Civil Procedure-Notice Required to Support Default Judgment

DEFAULT JUDGMENT VOID WHERE PLAINTIFF KNEW IDENTITY OF ATTY REPRESENTING DEFAULTING DEFENDANT IN A SIMILAR ACTION IN ANOTHER STATE BUT DID NOT PROVIDE THAT ATTY NOTICE OF DEFAULT DESPITE FACT NOTICE WAS SENT TO DEFENDANT'S STATUTORY AGENT AND HEADQUARTERS IN TWO STATES

Plaintiff and defendant had a dispute over whether plaintiff had properly performed aeronautical engineering services for defendant. Defendant quit paying plaintiff and sued plaintiff in Utah seeking declaratory relief that the services were not properly performed. Plaintiff then filed its own suit for breach of contract and bad faith in Arizona, ultimately obtaining a default when defendant failed to timely enter an appearance. The application for default was served upon defendant's statutory agent in Delaware and sent to defendant's corporate headquarters in California and principal office in Utah. Plaintiff knew the identity of the attorney representing the defendant in the Utah dec action but because that attorney had not entered an appearance in Arizona plaintiff did not provide him with notice of the application for default. The trial court entered a default judgment for $750,000. The trial court, however, later granted defendant's motion to set aside the default judgment due to the plaintiff's failure to notify known counsel. The Arizona Court of Appeals affirmed.

First the court of appeals noted that defaults are not favored, and the trial court has great latitude to resolve doubt in favor of setting one aside in favor of a determination on the merits. Here Rule 55(a)(1)(ii) of the Arizona Rules of Civil Procedure specifically provides that when the plaintiff seeks a default against a party “known to be represented by an attorney whether or not that attorney has formally appeared” the notice must be sent to that attorney. The rule does not require that the “known attorney” be licensed in Arizona, have applied for pro haec vice admission or have formally or even informally let it be known she would be representing the defendant in the Arizona action. The purpose of the rule is to assure the defendant gets all fair notice of the application and the consequences of not timely responding to it and providing a copy of the notice to known counsel is not burdensome. Hence the default judgment was set aside.

However, in conclusion, the court noted that its holding only applied to counsel “known to be representing a party in the dispute.” It specifically noted that it was not addressing the question of whether a party represented by multiple firms was entitled to have each firm notified, or whether a party known to have in-house counsel not involved in the dispute notified, or whether counsel representing the party in unrelated matters would be entitled to such notice.