Fidrych v. Marriott Int'l, Inc., No. 18-2030

• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)
• Writing for the Court: TRAXLER, Senior Circuit Judge
• Citation: 952 F.3d 124
• Parties: Anthony M. FIDRYCH; Patricia Anne Fidrych, Plaintiffs - Appellants, v. MARRIOTT INTERNATIONAL, INC., Defendant - Appellee.
• Docket Number: No. 18-2030
• Decision Date: 02 March 2020

952 F.3d 124

Anthony M. FIDRYCH; Patricia Anne Fidrych, Plaintiffs - Appellants,
v.
MARRIOTT INTERNATIONAL, INC., Defendant - Appellee.

No. 18-2030

United States Court of Appeals, Fourth Circuit.

Argued: December 11, 2019
Decided: March 2, 2020

ARGUED: Nathan Maxwell Crystal, CRYSTAL & GIANNONI-CRYSTAL, LLC, Charleston, South Carolina, for Appellants. Paul K. Leary, Jr., COZEN O’CONNOR, Philadelphia, Pennsylvania, for Appellee. ON BRIEF: Mark C. Tanenbaum, MARK C. TANENBAUM, PA, Mount Pleasant, South Carolina, for Appellants. Matthew Bleich, COZEN O’CONNOR, Philadelphia, Pennsylvania, for Appellee.

Before AGEE and QUATTLEBAUM, Circuit Judges, and TRAXLER, Senior Circuit Judge.

Affirmed in part, vacated in part, and remanded by published opinion. Senior Judge Traxler wrote the opinion, in which Judge Agee and Judge Quattlebaum joined.

TRAXLER, Senior Circuit Judge:

Bud Fidrych and his wife, both South Carolina residents, sued Marriott International in South Carolina district court after Fidrych was injured at the Boscolo Milano, a Marriott-affiliated hotel in Milan, Italy. After Marriott failed to file a timely answer to the complaint, the district court clerk, at the Plaintiffs’ request, made an entry of default. The district court subsequently entered what it described as a default judgment and set a date for the damages hearing. That same day, the district court sent Marriott notice of the default and of the damages hearing date. Five days after receiving notice, Marriott filed a motion to set aside the default, in which it argued that the court lacked personal jurisdiction over Marriott. The district court set aside the default and subsequently granted Marriott’s motion to dismiss for lack of personal jurisdiction. The Fidryches appeal, challenging the court’s decisions to set aside the default and to dismiss for lack of jurisdiction. They also contend that the district court erred by refusing to award them attorney’s fees as a sanction for Marriott’s failure to timely answer the complaint. As we will explain, we affirm the district court’s dismissal for lack of personal jurisdiction, but we vacate the district court’s denial of sanctions and remand that issue for reconsideration.

I.

Marriott is incorporated in Delaware, with its principal place of business in Maryland. Of the 6,200 hotels in the Marriott system, ninety (1.45%) are in South Carolina. Marriott does not own any of those ninety hotels – sixty-three are franchisees, and the remaining twenty-seven are licensed or managed by Marriott. Marriott has a Certificate of Authority issued by the South Carolina Secretary of State, as is required of all foreign corporations transacting business in the state. See S.C. Code § 33-15-101(a).

952 F.3d 129

Marriott’s website permits online booking and is accessible in South Carolina. When reserving a room online, the website requires the guests to provide their address and other personal information, and it allows guests to use a drop-down menu to select the place of their residence. The drop-down menu lists South Carolina, along with every other state in the country and every other country in the world.

The Fidryches are South Carolina residents. They are members of Marriott’s rewards program and have frequently stayed in Marriott and Marriott-affiliated hotels around the world. Bud Fidrych was traveling to Milan as part of his job as a demonstration pilot for Gulfstream Aerospace Corporation. According to the complaint, the Gulfstream team of which Fidrych was a member typically stayed at Marriott hotels when travelling for work, in part because the employees were members of Marriott’s rewards program and because they received a discount by virtue of a relationship between Marriott and General Dynamics, Gulfstream’s parent company.

Fidrych alleges that he specifically requested a Marriott hotel in Milan because he always felt safe and comfortable at Marriott hotels, but he was not otherwise involved in booking. Instead, the complaint alleges that in accordance with the usual Gulfstream procedures, the reservations for the trip were handled by a member of Fidrych’s work team, who used a travel agency to book the rooms at the Boscolo. The Boscolo is not owned or managed by Marriott, but it is part of Marriott’s "Autograph Collection" of hotels. The operation of the Boscolo is governed by a franchise agreement to which Marriott is not a party.

Fidrych’s affidavit alleges that at some point before the trip, he reviewed the Boscolo on Marriott’s website. The Marriott logo "was prominently displayed on the website," which gave him confidence in the Boscolo, particularly since there were no disclaimers stating that Marriott would not be responsible for the Boscolo’s conditions or services. J.A. 231. Fidrych does not allege that he was in South Carolina when he looked up the Boscolo, nor does he specify whether he researched the hotel before or after the reservations were made.

During his stay at the Boscolo, Fidrych was injured when the glass shower door shattered in his hand, severing a tendon in his thumb. Fidrych underwent two surgeries to repair the damage to his hand. The Fidryches subsequently filed suit against Marriott in federal district court in South Carolina.

After Marriott was served, it tendered defense of the action to the management of the Boscolo, in light of the Boscolo’s contractual indemnification obligations. Boscolo management failed to take appropriate action, and no answer was filed. At the Plaintiffs’ request, the district court clerk made an entry of default. The district court subsequently granted Fidrych’s motion for default judgment and set a date for a damages hearing. Although notice to Marriott was not required, the district court sent Marriott notice of the default and the hearing. Within a few days, Marriott filed a motion to set aside the default in which it asserted good cause to be relieved of the default and argued that the district court lacked personal jurisdiction over it.

The district court granted the motion to set aside the default under the standards set out in Rule 55 of the Federal Rules of Civil Procedure. In that order, the court invited the Plaintiffs to file a motion for sanctions against Marriott, noting that attorneys fees could be an appropriate sanction. After the default was set aside, Marriott

952 F.3d 130

filed a motion to dismiss for lack of personal jurisdiction and the Plaintiffs filed a motion seeking sanctions of more than $86,000 in attorneys’ fees and expenses. The case was subsequently transferred to a different district judge, who granted Marriott’s motion to dismiss for lack of personal jurisdiction. As to the Plaintiffs’ motion for sanctions, the judge denied it, explaining that the requested amount was "excessive, and that Plaintiffs have not shown an adequate causal link between the default judgment and the total requested fees." J.A. 252. This appeal followed.

II.

The Plaintiffs first challenge the standard applied by the district court when considering Marriott’s motion to set aside the default. Rule 55 provides that the district court "may set aside an entry of default for good cause, and it may set aside a final default judgment under Rule 60(b)." Fed. R. Civ. P. 55(c). Rule 60(b) provides that a "final judgment" may be set aside, inter alia , if the judgment is the product of "mistake, inadvertence, surprise, or excusable neglect." Fed. R. Civ. P. 60(b)(1). When granting the motion to set aside the default, the district court applied the good-cause standard of Rule 55 rather than Rule 60 ’s excusable-neglect standard.

On appeal, the Plaintiffs contend that that an entry of default is a ministerial act performed by the district court clerk, see Fed. R. Civ. P. 55(a), and that Rule 55 applies only to efforts to set aside these ministerial entries of default. In this case, however, after the clerk’s entry of default, the district court granted Plaintiffs’ motion for a default judgment and set a date for the damages hearing. The Plaintiffs therefore argue that because this case proceeded beyond the ministerial entry of default, the court should have analyzed the issue under Rule 60 ’s excusable-neglect standard. We disagree.

Rule 55 contemplates a two-step procedure. The first step is the entry of default, which must be made by the clerk "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise." Fed. R. Civ. P. 55(a). The second step is the subsequent entry of a default judgment , which may be done by the clerk "[i]f the plaintiff’s claim is for a sum certain or a sum that can be made certain by computation," Fed. R. Civ. P. 55(b)(1), but otherwise must be done by the district court, see Fed. R. Civ. P. 55(b)(2) ("In all other cases, the party must apply to the court for a default judgment. ..."). As the Rule itself makes clear, however, the standard for setting aside a default does not turn on whether the clerk or the district court entered the order, but on whether the default judgment is final . See Fed. R. Civ. P. 55(c) ("The court may set aside an entry of default for good cause, and it may set aside a final default judgment under Rule 60(b)....") (emphasis added).

In this case, the district court issued...