If someone sues you and you do not respond within the required timeframe, the court can enter a default judgment against you. This means that the court can award damages to a plaintiff, without you being heard. The plaintiff can then use this judgment to garnish your wages, levy your bank accounts, seize certain of your personal property, and even put a lien on your home.
There could be many reasons why you did not respond to a lawsuit (or perhaps you initially responded and then stopped). Perhaps you never received notice of the action, you forgot about it, or you were not sure what to do so you ignored the lawsuit. If a lawsuit was filed against a business, you may have forgotten to update your business’ registration with the Secretary of State. Regardless of the reason, it is important to act once you discover that a judgment has been entered.
Although the state and federal courts of New York prefer deciding cases on their merits, you should prepare a legally sound reason to contest and vacate the default judgment. In other words, being negligent in responding—standing alone—is usually insufficient. However, there are some variations between the rules that govern the state and federal courts with respect to the grounds, timing and notice requirements.
To vacate a default judgment in New York state court, you must provide both a reasonable excuse for the delay and a meritorious defense to the lawsuit. The court may also consider the following:
In addition, the clerk of the court may vacate a default judgment by an agreement between the parties.
Note that for excusable default, you must make the motion within one year. However, in certain cases, the plaintiff must also mail the defendant written notice of the entry of a default judgment as well as meet other requirements. These rules vary depending on whether you ever appeared in the case, the type of action, and whether the suit seeks payment of a sum certain (i.e., a non-variable amount, like the value of a breached contract).
In addition, if the summons was not personally delivered to you and you have a meritorious defense, you may be able to contest the default judgment but it must be done within one year after obtaining knowledge of the entry of the judgment, but in no event more than five years after such entry.
The grounds for contesting a default judgment in federal court are virtually identical to the requirements of the state courts of New York. However, the rules that govern the federal courts provide a looser standard, as they allow relief from a default judgment for “[a]ny other reason justifying release from the judgment.”
A defendant must object to the default judgment no more than a year after the entry of the judgment, order or the date of the proceeding, in instances of excusable neglect, newly discovered evidence, or fraud. Other grounds may also apply.
Further, the Local Rules of the Eastern District and Southern District of New York impose an additional notice requirement for plaintiffs that seek the entry of a default judgment. After the clerk enters default in favor of the plaintiff, the plaintiff must ask the court to enter a default judgment against the defendant. However, under Local Rule 55.2(c), prior to moving for default, a plaintiff must additionally notify the defendant in a manner “conducive to fairness and efficiency.”
The plaintiff must meet certain technical requirements in seeking entry of a default judgment by the clerk or by the judge as well as in serving notice on the defendant. These vary depending on whether you ever appeared in the case and if the plaintiff’s claim is for a sum certain.
Both state and federal courts prefer deciding cases on the merits as opposed to deciding a case because a defendant failed to show. If you have a default judgment entered against you, an experienced business attorney can help you navigate the legal issues you face.