Professionalism_ Another Line of Defense Against Default

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Professionalism: Another Line of Defense Against Defaultby Patrick J. Gregory

Few notices are more unwelcome to the defense lawyer than are notices that a default judgment hasbeen taken against your client. Sometimes such notices are received even though plaintiffs counselhad never properly affected service on your client. Other times, such defaults result from the fact thatthe client had been properly served with a summons and complaint, but had not retained defensecounsel while the time to respond had been ticking. The most unpleasant scenario, from the defensepractitioners perspective, is where the default arose due to defense counsels own neglect or mistake.The good news in these situations is that courts generally prefer that cases be resolved on their merits,and that relief from default entries and default judgments is frequently granted. See, e.g., Wright, Miller& Kane, Federal Practice and Procedure Civil 3d 2693, 2696. Courts have allowed relief under avariety of circumstances ranging from illness or death of the client or attorney, honest miscalculationsof time, and even to attorney neglect. Id. at 2695, 2696. Nevertheless, trial courts are usually givenbroad discretion to grant or deny relief from default, id., and any entered default or default judgment iscause for concern.

A recent California decision, Fasuyi v. Permatex, Inc., instructs that a plaintiffs counsels failure to warndefendant or its attorney that a default is about to be taken may provide additional grounds for a court togrant relief from a default. 84 Cal. Rptr. 3d 351 (Cal. Ct. App. 2008) The lesson from Fasuyiis notbased upon the rules of civil procedure or any legal obligation; rather, plaintiffs counsels duty to warnthat a default would be sought arose in that case from professionalism and ethical obligations.The FasuyiDefault Without Warning

InAugust 2006, Omotayo Fasuyi sued Permatex, Inc. for personal injury. Id. at 352. Fasuyis lawyerexperienced difficulty obtaining service and contacted the legal department at Permatexs parentcompany, Illinois Tool Works (ITW). Id. at 353. ITWs legal department kindly advised Fasuyis lawyeron how to obtain service. Id. After Permatexs agent was served, the summons and complaint wereforwarded to Permatexs insurance broker with instructions to provide a defense. Id. at 354.Miscommunication between the broker and the insurer ensued, and no attorney for Permatex wasretained before the date a response to the complaint was due. Id.

Shortly after the date Permatexs responsive pleading was due, Fasuyis attorney submitted a requestfor default, filed without any communication with anyone at ITW, or anyone else. Id. Fasuyi thenobtained a default judgment for $236,500. Id. Once Permatex learned of the judgment, it obtainedcounsel, who in turn asked Fasuyis attorney to voluntarily set aside the judgment. Id. After thatrequest was refused, Permatexs motion to set aside the default judgment was denied by the trial courtin a four-word order. Id.

Strong Rebuke of Failure to WarnThe California Court of Appeal found that applying the law to the facts leads inescapably to theconclusion that the trial court abused its discretion here all legal principles favored Permatex. Id. at361. The most fundamental of those principles is that the laws policy is to have every case litigatedupon 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.(quotingAu-Yang v. Barton, 90 Cal. Rptr. 2d 227 (1999)).

Consistent with that policy, the court of appeal criticized the actions of Fasuyis attorney, noting that

counsel had been in contact with ITWs legal department, which, not incidentally, had helped counseleffect service by identifying the location of CT Corporation, Permatexs service agent. Id. at 365. Thecourt of appeal further pointed out that, notwithstanding ITWs help, Fasuyis counsel took defaultwithout so much as a reminder, let alone a warning, about any responsive pleading. Id.The court of appeal not only agreed with Permatexs argument that plaintiffs counsels actions wereunfair, it also held that a warning is at least an ethicalobligation of a plaintiffs counsel seeking toobtain a default and default judgment. Id. (emphasis in original). Extensively quoting from a prominenttreatise on California civil procedure, the court relied on the rule that [i]f plaintiffs counsel knows theidentity of the lawyer representing defendant, he or she owes an ethical obligation to warn beforerequesting entry of defendants default. Failure to do so is a professional discourtesythat will not becondoned by the courts . . . . Id. (quotingWeil & Brown, Civil Procedure Before Trial (Rutter 2007)5:68-5:70 (emphasis added)). The Fasuyicourt also found support for its holding in Section 15 of theState Bars recently enacted California Attorney Guidelines of Civility and Professionalism, whichprovides that [a]n attorney should not take the default of an opposing party known to be representedby counsel without giving the party advance warning. Id. at 365 n.10.

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In addition to finding that his counsel breached an ethical obligation, the court of appeal found thatFasuyi would not be prejudiced by granting relief from default. Id. at 366. Again critic izing Fasuyisattorney, the court observed that Fasuyis only possible claimed prejudice would be the delay of hiscase, and there would have been none had his counsel done what he should have. Id.

Expanding the Scope of Who Must Be WarnedTheFasuyicourt was not the first to find an ethical or professional duty to warn that a default will betaken. Though there is perhaps not an expansive body of case law, there are certainly other similardecisions that predate Fasuyi. See, e.g., DIRECTV, Inc. v. Meyers, 214 F.R.D. 504, 512-15 (N.D. Iowa2003) (setting aside default and noting that plaintiffs counsels failure to warn defendants Alaska

counsel before taking default violated the Iowa Standards for Professional Conduct); First InterstateBank of Oklahoma v. Service Stores of America, Inc., 128 F.R.D. 679, 680 (W.D. Okla. 1989) (Thepurpose of this Memorandum of Opinion is for the Court to express its extreme displeasure with theconduct of plaintiffs counsel in attempting to snap-up a default judgment.); Insurance Co. of NorthAmerica v. S/S Hellenic Patriot, 87 F.R.D. 136, 139 (S.D.N.Y. 1980) (common courtesy requiredplaintiff to notify defendant of default; the rush to enter judgment without such notice smacks too muchof the sporting theory of justice.).

Fasuyi, however,is important if for no other reason than it provides further judicial condemnation ofsnapping up default judgments without warning. In addition, Fasuyiperhaps has even greater import,because it held that a warning should have been given even though plaintiff did not know the identity ofdefendants attorney.

Typically, when ethics guidelines or rules have mentioned the duty to warn of default, the warning hasapplied only where plaintiffs counsel knows the identity of defendants attorney. Indeed, the court ofappeal in Fasuyiobserved that the California State Bar had recently promulgated Attorney Guidelinesof Civility and Professionalism that advise that a duty exists to knownopposing counsel.

Similar guidelines that limit the warning to known opposing counsel have been promulgated by otherstates and courts, as well as local, state, and national bar organizations. See, e.g., Standards forProfessional Conduct Within the Seventh Judicial Circuit, 143 F.R.D. 441, 450 (1992) (Lawyers Dutiesto Other Counsel, No. 18: We will not cause any default or dismissal to be entered without firstnotifying opposing counsel, when we know his or her identity.); Minnesota Professional Aspirations,III(F)(2), available at www.mncourts.gov/lprb/profasp.html(We will not cause a default or dismissal tobe entered, when we know the identity of an opposing counsel, without first making a good faith attemptto inquire about the counsels intention to proceed.); American College of Trial Lawyers, AnnotatedCode of Trial Conduct, 13(b), available at www.actl.com (When a lawyer knows the identity of a lawyerrepresenting an opposing party, the lawyers should not take advantage of the opposing lawyer bycausing any default or dismissal to be entered without first inquiring about the opposing lawyersintention to proceed.); ABA Section of Litig., Guidelines for Litigation Conduct, available atwww.abanet.org/litigation/conductguidelines.

But the Fasuyicourtimposed the duty to warn on plaintiffs counsel even though counsel did not knowthe identity of any attorney retained to represent the defendant Permatex. Plaintiffs counsel had onlybeen in contact with personnel at the legal department of ITW, Permatexs parent corporation, andwhen Fasuyi obtained a default judgment, Permatex itself had not even yet retained counsel. Fasuyi,

84 Cal. Rptr. 3d at 353. Strictly speaking, there was no opposing counsel for Fasuyis attorney towarn.Nevertheless, the Fasuyicourt clearly believed that plaintiffs counsel had an obligation to warnsomeoneon Permatexs behalf that a request was default was coming. Indeed, the court remarkedthat after a response [by Permatex] was due, Fasuyis counsel filed a request for default, filed withoutany communication with anyoneat ITW or anyoneelse. Id. (emphasis added). Later, in its opinion,the court of appeal made a point of highlighting for a second time that plaintiffs counsel did not contactanyone [at ITW] or anyone else. . . . Id. at 354.

Thus, when the Fasuyicourt held that it was at least the ethical obligation of counsel to warn of theimpending default, id. at 365, the court was not limiting itself to the terms often used in ethicalguidelines, i.e., the warning was not limited to the instance where an attorney representing the opposingparty has been identified. Instead, the warning should be given to defendant or a representative of acorporate defendant.

That the Fasuyicourtheld that the ethical duty to warn was owed to someone besides known counselfor a party that plaintiff sued makes sense when one considers the multiple policies behind that

obligation. One driving force behind the obligation is that a failure to warn constitutes a professionaldiscourtesy to opposing counsel. Id. Certainly, the legal profession aspires to civility amongst itsmembers, and the duty to warn known opposing counsel about defaults is often found in standardsintended to promote that civility. See, e.g., California Attorney Guidelines of Civility andProfessionalism, supra; Minnesota Professional Aspirations, supra.But the obligation to be civil extends beyond counsels dealings with opposing counselthe duty alsoextends to opposing parties, the judiciary, and the public. See, e.g., California Attorney Guidelines ofCivility and Professionalism, p. 3 (attorneys have an obligation to be professional with clients, otherparties and counsel, the courts and the public.). Consistent with this broader obligation, the Fasuyicourt, as noted above, held that the most fundamental principle that favored defendant Permatex wasthe laws policy to try cases on the merits, and in accord with that policy preference, courts disdain apartys effort to take advantage of the mistake, surprise, inadvertence, or neglect of his adversary.Fasuyi, 84 Cal. Rptr. 3d at 361 (emphasis added). Adversary, of course would include both opposingcounsel and the opposing party.

Given that the civility and fairness obligations of Fasuyis counsel extended to more than just known


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opposing counsel, it makes sense that the duty about an impending default should extend to others toensure that a defendant obtains fair notice. This is a particularly helpful and important point for defensecounsel in the scenario where the default was obtained, without warning, before defense counsel waseven retained.

Making The Ethics-Based Case For Relief From DefaultKnowing how to respond to a default judgment is not just for the negligent. As Fasuyidemonstrates ,entry of default can happen to any defense counsel. Because defaults can take place before theattorney even knows about the case, they can happen to even the most conscientious defensecounsel. In addition, defaults can occur when the defense attorney has been retained and knows abouta case, but may have been precluded, for legitimate reasons, from timely responding to a complaint.

Of course, defaults can occur when the defense attorneys excuse was less than understandable.Regardless of defense counsels culpability (or lack thereof) in allowing the default to occur, plaintiffscounsels failure to warn should be raised as grounds for relief from the default. When doing so, it mayhelp defense counsels case to keep the following points in mind.

First, refrain from arguing that there is a hard-and-fast rule that relief from default should be grantedwhen the default was obtained without warning (unless, of course, the case is in a jurisdiction thatactually has such a rule). The California Court of Appeal in Fasuyispecifically noted it was not holdingthat a defendant is always entitled to relief in the failure to warn situation, nor was it holding that aplaintiffs counsel must always warn defendants attorney before taking a default. Id. at 367. The courtrecognized that each situation is sui generis, and that the totality of the circumstances in Fasuyidemonstrated that Permatex was entitled to relief from default. Id.Second, in that most courts would examine the totality of the circumstances, an argument thatplaintiffs counsel failed to warn should always be combined with any other grounds for relief or factsthat demonstrates defendants good faith. In Fasuyi, Permatexs case for relief was undoubtedlyhelped by the fact its parent company (ITW) helped plaintiff obtain service, by the fact that Permatexwas not evading the lawsuit, and by the fact that Permatexs attorney acted quickly once he learned of

the default judgment. Id. at 365. Presenting evidence of all the defense acts of good faith plays into therecognition that courts typically grant motions for relief from default unlessdefendants or its attorneysconduct has been grossly negligent or willful. SeeWright, Miller & Kane, Federal Practice andProcedure Civil 3d 2693-2696.

Third, make sure to check all possible sources for the obligation to warn. As noted above, the duty towarn is often found in aspirational or civility guidelines promulgated by national, state, or local barassociations. Sometimes the duty is even found within a states rules of professional conduct. See,e.g., Nevada Rule of Professional Conduct 3.5A. Local appellate court and local trial court rules mayalso be a source for the rule. See, e.g., Standards for Professional Conduct Within the SeventhJudicial Circuit, supra; Civility Principles, United States District Court, Eastern District of Michigan,available at www.mied.uscourts.gov/Information/Attorneys /civility.cfn. And a few states have evenincluded a duty to warn defendant or its counsel within its rule of civil procedure on defaults. SeePa.R. Civ. P. 237.1 (requiring that ten days notice of intention to seek default must be given to partysattorney or to party if unrepresented); Ariz. R. Civ. P. 55(a) (same). As Fasuyidemonstrates,respected local practice guides may also be a credible source for the duty to warn of a default.

Fourth, if your case is within the large majority of jurisdictions whose rules of civil procedure impose no

duty to warn, consider explaining why a warning of default by plaintiffs counsel still fulfills the lawspolicies on defaults and default judgments. Because courts have a preference that cases be tried onthe merits, and because default judgments are typically reserved for grossly neglectful or willfullydisobedient defendants or their attorneys, a warning by plaintiffs helps the courts identify the type ofparties against whom the law truly deems it proper to enter a default judgment. See, e.g., Wright, Miller& Kane, Federal Practice and Procedure Civil 3d 2693([W]hen the nondefaulting party endeavors to encourage the other party to respond, provides sufficientopportunity for the opponent to correct the default, or does not press too rapidly for the entry of thedefault and subsequent judgment, a court typically will conclude that there is no reason to give thedefaulting party relief.).

Fifth, keep in mind that a default, though obtained without warning, was likely obtained in compliancewith the applicable rules of civil procedure (unless the case is in one of the few jurisdictions wherenotice of default is required by the civil procedure rules). As the California Court of Appeal recognized,[t]he duty to warn opposing counsel is an ethical rather than a legal requirement. Fasuyi, 84 Cal. Rptr.3d at 365 (quoting Weil & Brown, Civil Procedure Before Trial, 5:69). Thus, while judges may believethat notice of a default should have been given as a matter of professional courtesy, they may alsobelieve that notice was not a legal obligation. Id. For this reason, it is all the more important to

demonstrate why a warning, though not strictly required by law, fulfills the legal policies discussedabove.

In addition, in that plaintiffs counsel may have acted in full compliance with the law by not giving awarning, it is a good idea (as is probably always the case) to temper any criticism of plaintiffs counsel.While it is fair game to point out any applicable ethical guidelines and rules, how those guidelines andrules support the laws policies, and why plaintiffs counsels failure to adhere to those guidelines andrules helps demonstrate the unfairness of the default, any further critique or conclusions aboutopposing counsels conduct probably is best left to the court.

ConclusionIf plaintiffs counsel does what professionalism and civility call forprovide warning that a default will besoughtdefendant and its conscientious counsel will respond to the complaint and the case will beresolved on its merits. In those instances where plaintiff has not given a warning and a default ordefault judgment has been entered, defense counsel should rely on that lack of warning as an additionalground for relief from the default or default judgment.


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Patrick J. Gregory is a partner with Shook, Hardy & Bacon, LLP, in its San Francisco, California office.

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Professionalism_ Another Line of Defense Against Default