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KWD Industrias SA DE CV v. IPM LLC

Court of Appeals of Indiana

July 24, 2019

KWD Industrias SA DE CV, Appellant,
IPM LLC and Mark Reynolds, Appellees.

          Appeal from the Marion Superior Court The Honorable Patrick J. Dietrick, Judge Trial Court Cause No. 49D12-1506-CC-21389

          Attorney for Appellant Ian P. Goodman Cantrell Strenski & Mehringer LLP Indianapolis, Indiana

          Attorney for Appellees Michael T. McNally Delk McNally LLP Carmel, Indiana

          Brown, Judge.

         [¶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.

         [¶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 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]

         [¶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.

         [¶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 ...

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