Butner v. Neustadter

Brief Fact Summary.

Butner (defendant) was served by Neustadter (plaintiff) and the case was heard in state court who granted a default judgment for the plaintiff.

Synopsis of Rule of Law.

If a case is timely removed to federal court, and there was a default judgment entered in state court, and the defaulting party was guilty of excusable neglect, then the default judgment should be set aside.

Facts.

Defendant was served in California regarding a claim for an unpaid note by the plaintiff. The defendant had 10 days to answer under California law, and proceeded to forward all the relevant papers to his attorney in Arkansas, and his attorney contacted the plaintiff’s counsel close to the end of the 10-day period, but he was out of town. The defendant’s attorney requested for an extension of time but by the time the plaintiff’s lawyer responded, he informed the defendants attorney he already obtained a default judgement. However, the defendant then timely removed the case to federal court and answered, arguing the answer should be valid and the default judgment set aside.

Issue.

Whether if a case is timely removed to federal court, and there was a default judgment entered in state court, the defaulting party was guilty of excusable neglect, then the default judgment should be set aside.

Held.

Yes. If a case is timely removed to federal court, and there was a default judgment entered in state court, the defaulting party was guilty of excusable neglect, then the default judgment should be set aside.

Discussion.

When a default judgment is entered in state court and the case is properly removed, the state court must send the case to the federal court, and entering a default judgment instead was an abuse of discretion. Here, the district court properly set aside default judgment for excusable neglect under Federal Rule of Civil Procedure 60. The law promotes that parties in a legal proceeding must be heard in court and whenever a court may properly set aside a default judgment, they should do so. The defendant attempted to contact the plaintiff’s attorney and answer within 10 days and the default judgment should be set aside for excusable neglect.