Thursday, August 16, 2007

S.D.N.Y. Holds Plaintiff Failed to Show Good Cause For Delay in Effecting Service

Per In re Teligent Services, Inc., --- B.R. ----, 2007 WL 1975444 (S.D.N.Y. Jul 06 , 2007) (NO. 01-12974, 03-03378, 05 CIV 7277 SAS):

Savage sought to serve Wiltel seventeen months after filing the original complaint and thirteen months after the 120 service period had expired. Federal Rule of Civil Procedure 4(m) allows for a plaintiff to serve a defendant after the 120 day service period in certain circumstances. . . .

. . . Savage had the burden of proving good cause for the thirteen month delay in service. In an attempt to do so, Savage claims that Teligent's records did not reflect Wiltel and NextiraOne as distinct entities. Savage only found one vendor number for all the Williams entities. Savage also points out that the various names and addresses on the checks and the overlapping names and roles of each Williams entity accounted for Savage's confusion. Some initial confusion on the part of Savage may have been justified-Savage was responsible for avoiding thousands of payments made by Teligent during the preference period, and each Williams entity's name is fairly similar.

However, the possible confusion by Savage does not excuse a thirteen month delay in service on Wiltel. Three of the checks did have Wiltel's former name on them, four of the checks were addressed directly to Witlel, and all of the checks had Wiltel's address somewhere on the check. Despite Savage's representation to the contrary, it did understand Wiltel to be a separate creditor from NextiraOne. Indeed, Savage was pursuing a separate preference period claim against Wiltel at the time of this action. Using Teligent's records, Savage could have matched the addresses on the checks with Teligent's records to discover that at least four of the five were sent to Wiltel.

Savage simply did not perform a diligent search of the records before serving NextiraOne rather than Wiltel. Early in the proceedings Savage expressed its confusion regarding which Williams defendant to serve for each Preference Period claim, as evidenced by the email communications between Savage and Turner. In its confusion, Savage could have filed for an extension of service under Federal Rules of Civil Procedure 6(b), but it did not do so. Given the record, the Bankruptcy Court did not abuse its discretion in holding that Savage's efforts were unreasonable.

On the other hand, Savage will be prejudiced by the court's decision to dismiss the claim against Wiltel because the statute of limitations has run on Savage's claims against Wiltel. Courts have often attempted to avoid dismissal based on late service where a refiling is prohibited by statute. But the Bankruptcy Court properly balanced this prejudice against Savage's lack of diligence and the prejudice to Wiltel and concluded that the prejudice to Savage did not outweigh these other factors. In short, Savage did not show good cause for delaying proper service on Wiltel for seventeen months.


Post a Comment

<< Home