Court orders lawyer to prove suit not frivolous

The 7th Circuit Court of Appeals today affirmed the orders of the District Court to grant summary judgment to defendants and also ordered the plaintiff's attorney to show cause why he shouldn't be sanctioned for filing a "frivolous" appeal.

In the conclusion of the opinion for Charles Price v. Wyeth Holdings Corporation, No 06-2072, on appeal from the U.S. District Court in the Northern District of Indiana, Hammond Division, Judge Diane Sykes ordered Price's attorney, Delmar P. Kuchaes of Crown Point, to show cause why he should not be sanctioned for his filing of the appeal. The Circuit Court also directed its clerk to send a copy of the opinion to the Indiana Supreme Court Disciplinary Commission for any action it deems appropriate.

Price later moved to reinstate the lawsuit in 1998 – which the state court granted – against Wyeth Holdings Corp., which was known as American Cynanmid Co. and Lederle Laboratories in his original state-court lawsuit. Price's attorney did not give the defendants any notice of the revived lawsuit until he sought to collect a $5 million judgment from the defendants. When the defendants learned of the suit, they removed the case to federal court and had the default judgment vacated based on the lack of notice. The District Court granted summary judgment for the defendants, dismissing Price's claim on statute of limitations grounds.

The original state lawsuit was filed in 1993 against American Cyanamid Co. and Lederle Laboratories after Cathy Price contracted polio from a child who had recently been vaccinated, according to court documents. Cathy Price's claim was based on product liability and Charles Prices' claim was for loss of consortium. The summons were sent certified mail to defendants, and the manager of American Cyanamid's legal department faxed a letter to Kuchaes, informing him that the National Childhood Vaccine Injury Act requires vaccination claims to be brought first in the U.S. Court of Federal Claims. After receiving the letter, the plaintiffs voluntarily dismissed the lawsuit, and Kuchaes sent a letter to the defendants with a copy of the dismissal order and notice the suit had been discontinued or non-suited.

Cathy Price obtained a judgment from the U.S. Court of Federal Claims, but Charles Price's claim was not compensable under the Vaccine Act, so he dismissed his claim. In 1998, the Prices moved to reinstate their state-court action against the defendants but did not provide any notice of that motion to the defendants. In 2000, Charles Price filed motions for default judgment against the defendants, stating the process had been started in 1993 and the defendants failed to appear or respond, without mentioning to the court the voluntary dismissal of the original suit and that the defendants were not served again. The court scheduled an evidentiary hearing on damages and mailed a notice of damages to Lederle Laboratories at the address on the original summons. The notice was returned because it was an incorrect address. Price's attorney, Kuchaes, made no attempt to notify the defendants, and the hearing went forward; the court awarded Charles Price $5 million.

It wasn't until 2004, when Kuchaes initiated garnish proceedings against the defendants did the defendants know the suit was reintroduced in state court. On June 22, 2004, the defendants jointly filed a notice of removal to federal court, and the case was removed. The District Court vacated the default judgment due to plaintiff's failure to comply with the notice requirements under Indiana law and granted summary judgment to the defendants. Price appealed the denial of his remand motion, the order vacating the default judgments, and the grant of summary judgment for the defendants.

Price argued the defendants couldn't file for removal because they had passed the 30-day requirement to file for removal after receiving initial pleadings. He explained the 30-day period expired 30 days after the defendants received the original complaint in 1993 and claimed that under Indiana law, a lawsuit is not actually terminated when it is voluntarily dismissed, but rather remains pending indefinitely until such a time as the plaintiff may seek reinstatement. According to court documents, Price also goes on to state under Indiana law, a "cause" refers to a lawsuit and a "cause of action" refers to an individual theory of liability within a "cause" and maintains he dismissed only his "cause of action."

"What utter nonsense," Judge Sykes wrote. "… Price cannot identify a single case supporting the notion that a voluntary dismissal terminates the 'cause of action' but not the 'cause.' This is undoubtedly because the idea is so ridiculous."

The Indiana Rules of Trial Procedure require a party to serve notice of all pleadings and motions on any party who is not in default, a duty Price's counsel "apparently deliberately ignored." The record demonstrates the defendants didn't receive notice of the new state-court suit until June 14, 2004, and they sought a removal eight days later, which is well within the 30-day period.

Price also argued a one-year removal limit on diversity cases also prevents the case from being removed, but the Circuit judges found his argument illogical because Price argued the removal clock continues to run after a lawsuit has been voluntarily dismissed.

"That an attorney could in good faith expect to prevail on such baseless arguments is difficult to fathom," Judge Sykes wrote.

Price challenged the District Court's granting of summary judgment in favor of the defendants. As noted earlier, the Indiana Rules of Trial Procedure require all parties not in default, which the defendants in this case were not in default, be served with any motions or pleadings filed with the court. The Indiana Supreme Court has held that an attorney has a duty under the Indiana Rules of Professional Conduct to provide any counsel with a motion for default before allowing the entry of default judgment and failure to comply requires relief from the judgment.

"Because the default judgments failed to comply with these requirements of Indiana law, they were void; the district court was therefore required to vacate the judgments, making this appeal of its order doing so frivolous," wrote judge Sykes.