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Sindhi v. Raina

United States Court of Appeals, Fifth Circuit

September 25, 2018

SALIM I. SINDHI, Plaintiff - Appellee
v.
KUNAL R. RAINA, Defendant-Appellant

          Appeal from the United States District Court for the Northern District of Texas

          Before STEWART, Chief Judge, and WIENER and HIGGINSON, Circuit Judges.

          CARL E. STEWART, CHIEF JUDGE:

         Salim Sindhi ("Sindhi") sued Kunal Raina ("Raina") for allegedly misappropriating confidential software, asserting copyright infringement claims under 17 U.S.C. §§ 501-505, as well as trade secret claims under the Texas Uniform Trade Secrets Act, Tex. Civ. Prac. & Rem. Code Ann. §§ 134A.002-005 (West Supp. 2016). After ignoring several district court orders and warnings, the district court entered a default judgment against Raina, who now appeals. Because the district court did not abuse its discretion in entering a default judgment against Raina, we AFFIRM.

         I.

         On October 5, 2015, Sindhi sued Raina, a former employee, for allegedly stealing source code from his online newspaper content management system ("CMS"), and then using the software to create a competing CMS business. On June 2, 2016, Sindhi served Raina, an Indian national and permanent resident of India, through the Hague Service Convention. Later, on June 21, Raina responded by filing a motion to dismiss for lack of personal jurisdiction. Raina did not, however, comply with three local rules. The first local rule, N.D. Tex. Civ. R. 7.4, required Raina to file a statement of interested persons; the second, N.D. Tex. Civ. R. 83.9(b), required Raina's attorney to be admitted to practice before the Northern District of Texas or apply for admission pro hac vice; and the third, N.D. Tex. Civ. R. 83.10(a), required Raina to retain local counsel. On September 29, the district court notified Raina that he had not complied with these local rules and issued two orders-one requiring Raina to file a statement of interested persons, and the other requiring him to comply with the admission and local counsel requirements. The district court gave him 21 days to comply.

         After the 21 days elapsed, Raina had not complied with, or otherwise responded to, the district court's orders. On October 24, the district court issued two more orders, warning Raina that he had 14 days to comply with the court's local rules; otherwise, the district court would strike Raina's responsive pleadings and enter a default judgment against him without additional warning. Raina did not comply. So, on November 8, the district court struck Raina's motion to dismiss and entered an interlocutory default judgment against him. Shortly thereafter, the district court entered an interlocutory permanent injunction.

         Raina did not respond until April 2017. On April 24, Raina filed a motion to set aside the district court's entry of default. In his motion, Raina argued that the district court did not have personal jurisdiction over him, making the default judgment void under Federal Rule of Civil Procedure 60(b)(4).[1] On September 20, the district court denied this motion, finding that Raina had minimum contacts with Texas, the forum state, in the form of ongoing contractual relationships.

         On October 25, Raina filed another motion to set aside the default judgment, this time under Rule 55(c). The district court again denied the motion. Then, on November 6, the district court entered a final judgment and corresponding permanent injunction against Raina.

         Raina now appeals, contending that the district court erred in entering a default judgment against him and failing to vacate it. Raina also contests the district court's entry of final default judgment, permanent injunction, and decision to exercise personal jurisdiction over him.

         II.

         We review both the entry of a default judgment and the district court's denial of a motion to vacate a default judgment "for abuse of discretion." Wooten v. McDonald Transit Assocs., Inc., 788 F.3d 490, 495 (5th Cir. 2015) (citations omitted). Factual determinations that support the district court's default decision "are reviewed for clear error." Lacy v. Sitel Corp., 227 F.3d 290, 292 (5th Cir. 2000).

         "Because of the seriousness of a default judgment, and although the standard of review is abuse of discretion, even a slight abuse of discretion may justify reversal." Id. Default judgments involve competing policy interests. On one hand, we have "'adopted a policy in favor of resolving cases on their merits and against the use of default judgments.'" Wooten, 788 F.3d at 496 (quoting In re Chinese-Manufactured Drywall Prods. Liab. Litig., 742 F.3d 576, 594 (5th Cir. 2014)). "On the other, this policy is 'counterbalanced by considerations of social goals, justice and expediency, a weighing process that lies largely within the domain of the trial judge's discretion.'" Id. (quoting In re Chinese-Manufactured Drywall, 742 F.3d at 594).

         III.

         On appeal, Raina challenges three primary sets of decisions. First, he argues that the district court erred by entering a default judgment against him and then denying his motions to vacate the entry of default. Second, he argues that the district court erred by entering a final default judgment against him. Finally, he challenges, in his notice of ...


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