Georgia Supreme Court Clarifies an Important Limitation on Seeking to Set Aside Out-Of-State Judgments

Doing business today will often mean interactions with clients, contract partners, and others that may bring you into contact with many different states. This may sometimes bring about a situation in which you need to enforce a judgment from one state in another or defend against such a judgment. When these commercial litigation situations arise, it is important to have knowledgeable Georgia business counsel on your side who understands the law and the role the Georgia courts can play in pursuing the outcome you need. Recently, the Georgia Supreme Court entered an informative decision about using this state’s courts to oppose a judgment entered by another state.

The underlying relationship that eventually led to litigation in that recent case was a commercial contract between a telecom company and an IT services and training company. The contract called for the latter company to provide services for the former. Eventually, the relationship soured, and the services company sued in state court in St. Louis, Mo. That case was resolved when the trial court there entered a default judgment in favor of the plaintiff, awarding it $52,589. A default judgment is a final resolution of a court case in favor of one party due to the other party’s failure to take a required action to participate in the case. Often, these occur in favor of plaintiffs because defendants fail to respond or take other required actions.

Four months after securing the judgment in St. Louis, the plaintiff brought its case to Atlanta, asking a judge in Fulton County to enter an order of enforcement of foreign judgment. A foreign judgment is any judgment entered by any court outside Georgia. In order for your out-of-state judgment to be enforceable and collectible in this state, you have to get an order from a Georgia court declaring it to be recognized in this state. Georgia has something called the Uniform Enforcement of Foreign Judgment Act (UEFJA), which indicates what’s required to make your out-of-state judgment enforceable here.

The defendant opposed the plaintiff’s action by asking the trial judge to vacate the underlying default judgment. The trial judge rejected the request, concluding that the defendant filed too late. The law says that the type of request the defendant made must be filed in the same “term of court” as the underlying default judgment, and, by the time the defendant made its request, the court was in its next term.

The case went all the way to the Georgia Supreme Court, and that court, as the lower courts had, refused to undo the default judgment. The Supreme Court clarified an important procedural point, however. The timing of the defendant’s motion was irrelevant. The defendant was not entitled to the relief it sought, but it was not because it waited to long. It was not entitled to succeed because the U.S. Constitution prohibited the defendant from receiving the relief it sought in the manner that it sought it. The defendant invoked the trial court’s inherent power to set aside judgments within the same term of court. Under the constraints of the Full Faith and Credit Clause, that inherent power does not extend to valid foreign judgments.

The UEFJA operates “in the shadow of” the Full Faith and Credit Clause of the U.S. Constitution, the court’s opinion explained. That meant that there are limited bases and limited avenues for using a Georgia court to defeat a valid judgment entered by a court from another state. The proper procedure, according to the court, “is to move to set aside under OCGA §9-11-60(d).” Valid bases for seeking relief under Section 9-11-60(d) include things like fraud or lack of jurisdiction. It does not offer relief in situations like this when the defendant did not participate in the out-of-state litigation due to a misunderstanding between the defendant and the defendant’s registered agent that led to the defendant not knowing about the lawsuit until after the default judgment had already been entered.

Whether you are a Georgia business or an out-of-state entity, and whether you’re seeking to enforce or to prevent the enforcement of an out-of-state judgment, it is vital to have experienced Georgia commercial litigation attorneys working for you to protect your interests. The skilled Atlanta collections attorneys at Poole Huffman, LLC have been helping our business clients for many years. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation.

More blog posts:

Confirmation Letters – Avoiding Potential Conflict Regarding Agreement Terms, Atlanta Business Litigation Attorneys Blog, April 5, 2016