The City of N.Y. v. Mickalis Pawn Shop Llc
| Citation | 645 F.3d 114,79 Fed.R.Serv.3d 682 |
| Decision Date | 04 May 2011 |
| Docket Number | Docket Nos. 08–4804–cv,09–1345–cv. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
| Parties | The CITY OF NEW YORK, Plaintiff–Appellee,v.MICKALIS PAWN SHOP, LLC, Defendant–Appellant,A–1 Jewelry & Pawn, Inc., Adventure Outdoors, Inc., Cole's Gun Shop, Inc., Dunkelberger's Sports Outfitters, Gallery Distributing Inc., Greg L. Driggers d/b/a AAA Gun & Pawn Brokers, The Gun Store, Inc., Harold W. Babcock, Jr. d/b/a Webb's Sporting Goods, James Thomas Farmer d/b/a Jim's Guns and Whatever, Nancy Dailey d/b/a Peddler's Post, Old Dominion Guns & Tackle, Inc., Patriot Services, Inc., Welsh Pawn Shop, Inc. d/b/a Big Tom's Pawn Shop, Woodrow C. Holman III d/b/a Woody's Pawn Shop, Virginia Firearms & Transfers, Inc., Defendants.The City of New York, Plaintiff–Appellee,v.Adventure Outdoors, Inc., Defendant–Appellant,A–1 Jewelry & Pawn, Inc., Cole's Gun Shop, Inc., Dunkelberger's Sports Outfitters, Gallery Distributing Inc., Greg L. Driggers d/b/a AAA Gun & Pawn Brokers, The Gun Store, Inc., Harold W. Babcock, Jr. d/b/a Webb's Sporting Goods, James Thomas Farmer d/b/a Jim's Guns and Whatever, Mickalis Pawn Shop, LLC, Nancy Dailey d/b/a Peddler's Post, Old Dominion Guns & Tackle, Inc., Patriot Services, Inc., Welsh Pawn Shop, Inc. d/b/a Big Tom's Pawn Shop, Woodrow C. Holman III d/b/a Woody's Pawn Shop, Virginia Firearms & Transfers, Inc., Defendants.* |
OPINION TEXT STARTS HERE
Frederick A. Brodie (Kenneth W. Taber, of counsel), Pillsbury Winthrop Shaw Pittman, LLP, New York, N.Y.; Eric Proshansky, Assistant Corporation Counsel (Richard J. Costa, Ari Biernoff, of counsel), for Michael A. Cardozo, Corporation Counsel of the City of New York, New York, N.Y., for Plaintiff–Appellee City of New York.Justin S. Kahn, Kahn Law Firm, Charleston, S.C., for Defendant–Appellant Mickalis Pawn Shop, LLC.John F. Renzulli (Scott C. Allan, of counsel), Renzulli Law Firm, LLP, White Plains, N.Y., for Defendant–Appellant Adventure Outdoors, Inc.Before: SACK and WESLEY, Circuit Judges, and EATON, Judge.**SACK, Circuit Judge:
These appeals present what appear to be two issues of first impression in this Circuit. First, whether a defendant who repeatedly moves to dismiss for lack of personal jurisdiction, but then withdraws from the litigation after those motions are denied, is permitted to attack an ensuing default judgment on the grounds that it is void for lack of personal jurisdiction. Second, whether a federal district court may exercise personal jurisdiction over an out-of-state firearms dealer under the New York long-arm statute, N.Y. C.P.L.R. § 302, based solely on the fact that the dealer's unlawful sales practices have facilitated the trafficking of guns by third parties to New York State, where those guns contribute to a public nuisance. Because we resolve the first question in the negative, we do not reach the second.
The City of New York (the “City”) instituted this lawsuit in May 2006 against fifteen federally licensed retail firearms dealers operating from stores in Georgia, Ohio, Pennsylvania, South Carolina, and Virginia. The defendants-appellants, Mickalis Pawn Shop, LLC (“Mickalis Pawn”) and Adventure Outdoors, Inc. (“Adventure Outdoors”) are among those dealers.1 Mickalis Pawn and Adventure Outdoors each operate a single retail store in South Carolina and Georgia, respectively. Each separately moved to dismiss the City's complaint against it on the theory that the district court lacked personal jurisdiction over it. The district court (Jack B. Weinstein, Judge ), denying those motions, concluded that the City had made at least a prima facie showing of personal jurisdiction, but left the final determination of personal jurisdiction for trial.
After additional rounds of motion practice and varying amounts of discovery, the two defendants each moved to withdraw their respective counsel and announced to the district court that they would proceed no further in the litigation. The district court entered a default against each of them. Eventually, after proceedings before a magistrate judge, the court entered a default judgment and ordered permanent injunctive relief against both defendants.
Both defendants now appeal from the default judgment on various grounds. 2 First, they assert that their withdrawal from the litigation did not justify the district court's entry of default or the issuance of a default judgment against them. Second, they contend that the district court lacked personal jurisdiction over them, and therefore that the default judgment is void. Finally, the defendants challenge the permanent injunctions as unconstitutional or as in violation of Federal Rule of Civil Procedure 65(d).
We conclude that the district court did not abuse its discretion in entering a default and issuing a default judgment against each of the defendants. We also conclude that the defendants forfeited the defense of lack of personal jurisdiction and any other defenses they may have had by willfully abandoning their defense of the litigation. The default judgment against them is therefore not void. However, because we agree with the defendants that the injunctions issued by the district court violate the requirements of Rule 65(d), we vacate the injunctions and remand to the district court for it to craft appropriate injunctive relief.
The facts underlying this litigation are discussed in detail in two lengthy opinions by the district court. See City of New York v. A–1 Jewelry & Pawn, Inc. (“ A–1 Jewelry I ”), 501 F.Supp.2d 369 (E.D.N.Y.2007); City of New York v. A–1 Jewelry & Pawn, Inc. (“ A–1 Jewelry II ”), 247 F.R.D. 296 (E.D.N.Y.2007). We repeat them here only insofar as we think it necessary for an understanding of our resolution of these appeals.
Mickalis Pawn is a limited liability company formed under South Carolina law. It operates a single retail store—a pawn shop in Summerville, South Carolina—where it sells, among other things, firearms. At all relevant times, Mickalis Pawn's revenue has been derived entirely from sales made at its Summerville store to customers who visit the store in person. As of 2006, Mickalis Pawn did not offer anything for sale in New York, nor had it ever done so. It has never sold any merchandise by mail order, by telephone, or by means of the Internet.
Adventure Outdoors is a Georgia corporation with its principal place of business in Georgia. It operates a single retail store, located in Smyrna, Georgia, from which it sells sporting goods, hunting and fishing equipment, camping supplies, and firearms and ammunition. Like Mickalis Pawn, its revenue is derived from sales made at its retail store to customers who visit the store in person. It does not ship its goods out of state, nor does it sell firearms at gun shows.
Adventure Outdoors has, however, maintained three websites through which customers may initiate the process of purchasing firearms from its store. These websites allow a customer from Georgia or elsewhere in the United States to place a deposit on a firearm through a wholesale distributor and direct the distributor to ship the firearm to Adventure Outdoors. The customer must then visit Adventure Outdoors' store in person to complete the sale and retrieve the firearm. Adventure Outdoors concedes that this system would permit a New York resident to purchase a gun from Adventure Outdoors, but only if he or she traveled to Georgia to pick it up. Adventure Outdoors has sold guns to residents of other states this way, but never to a New York State resident.
On May 15, 2006, the City brought suit against fifteen federally licensed retail firearms dealers located in states other than New York, including Mickalis Pawn and Adventure Outdoors, alleging that they engaged in unlawful sales practices that contribute to a public nuisance in the City.3 The City alleged in its complaint that each of the fifteen firearms dealers engages in “ ‘strawman’ purchases” that facilitate the acquisition of firearms by individuals who are prohibited by law from buying or possessing them.4 Compl. ¶ 21 (May 15, 2006). Many of these illegally purchased firearms, the City alleged, are used to commit crimes in the City within a short time after their sale by the defendants. The City's initial complaint asserted five causes of action—public nuisance, statutory nuisance, negligence, negligence per se, and negligent entrustment—and sought damages, nuisance-abatement costs, and permanent injunctive relief.
On August 8, 2006, Mickalis Pawn, Adventure Outdoors, and four other defendant firearms dealers each timely moved to dismiss the complaint as to it for lack of personal jurisdiction. The moving defendants asserted that the requirements of the New York long-arm statute, C.P.L.R. § 302, were not satisfied; that the defendants lacked the constitutionally requisite minimum contacts with New York; and that the defendants never purposely availed themselves of interstate commerce such that they should reasonably anticipate defending a lawsuit in New York. The defendants argued that requiring out-of-state retailers such as themselves to litigate this action in a state with which they have no connection would violate both New York law and tenets of due process under the Fifth and Fourteenth Amendments.
On August 15, 2007, following jurisdictional discovery, the district court denied the motions to dismiss in what it characterized as a applying the New York long-arm statute to public-nuisance suits against out-of-state firearms dealers. A–1 Jewelry I, 501 F.Supp.2d at 374. The court stated that the City's burden at the pleading stage was not to prove personal jurisdiction conclusively, but to show a “substantial likelihood that all the elements of jurisdiction” could be established at trial. Id. at 416. After reviewing evidence of the...
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