230 F.3d 565 (2nd Cir. 2000), 99-9237, Jacobs v Patent Enforcement Fund

Docket Nº:Docket No. 99-9237
Citation:230 F.3d 565
Party Name:JOSEPH J. JACOBS, Trustee of the Jacobs Family Trust of 10/13/80, DENNIS P.A. TOBIN, DIXON FRICK BURDEN, Plaintiffs Appellees, v. PATENT ENFORCEMENT FUND, INC, a Delaware Corp, ROBERT L. HILL, FRED SINGER, VALUTRON, NV, a Netherlands Antilles Business Corp., BONNYBROOK CHARITABLE TRUST, JOANNE LABELLA, Defendants, DAVID L. HILL, HARBOR RESEARCH COR
Case Date:September 27, 2000
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 565

230 F.3d 565 (2nd Cir. 2000)

JOSEPH J. JACOBS, Trustee of the Jacobs Family Trust of 10/13/80, DENNIS P.A. TOBIN, DIXON FRICK BURDEN, Plaintiffs Appellees,

v.

PATENT ENFORCEMENT FUND, INC, a Delaware Corp, ROBERT L. HILL, FRED SINGER, VALUTRON, NV, a Netherlands Antilles Business Corp., BONNYBROOK CHARITABLE TRUST, JOANNE LABELLA, Defendants, DAVID L. HILL, HARBOR RESEARCH CORP., Defendants Appellants.

Docket No. 99-9237

United States Court of Appeals, Second Circuit

September 27, 2000

Argued: September 5, 2000

Appeal from entry of a default judgment. Dismissed.

Page 566

JAY W. EISENHOFER, Grant and Eisenhofer, P.A., Wilmington, DE, for defendants-appellants.

BEVERLY S. KNAPP, Shrader and Knapp, Westport, CT, and STEVEN M. FEDER, Smith McCullough PC, Denver, CO, for plaintiffs-appellees.

Before: CALABRESI, and SOTOMAYOR, Circuit Judges, and TRAGER, District Judge.1

CALABRESI, Circuit Judge:

I.

This appeal involves a shareholder derivative action brought by (among other plaintiffs) Carl Johnston, Dixon Burden, and Dennis Tobin ("plaintiffs"), in their capacities as shareholders of Patent Enforcement Fund, Inc. ("PEF"), to recover damages from Harbor Research Corporation ("HRC"). Plaintiffs alleged that through a series of fraudulent business transactions (mostly fraudulent loans) among PEF, HRC, a third business organization called Valutron, and an individual named David Hill ("Hill"),2 monies rightfully belonging to PEF had been siphoned, through Valutron and HRC, to Hill.

Plaintiffs began this diversity action in the United States District Court for the District of Connecticut on January 14, 1998, and on January 28, HRC was served with a summons and complaint (return of service, indicating service on Hill for HRC, was received by the district court on February 6). HRC failed to file an answer, and on April 13, 1998, the clerk of the court entered a default against HRC. On April 14, Hill moved to intervene as a defendant, and on June 2, 1998 this motion was granted. Meanwhile, plaintiffs had, on May 26, moved for entry of a default judgment against HRC, and supplemented their motion with substantial written submissions. Although Hill (after being permitted to intervene) opposed the motion, the district court (Judge Peter Dorsey) entered a default judgment of $4,039,800.30 against HRC and in favor of plaintiffs on March 31, 1999.

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Hill moved for reconsideration of the default judgment on April 12, 1999, and on September 2, Judge Dorsey simultaneously granted Hill's motion for reconsideration and summarily concluded that "since [Hill] has raised no issues not previously considered by the Court, the prior Ruling is adhered to." Finally, on October 4, a notice of appeal was timely filed by "David L. Hill, Intervenor Defendant and on behalf of Harbor Research Corp." Hill and HRC (together "appellants") contend that the district court committed reversible error both in entering the default judgment without holding a hearing on damages and in denying the motion to vacate the default judgment.

II.

Before we may reach any of the other issues raised by this appeal, we must first deal with an exceedingly nice jurisdictional question. The question arises because on appeal, this court, nostra sponte, pointed out to the parties (as we are obligated to do), that plaintiffs had failed adequately to allege...

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