Procedural Twist in Kash Patel's Libel Suit Against Substacker Jim Stewartson (Filed in 2023)

From today’s decision by Chief Judge Andrew Gordon (D. Nev.) in Patel v. Stewartson (for more on the $100K compensatory damages + $100K punitives default judgment, see this post):

Kashyap Patel and the Kash Foundation, Inc. sued Jim Stewartson for allegedly defamatory statements Stewartson made on Twitter (now, X) and Substack between June 2021 and May 2023…. Stewartson did not defend against the suit, and I entered default judgment against him. Stewartson now moves to set aside the default judgment … and to dismiss the case for lack of personal jurisdiction …. He argues that he was not properly served and that he does not have minimum contacts with Nevada.

The court concluded that Stewartson “has not met his burden to show strong and convincing evidence that he was not served as a result of the plaintiffs’ substantial compliance with [the service rule] and his actual notice of the suit.” But the court noted uncertainty about who bears the burden of proof as to personal jurisdiction in a default judgment case, and ordered supplemental briefing:

A defendant who had actual notice but delayed in filing a motion until after entry of default judgment bears the burden to prove whether service occurred. However, the Ninth Circuit has not yet decided which party bears the burden to prove whether a defaulting defendant had minimum contacts sufficient to establish personal jurisdiction in the same circumstance…. In Thomas P. Gonzalez Corporation v. Consejo Nacional de Produccion de Costa Rica, … [t]he Ninth Circuit seemed to place the burden of proving minimum contacts to establish personal jurisdiction on the plaintiff. The court did not discuss the burden of proof, and it appears from the opinion that it was not a litigated issue.

However, the Ninth Circuit in Internet Solutions placed the burden on the defendant to show improper service of process, and that reasoning would also seem to support placing the burden on the defendant to show there were not minimum contacts. Internet Solutions reasoned that it “comports with general principles of fairness” that a “defendant who chooses not to put the plaintiff to its proof, but instead allows default judgment to be entered and waits, for whatever reason, until a later time to challenge the plaintiff’s action, should have to bear the consequences of such delay.”

Internet Solutions also noted that a defendant seeking to set aside a judgment under Rule 60(b) usually has “the burden of proving that he is entitled to relief.” So in this specific context, Internet Solutions changes the usual rule that the “plaintiffs bear the burden of establishing that service was valid under Rule 4.” That may indicate a willingness to also change the usual burden for the plaintiff to show minimum contacts to establish personal jurisdiction.

Circuit courts are divided on this issue. The Eleventh Circuit places the burden of establishing minimum contacts on the plaintiff. The Eleventh Circuit appears to impose no consequence on the defendant who had actual notice of the suit but nevertheless waited until after the court entered a default judgment to challenge personal jurisdiction. The Seventh Circuit found that in such a circumstance, the defendant should bear the burden of proof on whether sufficient minimum contacts support personal jurisdiction….

Therefore, I order supplemental briefing on the issues of (1) which party bears the burden to prove whether minimum contacts existed on a motion to set aside a default judgment based on lack of personal jurisdiction when a defendant had actual notice of the suit but waited until after default judgment to defend; (2) whether there were minimum contacts to support personal jurisdiction; and (3) what penalty, if any, should Stewartson suffer if I set aside the judgment.

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