Commercial Litigation and Arbitration

Duty to Mitigate Survives Entry of Default Judgment

From 16 Cobalt LLC v. Harrison Career Institute, 2008 U.S. Dist. LEXIS 98866 (Dec. 8, 2008):

Both parties agree that Plaintiff has a duty to mitigate damages.... Plaintiff, however, contends that the duty to mitigate is an affirmative defense and that Defendant's failure to file an answer and the consequent default judgment entered against it waived Defendant's ability to assert the affirmative defense now.. As support for this contention, Plaintiff relies on a single unpublished decision from a district court in another jurisdiction. See ... Scott v. Ind. State Prison, Cause No. 3:98CV0473RM, 2000 U.S. Dist. LEXIS 7698 (N.D. Ind. Jan 19, 2000).... Plaintiff has not directed the Court to any decision from this Circuit directly addressing this point, nor has the Court located any such precedent. Whether a defendant in default has waived the affirmative defense of mitigation therefore appears to be one of first impression in this Circuit.

The Court, however, is not persuaded that Defendant has waived its right to assert the mitigation doctrine as to any future rents not yet shown by Plaintiff. This is not a case where Defendant filed an answer that failed to assert an affirmative defense, but rather where Defendant filed no answer and was found liable pursuant to a default judgment. Cf Demoncratic Republic of Congo v. FG Hemisphere Assocs., LLC., 508 F.3d 1062, 1064 (D.C. Cir. 2007) (discussing waiver of personal jurisdiction defense under Federal Rule of Civil Procedure 12) ("In a case such as this, where the defendant's default has removed any occasion for these conventional opening defensive moves, the rule obviously cannot be applied literally."). Defendant has raised the issue of Plaintiff's duty to mitigate in both its Motion to Set Aside Default Judgment and its supplemental briefing now before the Court addressing the amount of damages owed to Plaintiff. Admittedly, Defendant's briefing on this question is perfunctory at best, and the Court has already determined that Defendant has not shown that Plaintiff failed to meet its duty to mitigate .... But ... the Court is persuaded that Defendants should have an opportunity to challenge the reasonableness of Plaintiff's efforts... Accordingly, ... Defendant shall be permitted to submit a response addressing Plaintiff's duty to mitigate damages....

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