Trilliant Funding, Inc., as Plan Administrator of v. Marengere

UNITED STATES BANKRUPTCY COURT 	FOR PUBLICATION
SOUTHERN DISTRICT OF NEW YORK
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In re 	Chapter 11
BOZEL S.A. et al.,, 	Case No. 10-11802 (SHL)
Debtors. 	(Confirmed)
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TRILLIANT FUNDING, INC.,
as Plan Administrator of Bozel S.A.
and Bozel LLC.,
Plaintiff,
vs. 	Adv. Pro. No. 13-01098 (SHL)
MICHEL MARENGERE
Defendant.
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MEMORANDUM OF DECISION GRANTING MOTION TO DISSMISS
A P P E A R A N C E S :
RICH MICHAELSON MAGALIFF MOSER, LLP
Counsel for Trillian Funding, Inc., as Plan Administrator
335 Madison Avenue, 9th Floor
New York, New York 10017
By: 	Robert N. Michaelson, Esq.
Eric T. Moser, Esq.
BACKENROTH, FRANKEL & KRINSKY, LLP
Counsel for Michel Marengere
800 Third Avenue, 11th Floor
New York, New York 10022
By: 	Scott Krinsky, Esq.
SEAN H. LANE
UNITED STATES BANKRUPTCY JUDGE
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Before the Court is the motion of Michel Marengere (the “Defendant”) to dismiss this
adversary proceeding for insufficient service of process. As more fully explained below, the
motion is granted because Trilliant Funding, Inc. (“Trilliant” or the “Plaintiff”) failed to exercise
reasonable due diligence in serving the Defendant by waiting 25 months after the filing of the
complaint and almost sixteen months after a deadline set by the Court.
BACKGROUND
This adversary proceeding arises from the voluntary petitions of Bozel S.A. and Bozel
LLC (together, the “Debtors”) for relief under Chapter 11 of the Bankruptcy Code. Compl. ¶ 5
[ECF No. 1].1 On February 9, 2012, the Court confirmed the Debtors’ Amended Joint Plan of
Liquidation (the “Plan”). Compl. ¶ 7. Trilliant serves as the plan administrator under the Plan,
and is thereby authorized to commence and prosecute certain actions on behalf of the Debtors.
Compl. ¶ 9.
On January 4, 2013, Trilliant brought this action against the Defendant—a former
executive of the Debtors—to recover funds allegedly misappropriated by him from Bozel LLC
and for monetary damages for his alleged breach of fiduciary duties. Compl. ¶¶ 1, 13, 17. The
Defendant asserts that for the last 32 years he has resided at 29 Montee Du Golf, Lac Beauport,
Quebec G3B 0K3 (the “Quebec Address”). Aff. of Michel Marengere ¶ 2 (the “Marengere
Aff.”) [ECF No. 15-18]. Several documents exist indicating that both the Debtors and Trilliant
were on notice during the bankruptcy proceeding that this was the Defendant’s address. See Ex.
A-G to Decl. of Scott Krinsky (the “Krinsky Decl.”) [ECF Nos. 15-3 through 15-9]. For
example, the Defendant identified the Quebec Address as his home address when he appeared
1 	Unless otherwise noted, all Case Management/Electronic Case Files (“ECF”) references are to Adversary
Proceeding No. 13-01098.
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for a deposition in the bankruptcy case in November 2011, more than a year before Trilliant
brought this action against him. See Ex. E to Krinsky Decl. [ECF No. 15-7].
On April 16, 2013, Trilliant filed an application to, inter alia, extend time to serve the
summons and complaint on the Defendant. See Ex. J to Krinsky Decl. [ECF No. 15-12]. On
May 2, 2013, the Court approved the application and entered an Order Extending Time to
Effectuate Service (the “Service Order”). See Ex. K to Krinsky Decl. [ECF No. 15-13]. The
Service Order stated in relevant part that “the time in which the Plan Administrator must effect
service upon any defendant not previously served in connection with [the instant case] be and
hereby is extended by one-hundred-eighty (180) days[,]” thereby setting a service deadline of
October 29, 2013. See id.
In August 2013, a process server hired by Trilliant reported that the Defendant’s wife had
lived at the Quebec Address, but it was currently “empty and listed for sale.” Ex. 2 to Decl. of
Eric T. Moser (the “Moser Decl.”) [ECF No. 21-3]. In early September 2013, an investigator
hired by Trilliant noted that “there was no movement on the property.” Ex. 3 to Moser Decl.
[ECF No. 21-4]. 2 In the summer of 2014, Trilliant called the Defendant’s counsel, Mark
Frankel, regarding the Defendant’s whereabouts. Moser Decl. ¶ 5 [ECF No. 21]. Trilliant
asserts that Mr. Frankel stated he “did not know, or have any documents that would show, Mr.
Marengere’s current location.” Id. Trilliant hired yet another investigator, who confirmed in
2015 that the Defendant was at his Quebec Address and finally served him there on February 20,
2015. Plaintiff’s Brief in Opposition to Motion to Dismiss at 5 [ECF No. 20].
2 	Trilliant asserts that it subsequently hired another investigator who was also unable to locate the Defendant.
See Plaintiff’s Brief in Opposition to Motion to Dismiss at 4 [ECF No. 20]. But Trilliant provides no information on
when this took place, what investigator was hired, and what actions this investigator took on behalf of Trilliant. See
id.
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DISCUSSION
The Defendant moves to dismiss Trilliant’s complaint for insufficient service of process
under Federal Rules of Civil Procedure 12(b)(2), (4) and (5), made applicable through Federal
Rule of Bankruptcy Procedure 7012(b). Federal Rule of Civil Procedure 4(m), made applicable
through Federal Rule of Bankruptcy Procedure 7004, requires the dismissal of an action if
service of the summons and complaint is not made upon a defendant within 120 days of the
filing of the complaint. Fed. R. Civ. P. 4(m). 3 The aim of this 120-day time limit “is to foster
‘diligent prosecution of civil cases.’” Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Sun, 1994
WL 463009, at *3 (S.D.N.Y. Aug. 25, 1994) (quoting Tillman v N.Y. State Dep’t of Mental
Health, 776 F. Supp. 841, 843 (S.D.N.Y. 1991)).
The explicit language of Rule 4(m), however, states that the 120-day time limit does not
apply to service in a foreign country under Rule 4(f) or Rule 4(j)(1). Fed. R. Civ. P. 4(m). But a
plaintiff does not have unlimited time to serve a defendant in a foreign country. See Yellowave
Corp. v. Mana, 2000 WL 1508249, at *2 (S.D.N.Y. Oct. 11, 2000). “[W]here service is in a
foreign country, the [c]ourt uses a flexible due diligence standard to determine whether service
of process was timely.” Id. (quoting Travers Tool Co. v. S. Overseas Express Line, Inc., 2000
WL 194781, at *1 (S.D.N.Y. Feb. 17, 2000)). Under this standard, courts will allow a plaintiff to
serve a foreign defendant “within a reasonable time.” Savage & Assocs., P.C. v. Banda 26, S.A.
(In re Teligent, Inc.), 2004 WL 724945, at *3 (Bankr. S.D.N.Y. Mar. 30, 2004) (citing Official
Comm. of Unsecured Creditors of Southold Dev. Corp. v. Mittemyer (In re Southold Dev. Corp.),
148 B.R. 726, 730 (E.D.N.Y. 1992)). Courts will generally refuse to dismiss cases for a short
3 	Fed. R. Civ. P. 4(m) was amended on April 29, 2015, to reduce the presumptive time for serving a
defendant from 120 days to 90 days. This amendment became effective on December 1, 2015, after the events
underlying this motion and the filing of the complaint. The Court therefore refers to the 120-day time limit.
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delay in service, absent a showing by the defendant of hardship or prejudice. In re Teligent,
2004 WL 724945, at *3; see also In re Southold, 148 B.R. at 730 (“Under this flexible due
diligence standard, courts generally refused to dismiss cases where the delay was in the range of
two or three months unless that delay caused the defendants hardship or prejudice.”) (collecting
cases).
In assessing the flexible due diligence standard, courts are mindful of the rationale behind
Rule 4 to “provid[e] for the prompt movement of civil actions in the federal courts.”
Crysen/Montenay Energy Co. v. E & C Trading Ltd. (In re Crysen/Montenay Energy Co.), 166
B.R. 546, 552 (S.D.N.Y. 1994). Indeed, before Rule 4(m)’s 120-day time limit was adopted in
1983, courts applied the same flexible due diligence standard to all questions about the
timeliness of service. See Montalbano v. Easco Hand Tools, Inc., 766 F.2d 737, 740 n.6 (2d Cir.
1985); In re Southold, 148 B.R. at 730.
Additionally, in considering whether a plaintiff has shown “good cause” for delay in
serving a foreign defendant, some courts have examined “(1) the reasonableness and diligence of
plaintiff’s efforts to serve; and (2) the prejudice to defendants from the delay.” In re
Crysen/Montenay, 166 B.R. at 553 (citing Bloomer v. City of New York, 1994 WL 92388, at *4
(E.D.N.Y. Mar. 3, 1994)); Gordon v. Hunt, 835 F.2d 452, 453 (2d Cir. 1987)); see also Papst
Licensing GMBH & Co. KG v. Sunonwealth Elec. Machine Ind. Co., 2004 WL 1977441, at *8
(N.D. Ill. Aug. 27, 2004) (“The ‘flexible due diligence’ standard is measured by the
reasonableness of the plaintiff’s effort as well as the prejudice to the defendant from any
delay.”).
The Second Circuit has “held inapplicable the foreign country exception to Federal Rule
of Civil Procedure 4(m)’s 120-day time limit for service where a party did not attempt service
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within the 120-day limit and ‘ha[d] not exactly bent over backward to effect service.’” DEF v.
ABC, 366 F. App’x 250, 253 (2d Cir. 2010) (quoting Montalbano, 766 F.2d at 740); see also
DHL Glob. Forwarding Mgmt. Latin Am. v. Pfizer, Inc., 2014 WL 5169033, at *5 (S.D.N.Y. Oct.
14, 2014) (stating that plaintiff had failed to show good cause where action had been pending for
almost a year, but plaintiff had not attempted to serve foreign defendants in an authorized
manner within the 120-day time limit of Rule 4(m)).
Applying the flexible due diligence standard here, the Court finds that Trilliant’s service
on the Defendant was untimely because Trilliant’s efforts at service and the resulting delay were
not reasonable. The Defendant was not served until more than two years after the complaint was
filed. See In re Southold, 148 B.R. at 730 (plaintiff failed to show it acted with due diligence in
failing to attempt to serve foreign defendant within 120 days of filing complaint to save money
during settlement negotiations); In re Crysen/Montenay, 166 B.R. at 553 (the passage of 14
months before plaintiff attempted service precluded a finding of diligence). 	Of particular
relevance is Trilliant’s failure to serve the Defendant by the October 21, 2013 deadline set in the
Service Order. Even though this deadline was established at Trilliant’s request, Trilliant appears
to have made no attempt to satisfy the deadline or seek a further extension. While there are no
strict deadlines under Rule 4 for service of a foreign defendant, it is not reasonable for the
Plaintiff to invoke the Court’s authority to issue an order on foreign service and then proceed to
completely ignore the deadline in the resulting order. Cf. United States v. Seltzer, 227 F.3d 36,
39-42 (2d Cir. 2000) (courts have inherent power to impose respect for its lawful mandates).
Indeed, Plaintiff failed to accomplish service for almost another sixteen months after the deadline
in the Service Order passed. The Court concludes that such conduct cannot satisfy the flexible
due diligence standard.
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Moreover, nothing in the record demonstrates a sufficient cause for Plaintiff’s failure to
honor the Court ordered deadline or to seek a further extension. Trilliant relies upon several
steps it took to effectuate service, but there are large gaps in the record where seemingly nothing
took place. For instance, Trilliant cites to the report by a process server issued in August 2013,
almost eight months after the filing of the complaint, as well as the report of an investigator one
month later. But after September 2013, the record is silent as to any specifics about its service
efforts for another ten months, when the Plaintiff’s counsel placed a call to the Defendant’s
counsel. See supra note 2. At that point, more than a year had passed since the Plaintiff
obtained an order extending service. After the call with the Defendant’s counsel, another five
months passed before the Defendant was actually served. Even where prior steps are taken to
effectuate service on a foreign defendant, courts have held that the failure to take further steps
makes the subsequent passage of time unreasonable. See Papst Licensing, 2004 WL 1977441, at
*8 (despite promptly initiating procedure required to serve process in Taiwan, plaintiff failed to
explain how subsequent 16 month delay was reasonable); In re Crysen/Montenay, 166 B.R. at
551, 553 (despite plaintiff’s claim that it was confirming foreign address and preparing
groundwork for service via letters rogatory, lack of diligence still found for 14 month delay
which transpired before plaintiff attempted to perfect service by filing application for letters
rogatory). Trilliant does not adequately explain its failure to act by the deadline set in the
Service Order or justify its 17 month delay in service after the investigator’s report in September
2013.4 Moreover, nothing prevented the Plaintiff from seeking a further extension for service if
its investigation had grown cold.
4 	Trilliant’s position is further undermined by the fact that the Defendant was eventually served at his stated
address, an address he lived at for 32 years and testified was his residence two years before the filing of this action.
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The Court further finds that the passage of such an extensive period of time prejudices
the Defendant, as the underlying facts occurred years ago and the discovery deadlines set by the
Court in this adversary proceeding have long since passed. See Pretrial Scheduling Order [ECF
No. 10]. Trilliant argues that any prejudice to the Defendant was caused by his own evasion of
service, but they have not established that the Defendant purposely attempted to avoid being
served.
CONCLUSION
For the foregoing reasons, the complaint against the Defendant is dismissed. The
Defendant should settle an order on five days’ notice. The proposed order must be submitted by
filing a notice of the proposed order on the Case Management/Electronic Case Filing docket,
with a copy of the proposed order attached as an exhibit to the notice. A copy of the notice and
proposed order shall also be served upon counsel to Trilliant.
Dated: New York, New York
April 14, 2016
/s/ Sean H. Lane
UNITED STATES BANKRUPTCY JUDGE
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