A frustrating trend has emerged over the past several years with regard to defaulting defendants. On many occasions, a defendant will fail to respond to a lawsuit, but will show up at the hearing when we attempt to obtain a default judgment. Sometimes, the judge will give the defendant another chance to respond, or will grant other relief, such as setting aside the entry of default. It is important to understand the default judgment process.
A defendant has thirty days from the date of receiving a lawsuit to respond by filing an Answer. The Answer should be sent directly to the plaintiff (or the plaintiff’s attorney). If no Answer is filed, the plaintiff can ask the Court to enter default against the defendant. This is called an “entry of default” and means that the defendant can no longer file an Answer or raise a defense to the claims, unless he shows good cause for why the entry of default should be set aside. After default has been entered, the plaintiff can ask the Court to enter the default judgment. Often, the clerk can enter the judgment, but under some circumstances only a judge can enter the judgment after a hearing. When defendants appear at the default judgment hearing, it can cause major problems for plaintiffs.
In particular, and the main cause for concern, is judges’ willingness to set aside the entry of default. The law requires that a defendant show a good cause (or reason) for why he should be given another chance to respond. Based on the case law, ignoring the lawsuit or not understanding its significance are not considered good cause. However, the current view exercised by the courts is that entries of default are set aside almost routinely upon request of the defendant. The logical reasoning for this view is that the courts prefer cases to be heard on the merits, not dismissed based on a procedural issue.
As a result of the current application of the default rules, businesses can save money and be more efficient in their pending lawsuits in several ways. First, if a defendant contacts a plaintiff or its attorney seeking consent to setting aside default, the consent should be strongly considered. This will save the cost of paying an attorney to attend a hearing where the result is likely inevitable. Of course, the circumstances of each case vary and there should not be a blanket rule on whether to consent to setting aside the default.
Second, once it is possible to obtain entry of default and default judgment, act quickly. In other words, go ahead and get the judgment as soon as possible, unless there is a legitimate business reason not to do so. Finally, understand that even if the entry of default is set aside or the judge does not enter the default judgment, all is not lost. Defendants, especially those not represented by attorneys, do not take advantage of the extra time given to respond, and the default judgment is simply delayed. In addition, there are other ways of resolving cases that do not require excessive costs and attorneys’ fees, such as confessions of judgment, settlements, and summary judgments (which basically means that even though the defendant filed an Answer, there is no real dispute and the plaintiff is entitled to judgment).