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holding that service on defendant's relative would likely give defendant notice of the case brought against him
Summary of this case from Ferrarese v. ShawOpinion
01 Civ. 5247 (KMW)(KNF)
February 19, 2003
MEMORANDUM and ORDER
I. INTRODUCTION
The Securities and Exchange Commission ("SEC") seeks an order authorizing alternative service of the amended summons and the amended complaint upon defendant Steven S. Bocchino ("Bocchino" or "defendant"), pursuant to Rule 4(e)(1) of the Federal Rules of Civil Procedure. The SEC proposes to publish the amended summons in a newspaper of national circulation, U.S.A. Today, and to deliver a copy of the amended summons and amended complaint to a person of suitable age at the home of Bocchino's bother and the home of Bocchino's sister. In addition, the SEC has asked the Court to set a time in which it must complete service upon Bocchino. See Fed.R.Civ.P. 4(m). For the reasons set forth below, the SEC's motion is granted.
II. BACKGROUND
The SEC's complaint, filed on June 12, 2001, alleges, inter alia, that Bocchino made misrepresentations of material facts in connection with the unregistered offer and sale of securities of Fargo Holdings, Inc. ("Fargo"). The SEC's amended complaint, filed on August 30, 2002, makes the same substantive allegations against Bocchino that were made in the original complaint. The amended complaint seeks additional relief against Bocchino and each of the other defendants — namely a penny stock bar — and also adds Hildreth J. Fleming, Jr. as a defendant. Specifically, the amended complaint contains the following allegations regarding Bocchino: (1) Bocchino solicited sales of Fargo stock between at least October 1998 and February 1999, while he was a registered representative at Pacific Continental Securities Corp. and Seaboard Securities, Inc.; (2) Bocchino induced at least two of his clients to purchase Fargo stock by representing that Fargo would be conducting an initial public offering of its stock in the near future that would allow the investors to resell their Fargo stock for a substantial profit; (3) Bocchino told some investors falsely that Fargo manufactured blue jeans at a factory in Honduras; (4) Bocchino told some investors falsely that Fargo operated a day-trading business; and (5) Bocchino received sales commissions totaling at least $14,800 from his fraudulent activities.
The amended complaint alleges further that Bocchino's conduct violated sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, 15 U.S.C. § 77e(a), 77e(c) and 77q(a), and sections 10(b) and 15(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and 78o(a), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. The amended complaint seeks injunctive relief against Bocchino, disgorgement of ill-gotten gains and prejudgment interest thereon, the imposition of civil penalties, and an order imposing a penny stock bar against Bocchino.
The SEC contends that Bocchino is aware that this action is pending against him, and that he has not appeared or otherwise responded to the complaint. The SEC contends further that, on March 26, 2001, Bocchino testified under oath to the SEC's staff that he resided at his brother's home at 1999 Lake of the Pines, Bushkill, Pennsylvania 18301 ("Bushkill Address"), which Bocchino identified as his brother's home address. According to the SEC, on July 3, 2001, a process server served Bocchino personally with a summons and a copy of the complaint at the Bushkill Address; however, Bocchino never answered or otherwise responded to the complaint, and on November 25, 2002, the Clerk of the Court for the Southern District of New York entered a Certificate of Default with respect to Bocchino.
In support of its motion for alternative service, the SEC has provided the following account of its attempt to locate Bocchino in order to serve him with an amended summons and a copy of the amended complaint. On October 7, 2002, a process server attempted to serve Bocchino with an amended summons and a copy of the amended complaint at the Bushkill Address, but a resident told the process server that Bocchino no longer resided at the address. The resident also told the process server that he did not know of Bucchino's whereabouts. At the request of the SEC's staff, on October 22, 2002, October 24, 2002, November 4, 2002, November 8, 2002, November 13, 2002, November 16, 2002, and November 20, 2002, the process server performed surveillance outside the Bushkill Address, but he did not see anyone that matched Bocchino's description entering or leaving the residence.
Additionally, on October 7, 2002, a process server attempted to serve Bocchino at 111 Broad Street, East Stroudsburg, Pennsylvania 18301 ("East Stroudsburg Address"). However, a resident, who identified herself as Bocchino's sister, told the process server that Bocchino did not reside at the address, and that she did not know of Bocchino's whereabouts. The process server had previously served a summons and complaint on Bocchino at the East Stroudsburg Address in an unrelated SEC action. At the request of the SEC's staff, on October 22, 2002, October 24, 2002, November 4, 2002, November 8, 2002, November 13, 2002, November 16, 2002, and November 20, 2002, the process server performed surveillance outside the East Stroudsburg Address, but he did not see anyone that matched Bocchino's description entering or leaving the residence.
In October 2002, the SEC's staff authorized a private investigator ("PI") to conduct an investigation to determine Bocchino's whereabouts. As part of his effort, the PI searched various computer databases and found that Bocchino had filed for bankruptcy on July 24, 2002, in the Middle District of Pennsylvania. The PI also found that, in his bankruptcy petition, Bocchino listed his residence as 121 Prospect Street, East Stroudsburg, Pennsylvania 18301 ("Second East Stroudsburg Address").
On November 30, 2002, a process server attempted to serve Bocchino at the Second East Stroudsburg Address, but a resident of the address told the process server that Bocchino did not live at that address. The process server also spoke with other tenants in the apartment building located at the Second East Stroudsburg Address, and various people in the neighborhood, but none of them knew of Bocchino or his whereabouts.
In its attempt to locate Bocchino, the SEC's staff also searched various computer databases. On December 26, 2002, the SEC's staff conducted a search using the Lexis SmartLinx function and the Auto Track XP National Comprehensive Report Plus Association to determine where Bocchino is residing or working, but the staff was unable to find a current residential or work address for Bocchino. The SEC's staff also contacted the United States Postal Service to determine whether Bocchino had provided a forwarding address from any of his former residences. On or about December 30, 2002, a member of the United States Postal Police informed the SEC's staff that the United States Postal Service did not have a forwarding address for Bocchino from the Bushkill Address or East Stroudsburg Address, and that the East Stroudsburg Address was the forwarding address that Bocchino provided to the United States Postal Service for the Second East Stroudsburg Address.
III. DISCUSSION
Rule 4(e)(1) of the Federal Rules of Civil Procedure provides that service of process upon an individual located within a judicial district of the United States may be effected "pursuant to the law of the state in which the district court is located, or in which service is effected." In New York, service may be effected upon a natural person by: (1) personal service; (2) delivering the summons to a person of suitable age and discretion at the individual's actual place of business, dwelling place or usual place of abode, and mailing it; (3) serving the individual's agent; or (4) affixing the summons to the individual's actual place of business, dwelling place, or usual place of abode, and mailing it. See New York State Civil Practice Law and Rules ("CPLR") §§ 308(1)-(4). In addition, service in New York may be made "in such manner as the court, upon motion without notice directs, if service is impracticable under paragraphs one, two, and four of this section." Id. § 308(5).
The meaning of "impracticable" depends upon the facts and circumstances of a particular case. See Markoff v. South Nassau Community Hosp., 91 A.D.2d 1064, 1065, 458 N.Y.S.2d 672 (App.Div.2d Dep't 1983). Although CPLR § 308(5) does not require a showing of due diligence or of actual prior attempts to serve a party under the other provisions of the statute, see Kelly v. Lewis, 220 A.D.2d 485, 485, 632 N.Y.S.2d 186 (App. Div.2d Dep't 1995); SEC v. HGI, Inc., No. 99 Civ. 3866, 1999 WL 1021087, at *1 (S.D.N.Y. Nov. 8, 1999), a plaintiff seeking to effect alternative service "must make some showing that the other prescribed methods of service could not be made." Markoff, 91 A.D.2d at 1065, 458 N.Y.S.2d 672.
Courts have found a showing of impracticability, and have authorized alternative service, where a defendant could not be located by inquiring with the United States Postal Service or by searching computer databases. See, e.g., HGI, Inc., 1999 WL 1021087, at *1 (finding proof of impracticability where, despite efforts to locate the defendant by these means, his whereabouts remained unknown). In addition, courts have found service to be impracticable where the defendant could not be located by means of a diligent search. See Kelly v. Lewis, 220 A.D.2d at 486, 632 N.Y.S.2d 186 (finding that service was impracticable where plaintiffs made three unsuccessful attempts to serve the defendant at his last known residence address); Arroyo v. Arroyo, 76 Misc.2d 652, 653-55, 351 N.Y.S.2d 536 (Sup.Ct. Kings Cty. 1974) (finding that service was impracticable where defendant could not be located by, among other things, searching records of motor vehicle operator's licenses and telephone directories, and attempting to reach the defendant's only known relative).
In the instant case, the SEC has demonstrated that it would be impracticable to serve Bocchino by traditional methods of service, as set forth in CPLR § 308. The SEC has been unable to locate Bocchino despite having sent process servers to several different addresses at which he might have been found. In addition, the SEC has searched relevant computer databases and has inquired with the United States Postal Service, but Bocchino's whereabouts remain unknown. Moreover, the SEC has been unable to discover Bocchino's residential or business address, or any person designated as Bocchino's agent for service of process. Therefore, under the circumstances, the Court may direct an alternative method of service.
The SEC proposes to effect service on Bocchino by publishing the amended summons in U.S.A. Today on a Monday and a Wednesday within the same week, and by delivering a copy of the amended summons and amended complaint to a person of suitable age at the Bushkill Address, the home of the defendant's brother, and the East Stroudsberg Address, the home of the defendant's sister.
Giving notice under a substitute system is permissible provided that it comports with due process by being "reasonably calculated, under the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." See SEC v. Tome, 833 F.2d 1086, 1093 (2d Cir. 1987) (quoting Mullane v. Central Hanover Bank Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 658). When personal service is otherwise impossible, and when it is reasonable to conclude that the defendant is apt to read the newspaper in which the notice is published, then service by publication in a newspaper is an appropriate means of giving notice. See Tome, 833 F.2d at 109, (finding that service by publication in the International Herald Tribune was adequate to provide notice to defendants); HGI, Inc., 1999 WL 1021087, at *1 (authorizing service by publication in U.S.A. Today where personal service was impracticable). Additionally, service may be effected by delivering the summons and complaint to a relative of the defendant.See Leab v. Streit, 584 F. Supp. 748, 763 (S.D.N.Y 1984) (permitting service by delivery of the summons and complaint to the defendants' parents and grandmother); Deason v. Deason, 73 Misc.2d 964, 966, 343 N.Y.S.2d 276 (Sup.Ct. Albany Cty. 1973) ("[S]ervice of the summons by mailing to the addresses of a defendant's relatives satisfies the demands of procedural due process . . . where a plaintiff has demonstrated that he or she has exhausted all reasonable possibilities of serving the summons personally.").
The SEC has shown that service by publication in a newspaper and by delivering the amended summons and amended complaint to relatives of the defendant are appropriate in this case. Service by other methods is impracticable, and it is reasonable to conclude that service by the means proposed are likely to give Bocchino notice of this action.
Rule 4(m) of the Federal Rules of Civil Procedure provides, in pertinent 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 . . . 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.
The SEC has indicated that its time to serve Bocchino expired on or about December 30, 2002; consequently, pursuant to Fed.R.Civ.P. 4(m), the SEC seeks additional time in which to effect service through a national publication. Under the circumstances, the SEC has shown good cause for its failure to effect timely service of the amended summons and amended complaint upon Bocchino. Accordingly, the Court may exercise its discretion to extend the time for effecting service for an appropriate period.
IV. CONCLUSION
For the reasons set forth above, the SEC's motion, made pursuant to Fed.R.Civ.P. 4(e), for alternative service of the amended summons and the amended complaint upon Bocchino is granted. Furthermore, the SEC is directed to effect service upon the defendant on or before March 20, 2003. See Fed.R.Civ.P. 4(m).