Arizona Supreme Court Clarifies Parties’ Post-Default Conduct Cannot Validate Void Default Orders

By Joseph Kanefield, Ryan P. Hogan, and Lilly M. Geiler

After filing a lawsuit, the first step is always serving process on the opposing party. While that preliminary step sounds basic enough, in McMahan v. Grasshopper, the Arizona Supreme Court recently provided a helpful refresher on the nuances of the service requirement and its importance in litigation for plaintiffs and defendants alike.¹

Background

McMahan arose from a hit-and-run where a tractor-trailer collided with safety barricades and injured a construction worker. The construction worker sued the tractor-trailer company, and he attempted to serve the company by leaving a copy of the complaint with the assistant to the company’s statutory agent who forwarded the complaint to the company. The assistant, however, was not authorized to accept service on the company’s behalf. Before the company appeared in the action, the construction worker successfully obtained an entry of default.

Several weeks later, the company appeared in the litigation and answered the complaint. It then moved to set aside the entry of default, but in doing so, repeatedly acknowledged that it had been “served.” It was not until the company’s third request to set aside the entry of default that the company — for the first time — argued the court lacked jurisdiction to enter the order due to insufficient service.

The trial court agreed and vacated entry of default, but that decision was reversed on appeal. The court of appeals held that the company had repeatedly acknowledged it had been served, so it waived its service objections. It also reasoned that the assistant had been held out as an agent conferring apparent authority on the assistant to accept service.

The company appealed that ruling to the Arizona Supreme Court. The key issue was whether the company had lost its ability to seek relief from the default due to its delay in raising the deficient-service argument, generally appearing after default without raising service objections, and acknowledging to the court that it had been served.

Decision

McMahan agreed that service was not proper. The assistant was not authorized to accept service on the company’s behalf, only its designated agent was. There was no indication that the assistant had been held out as the company’s authorized representative at the time of service. And it also did not matter that the assistant actually provided the company with the relevant documents. The assistant was not authorized to accept service — full stop.

Because the company was never served, never consented to jurisdiction, and did not make a general appearance in the case prior to entry of default, the court never acquired jurisdiction over it. That meant the company was correct that the entry of default was void from the outset. The court never had the power to issue it in the first place, and it had no legal effect.   

But what about the company’s concession that it had been served? It could not breathe life into a void order. As the Court said, a defendant’s litigation conduct cannot “cure a default that was void from the moment it was entered.” Any waiver or appearance was prospective only and “could not retroactively validate the entry of default that had already become void … weeks earlier.” Further, the company’s later acknowledgments that it had been served were irrelevant because the question was “whether jurisdiction existed when the court acted.” Simply, a void order or judgment must be vacated when the defendant seeks relief, regardless of the defendant’s post-default conduct.

Key Takeaways

Plaintiffs and defendants alike should heed the lessons in McMahan v. Grasshopper Transportation, Inc. For plaintiffs, the rules of civil procedure set forth specific rules for proper service, and failure to comply could prevent a court from establishing jurisdiction and result in unenforceable orders. Proper due diligence is necessary to ensure that a lawsuit is actually served on someone authorized to accept service. On the other hand, defendants faced with a default order should consider whether a jurisdictional defense, like improper service, is available to them.