To resolve a split of circuits, the Supreme Court granted certiorari on Friday in a bankruptcy case, but the question does not turn on bankruptcy law. Rather, the Court will decide whether there is a time limit under Rule 60(b)(4) to set aside a default judgment for lack of personal jurisdiction.

However, key precedent for the Court will include a bankruptcy case, United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 275 (2010), where the Court said that “Rule 60(b)(4) does not provide a license for litigants to sleep on their rights,” perhaps suggesting there can be a limit for Rule 60(b)(4) motions.

Still, constitutional law was not a focus in Espinosa. In the case the Court will review this fall, Coney Island Auto Parts Unlimited Inc. v. Burton, 24-808 (Sup. Ct.), the Constitution and the Due Process Clause will be at the forefront. Coney Island involved a default judgment where, allegedly, there never was personal jurisdiction over the defendant.

The Court’s opinion in Coney Island will say whether there is a time limit for moving to set aside a judgment that was allegedly void because there never was personal jurisdiction over the defendant.

The Default Judgment

A chapter 11 debtor had 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.

The bankruptcy court had entered a default judgment in favor of the debtor before the chapter 11 case was converted to chapter 7. Five years after entry of the default judgment, the chapter 7 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. Rather, 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 rule allows the court to “relieve a party . . . from a final judgment [or] order.” Rule 60(c) goes on to say, “A motion under Rule 60(b) must be made within a reasonable time . . . .”

The district court affirmed, and so did the Sixth Circuit, over a dissent. Burton v. Coney Island Auto Parts Unlimited Inc. (In re Vista-Pro Automotive LLC), 109 F.4th 438 (6th Cir. July 26, 2024). To read ABI’s report on the Sixth Circuit decision, click here.

The case before the Supreme Court will say whether “reasonable time” applies to void judgments for which there never was personal jurisdiction.

The Question

The parties disagree about the extent of a circuit split. The defendant, as petitioner in the Supreme Court, contends that all circuits aside from the Sixth believe there is no time limit for setting aside a judgment that was void for lack of personal jurisdiction.

The chapter 7 trustee, as respondent, disagrees and says, “at least seven circuits join the Sixth Circuit in finding Rule 60(b)(4) motions untimely in appropriate cases.”

Aside from the circuits that have opined on the question, two Supreme Court decisions will be at the forefront. In Kemp v. United States, 596 U.S. 528, 533 (2022) the Court said, “All [Rule 60(b) motions] must be filed ‘within a reasonable time.’ Rule 60(c)(1).”

Espinosa is close but not on point. The holder of student loans had notice but did not object when the debtor’s chapter 13 plan discharged student loans. Later, the lender moved to set aside the discharge of the student loans under Rule 60(b)(4), because the debtor had not prosecuted an adversary proceeding to establish that the loans imposed an “undue hardship” under Section 523(a)(8).

Espinosa upheld the discharge of the student loans, improper procedure notwithstanding.

While Espinosa does say that “Rule 60(b)(4) does not provide a license for litigants to sleep on their rights,” the case did not deal with personal jurisdiction. In Espinosa, the lender had notice. Personal jurisdiction was not an issue. The alleged defect was procedural: the failure to conduct an adversary proceeding.

In Coney Island, the alleged defect was the alleged lack of personal jurisdiction, thus raising a constitutional question not present in Espinosa.

If there are no delays in the submission of briefs, oral argument in Coney Island could be held not long after the new term begins in October. Near or soon after the new year, we could have a decision saying whether the constitutional right to Due Process can be waived by delay in asserting the right.