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Philos Technologies, Inc v. Philos& D

June 15, 2011

PHILOS TECHNOLOGIES, INC., PLAINTIFF-APPELLEE,
v.
PHILOS& D, INC.,ET AL., DEFENDANTS-APPELLANTS.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 08 cv 7240-William J. Hibbler, Judge.

The opinion of the court was delivered by: Hamilton, Circuit Judge.

ARGUED APRIL 7, 2011

Before CUDAHY, MANION, and HAMILTON, Circuit Judges.

This appeal calls on us to determine whether a party may, nearly a year after the entry of a default judgment, move to vacate the judgment on the ground that it was void for a lack of personal jurisdiction. The district court concluded that the delay rendered untimely defendants' motion to vacate and denied the motion without reaching its merits. Because the defendants did not appear in the district court before entry of judgment, and because they are entitled to one full opportunity to litigate the jurisdictional issue, we reverse and remand.

I. The Facts

On December 18, 2008, plaintiff-appellee Philos Technologies, Inc., an Illinois corporation based in Wheeling, Illinois, filed a single-count complaint in the federal district court for the Northern District of Illinois. Philos Technologies asserted federal jurisdiction on the basis of diversity of citizenship and asserted a claim for con-version under Illinois law against defendants DonHee Park, Jae-Hee Park, and Philos & D, Inc., a South Korean corporation based in Gwangju, South Korea. According to the complaint, Philos Technologies had provided the defendants with equipment used to strengthen materials used in the metalworking industry, but never received the compensation for that equipment previously agreed upon by the parties.

Although the defendants were all successfully served with process in January 2009, they neither appeared in court nor filed an answer to the complaint. Instead, DonHee Park and Jae-Hee Park sent an informal pro se "Response Letter" to the district court in which they claimed that they had "no involvement . . . whatsoever with Philos Technologies," but instead had a business relationship with a Korean company named PLS Tech Korea. Any agreement for equipment with PLS Tech Korea had been terminated in August 2008, they explained, because of "differences of understanding." For these reasons, the defendants "request[ed] dismissal of the lawsuit" against them.

Following the receipt of this letter, over four months passed without any further communication from the defendants. Finally, the district court granted Philos Technologies' motion for an entry of a default against the defendants on June 30, 2009. After a hearing on the issue of damages on July 21, 2009, the court entered a final judgment in favor of Philos Technologies totaling $2,916,332.

Nearly a year later, on June 14, 2010, counsel for the defendants entered an appearance and moved to vacate the default judgment under Federal Rule of Civil Procedure 60(b)(4). In their motion, the defendants argued that they never transacted business in Illinois and that they never entered into any contract with Philos Technologies, but instead contracted with PLS Tech Korea for the equipment at issue. They also argued that, even if they had been aware that PLS Tech Korea would obtain that equipment from Philos Technologies, that mere knowledge was not sufficient to support personal jurisdiction in Illinois. Moreover, Jae-Hee Park denied ever visiting Illinois, and Don-Hee Park claimed to have visited Illinois only after Philos & D had entered into its agreement with PLS Tech Korea. The defendants requested that the court vacate the default judgment as void for a lack of personal jurisdiction and dismiss the complaint under Rule 12(b)(2).

The district court denied the defendants' motion to vacate. The court did so without reaching the merits of defendants' personal jurisdiction objection, explaining somewhat cryptically that it saw "no legal justification for this matter coming before the Court well after judgment has been entered and all parties have had an opportunity to fully litigate the issues." The district court added that, because it had received "sufficient and appropriate justification to exercise personal juris-diction" at the time it granted default judgment against the defendants, it saw no reason to second-guess its original ruling on that issue. This appeal followed.

II. Analysis

Under Rule 60(b)(4) of the Federal Rules of Civil Procedure, a district court may relieve a party from a final judgment if the judgment is void for lack of personal jurisdiction over that party. Planet Corp. v. Sullivan, 702 F.2d 123, 125 n.2 (7th Cir. 1983). On appeal, the parties' dispute centers on two issues: (1) the appropriate standard of review for the denial of defendants' motion under that rule; and (2) whether defendants' motion was untimely. We address each issue in turn.

A. Standard of Review

As to the first issue, the defendants argue that we should review the denial of their Rule 60(b)(4) motion de novo because that motion asserted that the district court was without jurisdiction to enter judgment against them. In response, Philos Technologies argues that the proper standard of review is for an abuse of ...


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