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In re Bozel S.A.

United States District Court, S.D. New York

July 25, 2017

In re BOZEL S.A., et al., Debtors.
v.
MICHEL MARENGERE, Appellee. TRILLIANT FUNDING, INC., as Plan Administrator of Bozel S.A. and Bozel LLC, Appellant

          OPINION AND ORDER

          ANDREW L. CARTER, JR., United States District Judge

         This is an appeal by the Plan Administrator Trilliant Funding, Inc. ("Trilliant" or "Appellant") from a Memorandum Decision Granting Motion to Dismiss (the "Decision")[1], issued April 14, 2016, and a corresponding Order, entered on May 17, 2016. The bankruptcy court dismissed the adversary proceeding instituted by Trilliant against Michel Marengere ("Marengere" OR "Appellee") for insufficient service of process. For the reasons that follow, the Court affirms the order dismissing the proceeding.

         BACKGROUND

         Unless otherwise noted, the following facts are taken from Bankruptcy Judge Sean Lane's Decision. Bozel S.A. and Bozel LLC (together, the "Debtors") filed voluntary petitions under Chapter 11 of the Bankruptcy Code. On January 4, 2012, Trilliant, as Plan Administrator under the Bankruptcy Plan, brought suit against Marengere, a former executive of the Debtors. Trilliant sought damages based on Marengere's alleged misappropriation of the Debtors' assets.

         On April 16, 2013, Trilliant filed an application seeking an extension of time to effectuate service of process with respect to a number of foreign defendants, including Marengere. Several documents in the bankruptcy proceedings indicated that Marengere resided at 29 Montee Du Golf, Lac Beauport, Quebec G3B 0K3 (the "Quebec Address"). A. 74-128.[2] In its application, Trilliant noted that the 120-day limitation set forth in Fed.R.Civ.P. 4(m) does not apply to service of individuals in a foreign country and thus "sought an extension with regard to these individual defendants to the extent that he might be able to make service upon them within j this United States." A. 40-41. On May 2, 2013, the Court approved the application and extended the time to serve on any defendant not previously served by 180 days, setting a service deadline for October 29, 2013.

         In a letter dated August 7, 2013, a process server hired by Trilliant reported that Marengere's wife resided at the Quebec Address but that the residence was "empty and for sale." In a report dated September 4, 2013, an investigator hired by Trilliant reported that "there was no movement on the property." At a conference held on December 13, 2013, Trilliant's counsel told the bankruptcy court that Marengere was "in Canada" and "actively evading service, " but that he could eventually be located. A. 340-341. In the summer of 2014, Trilliant's counsel called Marengere's counsel, inquiring about Marengere's location. Marengere's counsel stated that he did not know where Marengere was or have any documents showing his location. Finally, Trilliant hired yet another investigator, who confirmed Marengere's residence at the Quebec Address. Trilliant then had Marengere served at the Quebec Address by the Canadian authorities on February 20, 2015.

         On April 25, 2015, Marengere moved to dismiss the complaint based on insufficient service of process. Oral argument was held on July 28, 2015. The bankruptcy court dismissed the complaint, holding that "Trilliant's efforts at service and the resulting delay were not reasonable" and the resulting delay in service prejudiced Marengere. Decision, 549 B.R. at 450.

         STANDARD OF REVIEW

         District courts have jurisdiction over appeals from final orders of the bankruptcy courts pursuant to 28 U.S.C. § 158(a). The bankruptcy court's decision to dismiss the complaint for untimely service of process is reviewed for abuse of discretion. Meilleur v. Strong, 682 F.3d 56, 61 (2d Cir. 2012). "A district court has abused its discretion if it has (1) based its ruling on an j erroneous view of the law, (2) made a clearly erroneous assessment of the evidence, or (3) s rendered a decision that cannot be located within the range of permissible decisions." Lynch v. City of New York, 589 F.3d 94, 99 (2d Cir. 2009). This Court reviews the bankruptcy court's findings of fact under a clearly erroneous standard and reviews conclusions of law de novo. In re Hyman, 502 F.3d 61, 65 (2d Cir. 2007).

         DISCUSSION

         Upon review of the record, this Court has determined that the bankruptcy court correctly applied the flexible due diligence standard and did not abuse its discretion in dismissing the j proceeding for untimely service of process.

         Rule 4(m) of the Federal Rules of Civil Procedure, made applicable through Fed.R.Bankr.P. 7004, allows 120 days to serve a defendant before dismissal of the action is required. Fed.R.Civ.P. 4(m).[3] However, the text of Rule 4(m) provides that the 120-day limit does not apply to service in a foreign country. Id; see Lozano v. Bosdet, 693 F.3d 485, 488 (5th Cir. 2012). In this Circuit, the foreign country exception to Rule 4(m) does not apply unless a plaintiff makes no attempt to begin service on a foreign defendant within 120 days. See USHA (India), Ltd. v. Honeywell Int'l Inc., 421 F.3d 129, 133-34 (2d Cir. 2005); see also Moreira v. Ministerio de Exonomia y Production de la Republica Argentina, No. 10 Civ. 266 (LTS)(KNF), Order at 3 (S.D.N.Y. May 27, 2011) ("exemption from Rule 4(m) requires reasonable good faith effort by a plaintiff to serve the international defendant within 120 days").

         When the foreign country exception does apply, the court "use[s] a flexible due diligence standard to determine whether service of process was timely." Bur da Media, Inc. v. Blumenberg, No. 97 Civ. 7167(RWS), 2004 WL 1110419, at *5 (S.D.N.Y. May 18, 2004) (quoting Trovers Tool Co. v. Southern Overseas Express Line, Inc., 98 Civ. 8464, 2000 WL 194781, at *1 (S.D.N.Y. Feb. 17, 2000)), aff'd, 417 F.3d 292 (2d Cir. 2005). The plaintiff has the burden of proof in showing that it exercised due diligence in not timely serving the defendant. See AIG Managed Market Neutral Fund v. Askin Capital Management, L.P., 197 F.R.D. 104, 108 (S.D.N.Y. 2000). Under this standard, the court assesses the reasonableness of j the plaintiffs efforts and the prejudice to the defendant from any delay. Gordon v. Hunt, 116 F.R.D. 313, 319 (S.D.N.Y. 1987) (citing Lyell Theater Corp. v. Loews Corp., 682 F.2d 37, 42-43 (2d Cir. 1982)) ("A finding of lack of due diligence depended on two factors: first, whether the delay was 'unreasonable' or 'moderate or excusable, ' and second, if the delay fell into the latter category, whether the delay in service had caused 'actual prejudice' to the defendant."); see also In re Crysen/Montenay, 166 B.R. 546, 553 (Bankr. S.D.N.Y. 1994); U.S. ex rel Thomas v. Siemens AG, 708 F.Supp.2d 505, 522 (E.D. Penn. 2010); Papst Licensing GMBH & Co. KG v. Sunonwealth Elec. Machine Ind. Co., 332 F.Supp.2d 1142, 1151 (N.D. Ill. 2004).[4]

         Here, the foreign policy exception to 4(m) applies. Trilliant began the process of serving Marengere within the initial 120 days by requesting an extension of time for service of process and representing in the application that a process server or local agent was working on service. See Nylok Corp v. Fastener World Inc.,396 F.3d 805, 807 (7th Cir. 2005) (finding plaintiff attempted service when he hired a process server); Moreira, No. 10 Civ. 266, Order at 3 (contracting with process server constituted attempt at service). In Bur da Media, the district court held that the foreign service exception applied because plaintiff attempted service domestically before requesting two extensions of the time limit to serve, where there was uncertainty surrounding whether service would take place domestically or internationally. 2004 WL 1110419, at *6. Similarly, Trilliant's request for an extension in light of that same uncertainty about the location of service constituted an attempt. Id. ("While [plaintiff] may have known the address of [defendant's home] since 1996, it does not follow that [plaintiff] knew that [defendant] would be present there at the time [plaintiff] sought to effect service."). Further, within the additional 180 day extension, there were additional steps ...


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