E.D.Va. Considers Differing Circuit Interpretations of Leading Case on Availability of Default Judgment in Multiple-Defendant Cases

Per Jefferson v. Briner, Inc., --- F.Supp.2d ----, 2006 WL 3209957 (E.D.Va. Nov. 6, 2006):

This case presents the unusual situation where a plaintiff seeks a default judgment against one defendant, and yet the remaining, answering defendants have been exonerated from all liability. Stated more precisely, where multiple defendants are alleged to be jointly liable and the answering defendants have prevailed, must the action against the defaulting defendant be dismissed (and entry of default judgment refused) so as to prevent inconsistent judgments among the joint defendants? See Frow v. De La Vega, 82 U.S. (15 Wall.) 552, 554, 21 L.Ed. 60 (1872). Frow is the leading case on the subject of the availability of default judgment in actions involving multiple defendants. . . .

. . .Here, this court acted in accordance with Frowby waiting to address the issue of default judgment against [non-answering defendant Mortgage Store Financial, Inc.] MSF until the court first "proceed[ed] with the cause upon the answers of the other defendants," Briner and Carteret. Id. at 554. Accordingly, whether default judgment against MSF is appropriate is now ripe for decision.

. . .

Although many jurisdictions have narrowly construed Frow to bar entry of a default judgment against one of several defendants only if the theory for recovery is one of true joint liability, [FN6] the Fourth Circuit has interpreted Frow more broadly. The Fourth Circuit last revisited Frow almost forty years ago in United States ex rel. R.F. Hudson v. Peerless Ins. Co., 374 F.2d 942 (4th Cir.1967), an action prosecuted against a contractor and a contractor's surety. In Hudson, the contractor answered the complaint and denied liability. Id. at 943. However, the surety failed to respond and the district court entered default judgment against it. Id. In holding the default judgment against the surety to be premature, the court of appeals held: Although Frow was a case of joint liability, we think the procedure established for multiple defendants by Rule 54(b) is strikingly similar and applicable not only to situations of joint liability but to those where the liability is joint and/or several. Id. at 944 (emphasis added). The court went on to note that even when co-defendants are alleged to be "closely interrelated," and one of the multiple defendants "establishes that plaintiff has no cause of action or present right of recovery, the defense generally inures also to the benefit of a defaulting defendant[.]" Id. at 945 (citations omitted). Thus, the Fourth Circuit has concluded that Frow applies not only to defendants who are alleged to be jointly liable, but also to those defendants thought to be jointly and/or severally liable, or who are otherwise closely interrelated. [FN7]

FN6. See, e.g., McMillian/McMillian, Inc. v. Monticello Ins. Co., 116 F.3d 319 (8th Cir.1997) (Frownot extended to situation where the co-defendants shared closely related interests but were not truly jointly liable); Whelan v. Abell, 953 F.2d 663, 674 (D.C.Cir.1992) ("... in cases involving multiple defendants, a default order that is inconsistent with a judgment on the merits must be set aside only when liability is truly joint--that is, when the theory of recovery requires that all defendants be found liable if any one of them is liable--and when the relief sought can only be effective if judgment is granted against all.") (citation omitted), amended at No. 90-7016, 1992 U.S.App. LEXIS 6180 (D.C.Cir.), cert. denied sub. nom., Toomey v. Whelan, 506 U.S. 906, 113 S.Ct. 300, 121 L.Ed.2d 223 (1992); In re Uranium Antitrust Litig., 617 F.2d 1248, 1256-58 (7th Cir.1980) (Frow rule not applicable when defendants are alleged to be jointly and severally liable); Int'l Controls Corp. v. Vesco, 535 F.2d 742, 746-47 n. 4 (2d Cir.1976) ("... at most, Frowcontrols in situations where the liability of one defendant necessarily depends upon the liability of the others"), cert. denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 758 (1978).

FN7. Other Circuit Courts of Appeals have taken a similar stance to that of the Fourth Circuit when interpreting Frow. See In re: First T.D. & Inv., Inc., 253 F.3d 520, 532 (9th Cir.2001) (extending Frowto certain circumstances where defendants have closely related defenses or are otherwise similarly situated, even if not jointly and severally liable, so as to avoid inconsistent judgments against multiple defendants); Lewis v. Lynn, 236 F.3d 766, 768 (5th Cir.2001) (citing Hudson and holding that it would " 'incongruous' and 'unfair' to allow some defendants to prevail, while not providing the same benefit to similarly situated defendants.") (citation omitted and emphasis added); Wilcox v. Raintree Inns of Am., Inc., No. 94-1050, 1996 U.S.App. LEXIS 1501, at *7-8 (10th Cir. Feb. 2, 1996) (unpublished) (extending Frow to cases where multiple defendants have "closely related" defenses); Gulf Coast Fans v. Midwest Elecs. Imp., 740 F.2d 1499, 1512 (11th Cir.1984) (holding that "when defendants are similarly situated, but not jointly liable, judgment should not be entered against a defaulting defendant if the other defendant prevails on the merits" to be "sound policy") (emphasis added). Although the Circuits are split on the extent to which Frow applies, see supra footnote 6, the underlying theme of Frow is indisputable: logically inconsistent judgments among multiple defendants are to be avoided, and a finding of inconsistency will preclude the entry of default judgment against a non-appearing defendant.