On Appeal from Superior Court, Chittenden Unit, Civil Division April Term, 2013, Geoffrey W. Crawford, J.
Jasdeep Pannu of Law Office of Jasdeep Pannu, Burlington, for Plaintiff-Appellant.
Stuart Bennett and Jonathan Ciappa of Bennett & Zaikowski, PC, Shelburne, for Defendant-Appellee.
PRESENT: Reiber, C.J., Dooley, Skoglund, Burgess and Robinson, JJ.
¶ 1. The question in this case is whether the trial court’s dismissal of plaintiff’s eviction action on account of her lawyer’s failure to attend a scheduled status conference can withstand a motion to set aside the judgment pursuant to Vermont Rule of Civil Procedure 60(b) given the facts of this case. We conclude that it cannot and reverse.
¶ 2. For the purposes of this appeal, we assume the following facts.  The parties were formerly married. In March 2011, defendant began residing at a property owned by plaintiff. In March 2012, after previously serving defendant with a notice to terminate, plaintiff filed a complaint for eviction in the Chittenden Superior Court, Civil Division. The complaint alleged that defendant had not paid rent, and sought the fair market rental value. Thereafter, plaintiff withdrew her request for rental arrearages and attached a written rental agreement between the parties obligating defendant to pay plaintiff $1 a month in rent. Plaintiff then moved for damages alleging that defendant had negligently repaired the garage on the property. In his answer, defendant counterclaimed for damages to compensate him for the work performed on the garage.
¶ 3. The case was scheduled for a status conference in June 2012. Plaintiff requested a continuance, and the court rescheduled the conference for July 5, 2012. The court sent a hearing notice to both parties’ attorneys on June 13. Neither plaintiff nor her attorney appeared at the July 5 status conference. On defendant’s motion, the court dismissed the case with prejudice that same day. The court noted that plaintiff and her attorney had failed to appear after asking the case to be continued, and that defendant did not wish to pursue his counterclaim and had left the property.
¶ 4. Plaintiff did not appeal the dismissal, and did not file a timely motion to alter or amend the judgment of dismissal pursuant to Vermont Rule of Civil Procedure 59. Instead, on August 1, 2012, plaintiff’s attorney filed a motion under Rule 60(b)(1) requesting relief from judgment based on excusable neglect. Plaintiff’s attorney acknowledged that he had received written notice of the July 5, 2012 status conference and had failed to note it in his own calendar system. He explained that he had relied on the Vermont Judiciary’s online calendar that day and the online calendar did not list the hearing.  As a consequence, he did not realize that there was a hearing that morning. Plaintiff’s attorney alleged that the dismissal with prejudice had harmed plaintiff because defendant owed plaintiff money for negligently repairing the garage. The court denied the motion, concluding that plaintiff’s scheduling error did not amount to excusable neglect under Rule 60(b)(1). Plaintiff appeals, arguing that her attorney’s failure to attend the status conference was neither purposeful nor prejudicial to defendant.
¶ 5. We note at the outset that if plaintiff had directly appealed on August 1, 2012, instead of filing a Rule 60(b) motion, this would be an easier case. The Vermont Rules of Civil Procedure allow a trial court to dismiss a case on account of the plaintiff’s failure to pursue it, or because the plaintiff has not complied with a court order, including failing to attend a scheduled court hearing. V.R.C.P. 41(b)(2) (“For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim against the defendant.”).
¶ 6. That general power is limited by several important considerations. First, the law favors disposition of cases on their merits. Nichols v. Hofmann, 2010 VT 36, ¶ 4, 188 Vt. 1, 998 A.2d 1040; Dougherty v. Surgen, 147 Vt. 365, 366, 518 A.2d 364, 365 (1986). Second, sanctions against litigants should be proportionate to their offenses. See State v. Jones, 157 Vt. 553, 557, 601 A.2d 502, 504 (1991) (explaining that where a party does not prosecute its case, court should “fashion a sanction appropriate to the circumstances” and “[o]nly rarely would a sanction of final termination of the case be appropriate”). In light of these first two considerations, we have recognized in the discovery context that the sanction of dismissal for failure to comply with discovery orders is a last resort, not a first stop. Reversing a trial court’s dismissal of a juvenile case on account of the state’s willful violation of discovery orders, this Court explained:
We agree that dismissal of the proceeding may be a necessary sanction in some cases. However, the sanction should not be harsher than necessary to accomplish the goals of the discovery rules. The use of a dismissal sanction is proper only if the court finds that the defendant would be prejudiced by anything less than dismissal.
In re F.E.F., 156 Vt. 503, 515, 594 A.2d 897, 905 (1991) (citations omitted); see John v. Med. Ctr. Hosp. of Vt., Inc., 136 Vt. 517, 519, 394 A.2d 1134, 1135 (1978) (holding that where ultimate sanction of dismissal used, court must find “bad faith or deliberate and willful disregard for the court’s orders” and prejudice to party seeking sanction).
¶ 7. Third, courts must be wary of imposing sanctions on a party without notice and an opportunity to be heard concerning the proposed sanction. Lawson v. Brown’s Home Day Care Ctr., Inc., 2004 VT 61, ¶ 14, 177 Vt. 528, 861 A.2d 1048 (mem.) (stating that, when a court relies on its inherent authority to impose sanctions, “the party being ...