How should Utah attorneys serve process on sole proprietorships? Sewell v. Xpress Lube Explained

The Utah Supreme Court’s decision in Sewell v. Xpress Lube provides critical guidance for Utah practitioners on proper service of process for sole proprietorships and establishes important protections for default judgment proceedings involving unliquidated damages.

Background and Facts

Larry Sewell fell into a service pit at Xpress Lube and filed suit after unsuccessful settlement negotiations. The plaintiff’s process server left copies of the summons and complaint with an employee when no manager was available. The sole proprietor, Bruce Anderson, found the documents days later and forwarded them to his insurance agent, who mistakenly faxed them to the wrong number. The insurer never received notice, and no answer was filed. The district court entered a $600,000 default judgment without holding an evidentiary hearing on damages.

Key Legal Issues

The case presented three main issues: (1) whether service of process on a sole proprietorship employee constitutes proper service under Rule 4; (2) whether the default should be set aside under Rule 60(b)(1) for mistake or excusable neglect; and (3) whether the district court erred by entering judgment on unliquidated damages without an evidentiary hearing under Rule 55(b)(2).

Court’s Analysis and Holding

The Court ruled on three independent grounds. First, it held the judgment was void for lack of jurisdiction under Rule 60(b)(4) because sole proprietorships must be served by serving the individual owner under Rule 4(d)(1)(A), not employees. Second, even with proper jurisdiction, the default should be set aside under Rule 60(b)(1) due to the insurance agent’s mistake and defendant’s demonstration of meritorious defenses. Third, the district court abused its discretion by entering judgment for unliquidated damages without the required evidentiary hearing under Rule 55(b)(2).

Practice Implications

This decision requires Utah practitioners to carefully identify the proper defendant and service method for sole proprietorships. Corporate service provisions under Rule 4(d)(1)(E) do not apply to sole proprietorships. Additionally, the ruling reinforces that default judgments involving personal injury damages, pain and suffering, or lost future wages require evidentiary hearings to establish the damage amount, regardless of specific allegations in the complaint.