O'Brien v. R.J. O'Brien & Associates, Inc.
| Decision Date | 08 July 1993 |
| Docket Number | No. 92-1567,92-1567 |
| Citation | 998 F.2d 1394 |
| Parties | Mark E. O'BRIEN, Plaintiff-Appellee, v. R.J. O'BRIEN & ASSOCIATES, INC., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Daniel G. Loftus (argued), Chicago, IL, Thomas P. Sughrua, Bellevue, WA, for plaintiff-appellee.
Kenneth M. Lodge, Ronald L. Sandack (argued), Burke, Smith & Williams, Vincent D. Pinelli, Burke, Burns, Ellison & Pinelli, Chicago, IL, for defendant-appellant.
Before CUDAHY, FLAUM, and KANNE, Circuit Judges.
The district court defaulted the defendant, R.J. O'Brien & Associates, Inc. (RJO), on the basis that it failed to appear or file a response to the complaint of Mark E. O'Brien (O'Brien) for over seventeen months after being served with process. On appeal, RJO challenges the district court's entry of the default and its refusal to set aside the default order and the subsequent default judgment. RJO also alleges that the district court failed to provide it with an opportunity to present evidence regarding the amount of damages. We affirm both the default and the entry of default judgment.
This dispute reaches us after a prolonged journey through two district courts. On April 28, 1989, O'Brien filed a multiple count complaint in the United States District Court for the Western District of Washington against numerous defendants, including RJO and The Sage Group, Inc. (Sage). O'Brien maintained an investment account with Sage, an introducing broker, who purchased silver options for him through RJO. Count III of O'Brien's complaint alleged that RJO fraudulently executed the silver option transactions in violation of the Commodities Futures Trading Act, resulting in the loss of approximately $20,000 from his investment account with Sage.
In March 1990, the case was transferred to the United States District Court for the Northern District of Illinois pursuant to a forum selection clause in a contract between O'Brien and RJO. Over ten months later O'Brien moved to default RJO, which had not filed an appearance or responded to the complaint. At a default hearing on January 23, 1991, counsel for RJO asserted that it had not been served. When O'Brien was unable to produce proof of service, he withdrew his motion for default. Two days later, O'Brien filed another motion for default, this time accompanied by a copy of the summons and a return of service indicating that RJO had been served on August 23, 1989. On February 1, 1991, the district court conducted a hearing on the second motion for default, at which RJO was unable to explain its failure to answer or respond to the complaint other than by stating it was attempting to investigate the validity of service. Relying on the presumptive validity of the return of service and determining that no appearance had been entered on behalf of RJO, the district court entered an order defaulting RJO and scheduled for March 22, 1991 a "prove-up" hearing to determine the amount of damages to be awarded.
Before the district judge on March 1, 1991, RJO entered its appearance and filed a motion to vacate the entry of default. O'Brien filed its response to RJO's motion to vacate. RJO was given until March 8 to file a reply to O'Brien's response. The district judge set March 22 as the date for ruling or hearing on the motion to vacate and indicated that he would also hold the previously scheduled "prove-up" hearing on that date.
At the March 22 hearing, the district judge inquired as to the status of the motion to vacate, and the parties responded that it was fully briefed. As to the scheduled "prove-up" for damages, O'Brien filed a motion for default judgment and submitted materials supporting his request for damages. The district judge indicated that he would decide the motion to vacate the default, and, if he denied that motion, he would then consider the parties' submissions related to the judgment to be entered on the default. RJO did not object to the procedure outlined by the district court. At that time, however, RJO failed to submit any evidence indicating its view with regard to damages, in the event the motion to vacate the default was denied.
In an order dated March 28, 1991, the district court denied the motion to vacate and entered default judgment against RJO in the amount of $40,000, plus prejudgment interest. O'Brien v. The Sage Group, Inc., 136 F.R.D. 151 (N.D.Ill.1991).
On April 11, 1991, RJO filed a motion requesting the court (1) to dismiss the case for lack of personal jurisdiction because of defects in the summons served on RJO, (2) in light of such defects, to reconsider its March 28, 1991 order denying RJO's Rule 55(c) motion to vacate, (3) to vacate the default judgment pursuant to Fed.R.Civ.P. 60(b), or (4) to vacate the award of damages and set a hearing to determine the actual amount of damages.
On January 22, 1992, the court denied RJO's motion to dismiss for lack of personal jurisdiction and the motions to set aside the default, but reduced the amount of the default judgment to $20,000, the amount alleged in Count III of O'Brien's complaint. O'Brien v. The Sage Group, Inc., 141 F.R.D. 81 (N.D.Ill.1992).
On appeal, RJO urges us to find that the district court abused its discretion either by entering default or by refusing to set aside the default and subsequent default judgment. 1 At a minimum, RJO argues, the district court erred by not providing it with an opportunity to present evidence on the proper amount of damages.
Fed.R.Civ.P. 12(a) requires the defendant to file an answer within twenty days after the service of the summons and complaint; the failure to do so may result in the defendant's default under Rule 55(a). When RJO did not appear or respond to O'Brien's complaint after being served with process seventeen months earlier, the district court granted O'Brien's motion for default on February 1, 1991. The decision to enter default lies within the district court's discretion. Merrill Lynch Mortg. Corp. v. Narayan, 908 F.2d 246, 250 (7th Cir.1990). RJO argues that the district court abused its discretion in entering the default order for two reasons.
First, RJO asserts that because O'Brien failed to file the return of service until the filing of the motion requesting default, RJO did not have sufficient time to investigate the service of process. O'Brien withdrew his initial motion for default on January 23, 1991, when he was unable to supply the court with proof of service. On January 25, O'Brien again moved for default, this time presenting the court with proof of service indicating RJO had been served on August 23, 1989. Seven days later, on February 1, the district court entered default against RJO. RJO contends that in doing so, the district court abused its discretion by not affording RJO time to investigate the validity of the newly filed return of service, especially in light of RJO's assertions at the January 23 hearing that it had not been served, as well as O'Brien's willingness at that hearing to allow RJO twenty-eight days "in which to decide how to respond to the motion and/or answer on the merits of the complaint."
A signed return of service constitutes prima facie evidence of valid service "which can be overcome only by strong and convincing evidence." Hicklin v. Edwards, 226 F.2d 410, 414 (8th Cir.1955). See also Taft v. Donellan Jerome, Inc., 407 F.2d 807, 808-09 (7th Cir.1969). 2 At the February 1, 1991 hearing on the motion to default, the district court relied on the presumptive validity of the return of service in defaulting RJO. The sworn statement contained on the return of service indicates the summons was served on August 23, 1989. At the default hearing, RJO conceded it had not appeared and did not offer any evidence indicating it had not been served, but rather asserted it was attempting to investigate the validity of service. Absent evidence to the contrary, the district court did not abuse its discretion by concluding that RJO had in fact been served in August, 1989.
Second, RJO contends that the time period for filing an answer under Rule 12 did not begin until the return of service was filed on January 25, 1991, and thus RJO still had time to file its answer when the court entered default on February 1. RJO relies on Audio Enterprises v. B & W Loudspeakers, 957 F.2d 406 (7th Cir.1992), in which we held that service was not complete, and thus not valid under Fed.R.Civ.P. 4(c)(2)(C)(ii), until the plaintiff filed the defendant's acknowledgement of service by mail. This holding does not conflict with the district court's actions in this case. Unlike the filing of an acknowledgement for valid service of process by mail, which Rule 4(c)(2)(C)(ii) requires, in the case of personal service, "[f]ailure to make proof of service does not affect the validity of service." Fed.R.Civ.P. 4(g). See King v. Best Western Country Inn, 138 F.R.D. 39, 43 (S.D.N.Y.1991); Bernard v. Strang Air, Inc., 109 F.R.D. 336, 338 (D.Neb.1985). Consequently, O'Brien's failure to file the return of service until January 25, 1991 did not extend the twenty-day deadline before which RJO had to file an answer under Rule 12.
Entry of default by the district judge against RJO for its unexplained failure to appear, answer or respond from August 23, 1989 through February 1, 1991, does not constitute abuse of discretion.
In its April 11 Motion, RJO requested that the district court set aside the default judgment, arguing that the judgment was void because the court lacked personal jurisdiction due to defects in the form of the summons served on RJO. We agree with the district court that RJO waived any challenge to personal jurisdiction by failing to raise the issue in its initial motion to vacate of March 1, 1991.
Fed.R.Civ.P. 4(b) sets forth the requirements for the content of a summons:
The summons shall be...
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