This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
Woodlands National Bank, N.A.,
David J. Hoch,
Ramsey County District Court
File No. C4-04-3685
David Michael Aafedt, Winthrop
Considered and decided by Dietzen, Presiding Judge; Toussaint, Chief Judge; and Shumaker, Judge.
U N P U B L I S H E D O P I N I O N
TOUSSAINT, Chief Judge
Appellant challenges the default judgment entered against him because of his failure to answer respondent’s defamation complaint and the order denying his motion to vacate the default judgment. Although the default judgment was properly entered, because appellant made a strong showing to reopen the judgment based on a reasonable defense on the merits, we reverse and remand.
David J. Hoch is a lobbyist registered with the Minnesota Campaign Finance and
Public Disclosure Board (the Board). In
2003, he was examining reports submitted to the Board by and on behalf of the
Mille Lacs Band of Ojibwe Indians (the Band).
He concluded that respondent Woodlands National Bank, N.A., a
corporation, was making political contributions to a fund established by the Band,
in violation of
In letters dated October 16, 2003, and addressed to the Mille Lacs and Hennepin County Attorneys, Hoch requested “a criminal investigation into the activities of Woodlands National Bank . . . and this bank’s political contributions to the Mah Mah Wi No Min I political committee. . . .” About the same time, Hoch apparently contacted the Mille Lacs Messenger newspaper, which published an article on November 5, 2003, quoting from Hoch’s letter to the Mille Lacs County Attorney. In letters dated April 2 and May 17, 2004, respectively, both counties declined to pursue the matter.
Shortly after the Hennepin County Attorney’s decision not to pursue a criminal investigation, Woodlands served Hoch with a complaint alleging defamation based on the statements made to the county attorneys and newspaper. The complaint alleged that Hoch’s statement that Woodlands had made an illegal political contribution was false and made maliciously. It also alleges that the political-fund reports on file with the Board specifically state that the campaign contributions were made by the Band only, not any other individual or entity. Woodlands alleged damages in an amount to be determined at trial.
It is undisputed that Woodlands served Hoch with the defamation complaint on April 19, 2004. Letters written by Woodlands’ counsel, David Aafedt, to attorney Joe Friedberg confirm that Friedberg obtained two extensions for his “client” Hoch to file an answer. When Aafedt agreed to the second extension to June 7, he noted that Friedberg had “informed [him] that Mr. Hoch planned on tendering his defense to his insurance carrier and that it was unlikely that he would be representing Mr. Hoch.” Friedberg alleges in his affidavit that “Mr. Hoch was absolutely aware that I would not represent him when I referred him to his insurer and handed him his file back.”
In a letter dated June 4, 2004, the insurance company notified Hoch that the company was “now investigating this loss under a reservation of rights.” The letter stated that the company would notify him immediately when it determined the coverage issue. The same day, Aafedt received a message from the insurance company regarding an additional extension of the time to answer, but was unable to reach the caller. Aafedt received no other communication regarding this matter and proceeded to serve Hoch with discovery on June 11 and with a motion for a default judgment on June 24.
About the time he received the motion for a default judgment, Hoch forwarded his documents to attorney Randy Thompson. In a letter to Hoch dated July 7, Thompson noted that he had met with Hoch “several weeks ago.” Thompson also clarified that the insurance company had declined to defend Hoch, that Hoch’s inability to raise a retainer was a problem, and that Thompson had “not agreed to represent [Hoch].” Similarly, Hoch’s present counsel, Mark Anfinson, stated that Hoch approached him on July 1, but did not have the retainer required to hire him.
Hoch appeared without counsel at the July 22, 2004, hearing on the motion for default judgment. He argued in his defense that he had thought Friedberg was representing him. Hoch told the court that he had been trying to reach Friedberg since the insurance company’s decision not to defend, but had been unsuccessful. He told the court that he was “in a position where until I contact [Friedberg] I can’t really proceed. I’m willing to, I just can’t because I don’t . . . know what’s been done to this point.”
The district court accepted Aafedt’s affidavits in support of default judgment, including an affidavit indicating that his requests for admissions were deemed admitted by Hoch when Hoch failed to respond. An affidavit from Woodlands’ President, Lewis Anderson, set forth damages suffered by Woodlands. Additionally, an affidavit from a public-relations firm confirmed the costs of services rendered to date and the minimum estimated “public relations campaign” required to put Woodlands back in the position it would have been in had there been no defamatory statement. Aafedt requested “general reputational harm damages in the amount of $105,000 . . . in addition to those quantified damage amounts set forth in the various affidavits submitted to you.” The court issued an order for a default judgment in the amount of $45,000 plus costs and disbursements, which was entered on August 5, 2004.
On September 15, 2004, Hoch moved to vacate the default judgment, under Minn. R. Civ. P. 60.02. On October 1, 2004, before the hearing on the motion to vacate, Hoch also filed a notice of appeal from the judgment and moved to stay the appeal until the district court subsequently denied the motion to vacate, finding that Hoch had made deceptive statements regarding his representation by Friedberg. Because these statements rendered Hoch unbelievable, the court concluded that Hoch’s defense on the merits, too, lacked credibility.
Woodlands moved this court to strike Hoch’s brief for focusing on issues outside the scope of the appeal. This court denied the motion and referred to the panel the issue of whether to review the order denying the motion to vacate.
D E C I S I O N
Discretionary Review of Order Denying Motion to Vacate Default Judgment
As stated in this
court’s January 10, 2005 order, although the district court order denying the
motion to vacate the default judgment was not independently appealable, it
falls within this court’s scope of review, which extends to “review [of] any
order involving the merits or affecting the judgment” and “any other matter as
the interest of justice may require.”
Although we may decline to consider the order denying the motion to vacate, such a decision would render the district court’s decision unreviewable. Because both parties have briefed the issue and the trial court record on this appeal contains the moving papers, the transcript, and the post-appeal order involving the merits of the judgment, we will exercise our discretion to review it.
When a party fails to plead or otherwise defend
within the time allowed by law, default judgment may be entered against
There is little dispute that Woodlands’ complaint
stated a cause of action. The elements
of defamation are: (1) a false statement; (2) communication of the statement to
a third party; and (3) resulting harm to the plaintiff’s reputation and
standing in the community. Stuempges
v. Parke, Davis & Co., 297 N.W.2d 252, 255 (
Damages awarded on a default judgment must be
“limited in kind and degree to what is specifically demanded in the complaint
even if the proof would justify greater relief.” Thorp Loan & Thrift Co. v. Morse,
451 N.W.2d 361, 363 (
Because Woodlands stated a claim for defamation and supported it with proof of damages and Hoch failed to timely respond, the district court properly awarded Woodlands’ motion for a default judgment.
Motion to Vacate Default Judgment
In the district court,
Woodlands challenged Hoch’s motion to vacate the default judgment on procedural
and substantive grounds. The court did
not address the procedural challenge and instead disposed of the motion on the
substantive ground. On appeal, Woodlands
again argues that Hoch failed to follow the rules because he brought the motion
to vacate without filing the requisite copy of an answer. See
Minn. R. Gen. Pract. 109.01. Enforcement of local rules of civil procedure is
left to the discretion of the district court.
The record reflects that Hoch initially did not comply with the requirement that he file an answer, but did file one on October 4, prior to the time of the rescheduled motion hearing. Even without Hoch’s answer, however, his defense was apparent from his moving papers. Under these circumstances, it was within the district court’s discretion to decide the motion on the merits and this court, too, will review the order on the merits.
In reviewing the
denial of a motion to vacate a default judgment, we determine whether the
district court abused its discretion. Foerster
v. Folland, 498 N.W.2d 459, 460 (
The district court stated that Hoch is lacking on at least two of the four factors. It found Hoch had made deceptive statements and “played dumb” at the default hearing on the issue of whether he was represented by Friedberg or not. On the ground that Hoch lacked credibility due to his representations at the default hearing, the court found Hoch was weak on two factors—reasonable excuse and reasonable defense on the merits. The court did not specifically address prejudice or due diligence.
The record indicates that Hoch’s reliance on Friedberg was justified to a point. Friedberg himself confirmed that he acted in Hoch’s interests until early July. Once it was clear that neither Friedberg nor Hoch’s insurance company was going to represent him, which was even later in July, Hoch needed to, and did, proceed to seek other counsel. Although the record does not explain Hoch’s failure to advise Woodlands’ counsel or the court at the default hearing that he had proceeded to seek other counsel, the record contains evidence that Hoch was not ignoring the complaint or his obligation to defend. His pro se representations regarding his relationship with Friedberg were countered by his serious efforts to obtain counsel when that relationship ended. Under these circumstances, on the motion to vacate, Hoch made an adequate showing of a reasonable excuse on the merits.
existence of a “debatably” meritorious defense must be demonstrated by more
than conclusory allegations in the moving papers. Charson v. Temple Israel, 419 N.W.2d
488, 492 (
Hoch’s stated defenses include that (1) Woodlands is a public figure; (2) the statements were privileged; (3) the statements were “at least in part statements of opinion”; and (4) he did not act with actual malice. He asserted that he had no knowledge that the statements were false, he did not act with reckless disregard for their truth, he did not act with improper motive, he was not negligent, and he acted in good faith. He specifically stated that he thought that his interpretation of the reports was sound and that he had received some acknowledgement of this possibility from specific Board members. He also countered Woodlands’ claim that he has a history of making baseless claims, asserting that he has made successful complaints to the Board in the past.
Hoch’s generalized denials were inadequate to raise a reasonable defense. The record, however, reflects specific
denials and facts and allegations supporting the defenses. The record indicates that Woodlands is a
federally chartered banking institution, which is a sufficient basis to argue
that Woodlands is a “public figure” for purposes of defamation law. See Jadwin v. Minneapolis Star & Tribune,
Co., 367 N.W.2d 476, 487 (
doubts as to the truth of his publication”) (quotation omitted). Hoch also asserted that he believed he had discovered a violation of the law, he brought it to the Board initially, and based on the Board’s reaction, he went to the county attorneys. This, again, meets the standard of raising an arguable defense on the merits for purposes of a motion to vacate.
The district court did
not express an opinion on due diligence or prejudice. Due diligence looks at diligence “after
notice of the entry of judgment.” Guillaume
& Assocs. Inc., v. Don-John Co., 371 N.W.2d 15, 18 (
The record indicates that Hoch exercised due diligence to vacate the default judgment and that doing so will not cause actual prejudice to Woodlands. Hoch retained an attorney about one month after the default hearing and promptly took appropriate steps to appeal the judgment and to move to vacate the judgment. Any damage due to the alleged defamatory statements was done in late 2003 at the time of the statements, is not ongoing, and Woodlands promptly took steps to repair any damage, including a state-wide public relations campaign. Woodlands primarily argues that this matter has taken up too much time and that it is Hoch’s fault for blatantly and “intentionally ignoring the process.” As the record shows, however, Hoch was not ignoring the process.
In conclusion, the district court did not err in its decision to enter a default judgment against Hoch. On the motion to vacate, however, Hoch made a strong showing of a reasonable defense, due diligence, and no actual prejudice, which warrant reopening the judgment.
Reversed and remanded.
also argues that Hoch does not raise a reasonable defense because all
allegations against him are taken as true due to his failure to timely respond
to discovery. This argument is based on
cases in which a default judgment was entered due to a party’s willful and
unexcused failures to comply with discovery orders “with an intent to delay
trial and continu[ing] . . . refus[al] to cooperate.” See State by Humphrey v. Ri-Mel, Inc.,
417 N.W.2d 102, 108-09 (Minn. App. 1987) (citing Breza v. Schmitz, 311