Federal Court Victory for Business Client

We love it when our law firm can report another federal court victory! Our client, a prominent Philadelphia businesswoman, found out that another party had obtained a default judgment against her company to the tune of $119,687.56 in the United States Federal Court for the Eastern District of Pennsylvania, located at 601 Market Street, in Philadelphia. Worse yet, the client had originally hired a debt-relief company who did not give the client relief, but gave her plenty of grief instead. The problems only became worse and worse for our client. Finally, they decided to hire the business law team at Kenny, Burns & McGill to help get the judgment set aside. Attorneys Eileen T. Burns and Thomas D. Kenny vigorously fought for their client’s right to be heard and defend the claim. Our client needed a federal court victory and we were proud to deliver! The law is as follows: Federal Rule of Civil Procedure 60(b) provides for relief from a default judgment:  “On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceedings for the following reason(s)…(4) the judgment is void”. Fed. R. Civ. P. 60(b). United States Code Title 28 Section 1655 also allows for a district court to prevent enforcement of a lien when “Any defendant not so personally notified may, at any time within one year after final judgment, enter his appearance, and thereupon the court shall set aside the judgment and permit such defendant to plead on payment of such costs as the court deems just.” 28 U.S.C. § 1655.  As a general matter, the United States Court of Appeals for the Third Circuit disfavors defaults. Harad v. Aetna Cas. & Sur. Co., 839 F.2d 979, 982 (3d Cir. 1988). Federal court victory. Where a defendant has not been properly served with process, the Court’s discretion under Rule 60 is significantly cabined due to its lack of personal jurisdiction over that defendant.  Lampe v. Xouth, Inc., 952 F.2d 697, 700-01 (3d Cir. 1991) (“A court obtains personal jurisdiction over the parties when the complaint and summons are properly served upon the defendant. Effective service of process is therefore a prerequisite to proceeding further in a case.”); D’Onofrio v. Il Mattino, 430 F. Supp. 2d 431, 438 (E.D. Pa. 2006);  O’Donnell v. Shalayev, No. CIV.A.01-4721, 2004 U.S. Dist. LEXIS 25658, 2004 WL 2958698, at *7 (D.N.J. Dec. 22, 2004). “A default judgment rendered by a court which lacked personal jurisdiction over the defendant is void.” O’Donnell, 2004 U.S. Dist. LEXIS 25658, 2004 WL 2958698, at *7 (citing Pennoyer v. Neff, 95 U.S. 714, 725-727, 24 L. Ed. 565 (1877)); see also Grand Entm’t, 988 F.2d at 493 (“Because [plaintiff] failed to serve the Spanish defendants in compliance with either federal, Pennsylvania or Spanish law, the district court lacked jurisdiction to enter any judgment against them.”). Thus, where there has been improper service of process on a defendant, any default entered against that defendant must be set aside. See Grand Entm’t, 988 F.2d at 493; see also Gold Kist, Inc. v. Laurinburg Oil Co., Inc., 756 F.2d 14, 19 (3d Cir. 1995) (“A default judgment entered when there has been no proper service of the complaint is, a fortiori, void, and should be set aside.”); Petrucelli, 46 F.3d at 1304 (holding that it would have been error as a matter of law if default judgment was entered against defendant who was not served with summons and complaint within 120 days of complaint’s filing); D’Onofrio, 430 F. Supp. 2d at 438 (“Without proper service of process, any default judgment entered against a party is void for lack of personal jurisdiction.”). The fundamental purpose of service is to ensure that a defendant receives notice of  the suit and has a fair opportunity to present its objections . . . .” Bank of Am., N.A. v. Martin, No. 12-544, 2013 U.S. Dist. LEXIS 130381, 2013 WL 5128840, at *5 (M.D. Pa. Sep. 12, 2013), citing Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S. Ct. 652, 94 L. Ed. 865 (1950). “The rules governing service of process are not designed to create an obstacle course for plaintiffs to navigate, or a cat-and-mouse game for defendants who are otherwise subject to the court’s jurisdiction.” TRW, Inc. v. Derbyshire, 157 F.R.D. 59, 60 (D. Col. 1994). Although “notice underpins Federal Rule of Civil Procedure 4 concerning service,” “notice cannot by itself validate an otherwise defective service.” Grand Entertainment Group v. Star Media Sales, 988 F.2d 476, 492 (3d Cir. 1993).  “[a] district court’s power to assert in personam authority over parties defendant is dependent not only on compliance with due process but also on compliance with the technicalities of Rule 4.” Grand Entm’t, 988 F.2d at 492. “Notice to a defendant that he has been sued does not cure defective service, and an appearance for the limited purpose of objecting to service does not waive the technicalities of the rule governing service.” Id.; see also Henry v. Cooper Univ. Hosp., No. CIV.A.07-2402, 2008 U.S. Dist. LEXIS 71235, 2008 WL 4371764, at *2 (D.N.J. Sep. 17, 2008). In other words, even if a defendant has notice of a lawsuit against it, such notice neither validates an otherwise defective service nor waives the defendant’s right to object to that service. Id. “Without proper service, the court does not obtain personal jurisdiction over a defendant, and the case may not proceed to judgment.” Lin v. Pa. Machine Works, Inc., No. CIV.A.97-5407, 1998 U.S. Dist. LEXIS 2767, 1998 WL 111788, at *3 (E.D. Pa. Mar. 3, 1998) (citing Ayres v. Jacobs & Crumplar, P.C., 99 F.3d 565, 568 (3d Cir. 1996)); see also Kloth v. S. Christian Univ., 494 F. Supp. 2d 273, 275 n.3 (D. Del. 2007) (“If service of process is insufficient to confer jurisdiction of the person, a defendant does not waive this defense by failing to raise it in a motion or pleading within the time required for answer, since the court has no power over the defendant.”), aff’d, 320 Fed. Appx. 113 (3d Cir. 2008). As the United States Court of Appeals for the Third Circuit has explained, [i]t is an elementary requirement that personal jurisdiction must be established in every case before a court has power to render any judgment. . . . A court obtains personal jurisdiction over the parties when the complaint and summons are properly served upon the defendant. Effective service of process is therefore a prerequisite to proceeding further in a case. Lampe v. Xouth, Inc., 952 F.2d 697, 700-01 (3d Cir. 1991). On October 22, 2019 the Federal court agreed with Kenny, Burns & McGill’s position and granted the motion to set aside the judgment. Another federal court victory secured for one of our business clients. Kenny, Burns & McGill offers high-level representation in matters of business law and civil litigation in state and federal courts throughout Pennsylvania and New Jersey. Contact us today by calling or texting (215) 423-5500 to set up a free consultation.