Opinion
Civil Action No. 01-4721 (JBS).
December 22, 2004
Gregory D. Saputelli, Esq., OBERMAYER, REBMANN, MAXWELL HIPPEL, Cherry Hill, NJ, Attorney for Plaintiff.
Patrick Charles English, Esq., DINES ENGLISH, L.L.C., Clifton, NJ, Attorney for Defendant Valuev.
OPINION
This is Defendant Nicolai Valuev's motion to vacate default judgment, entered by the Court on March 28, 2002 for failure to respond to the Court's orders requiring Defendants to provide full and complete accountings to Plaintiff. The principal issue is whether a mailing of the Complaint by Plaintiff's counsel to Defendant Valuev's address in the Russian Federation was sufficient to accomplish service of process under any method permitted for foreign service in Rule 4 of the Federal Rules of Civil Procedure. If it is not, default judgment must be vacated. For the reasons set forth herein, the motion is granted and Defendant Valuev is required to serve an answer within 20 days of entry of the accompanying Order.
The Court has subject matter jurisdiction over this dispute pursuant to 28 U.S.C. 1332.
I. BACKGROUND
A. Underlying Facts
On October 10, 2001, Plaintiff, Joseph O'Donnell, individually and t/a Top Glove Promotions, filed a complaint for damages and injunctive relief against Defendants Oleg Shalayev, individually and t/a Oleg Shalayev Promotions, and Nicolai Valuev, grounded in several contract-based claims relating to an "Exclusive Representation Agreement" ("Agreement") with Defendants and Arseny Berezin.
The Agreement identifies Shalayev as "Manager."
Defendant Valuev, a seven foot, two inch, 330 pound professional boxer, is the former boxing champion of the Pan Asian Boxing Association ("PABA") and the current number eleven contender in the heavyweight division as ranked by the World Boxing Association ("WBA").
Plaintiff's claims against Defendants included: (1) breach of contract; (2) "breach of covenant of non-interference and non-circumvention"; and (3) breach of fiduciary duty. (Complaint at 18-30.) Plaintiff additionally brought the following claims against Defendant Shalayev; (1) fraud; (2) tortious interference with contract; and (3) tortious interference with prospective economic advantage.
These three individuals together comprised "The Russian Parties." Berezin, referred to in the Agreement as "Consultant," terminated his relationship with the Russian Parties under the Agreement on or about August 18, 2001.
The final party to the Agreement was Guennadi Synkov, O'Donnell's business partner. O'Donnell and Synkov together comprised "The U.S. Parties."
Pursuant to the Agreement, the U.S. Parties were given the "exclusive right" to "represent" Valuev in the United States and around the world, except Russia, and to "promote and manage fights" on Valuev's behalf in all countries worldwide, except Russia, "providing [Valuev] with financial, management, training and legal support as necessary." (Agreement at ¶ 3.)
B. Facts Relating to Service of Process
In the section of the Agreement entitled "addresses for legal notices," the U.S. and Russian Parties agreed to use the following address for legal notices to the Russian Parties: "Oleg Shalayev, Koroleva str. 9, apt. 28, St. Petersburg, 197431 Russia." (Agreement at ¶ 13.) Additionally, on March 12, 2001, Berezin sent an e-mail to Synkov including the following address: "Valuev Nikolay Sergeevich St. Petersburg, Krasnoloselsky Rayon, Krasnoye Selo, Ul. Gvardeyskaya 8/2 apt 39." (7/20/04 O'Donnell Cert. at ¶ 5.)
This is the same address that Valuev listed as his "place of residence" on his Russian Passport application in December 2000. (9/13/04 Supplemental O'Donnell Cert. at 1-2, Exs. A and B.)
In August 2001, Plaintiff sent, via fax, copies of the proposed summons and complaint, translated in Russian, to Shalayev and Valuev. In response, Shalayev faxed to Plaintiff a letter written in Russian. (7/20/04 O'Donnell Cert. at ¶ 12, Ex. G.) The letter is dated "08.23.001" and Plaintiff alleges that it bears the signatures of Shalayev and Valuev. (Id.) Valuev denies having signed that letter, accusing Shalayev of forging his signature. (9/04 Valuev Decl. at ¶ 3.) The English translation of the letter reads, in pertinent part: "We have received from you the papers concerning your complaint against me and Nicolay. Since this is a serious matter and requires a competent translation and consultation with experts, we are unable to give you an immediate answer, but we will respond [sic] you within a week." (7/20/04 O'Donnell Cert. at ¶ 12, Ex. G.)
The translation was included by O'Donnell, and was not part of the facsimile transmission from Shalayev and Valuev.
Moreover, on or about August 23, 2001, (which was about seven weeks before the Complaint was filed on October 10, 2001) Shalayev and Valuev allegedly telephoned O'Donnell to discuss the proposed complaint. (Id. at ¶ 13.) Synkov also participated in the discussion and served as a translator. (Id.) Defendant Valuev admits participating in that telephone discussion (Valuev Decl. at ¶ 5), but asserts that he has "no recollection of speaking with Mr. O'Donnell or with Mr. Synkov after August of 2001, and certainly did not discuss any final judgment with either." (Id. at ¶ 7.) According to Defendant, he has "been contacted by many individuals regarding fighting in the United States and it is possible such a conversation occurred though I have no recollection of one with plaintiff in 2002." (Id.)
On September 11, 2001, Plaintiff received a letter from Evgeny Vasilievich Popov, an attorney from St. Petersburg, Russia. Mr. Popov was not at that time a member of the New Jersey Bar. (7/20/04 O'Donnell Cert. at Ex. I.) The letter stated that "I have been retained by Oleg Shalayev and Nikolay Valuev to represent and protect the interests of The Russian Parties in Top Glove Promotions." (Id.) Defendant Valuev, however, maintains that "I never retained anyone, including Evgeny Vasilievich Popov to represent me in this matter. My sole retention has been the recent retention of the firm of Dines and English, L.L.C. to represent me." (4/17/04 Valuev Cert. at ¶ 5.)
On October 10, 2001, the day the complaint was filed, Plaintiff mailed copies of the summons and complaint to Defendant Valuev at "Sergeevich St. Petersburg, Krasnoloselsky Rayon, Krasnoye Selo, Ul. Gvardeyskaya 8/2 apt 39," via DHL Worldwide Express. (7/21/04 Saputelli Cert. at ¶ 3, Ex. B.) The delivery confirmation receipt is dated October 10, 2001, and the accompanying "tracking" report indicates that the delivery was signed for by "OSIPOVA" on October 16, 2001. (Id.)
Additionally, on October 10, 2001, Plaintiff sent, via DHL Worldwide Express, copies of the summons and complaint to Shalayev at "Koroleva St. 9, Apt. 28, St. Petersburg, Russia," the address designated by the Agreement for legal notices to the Russian Parties. (7/21/04 Saputelli Cert. at ¶ 3, Ex. A; see Agreement at ¶ 13.) According to the DHL tracking report, Shalayev signed for the delivery on October 17, 2001. (7/21/04 Saputelli Cert. at ¶ 3, Ex. A.) Finally, Plaintiff mailed copies of the summons and complaint to Mr. Popov, in Russia, via DHL Worldwide Express. (Id. at ¶ 5, Ex. C.). That delivery was signed for on October 12, 2001, by "KUZNETSOVA," Mr. Popov's secretary. (Id.)
By handwritten letter, allegedly bearing the signatures of both Shalayev and Valuev, dated "26.10.001," the two defendants acknowledged receipt of the "Complaint." (7/20/04 O'Donnell Cert. at ¶ 18, Ex. L.) On November 8, 2001, the Clerk of the Court received a document written in Russian from Mr. Popov. The Office of the Court Clerk promptly contacted Mr. Popov via e-mail, requesting that he clarify the significance of the submission. Mr. Popov replied that he was the "attorney for defendants" and that the document was the Defendants' "answer." (7/21/04 Saputelli Cert. at ¶¶ 6-8, Ex. D.) The Court Clerk granted the Defendants an additional 30 days in which to translate the answer into English, but Defendants failed to comply within that 30 day period.
On February 13, 2002, after oral argument by Plaintiff's counsel, the Court granted Plaintiff's motion to strike Defendants' November 8, 2001 submission, pursuant to Fed.R.Civ.P. 12(f), and to enter default judgment against Defendants under Fed.R.Civ.P. 55(a) and 55(b). In so ordering, the Court held that "personal jurisdiction over these defendants exists because they were duly served with process, they attempted to respond to these allegations, they've had substantial contacts with the forum state, New Jersey, sufficing for both general jurisdiction and transactional jurisdiction." (2/14/2002 Tr. at 15; 7-11.)
On February 14, 2002, the Court entered an Order granting preliminary injunctive relief in favor of Plaintiff and ordering that Defendants provide an accounting to Plaintiff. On March 26, 2002, a final hearing was held on the default judgment damages. Final judgment was entered on March 28, 2002, in favor of Plaintiff, in the amount of $176,783.04. Plaintiff served copies of the Orders of February 13 and 14, 2002, along with certified translations thereof, upon Defendants Valuev and Shalayev and Mr. Popov, via Courier Express Services, Ltd., as per the Court's Order. (7/21/04 Saputelli Cert. at ¶ 12, Ex. J.; 2/14/2002 Order at 4.) On March 30, 2002, a copy of the Final Judgment, as well as a certified Russian translation, was delivered to "St. Petersburg, Krasnoloselsky Rayon, Krasnoye Selo, Ul. Gvardeyskaya 8/2 apt 39." (8/3/04 Saputelli Cert. at ¶ 6, Ex. C.)
On September 12, 2002, Plaintiff moved for leave to re-open Final Judgment and to file a first amended complaint. Plaintiff's proposed pleading sought injunctive relief against the original Defendants as well as additional defendants theretofore not joined.
By letter dated September 12, 2002, the Court advised Plaintiff that Fed.R.Civ.P. 60(b) "does not appear to permit amending pleadings to assert new causes of action against new defendants not previously named." Subsequently, on September 17, 2002, Plaintiff withdrew all motions filed on September 12.
Before the Court is Defendant Valuev's Motion To Vacate Default Judgment and Set Aside Orders, filed July 9, 2004.
Plaintiff has since moved to amend and/or clarify judgment, seeking to have the Court extend the duration of the Agreement through February 28, 2008 [Docket Item 49]. That motion will be dismissed in light of the Court's setting aside default judgment herein.
II. DISCUSSION
A. Standard of Review
Rule 55(c) of the Federal Rules of Civil Procedure provides that "[f]or good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b)." Pursuant to Fed.R.Civ.P. 60(b)(4), "[o]n motion and upon such terms as are just, the court may relieve a party . . . from a final judgment" if "the judgment is void." A default judgment rendered by a court which lacked personal jurisdiction over the defendant is void.Pennoyer v. Neff, 95 U.S. 714, 725-727 (1877). A defendant may challenge the personal jurisdiction of the rendering court by attacking the validity of the service of process. Stranahan Gear Co. v. NL Indus. Inc., 800 F.2d 53, 56-57 (3d Cir. 1986). "Service of process refers to a formal delivery of documents that is legally sufficient to charge the defendants with notice of a pending action." Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 699, 701 (1988).
Though the decision to set aside a default judgment is left "primarily to the discretion of the district court," United States v. $55,518.05 in U.S. Currency, 728 F.2d 192, 194 (3d Cir. 1984), the Third Circuit mandates that a district court generally must weigh three factors in ruling on a motion to vacate default judgment under Rule 60(b):
(1) whether the plaintiff will be prejudiced if the default is lifted;
(2) whether the defendant has a meritorious defense; and
(3) whether the default was the result of the defendant's culpable conduct.Emcasco Insurance Co. v. Sambrick, 834 F.2d 71, 73 (3d Cir. 1987); Gold Kist, Inc. v. Laurinburg Oil Co., 756 F.2d 14, 19 (3d Cir. 1985); Mettle v. First Union Nat'l Bank, 279 F. Supp. 2d 598, 601 (D.N.J. 2003).
However, since "[a] default judgment entered when there has been no proper service of the complaint is, a fortiori, void, and should be set aside," Gold Kist, 756 F.2d at 19 (citing Fed.R.Civ.P. 60(b)(4)), in such instances, the district court need not resort to an analysis of the three factors listed above.Gold Kist, 756 F.2d at 19; Mettle, 279 F. Supp. 2d at 603 n. 3 ("As this Court finds that entry of default against [defendant] is void based on the improper service of the summons and complaint, the Court need not consider the factors set forth inGold Kist." (citing Gold Kist, 756 F.2d at 19)).
B. Defendant's Motion to Vacate
Defendant Valuev seeks to have the Court set aside default judgment pursuant to Fed.R.Civ.P. 60(b)(4). (Def.'s Br. at 3.) Valuev contends that service of process was never properly effectuated pursuant to Fed.R.Civ.P. 4(f), thereby preventing the Court from obtaining personal jurisdiction over Defendant. (Id. at 3-6.) Defendant is correct. Default judgment must be vacated.
Defendant additionally cites Fed.R.Civ.P. 60(b)(6), providing that upon motion a court may relieve a party from default judgment for "any other reason justifying relief from the operation of the judgment," in support of the proposition that "Mr. Valuev does, indeed, have [sic] valid defense." (Def.'s Br. at 6.)
"Rule 60(b)(6) is a grand reservoir of equitable power to do justice in a particular case. At the same time, however, that Rule does not confer upon the district courts a standardless residual discretionary power to set aside judgments. In particular, Rule 60(b)(6) is available only in cases evidencing extraordinary circumstances. In addition, courts must be guided by the well established principle that a motion under Rule 60(b) may not be used as a substitute for appeal." Martinez-McBean v. Gov't of the Virgin Islands, 562 F.2d 908, 911 (3d Cir. 1977) (internal citations omitted).
A meritorious defense is only one factor to be considered by the Court in deciding a motion under 60(b)(6) and, by itself, will not amount to "extraordinary circumstances" warranting vacating default judgment. Sambrick, 834 F.2d at 73. Accordingly, the merits of Valuev's arguments are discussed in turn below.
(i) Timeliness of Defendant's Motion
Rule 60(b) provides that a motion to vacate default judgment "shall be made within a reasonable time." Fed.R.Civ.P. 60(b). Despite this mandate, however, the Third Circuit has joined the "nearly overwhelming authority" supporting the proposition that "laches is not available to preclude a claimant from attacking a void judgment" under Rule 60(b)(4). One Toshiba Color Television, 213 F.3d at 158 (collecting cases). Indeed, "no passage of time can transmute a nullity into a binding judgment, and hence there is no time limit for such a motion." United States v. One Toshiba Color Television, 213 F.3d 147, 157 (3d Cir. 2000) (en banc).
"It is in the pursuit of his remedies that [the moving party's] delay, if any, will become an issue." Id. Thus, for example, where default judgment has been entered in a civil forfeiture proceeding and judgment has been satisfied, petitioner's delay in bringing a motion to vacate for defective service of process may not preclude the court from setting aside judgment, though it may be grounds for denying petitioner actual return of property.Id.; United States v. $119,980.00, 680 F.2d 106, 107-08 (11th Cir. 1982) (holding Rule 60(b) may not be used to impose affirmative relief beyond vacating prior judgment).
Where, though, the relief sought is limited to the motion to vacate, as it is here, the inquiry necessarily ends where it begins. Accordingly, Defendant Valuev was not bound by any time constraints in challenging the Court's default judgment as void.Id.; Shenouda v. Menhanna, 203 F.R.D. 166, 169 (D.N.J. 2001) (holding motion to vacate under Fed.R.Civ.P. 60(b)(4) timely despite being made almost five years after the court's entry of default judgment). Thus, the instant motion is timely.
(ii) Personal Jurisdiction and Service of Process
As the discussion below details, the Court has personal jurisdiction over Defendant Valuev.
[T]o exercise personal jurisdiction over a defendant, a federal court sitting in diversity must undertake a two-step inquiry. First, the court must apply the relevant state long-arm statute to see if it permits the exercise of personal jurisdiction; then, the court must apply the precepts of the Due Process Clause of the Constitution. In New Jersey, this inquiry is collapsed into a single step because the New Jersey long-arm statute permits the exercise of personal jurisdiction to the fullest limits of due process. . . .
Personal jurisdiction under the Due Process Clause depends upon the relationship among the defendant, the forum, and the ligation. Physical presence within the forum is not required to establish personal jurisdiction over a nonresident defendant. Instead, the plaintiff must show that the defendant has purposefully directed its activities toward the residents of the forum state, or otherwise purposefully availed itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.
IMO Industries, Inc. v. Kiekert AG, 155 F.3d 254, 258-59 (3d Cir. 1998) (internal citations omitted).
As explained in the Court's Oral Opinion of February 13, 2002, there is both general and specific jurisdiction over Defendant Valuev in this case. First, general jurisdiction was satisfied because at the time default judgment was entered there were continuous ongoing contacts for at least one year by Mr. Valuev with New Jersey. At the very least, there was a training camp in Vineland and a prize fight in Atlantic City, both located within the District of New Jersey.
Even if there were not general jurisdiction over Mr. Valuev, the Court finds that there was specific jurisdiction.
In order for specific jurisdiction to be properly exercised under the Due Process Clause, the plaintiff must satisfy a two-part test. First, the plaintiff must show that the defendant has constitutionally sufficient "minimum contacts" with the forum. Second, for jurisdiction to be exercised the court must determine, in its discretion, that to do so would comport with "traditional notions of fair play and substantial justice."
IMO Industries, 155 F.3d at 259 (internal citations omitted). Both prongs are satisfied here. Specifically, the subject matter of Plaintiff's complaint was the Exclusive Representation Agreement to which Defendant Valuev was a party. The Agreement pertains to services that have been rendered by Mr. Valuev as a boxer in the District of New Jersey. As such, it does not offend "traditional notions of fair play and substantial justice" that Mr. Valuev would be hailed into a New Jersey court to address the charges against him.
(iii) Means of Service of Process
"[N]otice, though necessary, is not sufficient to effect service. . . . Although notice underpins Federal Rule of Civil Procedure 4 concerning service, notice cannot by itself validate an otherwise defective service. Proper service is still a prerequisite to personal jurisdiction. Inquiry into the propriety of service is separate from, and in addition to, the due process concerns present in an inquiry into the notice itself." Grand Entertainment Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 492 (3d Cir. 1993).
(a) Service on Foreign Defendant and the Hague Service Convention
Under Rule 4(f)(1) of the Federal Rules of Civil Procedure, service upon an individual in a foreign country may be effectuated "by any internationally agreed means reasonably calculated to give notice, such as the Hague Convention on the Service of Judicial and Extrajudicial Documents."
The Hague Service Convention is a multilateral treaty that was formulated in 1964 by the Tenth Session of the Hague Conference of Private International Law. The Convention revised partsof the Hague Conventions of 1905 and 1954. The revision was intended to provide a simpler way to serve process abroad, to assure that defendants sued in foreign jurisdictions would receive actual and timely notice of suit, and to facilitate proof of service abroad.
Schlunk, 486 U.S. at 698 (1988). The Convention, as a ratified treaty, is the supreme law of the land and maintains controlling effect. See U.S. Const. Art. VI, cl. 2; Jennings v. Boenning Co., 482 F.2d 1128, 1132 n. 1 (3d Cir. 1973); EOI Corp. v. Medical Marketing Ltd., 172 F.R.D. 133, 135 (D.N.J. 1997).
The Hague Service Convention was entered into force for the United States on February 10, 1969 and for the Russian Federation on December 1, 2001. Plaintiff's Complaint was filed on October 10, 2001 and, thus, the terms of the Convention would not have governed service of original process attempted on that date.
(b) Service Under the Federal Rules
In the absence of an internationally agreed means of service, service may be effectuated "by delivery to the individual personally of a copy of the summons and the complaint," so long as service is "reasonably calculated to give notice" and is not prohibited by the law of the foreign country. Fed.R.Civ.P. 4(f)(2)(C)(i). Plaintiff here does not allege to have attempted service under this provision.
In the alternative, service under Rule 4(f)(2)(C)(ii) may be made by "any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the party to be served. . . ." Fed.R.Civ.P. 4(f)(2)(C)(ii). As the discussion below explains, service in this manner was likewise not accomplished.
(1) Service on Valuev Individually
Plaintiff here argues that service on Defendant Valuev by ordinary mail to Valuev's place of residence in Russia was sufficient to satisfy the requirements of Rule 4. This contention is erroneous. Under Rule 4(f)(2)(C)(ii), service by mail to a foreign defendant is improper if addressed and dispatched by the plaintiff rather than by the clerk of the court. Additionally, the Rule requires a signed receipt. The Advisory Committee Note to former Rule 4(i)(D)(1), now Rule 4(f)(2)(C)(ii), indicates that these "additional safeguards" — a signed receipt and the processing of papers by the court clerk — are intended to insure delivery, especially "since the reliability of postal service may vary from country to country. . . ." Advisory Committee Note to former Fed.R.Civ.P. 4(i)(D)(1). By failing to satisfy the technical requirements of the Rule, Plaintiff was unsuccessful in his attempt to properly serve Defendant by mail.
Under Fed.R.Civ.P. 4(f)(3), a court may in some instances specially authorize service of process by ordinary mail. Levin v. Ruby Trading Corp., 248 F. Supp. 537 (S.D.N.Y. 1965). The Court did not do so here.
(2) Service on Valuev's Agent
Plaintiff also attempted to serve Mr. Shalayev in Russia by ordinary mail to the agreed upon address. At that time, Shalayev arguably was acting as Valuev's agent. (See 9/30/04 Valuev Cert. ¶¶ 3,4 and 7.) Indeed, the Agreement explicitly identified Shalayev's address as that to which "legal notices" would be served on the Russian Parties. Whether Shalayev was indeed Valuev's agent for purposes of service of process, though, is of no import here; even if Shalayev were authorized to receive service of process on Valuev's behalf, any attempt by Plaintiff to do so was insufficient under the Federal Rules.
Service by delivery to a "individual personally" does not include service upon that individual's agent. See Fed.R.Civ.P. 4(e)(2) (distinguishing between service "to the individual personally" and service "to an agent authorized by appointment or by law to receive service of process"). To be sure, the Federal Rules of Civil Procedure do authorize, in other instances, service upon agents. See Fed.R.Civ.P. 4(e)(2) (authorizing service upon individuals within a judicial district of the United States "by delivering a copy of the summons and complaint to an agent authorized by appointment or by law to receive service of process"); Fed.R.Civ.P. 4(h)(1) (permitting service upon corporations and associations by delivering a copy of the summons or complaint to a "general agent" or "to any other agent authorized by appointment or by law to receive service of process"). Rule 4(f), however, governing service upon individuals in a foreign country, does not authorize service by such means, perhaps recognizing the difficulty inherent in determining whether a foreign entity was in fact a duly appointed agent for accepting service of process in the foreign country. In any event, even if service on an agent were permissible under Fed.R.Civ.P. 4(f), it would have to be effectuated through the agent in the same manner as on the party himself — either personally under Rule 4(f)(2)(C)(i), or by "any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the party to be served," Fed.R.Civ.P. (4)(f)(2)(C)(ii). Once again, neither requirement was satisfied here. As such, service on Shalayev, as Defendant Valuev's agent, was likewise insufficient to constitute service on Valuev.
By failing to comply with the requirements of the Federal Rules of Civil Procedure, Plaintiff failed to properly serve Defendant with notice of the proceedings against him. Because service was improper, the Court lacked personal jurisdiction over Mr. Valuev. And, as noted above, a default judgment rendered by a court which lacked personal jurisdiction over the defendant is void. Pennoyer v. Neff, 95 U.S. at 725-727.
Even if the address to which service by ordinary mail was attempted to Mr. Valuev was his actual place of residence (a disputable proposition as discussed in detail below), thereby affording Defendant actual notice of the pendency of the proceedings, the Court's conclusion would remain the same. Indeed, as noted supra, "notice cannot by itself validate an otherwise defective service." Grand Entertainment Group, 988 F.2d at 492. "A district court's power to assert in personam authority over parties defendant is dependant not only on compliance with due process but also on compliance with the technicalities of Rule 4." Id. (emphasis added).
"A void judgment is no judgment at all," Shenouda, 203 F.R.D. at 169, and, therefore, "no passage of time can render a void judgment valid." One Toshiba Color Television, 213 F.3d at 157. Thus, that the default judgment was issued roughly two and one half years ago is not relevant to the Court's determination of this issue.
C. Additional Factors to Be Considered by the Court
Having determined that default judgment entered against Defendant Valuev is void, the Court is not required to additionally consider the three factors enumerated inEmcasco. Gold Kist, 756 F.2d at 19 (citing Fed.R.Civ.P. 60(b)(4)); Mettle, 279 F. Supp. 2d at 603 n. 3;Shenouda, 203 F.R.D. at 171 (concluding a 60(b)(4) analysis upon a determination that default judgment was void because service of process was defective). In any event, as the following discussion illustrates, those factors also militate in favor of setting aside default judgment. Contra Hoxworth v. Blinder, Robinson Co., Inc., 980 F.2d 912, 920 (3d Cir. 1992) ("It is not necessary that all the factors point toward a default before the sanction will be upheld.")
Again, those factors are: (1) whether the plaintiff will be prejudiced if the default is lifted; (2) whether the defendant has a meritorious defense; and (3) whether the default was the result of the defendant's culpable conduct. Emcasco Insurance, 834 F.2d at 73.
(i) Prejudice to Plaintiff
Plaintiff here has failed to identify, both in its numerous written submissions and before the Court at oral argument on September 20, 2004, any prejudice that may befall Mr. O'Donnell if the Court were to vacate default judgment under Rule 60(b). The only potential prejudice that the Court can identify is the waste of time and money that Plaintiff will incur in awaiting Defendant's response and in addressing Defendant's default. These expenses, however, are curable by requiring Defendant to reimburse Plaintiff for reasonable costs and fees.
(ii) Existence of A Meritorious Defense
Defendant alleges that the Agreement violates the Professional Boxing Safety Act ("Muhammad Ali Boxing Reform Act" or "Act"), 15 U.S.C. § 6301 et seq., and, thus, is void. Additionally, Defendant claims the Agreement is invalid under Nevada law. The Court is inclined to agree with these conclusions.
(a) Muhammad Ali Boxing Reform Act
Pursuant to 15 U.S.C. § 6308(b)(1), entitled "firewall between promoters and managers," "it is unlawful for a promoter to have a direct or indirect financial interest in the management of a boxer" or for "a manager to have a direct or indirect financial interest in the promotion of a boxer." For reasons now explained, as to boxing matches conducted in the United States, the Agreement violates that provision.
The Act defines "manager" to mean "a person who receives compensation for service as an agent or representative of a boxer," and "promoter" as "the person primarily responsible for organizing, promoting, and producing a professional boxing match." 15 U.S.C. § 6301(5) and (9).
The Act is not applicable to that part of the Agreement governing boxing matches conducted outside of the United States, as the Act exclusively governs matches held in this country.See 15 U.S.C. § 6301(8) (defining "professional boxing match" as "a boxing contest held in the United States") (emphasis added).
The explicit purpose of the Exclusive Representation Agreement at issue here was for the U.S. Parties and the Russian Parties "to act . . . as a single management and promotional unit to"inter alia, "promote [Valuev's] fights in the U.S.A. and worldwide." (Agreement at ¶ 1.) Moreover, the Agreement purports to "grant to the U.S. Parties an exclusive right to represent [Valuev] in the United States and worldwide, except Russia, to promote and manage fights in the United States and worldwide, except Russia on behalf of [Valuev], providing him with financial, management, training and legal support as necessary." (Id. at ¶ 3 (emphasis added).); see 15 U.S.C. § 6301(5) (defining "manager" as "a person who receives compensation for service as an agent or representative of a boxer") (emphasis added).
Furthermore, the Agreement states that "[t]he U.S. Parties will designate its representatives to act as co-managers" so long as Shalayev gives his consent on decisions relating to choice of opponents and venues, training schedules and routines, and financial arrangement of fights. (Agreement at ¶ 4.2 (emphasis added).)
Despite the paucity of case law throughout the nation interpreting the Muhammad Ali Boxing Reform Act, the language and stated purpose of the statute seem to contemplate (and prohibit) agreements such as the one here.
The Agreement contains a choice-of-law provision in favor of Nevada law. The Court here must apply New Jersey choice of law rules. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 497 (1941); Echols v. Pelullo, 2004 WL 1699050, at *2 (3d Cir. 2004). New Jersey courts will generally enforce choice-of-law provisions in contracts provided that the chosen law does not offend the public policies of New Jersey and the contract bears some "reasonable relation" to the chosen jurisdiction. Pepe v. Rival, 85 F. Supp. 2d 349, 381-82 (D.N.J. 1999); Instructional Systems, Inc. v. Computer Curriculum Corp., 614 A.2d 124, 133 (N.J. 1992).
The public policy of the State of Nevada is consistent with that of New Jersey. Compare N.J.S.A. 5:2A-2 with Nev. Admin. Code 41 § 467.010 et seq. and 41 §§ 467.012, 467.015, 467.018 (creating a medical advisory board to oversee and regulate the physical and mental fitness of boxers within the state). Moreover, although neither party discusses whether the contract bears any "reasonable relation" to the chosen jurisdiction, the Agreement states that the parties "intend to establish a promotional company in the USA as a limited liability company to be registered in Las Vegas, Nevada. . . ." (Agreement at ¶ 2.4.)
Defendant additionally argues that the Agreement violates Nev. Admin. Code 41 § 467.104 which provides that "an unarmed combatant may not have a promoter or any of its members, stockholders, officials, matchmakers or assistant matchmakers act directly or indirectly as his manager." For the reasons expressed infra, the express terms of the Agreement contravene this prohibition. See Section II.C.ii.a. Additionally, section 467.104 states that "[a]n unarmed combatant may not have a promoter or any of its members, stockholders, officials, matchmakers or assistant matchmakers . . . hold any financial interest in his management or his earnings from contests or exhibitions." Nev. Admin. Code 41 § 467.104. This language directly implicates paragraph 7.1 of the Agreement, stating that "The Russian Parties and the U.S. Parties agree that they shall share all net proceeds of any fight revenues, including the purse. . . ."
As defined by Nev. Admin. Code §§ 467.0037 and 467.0039, this includes a professional boxer.
In addition, though neither party addresses the point, the Court notes that the "Exclusive Representation Agreement" likely violates Nevada Administrative Code § 467.112. That provision states that "[a] bout agreement which provides that an unarmed combatant must fight exclusively for one promoter or at the option of the promoter is prohibited." The term "bout agreement" is not explicitly defined by the statute, though, it means something distinct from promotional agreement. See Devin Burstein, Esq., The Muhammad Ali Boxing Reform Act: Its Problems and remedies, Including the Possibility of a United States Boxing Administration, 21 Cardozo Arts Ent. L.J. 433, 441 (2003). In any event, the statute would seem to be implicated where, as here, the promotional agreement grants the "promoter" the "exclusive right . . . to promote . . . fights in the United States and worldwide. . . ." (Agreement at ¶ 3.) See Jeffrey S. Fried, Esq., The Sweet Science, Legally Speaking (Professional Boxing), 14 J. Legal Aspects of Sport 75, 84 n. 3 (2004) (noting that Section 467.112(2) of the Nevada Administrative Code prohibits "exclusive" promotional agreements). However, as this issue has not been briefed or argued by either party, and as its resolution does not change the outcome here, further discussion may properly be reserved for another day.
For these reasons, the Court holds that the Agreement likely violates Nev. Admin. Code 41 § 467.104.
Defendant additionally argues that under common law contract principles the Agreement is indefinite and, therefore, void. Specifically, Defendant contends that because the Agreement allocates 50% of the net proceeds to the Russian Parties, "[t]here is absolutely no way one can determine from the document what Mr. Valuev's purse would be for any bout. . . ." (Def.'s Br. at 9.) This argument is without merit.
In Nevada, as in most jurisdictions, "[a] contract, to be enforceable, must be sufficiently definite." Chung v. Atwell, 745 P.2d 370, 371 (Nev. 1987) (citing Restatement (Second) of Contracts § 33 (1981)). "The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy." Restatement (Second) Contracts § 33(2); see Chung, 745 P.2d at 371 (citing Restatement with approval). However, with contracts for the rendition of services, "one party may be given power to fix the price within limits set by agreement or custom or good faith." Restatement (Second) Contracts § 33(2) cmt. e. For these reasons, Valuev's "indefiniteness" defense is meritless.
(iii) Defendant's Culpable Conduct
It is well settled that "the party in default must show that the default was not caused by his own culpable conduct in order to have it set aside." Emcasco Insurance Co., 834 F.2d at 73;Admiral Home Aplliances v. Tenavision, Inc., 735 F.2d 1347 (D.N.J. 1982). Plaintiff argues that "Valuev's utter disregard of the lawsuit and the mandates of the Final Judgment for well over two years, constitutes arrogance and complete disregard of the consequences of such conduct. Valuev is obviously moving to vacate the Judgment at this late date simply because the Judgment interferes in his new plans." (Pl.'s Br. at 32.) Specifically, Plaintiff alleges that Defendant Valuev has recently signed a promotional agreement with a German promoter, Wilfried Sauerland, and has fought (and will continue to fight) under Sauerland's promotion. (Pl.'s Br. at 17 ¶¶ 34-38, Ex. R.) The Court determines that these reasons for denying Defendant's motion are insufficient in light of the particulars of this case.
To begin with, Defendant Valuev does not speak, read nor write English. (9/30/04 Valuev Cert. at ¶ 14; 4/17/04 Valuev Cert.) All knowledge that Mr. Valuev had regarding the specifics of the proceedings against him were communicated to him by Mr. Shalayev. Indeed, it was Mr. Shalayev who first informed Mr. Valuev, sometime in the second half of 2002, of the judgment entered against him by this Court on March 28, 2002. (Id. at ¶ 4.) Based on Mr. Shalayev's communications with Defendant, Mr. Valuev was either unaware of, or unable to comprehend, the terms of the judgment. (Id. at ¶¶ 4-8.) In fact, Mr. Valuev maintains that he only learned the full terms of the final judgment after he severed ties with Shalayev sometime in 2003.
Mr. Shalayev was handling all of Mr. Valuev's business affairs from the time the action was commenced through entry of default judgment. (9/30/04 Valuev Cert. at ¶ 3.)
More specifically, Valuev first learned of the terms of the judgment when his current promoter received a letter from Mr. O'Donnell, dated September 19, 2003. (7/20/04 O'Donnell Cert., Ex. Q.)
Plaintiff, though, alleges that copies of the summons and complaint were sent to Defendant Valuev at his permanent address in Russia — the same address that Defendant listed as his permanent residence on his Russian Passport application, and the same address provided by Berezin in an e-mail to Synkov (7/20/04 O'Donnell Cert. at ¶ 5; 9/13/04 Supplemental O'Donnell Cert. at 1-2, Exs. A and B.) Defendant maintains that he has not lived at that address for at least several years. (4/17/04 Valuev Cert. at ¶ 4; 9/04 Valuev Decl. at ¶ 2.) In support of that contention, Defendant has explained to the Court that
in Russia the address at which one is registered is not necessarily the address at which one lives. The Guardeyska address was the address of my father and mother where I was brought up. When my surviving parent dies, the registration means that I will have a right to claim ownership rights to the apartment. I do not, however, live there.
(9/30/04 Valuev Cert. at ¶ 11.) Plaintiff does not dispute this characterization of Russian property law. As courts are entitled to consider such evidence in determining foreign law, Fed.R.Civ.P. 44.1, the Court accepts Mr. Valuev's representations, at least for purposes of the instant motion.
Having not received notice of the pendency of the proceedings against him, Mr. Valuev relied on the accuracy of Mr. Shalayev's representations regarding the terms of the Court's final judgment and order. That Mr. Shalayev's interests may not have been aligned with Mr. Valuev's only bolsters the veracity of the contention that Defendant did not learn the full terms of default judgment from Mr. Shalayev. Thus, just as Defendant suggested to this Court at oral argument, even if Shalayev did receive copies of the summons and complaint in this action, he in all likelihood never forwarded it along to Defendant Valuev.
Additionally, Defendant represented to the Court at oral argument that on multiple occasions Shalayev fraudulently signed Valuev's name to documents. (See also 9/04 Valuev Decl. at ¶ 3.)
For the reasons just explained, the Court is uncomfortable attributing the delay in filing this motion to Mr. Valuev. Indeed, once Valuev learned of the specifics of the judgment against him, he retained counsel within a relatively short period of time. In sum, the default was not caused by Defendant's culpable conduct.
In another context, the Court might be reluctant to find that a period of several months constituted a reasonably short period of time. Here, though, in light of Mr. Valuev's limited resources at the time, Defendant was not in a position to immediately retain counsel in the United States. (9/30/04 Valuev Decl. at ¶¶ 8, 14.)
This determination, by itself, does not resolve the question of whether the instant motion was made "within a reasonable time." Fed.R.Civ.P. 60(b). Indeed, the motion to vacate default judgment was not made until, at the very minimum, four months after Defendant retained counsel. This delay has not been explained by Defense counsel. To be sure, defense counsel has certified to the Court that Plaintiff did not immediately respond to the inquiries he directed to Plaintiff on March 12, 2004, almost two years after the case had been closed. (7/7/04 English Cert. at ¶¶ 2-4.) Even if this Court were to give Defendant the benefit of the doubt as to this added delay, the instant motion still would not have been filed until three months after Plaintiff responded to Defense counsel's inquiries. Nonetheless, in light of the Court's determinations as to the first two factors of the three-prong test — lack of prejudice to Plaintiff and existence of Defendant's meritorious defense — the Court holds that the motion should be granted. $55,518.05 in U.S. Currency, 728 F.2d at 195 (holding doubtful cases should be resolved in favor of setting aside the default judgment);Hoxworth, 980 F.2d at 920 ("It is not necessary that all the factors point toward a default before the sanction will be upheld.")
III. CONCLUSION
For the foregoing reasons, Defendant Valuev's motion to vacate default judgment pursuant to Fed.R.Civ.P. 60(b)(4) is granted and Defendant will be directed to answer Plaintiff's complaint within 20 days. The accompanying Order is entered.
ORDER TO VACATE DEFAULT JUDGMENT AND TO ANSWER
This matter came before the Court upon motion by Defendant Valuev to vacate default judgment entered by the Court on March 28, 2002 for failure to respond to the Court's orders requiring Defendants to provide full and complete accountings to Plaintiff; and
The Court having considered the written submissions and having heard oral argument on September 20, 2004; and
For the reasons expressed in the Opinion of today's date;
IT IS this 22nd day of December 2004 hereby
ORDERED that the motion to vacate default judgment under Fed.R.Civ.P. 60(b)(4) by Defendant Valuev is GRANTED ; and
IT IS FURTHER ORDERED that Defendant Valuev shall answer Plaintiff's complaint within 20 days from today; and
IT IS FURTHER ORDERED that Plaintiff's motion to amend and/or clarify the default judgment [Docket Item 49] is dismissed as moot.