Christopher Dougherty, V. Janes Gypsum Floors, Inc. ( 2024 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
CHRISTOPHER DOUGHERTY,
No. 85442-9-I
Appellant,
DIVISION ONE
v.
UNPUBLISHED OPINION
JANES GYPSUM FLOORS, INC;
MAXXON CORPORATION;
INNOVATIVE WORLDWIDE
LOGISTICS, INC; and DOES 1-10,
inclusive,
Respondent.
COBURN, J. — Christopher Dougherty, a warehouse worker, was injured when a
delivery truck backed into him while making a delivery. Dougherty sued, among others,
the freight broker, Innovative Worldwide Logistics (IWL), alleging several claims of
negligence and served process on IWL’s registered agent in Washington state. The
summons and complaint were never forwarded to IWL, which failed to appear.
Dougherty subsequently obtained a default judgment. IWL learned of the proceedings
shortly thereafter and moved to vacate under CR 60(b). The trial court granted the
motion. Dougherty argues that the trial court abused its discretion in granting the
motion to vacate. We disagree and affirm.
FACTS
IWL is a “freight broker” which connects companies needing to ship goods with
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motor carriers who transport the goods and handles payment of the motor carrier. IWL,
whose principal office is in Tennessee, maintains contractual relationships with a series
of motor carriers which are individual truck operators. IWL does not employ, supervise,
or train truck drivers, nor does it own any trucks used for shipping or deliver cargo itself.
In February, IWL was contacted by its client, Maxxon, who needed floor covering
underlays transported from Las Vegas, Nevada to Washington state. Maxxon
Corporation leases a warehouse in Monroe, Washington. IWL contracted with Desert
Eagle, which transported the goods from Las Vegas to Janes Gypsum Floors, Inc.
(JGF), an unmanned warehouse in Monroe. According to the rate confirmation sheet,
the receiver was to hire “temps” to unload.
On March 1, 2022 Christopher Dougherty was working for Labor Works, which
assigned him to work at JGF in Monroe at the warehouse. According to Dougherty’s
complaint, a commercial truck backed into him while he was working at the warehouse,
pinning him between the truck and a forklift, resulting in serious injuries. IWL received
confirmation of the delivery on March 1 but neither Desert Eagle nor JGF, the receiver
of the goods, advised IWL that an accident had occurred during the delivery.
In September 2022 Dougherty sued JGF, Maxxon Corporation, and IWL. In its
first amended complaint, Dougherty alleged that IWL had an obligation to ensure that
“its commercial truck operators used its vehicles in a safe manner,” and to “not be
negligent in its hiring, training, supervision, and retention of commercial truck
operators.” Dougherty claimed that IWL was responsible for tortious conduct of the
truck driver through the doctrine of respondeat superior, and also was separately liable
for the damages to Dougherty because of negligent hiring, supervision and retention of
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the truck driver. Dougherty also claimed IWL was liable through the doctrine of
negligent entrustment of a commercial vehicle to the truck driver, who IWL “should have
known was reckless, heedless, or incompetent to be entrusted with the commercial
vehicle.”
On December 9, Gregory Bailey, a process server hired by Dougherty, served
the complaint and summons on Keith Baldwin, of All American Agents of Process, at a
Seattle address because that person was IWL’s registered agent. Bailey’s declaration
gave the date and time of service, named Baldwin and listed the specific address of
delivery.
IWL did not receive the complaint and summons and did not respond to the
lawsuit. On January 30, 2023, Dougherty moved for an order of default against IWL,
noting that it had failed to appear or respond to the suit. On February 10, the trial court
granted the motion and issued an order of default against IWL. On April 25, Dougherty
filed a motion for entry of default judgment against IWL in the amount of $3 million.
That same evening, a Maxxon executive called IWL president Mark Kreider, asking if he
was aware of the lawsuit. Kreider stated in a declaration that this was the first he
learned of the accident or lawsuit. Kreider contacted his attorneys the next day. IWL’s
attorney filed a notice of appearance on April 26. The day after, Dougherty’s counsel’s
paralegal emailed IWL’s attorney copies of several documents, including a calendar
note for motion for entry of judgment.
The next week, IWL’s attorney filed a response in opposition to Dougherty’s
motion for default judgment, two days before the scheduled default judgment hearing.
The response in opposition included the date of the judgment hearing, May 5, but did
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not indicate any time or whether the motion was to be heard with or without oral
argument. 1 In support of its response, IWL submitted a declaration from Baldwin. At
that time, Baldwin had been an attorney for approximately 56 years and had worked as
a registered agent for service or original process since he started practice. 2 He stated
that, generally, process servers will call him before attempting to serve process on him
to arrange a time and ensure that he will be in the office when they arrive. Baldwin
stated he did not recall receiving any calls around December 9, 2022, alerting him of an
ongoing attempt to serve process in this matter. Baldwin explained that, as a rule, when
he did receive service of process on behalf of a company, he would immediately copy
the documents into a system to ensure he had a record of his receipt, then immediately
forward a copy to the named party to alert them of the litigation. He also would note on
the copy retained and the copy sent the date of service, his office phone number, and
when it was sent to the company, usually the same day service occurred. And he would
include a notation to pass along the documents to the relevant company’s insurance
company upon receipt. Baldwin stated he reviewed his records and asserted that “no
such record of service of process for this matter exists.”
The next day, Dougherty filed a supplemental declaration of service from Bailey
that provided more detailed information. Bailey stated he had called Baldwin and spoke
to him for two minutes on the phone prior to serving him. The declaration included what
appears to be a copy of a phone record highlighting a call made on December 9, 2022
at “10 06 26 AM” to a specific Seattle phone number and a number “2” that may be an
1
Plaintiff’s motion for entry of judgment does not indicate in the caption whether the
motion is noted for a hearing or whether it was to be heard with or without oral argument. It
appears that information was only indicated on a calendar note.
2
According to IWL, Baldwin passed away in January 2024.
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indication of the length of call. Bailey said he spoke with Baldwin for about five minutes
in his office to make sure he was the appropriate registered agent for IWL because
initially Baldwin was “unsure.” He described Baldwin as being between 70 and 75 years
old, and that Baldwin told Bailey he was “very hard of hearing, potentially partially def
[sic].” Bailey said the office was about 6 feet by 10 feet and “extremely unorganized.”
No attorney for IWL appeared at the May 5 hearing and the trial court entered the
requested default judgment for $3 million against IWL. After the hearing Dougherty
informed IWL that the judgment had been entered. IWL offered to pay counsel fees and
costs as part of a stipulation to vacate the judgment, which Dougherty declined. IWL’s
attorney later submitted a declaration explaining that he misread the calendar entry and
did not realize the motion for default judgment would be heard with oral argument,
resulting in his absence.
On May 16, IWL filed a motion to vacate the order of default and default
judgment under CR 60(b). IWL moved to vacate assuming that Baldwin was served,
but maintaining that it was undisputed that he failed to forward the summons and
complaint to IWL. In its reply in support of its motion to vacate, IWL explained in a
footnote “After IWL filed the Motion, Mr. Baldwin contacted IWL’s counsel by phone
suggesting that he may actually have received the summons and complaint. IWL’s
counsel are exploring this with Mr. Baldwin, but as presented herein, Mr. Baldwin’s
possible receipt of the summons and complaint does not impact IWL’s arguments.”
Dougherty opposed IWL’s motion. At the motion hearing, the trial court found that the
mistakes made by the registered agent which prevented IWL from receiving notice of
the suit was “excusable neglect.” The trial court further found that IWL presented a
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prima facie defense to the claims asserted by Dougherty. The trial court granted IWL’s
motion 3 and ordered it to pay Dougherty’s attorney fees for his time spent in obtaining
default and responding to the motion to vacate.
Dougherty appeals.
DISCUSSION
Dougherty argues that the trial court abused its discretion in vacating the orders
of default against IWL because IWL’s failure to respond was not the result of excusable
neglect and IWL did not establish a “virtually conclusive” defense to Dougherty’s
complaint. We disagree.
“Default judgments are generally disfavored in Washington based on an
overriding policy which prefers that parties resolve disputes on the merits.” Showalter v.
Wild Oats, 124 Wn. App. 506, 510, 101 P.3d 867 (2004) (citing Griggs v. Averbeck
Realty, Inc., 92 Wn.2d 576, 581, 599 P.2d 1289 (1979)). Our primary concern in
reviewing a trial court’s decision on a motion to vacate is whether that decision was just
and equitable. TMT Bear Creek Shopping Ctr, Inc. v. Petco Animal Supplies, Inc., 140
Wn. App. 191, 200, 165 P.3d 1271 (2007) (citing Calhoun v. Merritt, 46 Wn. App. 616,
619, 731 P.2d 1094 (1986)). “This system is flexible because ‘[w]hat is just and proper
must be determined by the facts of each case, not by a hard and fast rule applicable to
all situations regardless of the outcome.’” Id. (citing Little v. King, 160 Wn.2d 696, 703,
161 P.3d 345 (2007)). “A default judgment may be set aside in accordance with CR
3
IWL moved to vacate both the order of default and the default judgment. The name of
the court’s order is “ORDER GRANTING DEFENDANT INNOVATIVE WORLDWIDE
LOGISTICS’ MOTION TO VACATE DEFAULT ORDER AND JUDGMENT.” But the body of the
order only refers to the default judgment. This appears to be a scrivener’s error as both parties
are proceeding with the understanding that both default orders were vacated.
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60(b). CR 55(c)(1).” Ha v. Signal Elec., Inc., 182 Wn. App. 436, 446, 332 P.3d 991(2014).
A party moving to vacate under CR 60(b)(1) must show that “(1) there is
substantial evidence supporting a prima facie defense; (2) the failure to timely appear
and answer was due to mistake, inadvertence, surprise, or excusable neglect; (3) the
defendant acted with due diligence after notice of the default judgment; and (4) the
plaintiff will not suffer a substantial hardship if the default judgment is vacated.” Id. at
448-49 (citing Little, 160 Wn.2d at 703-04). The first two factors are primary while the
third and fourth are secondary. Id. (citing Little, 160 Wn.2d at 704). “[T]he four
elements ‘vary in dispositive significance as the circumstances of the particular case
dictate.’” TMT, 140 Wn. App. at 201 (quoting White v. Holm, 73 Wn.2d 348, 352, 438
P.2d 581 (1968)). The test is not mechanical and whether a default judgment should be
set aside is a matter of equity. Ha, 182 Wn. App. at 449 (citing Little, 160 Wn.2d at
704).
We review a trial court’s ruling on a motion to vacate a default judgment for
abuse of discretion. VanderStoep v. Guthrie, 200 Wn. App. 507, 518, 402 P.3d 883(2017). A trial court abuses its discretion by making a decision that is manifestly
unreasonable or by basing its decision on untenable grounds or untenable reasons. Id.This court is more likely to find an abuse of discretion when the trial court denies a
motion to set aside a default judgment than when the trial court grants such a motion.
Id. Dougherty repeatedly argues that IWL has not presented a “virtually conclusive
defense,” but the trial court found that IWL presented a prima facie defense.
[W]here the moving party is able to demonstrate a strong or
virtually conclusive defense to the opponent’s claim, scant time will be
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spent inquiring into the reason as which occasioned entry of the default,
provided the moving party is timely with his application and the failure to
properly appear in the action in the first instance was not willful. On the
other hand, where the moving party is unable to show a strong or
conclusive defense, but is able to properly demonstrate a defense that
would, prima facie at least, carry a decisive issue to the finder of the facts
in a trial on the merits, the reasons for his failure to timely appear in the
action before the default will be scrutinized with greater care, as will the
seasonability of his application and the element of potential hardship on
the opposing party.
TMT, 140 Wn. App. at 201 (quoting White, 73 Wn.2d at 352-53). “[I]n determining
whether a party is entitled to vacation of a default judgment, a trial court’s initial inquiry
is whether the defendant can demonstrate the existence of a strong or virtually
conclusive defense or, alternatively, a prima facie defense to the plaintiff’s claims.” Id.Prima Facie Defense
Establishment of the first factor avoids a useless trial. Johnson v. Cash Store,
116 Wn. App. 833, 841, 68 P.3d 1099 (2003) (citing Griggs, 92 Wn.2d at 583)). The
trial court examines the evidence and reasonable inferences in the light most favorable
to the moving party to determine whether there is substantial evidence of a prima facie
defense. Id. The defendant satisfies its burden of demonstrating the existence of a
prima facie defense if it is able to produce evidence which, if later believed by the trier of
fact, would constitute a defense to the claims presented. TMT, 140 Wn. App. at 202.
The court does not act as a trier of fact in making such a determination and may not
conclusively determine which party’s facts control. Id. at 203 (citing Showalter, 124 Wn.
App. at 512).
In this case, Dougherty’s complaint alleged that IWL was liable for negligent
hiring, negligent training, negligent supervision, and negligent retention of the driver of
the truck that backed over Dougherty, resulting in his injuries. The complaint also
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alleged that IWL was liable through the negligent entrustment doctrine because it
entrusted the commercial vehicle to the driver.
In order to show that an employer was negligent in hiring an employee, the
plaintiff must show that (1) the employer knew or, in exercising ordinary care, should
have known of its employee’s incompetence when the employee was hired, and (2) the
negligently hired employee caused plaintiff’s injuries. See Rucshner v. ADT, Sec. Sys,
Inc., 149 Wn. App. 665, 680, 204 P.3d 271 (2009). Negligent retention consists of an
employer “retaining the employee with knowledge of his unfitness, or of failing to use
reasonable care to discover it before . . . retaining him.” Anderson v. Soap Lake Sch.
Dist., 191 Wn.2d 343, 358, 423 P.3d 197 (2018) (alteration in original) (quoting Peck v.
Siau, 65 Wn. App. 285, 288, 827 P.2d 1108 (1992)). To prove negligent supervision,
the plaintiff must show (1) an employee acted outside the scope of his or her
employment; (2) the employee presented a risk of harm to other employees or third
persons; (3) the employer knew or should have known, in the exercise of reasonable
care, that the employee posed a risk to others; and (4) the employer’s failure to
supervise was the proximate cause of injuries to other employees or third persons. See
Anderson, 191 Wn.2d at 363-64 (citing Niece v. Elmview Grp. Home, 131 Wn.2d 39, 51,
929 P.2d 420 (1997)).
In its motion to vacate, IWL presented evidence that in its role as a “freight
broker,” it did not have any role in hiring, training, supervising, or retaining the driver
who allegedly caused Dougherty’s injuries. To support its assertions, IWL provided a
declaration of its president, Mark Kreider. This declaration stated that IWL “maintains
contractual relationships” with motor carriers, but “does not employ any drivers, does
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not own any trucks, does not deliver any cargo, and has not done so in 24 years of
business.” Kreider asserted that IWL was contacted by its client, Maxxon, requesting
that IWL “broker a freight delivery of goods from Las Vegas to Washington” and IWL
then brokered a contract for Desert Eagle, a motor carrier, to deliver the goods in
Washington. Along with the declaration, IWL submitted the contract between itself and
Desert Eagle, which provides that Desert Eagle “agrees to provide the necessary
equipment and qualified personnel for completion of the transportation services required
for BROKER and/or its customers.” The contract does not provide for IWL to select,
train, hire, or supervise any drivers selected by the motor carrier.
Dougherty argues in its reply that IWL presents no argument in response to one
of its theories of liability – negligent selection of the carrier – and therefore has waived
any argument that it proved a virtually conclusive defense. But despite its claim to the
contrary, Dougherty did not plead negligent selection of carrier in its first amended
complaint.
The evidence presented by IWL, if later believed by a trier of fact, does present a
prima facie defense to Dougherty’s claims that were before the trial court at the time of
the motion to vacate.
Excusable Neglect
Because IWL has presented a prima facie defense and not a “virtually
conclusive” defense, we must next scrutinize the reasons for the defendant’s delay in
responding. Johnson, 116 Wn. App. at 842. The record demonstrates that IWL’s failure
to respond was a mistake by the company’s registered agent in Washington and not
IWL’s willful intent to ignore the lawsuit.
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The record suggests that Baldwin never forwarded the summons and complaint
to IWL because he believed that he never received it. The context in which Bailey
described serving Baldwin, Baldwin’s initial declaration, and the fact IWL abandoned its
position that Bailey had not been served after again hearing from Baldwin suggests that
his initial belief that the summons and complaint did not exist was a mistaken one. 4
Dougherty argued below as it does on appeal that because IWL hired a company
to act as its registered agent, this court should treat Baldwin as an IWL employee and,
as in TMT, any breakdown in internal office management and procedure was
inexcusable. In TMT, a company’s in-house legal assistant received the complaint and
summons, but failed to enter the information into the company’s calendaring system or
notify the general counsel before going out of town for several weeks. 140 Wn. App. at
198. As a result, the company failed to appear and default judgment was entered
against it. Id. The trial court denied the company’s motion to vacate. Id. The court
held that the company’s “breakdown of internal office procedure,” was inexcusable. Id.
at 213. Unlike TMT, the mistake here was not the result of an “internal office
management and procedure.” Id.The trial court found Baldwin was not a functional employee, but a contracted
worker for service and his error constituted excusable neglect. Whether Baldwin’s
conduct was excusable does not turn solely on whether he was or was not a functional
employee. This court may affirm on any grounds. Hoflin v. City of Ocean Shores, 121
4
Though the process server estimated the age of the registered agent and reported that
Baldwin, who described himself as having difficulty hearing, we are cognizant that neither age
nor having difficulty hearing alone establishes incompetence. Relevant here is the fact that after
Dougherty submitted the more detailed description of the circumstances in which Baldwin was
served, IWL, apparently after hearing from Baldwin, reversed its position claiming that Baldwin
was never served.
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Wn.2d 113, 134, 847 P.2d 428 (1993). As this court stated in TMT, what is just and
proper must be determined by the facts of each case, not by a hard and fast rule
applicable to all situations regardless of the outcome. 140 Wn. App. at 200. The facts
in this case are not as simple as Dougherty attempts to portray. This is not the situation
where a registered agent is properly served and simply fails to forward it to the company
it is paid to represent. This is a case where the registered agent filed a declaration
asserting that he had never been contacted to be served and had never been served. It
was after the process server submitted a more detailed declaration of the circumstances
in which Baldwin was served that IWL reversed its position claiming that Baldwin had
never been served. Undisputed is the fact Baldwin never forwarded the summons and
complaint to IWL. Thus, the record suggests that Baldwin’s mistaken belief that he had
never been served led him to believe that the summons and complaint never existed.
Under an abuse of discretion standard, we conclude that a finding of mistake or
excusable neglect under these circumstances is not improper. That standard of review
weighs significantly in our consideration as recognized in TMT, where this court upheld
a denial to vacate a default judgment. We explained:
TMT’s citation to Showalter, 124 Wn. App. at 514, 101 P.3d 867,
does not convince us otherwise. In that case, the court found that the trial
court did not abuse its discretion by vacating a default judgment on the
basis of excusable neglect when the failure to respond was due to
defective office communication. Here, the failings at issue were more
egregious than those at issue in Showalter and involved more than the
single omission at issue in that case. Moreover, the court’s decision
finding that the trial court did not abuse its discretion does not necessarily
indicate that the trial court would have abused its discretion by denying a
motion to vacate under similar circumstances, a situation more akin to the
one at issue here.
TMT, 140 Wn. App. at 213 n.11. In Showalter, a paralegal bypassed the company’s
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typical protocols for receipt of service causing the documents not to reach the internal
claims administrator to whom they should have been forwarded. 124 Wn. App. at 509.
The paralegal instead gave them to a safety and risk manager, who routinely received
copies of such service documents “for informational purposes only” and did not
understand that the paralegal wanted the manager to forward the copies to the claims
administrator. Id. at 514. Both the paralegal and risk manager “emphasize[d] that this
misunderstanding was inadvertent and that they did not intentionally fail to respond to
Showalter’s lawsuit.” Id. Noting the nature of the error, this court affirmed the trial
court’s vacation of the default judgment. Id. at 515.
Dougherty cites to several out-of-state cases, none of which have similar facts
and all of which rely on their state’s rules and case law, not Washington’s. We need
only look at Washington law to conclude that the trial court did not abuse its discretion in
determining IWL’s failure to respond was excusable under CR 60(b)(1).
Dougherty also argues, as a matter of public policy, this court should not reward
IWL for designating a negligent registered agent “on the cheap” 5 without any safeguards
in place. Nothing in the record establishes that IWL knowingly designated a negligent
registered agent. Dougherty also fails to recognize that being on the receiving end of a
default judgment is a risk, not a benefit, of not getting proper service, and that the
primary concern in reviewing a trial court’s decision on a motion to vacate is whether
that decision was just and equitable.
The facts of this case demonstrate that IWL’s failure to respond was not
5
Dougherty cites to All American Agents of Process’s website where it advertises that it
provides “blanket coverage” of a process agent in all 50 states “for a low one-time fee of
$66.50.”
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deliberate or even neglectful. See Ha, 182 Wn. App. at 452 (affirming vacation of
default judgment where defendant’s failure to respond was not deliberate or even
neglectful when the company’s retained attorney and financial advisor for bankruptcy
proceedings mistakenly forwarded the summons and complaint to the wrong insurance
company).
Secondary Factors
After evaluating the primary factors, this court then evaluates the secondary
factors – whether the defendant acted with due diligence after notice of the default
judgment and whether the plaintiff will suffer hardship if the judgment is vacated. Ha,
182 Wn. App. at 448-49 (citing Little, 160 Wn.2d at 703-04).
A motion to vacate under CR 60(b)(1) must be filed within a reasonable time and
within one year of the judgment. Id. at 454 (citing Luckett v. Boeing Co., 98 Wn. App.
307, 310, 989 P.2d 1144 (1999)). What constitutes a “reasonable time” depends on the
facts and circumstances of each case. Id. (citing Luckett, 98 Wn. App. at 312). The
“critical period” is between when the moving party became aware of the judgment and
when it filed the motion to vacate. Id. Courts have found that three months is not within
a reasonable time, but within one month satisfies the due diligence requirement. Id.(citing Gutz v. Johnson, 128 Wn. App. 901, 919, 117 P.3d 390 (2005)).
Here, IWL learned of Dougherty’s motion for default on the evening of April 25,
2023 and its president contacted the company’s attorneys the next day. IWL submitted
a response in opposition to the entry of the default judgment on May 3, two days before
the scheduled default judgment hearing. When IWL missed the hearing and learned of
the entry of the judgment the same day, it offered to pay attorney fees and costs so that
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Dougherty would stipulate to vacate the judgment. Dougherty conceded below that the
“failure to appear here, though, to defend the default entry isn’t the primary issue. The
primary issue was IWL’s negligence months ago by not appearing in this case.” 6 After
unsuccessfully convincing Dougherty to stipulate to vacate the judgment, IWL filed a
motion to vacate the judgment on May 16, less than two weeks after the entry of default
judgment. This falls within the one month that this court has found satisfies the due
diligence requirement.
Dougherty argues that vacation of the default judgment will result in substantial
hardship because it will lead to a delay and further cost to the plaintiff. However,
“vacation of a default judgment inequitably obtained cannot be said to substantially
prejudice the nonmoving party merely because the resulting trial delays resolution on
the merits.” Ha, 182 Wn. App. at 455 (citing Johnson, 116 Wn. App. at 842).
The trial court’s finding that IWL met the four requirements for vacating a default
judgment under CR 60(b)(1) was based on tenable grounds. The trial court did not
abuse its discretion in vacating the default orders.
We affirm.
WE CONCUR:
6
At the time the IWL filed its response, it was represented by its retained counsel with
one firm and also had insurance-appointed counsel through a second firm. Both attorneys
agreed that counsel from the first firm would handle the opposition to Dougherty’s motion for
default judgment because the father of the insurance-appointed attorney with the second firm
had recently passed away.
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