Limehouse v. Hulsey

• Decision Date: 12 August 2011
• Docket Number: No. 4805.,4805.
• Court: South Carolina Court of Appeals
• Parties: Lawton LIMEHOUSE, Sr., Respondent, v. Paul H. HULSEY and The Hulsey Litigation Group, LLC, Appellants.

397 S.C. 49

723 S.E.2d 211

Lawton LIMEHOUSE, Sr., Respondent,

v.Paul H. HULSEY and The Hulsey Litigation Group, LLC, Appellants.

No. 4805.

Court of Appeals of South Carolina.

Heard April 13, 2010.Decided March 10, 2011.Withdrawn, Substituted and Refiled June 2, 2011.Withdrawn, Substituted and Refiled June 16, 2011.Rehearing Denied Aug. 12, 2011.

A. Camden Lewis and Ariail E. King, of Columbia; and Robert H. Hood, Deborah Harrison Sheffield, James B. Hood, and John K. Weedon, of Charleston, for Appellants.

Frank M. Cisa, of Mt. Pleasant, for Respondent.

THOMAS, J.

This is an appeal from an entry of default and the subsequent default damages trial based on a slander action against Paul Hulsey and the Hulsey Litigation Group, LLC (collectively Hulsey). Damages (actual and punitive) were found in excess of $7.3 million. Hulsey now appeals, alleging the trial court erred in (1) granting entry of default without subject matter jurisdiction, (2) failing to grant a motion to set aside the entry of default, (3) allegedly depriving Hulsey of due process in the default damages trial, and (4) allowing an award of $5 million in punitive damages. We affirm.

FACTS

In 2004, Hulsey filed a class action suit against Lawton Limehouse, Limehouse's son, and L & L Services, Inc., a staffing agency owned by the pair. The suit alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), as well as other state and federal laws. Although the case eventually settled, during its pendency, Hulsey made allegedly slanderous statements that the “[Charleston] Post & Courier” published, including (1) Limehouse engaged in a classic racketeering scheme, (2) Limehouse's conduct set the community back 150 years, (3) Limehouse engaged in blatant indentured servitude, and (4) Limehouse created a perfect racketeering scheme just like Tony Soprano.¹

In response, Limehouse filed suit against Hulsey on April 19, 2006. Service was perfected upon the Hulsey Litigation Group, LLC on April 20, 2006, and Paul Hulsey personally on April 21, 2006. On May 5, 2006, Hulsey filed a notice of removal to federal district court without filing an answer to the complaint. On June 2, 2006, Limehouse filed a motion to remand to state court. A federal district judge remanded the case to state court by an order dated July 19, 2006, for lack of federal subject matter jurisdiction.² The federal court electronically transmitted this order to counsel on July 20. The Charleston County Clerk of Court also received an uncertified copy and filed the order on July 21. The Charleston County Clerk of Court mailed notice of the filing to all parties on July 27.

On August 21, 2006, Limehouse filed a request for entry of default. The Charleston County Clerk of Court entered default on August 21, and filed the same on August 22. Subsequently, the clerk mailed a Form 4 to all parties on August 24, 2006, noticing entry of default. On August 29, upon receipt of the Form 4, Hulsey filed an answer and motion to set aside entry of default pursuant to Rule 55(c), SCRCP.

In December, 2006, a circuit judge denied Hulsey's motion to set aside entry of default, and in February 2008, a different circuit judge presided over a jury trial on the issue of damages. On February 6, 2008, the jury returned a verdict for actual damages in the amount of $2.39 million and awarded punitive damages in the amount of $5 million. Nine days later, on February 15, 2008, Hulsey filed a motion to dismiss for lack of subject matter jurisdiction, after discovering there was no certified copy of the remand order on file with the Charleston County Clerk of Court. The trial court denied the motion, as well as the accompanying motion for a new trial. This appeal follows.

ISSUES ON APPEAL

I. Did the trial court err in exercising jurisdiction over the case after remand?

II. Did the trial court err in failing to set aside the entry of default?

III. Did the trial court err in the manner in which the default damages trial was conducted?

IV. Did the trial court err in allowing an award of punitive damages?

LAW/ANALYSIS

I. Jurisdiction

Hulsey argues the trial court was, and still is, without jurisdiction over this matter because the clerk of the federal court failed to mail a certified copy of the remand order to the Charleston County Clerk of Court. We disagree and find the mailing of the certified copy is not a jurisdictional requirement.

Upon removal, the federal court acquires jurisdiction over the case, for the limited purpose of determining jurisdiction. See Davis v. Davis, 267 S.C. 508, 511, 229 S.E.2d 847, 848 (1976). Once the federal court determines that federal jurisdiction is not appropriate, the case is remanded to state court, and the remand ends the federal court's jurisdiction. 28 U.S.C. § 1446(d) (1996).

Congress has provided for a federal court's jurisdiction in section 1446(d): “Promptly after the filing of such notice of removal ... the defendant ... shall give written notice thereof to ... the clerk of such State court, which shall effect the removal and the State court shall proceed no further unless and until the case is remanded.” (emphasis added).

In addition, 28 U.S.C. § 1447(c) (1996) provides for “Procedure[s] after removal generally,” and states:

A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a). If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal. A certified copy of the order of remand shall be mailed by the clerk to the clerk of the State court. The State court may thereupon proceed with such case.

In interpreting section 1447(c), a majority of federal circuits take the position that the finality of the remand and the accompanying loss of federal jurisdiction requires both entry of the order with the federal clerk of court and a certified copy being mailed to the state court. See, e.g., Trans Penn Wax Corp. v. McCandless, 50 F.3d 217, 227 (3rd Cir.1995); Hunt v. Acromed Corp., 961 F.2d 1079, 1081–82 (3rd Cir.1992); Browning v. Navarro, 743 F.2d 1069, 1078–79 (5th Cir.1984); Fed. Deposit Ins. Corp. v. Santiago Plaza, 598 F.2d 634, 636 (1st Cir.1979).

However, the Fourth Circuit takes a minority view, reasoning that because remands for lack of subject matter jurisdiction or defect in removal are unappealable, “the plain language of the statute[ ] ... support[s] the conclusion that § 1447 divests a district court of jurisdiction upon the entry of its remand order” despite the federal clerk's duty to send a certified copy. In re Lowe, 102 F.3d 731, 735 (4th Cir.1996) (considering and declining the majority approach, holding “a federal court loses jurisdiction over [the] case as soon as its order to remand the case is entered [ ] ... [f]rom that point on, it cannot reconsider its ruling even if the district court clerk fails to mail ... a certified copy”); ³ see also Bryan v. BellSouth Commc'ns, Inc., 492 F.3d 231, 235 n. 1 (4th Cir.2007) (recognizing “a remand is effective when the district court mails a certified copy ... see [1447(c) ] ... or ... if the remand is based on the lack of subject-matter jurisdiction ... when the remand order is entered, see [ Lowe]”) ⁴ (emphasis added).

Accordingly, the South Carolina Federal District Court lost jurisdiction when the order of remand was entered.⁵ We believe this ends the inquiry. However, because Hulsey's assertion that the state court also lacks subject matter jurisdiction seems to leave the case caught in jurisdictional limbo, or as other courts have dubbed it, on “a jurisdictional hiatus,” for lack of the mailing, State v. City of Albuquerque, 119 N.M. 169, 889 P.2d 204, 207 (N.M.Ct.App.1993) aff'd 119 N.M. 150, 889 P.2d 185 (1994), we therefore address whether the mailing is required for the South Carolina Circuit Court to exercise jurisdiction.

We start with the premise that our state court's jurisdiction is general, derived exclusively from article V, section 11 of the South Carolina Constitution, not from federal law. S.C. Const. art. V, § 11; see, e.g., Fairfax Countywide Citizens Ass'n v. Fairfax County, 571 F.2d 1299, 1304 (4th Cir.1978) (indicating that unlike federal courts, state courts are courts of general jurisdiction). On the other hand, the jurisdiction of federal courts is limited to that expressly authorized by the United States Constitution or statute enacted by Congress pursuant thereto. Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 553, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005); Victory Carriers Inc. v. Law, 404 U.S. 202, 212, 92 S.Ct. 418, 30 L.Ed.2d 383 (1971) (“The power reserved to the states, under the Constitution, to provide for the determination of controversies in their courts, may be restricted only by the action of Congress in conformity to the judiciary sections of the Constitution.”) (internal citation and quotation marks omitted); U.S. Const. art. III, § 1 (“The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.”); see The Federalist No. 82, at 515–16 (Alexander Hamilton) (Wright ed., 2002) (considering the federal government has only the power exclusively delegated to it, it stands as a “rule” that “the State courts will retain ... jurisdiction [,] ... unless it appears to have been taken away in one of the enumerated modes”); Thus, unless otherwise prohibited by statute, a state court's jurisdiction is limited only by the federal court's proper exercise of jurisdiction over a case pursuant to Congressional act—which according to Fourth Circuit jurisprudence in Lowe, ceased upon...