A Georgia defendant is “in default” after failure to file a required answer within 30 days or failure to answer an amended complaint when ordered to do so by the Court.
A Georgia defendant is “in default” after failure to file a required answer within 30 days or failure to answer an amended complaint when ordered to do so by the Court. After the case has been in default for fifteen days the Court may enter default judgment, at which point the Defendant effectively loses its opportunity to defend the case on the merits: the allegations of the complaint are deemed admitted and the Court will only hear evidence regarding the amount of damages. Default judgments therefore have the potential to impose liability in clear contradiction of the actual facts, considering the exaggerated (if not wholly inaccurate allegations) contained in some complaints.
Opening any existing default is therefore a top priority when handling any incoming case.
A defendant may open default during the fifteen day window as a matter of right. However once that window has passed a number of “moving parts” come into play and the outcome is much less predictable. Defendant must file a motion establishing a meritorious defense to the suit and establishing a legal excuse for the default. There are procedural requirements which must be followed (i.e. court costs must be paid; the showing must be made “under oath”’ and Defendant must offer to plead instanter and announce ready to proceed to trial) but the following discussion focuses on when a defendant can established a “legal excuse” for default.
As a general rule, Georgia law disfavors default judgment and recognizes the strong public policy for resolving cases on their merits. There are three “legal excuses” which permit a defendant in default to open the default and defend the case on its merits: (1) providential cause which prevented the required pleading from being filed; (2) excusable neglect; and (3) where the judge has determined from all the facts that a “proper case” has been made to open default, on terms fixed by the court.
The excuse of “providential cause” generally refers to an “act of God” or other event beyond Defendant’s control which prevented the Answer from being filed. This may apply, for example, in cases where extreme weather prevented an answer from being filed at the Court.
“Excusable neglect” is a broader excuse reflecting the notion that – although a properly served Defendant’s failure to answer a lawsuit results from some form of neglect – sometimes that neglect is the result of otherwise reasonable conduct. For this reason some courts have stated that to establish this excuse, the Defendant has the burden to show that it exercised “reasonable diligence” in responding to the Complaint. Excusable neglect cases arise from a myriad of fact patterns and the appellate opinions are not always uniform, because trial court judges are given great discretion when determining whether to open default.
The courts have been relatively consistent when addressing whether to open a default which arises based upon an excuse that the Defendant referred an incoming lawsuit to its insurer. In these cases the key questions are : (1) whether Defendant can offer proof it forwarded the lawsuit to its insurer (such as a fax verification or confirmation) and (2) whether Defendant received assurances from the insurer that the case was being handled. Georgia appellate courts have consistently held that if the answer to either question is “no,” then the defendant has not demonstrated excusable neglect: a diligent defendant would not permit a lawsuit go unanswered on the assumption that it was being handled by the insurer, without some kind of assurances the suit was received and was being defended. On the other hand, a trial court is within its discretion to open default if the insured can prove it forwarded the complaint to its insurer and was assured a defense was being provided. The neglect associated with permitting a lawsuit to go unanswered in the presence of such assurances is properly considered “excusable” by the trial court.
A “proper case for opening default” is by far the broadest excuse and gives the trial court nearly unlimited discretion. This excuse is not intended to open default for any reason whatsoever but courts have noted that the category encompasses “every conceivable case where injustice might result if the default were not opened.” It would seem that the stronger a Defendant’s showing that it has meritorious defenses, the more likely that a default judgment would result in injustice and therefore the more likely that there is a proper case to open default.
The excusable neglect and proper case arguments sometimes overlap and in the past, an insured which went into default based on the assumption it was being defended was wise to argue both that the default arose from “excusable neglect” and in the alternative that that there was a “proper case” to open default. A trial court order invoking both doctrines was difficult for plaintiffs to appeal because trial courts are very rarely reversed for opening default in a “proper case.
In July 2008, however, the Court of Appeals overturned a trial court which had opened default in these circumstances. In Bellsouth Telecommunications, Inc. v. Future Communications, Inc., 666 S.E.2d 699 (2008), Bellsouth engaged in pre-suit negotations with Future arising from a business dispute and sent courtesy copies of the pre-suit correspondence to Future’s insurer. Negotiations broke down, Bellsouth filed suit, and Future was served. Future assumed that Bellsouth had also forwarded a copy to the insurer and on this assumption, Future neither answered the lawsuit nor forwarded it to the insurer. There was no evidence that Futurecomm ever contacted the insurer about the suit at sought assurances that it was being handled. However the trial court granted Future’s motion to open default based upon the excuses of “excusable neglect” and that there was a proper case to open default.
Unsurprisingly, the Court held that Future failed to show “excusable neglect” because it simply assumed its insurer was defending the case and took no affirmative actions to confirm this: it never forwarded the complaint or sought assurances from the insurer.
Surprisingly, however, the Court also held that the trial court abused its discretion by ruling that there was a “proper case” to open default. Although recognizing that the “proper case” class of cases encompasses “every conceivable case where injustice might result if default were not opened,” the Court held that “whatever that injustice might be, it may be avoided and default opened under the proper case analysis only where areasonable explanation for the failure to timely answer exists.”
In the absence of a “reasonable” explanation, the Court held, a trial court cannot act within its discretion because discretion is bound “with the rule of reason and law.” Applying that rule to Future, the Court held that its arguments were more properly addressed and rejected as an attempt to establish the excuse of “excusable neglect.” Even if a “proper case” analysis were necessary, the Court held, Future’s explanation for the default was unreasonable because it failed to take reasonable steps to ensure the insurer had received the complaint and was handling the defense.
The Bellsouth ruling is fairly recent so its precise impact cannot yet be determined. Plaintiffs will certainly use the case to argue that there is never a “proper case” to open default in circumstances which have been held outside the scope of “excusable neglect.” However the Bellsouth opinion does not discuss whether Future was able to establish that it had a meritorious defense to the suit. If the “proper case” is designed to prevent an unjust result, then, Defendants who present the reason for default in a reasonable light in conjunction with a particularly strong showing of a meritorious defense might still be able to “tip the scales” and establish a proper case to open default.