Effect of Entering Default

Effect of Entering Default

Rule 55(a) gives the clerk one instruction. When a party facing a claim for affirmative relief has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, "the clerk must enter the party's default."¹ Earlier sections covered what triggers that command; this one asks what the entry accomplishes. The text is the place to start, because the only thing the rule tells the clerk to enter is the party's default, a record that the party failed to respond. It awards the plaintiff no damages and no order. Whatever else the entry does must be measured against that narrow act.

Three consequences follow, and they form one picture. First, the entry is a docket notation and not a judgment, so the plaintiff holds a step toward relief and has nothing to enforce. Second, the complaint's well-pleaded factual allegations are treated as admitted, so the plaintiff need not prove them. Third, the admission has limits: it does not concede that the facts state a legal claim, and it does not fix what the plaintiff should recover. The three belong together because of what the entry records. A party that stays silent after being called to respond has passed up its chance to deny the facts alleged, so those facts can fairly be taken as true. Silence cannot make a legal conclusion correct, however, and it cannot measure a loss. Those questions remain with the court.

The entry is therefore significant for the defaulting party and still provisional. The party now stands on a path toward judgment with the facts of liability effectively conceded. The plaintiff, for its part, still needs a judgment, and a judgment needs a complaint that supports liability in law and a determination of what is owed. Entry narrows the dispute without ending it.

Entry Is Not a Judgment

A default, in the rule's sense, is a failure to respond as the rules require, and entering it means recording that failure. The entry is an official notation that the defendant has failed to respond. It is a step toward a default judgment and not itself an enforceable judgment.² The two labels sound alike, and running them together misstates what the plaintiff holds, what the court may do next, and what the defendant has lost.

The Seventh Circuit drew the line in Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec. One defendant, LMC, never appeared, and the district court entered a default against it. When the court later granted the other defendants' motions for summary judgment, it entered summary judgment for LMC as well, and the plaintiff objected that the court had erred in ruling for LMC on its own initiative. The court of appeals began its answer with the distinction: the district court had entered a default but not a default judgment, and "[a]n order of default is not a final judgment, though a default judgment is." A default may serve as the basis for a default judgment, but "the entry does not of itself determine rights."³ The entry fixes nothing, so what a court may do with it turns on the rules for undoing a default.

Those rules differ by label. Rule 55(c) allows a court to set aside an entry of default for good cause. A default judgment is set aside under Rule 60(b), which speaks of relieving a party from a final judgment "on motion." Relief from a default judgment is usually granted on the defaulting party's motion, but a majority of circuits to have considered the question hold that district courts may vacate a judgment under Rule 60(b) on their own initiative.⁴ Which rule applies depends on whether the paper is an entry or a judgment, so the label matters.

Rule 55 is built as a two-step process, and the structure protects the defendant. Because entry comes first, the defendant has the opportunity to move to set the default aside before the court enters a default judgment, and Rule 55(c) supplies that opportunity.⁵ The entry is not toothless in the meantime. It is a notation that precludes the defaulting party from making any new defenses regarding liability, and it records that the party failed to plead or otherwise defend.⁶ A party that wants to contest liability after entry must therefore first get the entry set aside. An entry that did less would make the response deadline costless, since a silent defendant could wait out the period and resume the case as though nothing had happened.

The plaintiff's side shows the same limit. A judgment is the instrument that lets a winner collect, and the entry is not that instrument. In Pennoyer v. Neff, the plaintiff in the underlying Oregon suit obtained a default judgment against a defendant who never appeared and used it to get a writ of execution, a court order that let the sheriff auction the defendant's Oregon land to satisfy the debt.⁷ The execution followed a judgment. An entry of default fixes no amount and orders no payment, so it gives a sheriff nothing to execute. Nor may the plaintiff treat the entry as a promise of judgment: entry of default raises no protectable expectation that a default judgment will follow, and courts do not find prejudice from delay alone or from the fact that the defaulting party will be permitted to defend on the merits.⁸

A paper's caption does not decide which of the two it is. One court faced with a document entitled "default judgment" held that there can be no "judgment" without a determination of relief, so the document was more properly termed simply a "default."⁹ The reasoning reaches any case that turns on what a clerk or court actually signed. A clerk can enter judgment for a sum certain shown by the plaintiff's affidavit, such as a stated amount due on an account, but a claim for an indefinite amount that the court must set after weighing evidence is not one the clerk can resolve.¹⁰ The test is substance: ask what the paper has determined, whatever it is called.

What separates the March paper from the May paper is that only the second determines relief. A fact pattern stating that the clerk "entered default" describes the notation, while one stating that the court entered judgment for a stated amount describes the instrument a plaintiff can enforce.

Well-Pleaded Facts Admitted

Rule 55(a) stops at the notation; it does not say what becomes of the complaint's allegations while the entry sits on the docket.¹² Courts fill the gap with a plain consequence of defaulting. Hernandez v. Apple Auto Wholesalers of Waterbury LLC, quoting an earlier decision, states it this way: "Once default has been entered, the allegations of the complaint that establish the defendant's liability are accepted as true, except for those relating to the amount of damages."¹³ The plaintiff does not have to prove those allegations.

The consequence rests on what a complaint asks of its recipient. A served defendant is expected to say which factual assertions it disputes, and the answer is the vehicle for saying so. A party that files nothing disputes nothing, so the facts reach the court uncontested, and proof, which exists to settle disputes, has none to settle. If the plaintiff still had to prove every allegation, the default would leave it exactly where a denial would, and the plaintiff would bear the cost of a trial against a party that declines to take part. Courts do not favor default judgments, but they are "certainly appropriate when the adversary process has been halted because of an essentially unresponsive party."¹⁴

The copyright case against a defendant named Lacey shows the admission at work. The complaint listed eight specific copyrighted recordings that Lacey had used an online media distribution system to download or distribute without permission, and it alleged that the plaintiffs owned the copyrights in them. Those facts, the court said, were "deemed admitted by virtue of Lacey's default" and were detailed and specific enough to support a claim for direct copyright infringement.¹⁵ The admitted facts supplied ownership and unauthorized copying, and the court took them as established without any proof from the plaintiffs.

The adjective "well-pleaded" marks the boundary of what a default concedes. Carlsen v. Koivumaki is a California appellate decision, so it is not federal authority, but it states the boundary clearly. The "well-pleaded allegations" of a complaint are all material facts properly pleaded, and they exclude contentions, deductions, and conclusions of fact or law. A well-pleaded complaint sets forth the ultimate facts constituting the cause of action, not the evidence by which the plaintiff proposes to prove them.¹⁶ The line follows from what silence can fairly mean. A defendant reading a complaint knows whether it signed the contract or received the goods, so staying silent about those assertions is a fair basis for treating them as conceded. Whether those events amount to a breach, or to liability, depends on how the law applies to them, and the defendant's silence cannot answer that question for the court.

The two paragraphs differ in the kind of statement each makes. The first reports events the contractor could have denied; the second states a result the court must reach by applying law. The same distinction explains why a plaintiff cannot use the default to fill gaps in its pleading. A default is "an admission of the facts cited in the Complaint," so the admission reaches what the complaint alleges and not what the plaintiff might later prove.¹⁷ The California court applied a similar idea when it observed that a plaintiff cannot supplement the complaint's general allegations by pointing to a showing made in summary judgment proceedings.¹⁸ A plaintiff who wants a fact treated as admitted by default should therefore have pleaded it as a fact.

This subsection has described only what the default concedes. The admission excludes allegations about the amount of damages, and the court must still decide whether the admitted facts establish liability as a matter of law.¹⁹ The next subsection takes up those limits.

Limits of the Admission

A default admits facts. It does not admit that those facts add up to a legal claim, and it does not admit what the claim is worth. The court must answer both questions itself, and each limit has its own reason.

The first limit appears in Lacey, where the court stated that the defendant's failure to appear and the clerk's entry of default against her "do not automatically entitle plaintiffs to a default judgment." A default, the court explained, is not an absolute confession of liability and of the plaintiffs' right to recover. It is "an admission of the facts cited in the Complaint, which by themselves may or may not be sufficient to establish a defendant's liability."²¹ The reason lies in what silence can concede. A complaint's factual paragraphs report events the defendant knew about and could have denied, so a failure to deny them is a sound basis for treating them as conceded. Whether those events amount to a legal wrong depends on how the law applies to them, and silence says nothing about that. Hence the rule Lacey takes from Chudasama v. Mazda Motor Corp.: "a default judgment cannot stand on a complaint that fails to state a claim."²² Hernandez agrees that the district court is still "required to determine whether the [plaintiff's] allegations establish [the defendant's] liability as a matter of law."²³

The court's task resembles ruling on a motion nobody filed. It is as if the defaulting party had made a phantom motion to dismiss for failure to state a claim under Rule 12(b)(6), which the court must decide before entering a default judgment.²⁴ The picture also explains why the argument survives the default. The default concedes the factual allegations about liability, but it does not prevent the defendant from claiming that those allegations fail to state a claim for relief.²⁵ That argument attacks what the law makes of the pleaded facts and leaves the facts alone.

The complaint in Lacey cleared this screen. It listed eight specific copyrighted recordings that the defendant had used an online media distribution system to download or distribute without permission and alleged that the plaintiffs owned the copyrights, so the admitted facts were detailed and specific enough to give rise to a cognizable claim for direct copyright infringement.²⁶

The second limit concerns the remedy. The plaintiff's allegations about the amount of damages are not accepted as true, and the court must determine the amount to be awarded.²⁷ The default does not concede the plaintiff's right to the relief requested.²⁸ The difference is one of kind. A defendant can be expected to deny facts about its own conduct, but the dollar figure is the plaintiff's own estimate of what the claim is worth, and if silence ratified that estimate, a plaintiff could name any number and collect it. A court therefore may not "just accept [a plaintiff's] statement of the damages," even in a default judgment.²⁹

The court has latitude in how it fixes the amount. It may conduct a hearing, or it may rely on documentary evidence if damages are ascertainable with reasonable certainty.³⁰ Rule 55(b)(2) lets the court hold hearings or make referrals when it needs to conduct an accounting, determine the amount of damages, establish the truth of any allegation by evidence, or investigate any other matter. A hearing is often particularly appropriate because the default concedes only the factual allegations about liability, and witnesses usually do not appear in person at such a hearing; evidence is submitted by affidavit.³¹ The demand matters in one direction only. Under most default rules, once there has been a default the claimant cannot recover more than the amount demanded or the type of relief requested in the complaint.³²

A sum certain stands differently. If the claim is for a fixed amount shown by the plaintiff's affidavit, such as an amount due on an account, the clerk can enter judgment for it.³³ Lacey was not such a case. The plaintiffs there sought unliquidated damages, an indefinite amount to be determined by the court after weighing the evidence, along with injunctive relief, and the statute set a range of penalties and not a specific one.³⁴ Nothing in that claim was a figure a clerk could simply apply.

Together the two limits explain why the entry never ends a case. After entry, the plaintiff still needs a court to find that the complaint states a claim and to fix the relief; only a claim for a sum certain can be turned into a judgment by the clerk. A fact pattern in which a defendant has "defaulted" therefore does not tell you that the plaintiff recovers what the complaint demanded, and an answer that treats default as a confession of both liability and amount has skipped two questions the court must still decide. The next section takes up the move from entry to judgment, where those questions are resolved.