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.

Magistrate judge recommends that ARC obtain default judgment against agency and owner

October 20, 2007

Airlines Reporting Corporation v. PVO Travel Corp. and Pete Victor Obuljen (E.D. Va. Sept. 27, 2007).  As previously reported, ARC filed a lawsuit against PVO and Obuljen, the agency’s sole owner, for unreported sales and dishonored drafts.  The defendants failed to respond to the complaint, so ARC moved for a default judgment.

The magistrate judge issued a report recommending entry of a default judgment for $296,947, the amount of damages ARC had demanded plus attorneys’ fees, against the defendants.  However, before issuing his recommendation, the magistrate judge engaged in a lengthy analysis as to whether the Virginia court had personal jurisdiction over the defendants, a California corporation and an individual residing in California.

The magistrate judge concluded that the court did have jurisdiction over the defendants under Virginia’s long-arm statute because they transacted business in Virginia by negotiating and entering into the Agent Reporting Agreement in Virginia, and because the ARA called for the defendants to perform certain obligations in Virginia.  The same court had engaged in a similar personal jurisdiction analysis, and had reached the same result, in Airlines Reporting Corporation v. Cisne Corp., Claudio Menicocci and Olga Menicocci (E.D. Va. Mar. 23, 2000).

Note:  On October 22, 2007, the court adopted the magistrate’s report and entered a default judgment against the defendants.

Canadian company files lawsuit against 1st-Air.Net

May 17, 2007

On May 9, 2007, Ticketmaster Canada Ltd. filed a lawsuit against 1st-Air.Net, Inc. and another defendant in the Supreme Court of British Columbia seeking damages of US$91,315.54.  According to its Statement of Claim, Ticketmaster had entered into an agreement allowing the defendants to use Ticketmaster’s system to process credit card transactions and defendants breached such agreement by failing to pay for credit card chargebacks totaling the amount of damages sought.  Ticketmaster alleges that both 1st-Air.Net and the other defendant, MAR-RAY Associates, Inc., do business in Canada under the name “Livingston Travel” and that 1st-Air.Net’s principal office in the U.S. is located in Rochester, New York.

Update:  On February 29, 2008, the court granted Ticketmaster’s request to add Robert Laney and Jacqueline DiBella as defendants in the case.  On July 24, 2008, the court entered a default judgment against Robert Laney for US$91,315.54 plus interest and costs.

Airline gets default judgment vacated on appeal

November 3, 2006

Bird v. United Airlines, Inc. (N.J. App. Oct. 12, 2006).  The plaintiff had sued the airline for failure to honor certain companion passes.  The airline had requested that the trial be adjourned so that its counsel could appear.  Without notifying the airline, the court denied the adjournment request.  The court then entered a default judgment against the airline and later denied the airline’s motion to vacate the default judgment.

On appeal, the court reversed the trial court’s refusal to vacate the default judgment.  The appeals court reasoned that the airline had paid attention to the case by promptly requesting the adjournment and, later, by promptly moving to vacate the default judgment.  The court also noted that the airline appeared to have meritorious defenses and that cases should be decided “on the merits rather than by procedural snafu.”


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