## Facts

- A Canadian bank sued an Icelandic citizen in the Eastern District of Michigan to collect about $34,572 allegedly owed on promissory notes and an overdraft.
- The defendant did not appear, and the district court entered a default judgment for the bank.
- The bank pursued collection based on the default judgment, including placing liens on Michigan real property held in the name of the defendant’s wife and acquiring the property through sheriff’s sale.
- More than a year after judgment, the defendant moved to set aside the default, asserting defective service and that he had entered Canadian bankruptcy proceedings.
- In argument on the motion, the defendant also challenged subject-matter jurisdiction on the ground that both parties were foreign.
- The district court found the plaintiff was a Canadian corporation and the defendant was not a U.S. citizen, concluded diversity jurisdiction was absent, vacated the default judgment under Rule 60(b)(4) or Rule 60(b)(6), set aside the enforcement measures, and dismissed the action.

## Issues

1. Whether the district court abused its discretion in vacating a default judgment more than one year after entry under Federal Rule of Civil Procedure 60(b) when the judgment was entered without subject-matter jurisdiction.
2. Whether an action between a foreign corporation and a foreign citizen lacks diversity jurisdiction under 28 U.S.C. § 1332, rendering the judgment void.
3. Whether the bank’s reliance on the default judgment and post-judgment enforcement actions should prevent vacatur where jurisdiction was lacking.

## Decision

- The Sixth Circuit affirmed the order vacating the default judgment and dismissing the case.
- The court held the district court did not abuse its discretion in granting Rule 60(b) relief based on lack of subject-matter jurisdiction.
- The court accepted the district court’s finding that both parties were aliens, defeating diversity jurisdiction.
- The court upheld setting aside the liens, executions, and sheriff’s sale because they flowed from a judgment entered without jurisdiction.

## Legal Principles

- A district court’s ruling on a Rule 60(b) motion is reviewed for abuse of discretion.
- A federal judgment entered without subject-matter jurisdiction is void and may be vacated under Rule 60(b)(4).
- Diversity jurisdiction under 28 U.S.C. § 1332 does not extend to a dispute between a foreign plaintiff and a foreign defendant where no U.S. citizen is on either side.
- Relief from a void judgment under Rule 60(b)(4) is not constrained by the one-year limit applicable to certain other Rule 60(b) grounds.
- Reliance interests in a default judgment do not override the requirement that federal courts act only within the limits of subject-matter jurisdiction.

## Conclusion

The Sixth Circuit upheld vacatur of a default judgment and related enforcement actions because the district court lacked diversity jurisdiction over a dispute between alien parties; the judgment was void and could be set aside under Rule 60(b) despite the passage of more than a year and the bank’s reliance on the judgment.


Bank of Montreal v. Olafsson, 648 F.2d 1078 (6th Cir. 1981)