Opinion
01 Civ. 4469 (JSR) (DF)
June 17, 2002
REPORT AND RECOMMENDATION
INTRODUCTION
By motion dated January 11, 2002, plaintiffs Richard D. Mandeville ("Richard") and Florence F. Mandeville ("Florence") (collectively "Plaintiffs"), seek a default judgment against defendant Florrie L. Wertheimer, P.C. ("Wertheimer, P.C."). For the reasons stated below, I recommend that Plaintiffs' motion for a default judgment be granted, with judgment to be entered in an amount to be determined upon a damages inquest.
The Notice of Motion To [sic] For Default Judgment, dated January 11, 2002 ("Notice of Motion for Default Judgment"), was signed by Florence Mandeville and by Candy Mingst, Plaintiffs' daughter, on Richard Mandeville's behalf. Although this Court previously denied the Mandevilles' request to have Mingst appointed as their guardian for the purpose of representing them in this matter (see Memorandum and Order, dated March 19, 2002), plaintiffs should not be required to re-file the motion, because at least Florence Mandeville signed the notice of motion herself.
FACTUAL BACKGROUND
As set forth in greater detail in this Court's prior Report and Recommendation, dated April 12, 2002, this is a legal malpractice action. Plaintiffs, proceeding pro se, are suing their former attorneys, Florrie L. Wertheimer ("Wertheimer"), Robert E. Higgins ("Higgins"), and Wertheimer, P.C. (collectively "Defendants"), for their alleged malpractice in failing to prosecute a 1995 personal injury lawsuit they brought on Richard's behalf Plaintiffs claim that, in that prior lawsuit, Defendants failed to meet a Court-ordered deadline for seeking a default judgment against the defendant, allegedly resulting in the loss to Richard of a money judgment he otherwise would have obtained. (See Complaint, filed May 25, 2001 ("Compl."), ¶¶ 13-21 and Counts 1 through 5.)
PROCEDURAL BACKGROUND
There is apparently no dispute that the complaint in this action was served on defendants Wertheimer and Higgins. Both of those defendants answered the complaint without asserting any defense of insufficiency of process, and both moved for summary judgment, as reflected in my prior Report and Recommendation. There is, however, a dispute as to whether the Wertheimer firm (Wertheimer, P.C.) was properly served. Plaintiffs claim that service was duly made, and that they are now entitled to a default judgment against Wertheimer, P.C. for failure to answer the complaint. (See Affirmation of Richard D. Mandeville and Florence F. Mandeville, affirmed on January 11, 2002 ("Mandeville Aff."), ¶¶ 2-3.) Wertheimer, P.C. has not appeared through counsel in order to contest service. Wertheimer, however, asserts in a letter to the Court that any purported service on Wertheimer, P.C. was improper and ineffective. (See Letter from Florrie L. Wertheimer, dated January 28, 2002 ("Wertheimer Ltr.").)
A defendant waives any defense of insufficiency of process by failing to include such a defense in its answer or to move to dismiss under Rule 12 of the Federal Rules of Civil Procedure. See Fed.R.Civ.P. 12(h)(1) ("A defense or lack of . . . insufficiency of service of process is waived . . . if it is neither made by motion under this rule nor included in a responsive pleading or an amendment thereof permitted by Rule 15(a) to be made as a matter of course."); see also Transaero, Inc. v. La Fuerza Aerea Boliviana, 162 F.3d 724, 730 (2d Cir. 1998) (to preserve the service of process defense, a party must assert it in its first responsive pleading); accord Federal Home Loan Mortgage Corp. v. Dutch Lane Assocs., 775 F. Supp. 133, 136-37 (S.D.N.Y. 1991); In re Blutrich Herman Miller, 227 B.R. 53, 60 (Bankr. S.D.N.Y. 1998) ("It is black letter law that a failure to raise the defense of lack of personal jurisdiction or insufficiency of service of process in a pre-answer motion or in an initial responsive pleading waives those objections.") (citations omitted).
Corporations can only appear through counsel. See Pecarsky v. Galaxiworld.Com, Ltd., 249 F.3d 167, 172 (2d Cir. 2001).
With their motion for a default judgment, Plaintiffs have submitted a Return of Service, dated August 29, 2001, and filed August 30, 2001, which states that the summons and complaint were "[s]erved by mail" and that each defendant returned a Notice and Acknowledgment of Receipt. Plaintiffs apparently claim that they mailed the summons, complaint, and acknowledgment form to Wertheimer, P.C. on July 23, 2001. (See Plaintiffs' proposed order for a default judgment, attached to the Notice of Motion for Default Judgment). The acknowledgment form identifies the firm's address as 225 Broadway, Suite 1201, New York, New York 10007 (see Notice of Acknowledgment of Receipt of Summons and Complaint, dated August 1, 2001, directed to Wertheimer, P.C. ("Acknowledgment Form")), which is presumably the address to which Plaintiffs claim to have mailed it. Wertheimer, however, asserts that the summons and complaint were actually left for Wertheimer P.C. at a different address (316 East 81st Street), which she indicated on the Acknowledgment Form before returning it. (See id.) In addition, Wertheimer wrote, on the bottom of the form: "Please note that Florrie L. Wertheimer P.C. is out of business." (Id.)
This notation is not entirely legible on the copy of the Wertheimer, P.C. Acknowledgment Form attached to plaintiffs' motion papers. At the Court's request Wertheimer submitted another copy of the Wertheimer, P.C. Acknowledgment Form.
Wertheimer did sign the form, and returned it to Plaintiffs on or about August 1, 2001. (See id.) In a conference before the Court, however, Wertheimer argued that her notations on the Acknowledgment Form, regarding both the address at which the papers were left and Wertheimer, P.C.'s defunct status, demonstrate that, by returning the form, she was not accepting service for Wertheimer, P.C. She further informed the Court that she would not agree to accept service for the firm.
DISCUSSION
Plaintiffs have moved, pursuant to Rule 55 of the Federal Rules of Civil Procedure, for a default judgment against Wertheimer, P.C. Plaintiffs argue that Wertheimer, P.C. was properly served and that the time to respond to the complaint has expired. (See Mandeville Aff. ¶¶ 2-3.) Therefore, Plaintiffs seek a default judgment in the amount demanded in the complaint. (See id. ¶ 7.) Wertheimer, however, argues that Wertheimer, P.C. was not properly served because the summons and complaint were not delivered to the Secretary of State in accordance with Wertheimer, P.C.'s certificate of incorporation (see Wertheimer Ltr. at 1), and service has not been waived (see id. at 2).
I. DEFAULT JUDGMENT STANDARD
Rule 55(a) of the Federal Rules of Civil Procedure provides that the Clerk of the Court shall enter a default against a party who "has failed to plead or otherwise defend" an action. Fed.R.Civ.P. 55(a). Once the default has been entered, upon application of the party "entitled to a judgment by default," the Court may enter a default judgment against the defaulting party. Fed.R.Civ.P. 55(b).
Rule 55(a) and Local Rule 55.2(b) require that a plaintiff seeking a default judgment attach a certificate issued by the Clerk of the Court noting the defendant's default. This initial requirement allows the Court to be confident that the defendant has not filed a timely response to the complaint. In this case, Plaintiffs have attached to their motion for a default judgment a blank Clerk's certificate; apparently, they did not first request that the Clerk of the Court fill out and issue such a certificate. The parties, however, agree that Wertheimer, P.C. did not answer the complaint, and the docket confirms the parties' understanding. Thus, the Clerk would have been obligated to issue the certificate if requested. In light of the fact that there is no dispute on this point, and given Plaintiffs' pro se status, I recommend that, in the interest of judicial efficiency, Plaintiffs' failure to submit a completed Clerk's certificate not be considered fatal to their motion for a default judgment.
The decision to grant a motion for a default judgment lies in the sound discretion of the trial court. See Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993). A default judgment, however, cannot be entered unless the Court has "jurisdiction over the party against whom the judgment is sought, which also means that [defendants] must have been effectively served with process." Wright, Miller Kane, Federal Practice and Procedure Civil 2d § 2682. Therefore, in order to determine whether a default judgment against Wertheimer, P.C. would be proper, the Court must first determine whether Wertheimer, P.C. was effectively served with process.
II. SERVICE ON WERTHEIMER. P.C.
Service upon corporations is governed by Rule 4(h)(1) of the Federal Rules of Civil Procedure, which essentially provides that service may be effected either pursuant to the law of the forum state or by delivery of a copy of the summons and complaint to an officer or authorized agent of the corporation. Fed.R.Civ.P. 4(h)(1). Rule 4(d), however, provides that the corporation may choose to waive service, under certain prescribed conditions. Fed.R.Civ.P. 4(d).
Here, Plaintiffs assert that they followed the provision of federal law that would result in a waiver of service. Plaintiffs, however, do not purport to have complied with Rule 4(d), which is the federal rule regarding waiver that is currently in place and that was actually in place at the relevant time. Rather, they claim to have followed that Rule's precursor — former Rule 4(c)(2)(C)(ii) (see Acknowledgment Form), which was superceded by Rule 4(d) on December 1, 1993. Because Rule 4(d) is, in fact, the governing rule, the Court will examine the substance of Plaintiffs' actions to determine whether they sufficiently satisfy the requirements of that rule.
Rule 4(d) imposes "a duty to avoid unnecessary costs of serving the summons" upon a defendant receiving notice of the commencement of an action in the manner set forth in Rule 4(d). Fed.R.Civ.P. 4(d)(2). Under Rule 4(d), the plaintiff must notify a defendant of the commencement of the action by sending the defendant a copy of the summons and complaint, identifying the court in which the action has been filed, via first class mail or other reliable means. Fed.R.Civ.P. 4 (d)(2)(B-C). Where, as here, the defendant is a corporation, the notification must be addressed to an officer, managing agent, general agent, or other agent authorized by appointment of law to receive service of process. Fed.R.Civ.P. 4(d)(2)(A). In addition, the plaintiff must "inform the defendant, by means of a text prescribed in an official form promulgated pursuant to Rule 84, of the consequences of compliance and of a failure to comply with the request." Fed.R.Civ.P. 4(d)(2)(D). The plaintiff must set forth the date upon which the request was sent, and allow the defendant "a reasonable time to return the waiver, which shall be at least 30 days from the date on which the request was sent." Fed.R.Civ.P. 4(d)(2)(E-F). Finally, the plaintiff "shall provide the defendant with an extra copy of the notice and request, as well as a prepaid means of compliance in writing." Fed.R.Civ.P. 4(d)(2)(G).
Here, Plaintiffs did not meet all of the requirements of Fed.R.Civ.P. 4(d). First, the notification was not addressed to an officer or agent of the corporation, but rather was addressed to Wertheimer, P.C. generally. The purpose of the Rule 4(d)(2)(A) requirement is to ensure that notification of service actually reaches a person in the organization who will respond to the lawsuit. See Fed.R.Civ.P. 4, Advisory Committee Note to the 1993 Amendments (stating that "[t]he general mail rooms of large organizations cannot be required to identify the appropriate individual recipient for an institutional summons"). Here, it is undisputed that Wertheimer, who is, according to Wertheimer, P.C.'s certificate of incorporation, its sole shareholder, director and officer, actually received the summons and complaint directed to Wertheimer, P.C. (See Certificate of Incorporation of Florrie L. Wertheimer, P.C., attached to the Wertheimer Ltr. ("Certificate of Incorporation").) Additionally, Wertheimer herself signed and returned the Acknowledgment Form. Thus, there appears to be no prejudice resulting from Plaintiffs' failure to address the notification to a specific individual. See Stapo Indus., Inc. v. M/V Henry Hudson Bridge, 190 F.R.D. 124, 125-26 (S.D.N.Y. 1999) (holding that plaintiffs technical error in not directing the request for a waiver to a specific person was harmless where there was no prejudice to the defendant).
Second, because Plaintiffs followed the old rule, Plaintiffs did not use the official form promulgated pursuant to Rule 84, as required under Fed.R.Civ.P. 4(d)(2)(D). Plaintiffs did, however, comply with the substance of that requirement. Specifically, in the acknowledgment of receipt, Plaintiffs informed Wertheimer P.C. of the consequences of compliance, i.e., that Wertheimer P.C. would then have to answer the complaint within 20 days of service, and of noncompliance, i.e., that Wertheimer, P.C. might be assessed the costs of obtaining service in another manner. Thus, Plaintiffs' technical violation of Fed.R.Civ.P. 4(d)(2)(D) does not appear to render service invalid. See generally Ortiz v. County of Westchester, No. 94 Civ. 1685, 1994 WL 419815, at *2 (S.D.N.Y. Aug. 10, 1994) ("Because the new waiver procedure comports substantially with the former mail service provision, the return of the Acknowledgement by [the defendant] to Plaintiff's counsel, together with the subsequent filing of the same with the Court, constitutes a waiver of service of process under Rule 4(d).").
Third, the outdated acknowledgment form used by Plaintiffs stated, pursuant to the old rule, that the defendant needed to complete and return the form to Plaintiffs within 20 days. (See former Fed.R.Civ.P. 4 (c)(2)(C)(ii) ("If no acknowledgment of service under this subdivision of the rule is received by the sender within 20 days after the date of mailing, service of such summons and complaint shall be made [by other available means].").) The new Rule 4(d) expanded that 20-day period to 30 days. (See Fed.R.Civ.P. 4(d)(2)(F).) This Court has previously held, however, that Rule 4(d)'s expansion of defendant's time to return the acknowledgment form did not materially change the previously existing waiver procedure. See Cruz v. Jackson, No. 94 Civ. 4665 (LMM), 1994 WL 652546, at *1 (S.D.N.Y. Nov. 17, 1994). Thus, this defect in the form used by Plaintiffs is also not material to the question of whether service on Wertheimer, P.C. was effective.
Additionally, Plaintiffs failed to set forth the date upon which the request was sent. It is also unclear whether the Plaintiffs provided Wertheimer, P.C. with an extra copy of the notification and a prepaid means of compliance. These defects, however, are de minimis, especially in light of the fact that Wertheimer apparently returned the Acknowledgment Form well within 30 days of when it was received.
In sum, Plaintiffs have satisfactorily demonstrated that they complied with the provisions of Rule 4(d), and the only remaining issue is whether any aspect of Wertheimer's notations on the Acknowledgment Form show that Wertheimer, P.C. was not actually accepting service by returning that form. This issue should be analyzed in light of Wertheimer, P.C.'s statutory duty under Rule 4(d) to minimize Plaintiffs' costs by accepting service, and in further light of the fact that, as noted above, Wertheimer, P.C. has not itself appeared in this action to challenge service, which it may only do through counsel. The only arguments in opposition to Plaintiffs' motion have been raised by Wertheimer, who does not purport to act on the corporation's behalf
Regardless of whether Wertheimer has standing to oppose Plaintiffs' motion, the Court will consider her arguments on the merits. Wertheimer argues that the fact that she noted on the Acknowledgment Form that (1) Wertheimer, P.C. was no longer in business, and (2) the summons and complaint were left at a different address than the one to which Plaintiffs purported to mail the papers, means that her return of the form to Plaintiffs did not constitute an acceptance of service by the corporation. Both of these arguments fail.
First, merely informing Plaintiffs that Wertheimer, P.C. was no longer in business did not suffice to inform Plaintiffs that the corporation was refusing to accept service — a corporation which is no longer in business can still be sued. Under Rule 17(b) of the Federal Rules of Civil Procedure, "[t]he capacity of a corporation to sue or be sued shall be determined by the law under which it was organized." Fed.R.Civ.P. 17(b). Wertheimer, P.C. was organized under the laws of New York. (See Certificate of Incorporation.) Under New York law, even a corporation that has been dissolved can be sued. New York's Business Corporations law provides that "[a] dissolved corporation . . . may sue or be sued . . . and process may be served by or upon it." N.Y. Bus. Corp. § 1006(a)(4). Moreover, "a corporation no longer in existence remains responsible for its liabilities until its affairs are fully adjusted." State v. Yonkers Contracting Co., No. 90 Civ. 3779, 1991 WL 12132 at *2 (S.D.N.Y. Jan. 28, 1991) (internal citations omitted). In any event, it is not clear that Wertheimer, P.C. is actually out of business. As of the date of this Report and Recommendation, the New York State Department of State website (http://www.dos.state.ny.us/) lists Wertheimer, P.C. as an active corporation.
Second, in the circumstances of this case, it is irrelevant that the summons and complaint may have been delivered to Wertheimer's home address rather than to Wertheimer, P.C.'s business address. Wertheimer, the sole shareholder, officer and director of Wertheimer, P.C., would be the most likely (and indeed probably the only) proper person to respond to the summons and complaint. Wertheimer received the Acknowledgment Form, which was clearly directed to Wertheimer, P.C. She signed and dated that form, and returned it to Plaintiffs. The form itself stated: "[I]f you do complete and return this form, you (or the party on whose behalf you are being served) must answer the complaint." (See Acknowledgment Form). Not only was the form thus plain on its face regarding the consequences of its return, but Wertheimer is herself an attorney (and, indeed, a litigator), and thus should have well understood that her return of the signed form would be considered acceptance of service for the corporation. Moreover, Plaintiffs fairly relied on the fact that Wertheimer returned the form. Had she not done so, Plaintiffs presumably would have attempted to serve Wertheimer, P.C. in some other manner.
In light of the foregoing, Wertheimer, P.C. should be held to have accepted service. See Tadros v. Pub. Employees Fed'n, No. 94 Civ. 6893, 1995 WL 746371 at *4 (S.D.N.Y. Dec. 15, 1995) (holding that in pro se actions, Rule 4(d) "should be construed liberally . . . to allow courts to find personal service when the parties have received actual notice"). Since Wertheimer, P.C. did not then answer or otherwise respond to the complaint, it is in default, and a default judgment against it should be granted.
The Court is mindful of the fact that "defaults are generally disfavored," Enron, 10 F.3d at 96, and that it is generally preferable to resolve disputes on the merits. See id. at 95. Here, however, the sole question before the Court is whether Wertheimer, P.C. was adequately served. As set forth above, a default judgment is appropriate because Wertheimer, P.C. was properly served and did not answer. Therefore, under Rule 55(a), Plaintiffs are entitled to a default judgment, and I recommend that one be granted, with judgment to be entered in an amount to be determined upon a damages inquest. If Wertheimer, P.C. does wish to appear and defend this action on the merits, it can retain counsel and seek relief from the default judgment under Fed.R.Civ.P. 60(b).
CONCLUSION
For the reasons set forth above, I recommend that a default judgment be entered against Defendant Florrie L. Wertheimer, P.C. in an amount to be determined upon a damages inquest.
Pursuant to 28 U.S.C. § 636 (b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from service of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections, and any responses to objections, shall be filed with the Clerk of Court, with courtesy copies delivered to the chambers of the Honorable Jed S. Rakoff, United States Courthouse, 500 Pearl Street, Room 1340, New York, New York 10007, and to the chambers of the undersigned, United States Courthouse, 40 Centre Street, Room 631, New York, New York, 10007. Any requests for an extension of time for filing objections must be directed to Judge Rakoff. FAILURE TO FILE OBJECTIONS WITHIN TEN (10) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See Thomas v. Am, 474 U.S. 140, 155 (1985); IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir. 1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir. 1992); Wesolek v. Canadair Ltd., 838 F.2d 55, 58 (2d Cir. 1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir. 1983).