Default Judgments Presentation

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D. Todd Smith's slide presentation on default judgments at the 2012 South Texas Insurance Law Seminar.

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Default Judgments Presentation

  1. 1. Default JudgmentsD. Todd Smith September 30, 2012www.appealsplus.com
  2. 2. Overview • The paper is very comprehensive, though not focused on insurance-related issues per se • Assume we’re talking about no-answer defaults • Coming at this from the perspective of a P taking a default judgment. Focusing on four questions: – How do I take a default judgment effectively? – Will my default judgment withstand a motion for new trial? – Will my default judgment stand up on appeal? – How do keep insurance coverage for my default judgment?9/30/2012 Copyright © 2012 Smith Law Group, P.C. 2
  3. 3. How Do I Take a Default Effectively? First, consider whether you can legitimately take a default. • Basic procedural prerequisites (see Appendix 1): – No answer filed when due—can be almost anything, any time – Citation with return on file for at least 10 days (TRCP 107) – Personal and subject-matter jurisdiction are present – D served with live pleading—not a more onerous amended pleading—sufficient to provide fair notice of claims • If ―yes,‖ default likely worthwhile because D’s failure to answer admits all facts in petition other than the amount of unliquidated damages9/30/2012 Copyright © 2012 Smith Law Group, P.C. 3
  4. 4. How Do I Take a Default Effectively? • Legitimately taking a default may involve ―curing‖ some things that otherwise might be reversible error • For example: – Citation and return can be amended to cure defects if trial court retains plenary power – Theoretically, defects in petition can be cured as long as the petition does not seek to impose a more onerous judgment (but should serve D per TRCP 21a)9/30/2012 Copyright © 2012 Smith Law Group, P.C. 4
  5. 5. How Do I Take a Default Effectively? Next, consider the type of damages. • Liquidated damages – Can be calculated from facts stated in petition and a written instrument, i.e., a sworn account – No separate hearing or additional proof required – Great for Ps, but not likely in an insurance situation • Unliquidated damages – Everything else – Must put on evidence of damages as in any other case9/30/2012 Copyright © 2012 Smith Law Group, P.C. 5
  6. 6. How Do I Take a Default Effectively? Consider filing a motion for default judgment. • Rules don’t require a motion, but filing one allows P to package everything up neatly – Recite facts demonstrating default – Provide certificate of last known address (TRCP 239a) – Non-military affidavit, if needed (50 App. U.S.C.A. § 521) • In a no-answer situation, no notice to D required • But notice may be advisable for purposes of protecting insurance coverage9/30/2012 Copyright © 2012 Smith Law Group, P.C. 6
  7. 7. How Do I Take a Default Effectively? Next, obtain a hearing to prove up unliquidated damages. • Generally involves live testimony before court reporter establishing the amount of damages as in contested trial • Prove what you can prove, but overreach at your peril9/30/2012 Copyright © 2012 Smith Law Group, P.C. 7
  8. 8. How Do I Take a Default Effectively? • Can you rely on affidavits? – Case law says yes, but Ds sometimes cite TRCP 243 to argue that affidavits are not enough without a formal evidentiary hearing – Safest course is to hold a hearing on the record and formally admit the affidavits into evidence • Whether by affidavit or live testimony, must establish a ―causal nexus‖ between conduct admitted in petition and damages suffered9/30/2012 Copyright © 2012 Smith Law Group, P.C. 8
  9. 9. How Do I Take a Default Effectively? • Risky to rely only on requests for admissions ―embedded‖ in petition that go to damages – Deemed admission rules and case law suggest this is OK, BUT… – Citing ―due process concerns,‖ one court reversed a substantial default judgment based on deemed admissions that D’s conduct caused a specific amount of damages. Lucas v. Clark, 347 S.W.3d 800 (Tex. App.—Austin 2011, pet. denied).9/30/2012 Copyright © 2012 Smith Law Group, P.C. 9
  10. 10. How Do I Take a Default Effectively? Finally, submit a proposed final default judgment. • Identify the cause and the parties, state the relief granted, and recite all jurisdictional prerequisites – Citation was duly served with process – Return of service was on file 10 days – D failed to answer and appear • Make sure the final default judgment disposes of all issues and parties—no presumption of finality here9/30/2012 Copyright © 2012 Smith Law Group, P.C. 10
  11. 11. Will My Default Withstand a MNT? An equitable MNT provides a method by which a defaulting D may get the judgment vacated in the trial court (see Appendix 2) • Elements of an equitable MNT (Craddock) : – Failure to answer was not intentional, or the result of conscious indifference on D’s part, but was due to a mistake or accident – MNT sets up sets up a meritorious defense – MNT will occasion no delay or otherwise injure P • But per SCOTUS, a D who can prove lack of notice—lack of service in a no-answer case—gets a do-over without having to meet Craddock9/30/2012 Copyright © 2012 Smith Law Group, P.C. 11
  12. 12. Will My Default Withstand a MNT? Element 1: D must show that the default resulted from accident or mistake, not intent or conscious indifference. • D’s affidavits must show that D and any agent relied on— i.e., an insurer—satisfied this element – Explanation must be detailed, not conclusory – For some courts, almost any explanation will do. Others require D to negate negligence. Paper lists many examples. – If D discharges this initial burden, P is entitled to discovery before any hearing • If the trial court finds for D, that finding will not be disturbed absent an abuse of discretion9/30/2012 Copyright © 2012 Smith Law Group, P.C. 12
  13. 13. Will My Default Withstand a MNT? Element 2: D must set up a meritorious defense. • MNT must allege facts that, in law, would constitute a defense to P’s cause of action • D must support this element with prima facie evidence • P can challenge the legal sufficiency of the facts alleged to form a meritorious defense, but that’s about it9/30/2012 Copyright © 2012 Smith Law Group, P.C. 13
  14. 14. Will My Default Withstand a MNT? Element 3: No harm to P or undue delay. • Once D so alleges, the burden shifts to P • On harm, loss of the default judgment itself is not enough; Ds often successfully counteract by: – Offering to pay P’s expenses in procuring the default – Stating that D is ready to go to trial – Explanation must be detailed • Delay is very case-specific; it must be undue, which generally means a loss of rights (i.e., evidence is no longer available)9/30/2012 Copyright © 2012 Smith Law Group, P.C. 14
  15. 15. Will My Default Stand Up on Appeal? No Craddock motion filed. • A D who failed to timely file a MNT cannot rely on the Craddock elements as a basis for reversing a default • In that situation, D has three options: – A direct appeal challenging some other aspect of the default, such as sufficiency of the damages evidence—very limited – A restricted appeal brought within 6 months of the judgment showing error on the face of the record – A bill of review—an independent lawsuit seeking to set aside the judgment on equitable grounds similar to Craddock9/30/2012 Copyright © 2012 Smith Law Group, P.C. 15
  16. 16. Will My Default Stand Up on Appeal? Craddock motion filed. • A D who timely filed a MNT and lost can appeal the denial of the MNT or pursue a restricted appeal • In a restricted appeal, D would have to show lack of participation, which fits default judgments9/30/2012 Copyright © 2012 Smith Law Group, P.C. 16
  17. 17. Will My Default Stand Up on Appeal? • The key to holding on to a default judgment is to make sure the proceeding is handled properly on the front end • Appendix 1 checklist should help you do that; or, if you’re representing a D who suffered a default judgment, the checklist should help identify potential avenues of attack • The paper goes into detail on other considerations we can’t cover in 30 minutes, such as: – Specific requirements for citation and return – Rules for substituted service and citation by publication – What happens when D received no notice of the default – Restricted appeals and bills of review (a talk unto itself)9/30/2012 Copyright © 2012 Smith Law Group, P.C. 17
  18. 18. How Do I Keep Insurance Coverage? Two main concerns when insurance is in play: (1) lack of notice to insurer; and (2) lack of cooperation by insured. • Arise from common policy provisions that are frequently raised to contest coverage • Crocker: Notice provisions facilitate timely and effective defense of claim and trigger insured’s duty to defend by notifying insurer that a defense is expected • Policies require insureds to cooperate in investigation or settlement of claims or defense against suit9/30/2012 Copyright © 2012 Smith Law Group, P.C. 18
  19. 19. How Do I Keep Insurance Coverage? Key to both defenses is lack of prejudice to the insurer • Notice: Insurer bears the burden – Actual knowledge of the suit before default will usually create a fact issue on prejudice – Enforced through assignment, turnover, or breach of contract suit as judgment creditor/third-party beneficiary • Cooperation: Insurer bears the burden – Lack of cooperation is generally limited to situations in which the insurer was actually deprived of a valid defense or the insurer makes an agreement that imposes liability on the insurer – Abstract loss of the rights to investigate, defend, participate in, and control settlement negotiations are not sufficient9/30/2012 Copyright © 2012 Smith Law Group, P.C. 19
  20. 20. How Do I Keep Insurance Coverage? • Help keep coverage in play by providing notice to the insurer at every opportunity – Notice of claim – Notice of suit – Notice of service – Notice of default judgment, hearing, and intent to take default – Notice of judgment to allow opportunity to file MNT • An insurer facing documentation that it received notice along the way will have difficulty convincing a court that it suffered prejudice9/30/2012 Copyright © 2012 Smith Law Group, P.C. 20
  21. 21. Default JudgmentsD. Todd Smith September 30, 2012www.appealsplus.com

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