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United States v. Estate of Machat

September 21, 2009

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ESTATE OF MARTIN J. MACHAT, ET AL., DEFENDANTS.



The opinion of the court was delivered by: John G. Koeltl, District Judge

MEMORANDUM OPINION AND ORDER

This is an action by the Government to recover taxes allegedly not paid by the estate of Martin Machat. The Government seeks to collect the allegedly unpaid taxes from the fiduciaries, beneficiaries, and transferees of the estate. The Government brought this motion for alternative service, requesting that this Court declare valid nunc pro tunc service of process upon (1) defendant Avril Giacobbi ("Giacobbi") individually and on behalf of defendant Estate of Martin J. Machat ("the Estate"), and (2) defendant Steven Machat ("Machat"). Giacobbi served as co-executor and was a beneficiary of the Estate. (Am. Compl. ¶ 12.) Machat was a beneficiary of the Estate. (Am. Compl. ¶ 16.) The Government also asks this Court in the alternative, to authorize service of process by alternative means. Giacobbi opposes the motion and moves to dismiss for lack of personal jurisdiction and for lack of proper service. Machat has not responded to the motion.

I.

Unless otherwise stated, the following facts are accepted as true for the purpose of these motions.

Harvey Corn ("Corn") was appointed Temporary Administrator of the Estate on July 8, 1988 by the New York State Surrogate's Court and probate proceedings in Connecticut were stayed in favor of the New York proceedings. (Def.'s Reply Ex. B; Am. Compl. ¶ 23.) On March 30, 1995 Giacobbi and Eric Sklar were appointed Co-Executors of the Estate by the Connecticut Probate Court. (Am. Compl. ¶ 24.) Giacobbi, a citizen of Ireland, has no residence in the United States. (Decl. of Avril Giacobbi ¶ 2, May 29, 2009 ("Giacobbi Decl.").)

On or before April 18, 1995, Giacobbi met with Corn to discuss the Estate's affairs. (Decl. of Natalie Kuehler Ex. 6, July 2, 2009 ("Kuehler July 2 Decl.").) Giacobbi made arrangements to retrieve Estate files from Corn's office in New York on May 31, 1995. (Kuehler July 2 Decl. Ex. 7.)

An agreement was made in February 2002 to settle objections to the petition for an accounting filed by Corn in the New York State Surrogate's Court. (Decl. of Natalie Kuehler Ex. B, Decree Settling Final Accounting, June 12, 2009, ("Kuehler June 12 Decl."); Am. Compl. ¶ 56.)*fn1 The objections included those filed in New York State Surrogate's Court by Giacobbi as Co-Executor and named distributee. (Kuehler July 2 Decl. Ex. 8.) Giacobbi consented to the entry of the settlement decree in New York State Surrogate's Court. (Kuehler June 12 Decl. Ex. B, Decree Settling Final Accounting at ¶ 4.) The settlement contained an agreement to make several payments from the Estate, including $425,000 paid to Giacobbi by check from funds held in New York. (Kuehler June 12 Decl. Ex. A; Kuehler July 2 Decl. Exs. 10-14; Am. Compl. ¶ 57.d.) Giacobbi paid $400,000 of these funds to herself as reimbursement for funds advanced to the Estate to pay legal costs. (Kuehler June 12 Decl. Ex. C; Kuehler July 2 Decl. Ex. 24; Am. Compl. ¶ 57.d.) Giacobbi never filed an accouting in the Connecticut Probate Court of her handling of the funds. (Am. Compl. ¶ 57.d.)

As of August 28, 2008 the Estate owed $1,631,264.94 in unpaid estate tax liability and $1,332,491.04 in unpaid 1989 federal income tax, including interest, penalties, and lien fees. (Am. Compl. ¶¶ 39, 49.) The relevant tax returns were filed while Corn was the Estate Executor. (Kuehler July 2 Decl. Exs. 2-3.) The Government now seeks to collect the unpaid taxes from the fiduciaries, beneficiaries, and transferees of the estate.

The Government filed the initial complaint in the present case on September 11, 2008. Since that time, the Government has dutifully, but unsuccessfully, attempted to serve process on both Giacobbi and Machat.

Pursuant to the Hague Convention on the Service Abroad of Judicial and Extra-judicial Documents in Civil or Commercial Matters, Nov. 15, 1965, 20 U.S.T. 361 ("the Hague Convention"), the Government attempted to serve Giacobbi in London, England, her last known address. See also Fed. R. Civ. P. 4(f)(1) (authorizing "any internationally agreed means of service that is reasonably calculated to give notice", such as those authorized by the Hague Convention). The Government's service request was accepted by British authorities, who made several attempts to serve Giacobbi. (Decl. of Tara La Morte Ex. 1, Apr. 21, 2009 ("La Morte Apr. 21 Decl.").) These attempts were not successful because British authorities were unable to ascertain whether Giacobbi continued to reside at her last known address. (La Morte Apr. 21 Decl. Ex. 1.) A search of public documents revealed a possible address for Giacobbi in France, and the Government also unsuccessfully attempted to serve her there pursuant to the Hague Convention. (Kuehler July 2 Decl. Ex. 1.)

The Government learned that attorney Richard Kestenbaum had been in touch with Giacobbi regarding assets of the Estate, although Giacobbi prohibited Kestenbaum from revealing her location and he was not authorized to accept service of process on her behalf. (La Morte Apr. 21 Decl. Ex. 3.) As a result of a Government subpoena, Kestenbaum did arrange email contact with Giacobbi and she indicated her unwillingness to share her contact information publicly. (La Morte Apr. 21 Decl. Ex. 3; Decl. of Tara La Morte Ex. A, Apr. 14, 2009 ("La Morte Apr. 14 Decl.").) While several emails were exchanged between the Government and Giacobbi by using this address, Giacobbi represents that the email address was lent to her by a friend. (La Morte Apr. 14 Decl., Apr. 14, 2009; Giacobbi Decl. ¶¶ 5-6.) On March 5, 2009 the Government sent Giacobbi the complaint and other papers by email and asked that she waive formal service of process. (La Morte Apr. 14 Decl. Ex. B.) In response, Giacobbi initially indicated that she would sign the waiver of process and return it as instructed, but subsequently asked for clarification. (La Morte Apr. 14 Decl. Exs. D-E.) Attorney John Shaban, representing Giacobbi, later notified the Government that Giacobbi would no longer sign the waiver of service of process. Shaban advised the Government that he was not authorized to accept service of process for Giacobbi, and that Giacobbi does not reside in the United States. (Pl.'s Mem. in Supp. of Mot. for Alternative Service 3.)

The Government additionally served the Judge of the Court of Probate District of Greenwich, Connecticut, who Giacobbi, as a non-resident executor of the Estate, had appointed as her agent for service of process for matters concerning her duties as Estate fiduciary. (La Morte Apr. 21 Decl. Ex. 5; Certificate of Service, Docket No. 42.)

In the case of Machat, the Government unsuccessfully sent professional process servers to seven New York and California addresses that were believed to be Machat's potential addresses. (La Morte Apr. 21 Decl. Ex. 6.) Family members have identified London, England as Machat's current location. (La Morte Apr. 21 Decl. Exs. 7-8.) Three family members independently provided the Government with the same email address for Machat, and two of them have successfully communicated with Machat at that address. (La Morte Apr. 21 Decl. Exs. 8-9.) The Government emailed the service of process documents to this address on January 8, 2008, but has not received a reply from Machat. (Decl. of Robert Yalen ΒΆ ...


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