$3 MILLION DEFAULT JUDGMENT TAKEN ON ANSWER DATE AT 10:15 A.M. EVENTUALLY SET ASIDE

G & C Land v. Farmland Management Services started out as an ordinary state court case headed for removal to federal district court in Lubbock Texas.  It is now a warning on how things can quickly go wrong. The state court citation had the standard language that an Answer must be filed by 10AM on the Monday after the expiration of 20 days from the date the citation was served.  The defense counsel intended to remove the case before the Answer was due, but was delayed by two hours because he was at his son’s school a little longer than expected that morning.  Additionally, defense counsel indicated he needed to finish investigating the amount in controversy and the Plaintiff’s citizenship for diversity purposes, but his investigation had been delayed because his grandfather unexpectedly ended up in the hospital that weekend. While defense counsel was finishing up his removal due diligence, Plaintiff’s counsel took at $3 million default judgment at 10:15a.m. the morning the answer was due.  See G & C Land v. Farmland Management Services, Cause No. 2012-502,932 in the 99^th Judicial District Court, Lubbock County, Texas (August 6, 2012.)

Defense counsel sought to have the default judgment set aside in federal court, and finally succeeded on the second amended motion to set aside the default judgment.  The federal district court eventually found that the Defendant did not willfully miss the deadline by 15 minutes, there was a lack of prejudice to the Plaintiff, Defendant had demonstrated there were meritorious defenses, and the fault for missing the deadline lay solely at the feet of the defense counsel who did not intend to miss the deadline.  The court found defense counsel was negligent in missing the deadline, but it was “excusable neglect” because it was not willful.  See Order, G & C Land v. Farmland Management Services, Civil Action No. 5:12-cv-00134-C (N.D. Tex. October 12, 2012.)  As a condition for setting aside the default judgment, the Defendant was ordered to pay the Plaintiff’s attorneys’ fees incurred in taking the default judgment and in responding to the Defendant’s efforts to set aside the default.

The Defendant eventually prevailed on the merits by summary judgment.  On appeal, the 5^th Circuit Court of Appeals upheld both the summary judgment and the court’s exercise of discretion in setting aside the default judgment.  On appeal, the Court held: “The entry of default judgments are ‘generally disfavored in the law’ and therefore, ‘should not be granted on the claim, without more, [than] the defendant had failed to meet a procedural time requirement.’  When determining whether or not to set aside a default judgment, district courts are directed to consider ‘whether the default was willful, whether setting it aside would prejudice the adversary, and whether a meritorious defense is presented.’”  G & C Land v. Farmland Management Services, 2014 WL 4699515 (5^th Cir. Sept. 23, 2014)(citations omitted.)

Lessons learned:  1) timely filing a state court general denial avoids any last minute removal problems resulting in a default judgment; 2) fax a copy of the answer to be filed in advance to Plaintiff’s counsel to avoid an issue about paying for his attorney fees as a condition to set aside a default judgment; 3) mailing an answer to the Court constitutes filing an answer, but the Court may not know it is in the mail when entering a default judgment; and 4) plan on answering a suit before the day the answer is due.  And most importantly, 10 a.m. means 10 a.m.!