FILED
Jul 24 2019, 6:05 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEES
Ian P. Goodman Michael T. McNally
Cantrell Strenski & Mehringer LLP Delk McNally LLP
Indianapolis, Indiana Carmel, Indiana
IN THE
COURT OF APPEALS OF INDIANA
KWD Industrias SA DE CV, July 24, 2019
Appellant, Court of Appeals Case No.
18A-CC-2751
v. Appeal from the Marion Superior
Court
IPM LLC and The Honorable Patrick J. Dietrick,
Mark Reynolds, Judge
Appellees. Trial Court Cause No.
49D12-1506-CC-21389
Brown, Judge.
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 1 of 12
[1] KWD Industrias SA DE CV (“KWD”) appeals from the trial court’s decision
to set aside default judgment. We affirm.
Facts and Procedural History
[2] On June 29, 2015, KWD filed a complaint against IPM LLC (“IPM”) and
Mark Reynolds (together, “Appellees”) alleging claims of breach of contract
and unjust enrichment against IPM for which it sought $46,800 together with
interest and costs, and claims of conversion and deception against Reynolds for
which it sought actual losses and treble damages of $140,400 plus attorney fees,
interest, costs, and an additional award of punitive damages. KWD asserted
that it provided $46,800 to Reynolds on behalf of IPM to purchase certain
equipment from IPM and that IPM failed to provide the equipment or return
the funds.
[3] The Joint Venture and Non-Disclosure Agreement, referenced in and attached
to the complaint as an exhibit, was executed on July 17, 2013, provided that its
initial term was July 17, 2013, through July 17, 2014, and included provisions
related to renewal, maintenance of equipment, product pricing, manufacturing
rights, and the ownership of equipment and tooling. The agreement provided:
“All equipment and tooling transferred to [KWD’s] manufacturing facilities
including assembly cells, fixtures, test equipment, stamping presses, and other
equipment required [f]or the current manufacturing process will remain the sole
property of [IPM].” Appellant’s Appendix Volume II at 25.
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 2 of 12
[4] Attorney Steven Fulk filed an appearance to represent Appellees in August
2015 and later filed an answer, affirmative defenses, and counterclaims against
KWD alleging an action in replevin seeking the return of property valued in
excess of $170,000, damages for the wrongful retention of the property, and
attorney fees and costs; civil conversion seeking treble damages, attorney fees,
and costs; unjust enrichment; and malicious prosecution. Appellees asserted
that the parties agreed, as part of a joint venture, that they would provide
certain property including two assembly lines for the manufacture of heavy-
duty commercial solenoid switches, tools and various parts and inventory
necessary for the operation; that KWD instructed them to ship equipment,
assembly lines, and tools to a location in Mexico; that they shipped four trucks
worth of property to Mexico in 2013 and 2014; and that KWD unlawfully
retains certain equipment including the assembly lines and tools.
[5] The chronological case summary (“CCS”) indicates that KWD filed a motion
for judgment on the pleadings as to Appellees’ malicious prosecution claim in
November 2015, the court entered an order of dismissal as to that count in
March 2016, and Appellees filed a motion to accept interlocutory appeal which
was denied in June 2016. On September 19, 2016, the parties submitted a case
management order signed by Attorney Fulk for Appellees and Attorney Ian
Goodman for KWD, and the court approved the plan and set a final pre-trial
conference for August 15, 2017, and trial for September 6, 2017. The
Appellant’s Appendix includes responses by Appellees to KWD’s second set of
interrogatories together with a certificate of service signed by Attorney Fulk
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 3 of 12
dated November 2, 2016, and responses to KWD’s second requests for
admissions together with a certificate of service signed by Attorney Fulk dated
October 14, 2016. It also includes a letter to Attorney Goodman dated May 22,
2018, which referenced an enclosure of the original transcript of the deposition
of Reynolds taken on July 13, 2017. An entry in the CCS dated August 18,
2017, states the court granted a motion for continuance, and entries dated
September 6, 2017, state the final pre-trial conference was scheduled for 2:30
p.m. on April 18, 2018, and the bench trial was scheduled to begin on May 2,
2018. An entry in the CCS dated September 7, 2017, states “Automated
ENotice Issued to Parties” and “Hearing Scheduling Activity – 9/6/2017:
Steven T Fulk; Ian Peter Goodman.” Id. at 9.
[6] On April 18, 2018, the court held the scheduled final pre-trial conference at
which Attorney Fulk did not appear on behalf of Appellees. The following day,
April 19, 2018, KWD filed a motion for sanctions against Appellees which
stated that, because of their failure to appear at the pre-trial conference, it
sought default judgment in its favor for the relief sought in its complaint,
dismissal of Appellees’ counterclaims, attorney fees, and costs. On April 20,
2018, the court scheduled a hearing on KWD’s motion for April 25, 2018, and
the CCS indicates automated e-notices were sent to Attorney Fulk and Attorney
Goodman. An April 25, 2018 CCS entry indicates a hearing was held. 1
1
The record does not contain a transcript of this hearing.
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 4 of 12
[7] On May 14, 2018, the court issued an order which granted KWD’s motion for
sanctions, entered default judgment in favor of KWD and against IPM for
$46,800 plus costs of $151 and against Reynolds for $140,400 plus attorney fees
of $22,747.39 and costs of $151, and ordered that Appellees’ counterclaims be
dismissed with prejudice. On June 1, 2018, KWD filed a motion for leave of
court to communicate directly with Appellees stating that its counsel had not
heard from Appellees’ counsel since January 8, 2018; that Comment [6] to Ind.
Rules of Professional Conduct 4.2 provides a lawyer may seek a court order in
exceptional circumstances to authorize communication otherwise prohibited by
the rule 2; that it “believes the circumstances described in this Motion are
exceptional”; that it held judgments against Appellees and that “to collect its
judgments it must have the ability to communicate with” them; and that it “has
no expectation that counsel for [Appellees] will communicate with counsel for
[KWD] or appear in Court on behalf of [Appellees].” Appellees’ Appendix
Volume II at 3. According to Appellees, the court granted KWD’s June 1, 2018
motion on the same day and shortly after that counsel contacted Reynolds.
2
Ind. Rule of Professional Conduct 4.2 provides that “a lawyer shall not communicate about the subject of
the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless
the lawyer has the consent of the other lawyer or is authorized by law or a court order.” Comment [6] states:
A lawyer who is uncertain whether a communication with a represented person is
permissible may seek a court order. A lawyer may also seek a court order in exceptional
circumstances to authorize a communication that would otherwise be prohibited by this
Rule, for example, where communication with a person represented by counsel is
necessary to avoid reasonably certain injury.
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 5 of 12
[8] On July 24, 2018, Appellees by new counsel filed a motion under Ind. Trial
Rule 60 requesting that the court set aside its May 14, 2018 order and set the
matter for a pre-trial conference. The motion stated that the dispute arises out
of a failed joint venture between KWD and IPM; that Appellees, represented by
Attorney Fulk, filed an answer and counterclaims; that neither IPM nor
Reynolds was notified of either the final pre-trial conference or the scheduling
of the bench trial; that “[i]t is unknown to undersigned counsel whether Mr.
Fulk had notice as he has not responded to undersigned counsel’s attempts to
contact him”; and that, “[t]o date, Mr. Fulk has not responded to inquiries as to
why he failed to appear.” Appellant’s Appendix Volume II at 74-75. Appellees
further argued that KWD filed its motion for sanctions on April 19, 2018;
“[f]rom a review of the docket, this appears to be the first time either party
sought sanctions of any kind in this matter”; neither IPM nor Reynolds
received notice of the motion or of the April 25, 2018 hearing; and, shortly after
the court granted KWD’s motion for leave to communicate with Appellees on
June 1, 2018, “counsel contacted Mark Reynolds directly” and “[t]his was the
first time that Mark Reynolds and [IPM] learned of Steven Fulk’s failure to
appear at the final pre-trial conference, the Motion for Sanctions, and that
judgment had been entered against them.” Id. at 75-76. Appellees stated that
they believed their attorney was diligently protecting their interests and that
they have meritorious claims and defenses.
[9] In a Declaration of Mark Reynolds referenced in Appellees’ motion to set aside,
Reynolds stated that he and IPM were not notified of the April 18, 2018 final
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 6 of 12
pre-trial conference, the scheduling of the bench trial, or the April 25, 2018
hearing. He stated: “I have reviewed my communications with my attorney
and his staff, and I have been unable to identify any communications regarding
the above dates and deadlines.” Id. at 82. He further stated that IPM provided
KWD with two complete manufacturing assembly lines and equipment, KWD
did not pay for the assembly lines and equipment, it is believed KWD still has
possession of the property, and the value of the property is approximately
$156,000. On August 24, 2018, KWD filed a response in opposition to
Appellees’ motion to set aside arguing that Appellees “simply ask the Court to
let them off the hook for Mr. Fulk’s apparent error.” Id. at 89.
[10] On August 28, 2018, the court held a hearing and on October 19, 2018, it
entered an order granting Appellees’ motion to set aside the May 14, 2018
order, conditioned upon Appellees reimbursing KWD’s counsel $3,145, the
amount of attorney fees incurred in procuring the order. As the amount was
paid, the May 14, 2018 order was set aside. KWD appeals.
Discussion
[11] The issue is whether the trial court abused its discretion in granting Appellees’
motion to set aside the May 14, 2018 order. A grant of equitable relief under
Ind. Trial Rule 60 is within the discretion of the trial court. Wagler v. West Boggs
Sewer Dist., Inc., 980 N.E.2d 363, 371 (Ind. Ct. App. 2012), reh’g denied, trans.
denied, cert. denied, 571 U.S. 1131, 134 S. Ct. 952 (2014). An abuse of discretion
occurs when the trial court’s judgment is clearly against the logic and effect of
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 7 of 12
the facts and inferences supporting the judgment for relief. Id. When reviewing
the trial court’s determination, we will not reweigh the evidence. Id.
[12] KWD asserts this case has been pending for nearly three years, for the entirety
of that period Attorney Fulk was Appellees’ counsel of record, and the court
abused its discretion “because Appellees presented evidence of only mere
neglect, not excusable neglect.” Appellant’s Brief at 12. It argues there is no
evidence that Appellees made any efforts to check the status of the litigation
and that they did not designate evidence of their attempts to contact Attorney
Fulk regarding the action. Appellees respond that the trial court’s decision is
supported by Trial Rule 60(B)(1) and (8), that KWD concedes that Attorney
Fulk’s conduct in failing to communicate with and abandoning his clients
constitutes exceptional circumstances, that they further established excusable
neglect, and that they have meritorious defenses and counterclaims.
[13] Ind. Trial Rule 55(C) provides that default judgment may be set aside in
accordance with Trial Rule 60(B). Trial Rule 60(B) provides in part: “On
motion and upon such terms as are just the court may relieve a party or his legal
representative from a judgment, including a judgment by default, for the
following reasons: (1) mistake, surprise, or excusable neglect; . . . (8) any reason
justifying relief from the operation of the judgment, other than those reasons set
forth in sub-paragraphs (1), (2), (3), and (4).” It also states that a movant filing
a motion “for reasons (1) . . . and (8) must allege a meritorious claim or
defense.” The trial court’s residual powers under subsection (8) may only be
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 8 of 12
invoked upon a showing of exceptional circumstances justifying extraordinary
relief. Wagler, 980 N.E.2d at 372.
[14] A motion under Rule 60(B)(1) does not attack the substantive, legal merits of a
judgment, but rather addresses the procedural, equitable grounds justifying the
relief from the finality of a judgment. Kmart v. Englebright, 719 N.E.2d 1249,
1254 (Ind. Ct. App. 1999), trans. denied. There is no general rule as to what
constitutes excusable neglect. Id. Each case must be determined on its
particular facts. Id. The following facts have been held to constitute excusable
neglect, mistake, or surprise:
(a) absence of a party’s attorney through no fault of party; (b) an
agreement made with opposite party, or his attorney; (c) conduct
of other persons causing party to be misled or deceived; (d)
unavoidable delay in traveling; (e) faulty process, whereby party
fails to receive actual notice; (f) fraud, whereby party is prevented
from appearing and making a defense; (g) ignorance of the
defendant; (h) insanity or infancy; (i) married women deceived or
misled by conduct of husbands; (j) sickness of a party, or illness
of member of a family.
Id. (citing Cont’l Assurance Co. v. Sickels, 145 Ind. App. 671, 675, 252 N.E.2d 439,
441 (1969), reh’g denied).
[15] “A default judgment is not generally favored, and any doubt of its propriety
must be resolved in favor of the defaulted party.” Allstate Ins. Co. v. Watson, 747
N.E.2d 545, 547 (Ind. 2001) (citation and brackets omitted). It is “an extreme
remedy and is available only where that party fails to defend or prosecute a suit.
It is not a trap to be set by counsel to catch unsuspecting litigants.” Id. (citing
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 9 of 12
State v. Van Keppel, 583 N.E.2d 161, 162 (Ind. Ct. App. 1991) (noting Indiana
law strongly prefers disposition of cases on their merits), trans. denied). This
court has considered the amount of money involved, the material issues of fact
accompanying the allegations, the length of the delay, and lack of prejudice in
concluding that a trial court did not abuse its discretion in allowing a case to be
heard on the merits. See Green v. Karol, 168 Ind. App. 467, 475, 344 N.E.2d
106, 111 (1976). See also Kmart, 719 N.E.2d at 1253 (“A cautious approach to
the grant of motions for default judgment is warranted in cases involving
material issues of fact, substantial amounts of money, or weighty policy
determinations.”) (citation and internal quotation marks omitted).
[16] The record reveals that, in September 2017, the court scheduled a final pre-trial
conference for 2:30 p.m. on April 18, 2018, and an automated notice was sent
to Attorney Fulk and Attorney Goodman. Attorney Fulk did not appear at the
April 18, 2018 conference, and one day later, on April 19th, KWD filed its
motion for sanctions requesting default judgment in its favor and dismissal of
the counterclaims against it, resulting in the court’s May 14, 2018 default
judgment against IPM in the total amount of $46,951 and against Reynolds in
the total amount of $163,298.39. KWD sought and obtained leave of court to
communicate directly with Appellees on June 1, 2018, on the basis of
“exceptional circumstances,” Appellees’ Appendix Volume II at 3, and,
according to Appellees, counsel directly contacted Reynolds shortly after that,
which was the first time Appellees learned of Attorney Fulk’s failure to appear
at the final pre-trial conference, KWD’s motion for sanctions, and that the court
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 10 of 12
had entered default judgment. In his declaration, Reynolds states that he and
IPM did not receive notice of the final pre-trial conference, the motion for
sanctions, or the hearing on the motion for sanctions and that Attorney Fulk
had not responded to inquiries as to why he failed to appear.
[17] Based upon the record and in light of the issues of fact accompanying the claims
raised in the complaint and counterclaims, that less severe sanctions had not
been previously requested or imposed, the absence of evidence of prejudice to
KWD, and the amount of money at issue, we conclude Appellees demonstrated
mistake, surprise, or excusable neglect and exceptional circumstances
supporting relief under Trial Rule 60(B).
[18] Appellees must also show they alleged a meritorious defense or claim. Trial
Rule 60(B) by its terms requires only an allegation of a meritorious defense or
claim. A meritorious defense is one demonstrating that, if the case was retried
on the merits, a different result would be reached. Baxter v. State, 734 N.E.2d
642, 646 (Ind. Ct. App. 2000). The moving party need not prove absolutely the
existence of a meritorious defense. Bunch v. Himm, 879 N.E.2d 632, 637 (Ind.
Ct. App. 2008). Rather, the party must make a prima facie showing of a
meritorious defense. Id. Appellees were required only to allege a meritorious
defense and were not required to present evidence to satisfy the requirement.
See Goodson v. Carlson, 888 N.E.2d 217, 222 n.9 (Ind. Ct. App. 2008).
[19] Appellees have alleged facts which, if true, may support their defenses or
counterclaims and lead the fact-finder to reach a different result. KWD raises
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 11 of 12
claims of breach of contract and unjust enrichment against IPM and claims of
conversion and deception against Reynolds. In response, Appellees assert
affirmative defenses including, among others, that KWD failed to mitigate its
damages and that its claims are barred by the doctrine of unclean hands and
fraud. Appellees also raise several counterclaims against KWD including an
action in replevin seeking the return of property valued in excess of $170,000
and damages, civil conversion seeking treble damages, and unjust enrichment.
They allege that KWD is unlawfully detaining property which belongs to them.
Reynolds states in his declaration that IPM provided KWD with two complete
manufacturing assembly lines, KWD did not pay for the equipment and
assembly lines, it is believed KWD still has possession of the property, and the
value of the property is approximately $156,000.
Conclusion
[20] Appellees demonstrated grounds for setting aside the entry of default judgment
under Trial Rule 60 and alleged a meritorious defense or claim. Under these
circumstances, we cannot say the trial court abused its discretion in granting
Appellees equitable relief from the finality of default judgment.
[21] For the foregoing reasons, we affirm the trial court’s decision to set aside the
May 14, 2018 order.
[22] Affirmed.
Mathias, J., and Pyle, J., concur.
Court of Appeals of Indiana | Opinion 18A-CC-2751 | July 24, 2019 Page 12 of 12