Strict compliance with Bankruptcy Rule 7004(b)(3) is not required for a complaint to be served effectively, for reasons explained by the Eighth Circuit in an opinion relying in part on the Supreme Court’s Espinosa decision.
A creditor filed a proof of claim, listing its address and suite number in an office building, together with the name of a “managing partner.” Later, the chapter 7 trustee initiated a preference action by serving a summons and complaint on the creditor at exactly the address and suite number shown in the proof of claim. The trustee also put the name of the managing partner on the envelope, which was sent by certified mail, return receipt requested.
Before mailing the papers, the trustee checked with the secretary of state, learning that the creditor’s street address and suite number were exactly the same as the creditor had shown on the proof of claim. However, the secretary of state did not have the name of an authorized agent.
The return receipt came back signed, not by the managing partner but by an employee of the creditor who was not authorized to accept service of process.
The creditor never responded to the complaint. Following proper procedures, including additional notices to the creditor, the bankruptcy court eventually entered a $150,000 judgment by default in favor of the trustee.
Finally awakening after service of the default judgment, the creditor filed a motion to vacate the judgment under Federal Rules 60(b)(4) and (b)(6). The creditor argued that service was invalid and the judgment was void because the creditor had moved to another floor in the same office building before the papers were served. The managing partner had also left the company before the trustee served the papers.
The creditor had failed to update its address with the bankruptcy court and the secretary of state, Circuit Judge James B. Loken said in his December 8 opinion.
The bankruptcy court denied the Rule 60(b) motion, and the district court affirmed. So did Judge Loken.
The principal governing authorities were Bankruptcy Rule 7004(b)(3), Federal Rules 60(b)(4) and (b)(6) and United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010). Regarding the service of a summons and complaint on a domestic corporation, Rule 7004(b)(4) calls for:
mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant.
Made applicable by Bankruptcy Rule 9024, Rule 60(b) governs vacating a judgment. Specifically, Rule 60(b)(4) will vacate a judgment if “the judgment is void.” The creditor submitted that the judgment was void because Rule 7004(b)(3) requires “strict compliance,” and the papers were served on the wrong person and at the wrong address.
Judge Loken said that his circuit has never required “strict compliance.” Rather, he said, the outcome is governed by Espinosa.
Judge Loken quoted Espinosa for the proposition that a judgment is void under Rule 60(b)(4) if it was based on “a jurisdictional error or on a violation of due process that deprives a party of notice or the opportunity to be heard . . . .” Espinosa, supra, 559 U.S. at 270-271. He went on to quote Espinosa for saying that the rule is “generally . . . reserved” only for the “exceptional case” where there was no “arguable basis” for jurisdiction. Id.
Like the two lower courts, Judge Loken ruled that the bankruptcy court “at least” had an arguable basis for jurisdiction. The trustee had sent the papers to exactly the address on the creditor’s claim, and the papers were “actually received” by an employee of the creditor. [Emphasis in original.]
Furthermore, Espinosa says that procedural rules like Rule 7004 are not jurisdictional. Thus, the creditor was not entitled to void the judgment under Rule 60(b)(4).
Similarly, the creditor was not entitled to relief under Rule 60(b)(6), the so-called catchall that can be invoked for “any other reason that justifies relief.”
To begin with, Judge Loken said that Rule 60(b)(4) was not inapplicable. Because the creditor had failed to show “exceptional circumstances,” he affirmed the judgment given that the creditor was not entitled to relief under Rule 60(b)(4) an (b)(6).
Strict compliance with Bankruptcy Rule 7004(b)(3) is not required for a complaint to be served effectively, for reasons explained by the Eighth Circuit in an opinion relying in part on the Supreme Court’s Espinosa decision.
A creditor filed a proof of claim, listing its address and suite number in an office building, together with the name of a “managing partner.” Later, the chapter 7 trustee initiated a preference action by serving a summons and complaint on the creditor at exactly the address and suite number shown in the proof of claim. The trustee also put the name of the managing partner on the envelope, which was sent by certified mail, return receipt requested.
Before mailing the papers, the trustee checked with the secretary of state, learning that the creditor’s street address and suite number were exactly the same as the creditor had shown on the proof of claim. However, the secretary of state did not have the name of an authorized agent.
The return receipt came back signed, not by the managing partner but by an employee of the creditor who was not authorized to accept service of process.