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No. 89-583

IN THE SUPREME COURT OF THE STATE OF MONTANA

1990

RAYMOND G. BECKY and MARGARET K. BECKY,
husband and wife, individually; and DAVID GLAUS
and RAMONA GLAUS, husband and wife; and
WARREN G. GLAUS and ROSAMOND F. GLAUS, husband
and wife; individually and d/b/a/ 76 RANCHES,
an Idaho partnership,

Plaintiffs and Appellants,
-vs-
THE NORWEST BANK DILLON, N.A., formerly the
FIRST NORTHWESTERN NATIONAL BANK OF DILLON,
ROBERT MOUNTAIN and RONALD JOHNSON, individually and
in their capacities as agents or officers of
NORTHWEST BANK DILLON, N.A.,

Defendants and Respondents.

APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Beaverhead,
The Honorable Frank M. Davis, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

James E. Purcell, Henningsen, Purcell, Vucurovich & Richardson, P.C., Butte, Montana; Phillip D. Tawney, Mullendore and Tawney, Missoula, Montana; Peter M. Meloy, Meloy Law Firm, Helena, Montana
+ For Respondents:
Clr:
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c-) Donald C. Robinson, Poore, Roth & Robinson, Butte,
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T-( t:; L~J Montana (Norwest Bank Dillon); Gregory C. Black,
J :.-Corette, Smith, Pohlman & Allen, Butte, Montana
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Decided: September 20, 1990

Justice William E. Hunt, Sr., delivered the Opinion of the Court.

Plaintiffs and appellants, Raymond and Margaret Becky, David
and Ramona Glaus, and Warren and Rosamond Glaus, partners in the
76 Ranches, appeal from an order of the Fifth Judicial District
Court, Beaverhead County, dismissing their claims against
defendants, Norwest Bank Dillon, Robert ~ountain and Ronald
Johnson. We reverse.

The sole issue raised on appeal is whether the District Court
abused its discretion by dismissing plaintiffs1 lawsuit for failure
to prosecute.

On July 12, 1984, plaintiffs filed this action against Norwest
Bank Dillon and its officers, Mountain and Johnson, individually
and as agents for the bank, as well as against William Ballard,
another of the bank's officers, and Norwest Corporation, the
principal shareholder of the bank. The complaint alleged bad
faith, fraud, commercially unreasonable sale of collateral,
conversion, tortious interference with contract, breach of
fiduciary duty, deceit, negligent misrepresentation and
constructive fraud, all arising from loan transactions made from
1980 through 1982.

Defendants responded with pro forma motions to dismiss. When
the motions were denied, they filed their answers and
counterclaims. The bank and Ballard counterclaimed for breach of
promissory notes, monies due and owing on a foreign judgment, bad
faith, malicious prosecution and abuse of process. In addition,

Ballard alleged intentional or negligent infliction of emotional

distress. Mountain and Johnson obtained separate counsel and filed
their own counterclaims, alleging malicious prosecution as well as
intentional or negligent infliction of emotional distress.

Plaintiffs had employed a Boise, Idaho, law firm as lead counsel and Henningson & Purcell of Butte as local Montana counsel. In October, 1984, the Boise firm withdrew from the suit because of the difficulty of conducting the case from Idaho. On December 6, 1984, Thomas A. Budewitz of the firm of Hooks & Budewitz in Townsend replaced the Boise firm as lead counsel.
In December, 1984, plaintiffs moved to amend their complaint
to consolidate the counts against the defendants, add a claim for
emotional distress and drop Norwest Corporation and Ballard as
party defendants. After briefing, the District Court granted the
motion. Defendants answered the amended complaint, reasserting
their previous counterclaims.

On May 2, 1985, plaintiffs moved to dismiss the counterclaims
alleged by defendants. The question was briefed by both sides but
was never ruled upon by the District Court.

In the meantime, both sides had commenced discovery. From
October, 1984, through December, 1986, all parties served and
answered requests for production. They also engaged in extensive
oral discovery, deposing a large number of parties and witnesses.
During this time, some depositions were interrupted or discontinued
for various reasons, several were postponed because of scheduling
difficulties, and at least one was unable to take place because

the witness failed to appear. It does not appear that the blame

for these inconveniences can be laid at the feet of one side or the
other, both were responsible for the delays, cancellations and
postponements.

The last formal discovery effort engaged in by either side
occurred on March 10, 1987, when Mountain and Johnson served
plaintiffs with another round of interrogatories and requests for
production. Although plaintiffs failed to respond, Mountain and
Johnson did not follow up on the requests nor did they avail
themselves of other formal remedies, such as moving to compel a
response.

While discovery was taking place, the action was set for trial
on two different occasions. The first trial date of January 5,
1987, was vacated upon stipulation of counsel and reset for April
6, 1987. Subsequently, the District Court vacated the April trial
date because of scheduling conflicts of its own.

Other than the filing of depositions on July 15, 1987, and
counsels' February 29, 1988, stipulation to a discovery deadline
of November 1, 1988, no further action is recorded in the file
until June 29, 1989, when the District Court ordered a case status
conference for August 7, 1989. The attorneys for both sides
stipulated to reset the conference for August 14, 1989.

On July 12, 1989, attorney Budewitz forwarded a consent to
withdraw as attorney of record form to plaintiff Raymond Becky.
Becky, in turn, forwarded the form to the Glauses, who resided in
Oregon. The form had not been returned by the Glauses prior to the

status conference.

The status conference was conducted by telephone on August 14, 1989. During the conference, Budewitz moved to withdraw as counsel for plaintiffs and defendants moved to dismiss plaintiffs' claims for failure to prosecute. The District Court granted Budewitzrs motion to withdraw and relieved both Budewitz and James Purcell of the firm of Henningson & Purcell as counsel of record, even though Purcell, who did not participate in the conference, had made no such request of the court. The court also granted the motion to dismiss for failure to prosecute, even though plaintiffs had not been notified that such a motion would be presented at the conference. The court did, however, give plaintiffs 30 days to employ other counsel and have the case reinstated.
Upon learning of the withdrawal and dismissal orders, Purcell
advised plaintiffs that he would stay on the case until the matter
was resolved. He began looking for new counsel. On his
recommendation, plaintiffs consulted with two other attorneys.
One was unable to take the case, however, because of a conflict of
interest. It is unclear why the other attorney declined the case.

In September, 1989, plaintiffs moved the court to reinstate
their claims. Defendants objected to the reinstatement, alleging
that the lengthy lawsuit had prejudiced them because they were
forced to list the suit as a contingent liability on their
financial statements.

The trial court set a hearing for October 2, 1989, ordering
plaintiffs to show cause why the case should be reinstated.

Plaintiffs personally attended and testified at the hearing. In

addition, they presented to the court their new lead counsel, who
assured the court that he would attempt to bring the case to trial
in the spring of 1990.

During the reinstatement hearing, plaintiffs refuted the
allegations made by Budewitz in his affidavit supporting his motion
to withdraw as counsel of record. According to Budewitz, he
delivered the complete case files to Raymond Becky in October,
1988, with the understanding that Becky would give the files to a
Billings attorney, who would then be substituted for Budewitz as
lead counsel. Becky acknowledged that he received the case files
from Budewitz but stated that he delivered them to an agricultural
financial consultant who was to analyze the transactions at issue
in the case. He also acknowledged meeting the Billings attorney
in the financial consultantts office. He understood, however, that
the reason for consulting with another attorney was because
Budewitz desired assistance from an additional law firm not because
Budewitz had decided to withdraw from the case. Becky also
understood that the Billings attorney declined the case because the
attorney believed that the suit required two full-time lawyers, and
Budewitz could no longer devote full time to the action.

After the Billings attorney declined his assistance,
plaintiffs contacted a Great Falls attorney about becoming involved
in the case, who in turn contacted Budewitz. The record does not
disclose why the Great Falls attorney decided not to take the case.

Becky testified that he had been informed by Budewitz that

discovery had been delayed because of the difficulty of getting

three sets of attorneys together to attend depositions, many of
which were to take place outside of Montana. As Becky had attended
many of the depositions that had already taken place, he had
personal knowledge of the difficulties the attorneys had
encountered in attempting to conduct oral discovery.

Budewitz stated in his affidavit that he had not spoken to
any of the plaintiffs since October 28, 1988, an assertion that
Becky flatly denied during the reinstatement hearing. Warren Glaus
also testified at the hearing that his wife had attempted to
contact Budewitz after October, 1988, but that the attorney never
returned her phone call.

In an order entered October 16, 1989, the trial court denied
plaintiffs1 motion to reinstate, finding a total absence of any
cause for the requested reinstatement. Pursuant to Rule 54(b),
M.R.Civ.P., the court entered final judgment, dismissing
plaintiffs1 complaint with prejudice and expressly preserving
defendants1 counterclaims. Plaintiffs subsequently filed this
appeal.

The sole issue is whether the District Court abused its
discretion in dismissing plaintiffs' complaint for failure to
prosecute.

A party who has not exercised due diligence in bringing his case to a conclusion may be in danger of having his claims dismissed by the district court. Shackelton v. Neil, 207 Mont. 96, 100, 672 P. 2d 1112, 1114 (1983) . The Rules of Civil Procedure
authorize the district court to dismiss an action for failure to prosecute. Rule 41(b), M.R.Civ.P., provides in pertinent part: For failure of the plaintiff to prosecute . . . a defendant may move for dismissal of an action or of any claim against him. . . . Unless the court in its order for dismissal otherwise specifies, a dismissal under this
subdivision . . . operates as an adjudication upon the merits. The district court is accorded broad discretion to determine
whether a cause of action should be dismissed for the failure of the party seeking relief to prosecute. The court's decision to dismiss for failure to prosecute will be overturned only upon a showing of abuse of discretion. Shackelton, 207 Mont. at 101, 672 P.2d at 1114-15; Cremer v. Braaten, 151 Mont. 18, 19-20, 438 P.2d 553, 554 (1968) ; State Savings Bank v. Albertson, 39 Mont. 414, 420-21, 102 P. 692, 694 (1909). However, because dismissal of an action is a harsh remedy, the district court's discretion is not unlimited. Courts "exist primarily to afford a forum to settle litigable matters between disputing parties." Brymerski v. City of Great Falls, 195 Mont. 428, 431-32, 636 P.2d 846, 848 (1981) (quoting Farber v. Green Shoe Mfg. Co., 596 P.2d 398 (1979)). Therefore, the district court must balance the concerns of judicial efficiency embodied in Rule 41 (b) , M.R. Civ. P., against a party's right to meaningful access to the judicial system. Timber Tracts, Inc. v. Fergus Elec. Coop., Inc., 231 Mont. 40, 43, 753 P.2d 854,
There is no precise formula for determining when an action may
properly be dismissed for failure to prosecute. Each case turns
on its own particular set of circumstances, and lapse of time in

and of itself is insufficient to justify dismissal. Kujich v.

Lillie, 127 Mont. 125, 136, 260 P.2d 383, 389 (1953).

In Shackelton, 207 Mont. at 102, 672 P.2d at 1115, we adopted
the following factors from State Steamship Co. v. philippine Air
Lines, 426 F.2d 803, 805 (9th Cir. 1970), to be used in considering
whether the district court abused its discretion by dismissing a
suit for failure to prosecute:

(1)
[Tlhe appellant's right to a hearing on its claim,


(2)
the impairment of the appellees' defenses presumed
from the unreasonable delay, (3) the wholesome policy of
the law in favor of the prompt disposition of law suits,
and (4) the duty of the appellant to proceed with due
diligence.



In Cox v. Myllymaki, 231Mont. 320, 322, 752 P.2d 1093, 1094,
(1988), we restated and somewhat expanded the Shackelton factors.
Quoting Hamilton v. Neptune Orient Lines, Ltd., 811 F.2d 498, 499
(9th Cir. 1987), we enumerated the following considerations:

[Tlhe plaintiff's diligence, the trial court's need to
manage its docket, the danger of prejudice to the party
suffering the delay, the availability of alternate
sanctions, and the existence of warning to the party
occasioning the delay.

Taking the Shackelton and Cox factors together, the elements
this Court will consider when determining whether a district court
has abused its discretion by dismissing an action for failure to
prosecute are: 1) the plaintiff's diligence in prosecuting his
claims; 2) the prejudice to the defense caused by the plaintiff's
delay; 3) the availability of alternate sanctions; and 4) the
existence of a warning to plaintiff that his case is in danger of
dismissal. These elements will be considered in light of the
competing concerns of the plaintiff's right to a hearing on the

merits, the trial court's need to manage its docket and the general

policy in favor of prompt disposition of lawsuits.

The party moving for dismissal must demonstrate that the
plaintiff has delayed action on the claim for an unreasonable
period of time. Once an unreasonable delay has been shown, the
plaintiff must proffer a reasonable excuse for the delay. Calaway

v. Jones, 177 Mont. 516, 520, 582 P.2d 756, 758 (1978). An unreasonable delay raises a presumption of prejudice to the defendant, and the defendant is under no obligation to demonstrate injury from the delay. Shackelton, 207 Mont. at 102, 672 P.2d at 1115. However, if the plaintiff comes forward with a reasonable excuse for the delay, the burden shifts to the defendant to show actual prejudice. "A reasonable excuse is one that is not frivolous '. . . where a plaintiff has come forth with an excuse for his delay that is anything but frivolous, the burden of production shifts to the defendant to show at least some actual prejudice. 11' Cox, 231 Mont. at 322, 752 P.2d at 1094 (quoting Nealey v. Transportacion Maritima Mexicana, S.A., 662 F.2d 1275, 1281 (9th ~ir. 1980) ) .
In the present case, the District Court file shows an absence
of any formal discovery or other substantial prosecutorial activity
by plaintiffs for slightly more than two and one-half years prior
to the motion for dismissal. Assuming that this period of time
constituted an unreasonable delay, the plaintiffs bore the burden
of showing a reasonable excuse for their failure to prosecute. At
the reinstatement hearing, plaintiffs offered two reasons for their

failure to take any formal action during this time period. First,

they had been led to believe by their attorney that further
discovery efforts had been postponed due to scheduling conflicts
between the three sets of attorneys involved in the case. Second,
they misunderstood the scope of their lead attorney's
representation. Plaintiffs assumed that Budewitz was continuing
to pursue the case while they sought assistance from other law
firms. Yet Budewitz apparently ceased activity on the case after
October, 1988, except to respond to inquiries from other attorneys.

In past cases involving Rule 41(b) dismissals, we have held
plaintiffs at least partially responsible for the inadvertence of
their attorneys. Those cases may be distinguished from the action
at hand. Diversified Realty, Inc. v. Holenstein, 222 Mont. 263,
721 P.2d 752 (1986), for example, involved a delay of over eight
years, as well as a previous order from the court mandating
plaintiffs to proceed with due diligence. The present case, on the
other hand, involves a delay of only two and one-half years with
no order or other warning from the court to proceed more
diligently.

Timber Tracts, 231 Mont. at 44-45, 753 P.2d at 857, and its
companion case, Cook v. Fergus Elec. Coop., Inc., 235 Mont. 173,
177, 765 P.2d 1138, 1140 (1988), involved cases in which one of the
plaintiffs was also an attorney whose law firm was listed as
counsel of record. Under those circumstances, we refused to
absolve the plaintiffs from their responsibility to move the suit
to trial. In the present case, however, none of the plaintiffs are

attorneys, all are lay persons.

Furthermore, plaintiffs in this case did not sit on their
claims while their attorney took no further action to prosecute.
Rather, plaintiffs undertook what measures they could reasonably
be expected to engage in as lay persons who believed they were
being represented by counsel. They consulted with a financial
expert to determine the value of their claims. They also conferred
with other attorneys in an effort to get additional assistance with
the suit.

Under the circumstances, plaintiffs offered reasonable excuses
for the delay in the formal prosecution of their case. Because
plaintiffs1 reasons were not frivolous, the burden shifted to
defendants to demonstrate that they were actually prejudiced by the
delay.

Actual prejudice for the purpose of a Rule 41(b) dismissal for
failure to prosecute means an impairment of the ability to defend
due to the plaintiff's delay in diligently pursuing the action.
An impairment of defense usually involves the loss of evidence or
witnesses. In Brvmerski, 195 Mont. at 432, 636 P.2d at 849, we
held that the defendant had not been prejudiced since most of the
witnesses were still available to testify and records and files
continued to be available as evidence. Similarly, in Kuiich, 127
Mont. at 135-36, 260 P.2d at 388-89, we noted that no prejudice
existed when the witnesses remained available and no crucial
evidence was lost as a result of the delay. On the other hand, in
Chicago Title Ins. Co. v. Wheat, 216 Mont. 98, 101, 699 P.2d 597,

599 (1985), we found actual prejudice because f'[w]itnesses have moved or forgotten the facts, records and files have been lost, one of [defendantsf ] former attorneys has given up the practice of law, and [a defendant] has changed ownership.If
In the present case, defendants do not allege that their
defense of the action has been impaired by plaintiffsf delay in
prosecution. They do not claim that witnesses are no longer
available or that evidence no longer exists. Rather, the only
prejudice they allege is that they have been forced to list the
lawsuit as a contingent liability on their financial statements.
While we do not doubt that this constitutes a hardship for
defendants, we recognize that it is a hardship suffered by many
parties involved in litigation. It does not constitute prejudice
for purposes of a Rule 41(b) dismissal for failure to prosecute.

Because plaintiffs proferred a reasonable excuse for their
delay in prosecuting the lawsuit and defendants were unable to
demonstrate that they had been actually prejudiced by the delay,
we hold that the trial court abused its discretion in dismissing
plaintiffsf complaint for failure to prosecute. We therefore need
not discuss the court's failure to consider the availability of
alternate sanctions or the complete absence of a warning to
plaintiffs that the action was in danger of being dismissed.

Reversed and remanded for further proceedings consistent with
this Opinion.

/'
Justice



We Concur:

' chief Justice
Justices

Justice Fred J. Weber specially concurs as follows:

I do agree with the reversal as required under the majority
opinion. In reaching that conclusion, however, I have also
considered other factors upon which the majority did not rely.

In particular, I note the complete absence of a warning to the
plaintiffs that their action was in danger of being dismissed.
Under the facts of this case, it would have been entirely
appropriate to give a warning, granting an appropriate period of
time in which to actually prosecute the lawsuit. The dismissal and
giving of 30 days to respond does not appear to meet the test under
these circumstances.

In addition, the record indicates the District Court did not
consider any alternate sanctions. As an example, it would have
been readily possible in this case to require of the plaintiffs
that they be prepared to try the case in a period of time such as
3 months or 6 months and in the event of their failure to be
totally prepared for trial, that the case then would be dismissed.
Furthermore, under Rule 16,M.R.Civ.P., the District Court has the
ability to manage and control the course of this litigation as well
as consider appropriate sanctions when discovery is not completed
or answered as required.

The majority accepts at face value the testimony of the
plaintiffs with regard to their explanation of their actions during
the one and one-half years prior to dismissal. I note the
testimony contradicts the affidavit of Mr. Budewitz, their
attorney. As a result, it is certainly possible that the District

Court found their testimony not to be believable. Where the
plaintiffs had picked up all of the files and were aware that the
files had never been returned to Mr. Budewitz, it is difficult to
conclude that they expected Mr. Budewitz to continue as attorney.

For me a controlling factor is stated in Cox v. Myllymaki
(1988), 231 Mont. 320, 322, 752 P.2d 1093, 1094, where the Court
stated that a judge's discretion is not unlimited and it must be
remembered that courts "exist primarily to afford a forum to settle
litigable matters between disputing parties (citations omitted)."
I find the facts to be very close in this case, but for these
reasons I conclude that we may properly say that there was an abuse
of discretion in the dismissal of plaintiffs1 complaint.

Justice Diane G. Barz concurs in the foregoing special concurrence.

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