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Paes v. Bear Communications, LLC

Court of Appeals of Missouri, Western District, Special Division

February 13, 2019

BRETT PAES, Appellant,
v.
BEAR COMMUNICATIONS, LLC, Respondent.

          Appeal from the Circuit Court of Jackson County, Missouri The Honorable Kenneth R. Garrett III, Judge.

          Before: Zel M. Fischer, Special Judge, Presiding, Cynthia L. Martin, Judge and Gary D. Witt, Judge.

          Cynthia L. Martin, Judge.

         Brett Paes ("Paes") appeals from a judgment setting aside a default judgment entered against Bear Communications, LLC ("Bear Communications"). Paes argues that the trial court's judgment is erroneous because Bear Communications failed to demonstrate that it had good cause for failing to timely respond to Paes's petition. Finding no error, we affirm.

         Factual and Procedural Background

         On April 6, 2017, Paes filed suit against Bear Communications in the Circuit Court of Jackson County, claiming he was wrongfully terminated in retaliation for pursuing workers' compensation treatment and benefits. Paes had been performing work for Baer Communications in Missouri as a project manager.

         Paes unsuccessfully attempted to serve process on Bear Communications at the office of the Missouri registered agent designated for Bear Communications with the Missouri Secretary of State's office. On May 3, 2017, a private process server successfully served Bear Communications by delivering a copy of the summons and petition on Marty Lund ("Lund"), the director of finance, at Bear Communications' headquarters in Lawrence, Kansas. Notice of a scheduled case management conference accompanied the summons and petition. Paes filed proof of service on June 19, 2017, noting service of process on Bear Communications at the Kansas address.

         Bear Communications did not file an answer to the petition, and failed to appear at the case management conference scheduled for August 7, 2017. The case was set for a default hearing on September 6, 2017. The trial court sent Bear Communications notice of the default hearing. The notice was mailed to the Missouri registered agent's office where Paes had unsuccessfully attempted service of process on Bear Communications.

         Bear Communications did not appear at the September 6, 2017 default hearing. Accordingly, the trial court entered a default judgment in favor of Paes, and awarded Paes damages in the amount of $200, 000, plus costs and post-judgment interest at the statutory rate. The trial court mailed notice of the default judgment to the same Missouri registered agent's address to which notice of the default hearing had been sent.

         On November 1, 2017, Bear Communications learned of entry of the default judgment when it received a copy of Paes's notice of registration of the Missouri default judgment in Kansas. On December 13, 2017, Bear Communications filed a motion to set aside the default judgment with suggestions in support ("Motion to Set Aside"). The Motion to Set Aside, which was supported by affidavits, argued that Bear Communications "has a meritorious defense to [Paes's] claim and can establish good cause for its failure to respond to [Paes's] Petition." The Motion to Set Aside asserted that Bear Communications had a meritorious defense because Paes was released from employment when the company's work in the Kansas City area was completed, and Paes refused a transfer to Nashville, the site of the company's next project. The Motion to Set Aside asserted that Bear Communications had good cause for failing to answer Paes's petition because of an "internal mishap." According to the Motion to Set Aside, "[u]pper management believed that [an] employee was handling the response, and did not learn of his failure to do so until after the employee was terminated for unrelated performance issues."

         Bear Communications supported its Motion to Set Aside with an affidavit by Brett Niles ("Niles"), the founder and chief executive officer of the company. Niles's affidavit acknowledged that Lund accepted service of Paes's petition on May 3, 2017; noted that Bear Communications received Paes's petition "during a very tumultuous time at the company, which included multiple setbacks in several projects in several states and the departure of numerous key employees"; explained that Lance Addison ("Addison"), the company's then-president, had been tasked with handling Paes's petition; and explained that the company had recently secured employment liability insurance which it believed would have covered the claim.

         Niles's affidavit noted that at the end of August 2017, Bear Communications terminated Addison's employment for performance-related reasons, and that Addison left the company without transitioning any of his projects. As a result, Niles was unaware that Addison had failed to address Paes's petition. According to Niles's affidavit, if Bear Communications' upper-level managerial employees had known that Addison had not addressed Paes's petition, they would immediately have taken steps to do so. Niles's affidavit explained that Bear Communications did not realize that Paes's petition had not been addressed until November 1, 2017, when Niles learned that Paes was registering the Missouri default judgment in Kansas.

         Paes argued in suggestions in opposition ("Suggestions in Opposition") to the Motion to Set Aside that Bear Communications had not presented credible evidence establishing a meritorious defense. Paes also argued that Bear Communications had not established that it had good cause for failing to timely respond to the petition. Paes argued that Bear Communications' failure to respond to the petition reflected a pattern of reckless conduct by upper-level managerial employees. Paes argued that Bear Communications "intentionally and knowingly maintain[ed] a sham corporate Registered Agent office designed to help[] shield [it] from legal notices and service of summons and garnishments in Missouri," and attached a document from the Missouri Secretary of State's office demonstrating that Bear Communications had maintained the incorrect address for its Missouri registered agent for over five years. Paes argued that as a result, in twenty-four cases in which Bear Communications was named as a party, summons was initially issued to an incorrect registered agent where service could not be had. Paes also argued that Niles's affidavit contained false statements and fabrications, and referred to correspondence between Addison and Bear Communications' and its counsel to challenge the veracity of Niles's affidavit.

         Paes's Suggestions in Opposition alternatively argued that even if the trial court found Niles's affidavit to be credible, it failed to establish good cause. Paes argued that Bear Communications' failure to respond to the petition reflected the company's pattern of permitting the entry of default judgments as a litigation tactic. Paes noted that based on Niles's affidavit, at least five upper-level managerial ...


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