Are You Based in Latin America and Would Like to Learn About Default Judgments Issued by U.S. Courts? Clara Krivoy Jessica N. Meyers Madeline P. Reyes long arrow

A default judgment is a binding court decision in favor of a plaintiff when the defendant in a lawsuit fails to respond to the complaint, or fails to appear in court, and as a result the court issues a judgment in favor of the plaintiff without a trial on the merits.

The process typically begins with the plaintiff filing a complaint and serving it to the defendant. If the defendant does not respond within the specified time frame (usually 20-30 days depending on the jurisdiction), the plaintiff can request a default judgment from the court. The court may require proof of service and may schedule a hearing to confirm the validity of the plaintiff's claim before issuing the default judgment. Once a default judgment is issued, it has the same effect as a judgment issued after a full trial. The defendant is legally obligated to comply with the judgment, which could include paying damages, ceasing certain activities, or fulfilling contractual obligations. Defendants typically have limited options to challenge or overturn a default judgment. Grounds for vacating a default judgment include lack of proper service, excusable neglect, or other procedural issues. To learn how to access U.S. courts, you can read Brown Rudnick's article on the topic by clicking here.

Seeking Default Judgment in U.S. Federal Courts

Default procedures in U.S. federal courts, pursuant to the Federal Rules of Civil Procedure, require a two-step process to obtain judgment against the defaulting party.

1. Entry of Default

A plaintiff seeking a default judgment must first move for an entry of default. The party can request an entry of default only after a defendant fails to respond to a pleading after a prescribed amount of time, or otherwise fails to participate in the litigation. The plaintiff must notify the court clerk of defendant's inaction and request entry of default in the docket via an affidavit. The affidavit must show there was communication with the defendant to which the defendant failed to respond.

This entry of default prohibits the defendant from answering or raising a defense.

2. Default Judgment

Upon entry of default, a plaintiff may then seek a default judgment. The clerk may award default judgment against a defendant who has never appeared in the action if the judgment is certain. A sum certain is an amount that requires no extrinsic evidence of the amount to be paid. This includes, usually, money based on contracts or agreements with a set formula or amount provided, such as a bond.

When a plaintiff seeks injunctive relief, unliquidated damages, undetermined damages, or where the defendant has appeared in the action in some capacity, the plaintiff must make a motion to the court. In making such a motion, the plaintiff must show proper entry of default and appropriate damages. The court has ultimate discretion as to whether to enter default judgment and award damages. Damages can include attorney fees and other costs, if demanded in the complaint and supported by the facts and law.

Seeking Default Judgment in New York State Courts

A plaintiff in New York state court can likewise seek default judgment if a defendant fails to appear in the lawsuit. In New York, the plaintiff need not request an entry of default and may automatically seek default judgment. The requirements for obtaining a default judgment in New York state court are similar to those in federal court.

Plaintiff must move for default judgment within one year of the defendant's default. The plaintiff's motion must include proof of the default, which consists of an affidavit that the defendant has failed to make an appearance or answer, along with proof of adequate service and of the amount due. In a motion to the court, the court must determine damages by conducting an inquest or appointing a referee.

The default judgment will usually allow the plaintiff to collect the amount of money requested in the complaint, plus interest and court costs. If you would like to learn about pre- and post-judgment interest, you can read Brown Rudnick's article on the topic by clicking here.

Some examples of default judgments obtained in U.S. courts against Latin American countries include:

1. Argentina: Argentina faced numerous lawsuits in U.S. courts following its 2001 debt default. One of the most notable cases involved hedge funds led by Elliott Management, which secured a default judgment for billions of dollars. This prolonged legal battle culminated in a 2016 settlement in which Argentina agreed to pay approximately $4.65 billion to resolve claims from these holdout creditors.
2. Ecuador: Chevron Corporation obtained a default judgment in the U.S. District Court for the Southern District of New York against the Republic of Ecuador. This case stemmed from a dispute over environmental damages and enforcement of a multibillion-dollar judgment originally issued by Ecuadorian courts. The U.S. court ruled in favor of Chevron, finding the Ecuadorian judgment to be fraudulently obtained and therefore unenforceable.
3. Venezuela: In recent years, New York federal and state courts have issued several default judgments in connection with unpaid bonds issued by the Republic of Venezuela, Petróleos de Venezuela, S.A. (PDVSA) and Corporación Eléctrica Nacional S.A. (Elecar) for the issuers' failure to make interest payments and principal repayments on various bonds.

If you want to learn more about how to obtain a default judgment in the U.S. and thereafter monetize it, let us know. Our team of international lawyers can help create a tailor-made strategy to maximize your recovery.

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