In re International Telemedia Associates, Inc.

• Decision Date: 15 February 2000
• Docket Number: Bankruptcy No. 98-75533 SWC. Adversary No. 99-6233.
• Citation: 245 BR 713
• Parties: In re INTERNATIONAL TELEMEDIA ASSOCIATES, INC., Debtor. Herbert C. Broadfoot II, As Chapter 7 Trustee, Plaintiff, v. Arjuna Diaz, Kevin Frace, Diane Shepard, Gerard Engel, Dennis Howe, Karen Pettifer, and Norman Klugman, Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

245 B.R. 713 (2000)

In re INTERNATIONAL TELEMEDIA ASSOCIATES, INC., Debtor Herbert C. Broadfoot II, As Chapter 7 Trustee, Plaintiff, v. Arjuna Diaz, Kevin Frace, Diane Shepard, Gerard Engel, Dennis Howe, Karen Pettifer, and Norman Klugman, Defendants.

Bankruptcy No. 98-75533 SWC. Adversary No. 99-6233.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

February 15, 2000.

COPYRIGHT MATERIAL OMITTED

William C. Humphreys, Jr., Alston & Bird LLP, Atlanta, GA, for plaintiff.

Arjuna Diaz, defendant pro se.

ORDER

STACEY W. COTTON, Chief Judge.

Pursuant to Federal Rule of Civil Procedure 55, as incorporated by Federal Rule of Bankruptcy Procedure 7055, Plaintiff Herbert C. Broadfoot II, Chapter 7 Trustee ("Trustee") for International Telemedia Associates, Inc. ("ITA," "Company," or "Debtor") has moved this Court for entry of judgment by default against Defendant Arjuna Diaz ("Diaz"). Defendant Diaz failed to answer or otherwise defend against the Complaint. By virtue of default, he is deemed to have admitted the allegations contained in the Complaint as to liability. On December 2, 1999, the Court held a hearing on said Motion to determine the amount of damages for which Diaz is liable. This is a core matter pursuant to 28 U.S.C. § 157(b)(2)(A), (F) and (H).¹ The court's findings of fact and conclusions of law are set forth hereinafter:

FACTS

A. Nature of the Action and Service on Arjuna Diaz

On September 15, 1998, an involuntary petition for relief under Chapter 7 of the Bankruptcy Code was filed against the Debtor. See Complaint ¶ 3. Plaintiff Trustee was appointed on September 25, 1998. See id. at ¶ 4.

Pursuant to Federal Rule of Bankruptcy Procedure 7001(1), the Trustee filed this adversary proceeding complaint against Diaz and several other defendants on May 14, 1999. The Trustee seeks recovery of damages from Diaz, a former officer and director of ITA, for mismanagement of the Debtor. See id. at ¶ 1. The allegations of the Complaint include, but are not limited to: breach of fiduciary duty, waste of corporate assets, improper disposition and diversion of corporate assets, fraudulent transfer of funds, preferential transfer of funds and recovery of unpaid loans of ITA to Diaz.

On June 11, 1999, the Trustee moved the court, pursuant to Federal Rule of Civil Procedure 4(f)(3), as incorporated by Federal Rule of Bankruptcy Procedure 7004, for an order authorizing the Trustee to serve a copy of the Summons and Complaint in this adversary proceeding upon Diaz, a defendant in a foreign country, by facsimile transmission, electronic mail, and by mail to Diaz's last known address. See, Motion for Service of Process by Facsimile Transmission, Electronic Mail, and Mail to Defendant's Last Known Address ("Motion for Service"). At that time, Diaz had not been served with the adversary complaint and had not otherwise made any appearance.

On June 21, 1999, this Court held a hearing on the Trustee's Motion for Service. This appears to be a matter of first impression to the extent that the motion seeks an order authorizing service by electronic mail. Upon consideration of the Motion for Service, the supporting Affidavit of Herbert C. Broadfoot II, the authorities cited in the Trustee's supporting Memorandum of Law, and the arguments of counsel at the hearing, an order was entered authorizing the Trustee to effect service on Diaz by facsimile transmission, electronic mail, and mail to Diaz's last known address.²See, Order entered on June 22, 1999, authorizing service of process on Defendant Arjuna Diaz by Facsimile Transmission, Electronic Mail, and Mail to Defendant's Last Known Address ("Order Authorizing Service"). In that order, the Court further ordered:

that until such time as Diaz retains counsel and identifies such counsel to the Trustee or otherwise designates and identifies to the Trustee an authorized agent in the United States to receive service of pleadings and papers in the above-styled action on his behalf, the Trustee may serve all pleadings and papers in the above-styled action upon Diaz in the manner set forth hereinabove.

Id.

On June 25, 1999, the Trustee caused service to be effected in accordance with the Order Authorizing Service, serving Diaz with a copy of the Summons, Complaint, and this Court's Order Authorizing Service. See, Certificate of Service filed on June 28, 1999. Specifically, the Trustee's Certificate of Service stated as follows:

This is to certify that, pursuant to this Court\'s "Order Authorizing Service of Process on Defendant Arjuna Diaz by Facsimile Transmission, Electronic Mail, and Mail to Defendant\'s Last Known Address" entered on June 22, 1999, I have this date caused a copy of the following documents in the above-styled action:

(1) AMENDED SUMMONS IN AN ADVERSARY PROCEEDING;

(2) COMPLAINT; and

(3) ORDER AUTHORIZING SERVICE OF PROCESS ON DEFENDANT ARJUNA DIAZ BY FACSIMILE TRANSMISSION, ELECTRONIC MAIL, AND MAIL TO DEFENDANT\'S LAST KNOWN ADDRESS

to be served upon Defendant Arjuna Diaz by the manner and means set forth below:

(1) By facsimile transmission to: (815) 352-6137;

(2) By electronic mail to: ita0999@hotmail.com;

and

(3) By international airmail to:

Mr. Arjuna Diaz 20 Saunders Road Singapore 228265

This will further certify that:

(1) I attempted to serve the foregoing documents upon Defendant Arjuna Diaz by electronic mail to arjuna@prahlad.org, but that I received a reply message indicating that the documents could not be delivered to that electronic mail address;

(2) I received no such reply message with respect to my service of the foregoing documents by electronic mail to ita0999@hotmail.com; and

(3) I received a facsimile confirmation sheet indicating that my transmittal of the foregoing documents by facsimile transmission to (815) 352-6137 was successful.

Id.

Thereafter, on July 12, 1999, the Trustee moved this Court pursuant to Federal Rule of Bankruptcy Procedure 7012 for an order prescribing the time within which Diaz would be permitted to serve an answer to the Complaint in this action. On the same day, the Trustee caused a copy of the motion and the supporting Memorandum of Law to be served on Diaz in accordance with the Order Authorizing Service. See, Certificate of Service filed on July 12, 1999.

Upon consideration of the authorities cited by the Trustee and all other relevant matters of record, the Court entered an order on July 15, 1999, pursuant to Federal Rule of Bankruptcy Procedure 7012, prescribing the time within which Diaz could serve a response to the Complaint in this action. The order provides that "Defendant Arjuna Diaz shall serve an answer to the complaint in this action within sixty (60) days after June 25, 1999, the date process was served upon him in this action, meaning that Defendant Arjuna Diaz's answer shall be served on or before August 24, 1999." Id. On July 19, 1999, the Trustee caused this Court's Order Prescribing Time to be served upon Diaz in the manner prescribed by this Court's Order Authorizing Service. See Certificate of Service filed July 19, 1999.

B. Default of Arjuna Diaz

The Trustee filed a Request for Entry of Default on August 31, 1999, with a supporting Affidavit of Default which was served upon Diaz on August 30, 1999. See, Certificate of Service filed August 31, 1999. As set forth in the Affidavit of Jeffrey J. Swart, counsel for the Trustee, filed on August 31, 1999, Diaz failed to answer or otherwise defend against the Complaint in this action within the time prescribed by the July 15, 1999 Order.

On September 1, 1999, the Court Clerk entered a default against Defendant Diaz in this action. Thereafter, on October 14, 1999, the Trustee filed a Motion and Memorandum of Law requesting entry of a default judgment against Diaz. A copy of the Trustee's Motion for Default Judgment and supporting Memorandum of Law were served upon Diaz on October 14, 1999, pursuant to the Order Authorizing Service. See, Certificate of Service filed on October 14, 1999.

On November 5, 1999, this Court entered an Order setting a hearing on the Trustee's Motion for Default Judgment on December 2, 1999, at 2:00 p.m. See, Order and Notice of Assignment of Hearing entered on November 5, 1999. In accordance with the Order Authorizing Service, a copy of this Order and Notice of Assignment of Hearing was served upon Diaz on November 8, 1999. See, Certificate of Service filed on November 8, 1999.

DISCUSSION

A. Personal Jurisdiction Based Upon Alternative Service of Process on Diaz

As discussed more fully below, the propriety of the Court's inclusion of electronic mail among the alternative methods by which the Trustee may serve process on Diaz appears to be a matter of first impression. Thus, before discussing the evidence as to damages, the Court will address its personal jurisdiction over the defendant, based upon the Trustee's service of process on Defendant Diaz by the alternative means of service prescribed in this Court's Order Authorizing Service. See, e.g., Posner v. Essex Ins. Co., 178 F.3d 1209, 1214 n. 6 (11th Cir.1999) ("A court without personal jurisdiction is powerless to take further action."); Delong Equip. Co. v. Washington Mills Abrasive Co., 840 F.2d 843, 847 (11th Cir.1988) ("Before a federal court may exercise personal jurisdiction over a defendant, there must exist both a constitutionally sufficient relationship between the defendant and the forum, i.e. minimum contacts, and a basis for the defendant's amenability to service of summons.") (citation omitted); 10A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Federal Practice and Procedure § 2682 (3d ed. 1998) ("Before a default can be entered, the court must have jurisdiction over the party against whom the judgment is sought, which also means that the party must have been effectively served with process.").

1. Need for Alternative Service of Process on Diaz

The evidence presented in connection with the Trustee's Motion for...