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.

U.S. airline obtains personal jurisdiction over European online travel agent

December 26, 2006

TravelJungle v. American Airlines, Inc. (Tex. App. Dec. 14, 2006).  TravelJungle is an online travel agent that uses software to automatically harvest information from airline web sites.  TravelJungle’s principal places of business are in Europe and it has no U.S. employees.

American sued TravelJungle in a Texas state court for violating’s use agreement, which prohibits use of site information for “commercial purposes.”  In response, TravelJungle challenged the court’s personal jurisdiction over the company.

The appeals court held that the courts of Texas had jurisdiction over TravelJungle under the state’s long-arm statute.  The court reasoned that TravelJungle’s software had been purposefully directed to access the airline’s site and its servers, which are in Texas, and that the company should have been aware that it could be subject to suit wherever the site’s servers happen to be located.