Profess. Sports v. Nat. Indoor Foot. League

• Citation: 2008 MT 98,180 P.3d 1142,342 Mont. 292
• Decision Date: 24 March 2008
• Docket Number: No. DA 06-0654.,DA 06-0654.
• Parties: MONTANA PROFESSIONAL SPORTS, LLC, Plaintiff and Appellee, v. NATIONAL INDOOR FOOTBALL LEAGUE, LLC, an Ohio limited liability company, Defendant and Appellant.
• Court: United States State Supreme Court of Montana

180 P.3d 1142

2008 MT 98

342 Mont. 292

MONTANA PROFESSIONAL SPORTS, LLC, Plaintiff and Appellee, v. NATIONAL INDOOR FOOTBALL LEAGUE, LLC, an Ohio limited liability company, Defendant and Appellant.

No. DA 06-0654.

Supreme Court of Montana.

Submitted on Briefs November 14, 2007.

Decided March 24, 2008.

For Appellant: Shane P. Coleman and Jason S. Ritchie, Holland & Hart, Billings, Montana.

For Appellee: James P. Murphy and Bruce F. Fain, Murphy, Kirkpatrick & Fain, Billings, Montana.

Justice BRIAN MORRIS delivered the Opinion of the Court.

¶ 1 The National Indoor Football League, LLC (NIFL) appeals from an order of the Thirteenth Judicial District, Yellowstone County, denying its motion to set aside default judgment. We affirm.

¶ 2 NIFL presents the following issues for review:

¶ 3 Whether the District Court properly awarded a default judgment when Montana Professional Sports, LLC (MPS) had served the summons and complaint on a person not employed by NIFL.

¶ 4 Whether the District Court properly denied NIFL's motion to set aside the default judgment for excusable neglect.

¶ 5 Whether the District Court properly determined that MPS had not engaged in sharp practice in obtaining the default judgment.

¶ 6 Whether the District Court properly awarded $100,000 in punitive damages.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 7 NIFL operates an indoor football league with teams located in several states. NIFL has its principal place of business in Lafayette, Louisiana. MPS is a Montana limited liability company with its principal place of business in Billings, Montana. MPS purchased a professional indoor football team from Duane Anderson (Anderson) in March 2005. MPS also acquired from NIFL in March 2005 the right to operate the team in Billings, Montana, as an NIFL franchise.

¶ 8 NIFL assured MPS that MPS had acquired an exclusive contractual right to operate as the Outlaws within the NIFL. MPS subsequently announced its intention that the team would play as the Billings Outlaws that season. Anderson still owned, however, the federally registered trademark on the name and on images associated with the name. Anderson informed MPS that he intended to enforce his trademark rights. As a result, MPS operated the team under the name Billings Mavericks during the 2005 season while it negotiated with Anderson to purchase the trademark.

¶ 9 MPS informed NIFL that a federal trademark protected the Outlaws name and image. MPS also indicated to NIFL that MPS intended to resume using the Outlaws name at the start of the 2006 season after it had acquired the trademark. MPS purchased the trademark rights from Anderson on November 10, 2005. MPS immediately apprised NIFL of the acquisition and reiterated its intention to resume using the Outlaws name in 2006. NIFL informed MPS, however, that it already had authorized a team in Florida to rename itself the Osceola Outlaws. MPS urged both NIFL and the Osceola team to reconsider using the name in 2006.

¶ 10 MPS filed a suit in U.S. District Court in Florida to enforce the trademark against NIFL and the Osceola team when they refused to reconsider. The federal court upheld the trademark on February 7, 2006, and enjoined NIFL and the Osceola team from using the federally trademarked names and images. NIFL subsequently notified MPS in a letter dated March 7, 2006, that NIFL intended to suspend MPS from the league on March 9, 2006, if it operated as the Billings Outlaws, despite MPS's federal trademark rights.

¶ 11 MPS brought this action on March 9, 2006, to enjoin NIFL from infringing upon its trademark, to remain in the NIFL, and to obtain compensatory and punitive damages. MPS contacted NIFL's general counsel and executive director, Randy Wagley (Wagley), by e-mail and telephone message on March 9, 2006. MPS notified Wagley that it had filed that day for an injunction against NIFL. MPS also informed Wagley that MPS's counsel would be appearing before the District Court in 30 minutes to request a temporary restraining order against NIFL with regard to its threat to suspend MPS from the NIFL. Wagley participated by telephone in an informal discussion with the court and counsel for MPS. No formal record exists of the discussion. The court granted the temporary restraining order and set a hearing date to consider a temporary injunction.

¶ 12 MPS supplied Wagley with copies of the complaint, summons, application for temporary restraining order, and acknowledgement of service on March 9, 2006. Wagley contacted Montana counsel for consultation on this litigation. Wagley failed to return the acknowledgement of service, however, despite his earlier assurances that he would. MPS therefore engaged a process server to serve a summons and complaint on NIFL at its corporate headquarters in Lafayette, Louisiana, on March 17, 2006.

¶ 13 MPS provided the process server with NIFL's only known address, the registered address on record with the Louisiana Secretary of State. MPS also supplied the process server with three certificates of service. Two certificates of service specifically named NIFL executive director, Wagley, and NIFL president Carolyn Shiver (Shiver). The third certificate of service left blank the party to be served.

¶ 14 The process server verified in an affidavit that the address that MPS had given him housed a nondescript office building without any signs indicating what businesses were located there. A large sign reading "LABS" hung over the main entrance. The process server entered the building and approached a reception area. The process server explained that he was looking for Shiver or Wagley of NIFL. The receptionist referred the process server to Lynn Richard (Richard). Richard confirmed to the process server that the office served as the location of NIFL. Richard informed the process server that Shiver was out of the office and that Wagley was difficult to reach. Richard told the process server that she was the "office manager and [could] deliver the papers to Ms. Shiver."

¶ 15 The process server delivered the documents to Richard and filled Richard's name into the blank certificate of service. Richard did not serve as an NIFL agent or employee. LABS, a company that shared the office building with NIFL, employed Richard. Shiver owned both NIFL and LABS. The process server did not know these facts. MPS's counsel stated in an affidavit that Wagley contacted him the evening of March 17, 2006, to confirm that Wagley was aware that MPS had served the complaint and related documents at the NIFL office.

¶ 16 MPS and NIFL conducted settlement negotiations regarding this action and the ancillary federal court action in Florida during March and April 2006. NIFL never acknowledged that it had been served, however, and it did not otherwise appear or contact the court. MPS requested that the court twice continue the hearing on MPS's request for a preliminary injunction to allow negotiations to continue. Wagley, acting on NIFL's behalf, expressly consented in a letter to MPS to continuing an April 3, 2006, hearing that the court had rescheduled for April 24, 2006. NIFL still did not appear or contact the court.

¶ 17 The court entered a default against NIFL on April 10, 2006, on MPS's motion. NIFL did not appear at the rescheduled preliminary injunction hearing set for April 24, 2006. The court issued findings of fact, conclusions of law, and an order granting the preliminary injunction on April 24, 2006. MPS moved for judgment by default on the underlying claims on May 2, 2006. The court held a hearing on MPS's motion for a default judgment on May 24, 2006. MPS did not notify NIFL of the hearing on the default judgment and NIFL did not appear. The court awarded MPS a default judgment against NIFL on May 31, 2006. The court ordered NIFL, on June 9, 2006, to pay $89,627.82 in compensatory damages and $100,000 in punitive damages.

¶ 18 MPS again served Richard with the default judgment at NIFL's Lafayette, Louisiana, headquarters on June 12, 2006. MPS also informed Wagley of the default by e-mail on June 12, 2006. NIFL obtained Montana counsel on July 5, 2006, and moved to set aside the default judgment on July 10, 2006.

¶ 19 NIFL first argued that default should be set aside for defective service of process. NIFL asserted that MPS improperly had served Richard, who did not work for NIFL and who therefore could not accept service on its behalf. NIFL next argued that MPS had engaged in sharp practice in obtaining the default judgment against NIFL. NIFL alleged that MPS should have notified NIFL of its intent to seek a default during its ongoing communication with NIFL over the course of the dispute. NIFL finally argued that it satisfied the four part test for motion to set aside default judgment: (1) defaulting party proceeded with diligence; (2) defaulting party's neglect was excusable; (3) defaulting party has a meritorious defense to the claim; and (4) the judgment will affect the defaulting party injuriously. Blume v. Metropolitan Life Ins. Co., 242 Mont. 465, 467, 791 P.2d 784, 786 (1990) overruled on other grounds by Essex Ins. Co. v. Jaycie, Inc., 2004 MT 278, ¶ 12, 323 Mont. 231, ¶ 12, 99 P.3d 651, ¶ 12.

¶ 20 The District Court denied NIFL's motion to set aside the default. The court reasoned that MPS had affected proper service based upon Richard representing herself as NIFL's agent. The court also determined that MPS had not engaged in sharp practice. The court instead determined that NIFL had failed to monitor litigation. The court finally concluded that NIFL had failed parts one and two of the Blume test. The Court determined that NIFL had not acted diligently when it waited 23 days after receiving notice of the default judgment before retaining Montana counsel. The court determined that NIFL's neglect was not excusable in light of its failure to monitor the litigation. NIFL appeals.

STANDARD OF REVIEW

¶ 21 We disfavor judgments by default in light of our...