When a party pleads a prima facie cause of action and obtains a default judgment on liability, a damages inquiry should necessarily follow, and during the damages determination the trial court should not reconsider liability issues.
In Tennison Brothers, Inc. v. Thomas, No. W2013-01835-COA-R3-CV (Tenn. Ct. App. Aug. 6, 2014), the Tennessee Court of Appeals held that a trial court erred when it refused to award damages to two parties who had already been granted default judgments on liability against a third party. The case involved a decade-old business dispute over rights to a state permit to construct a billboard on two adjacent properties fronting Interstates 40 and 240 in Shelby County, Tennessee.
In July 2008, Tennison Brothers, Inc. sued Clear Channel Outdoor (CCO) and William Thomas for breach of contract, intentional interference with business relationships, and inducement to breach a contract and intentional interference with a contract. In September 2008, CCO asserted a cross-complaint against Thomas alleging similar causes of action as Tennison. Highlights from the ensuing four years of litigation according to the appellate opinion include:
- Tennison files motion for default judgment against Thomas for failure to answer on December 5, 2008.
- Thomas files answer to Tennison and to CCO on December 18, 2008.
- Trial court denies Tennison’s motion for default judgment and allows Thomas more time to answer on January 7, 2009. (The opinion does not explain why the trial court allowed Thomas “more time to answer” after Thomas filed his answers.)
- Thomas files motion to dismiss Tennison’s complaint and CCO’s cross-complaint on May 6, 2009.
- Trial court denies Thomas’s motions to dismiss on November 20, 2009.
- Also on November 20, 2009, the trial court enters an order striking Thomas’s answers as a discovery sanction under Tenn. R. Civ. P. 37.02. The court enters default judgments on liability against Thomas in favor of Tennison and CCO.
- Trial court enters an order on April 16, 2010, setting a writ of inquiry to determine the amount of damages against Thomas.
- Thomas files motion seeking recusal or disqualification of the chancellor on May 18, 2010.
- Trial court denies Thomas’s motion for recusal on June 4, 2010. Trial court also grants Tennison’s second motion for sanctions against Thomas for failure to appear for his deposition and refusing to produce documents. Court rules that Thomas shall not be allowed to present proof related to or in defense of damages, but Thomas may only be allowed to cross-examine witnesses presented by other parties related to damages.
- Thomas files motion to dismiss any claims for damages on July 2, 2010.
- Tennison and CCO files briefs on damages on July 9, 2010.
- Trial court enters order on December 1, 2010, setting writ of damage inquiry.
- Thomas renews his motion to dismiss on January 25, 2011.
- Tennison files motion to strike Thomas’s motions to dismiss on February 4, 2011.
- Tennison files motion in opposition to Thomas’s motions to dismiss on February 17, 2011.
- On November 2, 2011, the trial court enters an order re-setting the writ of inquiry.
- Trial court denies Thomas’s motions to dismiss on December 6, 2011.
- Thomas files motions to set aside the default judgments on January 10, 2012.
- Trial court denies Thomas’s motions to set aside default judgments on July 6, 2012.
- Case transferred to a different court based upon Thomas’s multiple motions for recusal and transfer. (Opinion does not provide specific date.)
- Writ of damage inquiry held by new chancellor on January 7, 2013. During the damages determination, the new chancellor went outside of the pleadings to reconsider liability issues and thereafter ruled that Tennison and CCO had not proved that Thomas had breached a contract. Finding no actual breach, the chancellor held that Tennison’s and CCO’s other claims failed as well and refused to award any damages.
- The trial court entered an order on its opinion on August 2, 2013, and Tennison and CCO appealed.
In finding that the trial court had erred during the damages inquiry by reconsidering liability issues, the court of appeals relied on long held Tennessee case law providing that so long as matters are sufficiently pled in the complaint a default judgment requires that the allegations be taken as true and determinative of liability. The appellate court reviewed the necessary elements for each of the causes of actions asserted by Tennison and CCO against Thomas and then compared the prima facie requirements to Tennison’s and CCO’s pleadings. The appellate court then found that Tennison and CCO had sufficiently pled each of their respective claims against Thomas under the applicable standard for default judgments and therefore ruled that Tennison and CCO were entitled to damages against Thomas. The case was remanded to the trial court for a damages determination, wherein Tennison and CCO can elect between treble damages and punitive damages.
This only makes sense. If you fail or refuse to answer in a timely fashion and a default judgment is entered against you the right to contest liability should be gone. There has to be some cost, some sanction for refusing to answer in a timely fashion.