Burda Media, Inc. v. Viertel

Citations: 417 F.3d 292; 2005 U.S. App. LEXIS 16197; 2005 WL 1845553Docket: Docket No. 04-3426-CV

Court: Court of Appeals for the Second Circuit; August 5, 2005; Federal Appellate Court

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Christian Viertel appeals the denial of his motion to vacate a default judgment issued by the Southern District of New York in favor of Burda Media, Inc. and Burda Media Holding GmbH, which accused him and others of a fraudulent scheme. The Burda plaintiffs initiated the suit in September 1997, alleging that Viertel, in collusion with Fritz G. Blumenberg, defrauded them by submitting fraudulent invoices via sham companies controlled by Viertel. After multiple unsuccessful attempts to serve him in New York and France, Burda successfully served Viertel in France under the Hague Convention. 

Viertel failed to respond, leading to a default judgment in April 2000. In October 2003, he sought to vacate the judgment, claiming improper service as the French authorities did not complete the required Certificate of service and asserting he never received the summons. The district court denied his motion, which the appellate court affirmed, ruling that the service complied with the Hague Convention due to the adequacy of the police report as a substitute for the formal Certificate and concluding that Viertel did receive the summons despite his claims. 

The background highlights Burda’s initial attempts to serve Viertel in New York and subsequent identification of his residence in France, leading to service under the Hague Convention.

On July 14, 1998, Burda submitted documents to the French Ministry of Justice to serve Viertel and his companies, including executed USM-94 Forms and summons and complaint copies in French and English. The USM-94 Form, compliant with Hague Convention standards, included details of the applicant, defendants, and receiving authority, with a blank Certificate section and a summary of the documents. The Ministry of Justice subsequently tasked local police with serving the documents in August 1998. 

Two police reports were generated: the first, dated August 3, 1998, recorded an unsuccessful service attempt on Viertel for his companies, as he denied any connection. The second report, dated August 12, 1998, noted a successful service of documents pertaining to Viertel personally, where he acknowledged receipt but refused documents related to his former companies, citing an expired service period. 

Burda received these reports but not the formal Certificate. In November 1998, Burda submitted Proof of Service to the district court, asserting that service was completed on August 3 and 12, 1998, as per the Federal Rules of Civil Procedure and the Hague Convention. This included the USM-94 Forms, summons, complaint, and police reports. In January 1999, Burda informed Viertel of the proof of service, noting the absence of legal representation. Viertel did not respond. By December 1999, Burda sought an entry of default against Viertel and Telecommunication Partners Limited.

Viertel's companies were served, and after more than twenty days without response, the Clerk of the Court issued a Certificate of Default. In March 2000, Burda sought a default judgment against Viertel and TPL, which was unopposed despite service in both France and Florida. On April 10, 2000, the district court granted a default judgment of approximately $2.75 million against them. By October 2001, Viertel was aware of this judgment. He faced criminal charges in the Southern District of New York for fraud, resulting in a conviction in October 2002, where he was sentenced to twenty-one months in prison.

In October 2003, Viertel, initially pro se, sought to vacate the default judgment, arguing it was void due to lack of personal jurisdiction stemming from improper service. He later provided an affidavit claiming he did not receive the summons. On May 18, 2004, the district court denied his motion, stating that Burda complied with the Hague Convention, that actual receipt of the summons is not necessary, and that Viertel's denial of receipt was not credible. This led to an appeal focusing on Rule 60(b)(4), which allows for relief from a judgment deemed void. The standard of review for this appeal is de novo, differing from the abuse of discretion standard typically applied to other Rule 60(b) motions.

Old Republic referenced SEC v. McNulty, which applied an abuse of discretion standard for reviewing the denial of a motion to vacate a default judgment under Rule 60(b)(1) and (b)(6). However, McNulty did not address claims of void judgments under Rule 60(b)(4) for lack of jurisdiction, making Old Republic's reliance on it inappropriate. The document reaffirms that a de novo standard of review applies to motions to vacate judgments under Rule 60(b)(4). If a judgment is void, denying the motion is a per se abuse of discretion.

The excerpt also highlights a dispute over the burden of proof regarding the personal jurisdiction of the district court in the underlying action. Viertel argues that the Burda plaintiffs should prove jurisdiction, as they would in a motion to dismiss for insufficient service of process. Conversely, Burda contends that Viertel, as the defaulting defendant, should bear this burden to prevent him from benefiting from his delay. The document seeks to clarify this issue, noting differing district court approaches. It concludes that when a defaulting defendant has actual notice of the proceedings but delays in filing a motion to vacate, the defendant must prove that proper service did not occur. This position is supported by case law, indicating that defendants with notice have the burden to demonstrate improper service in collateral attacks on judgments.

District Judge José Cabranes highlighted the importance of placing the burden on the defendant in legal proceedings, emphasizing the interests of judicial comity, efficient dispute resolution, plaintiff forum choice, and the risk of prejudicing a plaintiff due to delays that may affect evidence of personal jurisdiction. In the present case, Viertel acknowledged knowledge of the case as of August 12, 1998, by informing Officer Pascal Robert of the expired service period, opting not to move for dismissal under Rule 12(b)(5), which resulted in his burden to prove improper service.

Viertel contended that service of process was invalid under the Hague Convention for two reasons: failure to meet procedural requirements and non-receipt of the summons. Both arguments were rejected. Service upon individuals in foreign countries, such as Viertel in France, is governed by Federal Rule of Civil Procedure 4(f), which permits service via internationally agreed methods, including the Hague Convention. 

The Hague Convention aims to ensure that judicial documents served abroad are delivered in a timely manner and outlines multiple service methods, including service through the Central Authority, consular channels, mail, or local laws. In this case, Burda opted for service through the Central Authority, specifically the French Ministry of Justice, which is responsible for arranging service and providing a Certificate detailing the service process. Viertel's claims against Burda's service included allegations that Burda failed to prove proper submission of documents to the Ministry, the Ministry did not provide a Certificate, and Burda did not comply with Article 15 regarding default judgments. However, all these claims were found to be unsubstantiated.

Viertel's allegations regarding improper service are unfounded, as substantial evidence confirms that Burda provided the French Ministry of Justice with the required judicial documents, including USM-94 Forms, summons, and complaint. Viertel acknowledges receiving Burda's USM-94 Forms from the French Ministry, even submitting an executed form as part of his affidavit. Additionally, Burda's attorneys have sworn affidavits confirming the mailing of these documents. Testimony during Viertel’s criminal trial indicated that legal papers were delivered to him by an officer after being passed along by French prosecutors. 

Viertel also claims that the absence of a formal Certificate from the Ministry of Justice renders the service improper. While Burda admits the Ministry did not return a formal Certificate per the USM-94 Form, they argue that a second police report suffices as a substitute. This report, dated August 12, 1998, contains all necessary details about the service, fulfilling the requirements of the Hague Convention Article 6, which states that the Central Authority or its designated agent must complete a certificate regarding the service status. The court found that the completion of the police report by local authorities does not detract from its validity. The requirements of Article 6 do not mandate the use of an exact form; thus, strict adherence to format over substance is not required. Courts have previously ruled that minor deviations from the Hague Convention procedures do not invalidate effective service.

The court ruled that the Hague Convention must be interpreted alongside Rule 4, emphasizing actual notice over strict formalities. In the case of Fox, the district court rejected a foreign defendant's motion to dismiss due to insufficient process under the Hague Convention, despite the French Central Authority failing to provide a Certificate of service. The court found that service was valid because the plaintiff made a good faith effort to comply with the Hague Convention and the defendant had adequate notice, ensuring no injustice resulted. Similarly, in Greene, a technical defect in a returned Certificate did not warrant dismissal where the plaintiff adhered to the Hague Convention and the defendant suffered no prejudice.

In this case, Burda similarly attempted in good faith to comply with the Hague Convention, and the lack of a formal Certificate from French authorities was not Burda's fault. The court noted that the return of a police report instead of a formal Certificate did not invalidate service, as the essential information was conveyed, and Viertel, the defendant, did not dispute having received the complaint, leading to no prejudice against him.

Article 15 of the Hague Convention permits default judgments in the absence of a Certificate if six months have passed and the plaintiff has made all reasonable efforts to obtain one. However, the court found Article 15 inapplicable since the police report qualified as a Certificate. The court advised future plaintiffs to ensure they obtain a formal Certificate to prevent potential challenges to default judgments under Article 15. In this instance, Burda's service was deemed sufficient, and the plaintiffs were likely frustrated by Viertel’s delays and their own efforts to serve process.

Burda complied with the Hague Convention regarding service of process. Viertel contended that service was invalid due to his claim of not receiving the summons. The district court ruled that actual receipt is not required under the Hague Convention, and even if it were, Viertel’s affidavit denying receipt was deemed incredible. The court noted substantial evidence undermining Viertel’s credibility, including his past fraud conviction and a two-year delay in challenging the service despite being aware of the default judgment since 2001. Viertel's unsupported allegation that a process server’s envelope was empty was insufficient to counter the process server’s sworn statement. 

Despite Viertel’s assertions that the Burda plaintiffs failed to prove they sent a summons to the appropriate authorities, the evidence indicated that Viertel received legal documents from a New York court, which he did not identify. The court found it implausible that these documents lacked relevance to the summons issued by Burda. The district court upheld that Viertel did not prove he did not receive the summons.

Additionally, service must comply with constitutional due process, which requires notice reasonably calculated to inform interested parties of the action. The method of service employed by Burda met this standard, a point Viertel did not contest. The court concluded that personal delivery of the summons through French authorities fulfilled the due process requirement. Consequently, the judgment denying Viertel's motion to vacate the default judgment was affirmed. The Burda plaintiffs successfully served another defendant, Blumenberg, who is not involved in this appeal.

Blumenberg was prosecuted and convicted for mail and wire fraud, conspiracy, and filing false tax returns in United States v. Blumenberg, 96 Fed. Appx. 776 (2d Cir. May 13, 2004). Burda sought a default judgment against only TPL, as there was evidence that Viertel was a managing director of TPL, allowing for service as its representative. Burda successfully obtained a default judgment against both Viertel and TPL, yet Viertel did not contest the judgment against TPL. While his appeal was ongoing in 2004, Viertel moved for reconsideration of the May 2004 decision that denied his motion to vacate the default judgment, proceeding pro se despite having legal representation for the original motion and appeal. In February 2005, the district court denied this reconsideration motion, as Viertel failed to provide facts or legal authority to show the original judgment was erroneous. The court referenced Toliver v. County of Sullivan, 957 F.2d 47, 49 (2d Cir. 1992), which states that a district court can deny a Rule 60(b) motion during an appeal without affecting the appellate court's jurisdiction. The opinion has been communicated to the judges involved in related cases.