Court Opinion

ID: 4426805
Source: CourtListenerOpinion
Date Created: 2019-08-20 00:00:22.125645+00
Date Added: 2024-06-11T12:43:47.116016
License: Public Domain

Case: 18-20655        Document: 00515082296       Page: 1    Date Filed: 08/19/2019

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                                            FILED
                                                                        August 19, 2019
                                      No. 18-20655
                                                                         Lyle W. Cayce
                                                                              Clerk
A.P. MOLLER - MAERSK A/S, TRADING AS MAERSK LINE,

               Plaintiff

v.

SAFEWATER LINES (I) PVT., LIMITED,

               Defendant-Third Party Defendant - Appellant

v.

SAMRAT CONTAINER LINES, INCORPORATED,

               Defendant-Third Party Plaintiff - Appellee

                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No. 4:13-CV-1726

Before STEWART, Chief Judge, and JONES and OWEN, Circuit Judges.
PER CURIAM:*
       Plaintiff A.P. Moller-Maersk A/S, trading as Maersk Line, a non-
participant in this appeal, is a Danish corporation specializing in

       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                No. 18-20655
transportation of containerized ocean cargo. This lawsuit ensued after an
improperly packaged shipment of hydrochloric acid (“HCL”) from India to
Houston resulted in a costly emergency clean-up response. Maersk claimed
that Defendant-Appellant Safewater Lines (I) Pvt., Ltd. and Defendant-
Appellee Samrat Container Lines, Inc. refused to take delivery of and
abandoned the cargo after it arrived at the Port of Houston. Samrat filed a
crossclaim for indemnification against Safewater. When Safewater did not
respond, Samrat filed a request for entry of default, which the district court
granted. Samrat later filed a motion for default judgment, which the district
court also granted. Safewater filed a motion to vacate default judgment, which
the district court denied along with a motion for reconsideration of that
judgment. Safewater appealed.
                                      I.
      Maersk is a Danish corporation specializing in transportation of
containerized ocean cargo. Safewater is an entity from India doing business in
Texas as a non-vessel operating common carrier (“NVOCC”), freight forwarder,
and logistics provider. Samrat is a New Jersey corporation doing business in
Texas as an NVOCC, freight forwarder, and logistics provider, entering into
service contracts and other contracts of carriage in the maritime industry. In
this case, under the bill of lading, Safewater was the shipper and Samrat was
the consignee.
      The action arises from an ocean carriage from India to Houston of sealed
shipping containers, loaded by a company other than Maersk, with improperly
packaged, overfilled, and incorrectly stowed drums of HCL. After the
containers arrived in Houston, it was discovered that HCL acid was leaking
from the drums in the shipping containers, necessitating a costly emergency
clean-up response. Maersk claimed that Safewater and Samrat refused to take
delivery of and abandoned the cargo after it arrived at the Port of Houston.
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                                            II.
       On June 13, 2013, Maersk filed its original complaint against Safewater,
Samrat, and ATNI Inc., 1 alleging negligence and breach of contract related to
the ocean carriage’s cargo of HCL from Pipav, India to Houston, Texas. In its
amended complaint, Maersk added a cause of action for contribution under the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (“CERCLA”), 42 U.S.C. § 9607(a). At the time of the second amended
complaint, Maersk’s damages amounted to $243,775.03.
       On January 25, 2016, Samrat filed its crossclaim against Safewater.
Samrat alleged it was not a party to any contract with Maersk; it did not
authorize Maersk or Safewater to designate it as consignee of the HCL on the
bill of lading; it played no role in the shipment of the HCL and did not act as a
shipper or freight forwarder; and that if it was liable to Maersk for negligence,
then Safewater was liable for all or part of the claim. Similarly, if Samrat was
liable for breach of contract, Safewater was liable to it for all or part of the
claim.
       On February 8, 2016, Maersk filed a notice of dismissal as to Safewater
based on their settlement agreement. On March 8, 2016, Samrat filed a request
for entry of default against Safewater for failure to respond to its crossclaim.
On December 8, 2016, while the briefing on Maersk’s notice of voluntary
dismissal was still pending, Samrat filed a proof of service of the crossclaim on
Safewater supporting Hague Convention on Service Abroad, and a renewed
Rule 55(a) request for entry of default against Safewater. Samrat’s attachment
reflected service on Safewater in India on August 11, 2016. On December 14,
2016, the district court issued an order granting entry of default against

       1On February 20, 2015, the district court signed an agreed order of partial dismissal
with prejudice, dismissing ATNI Inc.
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Safewater. The court noted Samrat “has shown service was effected by the
Hague Convention and Defendants’ failure to respond to Samrat’s crossclaim.”
      Four months after Safewater received notice of Samrat’s crossclaim via
Hague Service, on December 16, 2016, Samrat filed a motion for default
judgment against Safewater. Samrat argued the conditions for a default had
been met. Samrat contended that it was entitled to default judgment against
Safewater for any damages awarded to Maersk against Samrat. As “[Maersk]
only claims passive liability against Samrat based on Samrat’s identification
as consignee on the subject bill of lading ... [I]t is [Safewater], and not Samrat
who could be actively liable to Maersk for its claims in this action. [Safewater]
was the party who actually handled the subject cargo and interfaced directly
with [Maersk], their contractual counterpart.”
      On December 19, 2016, Safewater’s New Jersey counsel filed a motion
and order for admission pro hac vice. On December 21, 2016, the district court
admitted Safewater’s New Jersey counsel pro hac vice. On the same day, the
district court issued an order granting default judgment against Safewater on
Samrat’s crossclaim that “Defendants were responsible for loading, stowing, or
discharging the cargo.” The district court noted Safewater “failed to answer or
respond” to Samrat’s crossclaim.
      On January 5, 2017, almost three and a half years after initial notice of
the lawsuit by Maersk via Hague Service, Safewater made its first appearance
in the lawsuit by filing a motion to vacate default judgment. Safewater argued
in support of its lack of action in responding to Samrat’s crossclaim that “it
assumed that doing so would constitute formal entry into a matter that it
rightfully believed was resolved [by its settlement with Maersk] and should be
dismissed.”

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      On August 23, 2017, the district court denied Safewater’s motion to
vacate. 2 On September 14, 2017, Safewater filed a memorandum in support of
a Rule 60 motion for relief from judgment or order, and a motion for
reconsideration of the court’s August 23, 2017 order.
      On September 4, 2018, the district court denied Safewater’s Rule 60
motion to vacate and reconsideration of the district court’s August 23, 2017
order. 3 On September 25, 2018, Safewater filed its notice of appeal.
                                           III.
                                            A.
      We review a district court’s denial of a motion to vacate a default
judgment pursuant to Rule 60(b)(1) for abuse of discretion; however, “[b]ecause
of the seriousness of a default judgment, . . . even a slight abuse of discretion
may justify reversal.” Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114, 118
(5th Cir. 2008) (quoting Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000))
(internal quotation marks omitted); see also Scott v. Carpanzano, 556 F. App’x
288, 294 (5th Cir. 2014). We review the factual finding of whether a defendant
willfully defaulted for clear error. In re OCA, Inc., 551 F.3d 359, 367 (5th Cir.
2008) (citation omitted).
                                            B.
      Rule 55(c) provides that a “court may set aside an entry of default for
good cause, and it may set aside a default judgment under Rule 60(b).” Fed. R.
Civ. P. 55(c). Rule 60(b)(1) provides that a court may relieve a party from a
final judgment for “mistake, inadvertence, surprise, or excusable neglect.” Fed.

      2  On this same date, the district court granted Maersk’s motion for summary judgment
against Samrat. On September 4, 2018, the district court issued a final judgment against
Samrat in the amount of $133,775.03, plus attorney’s fees in the amount of $58,621.94 and
costs of $554.53 along with pre- and post-judgment interest.

      3   On July 13, 2018, the matter was reassigned from Judge Harmon to Judge Hanen.
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R. Civ. P. 60(b)(1). “In assessing a motion to vacate a default judgment, we
have interpreted Rule 60(b)(1) as incorporating the Rule 55 “good cause”
standard applicable to entries of default[.]” In re OCA, Inc., 551 F.3d at 369
(citation omitted). In determining whether good cause exists to set aside a
default judgment under Rule 60(b)(1), we examine the following factors:
whether the defendant willfully defaulted, whether a meritorious defense is
presented, and whether setting aside the default judgment would prejudice the
plaintiff. See Jenkens & Gilchrist, 542 F.3d at 119 (citation omitted).
      Of these factors, two can be determinative: a district court may refuse to
set aside a default judgment if it finds either that the default was willful or
that the defendant failed to present a meritorious defense. See Jenkens &
Gilchrist, 542 F.3d at 119-20 (citation omitted). “A finding of willful default
ends the inquiry, for ‘when the court finds an intentional failure of responsive
pleadings there need be no other finding.’” Lacy, 227 F.3d at 293 (citation
omitted). “Rule 60(b) [should be] applied most liberally to judgments of default,
since trial on the merits is to be favored over such a truncated proceeding.” In
re OCA, Inc., 551 F.3d at 370 (citation and internal quotation marks omitted).
                                              C.
      Safewater contends that the district court erred in denying its Rule
60(a) 4 motion to vacate the default judgment where default was entered before
seven days had passed between service of Samrat’s motion for default
judgment and the district court’s grant of default judgment. Safewater adds
that failure to give any notice of an application for default judgment raises

      4   Federal Rule of Civil Procedure 60(a) provides:

      The court may correct a clerical mistake or a mistake arising from oversight or
      omission whenever one is found in a judgment, order, or other part of the
      record.

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                                        No. 18-20655
questions of due process, and therefore relief should be granted under Rule
60(b)(4) or (6). 5 Safewater claims to have been “actively preparing to oppose[]
the Motion for [default judgment] when the Court inexplicably and without
warning granted the Motion.”
      Safewater also argues that the district court erroneously denied its
motion for reconsideration. The district court overlooked that Safewater’s
absence was not the result of any ill will or desire to ignore proceedings, but
borne of a good faith belief that its involvement in the lawsuit would
undermine its settlement with, and dismissal by, Maersk. The district court
also overlooked Safewater’s meritorious defense to Samrat’s crossclaim. That
is, contrary to Samrat’s insistence that Samrat could not be sued because it
was not a party to any contract with Maersk, Samrat was Safewater’s agent
under the terms of the bill of lading: “all U.S.-bound shipments were consigned
to it, including hazardous and non-hazardous shipments, so Samrat became a
party to a shipping contract as a consignee.” Alternatively, Safewater asserts
that we should remand the matter to the district court so that it may provide
reasons for the denial of its motion for reconsideration.
      Samrat makes three primary arguments: (1) because Safewater was
already in default when its counsel moved to appear, notice under Federal Rule
of Civil Procedure 5 of the motion for default judgment was not required; (2)
the district court properly denied Safewater’s motion to vacate default
judgment because Safewater acted “willfully” and without “good cause;” and
(3) the district court’s denial of reconsideration without written reasons is
allowed and proper.

      5   Federal Rule of Civil Procedure 60(b)(4) and (6) provides:

      [T]he court may relieve a party or its legal representative from a final
      judgment, order, or proceeding [if] . . . (4) the judgment is void [or] . . . (6) any
      other reason that justifies relief.
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                                             D.
Notice and Hearing
       Safewater principally argues that the default judgment must be vacated
for failure to provide and give the requisite seven-day notice. Rule 55(b)(2)
provides: “If the party against whom a default judgment is sought has
appeared personally or by representative, that party or representative must be
served with written notice of the application [for default judgment] at least
seven days before the hearing.” Fed. R. Civ. P. 55(b)(2). 6
       Safewater’s argument lacks merit for two reasons. First, Safewater’s
motion to vacate default judgment does not mention the seven-day notice
period that forms the basis of this appeal. Safewater argued this for the first
time in its motion for reconsideration. But motions for reconsideration “cannot
be used to raise arguments which could, and should, have been made before
the judgment issues.” Schiller v. Physicians Resource Grp. Inc., 342 F.3d 563,
567 (5th Cir. 2003).
       Second, Safewater was already in default on December 14, 2016. Rule
5(a)(2) provides that “[n]o service is required on a party who is in default for
failing to appear.” Fed. R. Civ. P. 5(a)(2). Accordingly, Samrat’s motion for
default judgment, filed on December 16, 2016, was not required to be served
on Safewater by either Samrat’s counsel or the district court. Under Rule 5,
Safewater’s counsel’s filing of a motion for admission pro hac vice only required
him to be notified “of all subsequent proceedings and receive copies of all

       6It is unclear from Safewater’s brief whether they argue that a hearing was required
before default judgment was granted. However, this argument was pressed by appellate
counsel at oral argument. No hearing was required. Rule 55(b)(2) states that “the court may
conduct hearings . . . when, to enter or effectuate judgment, it needs to: (A) conduct an
accounting; (B) determine the amount of damages; (C) establish the truth of any allegation
by evidence; or (D) investigate any other matter.” Fed. R. Civ. P. 55(b)(2) (emphasis added).
None of these inquiries were necessary.
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papers, even if he later chooses to default.” N.Y. Life Ins. Co. v. Brown, 84 F.3d
137, 141 (5th Cir. 1996) (citations omitted). Safewater’s counsel filed his
motion for admission pro hac vice on December 19, 2016. Importantly, there
were no “subsequent proceedings” with respect to the granting of Samrat’s
default judgment—only the district court’s issuance of the order granting
default judgment on December 21, 2016. That order was served on Safewater’s
counsel via CM/ECF. Moreover, the history of Safewater’s failure to respond to
any filings throughout this lawsuit from its commencement on June 13, 2013,
up until it filed the motion to vacate default judgment on January 5, 2017,
undermines its claim that it would have responded to the motion for default
judgment.
      Safewater primarily relies on two Fifth Circuit cases. First, it cites to
Turner v. Salvatierra, 580 F.2d 199, 201 (5th Cir. 1978), for the proposition
that “where a party has appeared and default judgment entered without notice
. . . the judgment should be set aside under Rule 60(b)(6).” In Turner, the
defendant had appeared by filing an answer and affirmative defenses in an
earlier version of the case and had deposed prospective witnesses. Id. We held
that the defendant had entered an appearance prior to the entry of default and
acknowledged default judgment “. . . is only appropriate where there has been
a clear record of delay or contumacious conduct.” Id. (citations omitted). Here,
Safewater did not file an answer or affirmative defense or appear prior to entry
of default.
      Safewater also cites Charlton which likewise is inapposite. Charlton L.
Davis & Co., P.C. v. Fedder Data Ctr, Inc., 556 F.2d 308, 309 (5th Cir. 1977).
In Charlton, a misunderstanding between the defendant’s president and
defense counsel about who was to obtain local counsel resulted in the entry of
a default. Id. at 308-309. Upon realizing the issue and prior to the plaintiff
moving for default judgment, defense counsel contacted the court and “both
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telephoned and wrote the plaintiff’s attorney, indicating an intent to defend
and requesting an extension of time because of a trial in another case.” Id. at
309. We noted from those facts that the defendant “had a clear purpose to
defend the suit.” Id. Shortly after receiving notice from defendant’s counsel,
“the plaintiff sought to reap a tactical advantage from [defendant’s] prior
neglect by acquiring [a default judgment] . . .” Id. Commenting on this
behavior, we said “[s]uch practice is what Rule 55 was designed to prevent.”
Id.
        Here, as reflected in the record, Samrat’s counsel promptly notified
Safewater’s counsel of the crossclaim on January 25, 2016, almost a year before
the entry of default and default judgment. In fact, Safewater conceded the
point that “[it] had notice of the crossclaim.” See Scott, 556 F. App’x at 292
(“The record demonstrates that [defendant] received notice sufficient to satisfy
his right to due process. He was well aware of the pendency of the action
against him . . .”). Safewater’s counsel’s prompt filing of a motion to appear
only two days after the district court granted entry of default suggests
Safewater’s counsel was aware of events in the district court. Even then,
Safewater did not file anything until January 5, 2017, fifteen days after default
judgment was entered, when it filed a motion to vacate default judgment. The
record contains no evidence of any extension request or reply by Safewater’s
counsel to Samrat’s counsel after notice of the entry of default. Consequently,
the district court did not abuse its discretion in declining to set aside the
default judgment.
Willful Default
        A district court may refuse to set aside a default judgment if it finds the
default was willful. Jenkens & Gilchrist, 542 F.3d at 119-20. We have defined
willfulness, explaining that “[a] willful default is an ‘intentional failure’ to
respond to litigation.” Scott, 556 F. App’x at 294 (citation omitted); see also,
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e.g., In re Chinese Manufactured Drywall Prod. Liab. Litig., 742 F.3d 576, 594
(5th Cir. 2014) (defining willfulness as “an intentional failure of responsive
pleadings”) (citation and internal quotation marks omitted)).
       Safewater claims it believed in good faith that if it did respond to the
crossclaim it would place itself in a dispute that was resolved by its settlement
with Maersk, which should have mooted the crossclaim. Safewater anticipated
that the complaint would be dismissed.” 7 But see Sigma Delta, LLC v. George,
No. 07-5427, 2008 WL 449682, at *2 (E.D. La. 2008) (“[C]ourts have found that
a proper crossclaim is not subject to dismissal simply because the original
complaint is dismissed as to the defendant named in the crossclaim.” (citing
Fairview Park Excavating Co. v. Al Monzo Constr. Co., 560 F.2d 1122, 1125 (3d
Cir. 1977))). As the district court suggested, Safewater could have filed a
motion to dismiss or for summary judgment of the crossclaim to test its
mootness theory, but it deliberately elected to “not get involved.” Safewater did
not appear for the initial conference or the second conference before the
magistrate judge, and did not respond to the original complaint, Maersk’s first
request for entry of default against Safewater, Maersk’s amended complaint,
Maersk’s second amended complaint, Samrat’s crossclaim, Maersk’s notice of
dismissal and Samrat’s opposition to it, Samrat’s motion for entry of default
against Safewater, and Samrat’s renewed request for entry of default judgment
against Safewater.
       The Federal Rules of Civil Procedure are clear about unanswered
motions for entry of default and entry of default judgment: they must be
responded to, especially as here, where the defending party has never

       7  Maersk filed its initial proposed order of partial dismissal (of Safewater) with
prejudice on the same day Samrat filed its crossclaim against Safewater. However, the
district court struck the proposed order from the record because it “was filed without a motion
and without explanation, and because it [was] opposed by [] Samrat [], which ha[d] also filed
a Cross-Claim against [] Safewater [] . . .”
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responded to any pleadings or documents throughout the litigation. See Fed.
R. Civ. P. 55(a). Otherwise, the district court in its discretion is likely to grant
the harsh remedy of a default judgment. See In re OCA, Inc., 551 F.3d at 370
(stating that we may hold a district court acted within its discretion in denying
relief from a default judgment if the defendant willfully defaulted). The district
court’s finding that Safewater willfully defaulted is not clearly erroneous. No
further inquiry is necessary. Lacy, 227 F.3d at 293.
Motion for Reconsideration
      A motion for reconsideration “must clearly establish either a manifest
error of law or fact or must present newly discovered evidence.” Gonzalez v.
Phila. Indem. Ins. Co., 663 F. App’x 302, 307 (5th Cir. 2016) (citation and
internal quotation marks omitted). Safewater asserts that the district court, in
denying the motion for reconsideration, demonstrated manifest error. For the
reasons discussed, we disagree. The district court’s order denying Safewater’s
motion to vacate is based on and supported by its factual findings and the
record. The order denying Safewater’s motion for reconsideration supports
those findings. Safewater takes issue with the fact that the district court did
not provide reasons for its reconsideration decision. However, a district court
is not required to state findings or conclusions when deciding a Rule 60(b)
motion or its reconsideration. See Fed. R. Civ. P. 52(a)(3); see also Jenkens &
Gilchrist, 542 F.3d at 118. As such, the district court properly denied
Safewater’s motion for reconsideration.

                                        IV.
      The district court’s judgment is AFFIRMED.

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