The Wisconsin Supreme Court today heard oral arguments in Johnson v. Cintas Corp. No. 2, et al., 2011 WI App 5, 2009AP2549, which is the latest in a number of recent cases accepted by the Court dealing with default judgments. (The oral argument can be viewed on WisconsinEye.)
The issue is whether a default judgment is void because the summons and complaint names the wrong corporate defendant and thus personal jurisdiction is not obtained over the correct corporate entity.
Robert Johnson, an employee for Cintas Corporation No. 2 (“Cintas No. 2”), was injured in a car accident resulting in permanent injury. Johnson was a passenger in the vehicle, which was being driven by a friend. Johnson was required to use his vehicle during the course of his employment and held auto liability insurance through Cintas No. 2. Johnson sought treatment coverage from Cintas No. 2 through its health insurance provider. When Cintas No. 2 refused to pay benefits, Johnson filed suit.
Johnson’s attorney filed the original summons and complaint naming “Cintas Corporation” as the defendant, instead of Cintas Corporation No. 2. Cintas Corporation No. 2 is a wholly-owned subsidiary of Cintas Corporation. Cintas Corporation No. 2 is a foreign corporation registered with the State of Wisconsin, whereas Cintas Corporation is a foreign corporation not registered in Wisconsin and does not do business within the State of Wisconsin.
Neither Cintas Corporation No. 2 nor Cintas Corporation responded to the complaint, and Johnson moved for default judgment. Cintas Corporation filed an Emergency Motion to Strike and Dismiss for Lack of Personal Jurisdiction. At the default judgment hearing Johnson was allowed to amend the summons and complaint. The trial court then granted default judgment against Cintas Corporation No. 2.
Cintas No. 2 then contacted the trial court and filed its answer to the original and amended complaints, but the court refused to hear Cintas No. 2’s motions because it had already granted default judgment against Cintas No. 2.
Cintas No. 2 filed a motion for relief from judgment, which the court granted and then vacated the default judgment. Johnson filed a motion for reconsideration and argued that newly obtained information proved that Cintas No. 2 effectively held itself out as Cintas Corporation. The trial court granted Johnson’s motion and reinstated the default judgment.
Court of Appeals Decision
The court of appeals reversed the trial court. The court held that because Johnson’s summons failed to accurately name the proper defendant (Cintas Corporation No. 2), the service of process failed to confer personal jurisdiction over that defendant.
The court further explained that regardless of how Cintas Corp. No. 2 held itself out to the public, the amendment of the summons and complaint had the effect of bringing a new party into the action. According to the court, added parties must be served with the summons or voluntarily appear. The court further noted that strict compliance with the rules of statutory service upon amendment naming a new corporate entity is consistent with Wisconsin’s policy viewing default judgments with disfavor.
A decision by the Wisconsin Supreme Court is expected before it ends its current term in July 2012.
Andrew Cook, Director of Legal Service, Great Lakes Legal Foundation.