Opinion
Civ. No. 99-707, SECTION: "R" (4).
March 20, 2000.
ORDER AND REASONS
Before the Court is defendants' motion to reconsider the Court's order of November 19, 1999, granting plaintiff's motion for summary judgment as unopposed. The Court treats defendants' motion for reconsideration as a motion under Rule 60(b)(4) for relief from judgment on the grounds of insufficient service of process. Also before the Court is plaintiff's motion for attorneys' fees and costs. For the reasons set forth below, defendants' motion for reconsideration is granted and plaintiff's motion for fees and costs is denied.
I. BACKGROUND
On August 10, 1998, plaintiff Harper Macleod Solicitors, Scottish law firm, filed suit against defendants Thomas Keaty, Robert Keaty and Keaty Keaty d/b/a the Keaty Law Firm, in the United States District Court for the Southern District of Texas, Galveston Division. Plaintiff sought to enforce a contract arising out of the referral to defendants of two families with personal injury claims in Texas. A default judgment and later an amended default judgment were entered in favor of plaintiff on January 13, 1999.
On March 2, 1999, plaintiff registered the amended judgment in this Court. Thereafter, it undertook collection activities including the issuance of writs of fieri facias and various garnishments. Anticipating a challenge of the default judgment, on June 4, 1999, plaintiff filed a Rule 60(a) motion in the Galveston court, seeking a determination of personal jurisdiction and proper service of process. The Galveston court granted the plaintiff's motion, and amended its earlier judgment by finding that service had been proper and that it had jurisdiction over the defendants.
On July 28, 1999, plaintiff filed a motion for summary judgment in this Court to establish the validity of the judgment rendered by the Galveston court. On November 19, 1999, this Court granted plaintiff's motion for summary judgment as unopposed.
The Court granted defendants a number of extensions to oppose plaintiff's motion for summary judgment before granting it as unopposed.
Defendants now ask this Court to reconsider its ruling, alleging defective service of process in the default judgment rendered by the Galveston court.
II. DISCUSSION
A. Reconsideration Standard
The Federal Rules of Civil procedure do not formally recognize a "motion for reconsideration." See Lavespere v. Niagara Mach. Tool Works, Inc., 910 F.2d 167, 173 (5th Cir. 1990), abrogated on other grounds by Little v. Liquid Air Corp., 37 F.3d 1069, 1075 n. 14 (5th Cir. 1994) (en banc). Nevertheless, the Fifth Circuit has held that a motion to reconsider a dispositive pretrial motion may be classified under either Rule 59 or Rule 60, depending upon the time of filing. See id. If it is filed within ten days of the court's judgment, a motion for reconsideration is treated as a Rule 59(e) motion "to alter or amend" the judgment. See id.; Pryor v. U.S. Postal Service, 769 F.2d 281, 285 (5th Cir. 1985). If filed more than ten days post-judgment, a motion for reconsideration falls under Rule 60(b) as a motion for "relief from judgment." See Lavespere, 910 F.3d at 173.
Here, defendants filed the motion for reconsideration thirty-one days after the Court's order granting plaintiff's motion for summary judgment. Thus, Rule 60(b) governs defendants' motion for reconsideration. Rule 60(b) provides for relief only upon a showing of one of the following:
(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59 (b); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.
FED. R. Civ. p. 60(b) (emphasis added). Typically, Rule 60(b) motions are left to the sound discretion of the district court. See Recreational Properties, Inc. v. Southwest Mortgage Service Corp., 804 F.2d 311, 313-14 (5th Cir. 1986). "When, however, a district court lacks jurisdiction over the defendant because of lack of service of process, the judgment is void and, under Rule 60(b)(4), the district court must set it aside, regardless of whether the movant has a meritorious defense." Bludworth Bond Shipyard, Inc. v. M/V Caribbean Wind, 841 F.2d 646, 649 (5th Cir. 1988), internal citations omitted;, accord Leedo Cabinetry v. James Sales Distrib., Inc., 157 F.3d 410, 412 (5th Cir. 1998) There is generally no timeliness requirement for a motion under Rule 60(b)(4). See Bludworth, 841 F.2d at 649.
B. Collateral Estoppel
As a threshold issue, plaintiff claims that defendants cannot collaterally challenge the Galveston court's determination that service was proper and that it had personal jurisdiction over defendants. A determination by the rendering court that it had personal jurisdiction over defendants should not be considered preclusive, however, when made upon the grant of a default judgment. See Broadcast Music, Inc. v. M.T.S. Enterprises, Inc., 811 F.2d 278, 281 (5th Cir. 1987) (holding that party may suffer default judgment and then collaterally attack it in defense to actions to enforce that judgment.); see also Transaero, Inc. v. La Fuerza Aerea Boliviana, 162 F.3d 724, 730 (2d Cir. 1998) ("any determination by the [rendering court] that service was proper and that it had personal jurisdiction [over defendants] when it entered the initial default judgment . . . cannot be deemed final and preclusive on these questions.").
In this case, the Galveston court amended its initial default judgment by granting plaintiff's Rule 60(a) motion. Although this amendment did not occur at the time the default judgment was initially entered, "[o]bjections to personal jurisdiction remain open to the defendant who remains entirely aloof from the original proceeding[.]" CHARLES ALAN WRIGHT, ARTHUR R. MILLER EDWARD H. COOPER, 18 FEDERAL PRACTICE AND PROCEDURE, § 4430, 291 (1981); see also Baldwin v. Iowa State Traveling Men's Ass'n, 283 U.S. 522, 525, 51 S.Ct. 517, 518 (1931) (reaffirming principle that court has power to determine its own personal jurisdiction only when defendant has his day in court).
One of the basic tenants of res judicata is that an individual has the right to a full and fair hearing; therefore, collateral estoppel is not available for issues which have not been fully and fairly litigated. See Parklane Hosiery Co. v. Shore, 439 U.S. 322, 332, 99 S.Ct. 645, 652 (1979); Universal American Barge Corp. v. J-Chem, Inc., 946 F.2d 1131, 1136 (5th Cir. 1991), quotation omitted. Nowhere in the ruling is there any mention of any challenges or exhibits made by defendant. It appears that defendant was not present for, nor in any way, participated in the proceeding. Because defendants did not have their day in court, the issue has not been fully and vigorously litigated, and defendants are not collaterally estopped from challenging service of process in this Court. The Court thus turns to the merits of defendants' motion.
C. Sufficiency of Service of Process
Defendants assert that the default judgment entered against them by the Galveston court was void because they did not receive proper service of process as defined by the Texas Long-Arm Statute. Thomas and Robert Keaty aver that, as of December 1997, the entity "Keaty Keaty" ceased to do business as the result of the formation of the Keaty patent Firm, and that, as of January 1998, they no longer did business as Keaty Keaty. (Defs.' Mot. Reconsider Exs. A, B.) They allege that as a result, proper service required the Secretary of State to be furnished with their home addresses and that plaintiff's failure to do so renders the default judgment void.
When entertaining a collateral attack on a default judgment rendered in another federal district court, the reviewing court must apply the substantive law of the state wherein that district lies. See Bludworth, 841 F.2d at 649 (holding that appropriate inquiry is whether attempted service was proper under Texas long-arm statute); see also Mu-Petco Shipping Co. v. Divesco, Inc., 101 F.R.D. 753, 755 (S.D. Miss. 1984). In this case, plaintiff attempted to serve defendants through the Texas long-arm statute, TEX. CIV. PRAC. REM. CODE ANN. § 17.045 (a), which provides in pertinent part:
If the Secretary of State is served with duplicate copies of process for a nonresident, he shall require a statement of the name and address of the nonresident's home or home office and shall immediately mail a copy of the process to the nonresident.
TEX. CIV. PRAC. REM. CODE ANN. § 17.045(a) (West 1999). Texas courts have consistently held that the statute must be followed with strict compliance. See Mahon v. Caldwell, Haddad, Skaggs, Inc., 783 S.W.2d 769, 771 (Tex.App.-Ft. Worth 1990, writ denied); Verges v. Lomas Nettleton Financial Corp., 642 S.W.2d 820, 821 (Tex.App.-Dallas 1982, writ denied). To support a default judgment, "a plaintiff must comply with these requirements: (1) the pleadings must allege facts which, if true, would make the defendant amenable to process by the use of the long-arm statute; and, (2) there must be proof in the record that the defendant was, in fact, served in the manner required by the statute." Whitney v. L L Realty Corp., 500 S.W.2d 94, 95-96 (Tex. 1973); accord Mahon, 783 S.W.2d at 771; see also Security Pacific Corp. v. Lupo, 808 S.W.2d 126, 127 (Tex.App.-Houston 1991, writ denied). The record reveals and defendants do not dispute that plaintiff complied with the first prong of this test.
To comply with the second prong, the Secretary of State must receive a statement of the name and address of the home or home office of the nonresident defendant and then forward a copy of the process to the defendant by registered mail, return receipt requested. See Bannigan v. Market Street Developers, Ltd., 766 S.W.2d 591, 592 (Tex.App.-Dallas 1989, no writ). The long-arm statute provides no definition of `home' or `home office'. See Mahon, 783 S.W.2d at 771. The record indicates that the Texas Secretary of State received copies of the process to be served as follows:
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
( See Pl.'s Mot. Summ. J. Ex. A, Exs. B-3.) The Texas Secretary of State attested that he received and forwarded two copies of the summons and plaintiff's original complaint to the addresses submitted, and that he received the return receipts bearing the signature of addressee's agent on September 3 (New Orleans address) and September 18 (Lafayette address). ( See id. Exs. B-4, B-5, B-6.)
Defendants contend that service upon Keaty Keaty was ineffective because it did not exist at the time service was attempted. In order to refute this contention, plaintiff attached to its motion a brochure, which bears the names "Keaty Keaty" and "Keaty Patent Firm" and lists the New Orleans address registered with the Louisiana Secretary of State and the Lafayette address (Doucet Street) at which service was attempted. It also submitted a Yellow Pages internet search result for Keaty Keaty, dated June 4, 1999, which lists Keaty Keaty at a different Lafayette address: 812 E. Saint Mary Blvd., #104, Lafayette, Louisiana 70503. ( See Pl.'s Mot. Summ. J. Exs. C, D.) In addition, plaintiff attached a bankruptcy proceeding, dated December 9, 1999, which lists the debtor as Robert Keaty of Keaty Keaty, Attorneys, and a business name search of the Louisiana Secretary of State conducted on July 28, 1999, which shows the existence of the law firm Keaty Keaty. ( See Pl.'s Opp'n Defs.' Mot. Reconsider Ex. A.; Pl.'s Mot. Summ. J. Ex. E.) Finally, plaintiff attached a letter dated August 14, 1998, on letterhead styled "Keaty Keaty," which lists both Robert and Thomas Keaty. (See Pl.'s Mot. Summ. J. Ex. A, Ex. B-2.)
In order to help resolve this issue, the Court contacted the office of the Louisiana Secretary of State, which informed it as follows:
(1) "The Keaty Patent Firm" was registered with the Louisiana Secretary of State on December 12, 1997, and the address listed for this firm was 2140 World Trade Center, 2 Canal Street, New Orleans, LA 70130.
(2) On March 18, 1998, the name of that firm was changed to "Keaty, A Professional Law Corporation," and the address remained the same.
(3) "Keaty Keaty" was not registered until June 10, 1999, and the address listed for this entity is 812 B. Saint Mary Blvd., #104, Lafayette, Louisiana 70503.
It is clear that "Keaty Keaty" was not registered at the time service was attempted. Plaintiff argues that even if Keaty Keaty did not exist at that time, at the very least, a partnership by estoppel existed. Under Louisiana law, a partnership by estoppel may be found even if the parties may not have intended to form a partnership. See Medline Industries, Inc. v. All-Med Supply Equip., 653 So.2d 830, 834 (La.App. 1st Cir. 1995). In order to find such a partnership, a person must hold himself out as a partner to the justified detrimental reliance of a third party, and there must be an intent to share profits or losses. See Gravois v. New England Ins. Co., 553 So.2d 1034, 1038 (La.App. 4th Cir. 1989). Plaintiff has produced no evidence of such an intent.
In sum, because it appears that Keaty Keaty did not exist at the time service was attempted, service upon Keaty Keaty was ineffective. Accordingly, service on the individual defendants should have been effected at their home addresses. See Leedo, 157 F.3d at 413 (holding that under Texas long-arm statute, plaintiff had to provide Secretary of State with individual nonresident's home address). The Keatys aver that they did not reside at any of the addresses provided to the Secretary of State, and that they were never served at their respective home addresses of 21 Audubon Place, New Orleans (Thomas Keaty) and 100 Whitcome Circle, Lafayette (Robert Keaty). Plaintiff does not dispute these facts. Thus, the Court finds that service failed to comply with the strict requirements of the Texas long-arm statute. Further, whether defendants received actual notice is irrelevant, "because a defendant's actual notice that a suit has been filed against him is not sufficient unless such notice was received in the manner prescribed by statute." Bank of America, N.T.S.A. v. Love, 770 S.W.2d 890, 892 (Tex.App.-San Antonio 1989, writ denied), citing BLS Limousine Service, Inc. v. Buslease Inc., 680 S.W.2d 543, 546 (Tex.App.-Dallas 1984, writ ref'd n.r.e.)
Moreover, even if Keaty Keaty did exist at the time service was attempted, there is no indication in the record that the Doucet Street address was the correct address for this firm when service was attempted. Although the brochure and the letter at issue both bear the name "Keaty Keaty," the brochure is not dated and is the only item that lists the Lafayette address at which service was attempted. In addition, while both the brochure and the letter bear the New Orleans address listed with the Louisiana Secretary of State, the address plaintiff submitted to the Texas Secretary of State for individual service on both Robert and Thomas Keaty contains an incorrect suite number. Under Texas law, a wrong address or a typographical error in an address forwarded by the Secretary of State are sufficient grounds to set aside a default judgment. See Royal Surplus Lines Ins. Co. v. Samaria Baptist Church, 840 S.W.2d 382, 383 (Tex. 1992), citations omitted; Commission of Contracts of General Executive Committee of Petroleum Workers Union of Republic of Mexico v. Arriba Ltd., 882 S.W.2d 576, 584 n. 5 (Tex.App.-Houston 1994, no writ).
Because this Court must adhere to the rule that "no presumptions will be indulged in favor or the validity of a default judgment[,]" it finds that service was ineffective under the Texas long-arm statute. Love, 770 S.W.2d at 892, citing United States v. Charter Bank Northwest, 694 S.W.2d 16, 18 (Tex.App.-Corpus Christi 1985, no writ). The Court finds that because the Galveston court never obtained personal jurisdiction over defendants, the default judgment entered by that court must be set aside. In so concluding, the Court notes the United States District Courts for the Eastern and Western Districts of Louisiana reached the same conclusion in similar proceedings. (See Pl.'s Mot. Summ. J. Ex. A (D, E).)
This Court therefore denies plaintiff's motion for summary judgment and grants plaintiff's motion for reconsideration under Rule 60(b)(4). Accordingly, the default judgment entered by the United States District Court, Southern District of Texas, Galveston Division is void. The writs of fieri facias and garnishments are hereby vacated.
Plaintiff's motion for attorneys' fees and costs under Local Rule 54.3 is hereby denied.
III. CONCLUSION
For the foregoing reasons, defendants' motion for reconsideration is granted and plaintiff's motion for attorneys' fees and costs is denied.
New Orleans, Louisiana, this 20th day of March, 2000.