
the Motion for Default Judgment or this Court’s Order entering the default. The
Court finds Mr. Petrucci’s conduct is not neglect considered the act of a reasonably
prudent person under the circumstances to satisfy Rule 60(b)(1). This applies to
Toyota’s conduct as well.
18. It remains unclear how one isolated event of an unrelated “notice” in
2013 would inform an agent’s decision to ignore documents sent to his attention
today. Nevertheless, this is the rationale. He states he acted under the direction of
Toyota’s General Counsel from an event that occurred shortly after he incorporated
Toyota in 2012. Accepting Mr. Petrucci’s representation that he ignored legal
47
Id. at *2 (citing McDonald v. S & J Hotel Enters., L.L.C., 2002 WL 1978933, at *2 (Del.
Super. Aug. 27, 2002)).
9
documents believing them to be courtesy copies, he did so under Toyota’s direction.
Accordingly, his conduct must be imputed on Toyota for its failure to act reasonably
under the circumstances. Thus, Toyota cannot rely on Williams.
19. Similar guidance in Verizon Del. v. Baldwin Line Constr. Co., Inc.,48
leads the Court to the same conclusion. The Verizon Court denied the motion to
vacate a default judgment holding that the defendant corporation’s failure to appoint
a new registered agent after learning about the death of their agent did not constitute
excusable neglect. 49 Mr. Petrucci’s affidavit confirms that his representation ended
in 2013 and alludes to an unawareness that he held a current role with or remained
obligated to Toyota.50 Though Toyota had a valid registered agent and did not
violate Del. Const. art IX, § 5 or 8 Del. C. § 371(b)(2), it failed to properly instruct
its agent, remind him of his obligations or appoint a new one.
20. This is also consistent with the holding in Apartment Communities
Corp. v. Martinelli,51 that the failure to acknowledge the importance of a
complaint—and advise appropriate management personnel—did not establish the
defendant’s excusable neglect.52 This Court echoes that “it [is] the responsibility of
the defendant…to ensure that [persons] who are capable of accepting service of
48
Verizon Del. v. Baldwin Line Constr. Co., Inc., 2004 WL 838610 (Del. Super. Apr. 13, 2004).
49
Id. at *2.
50
Defendant’s Motion, at Ex. A ¶ 2.
51
Apartment Communities Corp. v. Martinelli, 859 A.2d 67 (Del. 2004).
52
Id. at 69-72.
10
process know when and to whom the complaint should be forwarded.” 53 Though
Mr. Petrucci was not an employee, Toyota bore the responsibility to ensure that Mr.
Petrucci understood his obligation to the company. Its failure to do so created a
black hole. It cannot argue that the stale direction it gave its primary contact in 2013
supports a finding of excusable neglect today.
21. The Court finds an insufficient factual basis to establish excusable
neglect as is required under Rule 60(b)(1). Because Toyota cannot establish
excusable neglect, the Court need not address the meritorious defense 54 and
substantial prejudice prongs in setting aside a default judgment.55
B. Toyota satisfies Rule 60(b)(6)
22. Under Rule 60(b)(6), the Court must consider whether to set aside a
default judgment for “any other reason justifying relief from the operation of
judgment.”56 The language of Rule 60(b)(6) “vests power in courts adequate to
enable them to vacate judgments whenever such action is appropriate to accomplish
justice.”57 The Court resolves any doubt in favor of Toyota because of the sound
public policy in Delaware that favors the determination of actions on the merits.
53
Id. at 71.
54
Inexplicably, Toyota did not analyze or provide its meritorious defense in its initial Motion to
Vacate Default Judgment and only after prompting from the Court did Toyota unsuccessfully
attempt to address this prong during oral arguments. Plaintiff’s counsel objected to the Court’s
consideration of argument as untimely and waived.
55
Apartment Communities Corp., 859 A.2d at 72 (Del. 2004).
56
DEL. SUPER. CT. CIV. R. 60(b)(6).
57
Chaverri v. Dole Food Co., Inc., 220 A.3d 913, 922 (Del. Super. 2019) (emphasis added).
11
23. Plaintiff’s counsel is correct that the authority presented support his
position that Toyota fails to establish excusable neglect. It is also true that Toyota
was at a disadvantage and could have presented its case for vacating its judgment
sooner. Plaintiff cites to Lewes Dairy Inc. v. Walpole 58 and that he is “not their
excuse”59 for what he argues is an untimely filing by Toyota to seek relief. Though
Toyota faced a myriad of issues in responding, this Court disagrees that it should
result in a default judgment.
24. Toyota acted reasonably upon receiving notice in March of 2020. It
faced several hurdles during an unprecedented time that included national and local
states of emergencies when the world was initially reacting to the global pandemic.
It conducted an investigation to retrace steps that included obtaining information
from its registered agent and its primary contact. As outlined, Mr. Petrucci’s failures
reflect a careless or negligent mismanagement of Toyota’s interests coupled with
troublesome memory issues. It is unclear at what point he finally provided Toyota
with accurate information but there is no evidence to suggest that Toyota failed to
respond once it was on notice of the judgment against it.
58
Lewes Dairy, Inc. v. Walpole, 1996 WL 111130 (Del. Super. Jan. 5, 1996).
59
Plaintiff’s response to this Court when asked during Oral Arguments why he argued untimely
delay where it was undisputed that he and counsel had engaged in communications to include
production of documents from Toyota and a request that he voluntarily lift the default judgment.
12
25. The Court takes into consideration the ongoing exchanges that took
place in April and May between counsel for both sides. Plaintiff argues it was only
two discussions. No matter. Plaintiff’s counsel engaged in communications with
Toyota and leveraged the default judgment to obtain information from Toyota.
Toyota complied and produced documents and information germane to the
underlying claims. In turn, Toyota requested and waited for Plaintiff’s counsel to
consider whether he would voluntarily lift the default. He declined to do so after he
received materials from Toyota.
26. Though it is true that Plaintiff’s counsel is “not their excuse,” the Court
finds that Plaintiff benefitted from Toyota’s participation in the legal process,
receiving from this defendant documents and information regarding the product
alleged to have caused Plaintiff’s injury. Plaintiff now seeks to preclude Toyota
from continuing to participate where it may no longer prove beneficial. On these
limited facts, the Court finds valid reason to permit Toyota its day in court.
13
Conclusion
Toyota has not met its burden under Superior Court Rule 60(b)(1) to show its
failure to respond was the product of excusable neglect. The Court finds a valid
reason exists under Rule (60)(b)(6) to accomplish justice in light of the narrow
circumstances presented in this case. Therefore, Defendant’s Motion to Vacate
Default Judgment is GRANTED.
IT IS SO ORDERED.
/s/ Vivian L. Medinilla
Vivian L. Medinilla
Judge
14