A recent decision by the Tennessee Court of Appeals discusses the circumstances under which default judgments may be set aside.
Relevant excerpts from the opinion:
The propriety of a trial court’s denial of a motion “to set aside a default judgment depends in part on whether the default judgment was properly entered in the first place.” H.G. Hill Realty Co., L.L.C. v. Re/Max Carriage House, Inc., 428 S.W.3d 23, 29-30 (Tenn. Ct. App. 2013) (citing Yearwood, Johnson, Stanton & Crabtree, Inc. v. Foxland Dev. Venture, 828 S.W.2d 412, 413 (Tenn. Ct. App. 1991)). Thus, we begin by examining whether Mr. Youree’s complaint contains sufficient factual allegations to support entry of a default judgment.
Under Tenn. R. Civ. P. 55.01, a litigant may move the court for entry of a default judgment when an opposing party fails to timely file an answer to the complaint. In general, “‘the entry of a default judgment has the effect of an answer admitting the well-pleaded material allegations of fact contained in the adversary’s pleading and fair inferences therefrom.’” H.G. Hill, 428 S.W.3d at 30 (quoting Lawrence A. Pivnick, TENNESSEE CIRCUIT COURT PRACTICE, § 27.2 (2012)); see also Clark v. Sputniks, LLC, 368 S.W.3d 431, 435 (Tenn. 2012) (“By allowing default judgments to be entered against them, the defendants impliedly admitted as true all the material factual allegations contained in the complaints, except the amount of the plaintiffs’ unliquidated damages.”). To be “sufficient to sustain default judgment, the complaint ‘need not contain detailed allegations of all the facts giving rise to the claim,’ but it ‘must contain sufficient factual allegations to articulate a claim for relief.’” H.G. Hill, 428 S.W.3d at 31 (quoting Plunk v. Gibson Guitar Corp., No. M2012-00882-COA-R3-CV, 2013 WL 2420539, at *3 n.3 (Tenn. Ct. App. May 31, 2013)). Furthermore, the complaint “‘must contain direct allegations on every material point necessary to sustain a recovery on any legal theory . . . or contain allegations from which an inference may fairly be drawn that evidence on these material points will be introduced at trial.’” Id. (quoting Webb v. Nashville Area Habitat for Humanity, Inc., 346 S.W.3d 422, 427 (Tenn. 2011)).
Youree v. Recovery House of East Tennessee, LLC, at *3-4, No. M2021-01504-COA-R3-CV (Tenn. Ct. App. May 30, 2023).
The Court of Appeals reversed the order granting a default judgment, finding that “the Second Default Judgment was not properly granted because the complaint failed to allege sufficient facts to articulate a claim for piercing the corporate veil to hold Defendants liable for [a related-entity’s] debt.” Id. at*10 (footnote omitted).
The opinion also includes an excellent discussion of the application of the factors evaluated in determining whether a corporate veil should be pierced.
UPDATE
Jahen v. AER Express, Inc., No. E2022-00344-COA-R3-CV (Tenn. Ct. App. June 6, 2023) addresses a defendant’s efforts to overturn a default judgment when it allegedly failed to get notice of trial date. The unrepresented defendant had not kept its addresses current with the court clerk. The trial court’s refusal to set aside the judgment was affirmed.