United States District Court, E.D. Wisconsin
DECISION AND ORDER
WILLIAM E. DUFFIN U.S. MAGISTRATE JUDGE.
Procedural
History
Having
relatively recently purchased the assets and goodwill of a
Hyundai car dealership located in West Allis, Wisconsin from
BMR No. 1 LLC d/b/a Arrow Hyundai, plaintiff HWAG, LLC
commenced this lawsuit on June 13, 2017, against Shawn Monty,
a former Arrow Hyundai employee, and the entity that it
believed to be his then-current employer, Home Run Auto
Group, LLC d/b/a Racine Hyundai. (ECF No. 1.) The complaint
alleged that Monty was continuing to access his former
employer's trade secrets and confidential business
information.
HWAG
subsequently learned that Monty's new employer was
actually Racine Car Dealer, LLC, and sought leave to file an
amended complaint substituting Racine Car Dealer as a
defendant for Home Run Auto Group (ECF No. 13), which motion
was granted on July 25, 2017. (ECF No. 17.) HWAG's
amended complaint alleges misappropriation and wrongful use
of confidential information and trade secrets, computer
fraud, deceptive trade practices, and tortious interference
with business relationships by Racine Car Dealer and Monty.
(ECF No. 18, ¶¶ 1, 9.)
On
August 17, 2017, Monty filed an answer to the amended
complaint along with a counterclaim against HWAG and a
cross-claim against Racine Car Dealer, by whom he was at that
point no longer employed. (ECF No. 27.) Monty's
counterclaim against HWAG included six causes of action: one
count of defamation by libel, four counts of defamation by
slander, and one count of tortious interference with
prospective economic advantage. (ECF No. 43 at 25-31.) Racine
Car Dealer filed an answer to Monty's cross-claim. (ECF
No. 31.) On September 19, 2017, HWAG and Racine Car Dealer
entered into a settlement agreement and HWAG's claims
against Racine Car Dealer were dismissed. (ECF No. 41.)
On
September 28, 2017, HWAG filed a motion to dismiss all six
counts of Monty's counterclaim under Federal Rule of
Civil Procedure 12(b)(6) for failure to state a claim. (ECF
No. 42.) Monty filed a brief in opposition to the motion to
dismiss (ECF No. 44), and separately and simultaneously filed
an amended answer and counterclaims. (ECF No. 43.) The
amended counterclaims add several allegations (although no
new counts), apparently in an attempt to remedy some of the
alleged shortcomings raised in the motion to dismiss. In
reply, HWAG stated that, for purposes of judicial economy,
its reply was to serve not only as a reply in support of its
motion to dismiss but also as its response to the amended
counterclaims. (ECF No. 46 at 2, n. 1.)
Approximately
one week later, Monty filed a motion for entry of default on
the ground that HWAG failed to answer Monty's amended
counterclaims. (ECF No. 48.) The motion argues that
HWAG's reply in support of the motion to dismiss the
original counterclaims is not a proper pleading in response
to the amended counterclaims.
Both
motions have been fully briefed. All parties have consented
to have this court resolve this case. (ECF Nos. 16, 23, 29.)
The court has jurisdiction under 28 U.S.C. §§ 1331
and 1367.
Motion
for Entry of Default
Monty's
motion for entry of default is not well received. Twenty five
years ago the Seventh Circuit Court of Appeals adopted
standards for professional conduct for those lawyers and
judges practicing within the Seventh Federal Judicial
Circuit. The standards were “designed to encourage us,
judges and lawyers, to meet our obligations to each other, to
litigants and to the system of justice, and thereby achieve
the twin goals of civility and professionalism, both of which
are hallmarks of a learned profession dedicated to public
service.” Standards for Professional Conduct Within the
Seventh Federal Judicial Circuit, Preamble. The standards are
to be “reviewed and followed by all judges and lawyers
participating in any proceeding in this Circuit.”
Id. The standards set forth certain duties that
lawyers have to other counsel. One of those duties states:
“We will not cause any default or dismissal to be
entered without first notifying opposing counsel, when we
know his or her identity.” Standards for Professional
Conduct Within the Seventh Federal Judicial Circuit,
Lawyers' Duties to Other Counsel, ¶ 18.
It does
not appear that counsel for Monty contacted counsel for HWAG
prior to filing its motion for default judgment. Had they
done so, this motion very likely would have been avoided.
Among other things, one of the matters that counsel for Monty
could have cleared up was the confusion they created by
filing amended counterclaims while simultaneously, and
separately, filing a brief in opposition to HWAG's motion
to dismiss. Monty's position is that the amended
counterclaims superseded the original counterclaims (ECF No.
50 at 2) and rendered the motion to dismiss moot (ECF No. 48
at 5). The problem is that, by separately filing a brief in
opposition to the motion to dismiss, Monty did not treat the
motion to dismiss as moot. Indeed, nowhere in his response to
the motion to dismiss does Monty state that the motion is
moot or that the original counterclaims have been superseded
by the amended counterclaims.
Under
Rule 55(a), “When a party against whom a judgment for
affirmative relief is sought has failed to plead or otherwise
defend, and that failure is shown by affidavit or otherwise,
the clerk must enter the party's default.”
Fed.R.Civ.P. 55(a). In response to the amended counterclaims,
HWAG could have withdrawn its motion to dismiss the original
counterclaims and filed a new motion to dismiss the amended
counterclaims--the same arguments that support the motion to
dismiss the original counterclaims apply just as much to the
amended counterclaims. But in the interest of “judicial
economy” (ECF No. 46 at 2, n. 1) it chose to simply go
forward with the already-pending motion to dismiss rather
than start over. Thus, HWAG did “otherwise
defend” against the amended counterclaims by referring
to and discussing them as part of its reply in support of its
pending motion to dismiss.
In
short, default judgment is not appropriate. See Schmidt
v. Hudec, 486 F.Supp.2d 821, 825-26 (E.D. Wis. 2007)
(improper filing of answer to amended complaint in state
court rather than federal court does not warrant default
judgment when the procedural posture of the case was unique
and the movant was not prejudiced by the improper filing).
Monty's motion for entry of default is
denied.
After
careful consideration, HWAG's request for costs and fees
in having to respond to Monty's motion for entry of
default is also denied. However, counsel is expected to be
familiar with the Standards for Professional Conduct
discussed above and conduct themselves accordingly. Zealous
representation of one's client, on the one hand, and the
...