Bell Helicopter Textron Inc. v. Islamic Republic of Iran, Civil Action No. 06–1694 (ABJ).

• Decision Date: 25 September 2012
• Docket Number: Civil Action No. 06–1694 (ABJ).
• Parties: BELL HELICOPTER TEXTRON INC., et al., Plaintiffs, v. ISLAMIC REPUBLIC OF IRAN, et al., Defendants.
• Court: U.S. District Court — District of Columbia

892 F.Supp.2d 219

BELL HELICOPTER TEXTRON INC., et al., Plaintiffs,

v.ISLAMIC REPUBLIC OF IRAN, et al., Defendants.

Civil Action No. 06–1694 (ABJ).

United States District Court, District of Columbia.

Sept. 25, 2012.

David Lee Rutland, Wharton, Levin, Ehrmantraut, & Klein PA, Annapolis, MD, David W. Chant, John G. Sams, Brown, Dean, Wiseman, Proctor, Hart & Howell, LLP, Fort Worth, TX, for Plaintiffs.

Charles Thomas Kimmett, Jr., Christopher J. Wright, Patrick Pearse O'Donnell, Wiltshire & Grannis, LLP, Laina Catherine Lopez, Thomas G. Corcoran, Jr., Berliner, Corcoran & Rowe, L.L.P., Washington, DC, for Defendants.

MEMORANDUM OPINION

AMY BERMAN JACKSON, District Judge.

This action involves a motion by defendant Islamic Republic of Iran (“Iran”) under Federal Rules of Civil Procedure 60(b)(1), (4), and (6) to vacate a default judgment entered against it for a violation of the Lanham Act, 15 U.S.C. § 1125 (2006). Because the Court finds that defendant Iran has not waived sovereign immunity, it will grant its motion to vacate the default judgment pursuant to Rule 60(b)(4) [Dkt. # 28] and dismiss the action for lack of subject-matter jurisdiction.¹

I. BACKGROUND

On September 29, 2006, plaintiffs Bell Helicopter Textron Inc. (“Bell”) and Bell Helicopter Textron Canada Ltd. (“Bell Canada”) filed a complaint in this Court against defendants Iran, Iran Aircraft Manufacturing Company (“HESA”), and Iran Helicopter Support & Renewal Company (“PANHA”), alleging trademark violations under the Lanham Act. Compl. [Dkt. # 1] ¶ 4.2. Defendants failed to appear, and on March 31, 2009, the Clerk of the Court found them to be in default. [Dkt. # 11]. On October 5, 2009, the Court then assigned to the matter conducted an evidentiary hearing pursuant to the Foreign Sovereign Immunities Act (“FSIA”) to determine whether plaintiffs had “establishe[d] [their] claim or right to relief by evidence satisfactory to the court.” 28 U.S.C. § 1608(e) (2006). [Dkt. # 28–2]. After concluding that plaintiffs had adequately established their claim for relief, the Court issued Findings of Fact and Conclusions of Law (“Findings of Fact”) [Dkt. # 17] and entered a default judgment against defendant Iran in the amount of $22,532,127.28 on February 11, 2011, 764 F.Supp.2d 122 (D.D.C.2011). Order and Judgment [Dkt. # 18].²

The evidentiary hearing focused on the merits of plaintiffs' claims; plaintiffs submitted evidence regarding trademark infringement, dilution, and tarnishment, as well as the amount of the damages. Transcript of Hearing (“Tr.”) [Dkt. # 28–2] at 3–4. The hearing did not specifically address whether the Court had subject matter jurisdiction to hear the case. Id. But the Findings of Fact contained the conclusion that jurisdiction was established because defendant had waived its sovereign immunity under the FSIA since “plaintiffs have demonstrated both that Iran engaged in commercial activity outside of the United States and that the commercial activity caused a direct effect in the United States.” Findings of Fact at 5.

Evidence presented at the hearing demonstrated that since 2001, defendant had been manufacturing helicopters that copied the distinctive trade dress of plaintiffs' “Bell 206.” Tr. at 18; Findings of Fact at 3 ¶¶ 9–11, 15. The defendant's aircraft, known as the “Shahed 278,” and the militarized version, the “Shahed 285,” were marketed to foreign customers at an air show on an island off the coast of Iran and were advertised in international aviation magazines. Tr. at 18. The witnesses presented expressed the belief that international customers might purchase defendant's helicopters thinking that they were actually Bell helicopters and expecting performance similar to that of a Bell helicopter. Tr. at 42, 48. Finding that plaintiffs'customers were likely to be confused as to the source or origin of the products sold by defendant, id. at 8, the Court awarded plaintiffs treble damages of $19.5 million, $2.5 million in prejudgment interest, and nearly $500,000 in attorney's fees. Findings of Fact at 3, 9; Order of Default Judgment [Dkt. # 18].

Defendant received notice of the default judgment [Dkt. # 20] on August 17, 2011. On February 10, 2012, it filed a motion to vacate the judgment pursuant to Federal Rules of Civil Procedure 60(b)(1), (4), and (6) on the grounds that the court lacked subject matter jurisdiction. Def.'s Mem. in Supp. of Mot. to Vacate Default J. (“Def.'s Mem.”) [Dkt. # 28] at 2–3, 10.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 60(b) permits a court to relieve a party from a judgment or order for any one of six reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud, misrepresentation, or other misconduct by an opposing party; (4) a void judgment; (5) a satisfied, released, or discharged judgment; or (6) any other reason justifying relief. Fed.R.Civ.P. 60(b). A motion to vacate on one of the first three grounds must be made within one year, and all motions must be made “within a reasonable time.” Fed.R.Civ.P. 60(c)(1). “The party seeking relief from judgment bears the burden of proof.” Norris v. Salazar, 277 F.R.D. 22, 25 (D.D.C.2011).

Rule 60(b)(4) applies if a judgment is void, a judgment is considered to be void “if the court lacked ... subject-matter jurisdiction in the case.” Ramirez v. Dep't of Justice, 680 F.Supp.2d 208, 210 (D.D.C.2010). “[I]f the judgment is void, relief is mandatory.” Combs v. Nick Garin Trucking, 825 F.2d 437, 441 (D.C.Cir.1987).

A court lacks subject-matter jurisdiction over a foreign state “except as provided ... by nine specifically enumerated exceptions.... If no exception applies, a foreign sovereign's immunity under the FSIA is complete: the district court lacks subject matter jurisdiction over the plaintiff's case.” Phoenix Consulting Inc. v. Republic of Angl., 216 F.3d 36, 39 (D.C.Cir.2000).

III. ANALYSISA. Because jurisdiction has never been litigated, the Court must conduct its own de novo analysis of the jurisdictional question.

The Supreme Court has explained that a judgment is void under Rule 60(b)(4) if the court that entered it lacked jurisdiction over the case. United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 130 S.Ct. 1367, 1377, 176 L.Ed.2d 158 (2010). However, “[a] judgment is not void ... simply because it is or may have been erroneous.” Espinosa, 130 S.Ct. at 1377 (internal citation omitted). Nor is a motion under Rule 60(b)(4) a substitute for a timely appeal. Id. “Instead, Rule 60(b)(4) applies only in the rare instance where a judgment is premised either on a certain type of jurisdictional error or on a violation of due process that deprives a party of notice or the opportunity to be heard.” Id., citing United States v. Boch Oldsmobile, Inc., 909 F.2d 657, 661 (1st Cir.1990). ³

Here, defendant contends that the judgment is void because the Court lacked subject matter jurisdiction to enter it. Def.'s Mem. at 2. And the law is clear that “every federal court has a ‘special obligation to satisfy itself’ of its own jurisdiction before addressing the merits of any dispute.” Dominguez v. UAL Corp., 666 F.3d 1359, 1362 (D.C.Cir.2012), quoting Bender v. Williamsport Area School Dist., 475 U.S. 534, 541, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986).

Plaintiffs respond that a defendant cannot obtain relief from a default judgment for lack of jurisdiction unless “the court that rendered judgment lacked even an ‘arguable basis' for jurisdiction.” Pl.'s Opp. at 4, citing Espinosa, 130 S.Ct. at 1377. Plaintiffs direct the Court to the following passage from Espinosa:

Federal courts considering Rule 60(b)(4) motions that assert a judgment is void because of a jurisdictional defect generally have reserved relief only for the exceptional case in which the court that rendered judgment lacked even an “arguable basis” for jurisdiction. Nemaizer v. Baker, 793 F.2d 58, 65 (2d Cir.1986); see, e.g., Boch Oldsmobile, supra, at 661–662 (“[T]otal want of jurisdiction must be distinguished from an error in the exercise of jurisdiction, and ... only rare instances of a clear usurpation of power will render a judgment void....”).

130 S.Ct. at 1377. But plaintiffs' argument mischaracterizes what the Supreme Court actually said in Espinosa. The Court did not hold that the test should be simply whether there was any arguable basis for jurisdiction, or that in reviewing a judgment under Rule 60(b)(4), a district court is limited only to those circumstances where there has been a clear usurpation of power. In fact, the Court expressly declined to address that question in the paragraph immediately following the quote provided by plaintiffs:

This case presents no occasion to engage in such an “arguable basis” inquiry or to define the precise circumstances in which a jurisdictional error will render a judgment void because [defendant] does not argue that [the court's] error was jurisdictional.

Id.

The Third Circuit recently grappled with what Espinosa might mean in Aurum Asset Managers, LLC v. Bradesco Companhia de Seguros, 441 Fed.Appx. 822, 824–25 (3d Cir.2011). In that case, a Brazilian-owned company moved to vacate a judgment enforcing an arbitration award against it. Id. at 823. As in this case, the motion to vacate was filed in the district court almost a year after the original order was entered. Id. at 823–24;Aurum Asset Managers, LLC v. Banco Do Estado Do Rio Grande Do Sul, Misc. No. 08–102, 2010 WL 4027382, at *1 (E.D.Pa.2010). The district court ruling on the motion considered the question of jurisdiction de novo and vacated the order on the grounds that the court lacked jurisdiction under the FSIA to confirm the arbitration award and enter judgment in the first place. Aurum, 2010 WL 4027382, at *7.

On appeal, the Third Circuit took note of the Supreme Court's observation in Espinosa that Rule 60(b)(4) had generally been applied “only in the ‘rare instance’ that there is a jurisdictional error,”...