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Swaim v. Moltan Company

January 8, 1996






Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division.

No. 93 C 742--John Daniel Tinder, Judge.

Before BAUER, KANNE, and DIANE P. WOOD, Circuit Judges.

KANNE, Circuit Judge.



Plaintiff obtained a default judgment in an action for wrongful termination of employment. Defendant appeals from both the default judgment and the district court's denial of its motion to vacate that judgment pursuant to FED. R. CIV. P. 55(c) and 60(b). The question before us is whether either of these two decisions manifests an abuse of discretion. We find that the district court exercised sound discretion in entering the default judgment and in denying defendant's motion for Rule 60(b) relief.

Moltan Company, which is based in Memphis, Tennessee, markets petroleum absorption products in Indiana and the several States. Moltan hired Robert Swaim on March 1, 1990, as a regional sales manager for the territory encompassing Alabama, Arkansas, Georgia, Kansas, Louisiana, Mississippi, Missouri, and Tennessee. Moltan later reconfigured Swaim's territory to include Alabama, Georgia, Kentucky, Indiana, Ohio, Tennessee, and West Virginia. Swaim alleges that Moltan initiated the reconfiguration, but Moltan claims the change accommodated Swaim's wish to move from Nashville, Tennessee, to Indianapolis, Indiana, so he could marry. Shortly after this reconfiguration, Moltan terminated Swaim on August 14, 1992, citing unsatisfactory job performance.

Swaim filed an administrative complaint with the Equal Employment Opportunity Commission ("EEOC") pursuant to 29 U.S.C. sec. 626(d) *fn1 on December 23, 1992, alleging that Moltan had terminated him because of his age in violation of 29 U.S.C. sec. 623(a). After receiving a right to sue notice from EEOC, Swaim filed a complaint and demand for jury trial in the Southern District of Indiana on June 7, 1993, seeking back pay, liquidated damages, and reinstatement. That day, Swaim's counsel mailed a copy of the complaint and summons by certified mail with return receipt requested to B.J. Gurley, the chief executive of Moltan, at Moltan's business address in Memphis, Tennessee. The postal service returned the papers unclaimed, and Swaim's counsel then hired a private process server to deliver the papers personally to Moltan's office.

The process server arrived at Moltan's office on August 11, 1993, and Jean Black, B.J. Gurley's secretary, refused to accept the complaint and summons. The process server left the papers at Black's feet, and Black mailed the papers back to the process server's office. Swaim's counsel then delivered the complaint and summons to the Indiana Secretary of State on September 3, 1993, in accordance with Indiana Trial Rule 4.4, which nominates the Secretary of State as the agent of persons and organizations doing business in Indiana with regard to service of process. IND. CODE sec. 34, app. T.R. 4.4(B). The Secretary of State mailed the papers by certified mail with return receipt requested to Moltan at its Memphis address, and the papers were returned unclaimed on September 18, 1993.

The clerk of the district court entered default against Moltan upon Swaim's motion under FED. R. CIV. P. 55(a) on December 29, 1993. The district court subsequently ordered default judgment against Moltan in the amount of $197,733.04 and also awarded Swaim $4,681.75 in fees and costs. Moltan promptly filed a motion to set aside the default judgment according to FED. R. CIV. P. 55(c) and 60(b) on January 28, 1995. *fn2 Moltan asserted in its Rule 60(b) motion that ineffective and "confused" service of process amounted to good cause for setting aside the judgment. It also claimed that the meritorious defenses articulated in its proposed answer would prevail should the case go to trial. The district court denied Moltan's motion on November 23, 1994. It concluded that Moltan had failed to show good cause for setting aside the default judgment because service of process had been substantially accomplished and Moltan had actively evaded such service.

Moltan filed its notice of appeal on December 2, 1994, from both the default judgment and the denial of the motion to set the default judgment aside. We have jurisdiction to address both the default judgment and the order denying Rule 60(b) relief. A motion for relief from judgment under FED. R. CIV. P. 60, if filed within ten days after the entry of judgment, resets the thirty-day period in which to file a notice of appeal. FED. R. APP. P. 4(a)(4)(F). The thirty-day clock prescribed by Rule 4(a)(1) then begins to run the day the district court rules on the Rule 60 motion. United States v. Duke, 50 F.3d 571, 574 (8th Cir.), cert. denied, 116 S. Ct. 224 (1995). Moltan filed its Rule 60(b) motion ten days after the default judgment and thus reset the default judgment appeal clock to begin running on November 23, 1994, when the district court entered its order denying Moltan's Rule 60(b) motion. We may therefore review both decisions of the district court. See Glass v. Dachel, 2 F.3d 733, 738 (7th Cir. 1993).


This court will reverse a district court's default judgment only upon finding an abuse of discretion. Pretzel & Stouffer v. Imperial Adjusters, Inc., 28 F.3d 42, 45 (7th Cir. 1994). This standard of review reflects the district court's institutional position as the forum best equipped for determining the appropriate use of default to ensure "that litigants who are vigorously pursuing their cases are not hindered by those who are not" in an environment of limited judicial resources. Johnson v. Gudmundsson, 35 F.3d 1104, 1117 (7th Cir. 1994) (quoting Stevens v. Greyhound Lines, Inc., 710 F.2d 1224, 1230 (7th Cir. 1983)). We will, however, set aside a default judgment as a per se abuse of discretion if the district court that entered the judgment lacked jurisdiction. Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 400 (7th Cir. 1986).

Moltan appeals from the default judgment raising an argument it did not include in its Rule 60(b) motion to the district court: that it is a legal nonentity incapable of being sued. Moltan devoted little attention to this claim either in its brief or at oral argument, and we are unable to divine the precise basis of this challenge. It appears to rest on one of two assertions. First, by contesting its amenability to lawsuit, Moltan may be challenging the district court's exercise of personal jurisdiction. Second, Moltan may be suggesting that it lacks the capacity to be sued contemplated by the drafters of FED. R. CIV. ...

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