It has been a year since Louisiana’s new default judgment laws went into effect on January 1, 2022. Practitioners and judges alike have now had enough time to adjust to the changes in the law. As a practitioner who takes default judgments every week, these changes were of particular interest to myself, my staff, and my clients. One of the first questions I received last January was: “[i]s it going to be harder to get a default judgment?” My short answer then was that it appeared it would be a give and take; that one step in the process was traded for another, and our debtors would have more time to file an answer. Before delving into the effects of the change in practice, it’s important to understand the purpose of default judgments, how they are historically viewed by the judiciary, and their importance in creditors’ rights litigation.
What are default judgments?
After a plaintiff files a lawsuit and perfects service of the pleadings and citation on the defendant(s), an answer or other responsive pleadings must be filed by the defense within certain time delays. The time frame can be extended formally or informally between counsel for each side. However, when no such extension is granted and no answer is filed, a plaintiff may move for a default judgment with prima facie proof of their case. This is important because otherwise a defendant could prolong litigation by avoidance.
Default judgments and professionalism:
Historically, default judgments were unfavored by judges and professionalism experts. The philosophy being that defendants should have fair notice and a right to be heard prior to a judgment being entered. Thus, judges would not sign a default judgment unless the case was proved with prima facie evidence and each procedural rule was specifically followed. Further, every practitioner has heard a lecture in law school or a professionalism seminar about the importance of making a phone call before entering a default.
The changes in the law:
Two separate laws were amended that changed the time frame to file responsive pleadings and the procedural process for taking a default. First, La. Code of Civ. Proc. art. 1001 was amended to change the time for answering a petition from 15 days to 21 days from the date of service, or 30 days if discovery requests are served with the petition. Also, La. Code of Civ. Proc. art. 1702 was substantively changed as follows:
- Previously a “preliminary default” was required to be entered first. A plaintiff then had to move for confirmation of the default after 2 days if no appearance of record has been made or 7 days if there has been an appearance of record. Here, an “appearance of record” may be a motion to enroll as counsel or a motion for extension of time to answer. The purpose of the preliminary default was to give the clerk of court a chance to certify that no answer was filed. However, in practicality it just served to slow things down and to increase court costs. The new law has removed the requirement of the preliminary default altogether. In fact, the author of the new law testified in committee that the primary purpose of the changes were to remove the preliminary default.
- Previously, a plaintiff moving for a default only had to send notice by certified mail if counsel for defendant made a formal appearance of record. Now, the notice requirements are more stringent. A plaintiff now has to send notice by certified mail at least 7 days prior to taking the default if a defendant has made an appearance in the record, with or without an attorney, or if an attorney for the defendant has simply contacted the plaintiff or plaintiff’s attorney in writing. Further, in tort cases where no appearance has been made and there has been no written communication from a defense attorney, the plaintiff must send notice by regular mail to the defendant at least 7 days prior to taking a default.
The essence of the changes to art. 1702 is to legislate professionalism. That was essentially part of the give and take. In exchange for eliminating the preliminary default, defendants now have more time to answer and benefit from strict notice requirements in most instances.
How the amended laws have affected creditors’ rights litigation:
It’s important to point out that the new notice requirements of art. 1702 are silent as to conventional obligations such as suits for delinquent open accounts (credit cards) and promissory notes. While the changes specifically address tort suits, it did not mention any notice requirement for conventional obligations or creditors’ rights cases. Thus, notice must be sent if an appearance is made or written communication is received from an attorney, but no notice by regular mail is required for conventional obligations as they are in tort claims.
One can guess as to why. Mine is that the author of the amendment and the legislature recognized that in most creditors’ rights cases, a demand letter has already gone ignored by the defendant for more than 30 days prior to filing the lawsuit. Debts become delinquent for many different reasons, but one thing is fairly common among unpaid debts: debtors go silent. Some may hope that ignoring it will make it go away. Others are too focused on remedying the problem that led to the unpaid debt in the first place. Whatever the reason, it’s an unfortunate truth in creditors’ rights litigation. As a result, the vast majority of demand letters go ignored. Likewise, the vast majority of lawsuits for delinquent debt go unanswered. That’s why the default judgment is so important to creditors. Without it, their rights to collect would be greatly delayed.
Also of note is that the new notice requirement does not address the procedure for notifying the court prior to taking a default when the debtor has not made an appearance or communicated with creditor’s counsel in writing. Obviously, when such appearance or communication is received, a plaintiff can submit as evidence a copy of the letter and signed “green card.” However, when no notice is required, there is nothing to submit to the court, but there is a creative step we implemented early on that has worked thus far. We simply added a paragraph to our “Article 1702.1 Certificate of Attorney” that certifies no appearance has been made in the record and no written communication has been received from counsel. That has sufficed in every such case except for one.
Last February, our office had a proposed default judgment returned to us with a note by the Judge that we did not comply with the art. 1702 notice requirement. I resubmitted the Default Judgment along with a concise Memorandum in Support of Default Judgment, respectfully pointing out that our suit was not in tort and highlighting the added paragraph in our 1702.1 certificate. The Judge in that case promptly signed the Judgment and we have had no further hiccups since, in that Court or any other.
Overall, the new laws have streamlined the default process in the district courts. The preliminary default was a burdensome process and always took longer than two days to confirm. Between waiting for the clerk to certify that no answer was filed, and then waiting to find out the date the preliminary default was actually entered, more than a week would pass in some instances, and that’s after the initial 15-day required delay for answering. However, while law offices like ours are relieved from the unnecessary step of entering a preliminary default, our debtors now have six extra days to answer in district courts. Thus, it’s basically a wash as far as time is concerned, but with less work to do which saves time and court costs for our clients. It’s important to note that the time allowed to answer in parish and city courts remains 10 days per La. Code Civ. Proc. art. 4903.
As a practical matter, we have never defaulted a defendant who has been in contact with our office. Generally, if a debtor calls us after being served with a lawsuit for a debt, they are doing so to make some sort of payment arrangement and will often sign a Consent Judgment. If they are disputing the debt, our office will give them enough time and opportunity to file an answer. If we get a call from a debtor’s counsel, our stance has always been the same. Unless their client is actively trying to sell off assets, we are not going to default them. Our reasoning goes beyond the standards of professionalism. In the world of creditors’ rights, we see the same debtor attorneys over and over whether it’s in state court or bankruptcy court. It’s far better for business to maintain a respectful working relationship that will undoubtedly last years than to be a hardliner looking to score a quick win in one case.