Failure to Comply with Local Rules Risks Entry of Default Judgment
The US Court of Appeals for the Fifth Circuit upheld the entry of a default judgment against a copyright infringement and trade secrets defendant who ignored several district court orders and warnings regarding compliance with the district’s local rules. Sindhi v. Raina, Case No. 17-11388 (5th Cir. Sept. 25, 2018) (Stewart, J).
Salim Sindhi sued Kunal Raina, a former employee, for allegedly stealing source code information from Sindhi’s online newspaper content management system. In response to Sindhi’s complaint alleging copyright infringement and a violation of the Texas Uniform Trade Secrets Act, Raina filed a motion to dismiss for lack of personal jurisdiction. Raina is an Indian national and a permanent resident of India. In filing his motion, Raina did not comply with three local court rules:
He did not file a statement of interested persons.
His lawyer was not admitted to practice before the district court and did not apply for admission pro hac vice.
He did not retain local counsel.
The district court gave Raina 21 days to comply with these local rules. When the 21 days elapsed without a response from Raina, the district court issued new orders warning Raina that if he did not respond within 14 days, the court would strike his responsive pleadings and enter a default judgment against him. Ultimately, the district court struck Raina’s motion to dismiss and entered an interlocutory default judgment and an interlocutory permanent injunction against Raina.
About five months later, Raina responded with a motion to set aside the entry of default judgment, arguing that it was void under Fed. R. Civ. P. 60(b)(4) because the district court lacked personal jurisdiction over him. The district court denied this motion, finding that Raina had minimum contacts with the forum state in the form of ongoing contractual relationships. The district court also denied Raina’s additional motion to set aside the default judgment under Rule 55(c), and entered a final judgment and corresponding permanent injunction against Raina. Raina appealed.
The Fifth Circuit explained that although entry of a default judgment and denial of motions to vacate default judgments are reviewed for “for abuse of discretion,” even the slightest abuse may justify reversal because of the seriousness of a default judgment.
Preliminarily, the Fifth Circuit rejected Sindhi’s argument that it lacked appellate jurisdiction, because three of the district court orders that Raina challenged were interlocutory. As the Court explained, “an appeal from a final judgment preserves all prior orders intertwined with the final judgment.” The Court found no prejudice to Sindhi in exercising appellate jurisdiction, regardless of whether Raina incorrectly designated the orders he sought to appeal.
As to the merits, the Fifth Circuit affirmed the entry of default judgment (and subsequent denial of the motion to vacate it) based on the “well-settled principle” that a district court may enter default judgment due to a party’s failure to comply with local court procedural rules. As for denial of the motion to vacate, the Court affirmed because of Raina’s failure to provide facts in support any of the listed grounds for vacating a judgment under Rule 60(b)(1)-(6).