Choice Hotels Int'l, Inc. v. Grover - 792 F.3d 753 (7th Cir. 2015)

Rule:

The rule is that all of the attorney's misconduct becomes the problem of the client, except in the cases where the act is outside the scope of employment or in cases of excusable neglect covered by Fed. R. Civ. P. 60(b)(1). A lawyer who inexcusably neglects his client's obligations does not present exceptional circumstances to justify relief from judgment. That conclusion cannot be avoided by calling an attorney's failure to file critical documents "nonfeasance" rather than "misfeasance."

Facts:

Choice Hotels sued SBQI, Inc., plus several of its managers and investors, seeking damages for a breach of a franchise agreement. The defendants did not answer the complaint, and the clerk of court entered a default. One of the defendants, Tarranpaul Chawla, an attorney admitted to practice in Illinois, represented the others but did so poorly, which led to the default. The default judgment led the Investors to hire a new lawyer, who filed a motion seeking to set aside the judgment, which the district court denied.

Issue:

Under the circumstances, were the Investors entitled to relief from the default judgment?

Answer:

No.

Conclusion:

In an action for a breach of a franchise agreement where a default judgment was rendered after the investors' attorney failed to take action in the case, the Court held that the investors were not entitled to relief from judgment under Fed. R. Civ. P. 60(b)(6) because they did not show extraordinary circumstances to justify upsetting the judgment. The Court averred that the remedy for legal neglect lies in a malpractice suit against the lawyer, rather than continuing the original litigation and upsetting the adversary's legitimate expectations based on a final judgment.