The Supreme Court of Montana has affirmed a lower court’s ruling that a team owner was entitled to a default judgment from an indoor football league, stemming from a legal dispute involving the team’s nickname.
The National Indoor Football League, LLC (NIFL) had claimed among other things that it was improperly served by the plaintiff. MPS, the plaintiff, had purchased a professional indoor football team in March 2005 as well as acquired from the NIFL the right to operate the team in Billings, Montana as an NIFL franchise.
The NIFL had assured MPS that it had acquired an exclusive contractual right to operate as the Outlaws within the NIFL. However, the seller of the franchise (Duane Anderson) to MPS, had other ideas. Anderson still owned the federally registered trademark on the name and on images associated with the name, and informed MPS that he intended to enforce his trademark rights. As a result, MPS operated the team under the name Billings Mavericks during the 2005 season while it negotiated with Anderson to purchase the trademark.
MPS informed the NIFL that it intended to resume using the Outlaws name at the start of the 2006 season after it had acquired the trademark. MPS, meanwhile, purchased the trademark rights from Anderson on November 10, 2005. MPS immediately apprised NIFL of the acquisition and reiterated its intention to resume using the Outlaws name in 2006. NIFL informed MPS, however, that it already had authorized a team in Florida to rename itself the Osceola Outlaws. MPS urged both NIFL and the Osceola team to reconsider using the name in 2006.
MPS filed a suit in U.S. District Court in Florida to enforce the trademark against NIFL and the Osceola team when they refused to reconsider. The federal court upheld the trademark on February 7, 2006, and enjoined NIFL and the Osceola team from using the federally trademarked names and images. NIFL subsequently notified MPS in a letter dated March 7, 2006, that NIFL intended to suspend MPS from the league on March 9, 2006, if it operated as the Billings Outlaws, despite MPS’s federal trademark rights.
MPS brought the action on March 9, 2006 to enjoin NIFL from infringing upon its trademark, to remain in the NIFL, and to obtain compensatory and punitive damages.
MPS contacted NIFL’s general counsel and executive director, Randy Wagley by e-mail and telephone message on March 9, 2006, informing him that it would be seeking an injunction. MPS supplied Wagley with copies of the complaint, summons, application for temporary restraining order, and acknowledgement of service on March 9, 2006. Wagley failed to return the acknowledgement of service, however, despite his earlier assurances that he would. MPS engaged a process server to serve a summons and complaint on NIFL at its corporate headquarters in Lafayette, Louisiana, on March 17, 2006.
The process server arrived at the stated address to find a nondescript office building without any signs indicating what businesses were located there. The process server entered the building and approached a reception area. The process server explained that he was looking for Wagley and the league’s president. The receptionist referred the process server to Lynn Richard, who informed the process server that, while the officials were away from the office, that she was the “office manager and [could] deliver the papers” to the officials.
The court noted that the process server did not know that Richard was the owner of the company that owned the building as well as the league, and employed the officials in question.
When the NIFL and its officials did not appear at a hearing on MPS’s request for a preliminary injunction, MPS moved, and the court granted, a default judgment. MPS then moved for judgment by default on the underlying claims. The court awarded the plaintiff a default judgment, ordering the NIFL to pay $89,627.82 in compensatory damages and $100,000 in punitive damages.
The NIFL moved to set aside the default judgment on July 10, 2006. The court denied the motion, reasoning that MPS had affected proper service based upon Richard representing herself as NIFL’s agent. The court also determined that MPS had not engaged in sharp practice. The court instead determined that NIFL had failed to monitor litigation.
The league appealed. The high court affirmed, addressing three central questions:
Whether the District Court properly awarded a default judgment when MPS had served the summons and complaint on a person not employed by NIFL.
“Richard held herself out to be in charge at NIFL’s one and only office,” held the court. “The process server had no reason to doubt that Richard was in charge based on Richard’s affirmative representation and the surrounding circumstances. Although MPS served a person not employed by NIFL, it did not serve a mere stranger to NIFL. Shiver, NIFL’s president, also owns LABS, the company that shares office space with NIFL and actually employed Richard. Service on Richard gave NIFL proper notice of the lawsuit and afforded it the opportunity to defend itself and its property. Ioerger, P 18. Wagley actually confirmed that NIFL had been served the same day of service. Service on Richard fairly and reasonably effectuated the purpose of giving NIFL adequate notice to defend the action. See Doble, 180 Mont. at 171-72, 589 P.2d at 997-98.”
Whether the District Court properly denied NIFL’s motion to set aside the default judgment for excusable neglect.
“NIFL’s failure to monitor litigation not only distinguishes it from Maulding, but also renders relief from judgment under M. R. Civ. P. 60(b)(6) generally inapplicable,” held the court. “A successful Rule 60(b)(6) motion requires that the movant demonstrate each of the following elements: “(1) extraordinary circumstances; (2) the movant acted to set aside the judgment within a reasonable period of time; and (3) the movant was blameless.” Essex Ins. Co. v. Moose’s Saloon, Inc., 2007 MT 202, P 25, 338 Mont. 423, P 25, 166 P.3d 451, P 25 (internal citations omitted). We refused to excuse NIFL’s neglect because it had failed its affirmative duty to monitor the litigation. P 45. We acknowledged by this determination that NIFL could not be blameless for the default judgment against it. Essex Ins. Co., P 25. The District Court properly dismissed NIFL’s motion pursuant to M. R. Civ. P. 60(b)(6).”
Whether the District Court properly awarded $100,000 in punitive damages.
“A punitive damage award rendered in violation of the applicable statute presents a reasonable grounds for relief under M. R. Civ. P. 60(b)(6),” held the court. “Such a challenge falls within the ambit of the broad range of issues for which we have allowed relief in the past. Our determination in Winn, in which the district court apportioned marital assets based upon an erroneous valuation, seems particularly analogous to the punitive damage award here. As we determined in Winn, an award based on incorrect valuation, like the alleged false statement of NIFL’s net worth, can constitute an ‘other reason justifying relief from operation of the judgment,’ pursuant to M. R. Civ. P. 60(b)(6). NIFL may not now raise this issue for the first time on appeal.”
Montana Professional Sports, LLC v. National Indoor Football League, LLC; S.Ct. Montana; DA 06-0654, 2008 MT 98; 2008 Mont. LEXIS 100; 3/24/08
Attorneys of Record: (for appellant) Shane P. Coleman and Jason S. Ritchie, Holland & Hart, Billings, Montana. (for appellee) James P. Murphy and Bruce F. Fain, Murphy, Kirkpatrick & Fain, Billings, Montana.
