5th Circuit Upholds District Court's Default Judgment in Suit Over Ship Detainment in Nigeria

A three-judge panel at the U.S. Court of Appeals for the 5th Circuit on Dec. 3 upheld Greek shipping company Tango Marine's default judgment win against two Nigerian companies after rejecting the defendants' arguments that the district court lacked jurisdiction in the case. The panel said that the Nigerian companies, known collectively as the Elephant Group, failed to note any "meritorious defense" of their attack on the default judgment. As such, the district court had personal jurisdiction in the case and was right to issue the pricey default judgment (Tango Marine S.A. v. Elephant Group Limited, et al., 5th Cir. #21-10068).

Tango Marine's lawsuit alleges that Elephant Group chartered one of its ships to deliver cargo to Lagos, Nigeria, in 2016. When the vessel arrived, Nigerian authorities halted the unloading of the cargo and held it for two and half years. This led Tango Marine to file a lawsuit in the U.S. District Court for the Northern District of Texas, which was met with silence from the Elephant Group. After a continued period of silence in response to service entered, the Greek company then filed for default judgment against Elephant Group. Finally appearing in the case, the Elephant Group then moved to dismiss the case, arguing for a lack of jurisdiction.

Tango Marine then filed an amended complaint which Elephant Group did not reply to, leading to the court issuing a default judgment. The district court then found the Elephant Group's default was "willful" and that the "willfulness of the default ends the inquiry." The Elephant Group was ordered to pay nearly $4.5 million in the final judgment. The case was appealed to the 5th Circuit.

The Elephant Group made two arguments in its appeal: that the district court never had personal jurisdiction over it and that the district court abused its discretion in entering the default judgment. The three-judge panel addressed these issues together, finding that they require "some common analysis." The panel pointed to three factors that dictate whether there is good cause to set aside the default judgment: the willfulness of the default, the prejudice to the opposing party if the default is vacated and the presence of any "meritorious defenses for the defaulting party." The appellate court chose to primarily look at this third criteria after declaring that it has the discretion not to toss a default judgment if there is no meritorious defense.

The Elephant Group argued that the district court had no personal jurisdiction and that the absence of such "amounts to a meritorious defense." In doing so, it said that it was a group of Nigerian businesses that had no continuous contacts with Texas, the forum state. Tango Marine, on the other hand, said that the Elephant Group waived its lack of personal jurisdiction argument when it failed to present that argument in its first brief and that the group had minimum contacts in Texas. "Failure to appear specially to contest in personam jurisdiction can amount to waiver of that defense in maritime actions," the court responded.

In front of the district court, Tango Marine alleged "writs of attachment" for assets owned by the Elephant Group that Tango Marine pegged as being in the district. These "good faith allegations" were the "jurisdictional facts" that created in personam jurisdiction over the Elephant Group, the panel said. "When the district court entered the second default, this jurisdiction existed. Thus, even assuming that a lack of personal jurisdiction amounts to a meritorious defense, here there was jurisdiction over the Elephant Group."

The Elephant Group also said that it had two other meritorious defenses through its arguments pointing out pleading defects and Tango Marine's failure to join an indispensable party. However, the Elephant Group merely cites 5th Circuit precedents without analyzing their application, the appeals court said. This is not a meritorious defense, it said. Looking at the facts though, the court said that Tango Marine's first amended complaint did not have any pleading defect and that the Elephant Group failed to identify the "indispensable third party that needed to be joined."