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PC Drivers Headquarters, LP v. Ambicom Holdings, Inc.

United States District Court, W.D. Texas, Austin Division

April 4, 2017

PC DRIVERS HEADQUARTERS, LP, Plaintiff,
v.
AMBICOM HOLDINGS, INC., Defendant.

          ORDER

          ROBERT PITMAN, UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant AmbiCom Holdings Inc.'s Motion for Reconsideration. (Dkt. 37). Having reviewed the pleadings and the relevant legal authorities, the Court issues the following order.

         BACKGROUND

         Plaintiff PC Drivers Headquarters, L.P. (“PCD”) sued Defendant AmbiCom Holdings, Inc. (“AmbiCom”) for breach of contract. According to Plaintiff, PCD and AmbiCom entered into a joint business venture to develop, market, and sell certain software-related products and services. (Orig. Pet. ¶ 7; Mot. Default. J. ¶ 8). PCD contended that, following AmbiCom's repeated failure to perform its contractual obligations, it was forced to make payments owed by AmbiCom to various third parties in order to preserve PCD's ownership of certain assets. (Mot. Default. J. ¶ 8). PCD sought compensatory damages for the payments made on behalf of AmbiCom, a declaratory judgment defining its surviving rights following the termination of the business venture, a permanent injunction, and attorneys' fees. (Id.).

         On October 29, 2015, Plaintiff filed this action in the 201st Judicial District Court of Travis County, Texas. On November 17, 2015, AmbiCom removed the case to this Court. AmbiCom did not file an answer or any other defensive pleading in the state court action prior to removal, nor did it do so after removal in this Court. On December 4, 2015, AmbiCom's counsel filed a motion to withdraw. The Court held a hearing on December 17, 2015, and entered an order granting the motion to withdraw. In the order, the Court admonished Defendant “if its financial situation should change, it should retain litigation counsel expeditiously, as the probable consequence of proceeding without counsel is the issuance of a default judgment.” (Order, Dkt. 9.) After AmbiCom's counsel withdrew, no other attorney made an appearance on its behalf.

         On January 27, 2016, PCD filed a Motion for Entry of Default. (Dkt. 11). The Clerk of the Court entered a default against AmbiCom on January 26, 2016. (Dkt. 12). PCD thereafter moved the Court for the entry of default judgment, (Dkt. 13), which this Court granted by order dated April 19, 2016. (Dkt. 14). The Court entered final default judgment that same day. (Dkt. 15).

         On January 19, 2017, nearly a year after PCD initially moved for entry of default, an attorney appeared on behalf of AmbiCom and filed a motion to set aside the default judgment. This Court denied the motion on March 20, 2017. AmbiCom has now filed a motion for reconsideration in which AmbiCom argues the Court erred in holding that a violation of Federal Rule of Civil Procedure 54(c) does not, standing alone, provide a basis for setting aside a judgment.

         LEGAL STANDARD

         Because the Federal Rules of Civil Procedure do not specifically provide for motions for reconsideration, see Shepherd v. Int'l Paper Co., 372 F.3d 326, 328 (5th Cir. 2004), courts often consider such motions by the standards of Federal Rule of Civil Procedure 59(e), a provision governing the grounds for alteration or amendment of a judgment. See Jacoby v. Trek Bicycle Corp., No. 2:11-cv-124, 2011 WL 3240445, at *1 (E.D. Tex. July 28, 2011). The party moving for the remedy must show “(1) an intervening change in controlling law; (2) the availability of new evidence not previously available; or (3) the need to correct a clear error of law or prevent manifest injustice.” Id. (quoting In re Benjamin Moore & Co., 318 F.3d 626, 629 (5th Cir. 2002)).

         A Rule 59(e) motion “calls into question the correctness of a judgment.” In re Transtexas Gas Corp., 303 F.3d 571, 581 (5th Cir. 2002). It is not the proper vehicle for “rehashing evidence, legal theories, or arguments that could have been offered or raised before the entry of judgment.” Templet v. HydroChem, Inc., 367 F.3d 473, 478 (5th Cir. 2004); Simon v. United States, 891 F.2d 1154, 1159 (5th Cir. 1990). Rather, the rule “serve[s] the narrow purpose of allowing a party to correct manifest errors of law or fact or to present newly discovered evidence.” Waltman v. Int'l Paper Co., 875 F.2d 468, 473 (5th Cir. 1989). Thus, reconsideration of a judgment after its entry is an extraordinary remedy to be used only sparingly. Templet, 367 F.3d at 478.

         DISCUSSION

         In its prior motion to set aside the default judgment in this case, AmbiCom argued that this Court's final default judgment was void, and thus should be set aside under Rule 60(b)(4), because it provided relief beyond what was requested in the pleadings in violation of Rule 54(c). (Mot. Set Aside Default J., Dkt. 16, at 10-12). The Court rejected AmbiCom's argument, holding that a violation of Rule 54(c) is insufficient to warrant relief under Rule 60(b)(4) absent a showing that the Court lacked jurisdiction or acted in a manner inconsistent with due process. (Dkt. 36, at 5-6). Because AmbiCom had not made that showing, the Court denied its motion to set aside the default judgment under Rule 60(b)(4). (Id.). AmbiCom's motion for reconsideration now goes further than its initial motion and argues that a violation of Rule 54(c) constitutes a violation of due process.

         The Court is not persuaded that AmbiCom's new argument justifies the relief it seeks. First, AmbiCom's due process arguments could have been raised in support of its motion to set aside the default judgment. Instead, AmbiCom argued that a violation of Rule 54(c), standing alone, warrants relief under Rule 60(b)(6). As noted above, a motion for reconsideration is not the proper vehicle for presenting “arguments that could have been offered or raised before the entry of judgment” but were not. Templet, 367 F.3d at 478.

         Second, the Court disagrees with the substantive proposition that a violation of Rule 54(c) is a per se violation of due process. This Court is of the view that Rule 54(c), like the rule governing service in Espinosa, is designed to safeguard a defaulting party's right to notice and an opportunity to be heard[1] by apprising him of the allegations against him and allowing him to consider whether to avail himself of his right to proceed with the litigation. See In re Jacuinde, Bankruptcy No. 08-15509-B-7, 2009 WL 9083939, at *4 (Bankr. E.D. Cal. Apr. 16, 2009) (“Rule 54(c) serves to protect the rights of defendants to due process by limiting the relief granted against a defaulting defendant to the relief the defendant was properly notified would be at issue.”). Accordingly, violations of the rule may indeed correlate with violations of due process. See Stafford v. Jankowski, 338 F.Supp.2d 1225, 1228- 29 (D. Kan. 2004) (“The purpose ...


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