Serving the Banks: Federal Rule of Bankruptcy Procedure 7004(h)

While the Federal Rules of Bankruptcy Procedure (FRBP) mirror the Federal Rules of Civil Procedure, the two rule sets contain enough significant differences to require a lawyer appearing in bankruptcy court to do a little homework beforehand.

Service of process in both adversary proceedings and contested matters are governed by Bankruptcy Rule 7004, which incorporates, in substantial part, Civil Rule 4. However, Bankruptcy Rule 7004 contains several unique departures from service under Civil Rule 4, including an exclusive method for service of process on an insured depository institution. Bankruptcy Rule 7004(h) states as follows:

Service on an insured depository institution (as defined in section 3 of the Federal Deposit Insurance [FDI] Act) in a contested matter or adversary proceeding shall be made by certified mail addressed to an officer of the institution unless —

(1)   The institution has appeared by its own attorney; in which case the attorney shall be served by first class mail;

(2)   The court orders otherwise after service upon the institution by certified mail of notice of an application to permit service on the institution by first class mail sent to an officer of the institution designated by the institution; or

(3)   The institution has waived in writing its entitlement to service by certified mail by designating an officer to receive service.[1]

When Does Bankruptcy Rule 7004(h) Apply?

Part VII of the FRBP is titled “Adversary Proceedings.” Bankruptcy Rule 7001 further defines the scope of the rules of Part VII by stating that “[a]n adversary proceeding is governed by the rules of this Part VII” and lists 10 different proceedings that are considered adversary proceedings. Despite Bankruptcy Rule 7004(h)’s placement under Part VII, Rule 7004(h), per the text of the rule, applies in both adversary proceedings and contested matters.

Fortunately, an adversary proceeding is easy to spot; it is a lawsuit filed within a bankruptcy case. Accordingly, the adversary proceeding is assigned its own number and is commenced when some party in interest files an adversary complaint against some other party-in-interest.

Likewise, a contested matter is easy to spot. The Advisory Committee Notes to Bankruptcy Rule 9014 states that “whenever there is an actual dispute, other than an adversary proceeding, before the bankruptcy court, the litigation to resolve that dispute is a contested matter.”[2] Accordingly, if there is opposition to a motion,[3] pending before the judge in the main bankruptcy case, that motion is a contested matter.

Finally, Bankruptcy Rule 7004 only applies when serving “an insured depository institution,” as defined in § 3 of the Federal Deposit Insurance Act (the “FDI Act”). The FDI Act defines insured depository institution as “any bank or savings association the deposits of which are insured by the Corporation pursuant to this Act.”[4] Financial institutions typically make known that their deposits are insured by the Federal Deposit Insurance Corp. However, when in doubt, it is a better practice to serve the institution pursuant to Rule 7004.

Navigating the Rule

Bankruptcy Rule 7004(h) states that service on an insured depository institution is effected by certified mail addressed to an officer of the institution, unless one of three provisions apply. First, if counsel for the insured depository institution has made an appearance in the contested matter or adversary proceeding, service might be effected by serving the attorney by first-class mail. Second, service might be effected pursuant to the court’s order, if the court so orders after the movant serves the institution, via certified mail, a notice of an application to permit service on the institution by first-class mail sent to some officer of the institution’s choosing. Finally, service might be effected on an officer designated by the institution, if the institution has waived in writing its entitlement to service by certified mail.

Conclusion

Bankruptcy Rule 7004(h) is unique to the FRBP and may be a surprise to the unwary practitioner. If there is opposition to a filing, either in an adversary proceeding or main bankruptcy case, practitioners can protect themselves by serving insured depository institutions by certified mail on a named officer of the institution.