A bankruptcy decision from the Sixth Circuit could result in a grant of certiorari to resolve a circuit split on a nonbankruptcy question: Is there any time limit under Rule 60(b)(4) to set aside a default judgment for lack of personal jurisdiction?

The circuits are split, with six circuits and the leading treatise saying there is no time limitation when a judgment was entered without subject matter or personal jurisdiction. Over a dissent, the Sixth Circuit is the only circuit believing that a motion to set aside a void judgment must be made within a “reasonable time.”

Head

A chapter 11 debtor filed an adversary proceeding to recover some $50,000 in unpaid invoices. The debtor mailed the summons and complaint addressed to the defendant at the corporation’s address, but the papers were not addressed to any corporate officer because the corporation had listed itself as the agent for the service of process.

Eventually, the bankruptcy court entered a default judgment in favor of the debtor. The debtor’s chapter 11 case was converted to chapter 7. Five years after entry of the default judgment, the trustee attached the defendant’s bank account. Six years after the entry of judgment, the defendant moved under Bankruptcy Rule 9024 and Federal Rule 60(b)(4) to set aside the judgment.

The bankruptcy court never reached the question of whether the judgment was void for failure to address the papers to a corporate officer. Instead, the bankruptcy court denied the motion to void the judgment on the grounds that the delay in filing the Rule 60(b)(4) motion was unreasonable. The district court affirmed.

Rules 60(b) and 60(c)

Under Rule 60(b)(4), the court may relieve a party of a final judgment if “the judgment is void.” With regard to the timing, Rule 60(c)(1) says that a “motion under Rule 60(b) must be made within a reasonable time — and for reasons (1), (2), and (3) no more than a year after the entry of the judgment or order or the date of the proceeding.” The one-year requirement does not apply to a Rule 60(b)(4) motion to set aside a void judgment.

The question is: Does the “reasonable time” requirement in Rule 60(c)(1) apply to a judgment that is void under Rule 60(b)(4), or is there no time limit to set aside a judgment that is void for lack of subject matter or personal jurisdiction?

There is no time limit to set aside a void judgment, according to the Wright & Miller treatise along with First, Fifth, Seventh, Ninth, Tenth and District of Columbia Circuits.

The Majority on the Panel

Unable to set aside a judgment that might have been void for lack of personal jurisdiction, the defendant appealed to the Sixth Circuit. On appeal, Circuit Judge Joan Larsen affirmed for a split panel in an opinion on July 26, once again making the Sixth Circuit the only Court of Appeals requiring void judgment to be set aside within a “reasonable time.”

Citing Sixth Circuit precedent saying that a Rule 60(b)(4) motion must be filed within a “reasonable time,” Judge Larsen said,

Rule 60(c)(1) speaks in plain terms: “All” Rule 60(b) motions “must be filed ‘within a reasonable time.’”

Judge Larson spent the bulk of her opinion rebutting arguments by the dissenter, Circuit Judge David W. McKeague. Among other things, she said that the Supreme Court’s bankruptcy decision in United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 271 (2010), “did not consider whether the motion was timely under Rule 60(c)(1); it simply decided what kinds of defects make a judgment void within the meaning of Rule 60(b)(4).”

Judge Larson “acknowledge[d] that our circuit appears to be out of step with the majority view, which holds that Rule 60(b)(4) motions may be brought at any time,” but she saw the panel as bound by prior Sixth Circuit precedent holding that the “plain terms” of Rule 60(c))(1) “impose[] a reasonable-time requirement on each of the enumerated grounds in Rule 60(b).” In her view, “a reasonable time limitation . . . comports with basic equitable principles.”

The Dissent

“Respectfully” dissenting, Judge McKeague said that he “firmly” believed that “this Court should renounce that rule and join every other federal circuit in holding that the mere passage of time cannot render a void judgment valid.” He said, “Courts have no power to enforce void judgments” because “the passage of time cannot render it valid.”

Judge McKeague cited Espinosa for the proposition “that untimeliness alone cannot be the basis for denying a motion to vacate a void judgment.” He said he “would vacate the bankruptcy court’s determination that [the defendant’s] motion was untimely and remand for the court to consider whether the judgment was, in fact, void.” To his way of thinking, “[e]nforcement of a legal nullity is a true injustice. Where a judgment is void, it cannot stand.”

Observations

Based entirely on the rule, timeliness applies to motions under Rule 60(b)(4) even though the one-year limitation does not. Is the rule nonetheless unconstitutional as applied or beyond the rulemaking power when applied to a case like this?

Or, perhaps a Rule 60(b)(4) motion is timely no matter the length of the delay? Holding that a Rule 60(b)(4) motion is always timely would avoid reaching constitutional or rulemaking questions.