Eric von Helms
evonhelms@kmksc.com
(414) 962-5110
Can a money judgment that is entered in federal bankruptcy court be vacated, even after the normal deadline for seeking to set aside the judgment has passed, if the judgment was allegedly void in the first place? The United States Supreme Court recently decided, “No,” and allowed an allegedly defective judgment to stand because the challenge to the judgment came too late. The Supreme Court held, in a unanimous 9 to 0 decision, that the time limits under Federal Rule of Civil Procedure 60(c)(1) are applicable to motions to vacate an allegedly void judgment (under Federal Rule of Civil Procedure 60(b)(4)) even though Section 60(c)(1) does not expressly reference subsection (b)(4). Because the original lawsuit involved a complaint allegedly served on the defendant by mail (and not by a process server), this decision emphasizes that businesses need to be aware that, if not promptly and effectively challenged, bankruptcy lawsuits served by mail can have lasting and enforceable monetary consequences.
The Federal Rules of Bankruptcy Procedure allow for service of a summons through personal service, the same as with state court proceedings. However, Bankruptcy Rule 7004(b) allows service of a summons and complaint in a bankruptcy proceeding by mail as an alternative. Based on how quickly and affordably service by mail can be obtained, bankruptcy adversary plaintiffs almost always use this service by mail option, particularly in the dreaded preference action. If the summons is served by mail on a corporation, company or partnership, the summons is supposed to be addressed to an officer, managing agent or agent authorized to receive service.
In Coney Island Auto Parts Unlimited, Inc. v. Burton, a judgment debtor defendant argued that a judgment against it was void and therefore needed to be set aside. However, the judgment-creditor plaintiff, a bankruptcy trustee, responded that because the judgment was entered over a year before defendant brought the motion to set aside the judgment, defendant’s motion was too late.
The dispute originated in the Chapter 11 bankruptcy case of Vista-Pro Automotive in Tennessee. As part of its bankruptcy, in 2015, Vista-Pro brought an adversary proceeding against Coney Island Auto Parts Unlimited, a New York company, for unpaid invoices. Vista-Pro served the summons and complaint on Coney Island Auto via U.S. mail, as permitted under the federal bankruptcy rules. However, Coney Island Auto alleged that, contrary to the bankruptcy rules, Vista-Pro did not address the mailing of the summons to the required “officer, a managing or general agent, or an agent authorized by appointment or by law to receive service.”
The decision is not clear on whether Coney Island Auto never actually received the summons or received it and either lost it or just failed to respond. The case is clear that Coney Island Auto did not respond to the adversary complaint against it, and Vista-Pro obtained a $48,000 default judgment against Coney Island Auto. Vista-Pro’s Chapter 11 case was later converted to a case under Chapter 7 of the bankruptcy code. Following the conversion of the case to Chapter 7 and more than five years after Vista-Pro originally obtained the judgment against Coney Island Auto, the trustee, acting on behalf of the bankruptcy estate, commenced a proceeding in the bankruptcy court for the Southern District of New York (where Coney Island was located) in 2020 to collect on the judgment. The New York proceeding resulted in Coney Island Auto’s bank placing a hold on Coney Island’s account, in the approximate amount of $100,000, in order to potentially satisfy the judgment.
Coney Island Auto then sought to have the judgment vacated on grounds that the Tennessee bankruptcy court lacked personal jurisdiction over it in the original matter. In the usual case, a judgment would be void if the court never had personal jurisdiction over the defendant. However, the bankruptcy court in Tennessee, in a decision that was affirmed by the district court and the Sixth Circuit Court of Appeals, held that the more than five-year delay by Coney Island in attacking the Tennessee court’s jurisdiction was untimely.
On its appeal to the United States Supreme Court, Coney Island Auto argued that a judgment entered without personal jurisdiction is void, and that the time limits provided under the Federal Rules of Civil Procedure 60(c)(1) are not applicable to motions to set aside void judgments. Federal Rule 60, which provides for motions to vacate final judgments, requires that such motions must be made within a reasonable time, and if based on some circumstances, such as mistake or fraud, the motion must be brought within one year of entry of the judgment; however, the Rule does not specify the exact amount of time that constitutes “reasonable” for setting aside a judgment alleged to be void. Coney Island Auto contended that void judgments are of a special class and therefore not subject to the specific time restrictions under Rule 60(c)(1).
The trustee argued that Rule 60 is clear that any motion to vacate a judgment must be made within a reasonable time frame, and that anything more than a year is not reasonable. The trustee noted that Congress was specific when it enacted Rule 60 as to a one-year time limit on setting aside judgments for other grounds. Accordingly, the trustee argues that a similar time frame should apply when seeking to vacate a void judgment.
In its unanimous decision issued on January 20, 2026, the Supreme Court agreed with the trustee. In its decision, the Court found that allowing parties to allege voidness at any time, without any time limits, would have extreme implications such as allowing parties to ignore deadlines for filing appeals if subject matter jurisdiction was contested.
Coney Island Auto incurred substantial expenses both as a result of the decision of the Court and the costs of litigation and appeals. While there was a factual dispute as to when or if Coney Island Auto was properly served with the initial adversary complaint, if the mailed summons was received, Coney Island Auto could have saved itself considerable expense by taking immediate action.
Accordingly, this case demonstrates the value for all businesses to implement procedures to carefully check incoming mail and immediately respond to any potential litigation, whether in the federal bankruptcy courts or otherwise. While there may be a tendency to assume most USPS mail these days is marketing or other junk, important legal papers are still sent via mail and need to be discussed promptly with skilled legal professionals.
If you have any questions concerning valid service of process and its implications in litigation, or other bankruptcy litigation concerns, please contact KMK Attorneys Eric von Helms at evonhelms@kmksc.com or Samuel C. Wisotzkey at swisotzkey@kmksc.com or (414) 962-5110 for assistance.