Harper MacLeod Solicitors v. Keaty & Keaty

• Decision Date: 26 July 2001
• Docket Number: No. 00-30906,00-30906
• Parties: (5th Cir. 2001) HARPER MACLEOD SOLICITORS, Plaintiff-Appellant, v. KEATY & KEATY, doing business as Keaty Law Firm, Defendant-Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

Page 389

260 F.3d 389 (5th Cir. 2001)

HARPER MACLEOD SOLICITORS, Plaintiff-Appellant, v. KEATY & KEATY, doing business as Keaty Law Firm, Defendant-Appellee.

No. 00-30906

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

July 26, 2001

[Copyrighted Material Omitted] Appeal from the United States District Court for the Eastern District of Louisiana

Before KING, Chief Judge, ALDISERT^* and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

Appellees Thomas Keaty, Robert Keaty and Keaty & Keaty, d/b/a the Keaty Law Firm, (the Defendants) suffered a default judgment in the Southern District of Texas in favor of Appellant Harper Macleod Solicitors (Harper), a Scottish law firm. When Harper sought to register the default judgment in the Eastern District of Louisiana pursuant to 28 U.S.C. § 1963, the Defendants challenged its validity alleging deficient service of process. The Louisiana district court sustained that challenge and, using Rule 60(b)(4), voided the default judgment. Harper now appeals, arguing that (1) the Texas district court's jurisdictional findings should be afforded preclusive effect in accordance with Texas law, and (2) service on the Defendants sufficiently complied with the Texas long arm statute to support the default judgment issued by the Texas district court. After concluding that district courts have authority to entertain motions challenging the validity of another district court's judgment using Rule 60(b)(4), we confirm the propriety of the district court's reliance on federal rules of issue preclusion to determine that the Texas district court's jurisdictional findings did not preclude the Defendants from arguing their jurisdictional claims. Further, we agree with the Louisiana district court's conclusion that service on the Defendants was defective under Texas law. Accordingly, we AFFIRM the judgment of the Louisiana district court voiding the default judgment of the Texas district court.

Factual and Procedural Background

On August 18, 1998, Harper filed suit against the Defendants in the Southern District of Texas, Galveston Division (the Texas Court). Harper alleged fraud and breach of contract in relation to its referral of two personal injury plaintiffs to the Defendants. Federal jurisdiction was founded on diversity of citizenship.

Harper attempted service on the Defendants in accordance with the Texas long-arm statute by forwarding three copies of the complaint, as well as three summonses, to the Texas Secretary of State (the Secretary). Harper provided the Secretary with the following "home or home office" addresses for the Defendants:

1. To Defendant Keaty & Keaty d/b/a The Keaty Firm's home or home office:

345 Doucet Road, Suite 104

Lafayette, LA 70503

2. To Defendant Robert M. Keaty's home or home office:

c/o Keaty & Keaty

1140 World Trade Center

Two Canal Street

New Orleans, LA 70130

3. To Defendant Thomas S. Keaty Jr.'s home or home office:

c/o Keaty & Keaty

1140 World Trade Center

Two Canal Street

New Orleans, LA 70130

On September 1, 1998, Harper received from the Secretary certifications attesting that two copies of the summons and complaint had been delivered by certified mail to each defendant at the address provided for that defendant. The Secretary further certified that return receipts had been received "bearing Signature of Addressee's Agent."

The Defendants did not appear in the Texas Court. On January 14, 1999, the Texas Court entered an Amended Default Judgment in favor of Harper. The order judged the Defendants jointly and severally liable to Harper for $1,108,734.30 in liquidated damages, inclusive of pre-judgment interest and attorneys' fees. The order also recited that the Texas Court had jurisdiction over the Defendants and that the Defendants had been "properly served with the Summons and Complaint."

On March 2, 1999, Harper registered the default judgment in the Eastern District of Louisiana (the Louisiana Court) pursuant to 28 U.S.C. § 1963,¹

then commenced collection activities, specifically seeking the issuance of writs of execution and various garnishments. Defendants responded to the collection activities by challenging the validity of the Texas Court judgment.²

On June 4, 1999, Harper filed an unopposed Rule 60(a) motion in the Texas Court seeking to amend the default judgment to include express findings in support of that court's exercise of personal jurisdiction over the Defendants. The Texas Court subsequently signed an Order specifying that (1) Harper "properly provided the Texas Secretary of State with the addresses of each of the Defendants' 'home or home office' address" in accordance with the Texas long arm statute; (2) the record reflected that the Secretary actually forwarded process to each of the Defendants; (3) the record reflected that each Defendant had actually received process; and (4) the Texas Court had properly exercised personal jurisdiction over the Defendants.

Harper then moved for summary judgment in the Louisiana Court as to the validity of the Texas Court's default judgment. The district court granted the motion as unopposed on November 19, 1999, having granted the Defendants several extensions to oppose. The Defendants filed a "motion for reconsideration" on December 20, 1999 in support of which they offered evidence suggesting that neither the Keaty Law Firm nor Keaty & Keaty existed as a legal entity at the time Harper attempted service. Moreover, the Defendants maintained that none of the addresses provided to the Secretary by Harper accurately reflected the "home or home office" address of any of the Defendants. Because Texas law requires strict compliance with the Texas long arm statute, the Defendants asserted that service was defective and the Texas judgment void.

Treating Defendants' motion as a Rule 60(b)(4) request for relief from judgment on grounds of insufficient service, the Louisiana Court determined that (1) the Texas Court's jurisdictional findings did not preclude the Defendants from collaterally raising jurisdictional defects under federal res judicata principles, and (2) service to the Defendants was defective under Texas law. As a consequence, the Louisiana court declared that "the default judgment entered by the United States District Court, Southern District of Texas, Galveston Division is void." Harper's subsequent motion for relief from judgment pursuant to Rule 60(b)(1) or (b)(6) was denied and final judgment was entered on July 13, 2000. This appeal followed.

Discussion

Federal courts generally disfavor default judgments, preferring to resolve disputes according to their merits. Lindsey v. Prive Corp., 161 F.3d 886, 892 (5th Cir. 1998); Seven Elves, Inc. v. Eskenazi, 635 F.2d 396, 403 (5th Cir. 1981) (noting that Rule 60(b) should be "applied most liberally to judgments in default.") This circuit has held that a district court must set aside a default judgment as void if it determines that it lacked personal jurisdiction over the defendant because of defective service of process. See, e.g., Bludworth Bond Shipyard, Inc. v. M/V Caribbean Wind, 841 F.2d 646, 649 (5th Cir. 1988). In this case, we are presented with defendants that suffered a default judgment in one federal district court, then challenged that judgment as void for lack of jurisdiction in the district court of registration. It is well-established that defendants need not appear in a federal court without authority to exercise personal jurisdiction over them to raise a jurisdictional defect. Defendants are "always free to ignore . . . judicial proceedings, risk a default judgment, then challenge that judgment on jurisdictional grounds in a collateral proceeding." Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 706, 102 S.Ct. 2099, 2106 (1982); Broadcast Music, Inc. v. M.T.S. Enterprises, Inc, 811 F.2d 278, 281 (5th Cir. 1987).

Harper, as the beneficiary of the default judgment, has not challenged the ability of a registering court to grant relief from another district court's judgment using Rule 60(b)(4) when the rendering court did not properly exercise jurisdiction. Instead, Harper alternatively argues that (1) a registering court should apply the relevant state law on issue preclusion to determine the effect of jurisdictional findings made by a rendering district court sitting in diversity, or (2) service on the Defendants was proper because it sufficiently complied with the Texas long arm statute.

Though we generally review a district court's Rule 60(b) ruling solely for abuse of discretion, Bludworth Bond, 841 F.2d at 649, "Rule 60(b)(4) motions leave no margin for consideration of the district court's discretion as the judgments themselves are by definition either legal nullities or not." Carter v. Fenner, 136 F.3d 1000, 1005 (5th Cir. 1998). As a consequence, our review of the issues raised in this appeal is effectively de novo. See Export Group v. Reef Industries, Inc., 54 F.3d 1466, 1469 (9th Cir. 1995) ("We review de novo . . . . a district court's ruling upon a Rule 60(b)(4) motion to set aside a judgment as void, because the question of the validity of a judgment is a legal one.").

I. A Registering Court May Rely on Rule 60(b)(4) to Entertain Jurisdictional Challenges to the Validity of a Default Judgment Issued By Another District Court

Although both the Louisiana Court and the parties assume that Rule 60(b)(4) empowers a registering court to void a judgment rendered by another district court, the scope of a registering court's power to alter or amend judgments rendered by another court through Rule 60(b) is uncertain. See Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d § 2787 (1995).³

Typically, relief under Rule 60(b) is sought in the court that rendered the judgment at issue. See id. at § 2865. At least one circuit, the Seventh, has suggested that Rule 60(b) motions must be presented to the court that rendered the judgment...