In a published decision issued by the Court of Appeal, Fourth Appellate District, partners Richard Sybert and Joni Flaherty, and associate Patrick Mulkern, obtained a full reversal in favor of their client, a data recovery company. The Court of Appeal, Fourth Appellate District, Division One, found that the Superior Court erred when it refused to vacate the default judgment entered against the data recovery company.
In a unanimous opinion, the Court of Appeal found that the default judgment, entered in 2012, was void and must be set aside because it exceeded the amount of damages demanded in the complaint. The complaint, which alleged breach of contract against the data recovery company, alleged that the plaintiff “suffered damages in an amount to be proven at trial, but estimated to exceed $25,000.00." The payer likewise requested "damages in an amount to be proven." There was no other allegation in the complaint as to the amount of damages sought. Later, the plaintiff improperly obtained a default judgment in an amount exceeding $3 million.
Gordon & Rees argued that California Code of Civil Procedure (CCP) sections 580 and 585 prohibit the entry of default in an amount greater than that specifically demanded in the complaint. However, the Superior Court rejected these arguments and maintained the multi-million dollar judgment against the client. On behalf of our client, we appealed, with Rich Sybert handling the oral argument backed by a strong brief-writing team.
Citing the Code of Civil Procedure, the Court of Appeal agreed with the Gordon & Rees attorneys, finding that the Superior Court’s decision directly contravened the statutes. The appellate court found that the default judgment was not voidable, but rather was void, for exceeding the amount alleged in the complaint, and thus must be set aside and no discretion could be given to the Superior Court. The Court of Appeal vacated the default judgment and instructed the trial court to either enter a default not to exceed the $25,000 figure alleged in the complaint, or allow the plaintiff to amend its complaint and then reopen litigation.
This decision is particularly significant because the Court of Appeal opted to publish its written opinion, and it serves as the most straightforward, bright-line ruling interpreting CCP sections 580 and 585. Gordon & Rees's litigation team successfully saved its client millions of dollars in paying a default judgment that was not legally or procedurally valid. The appellate court ruled that the firm’s client may recover its costs on appeal.