Tyco Fire & Security LLC v.Jesus Hernandez Alcocer

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
FEB 22, 2007
No. 05-16180 THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 04-23127-CV-MGC
TYCO FIRE & SECURITY, LLC,
PHILLIP MCVEY,
GEORGE AZZE,
Plaintiffs-Appellants,
versus
JESUS HERNANDEZ ALCOCER,
JORGE HERNANDEZ TORRES,
EMILIO ESPINOLA,
RAIF SHANIN ISAAC,
GONZALO QUESADA SUAREZ, et al.,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
_________________________
(February 22, 2007)
Before TJOFLAT, HULL and BOWMAN,* Circuit Judges.
PER CURIAM:
Plaintiffs-Appellants Tyco Fire & Security, LLC, Phillip McVey, and
George Azze (“Tyco”), appeal the district court’s October 6, 2005 order granting
Defendant Alert 24, LLC’s (“Alert 24”)1 motion to dismiss for forum non
conveniens. Because we conclude that the district court’s order contains rulings
that are internally inconsistent, we vacate and remand for further proceedings with
directions.
I. BACKGROUND
A. Tyco’s Complaint and Service of Process
On December 15, 2004, Tyco filed a complaint against Defendant Alert 24
and several codefendants, in which Tyco alleged causes of action for violation of
the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968,
civil conspiracy, and defamation. The record reflects that Defendant Alert 24 was
served on December 31, 2004, through substitute service of process upon Carolyn
Harrison at her house in North Carolina, on behalf of Paul Eichelberger, Alert 24’s
registered agent who had been residing with Harrison for approximately four
*
Honorable Pasco M. Bowman II, United States Circuit Judge for the Eighth Circuit,
sitting by designation.
1
Alert 24 is a Texas limited liability company with its principal place of business in
Texas.
2
months. On January 27, 2005, a return of service was executed for Alert 24.
B. Clerk’s Entry of Default, Fed. R. Civ. P. 55(a)
For more than two months after service of process, Alert 24 failed to answer
Tyco’s complaint. Thereafter, on March 7, 2005, Tyco moved for a clerk’s entry
of default against Alert 24, pursuant to Federal Rule of Civil Procedure 55(a). In
its motion, Tyco alleged that “Alert 24 was served duly with summons and
complaint on December 31, 2004,” but failed to answer within the time prescribed
by the rules.2 Tyco also attached an affidavit of service which indicated that the
substituted service of process occurred on December 31, 2004.
Rule 55(a) provides: “When a party against whom a judgment for
affirmative relief is sought has failed to plead or otherwise defend as provided by
these rules and that fact is made to appear by affidavit or otherwise, the clerk shall
enter the party’s default.” Fed. R. Civ. P. 55(a).
On March 17, 2005, the clerk entered a default against Alert 24, finding that
Alert 24 was “in default for failure to appear, answer or otherwise plead to the
complaint filed herein within the time required by law.”
2
Federal Rule of Civil Procedure 12(a) provides, in relevant part, that a defendant shall
serve its answer “within 20 days after being served with the summons and complaint.” Fed. R.
Civ. P. 12(a)(1)(A).
3
C. Alert 24’s Motion to Dismiss
On April 8, 2005, Defendant Alert 24 subsequently moved, in a single
pleading, to quash service of process, to vacate the clerk’s entry of default, to
dismiss for lack of personal jurisdiction, to dismiss for improper venue, and to
dismiss for forum non conveniens. In its motion, Alert 24 argued, inter alia, that
service of process was invalid because (1) Eichelberger was not an agent of Alert
24 and had not been affiliated with Alert 24 since he sold his interest in the
company in 2002; and (2) even if Eichelberger was the proper person to serve,
substitute service of process was ineffective because the house in North Carolina
where the papers were served was not Eichelberger’s “permanent dwelling place.”
Alert 24 also argued that, because service of process was invalid, the clerk’s entry
of default should be set aside, pursuant to Rule 55(c).3
D. District Court’s October 6, 2005 Order
The district court addressed all of the issues in Alert 24’s motion to dismiss
in a single order. First, the district court found that service of process was proper
and denied the motion to quash. Specifically, the district court found that, under
Texas law, limited liability companies must continuously maintain a registered
agent for purposes of service of process, and that Eichelberger was Alert 24’s only
3
Rule 55(c) provides, in relevant part, that “[f]or good cause shown the court may set
aside an entry of default . . . .” Fed. R. Civ. P. 55(c).
4
registered agent with the Texas Secretary of State at the time of service. The
district court also noted that, even if Eichelberger was listed as Alert 24’s
registered agent due to an inadvertent error, that fact would be unavailing because
Alert 24 failed to comply with the clear provisions under Texas law for changing a
registered agent. The district court found that “it would be patently unfair and
contrary to the purpose of [Texas law] for this Court to allow Alert 24 to shield
itself from service of process simply by failing to comply with the [law’s]
unambiguous mandate.” Finally, the district court determined that the substituted
service of process was valid because the house in North Carolina was
Eichelberger’s usual place of abode at the time of service, and because there was
no requirement that substituted service of process occur at Eichelberger’s
permanent dwelling house.
Next, the district court addressed Alert 24’s motion to vacate the clerk’s
entry of default. The district court stated that a clerk’s entry of default could be set
aside for “good cause,” pursuant to Rule 55(c), but noted that Alert 24 had failed to
present any argument to justify setting aside the default other than its argument that
service of process was invalid. The district court reiterated that service of process
was valid and found that “the default was the result of Alert 24’s culpable
conduct.” Accordingly, the district court denied the motion to vacate the clerk’s
5
entry of default. The district court also denied Alert 24’s motion to dismiss for
lack of personal jurisdiction and its motion to dismiss for improper venue.
Although the district court had already denied Alert 24’s motion to vacate
the entry of default, and even though Alert 24 remained in default due to its failure
to timely defend, the district court granted Alert 24’s motion to dismiss for forum
non conveniens, finding that Mexico was an adequate alternative forum. Tyco now
appeals the district court’s order dismissing the case for forum non conveniens.
There is no cross-appeal from the district court’s order.
II. DISCUSSION
A. Effect of Clerk’s Entry of Default
The entry of a default against a defendant, unless set aside pursuant to Rule
55(c), severely limits the defendant’s ability to defend the action. While “a default
is not treated as an absolute confession by the defendant of his liability and of the
plaintiff’s right to recover,” a defaulted defendant is deemed to “admit[] the
plaintiff’s well-pleaded allegations of fact.” Nishimatsu Constr. Co. v. Houston
Nat’l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975).4 The defendant, however, “is not
held to admit facts that are not well-pleaded or to admit conclusions of law.” Id.Thus, before entering a default judgment for damages, the district court must
4
This Court adopted as binding precedent all Fifth Circuit decisions prior to October 1,
1981. Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc).
6
ensure that the well-pleaded allegations in the complaint, which are taken as true
due to the default, actually state a substantive cause of action and that there is a
substantive, sufficient basis in the pleadings for the particular relief sought. At that
point, the defendant, even though in default, is still entitled to contest the
sufficiency of the complaint and its allegations to support the judgment being
sought. See Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1278 (11th Cir.
2005) (citing Nishimatsu, 515 F.2d at 1206).5
A defaulted defendant also can defend by challenging the jurisdiction of the
court to enter judgment against him. Thus, for example, a defendant in default still
can challenge the validity of service of process or contest the court’s exercise of
personal jurisdiction over him.6
Other than the narrow exceptions discussed above, a defendant, once a
default has been entered against him, is not entitled to raise any other defenses.
Accordingly, procedural defenses, such as a motion to dismiss for forum non
5
A clerk’s entry of default, pursuant to Rule 55(a), is distinct from a judgment by default
entered by the clerk, pursuant to Rule 55(b)(1), or by the court, pursuant to Rule 55(b)(2). Here,
Tyco did not request, and would not have been entitled to, a judgment by default entered by the
clerk because its claim against Alert 24 was not “for a sum certain or for a sum which can by
computation be made certain.” See Fed. R. Civ. P. 55(b)(1). Rather, Tyco seeks an award of
compensatory damages in an unspecified sum. Thus, although in default, Alert 24 also is
entitled to contest the amount of damages before the court enters a judgment by default.
6
We note, therefore, that it was proper for the district court to consider Alert 24’s motions
to quash service of process, to vacate the clerk’s entry of default, and to dismiss for lack of
personal jurisdiction.
7
conveniens, which the Supreme Court has described as a “supervening venue
provision,” are lost. See Am. Dredging Co. v. Miller, 510 U.S. 443, 453, 114 S.
Ct. 981, 988 (1994).
In this case, the district court upheld the clerk’s entry of default against Alert
24, concluded that service of process was valid, and determined that it could
properly exercise personal jurisdiction over Alert 24. At that point, the district
court should have refused to consider Alert 24’s motion to dismiss for forum non
conveniens. However, because the district court did consider, and ultimately
granted, Alert 24’s motion to dismiss based on forum non conveniens without first
vacating the clerk’s default order, we find these rulings in the district court’s order
to be internally inconsistent. Thus, we vacate the district court’s October 6, 2005
order and remand for further proceedings.
On remand, if the district court determines, as it did in its October 6, 2005
order, that the default should not be set aside, then the district court must deny
Alert 24’s motion to dismiss for forum non conveniens. At that point, Tyco can
apply to the district court for entry of a judgment by default in accordance with
Rule 55(b)(2), and Alert 24 would be entitled to challenge only the sufficiency of
the complaint or the amount of the recovery.
If, on the other hand, the district court determines that the clerk’s entry of
8
default should be set aside, then the district court should explain in detail why,
vacate the clerk’s default order, and only then reconsider Alert 24’s motion to
dismiss for forum non conveniens.
B. Forum Non Conveniens Analysis
While we express no opinion as to the entry of default or as to the ultimate
merits of Alert 24’s motion to dismiss for forum non conveniens, we note that the
district court’s analysis of the forum non conveniens issues was lacking. Thus, we
point out certain legal principles that should guide the district court’s analysis in
the event that the district court decides to vacate the clerk’s default order and to
reconsider the motion.
In order to prevail on its motion to dismiss based on forum non conveniens,
Defendant Alert 24 has the burden of demonstrating that (1) an adequate
alternative forum is available, (2) the public and private factors weigh in favor of
dismissal, and (3) Tyco can reinstate its suit in the alternative forum without undue
inconvenience or prejudice. Leon v. Million Air, Inc., 251 F.3d 1305, 1311 (11th
Cir. 2001).
The first step in this forum non conveniens analysis is to determine “whether
an adequate alternative forum exists which possesses jurisdiction over the whole
case.” C.A. La Seguridad v. Transytur Line, 707 F.2d 1304, 1307 (11th Cir. 1983).
9
This inquiry has two parts – the defendant must demonstrate both the availability
and the adequacy of the proposed alternative forum. Leon, 251 F.3d at 1311. In
this case, Mexico would be an “available” forum if the Mexican court can assert
jurisdiction over the entire case. Id. Generally, a defendant can demonstrate an
available forum by showing that it is amenable to service of process in that forum,
or alternatively, by consenting to the jurisdiction of the alternative forum. See,
e.g., Piper Aircraft Co. v. Reyno, 454 U.S. 235, 242, 102 S. Ct. 252, 259 (1981);
La Seguridad, 707 F.2d at 1305 n.1. In its brief on appeal, Tyco emphasizes that
Defendant Alert 24 failed to establish before the district court that it was amenable
to service of process in Mexico. Moreover, Alert 24 conceded at oral argument
before this Court that it had not consented to the jurisdiction of the Mexican courts.
Thus, it is unclear whether Mexico is an available alternative forum for this case.
However, the district court’s order did not address this threshold issue of
“availability,” but instead focused only on the adequacy of the Mexican forum.
Any future analysis of Alert 24’s motion to dismiss for forum non conveniens must
address both whether the alleged alternative forum is “available” and whether that
forum is adequate.
As to the second part of the inquiry, an alternative forum will be considered
adequate so long as it could provide some relief for the plaintiffs’ claims, even if
10
“the substantive law that would be applied in the alternative forum is less favorable
to the plaintiffs than that of the present forum.” Piper Aircraft, 454 U.S. at 247,
102 S. Ct. at 261. In its brief on appeal, Tyco argues that Alert 24 failed to present
any evidence showing that adequate remedies exist in Mexico for the claims raised
in Tyco’s complaint, and that the district court improperly shifted the burden of
proof on this issue to Tyco. If the district court decides to address Alert 24’s
motion to dismiss for forum non conveniens, it must also address these concerns
when determining whether Mexico is an adequate alternative forum.
Once an adequate alternative forum has been established,
the trial judge must consider all relevant factors of private interest,
weighing in the balance a strong presumption against disturbing
plaintiffs’ initial forum choice. If the trial judge finds this balance of
private interests to be in equipoise or near equipoise, he must then
determine whether or not factors of public interest tip the balance in
favor of a trial in a foreign forum.
La Seguridad, 707 F.2d at 1307 (citation omitted); see also Gulf Oil Corp. v.
Gilbert, 330 U.S. 501, 508-09, 67 S. Ct. 839, 843 (1947) (discussing private and
public interest factors to be considered).
When balancing the private interest factors, the district court must consider
the strong presumption in favor of a plaintiff’s choice of forum. See Gulf Oil, 330
U.S. at 508, 67 S. Ct. at 843 (noting that “unless the balance is strongly in favor of
the defendant, the plaintiff’s choice of forum should rarely be disturbed”); Piper
11
Aircraft, 454 U.S. at 255, 102 S. Ct. at 265-66 (noting that “there is ordinarily a
strong presumption in favor of the plaintiff’s choice of forum, which may be
overcome only when the private and public interest factors clearly point towards
trial in the alternative forum”). This is especially true when a United States citizen
has chosen a home forum in which to litigate. See La Seguridad, 707 F.2d at 1308
n.7 (recognizing that “courts should require positive evidence of unusually extreme
circumstances, and should be thoroughly convinced that material injustice is
manifest before exercising any such discretion as may exist to deny a United States
citizen access to the courts of this country”) (quotation marks, brackets, and
citation omitted). Although “dismissal should not be automatically barred when a
plaintiff has filed suit in his home forum,” Piper Aircraft, 454 U.S. at 255 n.23, 102
S. Ct. at 266 n.23, the failure to account for this presumption when balancing the
private interests is an abuse of discretion, SME Racks, Inc. v. Sistemas Mecanicos
Para Electronica, S.A., 382 F.3d 1097, 1102-03 (11th Cir. 2004).
Finally, if the district court determines that the balance of interests favors the
alternative forum, then it must “ensure that plaintiffs can reinstate their suit in the
alternative forum without undue inconvenience or prejudice.” La Seguridad, 707
F.2d at 1307. In its previous order, it is not clear whether the district court
considered this final analytical step before dismissing Tyco’s complaint based on
12
forum non conveniens. On remand, the district court should make sure to consider
this issue in deciding whether to grant Alert 24’s motion to dismiss.
III. CONCLUSION
In sum, because we find that the district court’s October 6, 2005 order
contains rulings that are internally inconsistent, we vacate that order and remand
with directions for further proceedings consistent with this opinion.
VACATED AND REMANDED.
13