08-5128-c v

Or i x Fi n an ci al S erv i ce s , In c. v . T hun d er R i d ge E n er gy U N IT E D S T A T E S C O U R T O F A P P E A LS F O R T H E S E C O N D C IR C U IT SUM M AR

Y O RD ER RULI NG S BY S UM M ARY O RDER DO NO T H AVE P RECEDE NTI AL E F F ECT . C I TATI O N TO A SUMM ARY O RDER F I LED O N O R AF TER J ANUARY 1, 2007 , I S P ER MI T T E D A N D I S GOVE RNED B Y F EDERAL RU L E O F A P P ELL ATE P RO CEDURE 32. 1 AND THI S CO URT ’ S L O CAL RU L E 32. 1.1 . W H EN CI TI NG A S UM M ARY O RDER I N A DO CUM ENT F I LED W I TH THI S CO URT , A P ARTY MUST CI TE EI TH ER T H E F E D E R AL A PP ENDI X O R AN E L ECTRONI C DATAB AS E ( W I TH THE NO TATI O N “ S UM M ARY O RDER ”). A P ARTY CI TI NG A S UM M ARY O RDER M US T S ERVE A CO P Y O F I T ON ANY P ARTY NOT REP RES ENTE D BY COUNSEL . At a stated te rm of the United States Court of A ppeals for the Second Circuit, held at the Daniel Patric k Moy

nihan Courthouse, 500 Pear l Street, in the City of Ne w York, on the 9 day of th Marc h, two thousand ten. Pr e se nt: J OHN M. WAL KER, J R.,

G U ID O C A LA B R E S I, ROBERT A. K

ATZ MANN, Circuit Judges

.

________________________________________________ ORIX FI NANCIAL

SERVI CES, I

NC., former ly

known as Or ix Credit Alliance, I nc., Plaintif f-Appellee , v. No. 08-5128-c v LARRY CL I

NE and L I

NDA L . CL I

NE, De fe nd an ts- Ap pe lla nts , THUND ER RI DGE ENE RGY, I NC., CAREY CL I

NE, EDDI E CL I

NE, I L EEN CL I

NE, L I NDA G. CL I NE, MARK CL I

NE, and PAMELA S. CL I NE, De fe nd an ts .

________________________________________________ For Plaintiff-Appellee Orix Financial Service s Inc.: L EW I S M. S MO L EY , D avid of f M a lit o & Hutc he r L L P, New Y ork, NYAlthough the appellants we re he ld liable afte r the plaintiff- appellee ’s motion for 1 summary judgme nt was grante d, the district court a naly zed their motion as a motion to vacate a defa ult judgment bec ause the y did not oppose the summary judgme nt motion. All parties a dopt thi s ana ly sis on

a pp e a l. 2 For Def endants-A

ppellants L arr

y Cline and L inda L . Cline: D O M I N I CK C. C A PO ZZOLA , (Eric C. Stuart, of counsel ), Og le tr e e , D e akin s, Na sh , Sm oak & Ste wa rt , P.C., Morristown, NJ Appea l from the United States District Court for the Southern District of Ne w York (Holwe ll, J. ). ON CO NSI DE RA TIO N W HEREOF , i ti s h e r e b y OR DE RE D , AD JU DG ED , and DE CREED that the memora ndum opinion and order of the district court e ntere d September 30, 20 08 , is AF F IRMED in part and VACATED in p art and the c a se is REMAND ED for f urther pr oc e e din g s. De fe nd ants -A

pp e lla nts L arr y Clin e (“ L arr

y” ) a nd L ind a L . Cl ine (“ L ind a ” ) a

pp e a l f ro m a memorandum opinion and orde r of the United States District Court for the Southern District of New Y ork (Holwe ll, J. ), ente red Septe mber 30, 2008, de nying the ir motion to vacate the judgme nt ag ainst them. We assume the par ties’ familiarity

with the fac ts, procedur al history , and sp e c if ic atio n o f i ssu e s o n a

pp e a l. The a ppellants argue that the district cour t erre d in denying the ir motion to vacate the jud g me nt a g a ins t th e m un de r F e d. R. C iv. P. 6 0(b) (4 ). Th e y c la im that th e jud g me nt i s v oid beca use ser vice of proce ss was improper

under F ed. R. Civ. P. 4. W e re view de novo the denial of a motion to vacate a de fault judg ment under Rule 60(b)(4)

. Burda Media, Inc . v. Viertel , 417 1 F.3d 292, 298 ( 2d Cir. 2005).Th e a pp e lla nts c la im tha

t th e y did no t r e c e ive the no tic e le tte rs fr om C -A , b ut t hat c la im 2 is not relevant to our a

naly sis of whether

they wer e bound by

C-A’s ac cepta

nce of service

. 3 Under Fe d. R. Civ. P . 4(e) (2)( C), an individual may be ser ved by “delivering a

copy of [t he summons and complaint] to an ag ent authorized by appointment or by

law to re ceive service of pr oc e ss. ” Th e re c or d c onta ins c op ie s o f gua ra nti e s in fa vo r o f p la int if

f- a pp e lle e Or ix Financ ial Service s, Inc. (“ Orix”), bearing the purported signature s of L arr y and L inda, that desig nate C-A Cre dit Corp. (“C-A” ) as a g ent for se rvice of proc ess. On June 6, 2001, an offic er of C- A, wh ic h is a

su bs idi ary of Or ix, a c c e pte d s e rv ic e of the summo ns and

c omp la int

in t his action on beha lf of L arr

y and L inda. The C-Aoffice r executed le tters to L arr y and L inda inf or min gthe m of

the a c c e pta

nc e of se rv ic e of

pr oc e ss a nd g ave the se le tte rs , to g e the r w ith copies of the summons and complaint, to Orix ’s counse l to be mailed. Orix’s counsel then sent these notice letters fr om C-A by cer tified mail, return r ece ipt requested, to L arr y and L inda. 2 The a ppellants argue that ser

vice wa s improper be cause C-A did not itself mail the notice and summons and complaint to them. They claim that this failure inva lidated their a g ency relationship wit h C-A. B ut where a par ty to a private contra ct has a ppointed an ag ent to rec eive service of proc ess, “a

ny exercise of

power by the ag ent within the scope of the authorization, duringthe term for

which it was g iven, . . . will bind the principal.” Nat’l Equip. Rental, Ltd. v. Szukhent , 375 U.S. 311, 316 (1964) (quoting2 Wil liston on C ontrac ts § 274 (3d ed. 1959)) . C-A acte d within the scope of the authorization when it signe d the notification letter a nd then

arr ang ed for

the letter to be mailed, there by binding L arr

y and L inda. The me re f

act that a n ag ent of Orix ulti mately

put the notice letter , alongwith the summons and complaint, into the mailbox does not alter this conc lusion, given that there is no dispute that they wer e ac tually

mailed as C-A4

ha d c onte mpl ate d. No r d oe s th e pa re nt- su bs idi ary re latio ns hip be tw e e n O ri x an d C- A i nv a lid ate the a g e nc y

re latio ns hip be tw e e n C- A a nd the a pp e lla nts . Wh e n C- A’ s o nly

ro le a s a g e nt w a s to

rec eive se rvice of proc ess for the appellants, C-A “ can in no mea ningf ul sense be de emed to have ha d a n inte re st a

nta g on ist ic ” to t

he ir s, be c a

us e bo th O ri x an d th e a

pp e lla nts “ ha d a n e qu a l inte re st in assuringthat, in the event of litigation, the latter

be g iven that ade quate a

nd timely notice which is a pre requisite to a va lid judgment.” Id. at 317-18. F or all of these rea sons, the appellants’ a

rgument that service of proc ess on them fa iled to comport with the requir ements of Rul e 4 f a ils

. L ind a , b ut n ot L arr

y , r a ise s th e a dd iti on a l argume nt t hat he r s ignatur e on

the Or ix guara nty was for g ed, so that she ne ver va lidly desig nated C-A he r ag ent for se rvice of proc ess. The district cour

t found that she had w aived this argument by failingto raise it in the five year s of lit ig atio n th at pr e c e de d e ntr y of jud g me nt a g a ins t he r. L ind a c ha lle ng e s th is f

ind ingon a pp e a l. A def ense of insufficient ser

vice of proce ss is waived if it is not asserted by motion under F e d. R. C iv. P. 1 2 o r i n th e pa rt y ’s re sp on siv e ple a din g . F e d. R. C iv. P. 1 2( h) (1 ); Sa nto s v . S tate Farm Fire &Cas. Co. , 902 F.2d 1092, 1095 ( 2d Cir. 1990). Her e, L inda sig ned a motion desig nated “ Special Appe ara nces — Pro Se ,” in whic h s he and he r c o- de fe nd ants mov e d to dismiss the ac tion ag ainst them for a number of r easons, including “[f]ailure of ser

vice of proce ss,” “[i] mproper pr ocess,” and “[l]ack of jurisdiction of this Court.” In response , the district court denie d this mot ion without prejudice a s not in accor dance with the local rule s and

se t a de a dli ne fo r t

he de fe nd ants to a

ns we r t he c omp la int . A ft e r t

hat, L ind a

did no t di re c tly participate in the litigation. He r only involvement was to sig n an af fidavit in support of a motion to d ism iss fi le d b y

a ll o f t he de fe nd ants exc ept

for L inda and L arr

y , in which she stated that she5

had neve r sig ned a guara

nty in favor of

Orix. Although w e shar e the district cour t’s doubts reg ardingthe re asonable ness of L inda’s conduct in ignoringthe litigation base d on her putative belief that it had ended, we have ne ver befor e found that a def

endant wa ived the def

ense of insufficient ser

vice of proce ss when that defe ndant attempted to asse rt such a de fense in an initial, defec tive filing a nd then did not direc tly participate in the litigation at a ll. Rather, we ha ve found w aiver

only wher e the defe ndant litigate d the merits of the c ase w ithout assertingthe def ense. See, e .g. , Santos , 902 F.2d at 1095-96 (insuffic ient service of proc ess def ense w aived whe re State F arm a nswere d the complaint in 1985, did not mention s ervic e of pr ocess, a nd did not move to dism iss for improper service of proc ess until 1987); Datskow v. Teledy ne, Inc ., Cont’l Prods. Div. , 899 F.2d 1298, 1303 (2d Cir. 1990) (insuff icient servic e of pr ocess de fense waived where defe ndant attende d a confe renc e with the mag istrate judg e and pa rticipated in sche duling discove ry and motion prac tice, and thr oug hout said nothing a bout defe ctive ser

vice of proce ss). Acc ording ly , we respe ctfully

disag ree with the district court’s c onclusion that L inda waive d her insuff icient service of proc ess def

ense. Th e dis tr ic t c ourt

a lso fo un d, in t

he a lte rn ativ e , th at e ve n if L ind a ’s signatur e on

the Or ix guara nty is not authentic, she is estopped f rom deny ing he r oblig ations under that instrument beca use she wa s awa

re that it had been e x ecute d in her name and that Orix had re lied upon it. See OSRec overy

, Inc. v . One GroupeIntern., Inc

. , 4 62 F .3 d 8 7, 94 n. 3 ( 2d Cir . 2 00 6) (“ Eq

uit a ble estoppel is proper

wher e the e nforc ement rights of one par ty would cre ate injustice to the other pa rt y wh o h a s ju sti fi a

bly re lie d o n th e wo rd s o r c on du c t of the pa rt y a g a ins t who m e sto pp e l is soug ht.”). On the rec ord as it stands, howeve r, we cannot a ffirm on this g round. The district6

c ourt ba se d it s c on c lus ion

in s ignif ic ant p art up on fa c tua l f ind ing s th at it

ha d ma de wi th r e g ard

to L ind a ’s c o- de fe nd ants L ind a G. Clin e , I le e n Cl ine , a

nd Pame la Clin e , d ur ingpr oc e e din g s in wh ic h L ind a

did no t pa rt ic ipate . A lth ou g h w e no te tha t th e dis tr ic t c ourt ’s c on c lus ion may we ll be borne out if findings of fac t that are specific to L inda her self ar e made , equitable e stoppel cannot be applied base d on extrapolation from evidenc e per taining to other

defe ndants. We have c onsidered the Clines’ other arguments and find them without merit. For the fore g oing r easons, we AF F IRM the judg ment of the district cour t with reg ard to L arr

y Cline, and

we VA CA TE the jud g me nt o f t he dis tr ic t c ourt

wi th r e g ard

to L ind a Clin e . T he c a se is REMAND ED for f

urther pr ocee dings c onsistent with thi s order

. FOR THE COURT: CA TH ERI

NE O’ HA GA

N WO L F E, CL ERK