OPINION OF THE COURT
WEIS, Circuit Judge.
A default judgment was entered against an English insurance company for failure to answer interrogatories directed to it as garnishee and served on it in the United Kingdom. The carrier later submitted to the jurisdiction of the district court to ask that the judgment be opened, but the motion was denied. We conclude that the company's reasonable doubt about the personal jurisdiction of the American court demonstrates a lack of bad faith on its part. That factor, combined with a facially meritorious defense and a lack of prejudice to the judgment creditor, counsel that the default be opened. Accordingly, we vacate the judgment of the district court and remand for proceedings on the merits.
In 1978, plaintiff Feliciano a citizen of Costa Rica brought suit in the Eastern District of Pennsylvania against Union Special Corporation, incorporated in Delaware, and Reliant Tooling Company, Ltd., incorporated in the United Kingdom. Plaintiff sought damages for personal injury sustained in Pennsylvania allegedly caused by a defective machine that was manufactured by Reliant and sold by Union. Feliciano's direct claim against Reliant was dismissed for lack of diversity. However, Union pressed a third-party claim against Reliant, serving it, as had Feliciano, by registered mail through the Secretary of the Commonwealth of Pennsylvania. Reliant did not appear in the litigation or participate in any way.
After trial began, plaintiff and Union settled her claim for $250,000. A few days later, the district court, on Union's motion, entered a default judgment for $250,000 on the cross-claim against Reliant. The same day, Union
Within a week of service, Sun's solicitor wrote to counsel for Union and sent a copy to the clerk of the district court. In the letter, the solicitor said:
The solicitor listed the answers, stated that claims similar to those of Feliciano were excluded from coverage by the policy terms and asserted that the judgment against Reliant was unenforceable because Reliant had never submitted to the court's jurisdiction.
Union did not respond to the solicitor's letter, but on April 16, 1981, almost two months later, moved for entry of a default judgment against Sun for failure to answer the interrogatories. The motion did not refer in any way to the solicitor's letter. A copy of the motion was mailed to Reliant, but none was served upon Sun. On May 4, 1981, the district court entered judgment in favor of Union against Sun in the amount of $250,000, "together with counsel fees, costs and interest."
Following entry of the judgment, Union obtained writs of execution and garnishment accompanied by interrogatories directed to three subsidiaries of Sun and a company owned wholly by one of the subsidiaries.
In January 1982, Sun asked the court to set aside the May 4, 1981 judgment, to accept answers to the garnishment interrogatories originally served upon Sun, and to grant judgment in its favor on the coverage question. In the alternative, the carrier asked that the judgment against Reliant be set aside and that Sun be permitted to defend against Union's cross-claim. As part of its motion, Sun recited the history of the litigation and attached copies of an English barrister's opinion on the coverage issue as well as the letter of the company solicitor to Union's counsel. Sun said further that if the coverage issue were decided adversely to it, the carrier would agree to pay without the necessity of any foreign proceedings. After briefing by both parties, the district court denied Sun's motion without findings or opinion.
On appeal, Sun contends that the district court abused its discretion in refusing to set aside the default judgment and particularly in failing to recognize the interests of international comity. Union argues that, having chosen to allow the default to be taken against it, Sun should not be heard to complain at this point.
The Federal Rules of Civil Procedure do not set out detailed directions for execution on civil judgments. Instead, Rule 69(a) provides that proceedings in aid of execution follow state practice. In this case, those procedures are found in the Pennsylvania Rules of Civil Procedure 3101-3149.
The Pennsylvania rules provide that after a writ of execution is issued, the judgment holder may serve interrogatories on the garnishee respecting property possessed by him but owned by the judgment debtor. Pa.R.Civ.P. 3144. "The procedure between the plaintiff and garnishee shall, as far as practicable, be the same as though the interrogatories were a complaint and the answer of the garnishee were an answer in assumpsit." Pa.R.Civ.P. 3145. If the garnishee fails to file an answer to the interrogatories within 20 days, judgment may be entered against him in the same amount as the original judgment against the defendant. Pa.R.Civ.P. 3146.
As noted earlier, service of the garnishment documents was made on Sun in accordance with the provisions of the Hague Convention. Because Sun has raised no objection to the method of service, we may take it as being proper. Sun has also voluntarily submitted to the jurisdiction of the district court. Therefore we need not inquire whether that court had the power to enter a valid default judgment on a claim based on an insurance contract entered into in England between two English concerns, neither of which has offices in the United States.
We look then to the matter of the district court's refusal to open the default judgment. Sun's motion was filed under Fed.R.Civ.P. 60(b), which provides for relief from judgments in defined circumstances. Subsection (b)(1) lists as possible grounds, "mistake, inadvertence, surprise or excusable neglect." Subsection (b)(6) refers to "any other reason justifying relief from the operation of the judgment." Relief under (b)(1) requires that the motion be made within one year from the date of the judgment; motions pursuant to (b)(6) need be made only within a reasonable time. Since the parties do not dispute the timeliness of the motion and we find that the motion was filed within both a reasonable time and the one-year period, it is not necessary to choose between the two subsections in reaching our decision. See 7 J. Moore & J. Lucas, Moore's Federal Practice ¶ 60.27 at 346 (2nd ed. 1982).
Defaults are also treated in Rule 55(c), which authorizes a court to "set aside the entry of default" for "good cause shown". There is a distinction between a default standing alone and a default judgment. If a judgment by default has been entered, it may be set aside "in accordance with Rule 60(b)." Id. Less substantial grounds may be adequate for setting aside a default than would be required for opening a judgment. Thus, "[a]ny of the reasons sufficient to justify the vacation of a default judgment under Rule 60(b) normally will justify relief from a default entry and in various situations a default entry may be set aside for reasons that would not be enough to open a default judgment." 10 C. Wright & A. Miller, Federal Practice and Procedure § 2696 at 334 (1973).
In Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 245 (3d Cir. 1951), we said that in passing upon default judgments Rule 60(b) should be "given a liberal construction.... Any doubt should be resolved in favor of the petition to set aside the judgment so that cases may be decided on their merits." We followed that admonition in Livingston Powdered Metals, Inc. v. N.L.R.B., 669 F.2d 133 (3d Cir. 1982), a case involving the entry of a de facto default judgment by the NLRB against an employer. We also quoted the Tozer standard in Medunic v. Lederer, 533 F.2d 891, 893-94 (3d Cir. 1976), although there a default, rather than a default judgment, was challenged.
Our most recent foray into the field was Farnese v. Bagnasco, 687 F.2d 761 (3d Cir. 1982), where again it was a default entry, not a judgment, that was at issue. Although as we have noted the standards for the two situations are not always the same, we believe that the three factors discussed in Farnese should be applied in both situations:
Farnese, at 764; see also Livingston Powdered Metals, Inc., 669 F.2d at 136; Tozer, 189 F.2d at 244-45, 246.
We consider these points seriatim. Union has not demonstrated any prejudice that would result from opening the judgment, other than the financial costs associated with enforcing a judgment later vacated. Delay in realizing satisfaction on a
Union has not suggested that its ability to pursue the claim has been hindered since the entry of the default judgment. It has not asserted loss of available evidence, increased potential for fraud or collusion, or substantial reliance upon the judgment to support a finding of prejudice. See Farnese v. Bagnasco, at 764; General Tire & Rubber Co. v. Olympic Gardens, Inc., 85 F.R.D. 66, 70 (E.D.Pa.1979); Restatement (Second) of Judgments § 74 (1982). Since the record does not support a claim of prejudice justifying denial of relief, we conclude that the first factor weighs in Sun's favor.
Sun has advanced at least one meritorious defense, namely, its contention that the policy does not cover Reliant with respect to the Feliciano injury. This argument is supported by the opinion of a barrister at Grays Inn, James Roland Blake Fox-Andrews, Q.C., based on his review of English law. We, of course, express no view on the merits of the coverage question but observe that, prima facie, Sun does have a valid defense.
In addition, the liability of Sun depends upon the validity of the default judgment entered against Reliant. Sun's solicitor wrote that Reliant had never submitted to American jurisdiction and that the judgment against Reliant was unenforceable. In deciding not to appear, Reliant acted on the advice of independent counsel. Since the record before us does not contain such pertinent information as Reliant's theory for asserting lack of jurisdiction or evidence on that point, we cannot say that there may not be substance to Sun's position.
The third Farnese factor focuses on whether the defendant was culpable, that is, whether it acted willfully or in bad faith. Union argues that Reliant and Sun had obligations toward Feliciano that they sought to avoid by ignoring the proceedings in the American courts. Union concedes that British and American concepts on "extensions of personal jurisdiction" differ, but says that an American court should not "require its citizens to adhere to foreign procedures simply because American procedures differ." Union's Brief at 21, 22. Union's parochial attitude requires serious reevaluation because it does not aid the solution of complex problems engendered by international trade, transnational corporations, and conflicting national interests. As we pointed out in Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287, 1297 (3d Cir. 1979), eschewing a provincial approach better comports with the realities of international commerce.
A more accommodating approach leads to a different interpretation of Sun's conduct than that urged by Union. Sun was confronted with an unusual form of process. Their solicitor said he was "puzzled" by it. We see no reason to question that statement. It would indeed be unrealistic to expect English solicitors to be acquainted with the execution process of each of the fifty states. Not only was the procedure unusual insofar as it concerned the relationship between a claimant and an insurance company, but the pleadings were in the form of interrogatories, which generally require an order of court to be effective in England.
Sun did not exhibit a completely negative and hostile attitude. Although it did not wish to waive jurisdiction, it did supply the requested information to Union and to the district court. In sum, we find that Sun's reluctance to take action which it feared might undermine its jurisdictional position — a question which might well have substantial merit — does not demonstrate any bad faith on its part or any disrespect for the district court.
In view of Sun's lack of bad faith and its assertion of valid defenses on the merits, combined with lack of prejudice to Union, the requirements under Rule 60(b) for opening a default judgment are satisfied. We hold that the district court abused its discretion in refusing to hear the case on the merits.
Accordingly, the judgment of the district court will be vacated and the case will be remanded for further proceedings consistent with this opinion.
For a discussion of some of the practical problems and suggestions for improvement in the relationship between the United States and European countries on these questions, see A.H. Hermann, Conflicts of National Laws with International Business Activity: Issues of Extraterritoriality (1982) (British-North American Committee).