Friedman v. Estate of Presser, Nos. 89-3948

• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)
• Writing for the Court: Before KEITH and KRUPANSKY, Circuit Judges, and ENGEL; ENGEL
• Citation: 929 F.2d 1151
• Parties: Allen FRIEDMAN; Nancy J. Logue, Plaintiffs-Appellants (89-3948), Plaintiffs-Appellees (89-4012), v. ESTATE OF Jackie PRESSER; Harold Friedman; International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, Local 507, Defendants-Appellees (89-3948), Estate of Jackie Presser, Defendant-Appellant (89-4012).
• Decision Date: 11 April 1991
• Docket Number: 89-4012,Nos. 89-3948

Page 1151

929 F.2d 1151 19 Fed.R.Serv.3d 653 Allen FRIEDMAN; Nancy J. Logue, Plaintiffs-Appellants
(89-3948), Plaintiffs-Appellees (89-4012),
v.
ESTATE OF Jackie PRESSER; Harold Friedman; International
Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers of America, Local 507,
Defendants-Appellees (89-3948),
Estate of Jackie Presser, Defendant-Appellant (89-4012). Nos. 89-3948, 89-4012. United States Court of Appeals,
Sixth Circuit. Argued Jan. 31, 1991.
Decided April 11, 1991.

Page 1153

Robert J. Vecchio, Vecchio & Schulz, Cleveland, Ohio, and Robert S. Catz (argued), District of Columbia School of Law, Washington, D.C., for plaintiffs-appellants.

John R. Climaco, Paul S. Lefkowitz, Thomas M. Wilson (argued), Climaco, Climaco, Seminatore, Lefkowitz & Garofoli, Cleveland, Ohio, Paul J. Cambria, Jr., William M. Feigenbaum (argued), Lipsitz, Green, Fahringer, Roll, Schuller & James, Buffalo, N.Y., and Thomas A. McCormack (argued), Motta, McCormack, Wolgamuth & Watling, Cleveland, Ohio, for defendants-appellees.

Before KEITH and KRUPANSKY, Circuit Judges, and ENGEL, Senior Circuit Judge.

ENGEL, Senior Circuit Judge.

Allen Friedman and Nancy Logue appeal the district court's September 19, 1989 order overruling their motion for leave to amend this Bivens action, which seeks monetary relief for the violation of Friedman's due process rights and for various related pendent state claims. While plaintiffs claim that Jackie Presser (one of the defendants who allegedly entrapped Friedman in an embezzlement scheme) was an FBI informant and the government withheld exculpatory information at Friedman's prior criminal trial, the district court found that plaintiffs failed to plead any facts of fraudulent concealment from which to find the relevant statute of limitations period tolled in the instant action.

Presser, now the Estate of Presser, cross appeals a portion of the district court's July 28, 1989 order denying its 12(b)(2) and 12(b)(5) motion to dismiss based on lack of personal jurisdiction resulting from insufficient service of process. The Estate claims that plaintiffs' mail service was defective because no acknowledgment form was ever returned as required by Rule 4(c)(2)(C)(ii). Moreover, the Estate argues that personal service was not timely effected under Rule 4(j), and the district court's stay of all proceedings for approximately fifteen months did not toll the 120 day limitations period for such service. For the reasons that follow, we affirm the district court's dismissal of plaintiffs' complaint.

I.

Plaintiff-appellant Allen Friedman ("A. Friedman") is a former vice president of International Brotherhood of Teamsters, Chauffeurs, Wharehousemen and Helpers of America, Local 507 ("Local 507"). In December of 1976, he suffered a massive heart attack, requiring extensive recuperation. He was subsequently offered a position with Local 507 as a "labor consultant" at a weekly salary of $1,000. A. Friedman asserts, however, that during this time he was falsely designated as a "business consultant." Thereafter, defendants Presser (now Estate of Presser or "Estate") and Harold Friedman ("H. Friedman"), ¹ together with unknown federal agents, allegedly formulated a plan to entrap A. Friedman in a "ghost employee" scheme so as to secure his prosecution and conviction for embezzlement of Local 507's funds. In 1981, Local 507 was investigated by the Department of Labor ("DOL") and the Department of Justice ("DOJ"). Pursuant thereto, and allegedly as a result of his false designation as a business agent, A. Friedman was convicted and sentenced to four concurrent three year terms for embezzling union funds.

While in prison, A. Friedman learned from media publicity that Presser may have been an FBI informant and that U.S. agents had withheld exculpatory evidence at his trial. As a result of plaintiff's motion for a new trial and not wishing to divulge information provided by informants,

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on August 26, 1985, the government moved to dismiss the indictment against A. Friedman, which was subsequently granted with prejudice.

On September 15, 1986, attorneys for Presser filed a pretrial discovery motion in United States v. Presser, No. CR-86-114-1 (N.D.Ohio), seeking DOJ documents pertaining to the decision of the government not to turn over exculpatory information to A. Friedman and his attorney at his original criminal trial. Plaintiffs-appellants allege that this was the first time they were able to actually ascertain the plausible existence of a relationship between Presser and the government.

Thereafter, on September 1, 1987, A. Friedman and Nancy Logue ("Logue"), his ex-wife who claims to have suffered emotional distress from A. Friedman's incarceration, brought a Bivens action in district court in Ohio against Presser (now the Estate), H. Friedman, and Local 507. The complaint alleged that defendants violated A. Friedman's due process rights and included pendent state claims for negligence, false arrest and imprisonment, malicious prosecution, loss of consortium and emotional distress. On September 22, 1987, plaintiffs-appellants moved for a stay of all proceedings in this action because of the pending criminal case of United States v. Presser, which involved not only Presser but H. Friedman as well. Although opposed to it, H. Friedman joined in the motion for a stay and at that time put plaintiffs on notice that service of process was defective. The district court granted the stay on November 2, 1987, and subsequently lifted it on March 8, 1989.

In April and May of 1989, each of the three defendants filed a motion to dismiss the complaint for failure to state a claim for relief based on the inapplicability of a Bivens action as against private citizens; the running of the applicable statute of limitations on plaintiffs' Bivens claim; and insufficient service of process. On July 28, 1989, the district court upheld the service of process on defendants, but granted defendants' motion to dismiss, finding that plaintiffs failed to plead any facts of fraudulent concealment from which to find the limitations period tolled. On August 28, 1990, without first pursuing any other procedural steps under Rules 59 or 60, plaintiffs moved to amend their complaint to allege facts of fraudulent concealment. The district court denied the motion, setting forth no reasons for doing so. This timely appeal followed.

II.

Initially we consider the threshold issue of whether the district court correctly held, as a matter of law, that there was sufficient service of process. In comparing the record with H. Friedman's cross-appeal, the particular facts regarding the manner in which plaintiffs served defendants are not in dispute.

Plaintiffs first attempted to serve defendants on September 2 and 3, 1987, pursuant to Rule 4(c)(2)(C)(ii). ² At that time, plaintiffs sent to defendants, by certified mail, a summons and complaint with the required notice and acknowledgment form. Defendants, however, neither signed nor returned the acknowledgment form to plaintiffs.

On October 16, 1987, defendant H. Friedman, in his response to plaintiffs' motion for a stay, placed plaintiffs on notice that service of process was defective:

Harold Friedman denies that he has been duly served with a copy of the plaintiff's summons and complaint, either on September 2 or September 3, 1987 or to date.

Again on April 24, 1989, H. Friedman reiterated his allegation of insufficient service

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of process and requested that the district court issue an order "pursuant to Rules 12(b)(5) and 4(j) of the Federal Rules of Civil Procedure, vacating the plaintiff's purported service of summons and complaint on said defendant on the grounds that it was in violation of Rule 4(c)(2)(C)(ii)." Likewise, the other two defendants, the Estate and Local 507, moved the court on May 1, 1989 to dismiss the complaint for insufficient service of process.

On April 27 and 28, 1989, over 600 days after the original complaint was filed, plaintiffs properly served defendants by personal service. Under Rule 4(j), which the Estate relies on in arguing that there was insufficient service of process, a plaintiff is required to serve the defendant(s) within 120 days from the filing of the complaint or the court must dismiss the action, unless the plaintiff demonstrates good cause. ³ One of plaintiffs' arguments below ⁴ was that defendants were fully aware of their complaint by way of the mailed service effected in early September of 1987, and as evidenced by the pleading subsequently filed by H. Friedman in October of 1987. Therefore, plaintiffs contended defendants were properly served back in September of 1987, well within the 120-day period required by Rule 4(j).

The district court agreed with plaintiffs' argument and stated that "although plaintiff's original service was technically defective, all defendants had actual knowledge of this action and have not been prejudiced by the delay in service." For the great majority of courts, however, actual knowledge of the law suit does not substitute for proper service of process under Rule 4(c)(2)(C)(ii). See, e.g., United States v. Gluklick, 801 F.2d 834, 836 (6th Cir.1986) ("The courts, consistent with the legislative history, have held that the defendant's failure to acknowledge service renders such service invalid....") (citation omitted); Geiger v. Allen, 850 F.2d 330, 332 n. 3 (7th Cir.1988) ("The rule in this and other circuits is that service by mail is not complete until an acknowledgment is filed with the court."); Worrell v. B.F. Goodrich, Co., 845 F.2d 840, 841 (9th Cir.1988) (virtually every court that has examined the rule has concluded that service fails unless defendant returns acknowledgment form); Stranahan Gear Co., Inc. v. NL Indus., Inc., 800 F.2d 53, 57-58 (3rd Cir.1986); Armco, Inc. v. Penrod-Stauffer Bldg. Sys., Inc., 733 F.2d 1087, 1088-89 (4th Cir.1984).

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