In Cyrus Way Partners, LLC. (“Cyrus”) v. Cadman, Inc. (“Cadman”), the primary issue on appeal was whether the trial court erred in denying Cadman’s motion to vacate the default judgment under Civil Rules 55 and 60. A default judgment is a legal ruling that can be entered in favor of the plaintiff when the defendant fails to respond to a lawsuit. If that happens, the court may resolve the lawsuit without hearing from the other side. In Washington, a party typically has 20 days to appear in a suit before being at risk for default judgment. If a default judgment is entered for the plaintiff, the defendant can move to vacate the default judgment, meaning the defendant hopes the court will set aside the default judgment as if it never happened. In this case, Cadman, the defendant, presents several ultimately unsuccessful arguments for why the default judgment in favor of Cyrus, the plaintiff, should be vacated.
Cyrus and Orca Beverage Inc. (“Orca”) are under common ownership. In 2018, Cyrus began a project to build a warehouse for Orca, which included the construction of a large concrete slab. Cadman was hired to supply the concrete. Cyrus hired Olympic Concrete Finishing Inc. (“Olympic”) to finish the concrete. On April 1, 2018, Cadman poured the concrete, and Olympic finished the slab. The next day, Cyrus noticed several problems with the slab, which experts hired by both Cyrus and Cadman opined were caused by an abnormally high air content in the concrete.
On December 10, 2020, Cadman offered Cyrus a settlement of $10,000 for remediating the slab, but Cyrus did not respond to the offer. Instead, on December 22, 2020, Cyrus sued Cadman and Olympic under various causes of action, including breach of contract and breach of warranty and served the summons and complaint on Cadman’s registered agent. Cadman did not answer the lawsuit, so Cyrus moved for default judgment, which the trial court granted on March 22, 2021. On March 31, 2021, the court voluntarily dismissed Olympic from the lawsuit, and in April 2022, the court entered a final judgment.
In May 2022, Cadman formally appeared in the lawsuit and, in June 2022, moved to vacate the default judgment, which the trial court denied. Cadman appealed, arguing that under Civil Rule 55(3)(a) and 55(f), Cyrus should have provided notice of its motion for default judgment and the Court’s entry of default judgment. Cadman also argued that under Civil Rule 60(b), its failure to respond was excusable, or alternatively, there were “extraordinary circumstances” that warranted vacation of the judgment. The Court of Appeals affirmed the trial court’s denial of Cadman’s motion, holding that Cadman did not establish grounds for relief under CR 55, and its motion under CR 60(b) was untimely.
In reaching its decision, the Court first considered Cadman’s claim under CR 55(3)(a), holding that Cyrus did not need to provide notice of its motion for default judgment because Cadman did not appear in the suit before judgment was entered. Under CR 55(3)(a), if a party appears in an action, the movant must serve that party with written notice before the default judgment hearing. Under RCW 4.28.210, a party formally appears in a suit by giving written notice of its appearance. However, a party can still appear by taking action that acknowledges that the dispute is in court; for example – negotiating a settlement or discussing the case with the opposing party after the lawsuit is filed. Cadman argued that its December10, 2020, settlement offer counted as acknowledging the lawsuit. However, the court rejected this argument because the settlement offer happened before the suit was filed. Therefore, Cyrus had no obligation to provide notice under CR 55 (3)(a).
The Court also determined that Cyrus did not need to provide notice of the entry of default judgment under CR 55(f) because notice under that rule is only required if over a year had passed between service of the initial summons and the entry of default judgment, and it had been less than a year. A “judgment” is a “final determination of the rights of the parties in the action…” Cadman was served with the Summons and Complaint on December 22, 2020, the court entered default judgment against Cadman on March 22, 2021, and Olympic was dismissed on March 31, 2022. At that point, for the purposes of CR 55(f), the judgment was entered, meaning less than a year had elapsed and the notice requirement in CR 55(f) had not been triggered. Cadman argued that since Olympic was dismissed without prejudice, the suit was not final until the final judgment in April 2022. However, the court rejected that argument and held that a judgment without prejudice still disposes of the lawsuit and is a final judgment within the meaning of CR 55(f).
Next, the Court considered Cadman’s claim that the default judgment should be vacated due to excusable neglect under CR 60(b) and held that this claim was time-barred. Under CR 60(b)(1), a party is entitled to relief if their failure to answer the complaint was excusable. However, the motion must be made within a year after the judgment. Since Cadman moved to vacate the default judgment 14 months after the default judgment was finalized on March 31, 2021, its motion under CR 60(b)(1) was untimely.
The Court also held that the default judgment should not be vacated under CR 60(b)(11), which allows a party to seek relief if there was an extraordinary circumstance that warrants vacation. For one, Cadman argued that there were extraordinary circumstances because Cyrus’ lawyers did not explain that they planned to represent both Cyrus and Orca in the conflict waiver that Cadman signed. However, Cadman never explained how that prevented it from responding to the suit. Rather, Cadman said that it did not respond because of “the craziness of the holiday season and the Covid-19 pandemic.” Also, Cadman claimed Cyrus lacked standing to sue on behalf of Orca, but the court held that this claim is not an extraordinary circumstance and is time-barred. Therefore, the trial court did not err in denying Cadman’s motion to vacate the default judgment under CR 60.
Commentary –
Cyrus was able to move for default judgment because Cadman did not respond to the lawsuit. By the time Cadman learned about the lawsuit, most of its arguments were time-barred, and it was ultimately unsuccessful in its motion to vacate the default judgment. The case emphasizes the importance of responding to lawsuits and filing motions in a timely manner within the requirements established by Washington law.