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HOWARD v. KLYNVELD PEAT MARWICK GOERDELER

September 11, 1997

NELLIE HOWARD, Plaintiff, against KLYNVELD PEAT MARWICK GOERDELER, a general partnership, and WILLIAM HANNON and JON MADONNA, individually and as representatives of the class of all partners and principals in Defendant KLYNVELD PEAT MARWICK GOERDELER during the period January 25, 1993 through January 31, 1995, Defendants.


The opinion of the court was delivered by: KRAM

MEMORANDUM OPINION AND ORDER

 SHIRLEY WOHL KRAM, U.S.D.J.

 In this case asserting employment discrimination on the basis of gender and race, defendant Klynveld Peat Marwick Goerdeler ("Klynveld") moves, pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), 12(b)(5), 12(b)(6) and 9(b) to dismiss the complaint of Nellie Howard ("Howard") for lack of subject matter jurisdiction, lack of personal jurisdiction, insufficiency of service of process, failure to state a claim upon which relief may be granted and failure to plead fraud with particularity. In addition, defendants Jon Madonna ("Madonna") and William Hannon ("Hannon") move to dismiss the claims against them pursuant to Federal Rules of Civil Procedure 12(b)(5) and 12(b)(6) based on improper service of process and the duplicative nature of the claims in this action. Alternatively, Madonna and Hannon seek a stay pending arbitration of Howard's claims in the instant action and/or in a related action. Finally, Klynveld seeks sanctions pursuant to Federal Rule of Civil Procedure 11 and all defendants seek sanctions pursuant to 28 U.S.C. § 1927 and the Court's inherent powers. For the reasons set forth below, Klynveld's motion to dismiss for lack of personal jurisdiction is granted. Madonna and Hannon's motion to dismiss because of the duplicative nature of this action is granted. In addition, Klynveld's motion for sanctions pursuant to Rule 11 is granted, and the motions for sanctions pursuant to Section 1927 and the Court's inherent powers are denied.

 BACKGROUND

 In or about March 1993, Howard interviewed for a position in KPMG Peat Marwick's ("Peat Marwick") New York City office. On or about August 6, 1993, Peat Marwick sent Howard a letter in which they offered her a job and described her compensation benefits, her job title and company policies (the "Offer Letter"). On September 20, 1993, Howard commenced employment with Peat Marwick in New York city. On or about November 4, 1993, Howard received a Senior Manager's Agreement dated September 20, 1993 (the "Agreement"), which, like the Offer Letter, described the terms of her employment. The Agreement also contained other clauses not mentioned in the Offer Letter, including, inter alia, an employment at will provision and an arbitration provision.

 The arbitration clause provides:

 
Any claim or controversy between the parties arising out of or relating to this Agreement or the breach thereof, or in any way related to the terms and conditions of the employment of Senior Manager by Peat Marwick, shall be settled by arbitration under the rules of the American Arbitration Association and the laws of the State of New York.

 Agreement, annexed to the affidavit of Deborah A. Keller, dated Nov. 12, 1996, as Exh. "B," at P 11. Sometime in early February 1994, Howard signed and returned the Agreement to Peat Marwick. *fn1"

 On or about October 25, 1994, Howard's employment with Peat Marwick was terminated. According to Howard, Peat Marwick's Chicago office subsequently offered her an employment position. Howard claims that this offer was withdrawn, however, after representatives of Peat Marwick's Chicago office spoke with her supervisors from the New York office.

 On or about February 7, 1996, Howard filed a complaint in this Court against Peat Marwick and her immediate supervisor, Kathy Anderson ("Anderson"), alleging gender and race discrimination, intentional and negligent infliction of emotional distress, negligent supervision, fraud and misrepresentation (the "February 1996 Action"). On April 23, 1996, defendants in the February 1996 Action filed a motion to stay pending arbitration. On October 16, 1996, this Court granted defendants' motion to stay the February 1996 Action pending arbitration of Howard's claims. See Order in Howard v. Anderson and KPMG Peat Marwick, No. 96 Civ. 919, dated Oct. 16, 1996 (the "October 1996 Order"), at 11-15.

 On or about July 17, 1996, while the aforementioned motion was pending, Howard filed the instant action against Klynveld, a Netherlands-based association in the business of setting standards for accounting firms, and Hannon and Madonna, partners of Peat Marwick, alleging claims virtually identical to those alleged in the February 1996 Action. Specifically, Howard alleges the following causes of action: (1) wrongful termination in violation of public policy; (2) fraudulent misrepresentation; (3) intentional infliction of emotional distress; (4) negligent infliction of emotional distress; (5) negligent supervision; (6) race and gender discrimination in violation of the Civil Rights Act of 1866, the New York State Human Rights Law and the New York City Human Rights Law; and (7) race and gender discrimination in violation of Title VII of the Civil Rights Act of 1964.

 DISCUSSION

 I. Service of Process

 Pursuant to Federal Rule of Civil Procedure 12(b)(5), a complaint may be dismissed for insufficient service of process. Once a defendant challenges the sufficiency of service of process, "the burden of proof is on the plaintiff to show the adequacy of service." Blue Ocean Lines v. Universal Process Equip., Inc., 1993 U.S. Dist. LEXIS 14090, No. 93 Civ. 1722, 1993 WL 403961, at *4 (S.D.N.Y. Oct. 7, 1993). Conclusory statements that a defendant was properly served are insufficient to overcome a defendant's sworn affidavit that he was never served with process. Sassower v. City of White Plains, 1993 U.S. Dist. LEXIS 13475, No. 89 Civ. 1267, 1993 WL 378862, at *7 (S.D.N.Y. Sept. 24, 1993).

 Under Federal Rule of Civil Procedure 4(m), the summons and complaint must be served on the defendants within 120 days of plaintiff's filing them. "Among federal courts, there is virtual unanimity that dismissal is mandatory if a defendant is not served within 120 days, unless the plaintiff can show good cause for delay.'" National Union Fire Ins. Co. of Pittsburgh, Pa. v. Sun, 1994 U.S. Dist. LEXIS 11934, No. 93 Civ. 7170, 1994 WL 463009, at *2 (S.D.N.Y. Aug. 25, 1994) (quoting Geiger v. Allen, 850 F.2d 330, 332 (7th Cir. 1988)). In general, "good cause" exists only in exceptional circumstances where the failure to serve process in a timely manner results from circumstances beyond the plaintiff's control. Id. An attorney's inadvertence, neglect, mistake or misplaced reliance does not constitute good cause for the purposes of Rule 4(m). McGregor v. United States, 933 F.2d 156, 160 (2d Cir. 1991).

 A. Hannon

 Howard does not dispute that Hannon has not been properly served in this action. In fact, Howard concedes that she "has never attempted to serve defendant Hannon," because she is "unaware of his address and has been unable to locate him." Pl.'s Mem. of Law, dated Dec. 24, 1996, at 34. Moreover, Howard does not appear to argue that good cause exists for her failure to serve Hannon. *fn2" Rather, Howard contends that Hannon has waived any defenses as to insufficiency of service of process through his participation in these proceedings.

 The defense of improper service may be waived "by failure [to] assert [it] seasonably, by formal submission in a cause, or by submission through conduct." Federal Home Loan Mortgage Corp. v. Dutch Lane Assocs., 775 F. Supp. 133, 136 (S.D.N.Y. 1991) (quoting Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 168, 84 L. Ed. 167, 60 S. Ct. 153 (1939)). Although no specific time limit is specified for raising a defense of improper service of process, such a motion must be raised in a "reasonably timely fashion."Id.

 In the present case, Hannon's participation in the proceedings was limited to (1) the appearance of counsel at a status conference; (2) a letter to the Court confirming defendants' motions to dismiss and suggesting alternatively that the action be stayed until the Court decided the motion in the February 1996 Action; (3) a request for an extension of time to respond to the complaint; and (4) a request for sanctions against plaintiff's counsel filed with the instant motion. These facts, even considered in conjunction, do not constitute the type or extent of involvement which constitutes a waiver of jurisdictional defenses. See Grammenos v. Lemos, 457 F.2d 1067, 1070 (2d Cir. 1972) (taking basic procedural steps, such as appearing, do not constitute a waiver of jurisdictional objections); Elbex Video Kabushiki Kaisha v. Taiwan Regular Elecs. Co., 1994 U.S. Dist. LEXIS 6148, No. 93 Civ. 6160, 1994 WL 185896, at *2-*3 (S.D.N.Y. May 10, 1994) (no waiver of improper service defense where defense participated in teleconferences with court regarding time extensions); Securities Training Corp. v. Securities Seminar, Inc., 633 F. Supp. 938, 939 (S.D.N.Y. 1986) (no waiver of jurisdictional defense where parties participated in settlement negotiations for ten months before defense asserted motion).

 Moreover, throughout this period, Hannon has been consistent in his objections to Howard's service. In their first communication to the Court, defendants stated that the complaint had not been properly served on any defendant. See Letter, dated July 31, 1996, annexed to the Reply Affidavit of John G. Hutchinson, dated Feb. 3, 1997, as Exh. "2." Subsequently, at a conference held on September 18, 1996, defendants again advised the Court that they had not been properly served and thus requested permission to file appropriate jurisdictional motions. In an order dated September 25, 1996, the Court held that defendants had thirty days to file any appropriate motions, including those based on jurisdiction. Given these facts, there is no support for Howard's assertion that the defendants waived their jurisdictional defenses.

 The cases relied upon by Howard are inapposite. In United States v. Int'l Brotherhood of Teamsters, Chauffers, Warehousemen & Helpers of Am., AFL-CIO, 816 F. Supp. 864 (S.D.N.Y. 1992), the court held that defendants had waived their defense of improper service given their "glaring inaction." Id. at 870. Specifically, defendants waited more than a year before bringing a motion pursuant to Rule 12(b)(5), and gave no indication during that period that they objected to the service of process. Id. In addition, during this interim, defendants engaged in settlement negotiations and appeared at an evidentiary hearing. Id. In contrast, Hannon filed the instant motion less than four months after Howard's complaint was filed, and during that period, alerted both the Court and Howard of his objections to service of process.

 Howard's reliance on Lomaglio Assocs. Inc. v. LBK Marketing Corp., 876 F. Supp. 41 (S.D.N.Y. 1995) is similarly misplaced. In that case, the Court found that defendants had waived their 12(b)(5) defense by requesting removal to federal court without simultaneously objecting to personal jurisdiction. In the present case, ...


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