Bally Export Corp. v. Balicar, Ltd., No. 86-1150

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Writing for the CourtBefore WOOD and COFFEY, Circuit Judges, and SWYGERT; HARLINGTON WOOD, Jr.
Citation804 F.2d 398
Docket NumberNo. 86-1150
Decision Date05 December 1986
Parties, 55 USLW 2251, 6 Fed.R.Serv.3d 113 BALLY EXPORT CORPORATION, a Delaware corporation, Plaintiff-Appellee, v. BALICAR, LTD., a foreign corporation, and Juliano Internacional S.A., a foreign corporation, Defendants-Appellants.

Page 398

804 F.2d 398
102 A.L.R.Fed. 797, 55 USLW 2251, 6
Fed.R.Serv.3d 113
BALLY EXPORT CORPORATION, a Delaware corporation, Plaintiff-Appellee,
v.
BALICAR, LTD., a foreign corporation, and Juliano
Internacional S.A., a foreign corporation,
Defendants-Appellants.
No. 86-1150.
United States Court of Appeals,
Seventh Circuit.
Argued June 11, 1986.
Decided Oct. 24, 1986.
As Amended Nov. 7, 1986.
Rehearing and Rehearing En Banc Denied Dec. 5, 1986.

Page 399

George B. Collins, Collins & Uscian, Chicago, Ill., for defendants-appellants.

James R. Latta, Berman, Fagel, Haber & Maragos, Chicago, Ill., for plaintiff-appellee.

Before WOOD and COFFEY, Circuit Judges, and SWYGERT, Senior Circuit Judge.

HARLINGTON WOOD, Jr., Circuit Judge.

Balicar, Ltd. ("Balicar") and Juliano Internacional S.A. ("Juliano") appeal the district court's denial of their motion to vacate a default judgment entered against them in the amount of $1,018,205.87. Balicar and Juliano, both foreign corporations, contend that the district court lacked personal jurisdiction over them when it entered the July 7, 1981 judgment in favor of Bally Export Corporation ("Bally"). We find that the district court properly concluded that Balicar and Juliano fell within the "transacting business" clause of the Illinois long-arm statute, Ill.Rev.Stat. ch. 110, Sec. 2-209 (1985), and accordingly we affirm the decision of the district court.

I.

On January 30, 1981, Bally filed suit against Balicar and Juliano in federal district court for the Northern District of Illinois. The federal court's jurisdiction was based upon diversity of citizenship, 28 U.S.C. Sec. 1332. Bally, the plaintiff, is a Delaware corporation which does business in Illinois. Balicar is a corporation organized under the laws of Cayman, a part of the British West Indies, and its principal

Page 400

place of business is at Georgetown, Grand Cayman, British West Indies. Juliano is a Panamanian corporation and its principal place of business is Panama. Bally's final amended complaint alleged that Balicar and Juliano were liable to Bally for the purchase price of goods and merchandise, apparently gambling devices such as slot machines, which Bally manufactured in Illinois and sold to Balicar and Juliano. The amended complaint stated four counts, based upon the theories of an account stated and fraud, against both defendants. When neither defendant appeared, a default judgment was sought and granted on July 8, 1981.

For nearly four years, Bally was unable to execute upon its default judgment. Then, in 1985, Bally located assets which it believed belonged to the defendants. When Bally attempted to execute upon the 1981 judgment by bringing citation proceedings against L & G Management Consultants, Ltd., a foreign corporation which does business with both defendants, Balicar and Juliano moved the district court to vacate the 1981 judgment as being void for lack of personal jurisdiction. Fed.R.Civ.P. 60(b)(4). 1 The defendants claimed that the amended complaint failed to demonstrate a basis for either long-arm jurisdiction under the Illinois statute or jurisdiction based upon the Illinois common-law doing-business rule. Juliano also argued that it was not properly served.

The district court denied the defendants' motion to vacate the default judgment. The court found, among other things, that Balicar was the alter ego of Juliano, and Balicar and Juliano had transacted business in Illinois for purposes of the Illinois long-arm statute. The court concluded that the exercise of jurisdiction in the 1981 action was proper. The court also decided that Juliano had waived the service-of-process issue, although the court found later, in an order dated January 27, 1986, that Juliano had failed to show that the service of process upon it was unsatisfactory, and furthermore that the admittedly proper service upon Juliano's alter ego Balicar was sufficient to constitute proper service upon Juliano. Both Juliano and Balicar appeal.

II.

A. Standard of Review

There was some confusion, both in the briefs and at oral argument, as to the proper standard of review. The general rule is that

relief from a judgment under rule 60(b) is an extraordinary remedy and is granted only in exceptional circumstances. The decision to grant relief under rule 60(b) is left to the sound discretion of the trial court, and review of a trial court's decision to grant or deny rule 60(b) relief is subject to an abuse of discretion standard.

United States v. Zima, 766 F.2d 1153, 1157 (7th Cir.1985) (citing C.K.S. Engineers, Inc. v. White Mountain Gypsum Co., 726 F.2d 1202, 1204-05 (7th Cir.1984)). However, when the rule 60(b)(4) motion alleges that "the underlying judgment is void because the court lacked personal or subject matter jurisdiction," once the court decides that the allegations are correct "the trial judge has no discretion and must grant appropriate Rule 60(b) relief." Textile Banking Co. v. Rentschler, 657 F.2d 844, 850 (7th Cir.1981). See also Gulf Coast Fans, Inc. v. Midwest Electronics Importers, Inc., 740 F.2d 1499, 1511 (11th Cir.1984) (refusal to set aside default judgment an abuse of discretion where personal jurisdiction issue was unresolved); Venable v. Haislip, 721 F.2d 297, 300 (10th Cir.1983) (if judgment void for lack of jurisdiction, court must grant relief). Therefore, if the district court in the underlying action had no jurisdiction over the defendants it was a per se abuse of discretion to deny the defendants' rule 60(b)(4) motion.

Page 401

B. Burden of Proof

Our circuit apparently has never had occasion to consider which party, on a rule 60(b)(4) motion, has the burden of proof to establish whether or not the district court in the underlying action had jurisdiction to enter the default judgment. Normally it is well established that the plaintiff must prove jurisdiction exists once it is challenged by the defendant. See, e.g., Bobka v. Cook County Hospital, 117 Ill.App.3d 359, 73 Ill.Dec. 3, 4, 453 N.E.2d 828, 829 (1st Dist.1983). There is not agreement, however, as to whether the burden remains upon the plaintiff after the plaintiff has obtained a default judgment.

Several courts have held that the burden of proving the facts supporting jurisdiction remains upon the plaintiff. See Donnely v. Copeland Intra Lenses, Inc., 87 F.R.D. 80, 85 (E.D.N.Y.1980); Rockwell International Corp. v. KND Corp., 83 F.R.D. 556, 559 n. 1 (N.D.Tex.1979); DiCesare-Englar Productions, Inc. v. Mainman, Ltd., 81 F.R.D. 703, 705 (W.D.Pa.1979). These courts have decided that on a rule 60(b)(4) motion to vacate there is no reason to "reverse the normal placement when a party challenges ... in personam jurisdiction through a Rule 12 motion to dismiss." Rockwell, 83 F.R.D. at 559 n. 1. Therefore, when the issue in a rule 60(b)(4) motion is whether the defendant had sufficient minimum contacts with the forum state, these courts have placed the burden of proof on the plaintiff.

At least one court, however, has recognized that the burden of proof issue arises in a somewhat different context in a rule 60(b)(4) motion. In Rohm & Haas Co. v. Aries, 103 F.R.D. 541 (S.D.N.Y.1984), the court noted that the cases cited above

[fail] to consider that a defendant who was on notice of the original proceedings, had an opportunity, at that time, to oppose jurisdiction by a Rule 12 motion. Such a motion avoids prejudice to the plaintiff because all evidence needed to prove jurisdiction is readily available. This is not true of a Rule 60(b) motion made, as in this case, almost 20 years after judgment. Should the burden of proof be lodged with the plaintiff, severe prejudice can result when evidence needed to prove jurisdiction is no longer available due to the passage of time. Accordingly, it is not unfair to place the burden on a defendant who has chosen to contest jurisdiction after judgment under Rule 60(b) rather than at the time of trial pursuant to Rule 12. This, of course, presumes that defendant was on notice at the time of the original proceedings.

103 F.R.D. at 544.

We believe that the approach taken by the court in Rohm & Haas is the better one. If the defendant, after receiving notice, chooses to let the case go to a default judgment, the defendant must then shoulder the burden of proof when the defendant decides to contest jurisdiction in a postjudgment rule 60(b)(4) motion. Therefore, since both Balicar and Juliano received timely notice of the 1981 proceedings, 2 they must prove that the district court lacked personal jurisdiction over them.

C. Jurisdiction over the Defendants

A federal district court sitting in diversity looks to the long-arm statute of the state in which it is sitting to determine whether it has personal jurisdiction over the defendants. 3 Madison Consulting Group v. State of South Carolina, 752 F.2d 1193, 1195 (7th Cir.1985). Therefore, we look to the Illinois long-arm statute, which provides in relevant part that a nonresident...

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    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 17, 1998
    ...on newly-introduced evidence that supposedly established the commercial nature of CTS's speech. See Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 404 (7th Cir.1986) (stating that "a motion for reconsideration is an improper vehicle to introduce evidence previously available or to tende......
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    ...of proof on plaintiff to show court had jurisdiction over claim under Flood Control Act of 1928); Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 401 (7th Cir.1986) (plaintiff must prove jurisdiction exists once challenged by defendant). In Page 700 whether this burden has been met, the ......
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    • United States District Courts. 2nd Circuit. United States District Court (Connecticut)
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    ...of proof when challenging sufficiency of service of process." See Peia, 2001 WL 789201, at *3 (citing Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 404 (7th Cir.1986)). In other words, "[o]bjections to the service of process 'must be specific and point out in what manner the plaintiff ......
  • Rose v. Franchetti, No. 88 C 10036.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • May 16, 1989
    ...than where it was when Green issued, and thus that pre-Green cases remain authoritative. See, e.g., Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 403 (7th Cir.1986); Afirm, Inc. v. Frazee Paint & Wallcovering Co., 624 F.Supp. 973, 977 n. 5 (N.D.Ill.1985). This court takes a different a......
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192 cases
  • Commodity Trend Service, Inc. v. Commodity Futures Trading Com'n, No. 97-3477
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 17, 1998
    ...on newly-introduced evidence that supposedly established the commercial nature of CTS's speech. See Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 404 (7th Cir.1986) (stating that "a motion for reconsideration is an improper vehicle to introduce evidence previously available or to tende......
  • In re Daniels, Bankruptcy No. 03-10845 SR.
    • United States
    • United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania
    • July 16, 2003
    ...of proof on plaintiff to show court had jurisdiction over claim under Flood Control Act of 1928); Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 401 (7th Cir.1986) (plaintiff must prove jurisdiction exists once challenged by defendant). In Page 700 whether this burden has been met, the ......
  • Taylor v. Norwalk Cmty. Coll., Civil Action No. 3:13 - CV - 1889 (CSH)
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Connecticut)
    • September 28, 2015
    ...of proof when challenging sufficiency of service of process." See Peia, 2001 WL 789201, at *3 (citing Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 404 (7th Cir.1986)). In other words, "[o]bjections to the service of process 'must be specific and point out in what manner the plaintiff ......
  • Rose v. Franchetti, No. 88 C 10036.
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • May 16, 1989
    ...than where it was when Green issued, and thus that pre-Green cases remain authoritative. See, e.g., Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 403 (7th Cir.1986); Afirm, Inc. v. Frazee Paint & Wallcovering Co., 624 F.Supp. 973, 977 n. 5 (N.D.Ill.1985). This court takes a different a......
  • Request a trial to view additional results

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