Opinion
Case No. 2:00CV178K
April 17, 2000.
ORDER
This matter is before the court on Defendant Sheldon Young's Motion to Quash Service and Dismiss Complaint and his Motion to Withdraw the Reference. A hearing on the motions was held on April 4, 2000. At the hearing Kim Wilson represented Defendant Sheldon A. Young ("Mr. Young"), and Michael Zundel and Glenn R. Bronson represented Plaintiff-Trustee, Kenneth A. Rushton (the "Trustee"). Before the hearing, the court considered carefully the memoranda and other materials submitted by the parties. Since taking the matter under advisement, the court has further considered the law and facts relating to this motion. Now being fully advised, the court renders the following Order.
I. BACKGROUND
On or about March 16, 1999, the Trustee, through his counsel, filed a Complaint against Mr. Young and several other defendants. Mr. Young claims that on or about May 4, 1999, all defendants except for Mr. Young were served with a Summons and Complaint. The Trustee, on the other hand, claims that Mr. Young was served on May 4, 1999 because on that date, the Trustee's counsel mailed to Mr. Young the Summons and Complaint by certified mail.
On or about May 25, 1999, the envelope containing the Summons and Complaint that was mailed to Mr. Young, was returned to the Trustee's counsel, stamped "UNCLAIMED." It was also stamped with the post office's standard stamp, which indicates the dates upon which delivery was attempted and the dates upon which notices of the certified letter were provided to Mr. Young. Specifically, the stamp indicates that physical delivery of the certified letter to Mr. Young was attempted on 5/5, and that the "1st Notice" was given at that time by leaving a standard notice in Mr. Young's mailbox indicating that the post office was holding a certified letter for him. The stamp also indicates that a "2d Notice" was sent by the post office on 5/11. Finally, the stamp indicates that the certified letter was "Returned" to the sender on 5/21. Mr. Young claims that he did not receive any notices at his home address stating that the post office was holding a certified letter that required his signature for receipt.
On or about August 19, 1999, the Trustee and all of the other defendants — except for Mr. Young — participated in a party planning meeting and executed a "Report of Planning Meeting," which was filed with the court. On or about August 25, 1999, the Trustee and all of the other defendants participated in a pre-trial conference. On or about October 6, 1999, the Trustee and several other defendants entered into mediation, which subsequently resulted in a Stipulation of Settlement on February 8, 2000.
Mr. Young claims that he was not served until February 1, 2000, at which time his counsel accepted service on his behalf with an express reservation of right of dismissal of this proceeding.
II. DISCUSSION REGARDING DEFENDANT'S MOTION TO QUASH SERVICE AND DISMISS COMPLAINT
A. The Law
Rule 4(m) of the Federal Rules of Civil Procedure ("FRCP"), which is made applicable to this proceeding pursuant to Rule 7004(a) of the Federal Rules of Bankruptcy Procedure ("FRBP"), provides in part:
If 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.
In addition, FRBP 7004(b) provides, in pertinent part:
Service may be made within the United States by first class mail postage prepaid as follows: (1) Upon an individual other than an infant or incompetent, by mailing a copy of the summons and complaint to the individual's dwelling house or usual place of abode or to the place where the individual regularly conducts a business or profession.
B. Mr. Young's Arguments
Mr. Young claims that service was not timely under FRCP 4(m), and therefore the Complaint should be dismissed. According to Mr. Young, the Complaint was filed on March 16, 1999, and Mr. Young was not served until February 1, 2000, almost a year after the Complaint was filed. Thus, it was served well after the 120-day limit set forth in FRCP 4(m). Mr. Young also points out that the Trustee had Mr. Young's name and home address, as evidenced by the several mailings that Mr. Young had received previously from the Trustee. In addition, Mr. Young claims that FRBP 7004(b) requires service of process by "first class mail postage prepaid," and that this rule was enacted in recognition that there are significant differences between certified or registered mail and first class mail. He explains that prior to 1976, Rule 704 (the former Rule 7004) required a signed receipt for service to be valid. The rules were amended, however, to permit service of complaints in adversary proceedings by first class mail. The Advisory Committee Note to the 1976 amendment explained:
Subdivision (c). First Class mail postage prepaid is substituted for mail requiring a signed receipt as the authorized mode of making service by mail in the United States. Experience with the provision requiring a signed receipt has been unsatisfactory. Although the defendant's correct address is used for mailing, the defendant is often unavailable to the delivering postman, either to sign or to refuse delivery.
Mr. Young also claims that the legislative history regarding service by first class mail under FRCP 4 also indicates that the legislature and courts were also aware of the differences between service by certified and first class mail:
[The Rule 4(d) first class mail] system of mail service avoids the notice problems created by the registered and certified mail procedures proposed by the Supreme Court. If the proper person receives the notice and returns the acknowledgment, service is complete. If the proper person does not receive the mailed form, or if the proper person receives the notice but fails to return the acknowledgment form another method of service authorized by law is required. In either instance, however, the defendant will receive actual notice of the claim.
Further, Mr. Young argues that with first class mail, the defendant will receive a copy of the summons and complaint in his mailbox without having to take any affirmative act — such as going to the post office — to receive the mailing. With a certified mailing, the notice, if actually left by the post office, does not contain any reference to the nature of the letter and who the sender may be. If the defendant does not undertake the affirmative act of going to the post office, the mailing is returned to the sender, and the defendant has no notice of the proceeding against him.
Finally, Mr. Young urges the court not to grant an extension of time to the Trustee to effect proper service because the Trustee has failed to pursue service with diligence and good faith efforts, and because Mr. Young has been prejudiced by the length of time and the Trustee's pursuit of settlement and negotiations with the other defendants. Mr. Young also points out that there is no evidence that he intentionally refused to claim the certified mail or otherwise acted in bad faith.
C. The Trustee's Arguments
The Trustee first claims that service was timely under FRBP 7004(b) and that it is well-settled that service by first class mail in accordance with 7004(b) comports with the procedural requirements identified by the U.S. Supreme Court in Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 314 (1950). Further, he claims that while Rule 7004(b) refers only to service by "first class mail," it is equally well settled that service by "certified mail" also satisfies the rule, citing In re Ted A. Petras Furs, Inc., 172 B.R. 170, 176 (Bankr. E.D.N.Y. 1994). In addition, he also argues that Rule 9006(e) provides that "[s]ervice of process and service of any paper other than process or of notice by mail is complete on mailing." Finally, the Trustee claims that Mr. Young, "well aware that a certified letter had been sent to him, deliberately and intentionally refused to take receipt of that letter."
Even if service was not effectuated by sending the Summons and Complaint by certified mail in May 1999, the Trustee argues that the court should exercise its discretion and grant an extension of time in which to serve Mr. Young. The Trustee points out that FRCP 4(m) no longer contains a "good cause" component, as it did before the 1993 amendments to the federal rules. Thus, a court has discretion to relieve a plaintiff from the harsh consequences of the 120-day bar even if there is no good cause shown. The Advisory Committee Notes for the amendments to FRCP 4(m) state:
The new subdivision explicitly provides that the court shall allow additional time if there is good cause for the plaintiff's failure to effect service in the prescribed 120 days, and authorizes the court to relieve a plaintiff of the consequences of an application of this subdivision even if there is no good cause shown. . . . Relief may be justified, for example, if the applicable statute of limitations would bar the refiled action, or if the defendant is evading service or conceals a defect in attempted service.
The Trustee argues that relief from FRCP 4(m) is appropriate here because the statute of limitations has run and would bar Plaintiff's action if the proceeding were dismissed. Moreover, he argues that the facts suggest that Mr. Young was intentionally evading service. Finally, he argues that his reading of FRBP 7004(b) and subsequent use of certified mail constitutes "good cause" in any event.
D. Analysis
This court is unaware of any case in which a court has found that the use of certified mail was sufficient when the defendant had knowledge that the summons and complaint were never received by the plaintiff. The Trustee's reliance on In re Ted A. Petras Furs, Inc., 172 B.R. 170, 176 (Bankr. E.D.N.Y. 1994) is misplaced because that case is factually distinguishable — in a material way — from the case at bar. In Petras, the defendant had actually received and signed for the certified mail. While the Petras court determined that service by certified mail is acceptable, that holding presumed that the mailing was actually received by the defendant.
Furthermore, the Advisory Committee Notes regarding FRCP 4(d) highlight the problems with certified mail. As the Note states, "if the proper person receives the notice and returns the acknowledgment, service is complete. If the proper person does not receive the mailed form, or if the proper person receives the notice but fails to return the acknowledgment form another method of service authorized by law is required. In either instance, however, the defendant will receive actual notice of the claim."
Because there are differences between first class and certified mail (i.e., certified mail requires an affirmative act by a defendant to obtain an unidentified package that is being held by the post office, and the plaintiff receives actual notice regarding whether the defendant actually received the package), this court finds that service by certified mail is not sufficient, unless the defendant actually receives the mail. Thus, in this case, service was not accomplished within the 120 days required under FRCP 4(m).
The court's analysis does not end here, however. FRCP 4(m) allows a court to grant relief to a plaintiff who has not timely served a complaint. The Rule states that "[r]elief may be justified, for example, if the applicable statute of limitations would bar the refiled action, or if the defendant is evading service or conceals a defect in attempted service." There is no longer a "good cause" to obtain an extension of time to serve a complaint. Thus, it is entirely within the court's discretion to grant an extension of time. See, e.g., Espinoza v. United States, 52 F.2d 838 (10th Cir. 1995). In this case, if the court dismissed the Complaint, the dismissal would effectively be "with prejudice" because the action would be barred by the applicable statute of limitations. In addition, there is some evidence presented at the hearing that Mr. Young may have been avoiding service. Finally, although Mr. Young has argued that he has been prejudiced because "the train has left the station" in this case, the court finds that any prejudice that he has suffered is minimal. Accordingly, the court declines to dismiss the Complaint and grants the Trustee until February 1, 2000 to serve the Complaint. This service has already been accomplished, with Mr. Young's counsel having accepted service. Thus, the Complaint was timely served on February 1, 2000. Accordingly, Mr. Young's Motion to Quash Service and Dismiss Complaint is denied.
III. DISCUSSION REGARDING MOTION TO WITHDRAW THE REFERENCE
Mr. Young has requested that the court withdraw the reference to the bankruptcy court. The Trustee does not dispute that Mr. Young is entitled to withdraw the reference. The Trustee's only basis for opposing the motion was that the motion was not timely filed under DUCivR83-7.2(e), which provides that in adversary proceedings, "[i]f the movant is an original defendant, . . . the motion [for transfer of the adversary proceeding to the district court] must be filed within twenty (20) days after the movant has entered an appearance or been served with summons or notice." Because the Trustee claimed that Mr. Young had been served on May 4, 1999, the Trustee claimed that the Motion to Withdraw, filed on February 22, 2000, was not timely.
However, because the court has ruled that service was not effectuated on May 4, 1999, but rather was accomplished on February 1, 2000, the Motion to Withdraw is timely. Accordingly, Mr. Young's Motion to Withdraw the Reference is granted.
IV. CONCLUSION
For the foregoing reasons, and good cause appearing, IT IS HEREBY ORDERED that Mr. Young's Motion to Quash Service and Dismiss Complaint is DENIED and his Motion to Withdraw the Reference is GRANTED.