Security Act of 1974 ("ERISA"), 29 United States Code ("U.S.C.") §§ 1001 et seq. Marty Gutmacher, Inc. ("Gutmacher") was one of the employers required to contribute to the Fund on behalf of its employees.
The Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"), 29 U.S.C. §§ 1381 et seq. amended ERISA to require an employer who withdraws from a multiemployer defined benefit pension plan to contribute "withdrawal liability" to the plan. This withdrawal liability represents that employer's proportionate share of the plan's unfunded vested benefits. Moreover, ERISA classifies all trades or businesses that are under "common control" as a single employer for purposes of withdrawal liability. See 29 U.S.C. § 1301(b)(1). Thus, each member of a commonly-controlled group of trades or businesses is liable for the withdrawal liability of any other member of that group.
In 1987, Gutmacher withdrew from the Fund. Plaintiffs allege that Gutmacher, ESI, Davend, Culinary and Casserole are part of a commonly controlled group of corporations and therefore are jointly and severally liable for Gutmacher's withdrawal liability. In 1992, plaintiffs initiated this action to obtain $ 2,057,682, the amount allegedly owed to the Fund because of Gutmacher's withdrawal.
Plaintiffs delivered two copies of the Summons and Complaint for each defendant to the New York Secretary of State. The Secretary of State mailed one copy of the Summons and Complaint to Davend and ESI, New York corporations, by certified mail, return receipt requested, at the addresses designated by Davend and ESI. Plaintiffs mailed an additional copy of the summons and complaint to Culinary and Casserole, unauthorized foreign corporations, at the addresses on file in their respective states of incorporation.
None of the defendants answered the Complaint. On May 20, 1992, this Court entered a default judgment in favor of the plaintiffs in the amount of $ 4,270,811.99, which included interest, liquidated damages, costs, and attorneys' fees. Upon learning of the default judgment, defendants retained the law firm of Silverberg, Stonehill & Goldsmith, P.C. to represent them. The parties then entered into negotiations and a series of stipulations extending the deadline for the filing of a motion to vacate the default judgment. The parties engaged in discovery, in the form of documents and depositions, concerning the organization of the corporations in question in an attempt to determine if these entities were commonly-controlled.
Despite this discovery, the parties are presently at an impasse as to whether these corporations are part of a controlled group. Accordingly, defendants now move to vacate the default judgment entered against them. Defendants claim that the judgment is void due to improper service of process and, additionally, they satisfy the criteria established by the Second Circuit for vacating default judgments.
I. Void Final Judgment
Rule 60(b)(4) of the Federal Rules of Civil Procedure authorizes a court to grant a party relief from a void final judgment. A judgment obtained in the absence of in personam jurisdiction is void, and a court must vacate such a judgment. See Jaffe and Asher v. Van Brunt, 158 F.R.D. 278, 279 (S.D.N.Y. 1994); See also Kao Hwa Shipping Co., S.A. v. China Steel Corp., 816 F. Supp. 910, 913 (S.D.N.Y. 1993). "Unlike motions pursuant to other subsections of 60(b), the Court has no discretion regarding motions to vacate void judgments under Rule 60(b)(4)." Kao Hwa, 816 F. Supp. at 913.
As an initial matter, plaintiffs assert that because defendants participated in post-judgment discovery in this case, they have waived their jurisdictional objections. This contention is without merit and requires little discussion.
Following the entry of the default judgment, the parties entered into negotiations designed to resolve the issue in lieu of litigating a motion to vacate. As the negotiations progressed, the parties entered into a series of stipulations extending the time period for defendants to move to vacate the judgment. During this period, defendants neither appeared before the Court nor submitted any pleadings or motions.
The United States Court of Appeals for the Second Circuit has held that waiver of objections to either personal jurisdiction or insufficiency of service of process may occur due to a party's conduct as well as due to the failure to raise the defense in motions or pleadings. See Datskow v. Teledyne, Inc., 899 F.2d 1298, 1302-03 (2d Cir. 1990). However, when determining whether a party has waived its jurisdictional objections, the court must focus its attention on "the nature and extent of defendants' contacts with the court." Trustees of Central Laborers' Welfare Fund v. Lowery, 924 F.2d 731, 733 (7th Cir. 1991).
Defendants in this case have had minimal contacts with this Court. Defendants have not appeared before the Court for any conferences, nor have they submitted any previous motions or pleadings. While the defendants have exchanged information with plaintiffs, this has not occurred at the direction or supervision of the Court. In sum, the defendants' contacts with the Court are insufficient to constitute a waiver of their jurisdictional objections.
B. Davend and ESI
Plaintiffs served defendants Davend and ESI, New York corporations, by delivering two copies of the summons and complaint for each defendant to the New York Secretary of State. The Secretary of State mailed one copy of the summons and complaint to Davend and ESI by certified mail, return receipt requested, to the addresses designated by them for that purpose.
Under the former Rule 4(d)(3) of the Federal Rules of Civil Procedure
a plaintiff may effect service upon a domestic or foreign corporation:
By delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant.
Accordingly, when a plaintiff chooses to utilize service upon a statutory agent, such as the Secretary of State of New York, a court must look to the law of that state to determine if service was proper. In this case, if the service of Davend and ESI was improper under New York law, the Court lacks jurisdiction over the matter.
New York's Business Corporation Law ("BCL") governs service of process upon the Secretary of State as "agent of a domestic or authorized foreign corporation". N.Y. Bus. Corp. Law § 306 (McKinney 1996). Section 306(b) provides:
(1) Service of process on the secretary of state as agent of a domestic or authorized corporation shall be made by personally delivering to and leaving with the secretary of state . . . duplicate copies of such process . . . . Service of process on such corporation shall be complete when the secretary of state is so served.