Judges Can’t Create Hobson’s Choices

The courts like to have their orders followed. Sometimes, however, circumstances make that impossible. When the impediment is created by a later order of the court, is it fair to hold people to the order? A recent case from Oregon said no.

An employee sued a restaurant for employment violations. The restaurant was run by a limited liability company. The owners of the LLC filed bankruptcy in their own names, which resulted in the suit being taken off the active docket. They also dissolved the LLC, formed a new one, and continued operating the restaurant under the new LLC but the same business name.

The bankruptcy court then ruled that the LLCs were not part of the bankruptcy and were not entitled to bankruptcy protection. This enabled the original suit to go forward.

Before the original suit was officially reinstated to the active docket, the employee moved for permission to amend her complaint to allege that the owners created the new LLC to avoid her claim, and the new LLC should be held responsible for the claim. The trial judge reinstated the case to the active docket, and required the employee to file a motion to hold the LLCs in default if they did not file an appearance within six weeks. Thirteen days later, however, the judge granted the motion allowing the employee to amend her complaint. At this time, 29 days remained before the deadline, and the rules in Oregon allow new defendants, such as the new LLC, 30 days to respond to complaints after they are served. A motion for default can’t be filed until that 30 day period ends and any defendant with a lawyer is given ten days’ notice.

The new LLC was served before the deadline, but did not file its answer until after. Everybody assumed that the order allowing the amendment overrode the order setting the deadline, and they continued with the case. Seven months later, however, the judge, without a motion by the LLCs, issued a judgment dismissing the case for failure to comply with the deadline.

The employee, understandably upset, appealed. The Court of Appeals reversed the trial judge’s ruling and sent the case back for trial. It reasoned that it would be unfair to hold the employee to the original order because allowing her to amend her complaint made it impossible for her to ensure that the conditions could be met. There simply wasn’t enough time to file and serve the amended complaint and ensure that the new LLC could respond, and that time had to run out before a motion to hold it in default could be filed.

This was an unusual case. One important lesson can, however, be learned. The system does try to play fair. Judges can’t make it impossible to comply with their orders. If they do, they can’t hold it against you. On the other hand, making compliance difficult may still be allowable, so if you question whether an order is impossible, you should ask your lawyer about it.

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