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dismissing a complaint for insufficient service of process where it was possible that the statute of limitations had run, though the issue had not been fully briefed
Summary of this case from Cassano v. AltshulerOpinion
00 Civ. 8410 (SAS)
July 6, 2001
For Plaintiff, Theodore T. Mairanz, Esq., Neiman, Ginsburg Mairanz, P.C., New York, New York; Michael J. Keaton, Esq., David M. Bagdale, Esq., Keaton Associates, P.C., Glen Ellyn, Illinois.
For Defendant, Hartley B. Martyn, Esq., Martyn Associates, Cleveland, Ohio.
MEMORANDUM OPINION AND ORDER
Sunniland Fruit Company ("Sunniland") initially sued five defendants seeking payments owed to it as the assignee of Sunrise Farms, Inc., the beneficiary of a trust created pursuant to the Perishable Agricultural Commodities Act ("PACA"), 7 U.S.C. § 499e. Sunniland joined a claim against Martyn Associates Co., L.P.A. ("Martyn"), alleging that Martyn converted funds subject to an earlier PACA trust between Sunniland and Sunrise. Sunniland subsequently stipulated to the dismissal of the first five named defendants. Martyn now moves for dismissal of Sunniland's remaining claim against it under Federal Rules of Civil Procedure 12(b)(6) for failure to state a claim on which relief can be granted, 12(b)(2) for lack of personal jurisdiction, and 4(m) for insufficiency of service of process.
PACA provides a remedy for unpaid sellers of perishable agricultural commodities, impressing the produce and the proceeds of any subsequent sales of that produce by the buyer with a trust for the benefit of the unpaid sellers. See 7 U.S.C. § 499e(2).
Martyn's Rule 12(b)(6) motion appears to be based on the misapprehension that Sunniland is suing it as the assignee of Sunrise and thus Sunniland is liable to Martyn for the fee it earned. In fact, Sunniland is suing Martyn in Sunniland's capacity as a PACA beneficiary. As noted below, the Court does not address this claim.
Sunniland asserts that this Court has personal jurisdiction over Martyn based on New York's long-arm statute. See N.Y. C.P.L.R. § 302 (McKinney 2001). As noted below, the Court does not address this claim.
For the following reasons, Sunniland's claim against Martyn is dismissed for insufficiency of process.
I. BACKGROUND
According to the Complaint, Sunniland obtained a judgment against Sunrise, a company "in the business of selling wholesale quantities of perishable commodities ('Produce') in interstate commerce," on December 20, 1996 in the United States District Court for the Southern District of Ohio. See Complaint ¶ 37. Sunniland alleges that Sunrise's assets were impressed with an express statutory trust under PACA and that Sunniland became a PACA trust beneficiary and judgment creditor of Sunrise's accounts receivable. See id. ¶¶ 40, 50-52.
Martyn, meanwhile, had represented Sunrise in a victorious action against Orinco, a New York company. See id. ¶¶ 6, 34-35, 43. Sunrise failed to pay Martyn for its services, and on August 25, 1997, Martyn sued Sunrise for unpaid attorney's fees. See id. ¶¶ 48a-b. Martyn won and was assigned Sunrise's rights to the judgment against Orinco. See id. On January 13, 1998, Martyn settled Sunrise's claim against Orinco and collected "approximately $30,000." Id. ¶ 48c. On November 2, 2000, Sunniland filed this action against Martyn, alleging that Sunrise's judgment against Orinco was a Sunrise asset impressed with a PACA trust for Sunniland's benefit. See id. ¶ 52. Sunniland alleges that in settling and collecting Sunrise's judgment against Orinco, Martyn knowingly converted trust assets. See id. ¶¶ 42-56. Martyn now moves for dismissal for insufficiency of process pursuant to Federal Rule of Civil Procedure 4(m). To date, more than 250 days after filing, Sunniland has failed to provide any proof of service.
More than 90 days have passed since Martyn first gave notice of its intention to seek dismissal on these grounds in its March 30, 2001 motion to dismiss.
II. DISCUSSION
Martyn has moved to dismiss for failure of service of process pursuant to Rule 4m, which states:
[i]f service of the summons and complaint is not made upon a defendant within 120 days after the filing of the complaint, the court, upon motion or on its own initiative after notice to the plaintiff, shall dismiss the action without prejudice as to that defendant or direct that service be effected within a specified time; provided that if the plaintiff shows good cause for the failure, the court shall extend the time for service for an appropriate period.
Fed.R.Civ.P. 4(m). The purpose of this Rule is to promote "diligent prosecution of civil cases." National Union Fire Ins. Co. v. Sun, No. 93 Civ. 7170, 1994 WL 463009, at *3 (S.D.N Y Aug. 25, 1994). "The Second Circuit has held that dismissal is mandatory when a party is not served within the 120-day time limit and where there is no showing of good cause." Ogbo v. New York State Dept. of Taxation and Fin., No. 99 Civ. 9387, 2000 WL 1273840, at *2 (S.D.N.Y. Sept. 6, 2000) (citing Zankel v. United States, 921 F.2d 432, 436 (2d Cir. 1990)).
While Rule 4(m) does not define "good cause," courts have ruled that "mistake or inadvertence of counsel . . . does not constitute 'good cause' justifying failure to effect timely service of process." Meija v. Castel Hostel, Inc., 164 F.R.D. 343, 345 (S.D.N.Y. 1996); see also Zankel, 921 F.2d at 436 ("[A] judge is certainly not required to treat inadvertence or ignorance of the rules as 'good cause' or 'excusable neglect' for delay in service."). Good cause is measured against the plaintiff's recognizable efforts to effect service and the prejudice to the defendant from the delay. See AIG Managed Market Mutual Fund v. Askin Capital Mgmt., L.P., 197 F.R.D. 104, 108 (S.D.N.Y. 2000). Most importantly, "[w]hen service of process is challenged, the serving party bears the burden of proving its validity or good cause for failure to effect timely service." Systems Signs Supplies v. United States Dep't of Justice, 903 F.2d 1011, 1013 (5th Cir. 1990); see also Mason Tenders Dist. Council Pension Fund v. Messera, No. 95 Civ. 9341, 1997 WL 221200, at *3 (S.D.N.Y Apr. 1, 1997) ("Pursuant to Rule 4(m), the plaintiff bears the burden of proof in showing that it had good cause in not timely serving the defendant.").
Martyn asserts that Sunniland was ordered to effect service on at least four occasions — January 2, early February, February 18, and March 7, 2001. See Defendant Martyn and Associates' Memorandum in Support of Motion to Dismiss ("Def. Mem.") at 5-7. Sunniland contends that only on January 18, 2001 was it ordered to serve Martyn and that it did so on January 22, 2001. See Plaintiff's Response to Defendant Martyn Associates' Motion to Dismiss ("Response") at 6. However, as it admits in its May 10, 2001 Response, Sunniland
does not yet have the name of either the specific courier who must execute the return of service or the person at Martyn's office on whom the pleadings were served, but . . . expects to have such information within the next few days and will file the Proof of Service on receipt of the executed return.
Id.
Although plaintiff denies Martyn's allegation that it was ordered to effect service on four separate occasions, Sunniland admits that it was ordered to effect service on January 18, 2001. See Response at 6. Moreover, Sunniland has known since March 30, 2001, the date Martyn filed its motion to dismiss, that Martyn intended to challenge Sunniland's service of process. See Def. Mem. at 5-7.
In response to Martyn's motion, Sunniland alleges that it did serve Martyn on January 22, 2001. See Response at 6. However, Sunniland openly admits that it has no proof that service has been effected. See id. More than 250 days have now passed since the Complaint was filed, and Sunniland has still failed to file the proof of service required by Rule 4 and promised in its May 10, 2001 Response. See id. Sunniland cannot meet its burden of proving that Martyn was validly served. Moreover, Sunniland has not attempted to demonstrate, nor can it, "good cause" for its failure.
Martyn has not been properly served pursuant to Rule 4m. Accordingly, this Court lacks personal jurisdiction over Martyn, and Sunniland's claim against Martyn must be dismissed. See Redding v. Essex Crane Rental Corp. of Alabama, 752 F.2d 1077 (5th Cir. 1985) (dismissal for insufficiency of process proper even where statute of limitations has run); Dillion v. United States Postal Serv., No. 94 Civ. 3187, 1995 WL 447789, at *4-5 (S.D.N.Y July 28, 1995) (dismissing for failure to comply with Rule 4(m)).
Although a dismissal pursuant to Rule 4(m) is without prejudice, it effectively functions as a dismissal with prejudice when the statute of limitations has expired. See McGregor v. United States, 933 F.2d 156, 159, 161 (2d Cir. 1991) ("[I]n an action where service is not effected within 120 days of filing and where the statute of limitations has run during the 120-day period, a [Rule 4(m)] dismissal effectively dismisses the action with prejudice."). Although the statute of limitations tolls during the 120 days after filing, "if a plaintiff fails to effect service during the 120 days allotted by Rule 4(m), then the statute of limitations for the underlying claim again becomes applicable, and may serve to bar the claim if the statute runs before the plaintiff files another complaint." Ocasio v. Fashion Inst. of Tech., 86 F. Supp.2d 371, 376 (S.D.N.Y. 2000); see also Frasca v. United States, 921 F.2d 450, 452, 453 (2d Cir. 1990). The parties have not fully briefed the question of which state's statute of limitations would apply. However, given that the Complaint alleges that Martyn, an Ohio resident, converted funds under the control of Orinco, a New York resident, it is reasonable to assume that either Ohio or New York law would apply. Both states' statute of limitations provide three years within which to commence an action for conversion. See N.Y. C.P.L.R. § 214(c)(2) (McKinney 2001); Ohio Rev. Code Ann. § 1303.16(G)(1); Leichliter v. Nat'l City Bank of Columbus, 134 Ohio App.3d 26, 33, 729 N.E.2d 1285, 1290 (Ohio Ct.App. 1999). Martyn's alleged conversion took place on January 13, 1998. See Def. Mem. at 2. More than 3 years and 120 days have passed since that date.
III. CONCLUSION
Defendant's motion to dismiss is granted because Sunniland has failed to serve Martyn as required by Rule 4(m). The Clerk of the Court is directed to close this case.
Because this action is dismissed against Martyn for insufficiency of service of process, it is not necessary to address the merits of defendant's other grounds for dismissal.
SO ORDERED: