Thomas M. Fafinski v. Jaren Johnson ( 2016 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A15-2041
Thomas M. Fafinski,
Respondent,
vs.
Jaren Johnson,
Appellant.
Filed August 15, 2016
Affirmed
Smith, Tracy M., Judge
Dakota County District Court
File No. 19HA-CV-14-4686
Nathan W. Nelson, Steven V. Rose, Virtus Law, PLLC, Brooklyn Park, Minnesota (for
respondent)
Jaren L. Johnson, Johnson Law Office, PLLC, Edina, Minnesota (attorney pro se)
Considered and decided by Reilly, Presiding Judge; Smith, Tracy M., Judge; and
Klaphake, Judge.
UNPUBLISHED OPINION
SMITH, TRACY M., Judge
On appeal from default and attorney-fee judgments against him, appellant Jaren
Johnson argues that the district court erred by (1) entering default judgment against him

Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
when he had “otherwise defended” and (2) granting respondent Thomas M. Fafinski’s
request for attorney fees when the court did not cite to any facts supporting its conclusion
that he “repeatedly asserted positions that were non-meritorious and brought to cause
unnecessary delay.” Because the record supports the findings “that Johnson’s overall
course of conduct suggests intentional delay and a disregard for procedural rules” and that
Johnson “acted in bad faith and engaged in vexatious litigation,” we affirm.
FACTS
In 2005, Fafinski sold his law firm to Johnson. Fafinski continued to work for the
firm as an employee until January 2010. In 2010, Fafinski sued the firm and Johnson
personally, alleging that the firm had failed and refused to pay him money he had earned
as an employee and as a minority shareholder of the firm. From 2011 through 2013, the
district court entered several judgments in favor of Fafinski and against the firm and
Johnson.1
According to Fafinski, he “under[took] significant efforts to collect” on these
judgments, including serving requests for production of documents and seeking deposition
testimony from Johnson. In March 2014, after being ordered by the court, the firm and
Johnson provided Fafinski with their 2007 to 2012 tax returns.2 Based on the information
that was provided in these tax returns, Fafinski discovered that the firm and Johnson had
1
These judgments included sanctions against the firm and Johnson, in the form of attorney
fees to Fafinski, because the firm and Johnson did not comply with Fafinski’s discovery
requests.
2
Fafinski did not receive complete tax returns for 2007, 2009, and 2012 until April 2015.
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transferred assets from 2007 to 2010 and that Johnson had directed the firm to make two
transfers, totaling over one-half million dollars, to him in 2011 and 2012.
In November 2014, Fafinski sued Johnson personally, alleging, among other things,
that the transfers made by the firm to Johnson were fraudulent under Minnesota’s Uniform
Fraudulent Transfer Act. See Minn. Stat. §§ 513.41-.51 (2014).3 In December 2014, in
lieu of an answer, Johnson filed a motion to dismiss Fafinski’s complaint. In March 2015,
shortly after Fafinski filed a motion for summary judgment, Johnson filed an amended
motion to dismiss and scheduled the motion to be heard on April 27. Johnson also sought
sanctions against Fafinski and Fafinski’s attorneys under Minn. R. Civ. P. 11. After a
hearing, the district court denied Johnson’s motion to dismiss, and Johnson filed a motion
for summary judgment that same day. The district court also denied Johnson’s motion for
rule 11 sanctions.
On June 4, the district court heard the parties’ cross motions for summary judgment.
At the hearing, Fafinski’s counsel informed the district court that Johnson had failed to
answer the complaint. After Johnson explained that he had forgotten to submit an answer
following the denial of his motion to dismiss, Fafinski’s counsel asked the district court to
find Johnson in default and enter judgment in favor of Fafinski. The district court denied
this request. Immediately following the hearing, Johnson filed an answer. The answer had
3
“In 2015, the Minnesota Uniform Fraudulent Transfer Act was amended to the Minnesota
Uniform Voidable Transactions Act.” Landmark Cmty. Bank, N.A. v. Klingelhutz, 874
N.W.2d 446, 448 n.1 (Minn. App. 2016) (citing Minn. Stat. §§ 513-.41-.51 (Supp. 2015)),
review denied (Minn. Apr. 27, 2016). Because the effective date and application of the
amendments do not apply to a transfer made before August 1, 2015, the amended statute
does not apply to this case. Id. (citing 2015 Minn. Laws, ch. 17, § 13).
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several defects. First, the answer purported to preserve affirmative defenses pending
completion of discovery when discovery had closed in May 2015. Second, it asserted the
affirmative defenses of res judicata and collateral estoppel, which had already been raised
and denied in the motion to dismiss. Finally, the answer made several averments on behalf
of “Plaintiff.”
On June 12, Fafinski’s counsel wrote a letter to Johnson objecting to the answer as
untimely and procedurally improper under Minn. R. Gen. Pract. 109. The letter directed
Johnson that, under rule 109, he was required to seek leave from the district court to submit
a late answer and must also submit an affidavit of merit. The letter also stated that Fafinski
would move to strike the answer if it was not withdrawn by June 16. On June 16, Johnson
filed an affidavit of merit, together with a motion for leave to file an answer. Johnson did
not include notice of a hearing for the motion, but instead asked the district court to rule
without a hearing. On June 25, Fafinski’s counsel filed a letter with the district court
objecting to Johnson’s motion for leave to file an answer without a hearing because, under
Minn. R. Gen. Pract. 115.04, a hearing is required.
On July 1, each party’s motion for summary judgment was denied. In its order
denying the motions, the district court instructed Johnson to schedule a hearing for his
motion for leave to file an answer if he wanted the motion to be considered. Three weeks
later, on July 24, Johnson filed an amended motion for leave to file an answer and
scheduled the motion to be heard on August 11. On August 4, Fafinski filed a
memorandum opposing Johnson’s motion, arguing that Johnson’s motion and answer were
defective.
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On August 10, one day before the hearing, Johnson filed an amended affidavit of
merit with an amended answer attached. Johnson also attached bank statements that had
not previously been disclosed. The amended answer remedied the clerical errors in the
original answer regarding averments on behalf of “Plaintiff” and removed all affirmative
defenses and the statement reserving such defenses pending discovery. In his amended
affidavit of merit, Johnson stated that he did “not recall ever having brought a Rule 12
Motion to Dismiss and [he] was unfamiliar with the rules applicable to answering after a
ruling on the motion was made.” He also stated that he failed to answer the complaint
because he was focused on “other motions in process in this case.” Fafinski’s counsel
objected to the amended affidavit of merit, the amended answer, and the bank statements
as being untimely filed.
After the hearing, the district court denied Johnson’s motion for leave to file an
answer and struck the trial from the court’s calendar. In its order, the district court,
applying the factors for relief from default judgment, see Finden v. Klaas, 268 Minn. 268,
271, 128 N.W.2d 748, 750 (1964), concluded that Johnson had failed to establish excusable
neglect. With respect to two of the factors, the district court concluded that Johnson—a
practicing lawyer—had no reasonable excuse for his failure to timely answer and had not
acted with due diligence, stating “[i]t is the opinion of this [c]ourt that Johnson’s overall
course of conduct suggests intentional delay and a disregard for procedural rules.” The
district court’s order stated that Fafinski may “mak[e] an application for a default hearing.”
Fafinski moved for default judgment against Johnson, and, following a hearing, the
district court entered default judgment in the amount of $39,083. In its order, the district
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court stated that its “prior order denying [Johnson’s motion for leave to file an answer]
effectively put [Johnson] in default for ‘failing to plead or otherwise defend’ within the
time allowed” and explained that “[t]his [c]ourt has already established—based upon the
‘Finden’ factors—that [Johnson’s] failure to answer the [c]omplaint was not due to
excusable neglect.” Fafinski also filed a motion for attorney fees, based on Johnson’s
conduct in the current action, and the district court awarded Fafinski $40,000 in fees.
Johnson appeals.
DECISION
I.
Johnson argues that the district court abused its discretion by granting default
judgment against him because he had “otherwise defended” within the meaning of Minn.
R. Civ. P. 55.01 by making various filings in the case, including “a Rule 12 Motion to
Dismiss, a Motion for Rule 11 Sanctions, a Motion for Summary Judgment, a Joint
Statement of the Case, and Motions in Limine,” and by participating in discovery.
The decision whether to grant or deny a motion for a default judgment lies within
the discretion of the district court, and we will not reverse it absent an abuse of that
discretion. Black v. Rimmer, 700 N.W.2d 521, 525 (Minn. App. 2005), review dismissed
(Minn. Sept. 28, 2005). Minn. R. Civ. P. 55.01 states that “[w]hen a party against whom a
judgment for affirmative relief is sought has failed to plead or otherwise defend within the
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time allowed therefor by these rules or by statute, and that fact is made to appear by
affidavit, judgment by default shall be entered against that party.”4
In Black, we interpreted the phrase “otherwise defend” in rule 55.01 by looking to
federal caselaw interpreting Fed. R. Civ. P. 55(a). 700 N.W.2d at 525-26; see DLH, Inc.
v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (using United States Supreme Court’s
interpretation of federal rules of procedure to provide guidance on interpretation of parallel
state rules of procedure). We stated that “[u]nder the federal rules, ‘otherwise defend’ has
long referred to ‘attacks on the service, or motions to dismiss, or for better particulars, and
the like, which may prevent default without presently pleading to the merits.’” Black, 700
N.W.2d at 526 (quoting Bass v. Hoagland, 172 F.2d 205, 210 (5th Cir. 1949)). We held
that, “[t]o successfully defend against a default judgment, a party who has failed to plead
and contends that he or she has ‘otherwise defended’ within the meaning of Minn. R. Civ.
P. 55.01, must, at a minimum, have made a rule 12 or other defensive motion.” Id. at 524.
Johnson made defensive motions, thus satisfying the minimum requirement
identified in Black, but the district court nevertheless concluded that he failed to defend.
The parties have not cited, and our research has not found, any Minnesota case addressing
4
A district court should deny a motion for default judgment when the defendant has
established the following four factors: (1) a reasonable defense on the merits; (2) a
reasonable excuse for the failure to act; (3) action with due diligence after the entry of
judgment; and (4) lack of prejudice to the opposing party. Coller v. Guardian Angels
Roman Catholic Church of Chaska, 294 N.W.2d 712, 715 (Minn. 1980); see also Finden,
268 Minn. at 271, 128 N.W.2d at 750. Johnson does not argue in his brief that the district
court erred in its application of the Finden factors; therefore, this issue need not be
considered. See Melina v. Chaplin, 327 N.W.2d 19, 20 (Minn. 1982) (stating that issues
not briefed on appeal need not be considered).
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whether a party can be found to have failed to defend under rule 55.01 by virtue of the
party’s conduct after pleading or making a defensive motion. Federal courts, however,
have addressed the issue, and we find the Eighth Circuit caselaw persuasive. The Eighth
Circuit has stated that “[d]efault judgment for failure to defend is appropriate when the
party’s conduct includes ‘willful violations of court rules, contumacious conduct, or
intentional delays.’” Ackra Direct Mktg. Corp. v. Fingerhut Corp., 86 F.3d 852, 856 (8th
Cir. 1996) (quoting United States v. Harre, 983 F.2d 128, 130 (8th Cir. 1993); see also City
of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114, 129-30 (2d Cir. 2011) (affirming
entry of default judgment under rule 55(a) against defendants who answered plaintiff’s
complaint, appeared in litigation for several years, and moved to dismiss multiple times,
but subsequently failed to defend).
The record shows that Johnson engaged in “willful violations of court rules,
contumacious conduct, or intentional delays.” See Ackra, 86 F.3d at 856 (quotation
omitted). Johnson, a veteran attorney, failed to file an answer within ten days after his
motion to dismiss was denied. See Minn. R. Civ. P. 12.01 (stating that “[i]f the court denies
[a motion to dismiss] . . . the responsive pleading shall be served within 10 days after
service of notice of the court’s action”). He only submitted an answer after Fafinski
informed him that he had failed to do so. When he did file his answer, it contained clerical
errors, purported to assert affirmative defenses that had already been denied in the court’s
denial of his motion to dismiss, and reserved the right to assert affirmative defenses
pending discovery when the time for discovery had already passed. Prior to submitting his
answer, Johnson failed to move for leave to file an untimely answer as required by Minn.
8
R. Gen. Pract. 109, and only did so after being warned by Fafinski’s counsel that Fafinski
would move to strike if Johnson did not file a motion and include the required affidavit of
merit. Johnson then moved for leave to file an answer, but did not request a hearing as
contemplated by Minn. R. Gen. Pract. 115.04. Johnson only scheduled a hearing three
weeks after the district court directed him to do so. After briefing on the motion was
complete, and just one day before the scheduled hearing, Johnson made untimely filings of
an amended answer, an amended affidavit, and previously undisclosed bank statements.
This record supports the district court’s conclusion “that Johnson’s overall course of
conduct suggests intentional delay and a disregard for procedural rules” and demonstrates
a failure to defend. The district court did not abuse its discretion by entering default
judgment against Johnson.
II.
Johnson argues that the district court abused its discretion by granting Fafinski’s
request for attorney fees, because “[t]here was no citation to any facts supporting the
holding that [Johnson] repeatedly asserted positions that were non-meritorious or brought
to cause unnecessary delay.” We will not reverse a district court’s award of attorney fees
unless the district court abused its discretion by making the award. Becker v. Alloy
Hardfacing & Eng’g Co., 401 N.W.2d 655, 661 (Minn. 1987).
The district court has the authority to impose sanctions, including attorney fees,
under statute and as part of its inherent power. Peterson v. 2004 Ford Crown Victoria, 792
N.W.2d 454, 462 (Minn. App. 2010). “Attorney fees may be an appropriate sanction when
a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” Id.
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(quotation omitted). To award attorney fees under its inherent power, the district court
must find that the party against whom fees were awarded acted in bad faith. Id.
In granting Fafinski’s motion for attorney fees, the district court found that Johnson
had “acted in bad faith and engaged in vexatious litigation.” It further found that Johnson
“repeatedly asserted positions that were non-meritorious and brought to cause unnecessary
delay even after [j]udgment had been entered.” The district court explained that “[t]he
inherent authority of the court allows the award of attorney fees as a sanction.”
The record supports the district court’s finding that Johnson “acted in bad faith and
engaged in vexatious litigation.” As stated above, Johnson, a veteran attorney, failed to
submit a timely answer after his motion to dismiss was denied. He filed an answer only
when Fafinski’s counsel brought the failure to his attention. The answer he filed contained
numerous errors. Johnson filed the untimely answer without seeking leave to do so, as
required by the rules. He only brought the motion for leave to file when warned by
Fafinski’s counsel that it was required, and even then he did not appropriately request a
hearing. Johnson finally scheduled a hearing when directed to do so by the district court,
and then, one day before the hearing and one month before trial was scheduled to begin,
untimely submitted an amended answer, amended affidavit of merit, and previously
undisclosed bank statements. Further, the record supports the district court’s finding that
“[Johnson] repeatedly asserted positions that were non-meritorious and brought to cause
unnecessary delay even after [j]udgment had been entered.” Although the district court
had already rejected Johnson’s argument that Fafinski’s claims were barred by the
doctrines of res judicata and collateral estoppel in its order denying Johnson’s motion to
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dismiss, in his memorandum of law in opposition to Fafinski’s motion for attorney fees
Johnson again suggested that Fafinski’s claims were barred by the doctrines of res judicata
and collateral estoppel. The district court did not abuse its discretion by awarding attorney
fees to Fafinski.
Affirmed.
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