March 30, 2020- Ferguson Enterprises v. National Heating and Ventilating Co., Inc., No. A-1-CA-36915

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IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO	1
FERGUSON ENTERPRISES, INC.,	2
Plaintiff-Appellant,	3
v. 	No. A-1-CA-36915	4
NATIONAL HEATING AND VENTILATING	5
CO., INC. and EMPLOYERS MUTUAL	6
CASUALTY COMPANY,	7
Defendants-Appellees.	8
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY	9
Alan M. Malott, District Judge	10
Lorenz Law	11
Alice T. Lorenz	12
Albuquerque, NM	13
for Appellant	14
Caren I. Friedman	15
Santa Fe, NM	16
Ryan P. Carson	17
Albuquerque, NM	18
for Appellee National Heating and Ventilating Co., Inc.	19
Sheehan & Sheehan, P.A.	20
David P. Gorman	21
Albuquerque, NM	22
for Appellee Employers Mutual Casualty Co.	23
Court of Appeals of New Mexico
Filed 3/30/2020 8:37 AM

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MEMORANDUM OPINION	1
BOGARDUS, Judge.	2
{1} 	Ferguson 	Enterprises, Inc. (Ferguson) appeals 	from the dismissal 	with	3
prejudice of its complaint against National Heating and Ventilating Co. (National)	4
and 	Employers 	Mutual 	Casualty Co. 	(Employers) 	entered 	as 	a 	sanction 	for	5
Ferguson’s failure to obtain replacement counsel and violations of the district court’s	6
orders. Because we conclude that dismissal was too severe a penalty in light of	7
Ferguson’s conduct, we reverse and remand.	8
BACKGROUND	9
{2} 	Ferguson, a vendor of building materials, sued National on May 17, 2016,	10
alleging non-payment under a sales contract. Nine days later, Ferguson amended its	11
complaint to add Employers as a defendant, alleging that Employers executed a	12
surety bond in connection with the contract and was also liable for the relief	13
Ferguson claimed from National.	14
{3} 	About eleven months later, the district court sua sponte dismissed the case	15
without prejudice for lack of prosecution. Ferguson moved to reinstate the action, as	16
allowed under the dismissal order. The court granted the motion on May 8, 2017,	17
and set the matter for a November 28, 2017, bench trial.	18
{4} 	On 	August 7, 2017, Ferguson’s 	counsel 	moved to 	withdraw, citing a	19
breakdown in the attorney-client relationship. The district court granted the motion	20

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and ordered Ferguson to find replacement counsel by August 29, 2017. That deadline	1
came and went with no entry of appearance. Then, on September 19, 2017, an	2
attorney entered a limited appearance on Ferguson’s behalf for the sole purpose of	3
moving for a continuance of the scheduled trial-related dates and deadlines, which	4
the attorney did that same day.	5
{5} 	The next day, the district court granted Ferguson’s motion for continuance	6
and rescheduled trial for March 2018. The court (1) found that Ferguson had not	7
been able to retain replacement counsel; (2) recognized the strong public policy for	8
determining cases on their merits; (3) found that the case had not been pending for	9
an 	“excessive” 	period 	of 	time; 	and 	(4) 	concluded 	that 	these 	circumstances	10
established good cause to vacate the November trial.	11
{6} 	The day after that, on September 21, 2017, National moved to dismiss the case	12
pursuant to Rule 1-041 NMRA for failure to prosecute and failure to comply with a	13
court order. Employers concurred, but did not join, in the motion. Concerning	14
Ferguson’s alleged failure to comply with a court order, National reasoned that	15
because Ferguson’s motion for continuance was granted, the attorney’s limited	16
representation of Ferguson was complete; thus, Ferguson was unrepresented in the	17
matter and therefore was in violation of the court’s order to find replacement counsel	18
by August 29, 2017.	19

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{7} 	The same attorney who had previously entered a limited appearance for	1
Ferguson did so again and filed Ferguson’s response to National’s motion to dismiss,	2
which was several days late. In the response, Ferguson argued that a corporation’s	3
failure to obtain substitute counsel following its attorney’s withdrawal was not	4
grounds for dismissal. Ferguson argued that the only rule specifying a consequence	5
for such non-representation was the local rule allowing a court to strike the filings	6
of an unrepresented corporation, and further argued that all of its filings had been	7
made by attorneys.	8
{8} 	Without a hearing on the matter, the district court granted National’s motion	9
and dismissed the case with prejudice. This time, the court dismissed the case not	10
for Ferguson’s failure to prosecute, but rather “due to [Ferguson’s] failure to obtain	11
appropriate representation” and due to “its disregard of the previous [o]rders of the	12
[c]ourt, and its own [s]tipulation, regarding the acquisition of counsel.” The court	13
found that Ferguson’s violations “resulted in a waste of the [c]ourt’s resources [and]	14
undue waste of [National’s] resources without cause, and evidence[d] disrespect for	15
[the c]ourt and its processes.” In making its ruling, the court did not cite Rule 1-041	16
but instead appeared to have drawn on its inherent powers.	17
DISCUSSION	18
{9} 	Our sole inquiry on appeal is whether the district court erred in dismissing the	19
case. We review the ruling—whether made pursuant to Rule 1-041(B), for “failure	20

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of the plaintiff . . . to comply with these rules or any order of court,” id., or the court’s	1
inherent power to dismiss cases sua sponte for disregard of court orders, see	2
Newsome v. Farer, 1985-NMSC-096, ¶¶ 22-23, 103 N.M. 415, 708 P.2d 327—for	3
an abuse of discretion. See id. ¶¶ 22, 24. “An abuse of discretion will be found when	4
the [district] court’s decision is clearly untenable or contrary to logic and reason.”	5
Id. ¶ 22. Notwithstanding this review, our courts have repeatedly recognized that	6
dismissing an action with prejudice is a drastic sanction that must be imposed only	7
sparingly. See, e.g., id. ¶ 29; United Nuclear Corp. v. Gen. Atomic Co., 1980-NMSC-	8
094, ¶ 205, 96 N.M. 155, 629 P.2d 231 (“[A]n appellate court’s review should be	9
particularly scrupulous lest the district court too lightly resort to th[e] extreme	10
sanction [of dismissal], amounting to judgment against the defendant without an	11
opportunity to be heard on the merits.” (internal quotation marks and citation	12
omitted)). It is considered drastic because of the general policy to decide claims on	13
the merits. See Lujan v. City of Albuquerque, 2003-NMCA-104, ¶ 11, 134 N.M. 207,	14
75 P.3d 423. Consequently, granting a Rule 1-041(B) motion for a party’s pre-trial	15
failures is appropriate only where the party’s conduct is “extreme.” See Lowery v.	16
Atterbury, 1992-NMSC-001, ¶ 11, 113 N.M. 71, 823 P.2d 313.	17
{10} 	Relatedly, and contrary to National’s contentions, our Supreme Court has	18
recognized and applied a “wilfulness” test to such dismissals; under it, a party is	19
excused for violating a court order in the absence of “any conscious or intentional	20

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failure to comply [with the order.]” Newsome, 1985-NMSC-096, ¶ 28 (internal	1
quotation marks and citation omitted). Such wilfulness is distinct from negligent,	2
accidental, or involuntary noncompliance. See Lowery, 1992-NMSC-001, ¶ 13;	3
Newsome, 	1985-NMSC-096, 	¶ 28. 	Furthermore, 	“dismissal 	with 	prejudice 	is	4
appropriate only if the [district] court considered alternative sanctions short of	5
dismissal.” Lowery, 1992-NMSC-001, ¶ 17.	6
{11} 	Ferguson argues two main reasons that the district court’s dismissal was error:	7
(1) under the circumstances, dismissal with prejudice was too drastic a sanction	8
because “Ferguson’s inability to obtain counsel by the deadline was not shown to	9
have been willful or in bad faith”; and (2) Ferguson’s claim against Employers, as	10
independent of the claim against National, should not have been dismissed. Because	11
we agree with Ferguson on the first ground and because that resolution disposes of	12
this appeal, we need not consider the second.	13
{12} 	Before explaining why the district court’s dismissal was too drastic, we briefly	14
address National’s argument that Ferguson failed to prosecute its case—a ground	15
not recognized in the dismissal order. Citing Rule 1-041(B), which provides that a	16
defendant may move for dismissal “[f]or failure of the plaintiff to prosecute[,]”	17
National argues that Ferguson’s failures in this regard vindicate the dismissal. The	18
failure-to-prosecute rationale, though, does not aid National. When a party raises	19
failure to prosecute, Section (E)(1) of the rule conditions dismissal with prejudice	20

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on the passage of two years from the date the action was filed. Rule 1-041(E)(1).	1
Those two years had not yet passed when National filed its motion to dismiss. Hence,	2
failure to prosecute under Rule 1-041 provides no basis for this dismissal. While it	3
is true that the two-year rule can yield when a court exercises its inherent power to	4
dismiss a case for lack of diligence in prosecuting an action, 	see Foster v.	5
Schwartzman, 1965-NMSC-158, ¶ 12, 75 N.M. 632, 409 P.2d 267, such lack of	6
diligence was not the reason for this dismissal. And the question of Ferguson’s	7
diligence in prosecuting its action, being a fact-based one, is a question for the	8
district court. See id. ¶ 13.	9
{13} 	We instead look at the actual grounds for the district court’s decision: (1)	10
Ferguson’s failure to “obtain appropriate representation”; and (2) Ferguson’s	11
disregard of the court order, and its own stipulation, to acquire replacement counsel.	12
While Ferguson’s failings in this regard cannot be denied, what is not so certain is	13
that they were the product of conscious or intentional indifference. Ferguson tells us	14
that it tried, but was unable, to find trial counsel. It explains that some attorneys it	15
approached had ethical or scheduling conflicts, and others were not familiar enough	16
with the subject matter to take the case. National responds that Ferguson “ma[de] no	17
real effort to hire an attorney.”	18
{14} 	But again, it is not our place to decide this question; it is the district court’s—	19
which brings us to the first flaw in the court’s ruling. There is no indication that the	20

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court ever considered the nature of Ferguson’s violations, let alone concluded that	1
such violations were conscious or intentional. To the contrary, the court had	2
previously 	found 	that 	Ferguson 	“ha[d] 	not 	been 	able 	to 	retain 	replacement	3
counsel[.]” This suggests that Ferguson had been trying, but failed, to find new	4
counsel.	5
{15} 	The second flaw is rooted in the district court’s having not considered lesser	6
sanctions for Ferguson’s violations. See Universal Constructors, Inc. v. Fielder,	7
1994-NMCA-112, ¶ 12, 118 N.M. 657, 884 P.2d 813 (“The district court should . . .	8
consider 	alternatives 	to 	dismissal.”). 	National 	argues, 	unconvincingly, 	that	9
“anything less than dismissal would have been meaningless.” In support, National	10
cites Newsome, which affirmed dismissal in lieu of lesser sanctions, as a comparable	11
case. See 1985-NMSC-096, ¶¶ 29-31. But the facts in Newsome contrast sharply	12
with those here. In Newsome, the “rigidity” of the plaintiff whose case was dismissed	13
“not only made normal progress difficult, it prevented any progress at all.” Id. ¶ 30.	14
Among other things, the plaintiff intentionally ignored a court order to attend	15
document production, failed to notify the opposing party or the court of his non-	16
attendance, and failed to satisfactorily explain his conduct, even under the threat of	17
dismissal. Id. ¶ 26. Here, there is no evidence that Ferguson’s actions caused a	18
similar roadblock. To the contrary, Ferguson stated both that it was actively	19
negotiating a settlement and that it anticipated having trial counsel before the next	20

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scheduled hearing. There is no evidence, in other words, that had the case not been	1
dismissed, Ferguson’s conduct would have prevented the case from being tried as	2
scheduled or otherwise resolved. Cf. Lowery, 1992-NMSC-001, ¶¶ 1, 16 (concluding	3
that dismissal was inappropriate where the actions of the party whose case was	4
dismissed were not extreme, in that they did not evince a deliberate attempt to stall	5
litigation).	6
{16} 	Assuming some sanction was warranted, there is no indication that the district	7
court considered sanctions other than dismissal, and the facts of this case do not	8
suggest that a sanction less than dismissal would have been meaningless. See Lujan,	9
2003-NMCA-104, 	¶ 11 	(“Dismissal 	with 	prejudice 	. . . 	usually 	requires 	an	10
assessment 	of 	the 	violating 	party’s 	conduct 	weighed 	against 	the 	underlying	11
principles that cases should be tried on their merits and that dismissal is so severe a	12
sanction that it must be reserved for the extreme case and used only where a lesser	13
sanction would not serve the ends of justice.”). The district court erred in not	14
considering lesser sanctions.	15
{17} 	For the foregoing reasons, we conclude that the dismissal was too severe a	16
penalty for Ferguson’s conduct and thus amounted to an abuse of discretion. The	17
district court apparently did not consider whether Ferguson’s failure to acquire	18
replacement counsel was wilful or involuntary. See id. ¶ 13. It could therefore not	19
have gauged Ferguson’s culpability in the violations. Moreover, even if it had found	20

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that Ferguson was highly culpable—that its conduct was extreme—the ruling would	1
still be error because there is no indication that the court considered lesser sanctions.	2
See Lowery, 1992-NMSC-001, ¶ 17.	3
CONCLUSION	4
{18} 	We reverse and remand to the district court to vacate the order granting	5
National’s motion to dismiss and dismissing Ferguson’s complaint with prejudice.	6
{19} 	IT IS SO ORDERED.	7
_____________________________	8
KRISTINA BOGARDUS, Judge	9
WE CONCUR:	10
___________________________	11
JULIE J. VARGAS, Judge	12
___________________________	13
JENNIFER L. ATTREP, Judge	14