March 30, 2012 – Cintas Corporation and Cintas Corporation No. 2 are parent and subsidiary corporations. A plaintiff who named the wrong one in his summons and complaint made a fundamental defect that deprived the court of personal jurisdiction.
That’s what a Wisconsin Supreme Court majority recently declared in Johnson v. Cintas Corp. No. 2, 2012 WI 31 (March 27, 2012), a case in which plaintiff Robert Johnson obtained a default judgment against Cintas Corporation No. 2 (Cintas No. 2), when it failed to timely answer.
By a 4-2 vote (Justice Prosser did not participate), the majority did not stray from the rule that a fundamental defect occurs when a complaint fails to name the defendant, despite the plaintiffs argument that exceptions apply for certain mistakes that are technical in nature. (Technical defects don’t necessarily deprive courts of personal jurisdiction, but fundamental defects do.)
Specifically, Johnson argued that his error in naming Cintas Corporation instead of Cintas Corporation No. 2 as a defendant was a mere misnomer and Cintas No. 2 was not prejudiced by the mistake because it received the summons and complaint.
The supreme court majority disagreed, concluding that Johnson’s failure to name Cintas No. 2 “constituted a fundamental defect that deprived the circuit court of personal jurisdiction over Cintas No. 2, regardless of whether or not the defect prejudiced Cintas No. 2.”
Justices Ann Walsh Bradley and Chief Justice Abrahamson dissented, arguing that “the majority reaches the wrong result by dodging the applicable standards for mere misnomers, sidestepping precedent, and crafting an unreasonable and unnecessary new rule.”
Statute and lower courts
Under Wis. Stat. section 801.02(1), a civil action seeking personal judgment is commenced “when a summons and a complaint naming the person as defendant are filed with the court.” The defendant must receive an authenticated copy of the summons and complaint.
After Johnson was injured in a car accident, he sought liability insurance coverage through his employer, Cintas No. 2. He filed a civil action, naming Cintas Corporation as a defendant. Cintas Corporation does not do business in Wisconsin. Its subsidiary, Cintas No. 2, does.
However, Johnson served Cintas No. 2 with a summons and complaint. Neither corporation answered. Ultimately, Johnson obtained a default judgment against Cintas No. 2 after the circuit court granted his motion to amend the complaint to reflect the proper defendant.
Cintas No. 2 moved to vacate the judgment on the grounds that its failure to answer was excusable neglect, and the court granted the motion. On reconsideration, the court reinstated the default judgment when Johnson proved Cintas No. 2 was holding itself out as its parent.
For instance, Johnson’s offer of employment, the employment agreement and his paychecks were administered by Cintas Corporation, not Cintas No. 2.
The court of appeals reversed, concluding that amending the complaint improperly brought Cintas No. 2 into the case as a new party, and the default judgment must be voided.
Default judgment void, separate legal entity named
On review, the Wisconsin Supreme Court affirmed the appeals court, distinguishing the misnomer case of Hoesley v. La Crosse VFW Chapter, 46 Wis.2d 501, 175 N.W.2d 214 (1970). In Hoesley, the plaintiff commenced a lawsuit against an entity, but got the name wrong.
Under Hoesley, the majority explained, a misnomer would not necessarily deprive the court of personal jurisdiction “when an amendment to the pleadings would result in merely correcting the name under which the right party is sued.”
But Johnson named a different legal entity as the defendant. “Johnson’s amendment had the effect of substituting the wrong party, Cintas, with another existing and entirely new party, Cintas No. 2,” Justice Annette Ziegler wrote for the majority. “Thus, absent proper service of the amended summons and complaint upon Cintas No.2, the circuit court lacked personal jurisdiction over Cintas No. 2.”
The majority rejected Johnson’s argument that Cintas No. 2 was served with the lawsuit, so the decision should not hinge on his error in naming the parent corporation as the defendant.
“That the named party happens to have a name that closely resembles the name of the party intended to be sued is simply not enough,” Justice Ziegler wrote, noting that naming the proper defendant is the means by which a plaintiff confers personal jurisdiction on the court.
The majority also quashed the argument that Cintas No. 2 should be on the hook for holding itself out as the named defendant, noting that Wisconsin’s rules of civil procedure are strict and Johnson should have consulted state agency records to determine the proper defendant.
Justice Bradley wrote a dissenting opinion, joined by Chief Justice Abrahamson, stating that that the majority’s failure to properly examine the misnomer argument “results in a new bright-line rule: when a plaintiff misnames a party and the misnomer happens to be the correct name of another legal entity, the defect is transformed from technical to fundamental.”