Opinion
No. 11–P–2183.
2012-10-9
KENNETH KAPLAN, CPA, P.C. & another v. AMERICAN STRONG SAFETY FOODS CORPORATION & others.
By the Court (GRASSO, KANTROWITZ & GRAHAM, JJ.).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
In March, 2009, the plaintiffs, Kenneth Kaplan (Kaplan) and Kenneth Kaplan, CPA, P.C. (Kaplan, CPA) filed a complaint in the Superior Court against the several defendants to recover fees for alleged unpaid accounting services. The defendants responded by filing a motion to dismiss the claims. The motion was denied, and the defendants filed answers together with counterclaims.
The case proceeded unremarkably until September 22, 2010, when the plaintiffs' counsel, attending a scheduled pretrial conference filed a motion to withdraw. The judge set the motion for hearing on September 29, 2010, in order to allow Kaplan to attend a hearing on the motion. At the hearing, the judge allowed the plaintiffs' counsel to withdraw. He further informed Kaplan that the corporation, Kaplan, CPA, could not appear in court pro se. The judge then informed Kaplan that the corporation had thirty days to engage successor counsel, and continued the case for a status conference on November 2, 2010. Prior to the status conference, Kaplan filed a pro se appearance on behalf of himself and Kaplan CPA together with an emergency motion to compel mediation or arbitration, to be heard at the November 2 status conference. At the conclusion of the November 2 status conference, conducted by a different judge (motion judge), the motion judge denied Kaplan's emergency motion to compel mediation or arbitration. In addition, in an endorsement on Kaplan's emergency motion, the motion judge ordered that the claims of Kaplan, CPA were dismissed and that the corporation was defaulted on the counterclaims because “the corporation has not filed an appearance by an attorney as required by Massachusetts law....”
Massachusetts law requires that corporations be represented by legal counsel in all judicial proceedings. See Varney Enterprises, Inc. v. WMF, Inc., 402 Mass. 79, 520 N.E.2d 1312 (1988).
The endorsement on the motion to withdraw as counsel reads as follows: “After hearing, Allowed. Plaintiff has [thirty] days to seek new counsel. Case continued to [November 2, 2010] [at] 2:00 [P .M.] for hearing regarding new counsel.
In the motion to compel mediation or arbitration Kaplan noted that the “engagement letters as attached as exhibit C to the [c]omplaint requires (sic) mediation as a condition precedent to filing suit, which has not been done because defendants refused to participate in the process.... Late in the process and at the time of filing pretrial memorandums (sic) [p]laintiff's attorney withdrew as counsel and [p]laintiff is now [p]ro-[s]e.”
Within fourteen days of the default and dismissal of the claims of Kaplan, CPA, Michael S. Nuesse, Esq., filed a notice of appearance on behalf of the plaintiffs, and, on November 16, 2010, he filed an emergency motion for leave to file a motion to remove the default. Then, on December 2, 2010, Nuesse filed a motion to set aside the default and reinstate claims. That motion was denied on January 26, 2011, by the motion judge in an endorsement stating that the corporate plaintiff “has not shown good cause for removal of the default or for the failure to comply with the order for an attorney appearance for the corporation”, and “has not demonstrated a meritorious claim or a meritorious defense to the counterclaim.” On March 7, 2010, the corporate plaintiff filed a motion for reconsideration of the motion to set aside the default and reinstate its claims. The motion was denied.
On appeal, Kaplan, CPA, contends that the motion judge abused his discretion by defaulting the corporation and by denying its motion to remove the default and reinstate its claims.
Discussion. 1. Entry of default. Kaplan, CPA, argues that the motion judge abused his discretion by defaulting it because the first judge had not entered an express order regarding the corporation's need to hire successor counsel; Kaplan, CPA, had shown good cause for not meeting the first judge's deadline; and that it had meritorious claims and a meritorious defense to the counterclaim. Moreover, it contends that the motion judge abused his discretion by defaulting Kaplan, CPA, because the motion judge failed to provide the corporation an opportunity to testify to the good cause and meritorious nature of its claims and defense.
We agree that the default should not have entered because the corporation was not sufficiently apprised of the risk that it would be defaulted on the counterclaims and that its claims would be dismissed if it did not secure counsel with thirty days of the hearing where its counsel was allowed to withdraw. Rather, the first judge informed Kaplan, CPA, that the case would be continued for thirty days for a status conference regarding the appearance of successor counsel. At the hearing on September 29, 2010, the first judge made the following statements: “The motion to withdraw is allowed. Mr. Kaplan, you'll have [thirty] days to obtain successor counsel and have counsel appear or enter an appearance on behalf of the corporation.... All right. Let's put the case on [thirty] days out for status regarding the appearance of counsel.” On this record, we conclude that the default entered against Kaplan, CPA, should not have entered since no motion for default had been filed with the court, and the corporation had been notified by the first judge and the clerk that the matter was being continued to November 2, 2010, for a status conference.
It is clear from the record that the first judge was concerned about the ability of Kaplan, CPA, to obtain successor counsel. At the hearing in which the corporation's counsel was permitted to withdraw the judge stated “[i]f I allow the motion, it seems that I'm leaving [the corporation] in an enormous lurch at this stage of the litigation.”
We agree with the defendants that the first judge, after informing Kaplan that the corporation could not proceed pro se, and that he had thirty days to obtain successor counsel, was under no duty to further advise him that failure to obtain counsel in thirty days could result in default and dismissal of the claims. Here, however, we are not concerned with omissions by the judge. Rather, it is clear from the record that Kaplan was informed that the purpose of the November 2, 2010, date was for a status conference regarding successor counsel for the corporation.
2. Motion to vacate default. Were we to agree that the default against Kaplan, CPA, on the defendants' counterclaims entered properly, the defendants would fare no better in this appeal because we are persuaded that the motion judge abused his discretion by failing to vacate the default on the counterclaims entered against Kaplan, CPA, and the dismissal of the corporation's claims against the defendants. Pursuant to Mass.R.Civ.P. 55(c), 365 Mass. 822 (1974), a judge may set aside an entry of default “for good cause shown.” See Bissanti Design/Build Group v. McClay, 32 Mass.App.Ct. 469, 470, 590 N.E.2d 1169 (1992). “Good cause” requires a showing by affidavit that the defendant had a good reason for failing to plead or defend in a timely manner and had meritorious defenses. See New England Allbank for Sav. v. Rouleau, 28 Mass.App.Ct. 135, 140, 547 N.E.2d 61 (1989). See Smith & Zobel, Massachusetts Rule Practice § 55 .8 at 259 (2007). We review a judge's decision not to vacate a default for abuse of discretion. Greenleaf v. Massachusetts Bay Transp. Authy., 22 Mass.App.Ct. 426, 429, 494 N.E.2d 402 (1986). Rouleau, supra at 144, 547 N.E.2d 61.
Here, there were various mitigating factors weighing in favor of allowing the corporation's motion for relief. The sole reason given by the judge for defaulting Kaplan, CPA, on the counterclaims and for dismissing its complaint was the failure of the corporation to obtain successor counsel by the November 2, 2010, date which, as noted above, was set as a status conference. The corporation acted promptly after entry of default by obtaining successor counsel for the corporation and new counsel filed a motion to set aside the default two weeks after its entry. In addition, it was otherwise apparent on the record that Kaplan, CPA, had, in fact, been engaged by the defendants to provide accounting services and that a genuine dispute existed as to what, if any, damages were due the corporation. Finally, there has been no suggestion by any party that Kaplan, CPA's failure to obtain successor counsel by November 2, 2010, caused prejudice to the defendants in their trial preparations. Accordingly, we conclude that the motion judge abused his discretion by failing to vacate the default.
We again note that, as appears from the record, no judgment had entered on the case and no motion for default was pending before the court at the time the default was entered against the corporation.
Conclusion. The order denying the motion to vacate the default of Kaplan, CPA, and reinstate its claim is reversed, and a new order is to enter allowing the motion.
So ordered.