Contesting a Default Judgment in Texas Federal Court

2 minute read
Discovering that a federal court in Texas has rendered a default judgment against your company can be quite unsettling. Suddenly, your company finds itself liable for a substantial sum, despite the plaintiff's claims appearing feeble, and with the added surprise that your company was unaware of the lawsuit altogether.
What steps should you take next?

Your initial priority should be promptly retaining experienced legal counsel. Although there are procedural avenues available to challenge the default judgment, demonstrating to the court that you took swift action upon learning of the lawsuit is imperative. Moreover, the intricate legal procedures necessitate the expertise of a qualified attorney to navigate effectively. Notably, in court, corporate defendants are required to be represented by licensed attorneys and cannot proceed without one.

Once legal representation is secured, your attorney should provide tailored guidance specific to your case. Typically, they will enter an appearance on behalf of your company in the lawsuit and promptly file a motion seeking to set aside the default judgment, as permitted under the Federal Rules of Civil Procedure.

District courts have discretion to set aside final default judgments on various grounds:
  • A common basis is demonstrating “mistake, inadvertence, surprise, or excusable neglect.” Often, companies default not out of willful disregard but due to administrative errors, such as misplacing summonses or oversight by responsible employees. Providing evidence to the district court explaining the circumstances and requesting the default judgment be vacated is essential. Establishing that the default resulted from a genuine oversight, prompt action was taken upon discovery, and the plaintiff would not suffer undue harm from reversing the judgment is crucial.
  • Another common basis is failure to receive proper service. If your company never received proper service of the summons, it is imperative to raise this issue as it violates fundamental due process rights.
  • Other grounds for setting aside default judgments include the discovery of new evidence, as well as demonstrating fraud, misrepresentation, or misconduct by the opposing party. However, these grounds are more challenging to establish. 
  • In cases where the plaintiff's complaint lacks sufficient factual allegations to support the default judgment, this deficiency can also be raised. Although a default may occur due to failure to respond, the district court cannot issue a judgment unless the plaintiff's pleadings adequately support it.
  • This is not an exhaustive list. It is important to note that, upon motion of the defaulting party, Courts can set aside a default judgment for “any other reason that justifies relief.”

Ultimately, if the district court declines to set aside the default judgment, you may consider challenging this decision through an appeal. However, the feasibility of this recourse depends on the potential liability at stake and whether the district court erred in its decision-making.

Escaping a default judgment post-issuance is challenging, emphasizing the importance of responding to lawsuits before the deadline. Nevertheless, if your company discovers the lawsuit after a default judgment has been entered, acting promptly by engaging competent legal representation and presenting your case for setting aside the default judgment remains the most viable option.

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