Marcus Food Co. v. DiPanfilo

• Decision Date: 27 October 2011
• Docket Number: No. 10–3285.,10–3285.
• Parties: MARCUS FOOD COMPANY, Plaintiff–Appellee, v. Robert DiPANFILO, Defendant–Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

671 F.3d 1159

80 Fed.R.Serv.3d 1447

MARCUS FOOD COMPANY, Plaintiff–Appellee,

v.Robert DiPANFILO, Defendant–Appellant.

No. 10–3285.

United States Court of Appeals, Tenth Circuit.

Oct. 27, 2011.

Patricia M. Dengler, Brown, Dengler & O'Brien, LLC, Wichita, KS, for Defendant–Appellant.

Will Wohlford (Susan R. Schrag with him on the brief), Morris, Laing, Evans, Brock & Kennedy, Chtd., Wichita, KS, for Plaintiff–Appellee.

Before O'BRIEN, GILMAN, and HOLMES, Circuit Judges.^*GILMAN, Circuit Judge.

Marcus Food Company, a Kansas corporation based in Wichita, entered into an oral agreement in 1999 with Robert DiPanfilo, a citizen of Toronto, Canada, under which DiPanfilo served as an independent sales and purchasing agent for the company. The agreement included a provision that rendered DiPanfilo liable to Marcus Food for 45% of any net losses on his accounts. After the parties' relationship ended 10 years later, Marcus Food attempted to collect on debts allegedly owed it under the agreement by suing DiPanfilo in the United States District Court for the District of Kansas.

A default judgment was entered against DiPanfilo in the district court following his failure to appear or respond to the complaint. DiPanfilo moved to set aside the default judgment six-and-a-half months later on the grounds that it was void for lack of jurisdiction and/or because his delay was due to excusable neglect. After a hearing, the court denied DiPanfilo's motion, finding personal jurisdiction over DiPanfilo, subject matter jurisdiction over the case, and insufficient support for his excusable-neglect argument. For the reasons set forth below, we AFFIRM the judgment of the district court.

I. BACKGROUND

Marcus Food and DiPanfilo commenced negotiations in 1999 that led to their oral business arrangement. They agreed that DiPanfilo would serve as a sales and purchasing agent of Marcus Food for potential clients located primarily outside the United States. Although the parties dispute who initiated the negotiations, they agree that the discussions took place in Colorado and that a Marcus Food executive participated by telephone from Kansas. The record does not include any additional details about their negotiations.

DiPanfilo worked out of his office in Toronto and utilized warehouses for the storage of Marcus Food products in Canada. Marcus Food provided the financing and maintained legal title to the products under the terms of their agreement. DiPanfilo worked as an independent contractor to make connections for Marcus Food in the global meat-products market and to buy and sell such products on behalf of the company. In this role, DiPanfilo was in regular communication with several different departments at Marcus Food's Kansas headquarters over the course of their 10–year relationship. Although the parties dispute the frequency of these contacts, the record reflects that communications occurred on at least a monthly basis—if not weekly or even more frequently at times—and covered a range of topics from prospective sales and customers to issues regarding accounts receivable and payable.

DiPanfilo reported sales and confirmed purchases for Marcus Food via facsimile or on the company's internet-based proprietary database. According to DiPanfilo, none of the paperwork for these orders went through Marcus Food's headquarters in Kansas. Marcus Food, however, asserts that oversight for DiPanfilo's activities came directly from its Wichita headquarters. The company also reimbursed DiPanfilo for the costs of his office rent and business expenses pursuant to invoices that DiPanfilo submitted to the company via mail, email, or facsimile. DiPanfilo visited Kansas at least twice during their relationship, once for business in August 2008 and earlier for a social event honoring a Marcus Food coworker in March 2005.

In February 2009, Marcus Food terminated its business relationship with DiPanfilo, asserting that DiPanfilo breached their agreement when he failed to pay his 45% share of the net losses on his accounts. The company sent him a letter dated May 19, 2009 that detailed these outstanding debts, including $76,959 for products sold at a loss in closed sales transactions, $36,806 for products sold at a loss in open sales transactions, $13,224 in losses from currency transactions in November 2008, $67,582 in losses in accounts receivable for all of DiPanfilo's transactions, $20,000 estimated in lost inventory, $59,541 in lost product removed without authorization from the Coolbridge Cold Storage facility, and $6,000 in lost product abandoned at the McAllen Cold Storage facility.

DiPanfilo's 45% share of the net loss detailed in the letter totaled $280,112. Marcus Food asked for a response to the letter by June 5, 2009. DiPanfilo never responded.

On August 28, 2009, Marcus Food filed a complaint against DiPanfilo in the federal district court in Wichita. DiPanfilo received personal service of the summons and complaint in Toronto from a Canadian process server on September 9, 2009. When DiPanfilo did not respond to the complaint by October 9, 2009, the Clerk of the court entered a default against him. On October 14, 2009, the court entered a default judgment against DiPanfilo in the amount of $207,585. This amount was based on the allegations in the complaint and an affidavit from Marcus Food's Chief Operating Officer, Keith A. Alter. Alter averred that “[t]he claim asserted in the Complaint is for a sum certain amount of $207,585,” but did not provide additional information beyond what was set forth in the complaint.

The complaint listed three categories of damages: $155,972 in net losses from closed sales transactions, $38,839 in net losses from the accounts receivable of two specific customers, and $12,774 in lost product from the Coolbridge Cold Storage facility. This reduction from the claims stated in Marcus Food's May 19, 2009 letter apparently reflects a refinement to an amount that the company believed was readily provable. The district court did not hold a hearing on the issue of damages.

After receiving the service documents, DiPanfilo was unsuccessful in finding counsel licensed in both Canada and Kansas. He then sought to locate an attorney licensed only in Kansas, but had difficulty finding counsel unencumbered by a conflict of interest. DiPanfilo ultimately retained counsel in December 2009. That was when he first learned about the default judgment entered against him two months earlier.

On March 23, 2010, approximately six-and-a-half months after being served and three months after learning of the default judgment, DiPanfilo filed a motion to set aside the judgment as void. He argued that the district court lacked personal jurisdiction over him as a Canadian citizen and lacked subject matter jurisdiction over the case due to a lack of proof or judicial findings as to the amount in controversy. As an alternative basis for setting aside the default judgment, DiPanfilo argued that his delay was due to excusable neglect in that he spent several months locating counsel, that he had a meritorious defense based on Marcus Food breaching the agreement first, and that Marcus Food would not be prejudiced since it had not yet attempted to collect on the judgment. He attached to his motion a personal affidavit supporting these arguments.

The district court heard oral argument on DiPanfilo's motion on August 30, 2010, pursuant to a notice that asked the parties specifically to address the issue of excusable neglect. Both parties acknowledged this request on the record. The only explanation for DiPanfilo's delay provided by his counsel, however, was the following:

I think it probably has to do with doing the work, getting everything ready, getting the facts involved to prepare the affidavit, and making sure that he could approve the affidavit.

There were times when I would try to locate him and he was not available. He does travel some. He does have access to the Internet and a phone. By the same token, he's trying to work and earn his money in order to pay his expenses, including legal fees. So I think that would be what the issue is.

In a memorandum and order issued on October 5, 2010, the district court determined that it had personal jurisdiction over DiPanfilo and subject matter jurisdiction over the dispute. The court therefore denied the motion to set aside the default judgment as void. In addition, the court concluded that DiPanfilo had failed to show excusable neglect, thus denying his motion on that ground as well. This timely appeal followed.

II. ANALYSIS

A. Standard of review

Rule 60(b) of the Federal Rules of Civil Procedure allows the district court to relieve either party from a judgment or final order. Relief under this rule is “extraordinary and may only be granted in exceptional circumstances.” Dronsejko v. Thornton, 632 F.3d 658, 664 (10th Cir.2011) (internal quotation marks omitted). The abuse-of-discretion standard generally applies to the review of a district court's decision to deny a motion to set aside a default judgment for excusable neglect under Rule 60(b)(1). Hukill v. Okla. Native Am. Domestic Violence Coal., 542 F.3d 794, 796–97 (10th Cir.2008).

Where a party moves for relief on the ground that the judgment is void under Rule 60(b)(4), however, this court must apply the de novo standard of review. This is because “relief is not a discretionary matter; it is mandatory” where Rule 60(b)(4) is properly invoked. Id. at 797 (internal quotation marks omitted).

B. The district court properly found that it had personal jurisdiction over DiPanfilo

DiPanfilo argues that the default judgment against him should be set aside as void because the district court lacked personal jurisdiction over him and failed to affirmatively find that it had jurisdiction prior to entering the default judgment. “A default judgment in a civil case is void if there is no personal jurisdiction over the defendant.” Id. at 797 (internal...