Opinion ID: 2960211
Heading Depth: 2
Heading Rank: 3

Heading: Existence of Personal Jurisdiction

Text: We arrive, then, at the issue of whether the District Court correctly determined that it had personal jurisdiction over the son. As noted, the District Court upheld personal jurisdiction over the son primarily on the ground that he had consented to personal jurisdiction by signing several receipts that contained a consent to jurisdiction in the Southern District. We disagree that signing these receipts established the son’s consent to personal jurisdiction. Each receipt included a list of produce delivered and an attached one-page form titled “Standard Sales Terms,” which contained the consent-to-jurisdiction clause. The signature line appeared on the list portion of the receipt above the words “RECEIVED IN GOOD ORDER,” suggesting that the person signing might have represented nothing more than receipt of the listed produce in good order, especially since the district court’s personal jurisdiction, see id. at 904-05. The judgment was primarily challenged on the ground that the acquisition of personal jurisdiction just prior to entry of the default judgment deprived the defendant of the normal time period to respond to the complaint, a defect distinct from lack of personal jurisdiction, see id. at 903. Nevertheless, the Sixth Circuit stated that the elevenmonth delay warranted denial of a Rule 60(b)(4) motion. See id. at 905-06. -20- Standard Sales Terms form had no signature line. But even if the Defendant’s signature on the receipt committed him to the Standard Sales Terms, the only provision of those terms relating to jurisdiction stated: “Each party consents to the jurisdiction and venue of [the specified] courts” (emphasis added), and the parties to the Standard Sales Terms were the “BUYER,” i.e., Pat’s Supermarket, Inc. or Pat’s Market Place of Bristol, Inc., and the “SELLER,” i.e., the Plaintiff. Although the signature of the son, as agent for the corporate buyer, might have sufficed as his corporate employer’s consent to the jurisdiction of the District Court, on the record thus far developed, there is no basis for concluding that the son was the buyer or that his signature on the receipt established his consent to the Court’s jurisdiction. However, the District Court did not rely solely on the son’s having signed the receipt. After referring to the signed receipt, the Court stated: PACA makes individuals liable for payment for produce under certain terms and conditions, which are present here. As we also know, the entry of a default judgment means that the allegations of the complaint are deemed admitted. Taking all those facts together, the defendants are subject to jurisdiction in this court . . . .” The District Court was referring to the liability that the PACA creates for purchasers of produce who fall within the statutory definitions of “dealer” or “commission merchant.” See 7 U.S.C. §§ 499a(b)(5), (6), 499e. The Plaintiff’s amended complaint alleged -21- that the son was “a dealer and commission merchant subject to the PACA.” The amended complaint also alleged that the son “was in position [sic] of control over the PACA trust assets of [the Plaintiff] during the period of time in question.” And we have ruled that “[a]n individual who is in a position to control the assets of the PACA trust and fails to preserve them, may be held personally liable to the trust beneficiaries for breach of fiduciary duty.” Coosemans Specialties, Inc. v. Gargiulo, 485 F.3d 701, 705 (2d Cir. 2007). However, although the allegations of a complaint are deemed admitted for adjudication of the merits when a default judgment is entered by a court with jurisdiction, the entry of a default judgment cannot serve to admit the facts necessary to establish such jurisdiction. Personal jurisdiction must be established in the absence of a defendant’s consent or waiver. In this case, the District Court made no findings (other than the inappropriate reliance on the default judgment) to establish that the son was an individual subject to PACA liability. We will assume, for purposes of this appeal, that if the facts, properly found, show that the son is personally liable under the PACA,8 8 We note, however, that cases in which an individual defendant has been subjected to PACA liability along with a corporation have involved a sole shareholder or an officer/director. See Coosemans -22- then the consent of the corporate buyer to personal jurisdiction may be imputed to him.9 But the establishment of those facts, via the default judgment, for purposes of his liability, does not establish those same facts for purposes of personal jurisdiction. This is not the first case in which a court has recognized that facts established via a default judgment for purposes of the merits cannot suffice to establish the same facts necessary for personal jurisdiction. See Jackson v. FIE Corp., 302 F.3d 515, 531 (5th Cir. 2002). The case must be remanded for a hearing (in view of the conflicting affidavits) and findings as to whether the son was a dealer or commission merchant under the PACA or a person otherwise in control of PACA trust assets. If the District Court determines that the facts establish, for purposes of personal jurisdiction, sufficient involvement by the son in the affairs of the corporate defendants to render him liable for Specialties, 485 F.3d at 706 (sole shareholder and sole director); Golman-Hayden Co. v. Fresh Source Produce, Inc., 217 F.3d 348, 350-52 (5th Cir. 2000) (sole shareholder); Morris Okun, Inc. v. Harry Zimmerman, Inc., 814 F. Supp. 346, 347-49 (S.D.N.Y. 1993) (sole officer and sole shareholder). 9 We make this assumption because the issue is unsettled, has not been briefed, and might well never arise if, as seems likely, the factual basis for the District Court’s personal jurisdiction over the son cannot be established on remand. -23- PACA obligations, then the Court must resolve the issue, which we have pretermitted, whether the consent of the corporations to personal jurisdiction can be imputed to the son. The Court would then also have to consider the son’s challenges to the adequacy of the service of process, on which personal jurisdiction would also depend. A final issue concerns the burden of proof at the hearing on remand. Normally, a plaintiff has the burden of proving personal jurisdiction in a case where a defendant appears and contests such jurisdiction. See, e.g., Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990). But in a collateral challenge to a default judgment under Rule 60(b)(4), the burden of establishing lack of personal jurisdiction is properly placed on a defendant who had notice of the original lawsuit. See Bally Export, 804 F.2d at 401; Hazen Research, 497 F.2d at 154. Although the defaulting defendant has the opportunity to contest personal jurisdiction long after the default judgment, a defaulting defendant with notice of the action should bear the risk of non-persuasion on this issue since it will normally have greater access to relevant evidence often difficult to assemble after the passage of time. See generally Ariel Waldman, Comment, Allocating the Burden of Proof in Rule 60(b)(4) Motions to Vacate a Default Judgment for Lack of Jurisdiction, 68 U. Chi. L. Rev. 521, 529-36 (2001) (collecting cases and recommending that burden remain with plaintiff). In the analogous context of a Rule 60(b)(4) motion challenging sufficiency of service of process, we have held -24- that the defendant bears the burden of proving that service of process was insufficient. See Burda Media, Inc., 417 F.3d at 299.