Court Opinion

ID: 5131507
Source: CourtListenerOpinion
Date Created: 2021-12-04 01:00:31.058347+00
Date Added: 2024-06-11T08:23:24.384189
License: Public Domain

Case: 21-10068     Document: 00516116869          Page: 1    Date Filed: 12/03/2021

           United States Court of Appeals
                for the Fifth Circuit                           United States Court of Appeals
                                                                         Fifth Circuit

                                                                       FILED
                                                                December 3, 2021
                                   No. 21-10068
                                                                  Lyle W. Cayce
                                                                       Clerk
   Tango Marine S.A.,

                                                             Plaintiff—Appellee,

                                       versus

   Elephant Group Limited; Elephant Group, P.L.C.,

                                                        Defendants—Appellants.

                  Appeal from the United States District Court
                      for the Northern District of Texas
                            USDC No. 4:20-CV-42

   Before Jones, Southwick, and Engelhardt, Circuit Judges.
   Leslie H. Southwick, Circuit Judge:
          A maritime case was filed in the Northern District of Texas against
   two Nigerian business entities. The district court vacated the initial default
   against the Nigerian entities, but subsequent procedural errors led to a
   second default judgment that the district court refused to vacate. We
   AFFIRM.
              FACTUAL AND PROCEDURAL BACKGROUND
          Tango Marine S.A., a Grecian corporation, filed suit in the Northern
   District of Texas against two Nigerian businesses, Elephant Group Limited
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   and Elephant Group, P.L.C. (collectively, “Elephant Group”). Tango
   alleges that the Elephant Group chartered one of its vessels to deliver cargo
   to Lagos, Nigeria in 2016. Upon arrival in Lagos, though, the Nigerian port
   authorities prevented the unloading of the cargo. Tango alleges that the
   vessel was detained for two and a half years due to the Elephant Group’s
   failure to obtain proper permissions for the cargo, which caused damages for
   demurrage, supply, and maintenance charges. Tango also sought maritime
   attachment and garnishment pursuant to Federal Rule of Civil Procedure
   Supplemental Rule B.
          Serving process on the Nigerian entities proved difficult. The district
   court granted Tango’s request to serve the Elephant Group via email or mail.
   Approximately one month after this alternative service occurred and no
   response arrived, Tango sought entry of default, which the clerk entered.
   When no motion for default judgment appeared before the court, the court
   ordered Tango to file its motion for default judgment or explain its failure.
   Only after Tango filed its motion for default judgment did the Elephant
   Group participate in the suit by filing a motion for extension of time to file an
   answer and a notice of appearance. It also sought to have the default set aside,
   claiming that it was entering a restricted appearance under Supplemental
   Rules for Admiralty or Maritime Claims Rule E(8). It stated it was appearing
   solely to contest the merits of the claim underlying the attachment. The
   court set aside the initial default but required the Elephant Group to pay
   Tango’s attorneys’ fees for their legal work up to that point.
          With the initial default set aside, the Elephant Group filed a motion to
   dismiss under Federal Rule of Civil Procedure 12(b), arguing that (1) the
   court lacked jurisdiction (both personal and subject matter), (2) the
   complaint failed to comply with Rule 8(a)(2), and (3) Tango failed to join an
   indispensable party.

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          In response, Tango filed two pleadings on the same day. First, it filed
   an amended complaint. It also filed a “response opposing [the] motion to
   dismiss,” which argued the amended complaint cured the defects identified
   in the motion to dismiss. The Elephant Group responded only to this
   response to the motion to dismiss and never filed an answer to the amended
   complaint. Its reply to the motion to dismiss response referenced the
   amended complaint several times and specifically asked the district court to
   “dismiss, with prejudice, the Amended Complaint and the causes of action
   pled therein pursuant to” Rule 12(b). Importantly for later rulings by the
   district court, no answer to the amended complaint was filed.
          Two days after the Elephant Group filed that reply to the response in
   opposition to the motion to dismiss, Tango asked the clerk for a second entry
   of default due to the Elephant Group’s failure to answer the amended
   complaint. The Elephant Group filed an objection to this motion on the same
   day. Nevertheless, the clerk entered “default for want of answer or other
   defense.”
          The Elephant Group moved to have this second default set aside,
   which the district court denied. The district court determined that the
   Elephant Group’s default was “willful” and that “willfulness of the default
   ends the inquiry.” The district court also held that, even if the default were
   not willful, the Elephant Group failed to show that it had any meritorious
   defenses. It thus granted Tango’s subsequent motion for default judgment
   and entered final judgment for $4,491,784.17, plus post-judgment interest,
   over the Elephant Group’s objections. The Elephant Group appealed.
                                  DISCUSSION
          The Elephant Group makes two arguments on appeal. First, it
   maintains that the district court never acquired personal jurisdiction over it.
   Tango counters both that there is personal jurisdiction and that the Elephant

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   Group waived the personal-jurisdiction argument by not making such
   argument in its very first filing. Second, the Elephant Group argues that the
   district court abused its discretion in entering the default judgment. Tango
   asserts that default judgment was appropriate. We consider the Elephant
   Group’s arguments that the district court lacked personal jurisdiction as part
   of our default judgment analysis, as the two issues require some common
   analysis.
          Under the federal rules, “a district court may set aside an entry of
   default or default judgment for ‘good cause.’” Lacy v. Sitel Corp., 227 F.3d
   290, 291–92 (5th Cir. 2000). We review a refusal to set aside a default or
   default judgment for an abuse of discretion. Wooten v. McDonald Transit
   Assocs., Inc., 788 F.3d 490, 495 (5th Cir. 2015). “Because of the seriousness
   of a default judgment, and although the standard of review is abuse of
   discretion, even a slight abuse of discretion may justify reversal.” Lacy, 227
   F.3d at 292 (quoting CJC Holdings, Inc. v. Wright & Lato, Inc., 979 F.2d 60,
   63 n.1 (5th Cir. 1992)).
          We have identified three factors to determine whether good cause
   exists: (1) the willfulness of the default, (2) the prejudice to the opposing
   party if the default is set aside, and (3) the presence of any meritorious
   defenses for the defaulting party. Id. A district court may properly refuse to
   set aside a default judgment if the defendant “fails to present a meritorious
   defense sufficient to support a finding on the merits for the defaulting party.”
   Id. at 293.
          The default here was the failure to answer the amended complaint.
   The Elephant Group did reply to the response to the motion to dismiss that
   was filed simultaneously with the amended complaint, referred to the
   amended complaint in that reply, but clearly never filed an answer. The
   district court’s entry of default was primarily based on its conclusion that the

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   Elephant Group acted “willfully”; it also commented that no meritorious
   defenses were presented. We doubt that “willful” is the right label for
   counsel’s failure to file an answer. It did, after all, quickly make a filing
   referring to the new complaint. Inadvertence, clumsiness, or related labels
   come to mind. Whatever the inaction should be called, there was no filed
   answer. In the first order refusing to set aside the clerk’s entry of default, the
   district court stated that the “willfulness of the default ends the inquiry,”
   which is what our caselaw provides. See id. at 292. The district court
   nonetheless went on to conclude that no meritorious defenses existed either.
          Relieving the Elephant Group of its default is not controlled by
   whether we disagree with the finding of willfulness. Even without willfulness
   or even prejudice to the other party, “a district court may have the discretion
   not to upset a default judgment if the defendant fails to present a meritorious
   defense sufficient to support a finding on the merits for the defaulting party.”
   Id. at 293. That makes sense, as setting aside the default in the absence of a
   meritorious defense just postpones the inevitable. Thus, we examine the
   proposed defenses.
          The Elephant Group first contends that the district court had no
   personal jurisdiction and the absence amounts to a meritorious defense.
   Components of that argument are that it was a group of Nigerian businesses
   with its principal place of business outside the United States. Further, it had
   no continuous and systematic contacts with the forum state, Texas, and did
   not even have any property there. Tango responds by saying the Elephant
   Group waived its arguments about a lack of personal jurisdiction by failing to
   present that argument in its first responsive pleading. Tango also argues that
   the Elephant Group did have minimum contacts in the forum state.
          Some of the arguments raise issues of the existence of a distinction
   between general and special appearances in litigation. The Federal Rules of

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   Civil Procedure have abolished any distinction. The Civil Rules require only
   that a party raise certain defenses by motion or in its first responsive pleading,
   including the lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(2),
   12(h). Those Rules, though, do not supplant the Supplemental Rules for
   Admiralty that are relied upon by Tango in this case. E.g., Sembawang
   Shipyard, Ltd. v. Charger, Inc., 955 F.2d 983, 989 (5th Cir. 1992). Those
   Supplemental Rules continue to recognize both a general and a more limited
   category of appearance:
          Restricted Appearance. An appearance to defend against an
          admiralty and maritime claim with respect to which there has
          issued process in rem, or process of attachment and garnishment,
          may be expressly restricted to the defense of such claim, and in
          that event is not an appearance for the purposes of any other
          claim with respect to which such process is not available or has
          not been served.
   FED. R. CIV. P., SUPP. RULE E(8) (emphasis added). As we stated long
   after the distinction between special and general appearances was otherwise
   abolished, failure to appear specially to contest in personam jurisdiction can
   amount to waiver of that defense in maritime actions. See Sembawang
   Shipyard, 955 F.2d at 989.
          Tango argues that the Elephant Group ignored the perils of admiralty
   appearances and entered an unrestricted general appearance. Our review of
   the record reveals that the Elephant Group attempted to restrict its
   appearance in its initial motion to set aside default. Prior to this motion,
   though, counsel for Elephant Group (1) filed an application for admission pro
   hac vice; (2) filed a motion for extension of time; and (3) entered a “Joint
   Notice of Appearance.”        Did any of these filings constitute a general
   appearance on behalf of Elephant Group?

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          When determining whether a party has made a general appearance,
   we inquire whether the party has made “some presentation or submission to
   the court.” Cactus Pipe & Supply Co. v. M/V Montmartre, 756 F.2d 1103, 1108
   (5th Cir. 1985).   This can arise from filing an answer without raising
   jurisdictional defects or impliedly “from a defendant’s seeking, taking, or
   agreeing to some step or proceeding in the cause beneficial to himself or
   detrimental to plaintiff other than one contesting only the jurisdiction or by
   reason of some act or proceedings recognizing the case as in court.” Id.
   (quotation marks and citation omitted).
          None of the filings prior to the motion to set aside default were general
   appearances. None of these actions evince the “seeking, taking, or agreeing
   to some step or proceeding in the cause” required to constitute a general
   appearance. Id. Rather, they are best viewed as early maneuvering prior to
   any answer or motion; we agree with another circuit that they give “no hint
   that the answer will waive personal jurisdiction defects.” Benny v. Pipes, 799
   F.2d 489, 493 (9th Cir. 1986), amended by 807 F.2d 1514 (9th Cir. 1987).
          We now examine the language of the Elephant Group’s initial motion
   to set aside default to see if it was a restricted appearance. In the final few
   pages of the motion, the Elephant Group maintains that it is specially
   appearing “to defend against the claim underlying the attachment or arrest,”
   and cites Supplemental Rule E(8) for this proposition. Though the Elephant
   Group does not drape its entire motion in the protection of a restricted
   appearance, we are satisfied that this invocation of Rule E(8) is sufficient to
   constitute a restricted appearance.
          The Elephant Group’s restricted appearance, though, does not mean
   that there was no in personam jurisdiction over the Elephant Group. In this
   case, Tango specifically sought attachment and garnishment pursuant to
   Rule B of the Supplemental Rules of Civil Procedure because it believed

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   Elephant Group was not present in the district. Supplemental Rule B is “an
   adjunct to a claim in personam.” Sembawang Shipyard, 955 F.2d at 987.
   Functionally, Rule B establishes a quasi in rem proceeding which “allows a
   district court to take jurisdiction over a defendant in an admiralty or maritime
   action by attaching property of the defendant.” Submersible Sys., Inc. v.
   Perforadora Cent., S.A. de C.V., 249 F.3d 413, 421 (5th Cir. 2001). One
   treatise labels Rule B attachment as a quasi in rem process for in personam
   maritime claims. 29 James W. Moore et al., Moore’s Federal
   Practice § 705.04 (Matthew Bender 3d Ed. 2021). Importantly, it is the
   “good-faith allegation in the complaint that the res is present within the
   geographical jurisdiction of the court” — not the successful attachment of
   that res — that is “the jurisdictional fact which gives the court in personam
   jurisdiction over the defendant purported to own the res.” Great Prize, S.A.
   v. Mariner Shipping Party, Ltd., 967 F.2d 157, 159 (5th Cir. 1992). This is
   confirmed by the fact that the court maintains its jurisdiction even after a
   successful attachment has been vacated. See J. Lauritzen A/S v. Dashwood
   Shipping, Ltd., 65 F.3d 139, 142 (9th Cir. 1995).
          In this case, Tango alleged, and the district court approved, writs of
   attachment for various assets owned by the Elephant Group that Tango
   believed were present in the district. Tango’s good faith allegations in its
   complaint were the “jurisdictional facts” that generated Rule B in personam
   jurisdiction over the Elephant Group. When the district court entered the
   second default, this jurisdiction existed. Thus, even assuming that a lack of
   personal jurisdiction amounts to a meritorious defense, here there was
   jurisdiction over the Elephant Group.
          The Elephant Group claims it asserted two other meritorious
   defenses: pleading defects under Rule 8(a)(2) and failure to join an
   indispensable party.     The Elephant Group simply cites Fifth Circuit
   precedents but does not analyze their application here. Recitations of law

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   without a “definite recitation of facts” supporting the applicability of that
   law to this case are insufficient to establish a meritorious defense. Moldwood
   Corp. v. Stutts, 410 F.2d 351, 352 (5th Cir. 1969).
          Looking beyond that briefing defect, we see that Tango’s first
   amended complaint set out extensive facts and included exhibits upon which
   its claims were based. No pleading defect appears there. Further, at no point
   did the Elephant Group identify the indispensable third party that needed to
   be joined, instead unhelpfully referring to it as “the charterer.” The decision
   not to identify the allegedly indispensable party may have served some
   important purpose for the Elephant Group, but it failed to aid in the purpose
   of setting aside a default.
          We agree with the district court that neither claimed defense suffices.
   The presentation of meritorious defenses requires “definite factual
   allegations, as opposed to mere legal conclusions.” Jenkens & Gilchrist v.
   Groia & Co., 542 F.3d 114, 122 (5th Cir. 2008). Legal conclusions were all
   that were presented.
          AFFIRMED.

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