Defendant cannot move for default judgment on a counterclaim when plaintiff fails to reply

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A defendant files an untimely answer and counterclaim. The court grants default judgment against him, but does not strike the answer. Since the plaintiff has failed to reply to the counterclaim, can defendant seek default judgment on his counterclaim?

Manitowoc County Circuit Court Judge Jerome L. Fox said no, and the Wisconsin Court of Appeals agreed with him on Nov. 14 in Keene v. Sippel, No. 2006AP2580.

Danny and Maria Keene filed a lawsuit against Brian Sippel, a carpenter, alleging improper work in building their home. Sippel filed his answer and counterclaim 58 days after he was served. He additionally filed a motion for enlargement of time, which the court denied after finding no excusable neglect. The court then granted default judgment in favor of the Keenes. A few weeks later, Sippel sought default judgment on his counterclaim on the ground that his answer had not been stricken. The court denied that motion.

The District IV appellate court, in an opinion written by Judge Daniel Anderson, observed that the parties and the trial court did not have the benefit of additional guidance on the issue of untimely service as rendered in Estate of Otto v. Physicians Ins. Co. of Wis., 2007 WI App 192, because that decision hadn’t been issued until July 24, 2007. In that case, Physicians Insurance argued that a circuit court must consider the interests of justice when deciding whether to grant a motion to enlarge and must find prejudice to the opposing party in order to enter a default judgment. The appellate court disagreed, holding that prejudice need not be considered absent a finding of excusable neglect.

Distinguishing from Spit Rock

The court then held that the circuit court in this case properly distinguished the leading case from the Wisconsin Supreme Court on this issue, Split Rock Hardwoods Inc. v. Lumber Liquidators Inc., 2002 WI 66, 253 Wis. 2d 238, 646 N.W.2d 19. Unlike this case, in Split Rock, untimely service was not a factor, but rather, whether default judgment was a proper sanction for untimely filing under sec. 801.14(4).

Anderson wrote, “[T]hough Split Rock teaches that a circuit court is required to make a prejudice consideration when determining whether to grant default for untimely filing,

Estate of Otto explains that it need not consider prejudice or the interests of justice when determining whether to grant default for untimely service, absent excusable neglect. …

“We infer from the Supreme Court’s strong language in Split Rock that it did not intend to block the circuit court’s authority to ‘impose a serious sanction’ for untimely service.

Therefore, though we understand Sippel’s reliance on Split Rock’s statement that ‘when an answer has been served late or filed late, a motion to strike the late answer is a prerequisite to default judgment,’ in light of Estate of Otto, we do not believe that this statement was meant to bar a circuit court from exercising its discretion to impose a default judgment when, as here, a motion to enlarge time for a late answer is properly denied based on a finding of no excusable neglect. Mandating consideration of a motion to strike a late answer would be a superfluous consideration after the court has already found no excusable neglect.”

The court further concluded that, with regard to Sippel’s counterclaim, under Pollack v. Calimag, 157 Wis. 2d 222, 458 N.W.2d 591 (Ct. App. 1990), a defendant has no standing to move for default judgment on a counterclaim to which a plaintiff has failed to reply.

“[T]hough the statutory language of sec. 806.02(2) grants a plaintiff the opportunity to move for a default judgment when a defendant fails to timely answer, it does not give a commensurate right to a defendant to ask for default judgment when a plaintiff fails to reply to a counterclaim.”

Counsel’s Commentary and Analysis

The case sends an important reminder about “playing by the rules, and this rule, in particular, is reasonable,” says John I. Laun of Laun Law Offices in Kiel, who represented the Keenes. “When you start creating too many exceptions, the rule loses its overall effectiveness.”

The outcome means moving forward with collecting the approximately $12,000 owed to the Keenes pursuant to the default judgment, including interest.

Attorney Richard B. Hahn of Holden & Hahn in Sheboygan, who represented Sippel in the appeal, said that, given the amount in controversy, it’s not likely that Sippel will file a petition for review by the Wisconsin Supreme Court. He has not ruled it out completely, however.

Absent from the appellate opinion are the circumstances of defendant’s late responsive pleading. Laun explained that Sippel was previously represented by attorney Robert W. Horsch, now with the Law Offices of Horsch & Kaehne LLP in Sheboygan. Per Laun, Horsch told the court at the motion hearing that he had miscalculated the deadline by counting only business days.

Laun said, “Maybe if it had been day 46, the judge would’ve felt differently. Or, if Mr. Horsch had called me to ask for an extension before the answer was due, I would’ve agreed to that. I know that sometimes, clients don’t give you all the documents you need to draft a proper answer. But in this case, he didn’t call me to ask for an extension.”

The appellate court decided the case correctly under the rules, said John J. Slein of Nelson, Connell & Conrad S.C. in Brookfield, and past-president of the Civil Trial Counsel of Wisconsin. But he does not entirely agree with Laun about the fairness of those rules, characterizing them as “draconian.”

“This was just another case where the interests of justice took a backseat to the excusable neglect standard, which is very ill-defined,” he said. “I think the standard is backwards. If it were up to me, I’d consider the interests of justice first, and then consider whether there’s excusable neglect for not answering on time.”

Perhaps the only remedy now for Sippel is an attorney malpractice action, said Slein.

That’s a daunting proposition for most people, given the expense of hiring an expert to prove up his case, not to mention the emotional costs.

Speaking more generally, Slein added that it’s somewhat odd that so much emphasis is placed upon the timely filing of an answer – probably one of the least important papers in a lawsuit. But timeliness is often an afterthought for some lawyers when it comes to answering interrogatories – highly substantive documents.

Sally E. Anderson, vice president of claims at Wisconsin Lawyers Mutual Insurance Company in Madison, says that there seems to be an increase lately in malpractice claims involving litigation procedural errors, such as where an attorney follows the statutory deadlines, but a scheduling order or local rules have tighter deadlines that he misses, or when an attorney fails to respond to an issue in an amended complaint.

Likewise, the appellate courts appear to be handling more of these types of matters.

Among the recent decisions is Industrial Roofing Services, Inc. v. R. Marquardt, et al., she says, where the state Supreme Court held that a circuit court's decision to dismiss plaintiff’s action with prejudice wa
s not an erroneous exercise of discretion, after it reasonably concluded that the conduct of plaintiff’s attorney was egregious, although it would be an erroneous exercise of discretion for a circuit court to impose the sanction of dismissal with prejudice when the client is blameless. In that case, the attorney admitted having difficulty managing his practice.

In addition, on the high court’s docket now is Hefty v. Strickhouser, et al., to be argued in January. The case poses the question of whether the plain language of Wis. Stat. § 802.08(2) requires a circuit court to explain, on the record, why the exigencies of a particular case necessitate a modification of the summary judgment deadlines contained in Wis. Stat. § 802.08(2), or whether circuit courts have the inherent authority to control the cases on their dockets and deviate from these deadlines in their scheduling orders.

According to Anderson, the Keene decision is an obvious reminder that attorneys need to pay close attention to deadlines. “Don’t wait until the last minute. Don’t wait until the day of the deadline to get the answer in or the pleading out, or whatever it is you’re supposed to do. Allow yourself some extra time in case something does go wrong,” Anderson advised. “It just seems to me that the sooner those kinds of papers are off a lawyer’s desk and back into court, the better off everybody is. My colleague here at WILMIC, Brian Anderson, always puts it as, ‘Good things don’t come to lawyers who wait.’”

Echoing Laun’s sentiments, she added that attorneys who do not extend the professional courtesy to others by refusing to grant extensions in cases that don’t involve egregious conduct, but rather, a minor mistake, are not serving their clients well.

“That’s not good lawyering, in my opinion,” said Anderson. “What you’ve now committed your client to, is another motion, probably an appeal, maybe a petition for review, and two more years before there’s any type of adjudication. And the next time, it could be you who needs the extension.”