Virginia ruling returns to haunt ARC’s collection efforts against agency owner in California

September 21, 2008

Airlines Reporting Corporation v. Commercial Travel Corporation (S.D. Cal. Aug. 1, 2008).  In 2004, ARC was pursuing two separate lawsuits in the U.S. District Court for the Eastern District of Virginia in which Mario Renda was a defendant, ARC v. Uniglobe Fairway Travel, Inc. and ARC v. Commercial Travel Corporation.  In both cases, ARC alleged that Renda, as an owner and officer of the defendant travel agencies, was personally liable for the agencies’ failure to remit the proceeds from airline ticket sales.

In the Commercial Travel case in Virginia, a magistrate judge issued a report and recommendation in 2004 recommending that the court enter a default judgment against Renda.  The magistrate judge did not analyze whether the court had personal jurisdiction over Renda, a California resident; he simply concluded that, “based on the allegations and facts contained in [ARC’s] Complaint, personal jurisdiction over the Defendants is appropriate pursuant to Va. Code § 8.01-328.1.”  In 2007, after the case had been resolved with respect to the other defendants, the court adopted the report and recommendation and entered a default judgment against Renda for $701,942.

In the Uniglobe case, a different magistrate judge issued a report and recommendation in March 2005 analyzing the court’s personal jurisdiction over Renda in detail and recommending that the court dismiss the case as to Renda on the grounds that it lacked personal jurisdiction over him.  That same month, the court adopted the report and recommendation and issued an order dismissing the Uniglobe case as to Renda.

In February 2008, ARC registered the Commercial Travel default judgment against Renda in the U.S. District Court for the Southern District of California.  Renda moved to vacate the default judgment under FRCP 60 on the grounds that it was void because the Virginia court lacked personal jurisdiction over him.  Renda argued that the Virginia court’s 2005 order as to personal jurisdiction in the Uniglobe case had the effect of collaterally estopping ARC from relitigating the personal jurisdiction issue in the Commercial Travel case before the California court.

The California court agreed with Renda.  It found that Renda had proved the applicability of the collateral estoppel doctrine by showing that (i) both ARC and Renda were parties to the Uniglobe case, (ii) the court in that case actually heard and decided the question of its personal jurisdiction over Renda, and (iii) the court’s ruling was essential to its dismissal of the case as against Renda.  Accordingly, the California court held that it could rely on the Uniglobe ruling as a basis for holding that the default judgment against Renda in the case before it was void.  The court then granted Renda’s motion and vacated the default judgment.

Update:  After the court entered its order vacating the default judgment, Renda moved for an award of attorneys’ fees and costs totaling over $37,000 against ARC under the Agent Reporting Agreement’s fee-shifting clause.  On September 23, 2008, the court denied Renda’s motion.  It ruled that, under the ARA, fees and costs are only recoverable by an “Agent” within the meaning of the ARA and that Renda, as he himself persuasively argued in his motion to vacate, never was an “Agent” under the ARA.


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