BROOKELYN GILLMAN, CINDY MAUGHAN, CHANCELOR MAUGHAN, AND JOHN MAUGHAN, Appellants, v. GARY WALKER GILLMAN AND LANCE FINN GILLMAN, Appellees.
No. 20190404
SUPREME COURT OF THE STATE OF UTAH
Filed July 22, 2021
2021 UT 33
Heard November 9, 2020. On Interlocutory Appeal. Fourth District, Spanish Fork. The Honorable Jared Eldridge. No. 180300090.
Attorneys:
James K. Tracy, James C. Dunkelberger, and Hyrum J. Bosserman, Salt Lake City, for appellants
Michael F. Skolnick, Jeremy R. Speckhals, and Calvin C. Curtis, Salt Lake City, for appellees
JUSTICE PETERSEN authored the opinion of the Court, in which CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE, JUSTICE HIMONAS, and JUSTICE PEARCE joined.
INTRODUCTION
¶1 The defendants in this case missed the deadline to file an answer. The court clerk entered their default and the plaintiffs moved for default judgment. The defendants quickly opposed the motion and requested that the default certificate be set aside under
¶2 We affirm.
BACKGROUND
¶3 Decedents Glade and Betty Gillman left behind trusts for the benefit of their children: appellees Gary Walker Gillman and Lance Finn Gillman (collectively, the uncles), along with two other siblings who are deceased. The deceased siblings’ share was to pass to their children: appellants Brookelyn Gillman, Cindy Maughan, Chancelor Maughan, and John Maughan (collectively, the cousins), along with two additional non-party cousins. After becoming concerned with their uncles’ handling of the trusts, the cousins sued Gary Gillman for alleged mismanagement of the trusts and both uncles for unjust
¶4 The cousins filed their complaint in May 2018. The uncles timely moved for dismissal or, in the alternative, for summary judgment on each claim. The cousins opposed the motion to dismiss and moved the court to convert the motion to one for summary judgment under
¶5 On October 10, 2018, the district court heard argument on the matter and orally granted the motion to convert. The court deferred ruling on the summary judgment motion and ordered a period of discovery. At the end of the hearing, the court ordered the cousins to prepare an order memorializing its decision. Over a month later, on November 16, 2018, the cousins’ counsel sent the uncles’ counsel, Calvin Curtis (Curtis), a proposed order.
¶6 Two weeks later, Curtis emailed the cousins’ counsel, informing them he had been away for the Thanksgiving holiday and would look at the order and respond the following Monday. But he did not follow up. Just over five weeks later, on January 8, 2019, the cousins’ counsel emailed Curtis again to inform him they would file the order on January 11 if Curtis did not respond. Counsel also wrote that they anticipated the uncles’ answer would be due by the end of January.
¶7 On January 10, Curtis responded that the order was “fine,” that the uncles consented to entry, and that he would “be back in touch shortly on the remainder” of the email. The cousins’ counsel filed the order and the court entered it on January 16, 2019. The order specified that the uncles’ answer was due within fourteen days of the entry of the order, which was January 30.
¶8 On February 1, two days after the answer deadline, Curtis emailed the cousins’ counsel and informed them that the uncles were going to engage separate litigation counsel and Curtis expected to “have word on that within a couple days.” A week later, on February 8, the cousins’ counsel emailed Curtis and asked if he would be filing an answer. Curtis did not immediately respond.
¶9 On February 14, the cousins filed a proposed order entering the uncles’ default. It was entered the next day. Four days later, Curtis emailed the cousins’ counsel and informed them that the uncles had engaged separate litigation counsel, who would be in touch about the answer and proposed litigation schedule. The cousins’ counsel did not respond. Instead, on February 20, they filed a motion for default judgment.
¶10 Five days later, the uncles filed a motion opposing default judgment, which included a footnote requesting “that the Court set aside [the] default certificate.”1 It included an affidavit from Curtis, which stated that: (1) on or about February 1, he advised the cousins’ counsel that he would “be engaging separate litigation counsel“; (2) he had interacted with litigation counsel and their firm on other matters but first contacted them about the instant case on January 31, 2019; (3) he had “experience in litigating trust and estate matters,” but had reduced his litigation practice, and because the previous motion hearing had been “focused . . . on procedural rules,” the advisability of hiring separate counsel was “reinforced in [his] mind“; (4) between January 31 and February 19, he communicated with litigation counsel about the mechanics of their involvement in the matter but never discussed a due date for the answer; and (5) both parties had previously sought and received extensions in the case,
but Curtis had never requested an extension for the answer, nor did he “envision or foresee the possibility of entry of default based on a three week delay” in filing the answer.
¶11 Also included as an exhibit to the opposition was the uncles’ proposed answer, in which they asserted the following defenses:
¶12 The district court denied the cousins’ motion for default judgment and granted the uncles’ request to set aside the default certificate. In its written order, the court noted that the case was “a close call.” To determine whether the uncles had shown “good cause” to set aside the default certificate under
¶13 First, the court found that, while Curtis “could have been more diligent,” it was “not convinced that [his] omissions r[ose] to the level of willfulness.” Next, the court recognized that the uncles had asserted meritorious defenses and had acted expeditiously to set aside the default certificate and oppose the motion for default judgment. The court rejected the cousins’ contention that they would be prejudiced if the default certificate were set aside. And it found that the public interest weighed in favor of deciding the case on the merits because “Utah courts disfavor default judgments.”
¶14 The cousins sought this interlocutory appeal of the court‘s decision. We exercise jurisdiction under
STANDARD OF REVIEW
¶15 We review a district court‘s decision to set aside a default certificate for an abuse of discretion. Lund v. Brown, 2000 UT 75, ¶ 9, 11 P.3d 277. While the “court has broad discretion in deciding whether to set aside a default [certificate],” a “decision premised on flawed legal conclusions . . . constitutes an abuse of discretion.” Id. (citation omitted).
ANALYSIS
¶16 The cousins contend that the district court abused its discretion in setting aside the entry of default in this case. Their primary argument is that to show “good cause” to set aside a default certificate under
¶17 As we will explain, this is an incorrect reading of
I. THE RULE 55(C) “GOOD CAUSE” STANDARD
¶18 When a party fails “to plead or otherwise defend as provided by” our rules of civil procedure, the opposing party may request that the clerk of court enter default—sometimes called a default certificate—against the defaulting party.
defendant has failed to answer . . . in a timely fashion.” Skanchy v. Calcados Ortope SA, 952 P.2d 1071, 1076 (Utah 1998).
¶19 Once a default certificate is entered, the defaulting party may move for it to be set aside under
¶20 “Good cause” is not defined by our rules of civil procedure. Black‘s Law Dictionary defines “good cause” as a “legally sufficient reason“—“often the burden placed on a litigant . . . to show why a request should be granted or an action excused.” Good Cause, BLACK‘S LAW DICTIONARY (11th ed. 2019). Accordingly,
¶21 The cousins essentially read
¶22 The cousins also argue that their reading of the rule is supported by our appellate case law. They assert that “Utah appellate courts have consistently required some event, exigency, or other cause to justify setting aside default or default judgment.” This may be an accurate observation of the factual circumstances that are often involved in such appeals. But the cousins have not cited any case involving
¶23 Further, the cousins rely heavily on case law interpreting the “excusable neglect” standard found in
¶24 The cousins assert that our analysis of the excusable neglect standard applies equally here because the standard for setting aside a default certificate under
¶25 While a default certificate may be set aside for “good cause shown,”
¶26 “Th[e] distinction [between relief from a default certificate and a default judgment] reflects the different consequences of the two events and the different procedures that bring them about.”
¶27 The federal courts interpret their rules similarly. See, e.g., Let‘s Go Aero, Inc. v. Cequent Performance Prods., Inc., 78 F. Supp. 3d 1363, 1371 (D. Colo. 2015) (“The good cause required for setting aside an entry of default ‘poses a lesser standard for the defaulting party than the excusable neglect which must be shown for relief from judgment under Fed. R. Civ. P. 60(b).‘” (citation omitted)); Insituform Techs., Inc. v. AMerik Supplies, Inc., 588 F. Supp. 2d 1349, 1352 n.2 (N.D. Ga. 2008) (“The ‘excusable neglect’ standard . . . is more rigorous than the ‘good cause’ standard.” (citation omitted)).
¶28 This is not to say that cases involving
¶29 Accordingly, we reject the cousins’ argument that the good cause standard requires a movant to make an initial showing that the default was caused by some event, exigency, or other external cause before considering any other relevant factors.
¶30 Because we have not previously had occasion to interpret
principles to assist district courts in analyzing whether to set aside a default certificate. Vacatur of a default is an equitable remedy that necessarily requires the district court to exercise its discretion and consider the facts unique to each case. “By their nature, equitable inquiries are designed to be flexible, taking into account all relevant factors in light of the particular circumstances.” Jones, 2009 UT 39, ¶ 17. In other words, the movant can assert, and the court may consider, any fact relevant to the decision to set aside a default because “the question is always whether the particular relief sought is justified under principles of fundamental fairness in light of the particular facts.” Id.
¶31 With that in mind, any doubts should be resolved in favor of setting aside a default certificate and allowing the case to proceed on the merits. See, e.g., Helgesen v. Inyangumia, 636 P.2d 1079, 1081 (Utah 1981) (noting that courts should exercise discretion “in furtherance of justice and should incline towards granting relief in a doubtful case to the end that the party may have a hearing“). The policy that “courts
¶32 But we recognize the competing need for judicial efficiency and adherence to deadlines. “In exercising discretion under Rule 55(c), the court will be very cognizant of the competing policies and values that are relevant to entering defaults and setting them aside. Both the default entry and judgment play an important role in the maintenance of an orderly, efficient judicial system.”
¶33 These competing policies illustrate why the district court is granted wide discretion in its
¶34 Our court of appeals has identified several factors that could be relevant to this determination in a given case: “whether the default was willful, whether the defendant alleges a meritorious defense, whether the defendant acted expeditiously to correct the default, whether setting the default aside would prejudice the plaintiff, and the extent, if any, to which the public interest is implicated.” Roth, 2010 UT App 332, ¶ 16; see also Pierucci v. U.S. Bank, NA, 2015 UT App 80, ¶ 9, 347 P.3d 837. These factors have also appeared frequently in federal case law applying
¶35 We agree that these considerations could be relevant in an appropriate case. However, we make clear that these factors do not form a “test” that must be applied in all circumstances. Rather, we reiterate that “[e]quitable inquiries defy distillation into any formal legal test; instead, the question is always whether the particular relief sought is justified under principles of fundamental fairness in light of the particular facts.” See Jones, 2009 UT 39, ¶ 17. We caution that not every principle will weigh equally or be relevant in a particular case. And the factors identified are not an exhaustive list. A district court can consider anything that is relevant to determining whether the default certificate should be set aside. But because the factors identified in Roth may often be relevant to a
¶36 First, a court could consider whether the defaulting party‘s failure to answer was willful. “A willful default is an ‘intentional failure’ to respond to litigation.” In re OCA, Inc., 551 F.3d at 370 n.32 (citation omitted). “Mere negligence or carelessness is insufficient to support a finding of willfulness. Willfulness requires egregious conduct that is not satisfactorily explained,” such as “when a defendant ignores a complaint without action and fails to offer an explanation for its failure to respond to a motion or pleading,” Peoples, 299 F.R.D. at 59 (citations omitted), or “cho[oses] to play games,” Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000) (citation omitted).
¶37 Likewise, a court could consider more generally the defaulting party‘s conduct throughout the litigation—assuming some litigation has taken place, as it has here. For example, if a party has been actively engaged or otherwise diligent in the case and the default appears to be an anomaly, that would weigh in favor of vacating the entry of default.
¶38 Next, a court could consider whether the defaulting party acted promptly to cure the default. There is no hard-and-fast rule to determine what constitutes prompt action in every case. Courts should look at the response to the default in relation to the overall context of the litigation.
¶39 Further, a court could consider whether the non-defaulting party would be unduly prejudiced if the default certificate were vacated. Some courts have held that delay by itself is insufficient to show prejudice. See Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 98 (2d Cir. 1993) (recognizing that “delay standing alone does not establish prejudice“). These courts require a showing that the delay will “result in the loss of evidence, create increased difficulties of discovery, or provide greater opportunity for fraud and collusion.” Peoples, 299 F.R.D. at 61 (citation omitted).
¶40 But although we agree that delay can be especially pernicious when it leads to loss of evidence or witnesses, or otherwise influences litigation, we decline to categorically disqualify delay itself as a sufficient basis for a finding of prejudice. Instead, we leave to the district court‘s discretion whether delay in a particular case has become sufficiently egregious to constitute prejudice on its own. And it is appropriate for the court to consider whether, if any harm was done to the non-defaulting party, the harm can be remedied with a sanction less drastic than default. See Jones, 2009 UT 39, ¶ 22 n.15 (“The district court‘s equitable discretion extends to fashioning the remedy as well as granting it. In other words, a district court may, as part of exercising its equitable discretion, in appropriate cases, condition the relief from judgment on the moving party‘s payment of attorney fees incurred by the nonmoving party as a result of the moving party‘s neglect or satisfaction of any other equitable condition.“).
¶41 Additionally, it could be relevant whether the defaulting party has a meritorious defense. This is a low bar. “A defense is meritorious if it is good at law so as to give the factfinder some determination to make.” Am. All. Ins. Co., Ltd. v. Eagle Ins. Co., 92 F.3d 57, 61 (2d Cir. 1996) (citation omitted). This does not mean the court must consider whether the defendant will ultimately succeed on the merits. A meritorious defense is merely an indication of the defendant‘s ability and desire to litigate the case on the merits. Conversely, “if the defendant fails to present a meritorious defense sufficient to support a finding on the merits for the defaulting party,” the court may exercise its discretion not to allow the case to proceed. Lacy, 227 F.3d at 293. In such an instance, setting aside the default would be futile. Our policy favoring adjudication on the merits would be overcome because there would be no real legal issues to adjudicate.
¶42 We again emphasize that district courts have wide discretion in determining whether a party has shown good cause. The considerations we have discussed here are by no means a complete list, and they may not be relevant in every case. Courts should take the unique circumstances of each case into consideration and determine “whether the particular relief sought is justified under principles of fundamental fairness in light of the particular facts.” See Jones, 2009 UT 39, ¶ 17.
II. THE DISTRICT COURT‘S RULE 55(C) ORDER
¶43 To prevail on appeal, the cousins must demonstrate that the district court abused its discretion in vacating the default certificate. “Though broad, the court‘s discretion is not unlimited. As a threshold matter, a court‘s ruling must be ‘based on adequate findings of fact’ and ‘on the law.‘” Lund v. Brown, 2000 UT 75, ¶ 9, 11 P.3d 277 (citation omitted). In light of the principles and considerations we identify today and the district court‘s findings, the cousins have not carried their burden.
¶45 And the court‘s decision was supported by adequate findings. The district court determined that the uncles’ default was not willful. It recognized that the answer the uncles filed as an exhibit alleged four defenses, all of which it categorized as “meritorious.” The court found that the uncles acted expeditiously in moving to set aside the default and oppose the motion for default judgment. The court determined setting aside the default certificate would not prejudice the cousins. And it awarded the cousins attorney fees to compensate for the cost incurred in moving for the default certificate and default judgment. Finally, the court recognized that although the case was a “close call,” the public interest weighed in favor of adjudicating the case on the merits.
¶46 The cousins argue that the case before us is like Jones v. Layton/Okland, in which we affirmed a district court‘s refusal to vacate a default judgment because the defaulting party failed to show “even a minimum level of diligence” prior to default entering. Jones, 2009 UT 39, ¶ 29. In Jones we noted that in the realm of a
¶47 We disagree with the cousins’ comparison. The uncles’ conduct is not akin to the defendant‘s behavior in Jones, which was “utterly devoid” of diligence.4 The record shows that the
uncles were actively involved in the case—they filed a timely motion to dismiss, participated in oral argument, and communicated with opposing counsel. And when Curtis determined he was out of his element, he sought to engage litigation counsel and informed the cousins’ counsel of this fact. When the default certificate was entered, the uncles responded within days. It is arguable that a court could find this level of diligence sufficient to warrant vacation of a default judgment, not to mention a default certificate. “Even where a course of events does not make it strictly impossible for a party to meet its legal obligations, the party‘s choice to attend to another matter, or even its simple failure to attend to its legal obligation, may be sufficiently diligent and responsible, in light of the attendant circumstances, to justify excusing it from the full consequences of its neglect.” Id. ¶ 22. So while the court in Jones was within its discretion to deny relief from a default judgment under the circumstances before it, so too is the court here within its discretion to grant relief from a default certificate in light of the facts here.
¶48 Further, we note that the delay caused by the uncles’ failure to respond was not substantial in the context of the litigation—considering the extensions the parties had given each other and the time it took for the cousins to file their proposed order. Indeed, the cousins’ briefing to this court acknowledges
¶49 The district court determined these circumstances constituted good cause to set aside the default. And it did not abuse its discretion in doing so.5
This does not mean that we condone Curtis‘s handling of this facet of the litigation. He should have either timely filed the uncles’ answer or requested an extension while he assisted the uncles in obtaining litigation counsel. That said, we note that our Standards of Professionalism and Civility state that, “Lawyers shall not cause the entry of a default without first notifying other counsel whose identity is known, unless their clients’ legitimate rights could be adversely affected.” UTAH STANDARDS OF PROFESSIONALISM & CIVILITY 16. We do not intend this as a (continued . . .)
CONCLUSION
¶50 In determining whether there is good cause to set aside a default certificate under
criticism of the cousins’ counsel in this case. But in general, when counsel knows the identity of opposing counsel, they should notify opposing counsel explicitly that they intend to move for entry of default before doing so “unless their clients’ legitimate rights could be adversely affected.”