CCUR Aviation Finance, LLC v. South Aviation, Inc.

• Decision Date: 14 July 2021
• Docket Number: 21-cv-60462-BLOOM/Valle
• Parties: CCUR AVIATION FINANCE, LLC and CCUR HOLDINGS, INC., Plaintiffs, v. SOUTH AVIATION, INC. and FEDERICO A. MACHADO, Defendants.
• Court: U.S. District Court — Southern District of Florida

CCUR AVIATION FINANCE, LLC and CCUR HOLDINGS, INC., Plaintiffs, v. SOUTH AVIATION, INC. and FEDERICO A. MACHADO, Defendants.

No. 21-cv-60462-BLOOM/Valle

United States District Court, S.D. Florida

July 14, 2021

OMNIBUS ORDER

BETH BLOOM UNITED STATES DISTRICT JUDGE

THIS CAUSE is before the Court upon Intervenor Plaintiff Metrocity Holdings, LLC's (“Metrocity”) Motion for Leave for Alternate Service of Process by Publication on Defendant Federico Machado, ECF No. [60] (“Motion for Service by Publication”), and its Motion for Extension to Perfect Service of Process on Defendant Federico Machado, ECF No. [85] (“Motion for Extension of Time”). The Court has carefully reviewed each Motion, all related submissions, the record in this case, the applicable law, and is otherwise fully advised. For the reasons set forth below, Metrocity's Motion for Service by Publication is denied consistent with this Omnibus Order, and the Motion for Extension of Time is granted.

I. BACKGROUND

On March 1, 2021, Plaintiffs initiated this action against Defendants South Aviation, Inc. and Federico Machado (“Machado”) (collectively “Defendants”) for fraud and breach of contract. See ECF No. [1]. Specifically, Plaintiffs' allege that they entered into escrow-backed aircraft financing agreements with Defendants and an escrow agent Wright Brothers Aircraft Title Inc., and they paid large deposits pursuant to those agreements that were personally guaranteed by Machado but were never repaid. Notably, Machado has been indicted in the Eastern District of Texas for his role in this Ponzi scheme that defrauded numerous persons and obtained significant amounts of money by way of false and fraudulent representations. Less than a month after Plaintiffs initiated this action, Metrocity moved to intervene, ECF No. [24], which this Court granted, ECF No. [42]. On April 16, 2021, Metrocity filed its Intervenor Complaint, ECF No. [46] (“Intervenor Complaint”), which asserts the following eight counts: Count I - Civil RICO, 18 U.S.C. § 1962; Count II - Conspiracy to Violate Civil RICO, 18 U.S.C. § 1962(d); Count III -Fraud; Count IV - Breach of Contract (2019 Note); Count V - Breach of Contract (2019 Guaranty) - Against Machado; Count VI - Breach of Contract (2020 Note); Count VII - Breach of Contract (2020 Guaranty) - Against Machado; and Count VIII - Unjust Enrichment. See generally id.

Metrocity indicates that it has repeatedly and diligently attempted to personally serve Machado but has been unable to do so. In fact, Machado appears to have fled the country following his criminal indictment, see ECF No. [13-1] at 6-9, and was later arrested and detained in Argentina, see ECF No. [52] at 4. Machado is currently in custody in Argentina awaiting extradition proceedings. Id. As such, Metrocity seeks leave to serve Machado by publication in this district and in the Eastern District of Texas where his criminal case is pending. In light of Machado's fugitive status and the uncertainty surrounding his extradition to the United States, Metrocity seeks a ninety-day extension of time within which to serve Machado.

II. DISCUSSION

A. Service by Publication

Federal Rule of Civil Procedure 4(e) governs service on an individual within a judicial district of the United States, and states in relevant part that:

Unless federal law provides otherwise, an individual-other than a minor, an incompetent person, or a person whose waiver has been filed-may be served in a judicial district of the United States by . . . following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made[.]

Fed. R. Civ. P. 4(e)(1).

As noted above, in requesting leave to serve Machado by publication in this case, Metrocity relies on Florida law (i.e., the state where this Court is located) and Texas law (i.e., the state where service is made) to support its request. Both states permit service by publication.

1. Service by Publication Under Florida Law

Chapter 49 of the Florida Statutes sets forth the requirements for service of process by publication under Florida law. Section 49.011 enumerates fifteen types of cases in which service by publication is permitted. See Fla. Stat. § 49.011. Moreover, § 49.021 states that, “[w]here personal service of process or, if appropriate, service of process under s. 48.194 cannot be had, service of process by publication may be had upon any party, natural or corporate, known or unknown, including ....[a]ny known or unknown natural person[.]” Fla. Stat. § 49.021(1).

“As a condition precedent to service by publication, a plaintiff must file a statement in the action, executed by the plaintiff, the plaintiff's agent, or the plaintiff's attorney, setting forth substantially the matters required under the Florida Statutes, which statement may be contained in a verified pleading, an affidavit, or other sworn statement.” Evanston Ins. Co. v. 88 Spa LLC, No. 8:19-cv-2543-T-23AEP, 2020 WL 5822067, at *1-2 (M.D. Fla. Apr. 13, 2020) (citing Fla. Stat. § 49.031(1)). When the request for service of process by publication is against a natural person, this sworn statement must demonstrate:

(1) That diligent search and inquiry have been made to discover the name and residence of such person, and that the same is set forth in said sworn statement as particularly as is known to the affiant; and

(2) Whether such person is over or under the age of 18 years, if his or her age is known, or that the person's age is unknown; and

(3) In addition to the above, that the residence of such person is, either:

(a) Unknown to the affiant; or

(b) In some state or country other than this state, stating said residence if known; or

(c) In the state, but that he or she has been absent from the state for more than 60 days next preceding the making of the sworn statement, or conceals himself or herself so that process cannot be personally served, and that affiant believes that there is no person in the state upon whom service of process would bind said absent or concealed defendant.

Fla. Stat. § 49.041.

“This constructive service statute is strictly construed against the party who seeks to obtain service of process under it.” Huguenor v. Huguenor, 420 So.2d 344, 346 (Fla. 5th DCA 1982); see also EHR Aviation, Inc. v. Lawson, No. 3:09-cv-210-J-32TEM, 2011 WL 46119, at *2 (M.D. Fla. Jan. 6, 2011) (“Because the statutes that allow for substitute service of process are an exception to the general rule requiring that a defendant be personally served, ‘due process values require strict compliance.'” (quoting Monaco v. Nealon, 810 So.2d 1084, 1085 (Fla. 4th DCA 2002))); Hoffman v. Strobel, No. 3:15-cv-110-J-32MCR, 2016 WL 11110422, at *1 (M.D. Fla. June 6, 2016). As such, the “complaint must allege sufficient facts to show a cause of action for which constructive service is allowed under the statute.” Hugenor, 420 So.2d at 346.

Moreover, “[w]hen a plaintiff seeks service of process by publication, due process demands that an honest and conscientious effort, reasonably appropriate to the circumstances, be made to acquire the information necessary to fully comply with the controlling statutes.” Miller v. Partin, 31 So.3d 224, 228 (Fla. 5th DCA 2010). “In considering whether a plaintiff conducted a diligent search and inquiry, courts must therefore determine ‘whether the plaintiff reasonably employed the knowledge at his or her command, made diligent inquiry, and exerted an honest and conscientious effort appropriate to the surrounding circumstances to acquire the information necessary to enable the plaintiff to effect personal service on the defendant.'” Evanston Ins. Co., 2020 WL 5822067, at *2 (quoting Miller, 31 So.3d at 228).

Metrocity argues that service by publication is permitted in this case because it has asserted claims “[f]or the construction of any will, deed, contract, or other written instrument and for a judicial declaration or enforcement of any legal or equitable right, title, claim, lien, or interest thereunder[.]” Fla. Stat. § 49.011(5). Metrocity also contends that it has satisfied the conditions precedent under § 49.021 and § 49.031 by submitting the Affidavit of Paul J. Battista, Esq. Pursuant to Fla. Stat. § 49.031 and Tex.R.Civ.P. 109, ECF No. [60-1] (“Battista Affidavit”). The Battista Affidavit details Metrocity's repeated and unsuccessful attempts to (1) contact Machado by phone and/or e-mail, (2) personally serve Machado at his last-known residence and speak with his wife, who continues to live at that address, regarding his whereabouts, ^[1] (3) search multiple databases and records in order to locate Machado, and (4) check government forums to ascertain whether he has been registered as being in federal custody upon extradition. See id. ¶¶ 8-11.

Upon review, the Court concludes that permitting service by publication would be improper because this case does not fall within § 49.011 (5). Contrary to Metrocity's belief, it is well established that Florida law does not permit service by publication in an action seeking monetary damages on in personam claims.^[2] As Metrocity seeks monetary damages for, among others, claims for breach of contract and the enforcement of Machado's personal guarantees on Defendants' loans, the request to serve Machado by publication under Florida law is due to be denied.

2. Service by Publication Under Texas Law

Metrocity also contends that service by publication is warranted under Texas law. Texas law generally requires service by personal delivery or by certified mail with a return receipt requested. See Tex.R.Civ.P. 106. “However when a plaintiff has exercised due diligence in attempting to ascertain a defendant's whereabouts, a court may...