Commercial Litigation and Arbitration

Circuit Split as to Whether Failure to Provide 55(b)(2) Notice Renders a Default Judgment Void vs. Voidable — Factors Counseling against Opening Up Default

Green v. Johnson Richards & Co., 2011 U.S. Dist. LEXIS 127181 (M.D. La. Oct. 11, 2011):

This matter is before the Court on the Motion to Set Aside and Vacate Default Judgment Pursuant to Fed. R. Civ. P. 60(b)(4) and 60(b)(6) ***

On July 30, 2003, plaintiffs filed a "Motion for Entry of Default Pursuant to Rule 55(A) of the Federal Rules of Civil Procedure" on the basis that various defendants, including Sunstein, failed to answer the complaint after their Rule 12 motions were resolved against them.... On July 31, 2003, the Clerk of Court issued an Order granting entry of preliminary default against Sunstein and several other defendants, finding that they did not file any responsive pleadings after their Rule 12 motions were denied.... The Order states that notice was mailed to six specifically listed people as well as "all named defendants." ***

On November 5, 2003, plaintiffs' counsel sent a letter to Sunstein to place him on notice of the plaintiffs' intent to file a Motion for a Default Judgment against him in accordance with Fed. R. Civ. P. 55(b)(2), which letter was sent to the same address that was used for service of process***. That letter, however, was returned to plaintiffs' counsel on the basis that it was unable to be delivered. ***

On November 14, 2003, the Court entered a default judgment in favor of the plaintiffs and against various defendants, including Sunstein, on the basis that they had failed to file an answer as required by law after their motion to dismiss was denied, and they had not taken any action in the case since preliminary default was entered against them on July 31, 2003. See, R. Doc. 111.

Approximately seven and a half years later, on January 28, 2011, Sunstein filed the present motion, seeking to vacate the default judgment against him. Sunstein contends that the default judgment should be set aside because he was never served with notice of the entry of the preliminary default by the Clerk of Court or with the motion for default as required by Fed. R. Civ. P. 55(b)(2), which provision, in 2003, stated, in pertinent part, that "[i]f the party against whom a default judgment is sought has appeared personally or by a representative, that party or its representative must be served with written notice of the application [for default judgment] at least 3 days before the hearing." Fed. R. Civ. P. 55(b)(2). ***

Footnote 1. The circuits are split as to whether the failure to provide notice as required by Rule 55(b)(2) renders a default judgment void, under Rule 60(b)(4), or just voidable, under Rule 60(b)(6). See, Citizens Bank v. Parnes, 2010 WL 1753296, **8-9 (6th Cir. 2010)(citing cases from various circuits that are split on the issue). While the Fifth Circuit's decision in Savoretti [v. Rodriguez-Jiminez, 252 F.2d 290 (5th Cir. 1958)] suggests that the failure to give notice might render a default judgment void under Rule 60(b)(4), the Fifth Circuit did not specifically rely upon Rule 60(b)(4) in rendering its decision in that case, and its subsequent decisions ... indicate instead that the failure to provide notice as required by Rule 55(b)(2) renders a default judgment voidable under Rule 60(b)(6) since the Fifth Circuit specifically relies upon that provision in those cases.


In support of his motion to vacate the default judgment against him, Sunstein has filed a declaration, wherein he indicates that, after he was named as a defendant in this litigation, he was instructed by his employer, Tri-National, to sign an engagement letter with the attorney that had been retained by the corporation, i.e., Freeman and the Stone, Pigman law firm. *** Sunstein states that he did so in consideration for Tri-National's agreement to pay all attorney's fees and to take full responsibility for any judgment or settlement in this matter without reimbursement from him.... Sunstein indicates that Freeman made an appearance on his behalf by filing motions to dismiss on December 22, 2000 and June 15, 2001. While those motions were pending, however, Sunstein left employment with Tri-National in October 2001. Subsequently, on March 7, 2002, Freeman and the Stone, Pigman law firm withdrew as Sunstein's counsel of record, but notice of such motion and the Court's Order granting that withdrawal were sent to Sunstein at the Tri-National address. Sunstein contends that he therefore never received notice that Freeman had withdrawn from representing him. He also contends that, since all future motions, notices, and orders were sent to him at the Tri-National address, he did not receive notice that his motions to dismiss had been denied, that responsive pleadings on his behalf were due 40 days after January 8, 2003, that plaintiffs filed a motion for entry of preliminary default on July 30, 2003, and that the Clerk of Court granted entry of preliminary default against him on July 31, 2003. He further contends that he was not served with notice of the motion for default judgment as required by Rule 55(b)(2) since plaintiffs' November 5, 2003 letter providing him with notice of same was also sent to him at the Tri-National address. As a result, Sunstein argues that plaintiffs failed to comply with Fed. R. Civ. P. 55(b)(2), which is the basis for his request to vacate the default judgment against him.

The problems with Sunstein's motion are three-fold. First, it has been recognized that a plaintiff provides sufficient notice of an application for default judgment for purposes of Fed. R. Civ. P. 55(b)(2) by mailing a copy of that application to a defendant's last known address. Motown Record Co., LP v. Murray, 2007 WL 1521475 (W.D. La. 2007). When Sunstein left employment with Tri-National in October 2001, he had a duty to inform Freeman, who was still enrolled as his counsel at that time, of his change of address. Because he did not do so, Freeman was unable to notify the Court (and opposing counsel) of Sunstein's new address when the motion to withdraw as counsel was filed, and as a result, plaintiffs' counsel was unaware of any change of address for Sunstein at the time that the default proceedings were taking place. It was not plaintiffs' counsel's responsibility to ensure that the addresses of all named defendants were updated and correct; plaintiffs' counsel acted reasonably in sending notices to Sunstein's last known address listed in the Court record.

Furthermore, even assuming that sending the notice to Sunstein's last known address did not satisfy the notice requirement of Rule 55(b)(2) because Sunstein did not actually receive notice of the pending motion for default judgment, Sunstein's motion to vacate should nevertheless be denied because he has not sufficiently demonstrated that he has a meritorious defense to plaintiffs' claims. ***

Third and finally, even if Sunstein could demonstrate a meritorious defense to plaintiffs' claims, his motion should nevertheless be denied because it is untimely. A motion for relief from judgment under Fed. R. Civ. P. 60(b)(6) must be made "within a reasonable time." See, Fed. R. Civ. P. 60(c)(1); Simmons v. Twin City Towing, 2011 WL 1853282 (5th Cir. 2011)(holding that, "[i]n the absence of any known exceptional circumstances, nine years after the entry of judgment cannot be considered 'within a reasonable time' under any understanding of the phrase." Furthermore, even if the plaintiff had filed the motion within an acceptable time, relief under Rule 60(b)(6) is appropriate only in "extraordinary circumstances"); McGrew v. McQueen, 2011 WL 817525 (5th Cir. 2011)(Fed. R. Civ. P. 60(b)(6) requires that the motion be made "within a reasonable time," and a remedy is available "only if [*15] extraordinary circumstances are present" and its availability is "narrowly circumscribed").

Sunstein admits, in his declaration, that he received and signed an engagement letter to have Freeman represent him in this litigation on December 20, 2000. Thus, he was aware that this litigation was pending against him at that time. He contends, however, that he did not receive any further notices from his attorney concerning this litigation after that date and that he was not aware of the default judgment rendered against him in November 2003. He argues that he should not be held liable in this matter since he and Tri-National had an agreement (of which plaintiffs, of course, were not privy) that Tri-National would handle the legal representation and indemnity of the employees who had been named as defendants in this matter. When Sunstein left Tri-National's employment in October 2001, however, he had an obligation to at least notify counsel for Tri-National and himself that he was no longer associated with Tri-National so that he could receive notice of any future filings in the litigation. Because he did not do so, the undersigned finds that his failure to receive notices concerning this suit is no one's fault but his own. A litigant, who has full knowledge that a suit is pending against them, cannot simply sit back for years (here, for eleven (11) years from 2000 to 2011) without taking any action to follow up on the status of the suit (regardless of what "agreements" they may have with their co-defendants as to who is "handling" the suit). See, Associated Marine Equipment, LLC v. Jones, 2011 WL 72191 (5th Cir. 2011)("[A] party has a duty of diligence to inquire as to the status of his case"); Pryor v. U.S. Postal Service, 769 F.2d 281, 287 (5th Cir. 1985); Wilson v. Atwood Group, 725 F.2d 255, 257-58 (5th Cir. 1984)(en banc). If they do so, it will be at their peril, as is evident from the entry of a default judgment in this suit. Furthermore, plaintiffs indicate, in their opposition, that they initiated [*17] collection efforts against Sunstein in November 2005 with regard to the judgment he is seeking to vacate; as such, it is likely that Sunstein has had notice of the judgment against him at least since that time, which was nearly six (6) years ago.

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