Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

Exercise 6

Scott v. Carpanzano
United States Court of Appeals, Fifth Circuit, 2014 WL 274493 (2014).
FACTS Rick Scott deposited $2 million in an escrow account maintained by a company owned by Salvatore Carpanzano. Immediately after the deposit was made, in violation of the escrow agreement, the funds were withdrawn. When Scott was unable to recover his money, he filed a suit against Salvatore Carpanzano and others, including Carmela Carpanzano, Salvatore's daughter. In the complaint, Scott made no allegations of acts or knowledge on Carmela's part, and Carmela denied that she was involved in her father's business or the Scott transaction.
Salvatore failed to cooperate with discovery, did not respond to attempts to contact him by various means, refused to make an appearance in court, and did not finalize a settlement negotiated between the parties' attorneys. Carmela indicated that she was relying on her father to protect her interests in the lawsuit. The court issued a judgment for more than $6 million in Scott's favor, finding that the defendants had willfully defaulted--that is, intentionally failed to respond to the litigation. The defendants appealed to the U.S. Court of Appeals for the Fifth Circuit.
ISSUE Did the defendants willfully default and thereby justify the judgment against them?
DECISION Yes, as to Salvatore. No, as to Carmela. The federal appellate court affirmed the judgment against Salvatore, but reversed the decision against Carmela.
REASON Salvatore failed almost entirely to participate in the litigation in any way. In particular, he did not cooperate with discovery, respond to attempts to communicate with him, appear in court, or finalize his attorneys' negotiated settlement. This intentional failure to respond constituted a willful default. In contrast, Carmela did not willfully default; rather, she relied on her father to protect her interests in the lawsuit. As for her liability, Scott's complaint made no allegations of acts or knowledge on her part, and she denied that she was involved in her father's business or the Scott transaction. "Even if Scott were able to prove the entirety of the … complaint, we fail to see how it would justify a judgment … against Ms. Carpanzano."
FOR CRITICAL ANALYSIS-Ethical Consideration Are the actions of Salvatore likely to affect his business profits in the long run? Discuss.