Co. Interamer. v. Co. Dominicana

United States Court of Appeals,

Eleventh Circuit.

No. 95-5056.

COMPANIA INTERAMERICANA EXPORT-IMPORT, S.A., a Panamanian
Corporation, IAL Aircraft Holding, Inc., a Florida Corporation, AAA
Interair, Inc., a Florida Corporation, Plaintiffs-Appellees,

v.

COMPANIA DOMINICANA DE AVIACION, a Dominican Corporation a/k/a
Dominicana Airlines, Corporacion Dominicana De Empresa Estatales,
a Dominican Corporation, Defendants-Appellants.

July 23, 1996.

Appeal from the United States District Court for the Southern
District of Florida. (No. 93-1771-CIV-FAM), Federico A. Moreno,
Judge.

Before COX and BARKETT, Circuit Judges, and BRIGHT*, Senior Circuit
Judge.

BARKETT, Circuit Judge:

Appellants Compania Dominicana de Aviacion and Corporacion

Dominicana de Empresa Estatales (collectively "Dominicana") appeal

the district court's entry of default and default judgment against

them and in favor of Appellees Compania Interamericana Export-

Import, IAL Aircraft Holding, Inc., and AAA Interair, Inc.

(collectively "IAL"), in this breach of contract dispute.

Dominicana also appeals the district court's denial of its motions

to set aside the entry of default and default judgment.

Background

IAL sued Dominicana, the national airline of the Dominican

Republic and a corporation wholly owned by that government, for

breach of contract and injunctive relief, and Dominicana

*
Honorable Myron H. Bright, Senior U.S. Circuit Judge for
the Eighth Circuit, sitting by designation.
counterclaimed for wrongful repossession, conversion, breach of

leases, breach of contract, negligence, and fraud. During trial

preparation, Dominicana ran into a number of problems due to

political unrest in the Dominican Republic, changes in the

management of the company, and financial difficulties. As a

result, Dominicana failed to comply with a number of discovery

requests in a timely fashion, and in January of 1995, Dominicana's

counsel, Greenberg Traurig, withdrew from the case citing

"irreconcilable differences" stemming from non-payment of legal

fees. The court directed Dominicana to secure new counsel on or

before February 13, 1995, or risk sanctions. On February 14, 1995,

Dominicana moved for an extension of time to retain counsel,

explaining that it had reached an agreement on representation with

Alvaraz, Armas and Borron, but that approval had to be obtained

from the Dominican Republic's executive authority, who would not be

able to approve the agreement until March 6. The court granted the

extension, and denied a motion for default filed by IAL.

Dominicana retained counsel by March 6, but on March 14, 1995, IAL

again moved for default citing Dominicana's failure to respond to

interrogatories. Dominicana responded by stating that the

discovery delays and financial burdens were caused by the ongoing

political unrest in the Dominican Republic and within the

corporation. The court then ordered the parties to participate in

mediation no later than 60 days before the trial date of July 5.

Pursuant to that order IAL filed a motion for mediation on May 10.

Dominicana, however, moved for an extension of time because no

authorized corporate representative would be available until May
20. On May 22, Alvaraz Armas filed a motion to withdraw as counsel

because Dominicana was unable to comply with its financial

commitments.1 On May 23, the court granted the motion to withdraw,

denied Dominicana's motion for an extension of time to retain new

counsel, and ordered Dominicana to obtain counsel immediately.

On May 24, 1995, the court ordered a default "because

corporate Defendants are not represented by counsel," and directed

IAL to file a motion for default judgment, to which Dominicana

could respond by June 26. On June 16, 1995, IAL filed a motion for

default judgment, and in support of its request for damages

attached the affidavit of IAL's chief financial officer. On July

7, Greenberg Traurig filed a notice of appearance as counsel for

Dominicana, and moved to set aside the entry of default. On July

10, the district court entered a final default judgment, citing

Dominicana's "failure to obtain ... counsel and ... failure to

comply with this Court's discovery orders." The court awarded IAL

damages based upon the affidavits it had submitted.

On July 19, Dominicana filed a motion for relief from

judgment. The court denied both the July 7 motion to set aside the

entry of default, and the July 19 motion for relief from default

judgment, and Dominicana appeals. Dominicana argues that the

district court erred in entering a judgment of default because IAL

failed to comply with the requirements of 28 U.S.C. § 1608(e),

1
Both Greenberg Traurig and Alvaraz Armas explained to the
court that Dominicana was having financial problems as a result
of bureaucratic upheaval, and that its problems were not the
result of willful misconduct. At one point during the
litigation, IAL also acknowledged the political unrest within the
Dominican Republic.
governing default judgments against foreign sovereigns. Dominicana

also contends that the district court abused its discretion in

refusing to set aside its entry of default pursuant to Rule 55(c),

Federal Rules of Civil Procedure. Finding no abuse of the court's

discretion, we affirm the district court's denial of Dominicana's

motion to set aside the order of default. However, because it

appears that the district court failed to consider the requirements

of 28 U.S.C. § 1608(e), we vacate the entry of the judgment against

Dominicana.

Entering Default Judgment Under § 1608(e).

The Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §

1608(e), governs the requirements for obtaining a default judgment

against a foreign sovereign. Section 1608(e) provides:

No judgment of default shall be entered by a court of the
United States or of a State against a foreign state, a
political subdivision, or an agency or instrumentality of a
foreign state, unless the claimant establishes his claim or
right to relief by evidence satisfactory to the court.

28 U.S.C. § 1608(e) (emphasis added). Congress intended § 1608(e)

to provide foreign states protection from unfounded default

judgments rendered solely upon a procedural default. H.R.Rep. No.

1487, 94th Cong., 2d Sess. 26 (1976), reprinted in 1976

U.S.C.C.A.N. 6604, 6625. Section 1608(e) is modeled after

Fed.R.Civ.P. 55(e), which similarly protects the federal government

from default judgments based solely upon procedural defaults.2 Id.

2
Rule 55(e) provides that

[n]o judgment by default shall be entered against
the United States or an officer or agency thereof
unless the claimant establishes a claim or right to
relief by evidence satisfactory to the court.
Rule 55(e) "rests on the rationale that the taxpayers at large

should not be subjected to the cost of a judgment entered as a

penalty against a government official which comes as a windfall to

the individual litigant." Campbell v. Eastland, 307 F.2d 478, 491

(5th Cir.1962); 3 see also Commercial Bank of Kuwait v. Rafidain

Bank, 15 F.3d 238, 242 (2d Cir.1994) (Rule 55(e) and § 1608(e)

reflect congressional recognition that public fisc should be

protected from unfounded claims which would be granted solely

because of government's delay in responding).

IAL does not contest the necessity of "establishing [its]

claim or right to relief by evidence satisfactory to the court."

28 U.S.C. § 1608(e). IAL argues, rather, that it presented such

evidence through affidavits and invoices detailing the amounts

owed, as well as the underlying lease agreements and guaranties.

In granting IAL default judgment, the district court "considered

the motion and the pertinent portions of the record," and cited

IAL's affidavit as to the amounts due from Dominicana. As noted,

however, a default judgment governed by § 1608(e) must be treated

differently than an ordinary default judgment. Under § 1608(e), in

addition to damages, the claimant must "establish his claim or

right to relief," and must do so by "evidence satisfactory to the

court." This implies that, as a threshold matter, IAL was required

to establish entitlement to relief by providing satisfactory

evidence as to each element of the claims upon which relief was

3
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th
Cir.1981) (en banc), this court adopted as precedent all
decisions of the former United States Court of Appeals for the
Fifth Circuit rendered prior to October 1, 1981.
sought. Although explicit findings may not always be required, the

record must show that "the plaintiff provided sufficient evidence

in support of its claims" and that the evidence was considered by

the court before the default judgment was entered. Rafidain Bank,

15 F.3d at 242. Here, the record does not reflect that the court

considered the differing standard required by § 1608(e) prior to

its entry of default judgment against Dominicana. Accordingly, we

remand this case for consideration of § 1608(e).

Setting Aside an Order of Default.

Having vacated the judgment, we now turn to the question of

whether the court abused its discretion in denying Dominicana's

motion to set aside the entry of default. Rule 55(c), Federal

Rules of Civil Procedure, provides in relevant part that "[f]or

good cause shown the court may set aside an entry of default."

" "Good cause' is a mutable standard, varying from situation

to situation. It is also a liberal one—but not so elastic as to be

devoid of substance." Coon v. Grenier, 867 F.2d 73, 76 (1st

Cir.1989). We recognize that "good cause" is not susceptible to a

precise formula, but some general guidelines are commonly applied.

Id. Courts have considered whether the default was culpable or

willful, whether setting it aside would prejudice the adversary,

and whether the defaulting party presents a meritorious defense.

Rafidain Bank, 15 F.3d at 243; see also Robinson v. United States,

734 F.2d 735, 739 (11th Cir.1984). We note, however, that these

factors are not "talismanic," and that courts have examined other

factors including whether the public interest was implicated,

whether there was significant financial loss to the defaulting
party, and whether the defaulting party acted promptly to correct

the default. E.g., Dierschke v. O'Cheskey, 975 F.2d 181, 184 (5th

Cir.1992). "Whatever factors are employed, the imperative is that

they be regarded simply as a means of identifying circumstances

which warrant the finding of "good cause' to set aside a default."

Id. However, if a party willfully defaults by displaying either an

intentional or reckless disregard for the judicial proceedings, the

court need make no other findings in denying relief. Shepard

Claims Service, Inc. v. William Darrah & Associates, 796 F.2d 190,

194-95 (6th Cir.1986).

Dominicana claims that its failure to follow court orders was

not willful, but resulted from political unrest and the struggling

economy of the Dominican Republic. While we do not doubt the

administrative difficulties faced by Dominicana during this

litigation, we cannot say that the district court abused its

discretion in denying Dominicana relief from default. Most

failures to follow court orders are not "willful" in the sense of

flaunting an intentional disrespect for the judicial process.

However, when a litigant has been given ample opportunity to comply

with court orders but fails to effect any compliance, the result

may be deemed willful. The district court exhibited considerable

patience in granting Dominicana several extensions with regard to

the discovery orders and with regard to obtaining counsel. Foreign

governments have the protection of § 1608(e); by the same token,

permitting the entry of a judgment only upon the claimant's

satisfactory evidence necessarily implies that the litigation need

not be held in abeyance until a foreign country chooses to
participate in the lawsuit.

Accordingly, we affirm the district court's denial of the

motion to set aside the entry of default, but vacate the default

judgment, and remand for proceedings consistent with this opinion.

AFFIRMED in part; VACATED in part; and REMANDED.