Sharif v. Decatur Hotels, LLC
Filing
38
ORDER granting 26 Motion to Set Aside Default. The 24 Default Judgment and 22 Order on Motion for Entry of Default are VACATED. FURTHER ORDERED that defendant Decatur Hotels, LLC answer the complaint within ten days from entry of this Order. Signed by Judge Jay C. Zainey on 11/7/11. (plh, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
JAMIL SHARIF
CIVIL ACTION
VERSUS
NO: 10-970
DECATUR HOTELS, LLC D/B/A
NEW ORLEANS FINE HOTELS
SECTION: "A" (1)
ORDER SETTING ASIDE DEFAULT JUDGMENT
Before the Court is a Motion to Set Aside Default Judgment
(Rec. Doc. 26) filed by defendant Decatur Hotels, LLC.
Jamil Sharif opposes the motion.
Plaintiff
The motion, set for hearing on
October 5, 2011, is before the Court on the briefs without oral
argument.
I.
For the reasons that follow, the motion is GRANTED.
BACKGROUND
Plaintiff, Jamil Sharif, filed this lawsuit against
defendant Decatur Hotels, LLC on March 25, 2010.
The crux of the
complaint is that Decatur used Sharif’s image in its advertising
campaign without his permission.
the Lanham Act and state law.
Sharif asserted claims under
On January 5, 2011, the district
judge then presiding held an evidentiary hearing on Sharif’s
motion for a default judgment.
(Rec. Doc. 25).
On that same
date, the Court entered a default judgment in favor of Sharif for
$400,000.00.
(Rec. Doc. 24).
On March 24, 2010, the day before Sharif filed this lawsuit,
the same district judge dismissed Sharif’s identical complaint
against Decatur without prejudice for failure to properly serve
Decatur.
(09-6228, Rec. Doc. 19).
Sharif had relied upon the
same state law provision for service of process upon a limited
liability company, Louisiana Code of Civil Procedure article
1266(B)(2), in Civil Action 09-6228 that he relied upon in the
instant suit.1
Decatur now moves to set aside the default judgment arguing
inter alia that the judgment is void because service was
improper.2
II.
DISCUSSION
The court may set aside an entry of default for good cause,
and it may set aside a default judgment under Rule 60(b).
R. Civ. Pro. 55(c).
Fed.
According to Rule 60(b), on motion and just
terms, the court may relieve a party from a final judgment if the
judgment is void.
Fed. R. Civ. Pro. 60(b)(4).
If a court lacks
jurisdiction over a defendant because of insufficient service of
process, the judgment is void and must be set aside under Rule
1
Federal Rule of Civil Procedure 4(h)(1)(A) specifically
allows the plaintiff to use state law methods of service when
serving a corporation, partnership, or other association.
2
Civil Action 10-970 was transferred to this Section after
Decatur filed the motion to set aside the default judgment.
(Rec. Doc. 30).
2
60(b).
Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114, 118
(5th Cir. 2008) (citing Recreational Props., Inc. v. Southwest
Mortgage Serv. Corp., 804 F.2d 311, 314 (5th Cir. 1986)).
Turning now to the instant case, Sharif had at least three
service options available to him under the federal rules.
First,
pursuant to Rule 4(d)(1)(A)(ii), Sharif could have requested
waiver of service directly from Scott Day, Decatur’s president
and co-manager.
Counsel for Sharif had had extensive
communications with Day from April to May 2009 regarding
Decatur’s unauthorized use of Sharif’s image.
Second, pursuant
to Rule 4(h)(1)(B), Sharif could have served Day personally at
Decatur’s corporate headquarters.3
Of course, as Sharif
correctly points out, he was not required to use either of these
methods, and Rule 4(h)(1)(A), the third available option, was
equally available to him as a mode of service.
Rule 4(h)(1)(A) incorporates state law service of process
provisions.
Via this rule, a limited liability company can be
3
In response to this assertion Sharif directs the Court’s
attention to Defendant’s Exhibit D-11 and points out that
“[s]ervice was attempted at Mr. Day’s location at the 301
Magazine Street address [on] May 17, 2010, and May 24, 2010.”
(Rec. Doc. 32 at 2). Defendant’s Exhibit D-11 demonstrates only
that the process server attempted to serve Edwin Palmer, the
designated agent for service, at that location. This document
does not suggest that Sharif actually attempted to serve Day at
the corporate office.
3
served in accordance with Louisiana Code of Civil Procedure
article 1266.
This article dictates that service on a limited
liability company is to be made on its registered agent for
service of process.
La. Code Civ. Pro. art. 1266(A).
Decatur’s
registered agent for service of process is Edwin Palmer and the
registered address for service of process purports to be 301
Magazine Street.
Sharif had tried unsuccessfully to obtain a waiver of
service from Palmer via certified mail during the 09-6228 lawsuit
and Sharif began to suspect that Palmer was simply shirking his
legal duties as a registered agent.
That’s when Sharif decided
to rely upon the fail-safe provision of article 1266 which allows
for personal service on an employee at any place where the
business of the limited liability company is regularly
conducted.4
La. Code Civ. Pro. art. 1266(B)(2).
Sharif
personally served Jamie Stolberg, a Decatur employee.
Judge
McNamara dismissed Sharif’s complaint in Civil Action 09-6228
after concluding that this was not effective service as to
Decatur because Sharif had not demonstrated due diligence in
4
“[I]f the person attempting to make service certifies that
he is unable, after due diligence, to serve the designated agent,
service of the citation or other process may be made by . . .
[p]ersonal service on any employee of suitable age and discretion
at any place where the business of the limited liability company
is regularly conducted.” La. Code Civ. Pro. art. 1266(B)(2).
4
attempting to personally serve Palmer.
(09-6228, Rec. Doc. 18).
Notwithstanding the difficulties that Sharif had already
encountered with Palmer, the difficulties he had experienced in
satisfying the substantive requirements of article 1266's failsafe provision, and the other available modes of service which
would not have involved Palmer, Sharif nevertheless chose to rely
on article 1266(B)(2) and attempted personal service on Palmer.
Sharif’s process server tried to serve Palmer at the registered
address and was told that he does not come into that office and
no one knew where to locate him.
(Def. Exh. D-11).
The process
server then tried multiple times without success to serve Palmer
at a residential address.
Next, the United States Marshal
attempted to serve Palmer at the registered address and at the
alternate residential address but service was returned unexecuted
with the notation that the deputy marshal could not locate
Palmer.
(Def. Exh. D-12).
Concluding that he had satisfied due
diligence, Sharif then served Decatur employee Stacey Rico at the
St. James Hotel on July 27, 2010.
(Rec. Doc. 13).
On December
22, 2010, Judge McNamara entered Decatur’s default after
concluding that service on Rico was effective as to Decatur.
(Rec. Doc. 22).
The Court cannot grapple with the implicit conclusion of
Judge McNamara’s December 22, 2010, order-–Sharif surely
5
demonstrated due diligence in attempting to serve Palmer at the
registered address; both the deputy marshal and the private
process server failed.
Having been told by the employees present
that Palmer does not report to the corporate office, Sharif was
not required to engage in the futile act of returning to that
location yet again.
Nonetheless several aspects of the service
upon which the $400,000.00 default judgment was based trouble the
Court.
First, while Rico is an employee of Decatur, it is hardly
clear that the St. James Hotel is the location where Decatur
regularly conducts its business.
Decatur has a separate
corporate office down the street and while Palmer could not be
found at that location, the process server’s affidavit makes
clear that other employees were located there.
(Def. Exh. D-11).
Further, Judge McNamara had been told that Decatur owned the St.
James Hotel, (Rec. Doc. 22 n.1), but now its seems that another
entity albeit a related one actually owns the hotel.
Second, there is no evidence to suggest that Decatur’s
principals, or those who act on behalf of the entity, had actual
notice that Sharif had filed a second lawsuit.
Decatur did not
ignore Civil Action 09-6228 but retained counsel to defend that
case.
When Sharif’s counsel finally made actual contact with
Decatur after the default had issued in Civil Action 10-970,
(Def. Exh. D-10), Decatur, through its same attorneys, acted
6
expeditiously to move to set aside the judgment.
The Court
discussed these matters with counsel at a status conference on
July 12, 2011, and the Court left the conference persuaded that
Decatur did not know about the second lawsuit, much less about
the default proceedings.5
To be sure, the Court does not condone the practice of
appointing agents for service of process who later evade service
and who cannot be found at the registered address for service.
The Court is not convinced that Decatur is operating with “clean
hands” as far as the service issue is concerned.
5
But given the
Certain aspects of docket administration might also
suggest that Decatur knew nothing about the second lawsuit. When
Civil Action 10-970 was first filed the case was randomly
allotted and subsequently transferred to the original judge who
had dismissed Civil Action 09-6228 without prejudice. The two
cases were never consolidated, which is not problematic in and of
itself, but if the cases had been consolidated then Decatur’s
counsel would have received actual notice of everything that
occurred in Civil Action 10-970. The decision to consolidate is
solely within the discretion of the presiding judge and this
Court is not opining that consolidation should have occurred.
Instead, the Court merely points out that if Civil Action 10-970
had been consolidated into the closed 09-6228, which some judges
are wont to do, then notice would not have been an issue.
Instead, none of the defaulted defendant’s contact information
was added to the docket sheet in Civil Action 10-970, and the
motion for default itself contains no certificate of service.
Finally, there is no indication that anyone from the court
attempted to contact defense counsel who, at least up until the
day before Civil Action 10-970 was filed, and continuing through
the present, represented Decatur. Perhaps a simple phone call to
those same attorneys of record would have avoided the default in
this case.
7
extensive contact that Sharif’s counsel had had with Scott Day
regarding the very facts that gave rise to this lawsuit, and
given that Sharif easily contacted Day after the default was
entered, it is clear to the Court that Sharif could have made
Decatur aware of the second lawsuit and of the default
proceedings had Sharif really wanted to do that.
Instead, Sharif
ignored several modes of service of process that would have
allowed service on Day instead of Palmer,6 again an individual
with whom Sharif had had extensive contact about the case, to
instead serve a miscellaneous Decatur employee at a location that
does not appear to be the location where Decatur regularly
conducts its business.7
In other words, Sharif might have been
less than interested in effectively serving Decatur and thereby
having to defend the case on the merits.8
In sum, the Court is persuaded that service was not proper
6
Louisiana Code of Civil Procedure article 1266
specifically permits service on a manager of the limited
liability company when the registered agent cannot be served.
La. Code Civ. Pro. art. 1266(B)(1).
7
The Court did not learn during the July 12, 2012, status
conference what Stacey Rico actually did with the complaint.
8
At the July 12, 2011, status conference the Court
questioned counsel about why Sharif did not attempt any of the
other modes of service that would have ensured that Decatur
received notice of the lawsuit. The Court remains uncertain,
however, as to what the intent was with respect to the mode of
service.
8
and that the judgment is therefore void.
Accordingly;
IT IS ORDERED that the Motion to Set Aside Default (Rec.
Doc. 26) filed by defendant Decatur Hotels, LLC is GRANTED.
The
default judgment entered on January 5, 2011 (Rec. Doc. 24), and
the entry of default ordered on December 3, 2010 (Rec. Doc. 22),
are VACATED;
IT IS FURTHER ORDERED that defendant Decatur Hotels, LLC
answer the complaint within ten (10) days from entry of this
Order.
November 7, 2011
JAY C. ZAINEY
UNITED STATES DISTRICT JUDGE
9
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