Corporate – Alter ego

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Where (1) a judge entered a default judgment for the plaintiff against a Russian company engaged in the business of commercializing satellite capacity, (2) the plaintiff was unable to collect the judgment, and (3) the plaintiff now brings this action against the defendant company, claiming it be an alter ego and/or successor in interest to the original defendant, the defendant’s motion to vacate the default judgment must be allowed under the exceptional circumstances provision of Fed. R. Civ. P. 60(b)(6).

“Defendant [Information Satellite Systems (ISS)] seeks to set aside the judgment under Fed. R. Civ. P. 60(b) on the grounds that (1) it is void because the court did not have jurisdiction to enter the judgment by virtue of ISS’ immunity under the Foreign Sovereign Immunities Act (‘FSIA’) and for improper service; (2) plaintiff procured that judgment through misrepresentations of fact to the court; and (3) the interest of justice so requires. …

“… Exceptional circumstances warrant vacature here.

“First, attacks on subject matter jurisdiction cannot be waived and can be raised collaterally by non-appearing parties. … For this principle to have any meaning in the present context, ISS must be permitted to have its jurisdictional challenge assessed. …

“Second, the equities favor deciding cases on their merits. … This is especially so in cases involving foreign sovereigns and their instrumentalities. …

“Third, when a non-appearing foreign defendant collaterally raises substantial fact issues calling into question the court’s subject matter jurisdiction even if they are insufficient to void the judgment under Rule 60(b)(4), the strength of such challenge may, nevertheless, favor Rule 60(b)(6) vacature. … Here defendant raises a number of substantial factual challenges to plaintiff’s contentions of ISS’ alter ego status, ISS’ and Merkuriy [LTD]’s commercial contacts in the United States, and ISS’ waiver of sovereign immunity, all weighing in favor of vacature.

“Fourth, the monetary amount of the default judgment at issue is extremely high. …

“Fifth, the default judgment did not include any findings on waiver, the commercial activities of ISS or Merkuriy, or ISS’ sovereign immunity under the FSIA, and the findings therein contained were qualified. … Here, ISS, as a defaulting sovereign, is entitled to have the court consider its jurisdictional contentions since they have not previously been addressed. …

“For these reasons, vacature under Fed. R. Civ. P. 60(b)(6) is warranted, therefore I need not address defendant’s request under Rule 60(b)(3).”

Semtek International, Inc. v. Information Satellite Systems (Lawyers Weekly No. 02-091-12) (15 pages) (Zobel, J.) (USDC) (Civil Action No. 09-10183-RWZ) (March 9, 2012).

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