By Christopher M. Myatt

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Tucker v. Williams, No. 2013-CA-021-SCT (Miss. Aug. 4, 2016)

The Mississippi Supreme Court set aside a $2.9 million default judgment entered in favor of a motorist injured in an accident, finding that the trial court abused its discretion. The Court’s decision examines the three-part test for setting aside a default judgment but also serves as a cautionary tale for defendants that delay after receiving a summons and Complaint.

Mrs. Williams and her husband sued Tucker in Hinds County Circuit Court, seeking damages for her personal injuries sustained in an auto accident. Williams had Tucker served with a summons and Complaint. Upon receipt of the summons, Tucker failed to notify his insurer of the lawsuit. More than four months later, Plaintiffs filed an application for entry of default, and the clerk entered default. Two weeks later, Tucker filed a Motion to Set Aside the entry of default, arguing that he had meritorious defenses to the action and that the Plaintiffs had not been prejudiced by his delay in answering the Complaint.

At the hearing, the trial court asked Tucker’s lawyer why he had delayed in responding to the Complaint. Counsel had no explanation, yet stressed Tucker’s defenses to the suit. The trial court denied the motion. At a subsequent hearing on Tucker’s motion for reconsideration, the trial court again sought Tucker’s “good cause” for failing to answer timely. The trial court denied the motion for reconsideration “inasmuch as the Defendant has given no reason for the failure to timely respond to the complaint.”

In 2013, the trial court held an evidentiary hearing on damages. Tucker again challenged the entry of default. After hearing the Plaintiffs’ evidence on damages, the trial court awarded Williams $2.9 million. Tucker appealed.

After some initial discussion of Tucker’s imprecise citations to civil procedure rules, the Court considered the merits of Tucker’s appeal utilizing the three-part balancing test for setting aside a default judgment in Mississippi. Under this test, the trial court must determine: (1) the nature and legitimacy of the defendant’s reasons for his default, i.e., whether the defendant has good cause for default; (2) whether the defendant in fact has a colorable defense to the merits of the claim; and (3) the nature and extent of prejudice to the plaintiff if the default judgment is set aside. The Court reiterated that trial courts “should not be grudging about setting aside a default when a proper showing has been made” because the law does not favor default. Doubt should be resolved in favor of setting aside a default and hearing a case on its merits.

Turning to the three-part test, Tucker argued on appeal that his “good cause” for failing to answer timely was that he misunderstood that he had been sued. In fact, Tucker had sued Williams for his injuries in a separate suit filed in federal court and received a settlement. After the settlement, Tucker’s federal lawsuit against Williams was dismissed with prejudice. Because of the settlement and dismissal, Tucker believed that his dispute with Williams was “over for good.” For some reason, Tucker’s lawyer failed to explain these circumstances to the trial court when challenging the default. The Supreme Court held that the trial court did not abuse its discretion in refusing to set aside the default under this first factor.

Next, the Court considered whether Tucker had “colorable defenses” to the lawsuit. The Court emphasized that this second factor “outweighs” the others in importance. Tucker presented two colorable defenses. First, Tucker presented the report of an accident reconstruction expert who opined that Williams was at fault, not him. The Court found this persuasive.

The second defense, which three of the nine justices found dispositive, was the defense of res judicata. Latin for “the thing has been decided,” res judicata is a procedural defense asserting that the challenged claim has been previously adjudicated and cannot be pursued again. Here, Tucker asserted that Williams’s claim against him was barred by the settlement agreement and dismissal of the federal lawsuit he filed against her. Williams’s personal injury claim, Tucker argued, was a compulsory counterclaim under FRCP 13(a) that she should have asserted in the federal court suit. Her failure to do so barred her claim under the doctrine of res judicata. The majority opinion weighed the merits of Tucker’s res judicata defense and concluded that it was certainly “colorable” without actually deciding that it applied.

Thus, the Court found that Tucker had presented two “colorable defenses” to the lawsuit. Accordingly, the second—and most important—factor weighed in Tucker’s favor. Similarly, the Court found that Plaintiffs would suffer little prejudice if the default judgment was set aside. The third factor likewise favored Tucker. In the end, the Court set aside the $2.9 million default judgment and held that the trial judge erred in failing even to consider the second and third factors of the three-part test.

The takeaways from this case are basic, yet critically important. For the litigant: Notify your insurance company immediately upon receipt of a summons and Complaint. Time is of the essence, and your misunderstanding or delay can have disastrous consequences. For the lawyer: Present all of your client’s arguments to the court for its consideration. Tucker had good cause, but the trial judge never heard about it. Tucker’s lawyer won in the end but only after six years of litigation (and counting) and a trip to the state supreme court.

 

Chris is a partner in Spicer Rudstrom’s Memphis office. His practice is concentrated primarily in the areas of premises liability, business and commercial representation, products liability and insurance coverage.