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.