Judgment by the Court

Judgment by the Court

Every default judgment that the clerk cannot enter goes to a judge. Rule 55(b)(2) says so directly: in all other cases, the party must apply to the court.¹ The category is wide, because a plaintiff lands in it whenever any one of the clerk's conditions fails. The clerk may act only if the claim is for a sum certain or a sum that computation can make certain, the defendant was defaulted for not appearing, and the defendant is neither a minor nor an incompetent person.² An unliquidated damages claim, a demand for an injunction, a defendant who has appeared, and a minor or incompetent defendant each fall outside those conditions.

Two of those groups carry added protections. A party that has appeared, personally or by a representative, must be served with written notice of the application at least 7 days before the hearing, and a default judgment may be entered against a minor or incompetent person only if a general guardian, conservator, or other like fiduciary has appeared.³ The judge also holds tools that a clerk lacks: the court may conduct hearings or make referrals, preserving any federal statutory right to a jury trial, when it needs to do so to enter or effectuate judgment.⁴

A clerk can enter judgment because the papers on file already fix the figure. When they do not, two questions remain open after the default is recorded, and a judge must answer both. The first is liability. The defendant's silence lets the court treat the complaint's facts as true, but a complaint can recount events in full detail and still describe no wrong that the law recognizes. The second is relief. Silence concedes what happened; it says nothing about how much the plaintiff should recover or whether an injunction should issue.

The questions come in a fixed order. The court can test the complaint only after it knows what the default has conceded, and it can fix a remedy only after it knows which claim survives. This unit therefore begins with the effect of default and then turns to the proof of relief.

What Default Admits

A defendant who defaults admits the complaint's well-pleaded factual allegations, an axiom as old as the common law.⁵ Once default has been entered, the allegations that establish the defendant's liability are accepted as true, except those relating to the amount of damages.⁶ Well-pleaded factual allegations are the complaint's statements about what happened, as distinct from its assertions about what the law makes of those events. The defendant failed to deny them, and the entry of default bars the defendant from raising any new defense to liability.⁷ For a defendant who stays silent, the court's own review is then the only check on whether those facts amount to a legal claim.

The exception for damages follows from what silence can concede. A defendant who never denies that a recording was copied has left an event undisputed but has said nothing about what the event is worth. A court may not just accept a plaintiff's statement of damages, even on default.⁸ Proof of relief has its own section below. The point here is that the admission reaches the facts behind liability and stops there.

Even the admitted facts do not carry the plaintiff all the way to judgment. A default is not “an absolute confession by the defendant of his liability and of the plaintiff's right to recover,” but only “an admission of the facts cited in the Complaint, which by themselves may or may not be sufficient to establish a defendant's liability.”⁹ Or, in the words the court borrowed from the Eleventh Circuit, “a default judgment cannot stand on a complaint that fails to state a claim.”¹⁰ Whether admitted facts establish liability is a question of law, and the court decides it before entering judgment, as though the defaulting party had filed a phantom Rule 12(b)(6) motion to dismiss for failure to state a claim.¹¹ Many courts describe this step as an independent inquiry into whether the plaintiff has alleged facts that entitle it to relief.¹² Silence can concede facts, but it cannot turn them into a cause of action.

The complaint in a copyright suit against a defendant named Lacey cleared that screen. It listed eight specific copyrighted recordings that Lacey used an online distribution system to download or distribute without permission, and it alleged that the plaintiffs owned the copyrights in those recordings. With those facts deemed admitted by the default, the court found them detailed and specific enough to state a claim for direct copyright infringement under the copyright laws of the United States.¹³ That finding came first, and only then did the court find that the legal effect of the admission was to establish Lacey's liability for copyright infringement.¹⁴

The competitor and Lacey both stayed silent, and both defaults admitted every pleaded fact. What separates them is whether the admitted facts describe a wrong the law recognizes, a question the default never answers. A default does not stop a defendant from arguing that the facts alleged fail to state a claim,¹⁵ and notice marks the line between defendants. Most jurisdictions, following Rule 55(b)(2), require prior notice of a motion for default judgment only if the defendant has appeared. The reason is that a defendant who has appeared has shown interest and may contest the relief or argue that the pleadings fail to state a claim.¹⁶ The court's duty to ask the question exists even when, as in the Lacey case, no one is present to raise it.

A complaint that states a claim lets the court enter judgment but does not force it to. Failure to appear and the clerk's entry of default do not automatically entitle the plaintiff to a default judgment,¹⁷ and the court may deny one if it deems the judgment inappropriate.¹⁸ The Ninth Circuit directs courts to weigh seven discretionary factors before deciding, and the list is a useful model of what that discretion examines.¹⁹

1. The possibility of prejudice to the plaintiff if judgment is refused.
2. The merits of the plaintiff's substantive claim.
3. The sufficiency of the complaint.
4. The sum of money at stake in the action.
5. The possibility of a dispute concerning material facts.
6. Whether the default was due to excusable neglect.
7. The strong policy underlying the Federal Rules favoring decisions on the merits.

The factors share one purpose: to find a reason beyond mere silence for closing the door on a defense. Default judgments are a drastic action because they confront the judicial preference for deciding cases on the merits, especially when the defendant has otherwise been diligent.²⁰ Courts accordingly treat them as appropriate when the adversary process has been halted by an essentially unresponsive party.²¹ Factors two, three, and five ask whether the claim is strong and undisputed enough that no merits decision is needed. Factor four asks whether the stakes make a decision without testing reasonable, and factor six asks whether the silence reflects a choice or a mistake. The seventh factor works differently, because it always weighs against default judgment, so the plaintiff must assemble enough on the other side to overcome it.²²

A case against a defendant named Lied shows the factors at work. The plaintiff stated a prima facie claim for professional negligence over his pet, but the court found it unlikely that refusing default would prejudice him, since nothing suggested perishable evidence or any trouble subpoenaing Lied's employees if the case went to trial. His evidence of the extreme and outrageous conduct required for emotional damages was weak, so he would probably recover only the pet's replacement value and perhaps a small amount for emotional harm. The $5,000,000 he demanded was therefore not recoverable, and the court called it certain that no factfinder would award that sum, noting that even a defamation verdict in Bongiovi, over a statement that a plastic surgeon had caused a person's death, was only one twentieth as large.²³

The Lacey and Lied decisions show two layers of review. Both complaints stated a claim, so the legal screen did not separate them. The Lacey plaintiffs sought minimum statutory damages, costs, and a permanent injunction on detailed, specific allegations,²⁴ while the Lied plaintiff asked for a sum no factfinder would award. Stating a claim is a precondition to default judgment, and the discretionary factors decide whether the court uses its power to grant one.

Proving the Relief

Once the court finds that the admitted facts support liability, it must decide what the plaintiff receives. Rule 55(b)(2) supplies the tools: the court may conduct hearings or make referrals, preserving any federal statutory right to a jury trial, when it needs to do so to enter or effectuate judgment.²⁶ The rule names four occasions for them: to conduct an accounting, to determine the amount of damages, to establish the truth of any allegation by evidence, and to investigate any other matter.²⁷ An accounting is a detailed reckoning of what is owed when the amount depends on a series of transactions, and the last item is a catch-all for any other fact the court needs before it can shape a judgment. The jury-trial clause preserves a jury right that a federal statute supplies, so a hearing or referral cannot be used to take that jury from a party. Opinions quoted in this chapter sometimes use the rule's earlier phrasing (“take an account,” “establish the truth of any averment”), but the current text just described is the one to apply.

The power exists because a default settles less than it seems to. A defaulting defendant is taken to admit the well-pleaded allegations on liability, but the allegations about the amount of damages are excluded from that admission.²⁸ A damages figure is the plaintiff's own estimate of what the injury is worth, and a defendant who stays away never tests it. If the court adopted the figure because no one objected, the plaintiff would in effect be setting the judgment. The Lacey court said as much: entering default judgment does not remove the need to determine both the amount and the character of the relief.²⁹ Other courts state the same idea as a limit on timing, since “a default judgment cannot be entered until the amount of damages has been ascertained,” and when the sum is not certain the court may hold hearings or order references that enable it to enter judgment.³⁰ The Lied plaintiff's $5,000,000 demand shows what automatic acceptance would produce.³¹

Courts describe the verification in two alternative forms. In Hernandez v. Apple Auto Wholesalers of Waterbury LLC the court explained that after deciding liability as a matter of law it must determine the amount of damages, and that it may do so by holding a hearing or by relying on documentary evidence if the damages are ascertainable with reasonable certainty.³² The Lied court adds that damages claims that are sufficiently documented and detailed may be fixed by an accounting, declarations, or affidavits.³³ Which form fits a given case depends on what the plaintiff has put in the record.

A hearing is a tool the court may use, and it need not use it. Rule 55(b)(2) says the court “may” conduct hearings, and there is no requirement that one be held in every default judgment proceeding to fix damages.³⁴ As S.E.C. v. Smyth explains, an evidentiary hearing is not a per se requirement and may be omitted if all essential evidence is already of record.³⁵ Courts that treat a hearing as the norm still excuse it in limited circumstances, as when the court already holds a wealth of evidence from the party requesting the hearing, so that more evidence would be truly unnecessary to a fully informed determination of damages.³⁶

The practical test is whether the record already fixes the number. No evidentiary hearing is required where the claim is for a sum certain or where affidavits and documentary evidence make an adequate record to show statutory damages.³⁷ Likewise, as Taylor Made Golf Co. v. Carsten Sports, Ltd. notes, a default judgment may be entered without a hearing on damages when the amount claimed is capable of ascertainment from definite figures in documentary evidence or in detailed affidavits.³⁸ When a hearing does take place, witnesses usually do not appear in person, and it is often appropriate because the default concedes only the factual allegations on liability and not the plaintiff's right to the relief requested.³⁹ An exam answer that says a hearing is always required overstates the rule, and one that says default fixes the amount understates it. The accurate position is that the court must determine the relief and may do so on the papers when the papers suffice.

The Lacey case sits at the end of the spectrum where a hearing has nothing left to do. The deemed-admitted facts showed that Lacey infringed eight copyrighted works, and the plaintiffs sought statutory damages at the statutory minimum, $750 per work. The plaintiffs had waived any claim to more, and § 504(c)(1) forbade a lesser award, so $6,000 was the only figure the court could award.⁴⁰ No evidence could have produced a different amount, and the court found that a hearing would serve no constructive purpose. What spared the court a hearing was that the statute and the plaintiffs' own choice had already fixed the number, which is a different thing from the defendant having admitted it. The first homeowner above stands where Lacey does not, because that number depended on proof the record lacked.

Relief that rests on the factfinder's judgment sits at the other end. The Second Circuit has explained that the discretion in Rule 55(b)(2) exists to permit proceedings that help the judge determine damages or other relief falling within the trier of fact's discretion. It required a hearing on punitive damages in Flaks v. Koegel because those damages were within the factfinder's discretion and were clearly not liquidated or computable.⁴¹ No document the plaintiff files can fix a number that turns on how a factfinder weighs the defendant's conduct, so the record cannot already contain the answer. The statutory minimum in Lacey is the opposite case, since the law itself supplied the figure before anyone offered a word of evidence.