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FBM Holdings LLC v. Goldwerks

May 5, 2006

FBM HOLDINGS LLC, ET AL., PLAINTIFFS,
v.
GOLDWERKS, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hurley, District Judge

MEMORANDUM OF DECISION AND ORDER

Presently before the Court are the motions by defendants Curtis J. Bernhardt ("Bernhardt"), Greg Jakobson ("Jakobson"), Anthony DiMatteo ("DiMatteo"), LD Trust, Crown Jewel Resources Corp., Crown Jewel Resources Capital Corp., Park Vanguard, LLC, and Fieldstone Partners (collectively, "Movants") for an Order, pursuant to Federal Rule of Civil Procedure ("Rule") 55, vacating the default judgments entered against them. For the reasons stated below, the motions are granted in part and denied in part.

BACKGROUND

The instant action was commenced on November 4, 2002 in the United States District Court for the Western District of Washington. By Order dated June 3, 2003, the case was transferred to this Court. On June 10, 2005, Plaintiffs moved for the entry of default judgments against the Movants as well as several other defendants. On June 17, 2005, the Clerk of the Court issued a certificate noting the defendants' default. Thereafter, on October 7, 2005, the Court entered default judgments against the defendants.

The Movants now seek to vacate the default judgments pursuant to Rule 55 on the basis that they have not been properly served. In their opposition papers, Plaintiffs correctly point out Harold J. Levy, counsel for the Movants, has appeared in this action as counsel for the three individual movants only. (See Docket Entry 73, Notice of Appearance, dated Oct. 20, 2005.) Moreover, in Mr. Levy's October 20, 2005 letter to the Court requesting permission to file a motion to vacate, Mr. Levy states that he has just been retained to represent the individual movants "and possibly some of the defendant corporate or business entities with which they may have been affiliated." (See Docket Entry 72, at 1.) However, to date, no formal appearance on the corporate defendants' behalf has been filed. Accordingly, and as will be explained more fully below, the Court declines to address the motions to vacate filed by LD Trust, Crown Jewel Resources Corp., Crown Jewel Resources Capital Corp., and Park Vanguard, LLC but sua sponte grants the motion to vacate filed by Fieldstone Partners. In addition, the Court grants Bernhardt's and Jakobson's motions to vacate; DiMatteo's motion is referred to Chief Magistrate Judge Michael L. Orenstein for a traverse hearing.

DISCUSSION

I. Standard of Review

Under Rule 55(c), an entry of default may be set aside "[f]or good cause shown."

Because Rule 55 does not define the term "good cause," the Second Circuit has established three criteria that "must" be considered in deciding whether to vacate a default judgment: "(1) whether the default was willful; (2) whether setting aside the default would prejudice the adversary; and (3) whether a meritorious defense is presented." Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 96 (2d Cir. 1993). In addition, courts may consider other equitable factors, including whether "the entry of default would bring about a harsh or unfair result." Id.

Where a default judgment has been entered, it may also be set aside in accordance with any of the grounds listed in Rule 60(b). Fed. R. Civ. P. 60(b). Pursuant to Rule 60(b)(4), a defendant may move to set aside a default judgment on the ground that "the judgment is void." Id. 60(b)(4). A judgment is void if entered against a party over whom the court lacks personal jurisdiction. See Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 84-87 (1988). In challenging personal jurisdiction pursuant to Rule 60(b)(4), a defendant that had actual notice of the proceedings bears the burden of establishing that the purported service did not occur. See Burda Media, Inc. v. Viertel, 417 F.3d 292, 299 (2d Cir. 2005).

"[A] process server's affidavit of service establishes a prima facie case of the account of the method of service, and thus, in the absence of contrary facts, [courts] presume that [the defendant] was properly served with the complaint." Old Republic Ins. Co. v. Pacific Fin. Servs. of Am., Inc., 301 F.3d 54, 57 (2d Cir. 2002). "A defendant's sworn denial of receipt of service, however, rebuts the presumption of proper service established by the process server's affidavit and necessitates an evidentiary hearing." Id. No evidentiary hearing is required "where the defendant fails to swear to 'specific facts to rebut the statements in the process server's affidavits.'" Id. at 58 (quoting Simonds v. Grobman, 716 N.Y.S.2d 692, 693 (2d Dep't 2000)).

II. Application to the Present Case

By instant motion, the Movants seek to set aside the default judgments on the basis that the judgments are void for lack of personal jurisdiction because service of process was not properly effected. Thus, although the Movants state that they are moving under Rule 55, the Court will analyze their motions under Rule 60(4) pursuant to which, as noted above, a defendant may move to ...


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