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Zokaites Properties, Lp v. La Mesa Racing

December 3, 2012

ZOKAITES PROPERTIES, LP, PLAINTIFF,
v.
LA MESA RACING, LLC, DEFENDANT.



The opinion of the court was delivered by: Magistrate Judge Maureen P. Kelly

ECF No. 72

MEMORANDUM ORDER

Kelly, Magistrate Judge

Plaintiff, Zokaites Properties, LP ("Zokaites") initiated this action in the Court of Common Pleas of Allegheny County, Pennsylvania, on October 1, 2010, alleging that Defendant, La Mesa Racing, LLC ("La Mesa"), breached its contractual obligations under a promissory note that had been assigned to Zokaites. On November 5, 2010, Zokaites filed an affidavit of service in the Court of Common Pleas stating that a copy of its Complaint against La Mesa had been served by certified mail on October 25, 2010, on Butch Maki ("Maki"), La Mesa's registered agent. La Mesa failed to file a responsive pleading, and on November 30, 2010, Zokaites moved for a default judgment. On that same date, a Notice of Judgment by default was entered against La Mesa in the Court of Common Pleas.

On February 10, 2011, Zokaites sought to foreclose on property owned by La Mesa in New Mexico in order to satisfy the default judgment entered in Pennsylvania. On February 11, 2010, arguing that it had not received actual notice of the action until default judgment had already been entered, La Mesa responded to Zokaites foreclosure action by filing a petition to strike the default judgment in the Court of Common Pleas of Allegheny County and an alternative petition to open the default judgment. The Court of Common Pleas entered an order denying La Mesa's petitions on February 25, 2011, and, on that same date, La Mesa removed the case to this Court.

The case has since followed a somewhat tortured procedural path which has included proceedings in state court and bankruptcy court and the recent adjudication by this Court on August 1, 2012, of a Motion to Dismiss and a Motion to Remand, ECF Nos. 13, 22, filed by Zokaites. ECF No. 70. Both Motions were denied. Id.

Of particular relevance is the Court's finding in denying the Motion to Remand that removal to this Court was timely because La Mesa had never been properly served with the Complaint. Id. at pp. 26, 28. Having found that the case was properly removed, the Court concluded that any actions taken by the parties henceforth must be accordance with the Federal Rules of Civil Procedure. Id. at p. 27. The Court also counseled La Mesa that it would not rule on the petitions to strike or open the default judgment that La Mesa had previously filed in the Court of Common Pleas,*fn1 and that "[i]f [La Mesa] wished to attack the default judgment entered by the Court of Common Pleas of Allegheny County, it must do so in a way that conforms to federal law." Id. at p. 28. As a result, La Mesa filed the instant Motion for Relief From Judgment By Default ("the Motion") on August 20, 2012, and on October 22, 2012, Zokaites filed a Brief in Opposition to the Motion. ECF Nos. 72, 80. A Reply and Sur Reply were filed on November 1, 2012, and November 14, 2012, respectively. ECF Nos. 85, 87. As such, the Motion is now ripe for review.

I. DISCUSSION

Relying on this Court's earlier finding that La Mesa was never properly served with process in this case, La Mesa argues that the default judgment entered against it in the Court of Common Pleas is void and should be stricken under Fed. R. Civ. P. 60(b)(4).

Rule 60(b) provides that: "[o]n motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons . . . (4) the judgment is void." Fed. R. Civ. P. 60(b)(4). "A judgment is void ... only if the court that rendered it lacked jurisdiction of the subject matter, or of the parties, or if it acted in a manner inconsistent with due process of law." Union Switch & Signal Div. American Standard Inc. v. United Elec., Radio and Mach. Workers of America, Local 610, 900 F.2d 608, 612 n. 1 (3d Cir. 1990) (citations omitted).

It is well settled that "[p]roper service is an indispensable prerequisite to personal jurisdiction over a party." New York Pipeline Mechanical Contractors, LLC v. Sabema Plumbing & Heating, 2011 WL 2038766, at * 2 (D.N.J. May 24, 2011), citing Lampe v. Xouth, Inc., 952 F.2d 697, 700--01 (3d Cir. 1991). Thus, a "default judgment entered when there has been no proper service of the complaint is, a fortiori, void, and should be set aside." U.S. v. One Toshiba Color Television, 213 F.3d 147, 156 (3d Cir. 2000), quoting Gold Kist, Inc. v. Laurinburg Oil Co., Inc., 756 F.2d 14, 19 (3d Cir. 1985).

Here, the Court has already found that effective service was not made in this case. See ECF No. 70, pp. 20-26. As such, the Court of Common Pleas was without jurisdiction over La Mesa when it entered default judgment against it, rendering the judgment void.

Notably, Zokaites does not dispute that effective process was not made in this case but, rather, argues that determining whether to open or strike a judgment is within the Court's discretion. Citing to a myriad of cases that have no authority within this Court's jurisdiction, Zokaites further argues that La Mesa's failure to plead in its Motion that it has a meritorious defense to the action and that the Motion was timely filed weighs against the Court exercising its discretion. Zokaites takes particular issue with the timeliness requirement arguing that technical service is irrelevant and because Maki, as La Mesa's registered agent, was provided with notice of the lawsuit on October 1, 2010 (and fifteen times thereafter), that the delay in filing its petitions to strike and open the judgment until February 22, 2011, renders them untimely and counsels against striking the judgment. Zokaites' argument, however, is misplaced.

As noted by the United States Court of Appeals for the Third Circuit, analysis of the factors promoted by Zokaites, is required "only when the default judgment was authorized and the only question before the district court is whether to exercise its discretion to set aside the default." Gold Kist, Inc. v. Laurinburg Oil Co., Inc. 756 F.2d 14, 19 (3d Cir. 1985). Where, however, the default judgment was improperly entered in the first instance, such as where service was never effectuated, it should be set aside as a matter of law. Id. See Petrucelli v. Bohringer & Ratzinger, 46 F.3d 1298, 1304 (3d Cir. 1995). See U.S. v. Zotter, 2011 WL 1792533, at *2 (W.D. Pa. May 09, 2011) ("[a] default judgment entered when there has been no proper service of the complaint is improper and void, and will be set aside on that basis alone"); Grant Street Group, Inc. v. D & T Ventures, 2011 WL 778438, at *1 n.2 (W.D. Pa. Mar. 01, 2011) (finding that no further analysis is needed where the Court finds that process was never properly served); Mortgage Electronic Registration System, Inc. v. Patock, 2009 WL 1421295, at *2 (D. Virgin Islands May 20, 2009) ("if the Court finds that the default judgment was improperly entered, consideration of those three factors is unnecessary and the judgment should be set aside as a matter of law"); Newell v. Salta Int'l Inc. 2009 WL 2920265, at *3 (E.D. Pa. Sept. 10, 2009), quoting On Track, Inc. v. Lakeside Warehouse & Trucking Inc., 245 F.R.D. 213, 215 (E.D. Pa. 2007) ("In spite of Rule 60(b)'s permissive 'may,' 'the law is settled that a court lacks discretion under clause (4): if jurisdiction is absent, the court must vacate the judgment as void'"); 11 Wright and Miller ยง 2862 ("[t]here is no question of discretion on the part of the court when a motion is under Rule 60(b)(4) . . . . Either a ...


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