Failure to Warn of Default

Patrick J. Gregory, an attorney in the San Francisco office of Shook, Hardy & Bacon, LLP wrote an article in March 2015 discussing unwarned defaults by plaintiffs.

Sometimes notices of default judgments are not properly served on a defendant, and received through a plaintiff’s counsel.

Courts generally prefer that cases be resolved on their merits. Relief from default entries and default judgments are often granted. Any entered default or default judgment is cause for concern.

In California, Fasuyi v. Permatex, Inc., 84 Cal. Rptr. 3d 351 (Cal. Ct. App. 2008), explains a plaintiff’s counsel’s failure to warn defendant or its attorney that a default is about to be taken may provide grounds for a court to grant relief from a default because of a professional and ethical reason.

These are facts from the Fasuyi  case:  In August 2006, Omotayo Fasuyi filed a lawsuit against Permatex, Inc. for personal injury.  Id. at 352.  After Permatex was served, the summons and complaint were forwarded to Permatex’s insurance carrier with instructions to provide a defense.  Id. at 354.  No attorney for Permatex was retained before the date a response to the complaint was due.  Id.  After the date Permatex’s responsive pleading was due, Fasuyi’s attorney submitted “a request for default, filed without any communication with anyone at ITW, or anyone else.”  Id.   Fasuyi obtained a default judgment for $236,500.  Id.   Once Permatex learned of the default judgment, it obtained counsel, who asked Fasuyi’s attorney to voluntarily set aside the judgment.  Id.  After the request was refused, Permatex’s motion to set aside the default judgment was denied by the trial court.

The case was appealed to the California Court of Appeal.  The appellate court decided:   “leads inescapably to the conclusion that the trial court abused its discretion here – all legal principles favored Permatex.”  Id. at 361.  The law’s policy:  “’is to have every case litigated upon the merits, and it looks with disregard upon a party, who, regardless of the merits of the case, attempts to take advantage of the mistake, surprise, inadvertence, or neglect of his adversary.’”  Id.  (quoting Au-Yang v. Barton, 90 Cal. Rptr. 2d 227 (1999)).

The court of appeal discussed the actions of Fasuyi’s attorney:  “had been in contact with ITW’s legal department, which, not incidentally, had helped counsel effect service by identifying the location of CT Corporation.”   Id. at 365.  The court of appeal pointed out the lack of warning: “Fasuyi’s counsel took default without so much as a reminder, let alone a warning, about any responsive pleading.”  Id.

The court of appeal stated plaintiff’s counsel’s actions were “unfair,” and held that a “warning is at least an ethical obligation” of a plaintiff’s counsel seeking to obtain a default and default judgment.  Id.

The court relied on a treatise on civil procedure:  “‘[i]f plaintiff’s counsel knows the identity of the lawyer representing defendant, he or she owes an ethical obligation to warn before requesting entry of defendant’s default.  Failure to do so is a professional discourtesy that will not be condoned by the courts . . . .’”   Id.  (quoting Weil & Brown, Civil Procedure Before Trial (Rutter 2007) 5:68-5:70.  The Fasuyi court supported its holding based on Section 15 of the State Bar’s enacted California Attorney Guidelines of Civility and Professionalism:  “‘[a]n  attorney should not take the default of an opposing party known to be represented by counsel without giving the party advance warning.”  Id. at 365 n.10.

Outside of California, DIRECTV, Inc. v. Meyers, 214 F.R.D. 504, 512-15 (N.D. Iowa 2003) set aside default and noted plaintiff’s counsel’s failure to warn defendant’s counsel before taking default violated the Iowa Standards for Professional Conduct).  In Oklahoma, the court in First Interstate Bank of Oklahoma v. Service Stores of America, Inc., 128 F.R.D. 679, 680 (W.D. Okla. 1989) expressed its displeasure with the actions of plaintiff’s counsel in attempting a default judgment.  In New York, the court in Insurance Co. of North America v. S/S Hellenic Patriot, 87 F.R.D. 136, 139 (S.D.N.Y. 1980) stated “common courtesy” required plaintiff to notify defendant of default.