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Yrc, Inc v. Td Sherman


September 13, 2011


On appeal from the Superior Court of New Jersey, Law Division, Passaic County, DJ-48-10.

Per curiam.


Argued January 20, 2011

Before Judges R. B. Coleman and Lihotz.

Appellant, YRC Inc., f/k/a Yellow Transportation (YRC), appeals from an April 16, 2010 order denying its motion for reconsideration and a related February 19, 2010 order denying enforcement of a default judgment entered by the Civil Court Department of the District Court of Johnson County, Kansas, and recorded in the Superior Court of New Jersey against defendant Rainbow Appliance & Electronics, LLC (Rainbow A&E, LLC). Based on our review of the applicable law and the record on appeal, we affirm.

YRC is a shipping company which alleges it provided transportation services to TD Sherman, LLC and "Rainbow Appliances" between July 10, 2008 and October 30, 2008. On March 18, 2009, YRC filed a complaint in the District Court of Johnson County, Kansas, for unpaid invoices based on bills of lading. The complaint named as defendants five entities: TD Sherman, LLC; Rainbow Appliance & Electronics, LLC (Rainbow A&E, LLC); Rainbow Appliance Company, LLC; Rainbow Appliance & Electronics, Inc.; and Rainbow Appliance Company, Inc. The complaint alleged that the registered agent and president, member and/or chief executive officer for each of the defendant entities is Eli Klein and that the principal place of business of each of the entities is at River Road in Clifton, New Jersey. None of the defendant entities appeared or answered the complaint in Kansas and on July 10, 2009, YRC moved in Kansas for judgment by default. On August 7, 2009, the District Court of Johnson County, Kansas, granted YRC's motion and entered judgment by default against all of the defendant entities, jointly and severally for $118,529.10, plus post-judgment interest to be calculated pursuant to the Kansas judgment rate.*fn1

On January 4, 2010, YRC initiated this matter and filed an affidavit in support of an application to record its foreign Kansas judgment in New Jersey against the four remaining defendants. Rainbow A&E, LLC moved to stay the enforcement and to void the default judgment. None of the remaining three Rainbow Appliance entities took action with respect to YRC's effort to enforce the judgment, and none other than Rainbow A&E, LLC, is involved in this appeal.

Following a hearing on February 19, 2010, the motion court accepted Rainbow A&E, LLC's argument that it did not have sufficient minimum contacts with the State of Kansas to satisfy due process standards at the time the judgment was entered by the Kansas court. The motion judge determined Rainbow A&E, LLC proved it was not in existence during the timeframe that services were provided by YRC to TD Sherman and/or the other defendants, as alleged in the YRC Kansas complaint. The court therefore declared the default judgment unenforceable as against Rainbow A&E, LLC and cancelled and discharged the judgment as to that entity for lack of personal jurisdiction and lack of due process. YRC moved for reconsideration and that motion, heard on April 16, 2010, was denied for substantially the same reasons. This timely appeal followed.

Because the parties do not dispute the factual findings of the motion courts, we review the courts' holdings de novo. See Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). YRC argues that Rainbow A&E, LLC waived its right to challenge personal jurisdiction in Kansas by moving to set aside the default judgment and then later withdrawing its challenge.*fn2 Plaintiff asserts that motion was filed on June 25, 2010, after the entry of the two orders that denied enforcement in New Jersey and that are the subject of this appeal.

We note that the record presented on this appeal is incomplete regarding the post-judgment filings in Kansas as the appellant's appendix only includes (a) the first page of the referenced motion to set aside default judgment; (b) the first page of Rainbow A&E, LLC's reply to [YRC's] opposition to the motion to set aside default judgment; (c) stipulation withdrawing defendant Rainbow A&E, LLC's motion and canceling the hearing; and (d) an order signed by the stipulating attorneys [not signed by a judge] withdrawing the motion and declaring the motion shall be of no force and effect. Those documents are undated except that the stipulation and order signed by the attorneys bear a facsimile stamp date of August 10, 2010.

It is well settled that a party may waive or consent to the exercise of jurisdiction by a foreign state:

If defendant appears in the original action and participates in the litigation without objection to the court's jurisdiction over him, the defendant may not collaterally attack the judgment in a second state when an action is brought to enforce it as the defendant has consented to the jurisdiction of the first state. Likewise if a defendant challenges the jurisdiction of the court over him and the court rejects his challenge and finds it has jurisdiction, the issue may not be raised in a second state in an action to enforce the judgment rendered in the first state. [Hupp v. Accessory Distribs., 193 N.J. Super. 701, 709 (App. Div. 1984) (citations omitted).]

Here, YRC has not met its burden of proving Rainbow A&E, LLC waived its right to challenge the exercise of personal jurisdiction over it by the Kansas court. See Knorr v. Smeal, 178 N.J. 169, 177 (2003) ("The party waiving a known right must do so clearly, unequivocally, and decisively."). Contrary to YRC's argument, the record provided by YRC indicates the motion in Kansas was filed on June 25, 2010, well after the February 19, 2010 order in New Jersey declaring the Kansas judgment unenforceable and after the New Jersey court denied YRC's motion for reconsideration on April 16, 2010. In addition, the motion in Kansas was never considered by a court. The motion was withdrawn by consent of counsel for both parties, with the expressed qualification that "[b]ased on this stipulation the Motion . . . shall be deemed withdrawn and of no further force and effect." We therefore reject YRC's argument that Rainbow A&E, LLC waived its right to challenge personal jurisdiction in New Jersey. Rainbow A&E, LLC's challenge had been perfected by the time the motion was filed in Kansas.

Appellant next argues the default judgment by the Kansas court is entitled to full faith and credit in New Jersey. However, "[i]n considering whether to accord full faith and credit to a judgment of another state, a forum state must consider whether the state rendering the judgment had jurisdiction over the defendant." Silverman v. Berkson, 141 N.J. 412, 430 (1995) (citing May v. Anderson, 345 U.S. 528, 533, 73 S. Ct. 840, 843, 97 L. Ed. 1221, 1226-27 (1953)).

In World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S. Ct. 559, 62 L. Ed. 2d 490 (1980), the United States Supreme Court addressed the due process limits inherent in the full faith and credit clause by explaining:

A judgment rendered in violation of due process is void in the rendering State and is not entitled to full faith and credit elsewhere. Due process requires that the defendant . . . be subject to the personal jurisdiction of the court. . . .

[A] state court may exercise personal jurisdiction over a nonresident defendant only so long as there exist[s] minimum contacts between the defendant and the forum State. The concept of minimum contacts, in turn, can be seen to perform two related, but distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.

The protection against inconvenient litigation is typically described in terms of reasonableness or fairness. We have said that the defendant's contacts with the forum State must be such that maintenance of the suit does not offend traditional notions of fair play and substantial justice. The relationship between the defendant and the forum must be such that it is reasonable to require the corporation to defend the particular suit which is brought there. Implicit in this emphasis on reasonableness is the understanding that the burden on the defendant, while always a primary concern, will in an appropriate case be considered in light of other relevant factors, including the forum State's interest in adjudicating the dispute; the plaintiff's interest in obtaining convenient and effective relief, at least when that interest is not adequately protected by the plaintiff's power to choose the forum; the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies. [Id. at 291-92, 100 S. Ct. at 564-65, 62 L. Ed. 2d at 497-98 (citations and quotation marks omitted).]

In applying the minimum contacts test, a court should focus on the relationship among the defendant, the forum, and the litigation. McKesson Corp. v. Hackensack Med. Imaging, 197 N.J. 262, 277 (2009) (quoting Lebel v. Everglades Marina, Inc., 115 N.J. 317, 323 (1989)). The minimum contacts requirement is satisfied so long as the contacts result from defendant's purposeful conduct and not the unilateral activities of the plaintiff. World-Wide Volkswagen, supra, 444 U.S. at 297-98, 100 S. Ct. at 567-68, 62 L. Ed. 2d at 501-02.

This purposeful availment requirement ensures that a defendant will not be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts. The question is whether the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.

[Lebel, supra, 115 N.J. at 323-24 (citations and quotation marks omitted).]

In this case, the motion courts found Rainbow A&E, LLC did not have minimum contacts with Kansas because the entity had not been formed and did not exist as of the time the transportation services of YRC were provided. Since it is undisputed that the entity was formed subsequent to the rendition of services by YRC, and there is no other assertion of contact between it and YRC or the State of Kansas, the motion courts properly concluded Rainbow A&E, LLC did not have the minimum contacts with Kansas necessary to sustain that court's exercise of jurisdiction over it.

YRC also argues for the legitimacy of the forum selection charges in its tariff. We find this issue unrelated to the current appeal because the motion court's decisions do not implicate the legitimacy of the past due freight charges against TD Sherman and the other defendant companies that do not deny that they did exist when the tariffs were generated.

We recognize that YRC contends Rainbow A&E, LLC may have been an alter ego of the president, member or chief executive officer of the various entities bearing some form of the name Rainbow Appliance and that Rainbow A&E, LLC may have subsequently received assets from the principal or from one or more of the other entities. Those are contentions distinct from the threshold jurisdictional issues raised by this appeal, and we express no opinion on the ultimate merits of such contentions. To the extent that we have not specifically addressed issues or arguments advanced by appellant, we deem them to be without sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E).


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