Court Opinion

ID: 58778
Source: CourtListenerOpinion
Date Created: 2010-04-26 03:01:41+00
Date Added: 2024-06-11T17:19:46.753665
License: Public Domain

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

                                                                            FILED
                                                                         February 19, 2008

                                     No. 07-20531                     Charles R. Fulbruge III
                                   Summary Calendar                           Clerk

DEBRA LEVITT-STEIN

                                                  Plaintiff-Appellee
v.

CITIGROUP INC

                                                  Defendant-Appellant

                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No. 4:06-CV-3554

Before WIENER, GARZA, and BENAVIDES, Circuit Judges.
PER CURIAM:*
       Appellant Citigroup, Inc. (“Citigroup”) appeals the district court’s denial
of its motion to set aside default judgment under Federal Rule of Civil Procedure
60(b) and its subsequent motion for reconsideration.
       Federal Rule of Civil Procedure 60(b)(1) permits relief from a default
judgment for “mistake, inadvertence, surprise, or excusable neglect.” When
ruling on a motion to set aside default judgment, the district court should

       *
         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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.
                                  No. 07-20531

consider: “(1) the extent of prejudice to the plaintiff; (2) the merits of the
defendant’s asserted defense; and (3) the culpability of [the] defendant’s
conduct.” Rogers v. Hartford Life & Accident Ins. Co., 167 F.3d 933, 938-39 (5th
Cir. 1999) (internal quotation marks and citation omitted) (brackets in original).
      We review a district court’s denial of a Rule 60(b) motion to set aside
default judgment for abuse of discretion. Id. at 935. We note that our policy
“against the use of default judgments” is “counterbalanced by considerations of
social goals, justice and expediency, a weighing process [that] lies largely within
the domain of the trial judge’s discretion.”      Id. (internal quotation marks
omitted) (brackets in original). We also review a motion for reconsideration for
abuse of discretion. Templet v. HydroChem Inc., 367 F.3d 473, 480 (5th Cir.
2004).
      The undisputed evidence shows that Appellee Debra Levitt-Stein
worked for Citicorp Diners Club (“Diners Club”), the credit card division of
Citigroup. On September 14, 2006, Citigroup notified Levitt-Stein that it had
terminated her company-provided health insurance coverage for alleged non-
payment of premiums. On September 29, Levitt-Stein sent a letter addressed
to Citigroup disputing the termination of health coverage and notifying them
that she would commence legal action against Citigroup if her coverage was
not reinstated. On October 10, Levitt-Stein sent a similar letter addressed to
the Plans Administration Committee of Citigroup, Inc. (“the Plan”). On
November 1, Levitt-Stein faxed a letter to the Plan threatening suit against
both Citigroup and the Plan if her health coverage was not reinstated. A copy
of the letter was faxed to Allegra DiGia, Vice President and Senior Counsel of
Citigroup.

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                                       No. 07-20531

       On November 9, Levitt-Stein filed her original complaint against the
Plan and Citigroup.1 It is undisputed that Citigroup was served with a
summons and copy of the original complaint on November 14 through its
registered agent, CT Corporation Systems. The complaint was forwarded to
Citigroup’s mail room in New York. In addition to properly filing the
complaint, Levitt-Stein telephoned Allegria DiGia on November 9 and sent a
copy of the complaint to David Goldberg, Citigroup Associate General
Counsel, who then forwarded it to two other Citigroup attorneys.
       Citigroup failed to file an answer to Levitt-Stein’s complaint, allegedly
because it did not reach the appropriate paralegal. Citigroup argues that
David Goldberg accepted service of the complaint exclusively on behalf of the
Plan and, therefore, his knowledge cannot be imputed to Citigroup.
Accordingly, Citigroup contends that no lawyer representing Citigroup
received a service copy of the complaint. Additionally, Citigroup argues that:
(1) Citigroup’s default was the result of mistake, inadvertence, or–at
worst–excusable neglect; (2) Levitt-Stein would suffer no prejudice from
setting aside the default judgment; and (3) Citigroup demonstrated
meritorious defenses, including that Diners Club was Levitt-Stein’s actual
employer.
       We find Citigroup’s arguments unpersuasive and hold that the district
court did not abuse its discretion in denying Citigroup’s motions. Under the
Rogers framework, it was reasonable for the district court to find that
Citigroup’s default was not the result of “mistake, inadvertence, or excusable
neglect” given that: Citigroup was properly served with the complaint; its
Senior Counsel was put on notice of the threatened suit; and three Citigroup
lawyers received copies of the complaint–which lists both the Plan and

       1
        After receiving the complaint, the Plan negotiated a settlement with Levitt-Stein, and
the Plan is not a party to this suit.

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                                       No. 07-20531

Citigroup as defendants. Citigroup’s excuse that “a mail clerk must have
misplaced the complaint . . . is not a sufficient excuse.” Rogers, 167 F.3d at
939 (quoting Gibbs v. Air Canada, 810 F.2d 1529, 1537 (11th Cir. 1987)).
Once CT Corporation Systems received and forwarded the complaint and
Citigroup lawyers were put on notice, Citigroup “had a responsibility to
ensure that ‘process . . . in fact reached its destination and that action [was]
being taken.’” Id. (alterations in original). Because Citigroup’s “neglect was
at least a partial cause of its failure to respond, [it] had the burden to
convince the court that its neglect was excusable.” Id. Citigroup failed to
meet this burden.2
       In the alternative, Citigroup argues that it was not notified of Levitt-
Stein’s motion for default judgment or entry of default judgment, in violation
of Local Rule 5.5 of the United States District Court for the Southern District
of Texas. Local Rule 5.5 provides that: “All motions must be served on all
parties. Motions for default judgment must be served on the defendant-
respondent by certified mail (return receipt requested).” Levitt-Stein
responds that Local Rule 5.5 was not intended to modify Federal Rules of
Civil Procedure 55(b) and 5(a), which require written notice of a default
judgment only where the party has appeared in the action.3 Specifically,

       2
          As in Rogers, we need not address the issues of prejudice and meritorious defenses
where we find that the default judgment was proper because any delay was not the result of
“mistake, inadvertence, surprise, or excusable neglect.” See Rogers, 167 F.3d at 938-39 (noting
appellant’s arguments regarding prejudice and meritorious defenses and then finding that the
district court did not abuse its discretion without addressing these arguments).
       3
         Rule 55(b) provides that: “If the party against whom judgment by default is sought
has appeared personally or by a representative, that party or its representative must be served
with written notice of the application [for a default judgment] at least 3 days before the
hearing.”
       It is possible to interpret Local Rule 5.5 in a manner consistent with the Federal Rules
of Civil Procedure. The local rule could mean that, where notice of a motion for default
judgment must be provided (i.e. where the defendant-respondent has appeared), that notice
must be sent via certified mail with return receipt requested.

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                                         No. 07-20531

Federal Rule of Civil Procedure 5(a)(2) provides that: “No service is required
on a party who is in default for failing to appear.”
       Furthermore, Levitt-Stein argues that, to the extent Local Rule 5.5 is
inconsistent with the federal rules, it is invalid under Federal Rule of Civil
Procedure 83(a).4 The rule’s text–requiring that “a local rule shall be
consistent with” federal rules of procedure–and our case law support Levitt-
Stein’s argument. See In re Adams, 734 F.2d 1094, 1099 (5th Cir. 1984)
(“Therefore, a local rule cannot be inconsistent with the Rules of Bankruptcy
Procedure . . . [and] cannot be inconsistent with ‘Acts of Congress.’”).
Accordingly, Citigroup’s argument that the district court’s judgment must be
reversed because it violated Local Rule 5.5 is without merit.
           Therefore, we find that the district court did not abuse its discretion in
denying Citigroup’s motions. The judgment of the court below is
       AFFIRMED.

       4
        Rule 83(a) provides that: “[A] district court, acting by a majority of its district judges,
may adopt and amend rules governing its practice. A local rule must be consistent with–but
not duplicate–federal statutes and rules adopted under 28 U.S.C. §§ 2072 and 2075.”

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