Opinion
Civil No. 01-2743 (JP).
August 31, 2005
OPINION AND ORDER
I. INTRODUCTION AND PROCEDURAL BACKGROUND
Before the Court is Defendants' "Motion to Set Aside Judgment for Lack of Jurisdiction" ( docket No. 26); Plaintiffs' opposition thereto (docket No. 29); and Defendants' Reply to Plaintiffs' opposition (docket No. 32). This is a diversity action for breach of contract filed by Plaintiffs for damages under Article 1052 of the Civil Code of Puerto Rico, 31 P.R. Laws Ann. § 3016. Default was entered against Defendants on August 26, 2002 for failure to answer or otherwise plead (docket No. 10), and a default judgment was entered against the Defendants after a damages hearing was held on March 31, 2003 (docket No. 21).
Defendants now raise the issue of the Court's lack of jurisdiction over them due to insufficiency of service of process. Defendants contend that the Judgment entered on March 31, 2003 is null and void ab initio for lack of personal jurisdiction over Defendants OneSource and Carlisle. Defendants further allege that OneSource and Carlisle were not served with the correct Complaint, but rather with a Complaint in a case that had been previously dismissed by Judge Juan M. Pérez Giménez in Civil No. 01-2211 (PG).
On July 15, 2005, the Court held an evidentiary hearing where both parties presented their witnesses and submitted documentary evidence. The Court heard live testimony from Mr. Scott Friedlander, Vice President and Secretary of OneSource Facility Services, Inc. The Court also admitted deposition testimony from Mr. Steven Levine, former Vice-President and General Counsel of co-Defendant Carlisle Management Services, Inc. and Mrs. Genie Brummett, Legal Assistant for OneSource Facility Services, Inc. The parties also filed their respective Evidentiary Hearing Briefs (docket Nos. 42 and 44).
In support of the parties' claims, the following documentary evidence was proffered and admitted:
A. Joint Exhibits
I. Faxed letter from Scott E. Friedlander to Harold Vicente, Esq., dated 4/9/02.
II. Letter dated 4/9/02, from Scott Friedlander to Harold Vicente, Esq.
III. Summons for Civil Case No. 01-2743 (JP) dated 3/5/02.
IV. (Not Original) Complaint in Civil Case No. 01-2211 (PG) dated 12/28/01.
V. Letter dated 8/1/00 from Steven Levine to Víctor Velázquez.
VI. Federal Express airway bill dated 8/11/00.
VII. (Original) Complaint in Civil No. 01-2211 (PG).
VIII. Docket Sheet Civil No. 01-2211 (PG) as of 2/24/02.
IX. (Original) Complaint in Civil No. 01-2743 (JP).B. Defendants' Exhibits
A. Statement Under Penalty of Perjury of Scott Friedlander dated 5/7/04.
B. Auditors' Response Letters from Harold D. Vicente, Esq., to Price Waterhouse, dated 5/20/02 and 3/25/03.
C. Judgment entered in Civil No. 01-2211 (PG).
D. Transcript of Deposition of Genie Brummett.
E. Statement under penalty of perjury of Genie Brummett dated 5/7/04.
F. Transcript of Deposition of Steven Levine.
G. Statement Under Penalty of Perjury of Steven Levine, dated 5/7/04.
H. Video Deposition of Genie Brummett.
I. Video Deposition of Steven Levine.
C. Plaintiffs' Exhibits
1. Summons in Civil No. 01-2743 (JP) Returned executed upon Genie Brummett on 4/4/02.
2. Handwritten note marked as Joint Exhibit, made by Genie Brummett on her deposition in Atlanta on June 13, 2005.
3. Summons in Civil No. 01-2743 (JP), with note on the right hand side "Jennifer Richard, Executive Assistant" on 4/10/02.
Based on the evidence submitted by the parties, and after due deliberation, the Court makes the following Findings of Fact and Conclusions of Law.
II. FINDINGS OF FACT
1. OneSource is a corporation duly organized under the laws of Delaware.
2. Carlisle is a subsidiary of OneSource.
3. On September 12, 2001 the Plaintiffs, Oriental M.S. Corp, Victor Elí Velázquez González and Luz Del Carmen Santana Rodríguez filed a Complaint in the United States District Court for the District of Puerto Rico, which was docketed as Case No. 01-2211 (PG).
4. An Amended Complaint was filed in Civil No. 01-2211 (PG) on November 8, 2001.
5. On November 29, 2001, Civil No. 01-2211 (PG) was dismissed without prejudice, due to Plaintiffs' failure to re-pay the filing fee after the attorney's check had bounced.
6. Final Judgment was entered in Civil No. 01-2211 (PG) on January 28, 2002.
7. On December 23, 2001, the Complaint in the present case was filed, and was assigned by the Clerk of the Court Civil No. 01-2743 (JP).
8. Summons in the present case were issued on March 5, 2002.
9. On April 4, 2002, Ms. Genie Brummett, at the time assistant to the General Counsel of OneSource, received the Summons in Civil 01-2743 (JP), and a Complaint in Civil No. 01-2211 (PG).
10. The documents did not have the filing stamp of the Clerk of the Court and had a date of December 28, 2001.
11. Ms. Brummett delivered the documents to Mr. Scott Friedlander, at the time General Counsel for OneSource.
12. On April 10, 2002, Ms. Jennifer Richard, Assistant to the General Counsel of Carlisle received the Summons in Civil 01-2743 (JP), and a Complaint in Civil No. 01-2211 (PG).
13. Again, the documents did not have the filing stamp of the Clerk of the Court and were dated December 28, 2001.
14. By that time, the Complaint in Civil 01-2211 (PG) had already been superseded by an Amended Complaint, which was thereafter dismissed by Judge Pérez-Giménez.
15. On April 9, 2002, Mr. Scott Friedlander, sent via facsimile the Summons and the Complaint which he had received, together with a letter instructing Vicente Cuebas to represent OneSource and Carlisle in the case.
16. The faxed copy stamped by the fax machine on April 9, 2002 at 10:19 a.m., sent to the law firm of Vicente Cuebas reflects that the Summons served pertained to case Civil No. 01-2743 (JP), and the Complaint served referred to case Civil 01-2211 (PG).
17. The parties stipulated that handwriting contained on the fax cover page is that of Harold D. Vicente, Sr., Esq.
18. On or about April 24, 2002, Mr. Friedlander was informed by Mr. Harold D. Vicente, Esq. that the Complaint Civil 01-2211 (PG) had been dismissed.
19. The Docket Report printout, accessed via PACER, is dated April 24, 2002, and the parties stipulated that the handwriting contained on the front page upper right hand corner is that of Harold D. Vicente-Colón, Esq.
20. The Complaint that had been served upon OneSource and Carlisle, which was identified with the Civil No. 01-2211 (PG), had been dismissed without prejudice and Judgment had been entered on January 28, 2002.
21. While the summons in Civil No. 01-2743 (JP) was served upon OneSource and Carlisle, its Complaint was never served upon OneSource or Carlisle.
22. Neither OneSource nor Carlisle received copies of the documents nor of any subsequent motion filed in Civil No. 01-2743 (JP).
23. Neither OneSource nor Carlisle received the "Motion for Entry of Default" filed by Plaintiffs, even though the certificate of service in said document indicates that it was sent to OneSource and Carlisle.
24. The "Motion for Entry of Default" does not state the address to which the document was sent and the Summons returned and filed does not reflect Defendants' addresses.
25. The record reflects that OneSource and Carlisle intended to timely answer the complaint, but did not because the Complaint served upon them, which was identified with the Civil No. 01-2211 (PG), had been dismissed.
26. The instructions given to OneSource's counsel reflect its intention to defend itself against the allegations.
27. The Plaintiffs filed the Complaint in this case on December 23, 2001, one (1) month and five (5) days before the Judgment was entered by Judge Perez-Giménez dismissing the Complaint.
28. A "Motion to Vacate Order" filed on December 17, 2001, had not been ruled upon by Judge Pérez-Giménez.
29. The Plaintiffs simultaneously had two cases filed and open before the Court against the same Defendants and based on the same allegations.
III. CONCLUSIONS OF LAW
The issue before the Court is if the defendants were properly served by serving upon them the Summons and the document marked as Joint Exhibit IV. For the foregoing reasons, the Court VACATES the Judgment entered on March 31, 2003 (docket No. 31)
A. Default and Rule 60
Default judgments are generally avoided by the courts, since there is a strong policy in favor of decisions on the merits and against resolution of cases through default judgments. Klapprott v. United States, 335 U.S. 601, 611-612, 69 S. Ct. 384, 92 L.Ed. 266 (1949); see also, Coon v. Grenier, 867 F.2d 73, 76 (1st Cir. 1989) (allowing an entry of default to be set aside upon showing of reasonable justification is in keeping with philosophy that actions should be decided on their merits); and Enron Oil Corp. v. Masonori Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993) (defaults are generally disfavored and are reserved for rare occasions).
In light of the facts of this case, particularly that the amount of the Judgment entered is over Two Hundred Thousand Dollars, ($200,000.00), the Court finds Defendants' reasons for undertaking their actions were justified, as will be explained more fully below.
Rule 60(b) states:
"On motion and upon such terms as are just, the Court may relieve a party or his legal representative from a final judgment, order or proceeding for the following reasons: (1) mistake, inadvertence, surprise or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2) and (3) not more than one year after the judgment, order or proceeding was entered or taken. A motion under this subdivision (b) does not affect the finality of a judgment or suspend its operation. This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order or proceeding, or to grant relief to a defendant not actually personally notified as provided in Title 28, U.S.C. Section 1655, or to set aside a judgment for fraud upon the Court. Writs of coram nobis in the nature of a bill of review, are abolished and the procedure for obtaining any relief from a judgment shall be by motion as prescribed in these rules or by an independent action." Fed.R.Civ.P. 60.
It is well known that a motion for relief from a judgment under Rule 60(b) is a matter committed to the sound discretion of the Court. See Chang v. Smith, 103 F.R.D. 401, 405 (D. Puerto Rico 1984) (affirming that "it is widely recognized that a motion for relief from judgment pursuant to Rule 60(b) is addressed to the sound discretion of the Court"); see also American and Foreign Ins. Ass'n. v. Commercial Ins. Co., 575 F.2d 980 (1st Cir. 1978), Ralston Purina Co. v. Navieras de Canarias, S.A., 619 F.2d 152 (1st Cir. 1980). However, when the motion is based on a void judgment under rule 60(b)(4), the district court has no discretion. If a court lacks jurisdiction over the parties because of insufficiency of service of process, the judgment is considered void and the district court is obligated to set the same aside. See Echevarría-González v. González-Chapel, 849 F.2d 24, 28 (1st Cir. 1988) ("If the judgment is void, the district court has no discretion but to set aside the entry of default judgment"); see also, Sea-Land Service, Inc. v. Cerámica Europa II , Inc., 160 F.3d 849, 852 (1st Cir. 1998).
It is with this standard in mind that the Court addresses the issue before it.
B. Service of Process
Rule 4(c) of the Federal Rules of Civil Procedure provides that "[a] summons shall be served together with a copy of the complaint. The plaintiff is responsible for service of a summons and complaint within the time allowed under subdivision (m) and shall furnish the person effecting service with the necessary copies of the summons and complaint." Fed.R.Civ.P. 4(c)(1).
"A defendant must be served in accordance with Fed.R.Civ.P. 4, in order for the court to secure personal jurisdiction over him. . . . Lack of jurisdiction is 'the principal basis for an attack on a default judgment under Rule 60(b)(4).' 10 Charles Alan Wright, Arthur R. Miller Mary Kay Kane, Federal Practice Procedure, § 2695, at 503 (1983).
It is basic hornbook law that the ". . . core function of service of process is to supply the defendants notice of the pendency of a legal action, in a manner and at a time that affords the defendants a fair opportunity to answer the complaint and present defenses and objections." Henderson v. United States, 517 U.S. 654; 116 S. Ct. 1638, 1648 (1996). It has been held time and again that before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied. "Thus, before a court may exercise personal jurisdiction over a defendant, there must be more than notice to the defendant and a constitutionally sufficient relationship between the defendant and the forum. There also must be a basis for the defendant's amenability to service of summons. Absent consent, this means there must be authorization for service of summons on the defendant." Omni Capital Int'l, Ltd., et al. v. Rudolf Wolff Co., Ltd., et al., 484 U.S. 97; 108 S. Ct. 404. (1987); see also Williams v. Jones, 11 F.3d 247, 255 (1st Cir. 1993); ("Personal jurisdiction is established either by proper service of process or by the defendant's waiver of any defect in the service of process."); Jardines Bacata, Ltd. v. Díaz-Márquez, 878 F.2d 1555, 1559 (1st Cir. 1989) ("[I]n the ordinary course, the district court acquires jurisdiction over a defendant only by service of process. . . .").
It has long been held that without personal jurisdiction, a court is without power to adjudicate a claim or obligation of a person, and "any judgment or order so rendered is null and void."General Contracting Trading Co. v. Interpole Inc., 899 F.2d 109, 114 (1st Cir. 1990). Therefore, if the judgment is void, the district court has no discretion or option but to set aside the entry of the judgment. Echevarría-González, 849 F.2d at 28.
"The requirement that a court have personal jurisdiction flows not from Art. III, but from the Due Process Clause. The personal jurisdiction requirement recognizes and protects an individual liberty interest. It represents a restriction on judicial power not as a matter of sovereignty, but as a matter of individual liberty. Thus, the test for personal jurisdiction requires that "the maintenance of the suit . . . not offend 'traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945), quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)."
Indeed, this basic foundation of jurisdictional law has been more than adequately covered in caselaw: Bramesco v. Drug Computer Consultants, 148 F.R.D. 690, 691-692 (S.D.N.Y. 1993) (Court denied a motion for entry of default because the plaintiff served the summons but not the complaint): Macaluso v. New York State Dep't of Environmental Conservation, 115 F.R.D. 16, 18 (E.D.N.Y. 1986) (Court found that service was improper for failure "to include the complaint with the summons"); Phillips v. Murchinson, 194 F. Supp. 620, 622 (S.D.N.Y. 1961) (holding that service of process was insufficient because "plaintiff . . . did not serve the then complaint upon the defendant . . ., but served a superseded complaint which then was no more than a 'mere scrap of paper' insofar as the case is concerned"); Benjamin v. Grosnick, 999 F.2d 590, 591-592 (1st Cir. 1993) (dismissing the complaint because although summons cited the appropriate cases, the defendant was served with the wrong complaint).
It has been well established that the burden of proof lies on the Plaintiff to establish that proper service of process has been effected. See Sáez Rivera v. Nissan Manufacturing Co., 788 F. 2d 819 (1st Cir. 1986); Bolívar v. Director of FBI, 846 F. Supp. 163 (D. Puerto Rico 1994). In this case, the Court finds that Plaintiffs' proof is lacking.
In first place, the Court must mention that it finds that an attorney who gives a check to the Court for a filing fee which is returned for insufficient funds lacks credibility in the eyes of the Court. This is particularly so when that person is a member of a profession who is held to a higher standard than ordinary persons. Indeed, due to the rigorous model code of conduct that is applicable to attorneys and the conduct in accordance thereto that is expected of them, the Court finds the actions of Plaintiffs' attorney in this case particularly troublesome. Further compounding this issue is the fact that the issuance of a check without sufficient funds is a crime under Puerto Rico Law. See 33 P.R. Laws Ann. § 1851.
During the hearing, the Court heard testimony from Mr. Scott Friedlander, who testified that on April 4, 2002, he received a copy of a summons and complaint, and that he forwarded the paperwork he received to the company's legal counsel in Puerto Rico, Vicente Cuebas. He further explained that he was confused as to the Complaint, since the main allegation was that a confidential agreement had been allegedly breached and that OneSource had bid on and won a contract that Plaintiffs had lost. Since the contract went to Mirage, who had no connection to OneSource, Friedlander stated that he told his attorneys to pursue the case aggressively and to pursue costs and attorney's fees. Finally, Mr. Fiedlander stated that he had received the Summons with Civil 01-2743 (JP) on it, and the Complaint to Civil No. 01-2211 (PG) on it.
The testimony of Ms. Genie Brummett, at the time assistant to the General Counsel of OneSource, also explained that she had received the Summons of Civil 01-2743 (JP), and a Complaint with Civil No. 01-2211 (PG). Ms. Brummett further stated that she delivered them to Mr. Scott Friedlander, at the time General Counsel for OneSource. Finally, Ms. Jennifer Richard, Assistant to the General Counsel of Carlisle, also received the Summons for Civil 01-2743 (JP), and a Complaint for Civil No. 01-2211 (PG).
During the hearing, Plaintiffs attempted to imply that Defendants had some sort of duty or were negligent regarding the following issues: the fact that Mr. Friedlander did not enter into the Court's automated system, PACER, to check on his case; that Defendants' attorneys made notations on the side of the complaint they received, and insinuating that Ms. Brummett might have changed the case number on the document she had received to the Pérez-Giménez case. The Court finds all these contentions unpersuasive.
As previously stated, it is Plaintiffs' burden to establish that service was properly effected. At the hearing, Plaintiff presented no evidence nor testimony to aid him in this task. An attempt was made to introduce testimony by Mr. Steven Jefferson, who had allegedly coordinated the service of process upon Defendants. The Court held that not only was the announcement of Mr. Jefferson as a witness untimely — seeing as though he had been announced just days before the hearing — but that general fairness did not permit his testimony in Court. The Court further found his announcement as a was witness untimely, since Plaintiffs had known over one year ago that the main issue in this case was defective service of process, and that they should have known this witness might aid their case before. Since Plaintiffs had not been previously announced Mr. Jefferson, he had not been deposed. Lastly, the Court found that Mr. Jefferson's testimony was irrelevant to the issue at hand, since he merely facilitated the service and did not personally effect the service upon Defendants. The Court therefore did not permit his testimony.
The fact that Mr. Friedlander may or may not have checked the case number in PACER is irrelevant as to whether or not he was properly served. Defendants are not required to ascertain the status of their cases; this is why they rely on their attorneys. In the case at bar, it is evident that Defendants were in fact diligent in checking the status of their case on PACER and after typing into the access panel the number on the complaint that they had received, the case appeared closed, since it had, in fact, been closed by Judge Pérez-Giménez in January 2002. The Court finds that no further diligence by Defendants was necessary.
Equally unavailing to Plaintiffs is the fact that Defendants' attorneys made notes on the side of the margins of the complaint they received. In fact, this serves to prove what Defendants have been alleging all along — that they intended to defend themselves vigorously in this case. Again, upon checking the case status as per the number on the Complaint they received, it indicated it was closed, and therefore, believed no further action was necessary. The issue that the Complaints for both cases were identical, and that therefore, Defendants were not prejudiced, is similarly a non-issue in this case — it is irrelevant to the issue that a complaint in the present case had to accompany the summons in the present case. Simply no other reading of the Federal rule is permissible. Furthermore, Plaintiffs cannot seriously allege that no prejudice has befallen Defendants when Plaintiffs have a judgment entered against Defendants for an amount exceeding $200,000.
Finally, the Court finds troubling the fact that a summons and a Complaint were delivered upon Defendants personally, but that no further filings in this case were ever received by them, even though the certificate of service on all the documents indicated they were being sent to Defendants. This goes in direct contravention to all notions of justice and fair play. Indeed, the Court believes that had Defendants received a copy of any document before the Writ was executed, the outcome of the case would have been far different.
Therefore, pursuant to the case law and the facts of this case, the Court HOLDS that Plaintiffs' service of process upon Defendants was ineffective. Therefore, the Judgment entered in this case is null and without effect.
IV. CONCLUSION
The Court finds that Plaintiffs did not meet their burden of proving proper service. The Court gives credibility to the testimony of Defendants' witnesses, and concludes that the service of process performed by Plaintiffs was defective. Therefore, the Judgment entered on March 31, 2003 (docket No. 21) is null and void ab initio for lack of personal jurisdiction over OneSource and Carlisle, and Defendant's "Motion for Relief of Judgment" ( docket No. 26) is hereby GRANTED. The Default Judgment entered in this case is hereby VACATED. Judgment will be entered accordingly.