CHICAGO DOWNS ASSOCIATION, INC., PLAINTIFF-APPELLEE, v. DENNIS R. CHASE, DOING BUSINESS AS SPORTS ACHIEVEMENTS ASSOCIATION,
DEFENDANT-APPELLANT.
Nos. 90-2078, 90-2672. United States Court of Appeals, Seventh Circuit.
Argued May 17, 1991. Decided September 26, 1991.
Thomas D. Nash, Jr. (argued), Nash Lalich, Chicago, Ill., for plaintiff-appellee.
Wayne F. Plaza (argued), Edward Dismukes, Rooks, Pitts Poust, Chicago, Ill., for defendant-appellant. Appeal from the United States District Court for the
Northern District of Illinois.
Before COFFEY, MANION and KANNE, Circuit Judges.
MANION, Circuit Judge.
[4] A. Facts
Chicago Downs Association, Inc., an Illinois corporation licensed by the Illinois Racing Board, conducts pari-mutuel harness racing at a racetrack called
Sportsman's Park. Dennis R. Chase is a California businessman who owns and operates an unincorporated enterprise called Sports Achievements Association.
Chase provides risk reimbursement coverage on special promotional sporting events like hole-in-one contests at golf courses, fishing derbies, bingo games,
and "300" games (a perfect score) bowled in bowling tournament league play. In 1980, one of his first years in business, Chase "insured" 1,200 such events
which offered prizes worth a total of $10 million. He collected $360,000 in gross premiums and fees and paid off 19 winners worth $160,000.
Beginning in 1985, Chicago Downs offered at its Sportsman's Park track a parimutuel wagering pool called the "Super Bet." In order to win the Super Bet,
the bettor was required to select the first two horses to finish in exact order in both the fifth and sixth races and the first three horses to finish in
exact order in the seventh race. The wager was $1.00. In the event there was more than one winner on a particular evening, the pool was divided evenly
among the winning tickets. The Super Bet pool increased rapidly because unawarded amounts from one night's betting were added to the next night's purse.
Between the years 1985 and 1988, it was not uncommon for the collectable Super Bet pool to exceed several hundred thousand dollars.
In 1988 Chicago Downs decided that they wanted to establish a $50,000 minimum payout to the winner of the Super Bet. Chicago Downs received permission from
the Illinois Racing Board to supplement the Super Bet pool by $50,000. Therefore, Chicago Downs was able to offer a daily minimum of $50,000 regardless of
whether that amount had been independently created by patrons' wagers and the rollover of existing pools.
Through a broker Chicago Downs determined Chase provided the most competitive premium for risk reimbursement coverage for the $50,000 minimum payout. Chase
agreed to provide coverage and drafted an "Agreement of Reimbursement." The Agreement, effective between July 30 and December 31, 1988, provided in part
that any time Chicago Downs was required to pay a Super Bet winner the guaranteed minimum of $50,000 when less than that amount was in the Super Bet pool,
Chase was obligated to reimburse Chicago Downs in an amount equal to $50,000 minus the amount then in the pool. The Agreement imposed liability limits on
Chase of $150,000 in the aggregate, with no single occurrence payment to exceed the sum of $50,000. In consideration for potential future reimbursement,
Chicago Downs paid Chase $15,000.
Unfortunately for Chase, on three occasions the bettors beat the track and won the $50,000 minimum when the Super Bet pool had accumulated far less. The
total deficit subject to reimbursement under the Agreement exceeded $125,000. Immediately following each of the payouts to each of the winning Super Bet
tickets, Chicago Downs alerted Chase of that fact, furnished Chase with proof of payment to the winners, and complied with the other reporting procedures
required by the Agreement. Chicago Downs made demand on Chase for reimbursement with respect to each of the covered occurrences pursuant to the terms of
the Agreement. Chase refused to make such payments to Chicago Downs.
Chicago Downs filed in U.S. District Court a breach of contract suit against Chase (d/b/a Sports Achievement Association) in an effort to recover the
contracted-for reimbursement of its losses for three Super Bet payouts inadequately capitalized by the accumulated wagering pool. Chicago Downs filed a
one-count complaint seeking liquidated damages for the three occurrences covered by the Agreement equal to *368 $126,432.75. Chicago Downs also asked for
an award of prejudgment interest as permitted by Illinois law on liquidated contract damages and costs of the suit. This complaint was dismissed by the
district court for lack of jurisdiction because Chicago Downs failed to properly plead diversity of the parties. The complaint was amended and refiled
August 22, 1989.
On August 25, 1989, Attorney Thomas J. Royce filed an appearance with the court on behalf of Dennis Chase. Soon thereafter the court vacated the earlier
dismissal of the complaint and ordered Chase to respond to the amended complaint by September 21, 1989. A status hearing for September 25, 1989 was also
established.
On September 25, 1989, the district court entered a default judgment against Chase because "[d]efendant failed to appear for the status hearing," and
"[d]efendant failed to respond to the complaint." The judge remarked at the status hearing: "I have got no alternative, I think, except to default him to
see if that gets some action out of [Chase and Royce]." The judge was surprised at the lack of any response to the complaint and the failure of the defense
to appear at the status conference. The judge noted: "[t]his is not like Tom Royce. He is a very good dependable lawyer and he hasn't shown up and he
hasn't answered, and unless somebody is not paying him or something, and he hasn't communicated with [plaintiff's counsel]." The judge at that time set
October 4, 1989 as the date for the parties to appear and prove-up damages. On October 4, Royce once again failed to appear at the prove-up, nor did he
file any motions with the court in the meantime asking for relief. Counsel for Chicago Downs appeared with a witness and was successful in getting default
judgment damages on the Agreement of $126,432.75 plus costs of $266.05. The court entered judgment for this amount. In so awarding, the court remarked:
"[I] was surprised that Mr. Royce did not show up because he is a very, very dependable lawyer. I cannot presume that his absence is an accident."
A few days later, on October 12, the district court finally did "get some action out of" Royce. On that day Royce filed a Motion to Vacate Default
Judgment. Royce, in support of his motion, appeared before the court to explain that his failure to file a response to Chicago Downs' complaint, or appear
at the status hearing or appear at the prove-up was due to the fact that he had not received the amended complaint or any of the proper notices for the
hearing and prove-up in the mail. Royce also confessed to having misunderstood a posted bulletin concerning the date by which the amended complaint was to
be filed. Royce prefaced the hearing with a public announcement: "First of all, I would like to spread of record that it is public knowledge that I have
been charged with a misdemeanor complaint. I have conferred with my client relative to this matter and he believes that it would have no effect on my
representation of him in this case." This comment is the only record reference of Chase's assessment of Royce's representation. The court vacated the
prove-up, vacated the default judgment and ordered Royce to answer the complaint by October 19, 1989. Status conference was set up for November 13, 1989.
Royce did not file an answer to the complaint on behalf of the defendant until October 31, 1989 — twelve days late. He also failed to attend the previously
scheduled status conference of which he was personally notified by the district court judge. Nevertheless, the court reset the status hearing for January
16, 1990, and established a discovery cutoff for January 16 as to all written discovery and depositions of the "principals." The judge's ire at being
ignored by Royce again was tempered as indicated by his comment: "Mr. Royce isn't here . . . I think he's on trial isn't he?" and "[I] know he has been
beset with a host of difficulties of recent weeks. I think I will take that into consideration."
At the January 1990 status conference, Royce was given leave to file Chase's affirmative defenses to Chicago Downs' complaint. These were filed January 17,
1990. Also, Chicago Downs was given leave to file a Motion for Summary Judgment by *369 February 5, 1990, with the answer from defendant due February 20,
1990, and Chicago Downs' reply to the answer due February 27, 1990. Yet another status conference was scheduled for March 27, 1990.
On February 5, 1990, Chicago Downs filed its Motion for Summary Judgment, its Statement of Material Facts As To Which There Is No Genuine Issue (as
required by Local Rule 12( l)), and its Memorandum of Law in Support of its Motion for Summary Judgment. In its Memorandum of Law, Chicago Downs
denied the legal sufficiency and adequacy of the Affirmative Defenses filed by Royce on January 17, 1990.
Royce never filed a response to Chicago Downs' Motion for Summary Judgment nor did he file any opposition to Chicago Downs' statement of uncontroverted
facts. On March 5, 1990, Chicago Downs' attorney called Royce to see why he had not responded to the summary judgment motion. Royce claimed (once again)
that he did not receive a copy of the motion which was mailed to him. Chicago Downs' counsel then provided him with another copy via messenger.
On March 6, 1990, Royce filed a Motion for Summary Judgment on Chase's behalf. The sole reason advanced by Royce justifying summary judgment for his client
was that Chicago Downs had failed to respond to Chase's previously filed Affirmative Defenses within the time alloted by the court. Royce argued that
Chicago Downs' failure to deny Chase's affirmative defenses required the court to deem them as admitted and, thus, Chase was entitled to summary judgment.
The court denied Chase's Motion for Summary Judgment because his motion failed to conform to Local Rule 12( l) which requires that such a motion
have attached to it a statement of facts to which there is no genuine issue. By the terms of that rule, "failure to submit such a statement constitutes
grounds for denial of the motion." Conversely, the court ruled that Chicago Downs' previously submitted statement of uncontested facts was deemed admitted
by Chase due to Royce's failure to submit any opposition to them as required by Local Rule 12(m). However, the court reserved ruling on Chicago Downs'
motion for summary judgment and ordered the parties to brief the issue of whether California law entitled Chicago Downs to summary judgment. California law
was stipulated in the Agreement as being controlling over the construction and interpretation of the Agreement. The court ordered that Chicago Downs' brief
on California law's resolution of this case be filed by March 30, 1990 and that Chase's response thereto be filed by April 6, 1990, and Chicago Downs'
reply to be filed by April 13, 1990.
On March 30, 1990, Chicago Downs filed its Memorandum of Law with respect to California law. It was discovered that under California law, the plaintiff in
a breach of contract action could gain a higher rate of prejudgment interest than under Illinois law. Chicago Downs therefore amended its requested damages
upward to $136,807 plus costs. Royce never filed a response to Chicago Downs' memorandum.
Finally, on April 16, 1990, counsel for Chicago Downs appeared before the district court on its Motion for Summary Judgment. Royce did not appear on
Chase's behalf. Summary judgment was decided and entered for Chicago Downs for $136,807 plus costs. On May 22, 1990, an attorney affiliated with Royce
filed a notice of appeal from the order granting summary judgment in favor of Chicago Downs. On June 28, 1990, Chase fired Royce and retained new counsel
who filed an appearance to oppose Chicago Downs' Motion to Register the Judgment in Other Districts. The district court granted Chicago Downs' motion to
register the judgment pursuant to 28 U.S.C. § 1963.
Chase, represented now by new counsel, appeals the entry of summary judgment and the court's order permitting Chicago Downs to register the judgment in
other districts during the pendency of this case's appeal.
Continued...
