Michelson v. Merrill Lynch, Pierce, Fenner & Smith

• Decision Date: 28 March 1989
• Docket Number: No. 83 Civ. 8898(MEL).,83 Civ. 8898(MEL).
• Citation: 709 F. Supp. 1279
• Parties: Douglas J. MICHELSON, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Nelson Bunker Hunt, William Herbert Hunt, Douglas Herbert Hunt, Lamar Hunt, International Metals Investment Company, Ltd., John J. Conheeney, ContiCommodity Services, Inc., ContiCapital Management, Inc., ContiCapital, Ltd., Norton Waltuch, Gilian Financial, ACLI International Commodity Services, Inc., Bache Halsey Stuart Shield, Inc., Shiek Mohammed Aboud Al Amoudi, Shiek Ali Bin Mussalem, Mahmoud Fustok, Prince Faisal Bin Abdullah, Naji Robert Nahas, Banque Populaire Suisse, Advicorp Advisory and Financial Corporation S.A., Placid Oil Company, Commodity Exchange Inc., the Chicago Board of Trade, Irwin N. Smith, John Does Number Two to Ten, Defendants.
• Court: U.S. District Court — Southern District of New York

709 F. Supp. 1279

Douglas J. MICHELSON, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Nelson Bunker Hunt, William Herbert Hunt, Douglas Herbert Hunt, Lamar Hunt, International Metals Investment Company, Ltd., John J. Conheeney, ContiCommodity Services, Inc., ContiCapital Management, Inc., ContiCapital, Ltd., Norton Waltuch, Gilian Financial, ACLI International Commodity Services, Inc., Bache Halsey Stuart Shield, Inc., Shiek Mohammed Aboud Al Amoudi, Shiek Ali Bin Mussalem, Mahmoud Fustok, Prince Faisal Bin Abdullah, Naji Robert Nahas, Banque Populaire Suisse, Advicorp Advisory and Financial Corporation S.A., Placid Oil Company, Commodity Exchange Inc., the Chicago Board of Trade, Irwin N. Smith, John Does Number Two to Ten, Defendants.

No. 83 Civ. 8898(MEL).

United States District Court, S.D. New York.

March 28, 1989.

Douglas J. Michelson, Albuquerque, N.M., pro se.

Shmuel B. Klein, Brooklyn, for plaintiff.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for defendants ContiCapital Management, Inc. and ContiCapital Ltd.; Richard A. Rosen, Mary Anne Case, of counsel.

Brooksley Born, Daniel Waldman, Arnold & Porter, Washington, D.C., and Gilbert, Segall & Young, New York City, for defendant Banque Populaire Suisse.

LASKER, District Judge.

This action arises out of the events of the silver market in the years 1979 and 1980. Plaintiff Douglas J. Michelson, who until August of last year appeared pro se, alleges that the defendants conspired to corner the silver market, thereby causing the price to rise to unprecedented levels and then drop precipitously and plaintiff to suffer injuries of more than one million dollars. Throughout the case, which originated in New Mexico in 1983 and was transferred to this court that same year, the adequacy of service of process and thus the existence of personal jurisdiction have been disputed. Three of the defendants — Banque Populaire Suisse ("BPS"), a Swiss bank; ContiCapital Management, Inc. ("CCM"), a Delaware corporation doing most of its business in Illinois; and ContiCapital Limited ("CCL"), a corporation existing and doing business in the Bahamas — move to dismiss the action as to them with prejudice for lack of personal jurisdiction and ineffective service of process. BPS, CCM, and CCL originally moved for dismissal on these grounds in 1983, prior to the transfer of the case to this district; these motions were never decided and have only recently been rebriefed. Michelson now contends not only that the court has personal jurisdiction, but also that the defendants have waived their right to challenge personal jurisdiction.

I. BACKGROUND

This action has a complicated procedural history recounted in a previous opinion, Michelson v. Merrill Lynch, Pierce, Fenner & Smith, Inc, 619 F.Supp. 727 (S.D.N. Y.1985); the attempts to effect service and the arguments as to the inadequacy of the attempts, both as to the moving defendants and others, are detailed below. In 1983, Michelson filed this action in his home state of New Mexico, alleging that the defendants had violated state laws, as well as the Commodity Exchange Act ("CEA"), the Racketeer Influenced and Corrupt Organization Act ("RICO"), and federal antitrust statutes. Numerous defendants immediately moved to dismiss the complaint for lack of personal jurisdiction and improper venue because they lacked sufficient personal or business contacts with New Mexico to bring them within the scope of its long-arm jurisdiction. On October 7 and November 10, 1983, the motions were granted.¹

On November 15, 1983, CCL and CCM moved to dismiss the complaint with prejudice; three days later BPS filed a similar motion. CCL, CCM, and BPS all argued that they, too, lacked contact with New Mexico enabling the court to obtain personal jurisdiction. BPS also argued that the service that had been made by registered mail on the Banque in Switzerland on October 11, 1983 was ineffective because it did not conform with Swiss law, which requires that service be made through diplomatic channels. Soon thereafter, in December, 1983, the case was transferred by the New Mexico court to this district sua sponte pursuant to 28 U.S.C. § 1406(a). At the time of the transfer, the motions of BPS, CCL, and CCM were still pending.

At a pre-trial conference on February 3, 1984, Michelson was ordered to re-serve "all domestic United States defendants whose cases have been dismissed for lack of jurisdiction, as well as International Metals Company, Ltd., ContiCapital Ltd. and Fustok by February 25, 1984."² CCM contends that this ruling extended to it as well.³

In the fall, numerous defendants moved to dismiss on the ground that service was not sufficient; BPS, CCM, and CCL did not so move at that time. After a hearing on the motions, Michelson's time to effect service was extended until March 15, 1985 and the United States Marshals were ordered to assist him by serving copies of the summons and complaint on defendants as requested by the plaintiff.

In October, 1985, the motions of Norton Waltuch, John Conheeney, and ContiCommodity Services, Inc., all of whom had moved to dismiss the previous year, were granted and the service of process quashed. The three had not been personally served; service on the law firms representing them was held not to satisfy the requirements of the Federal Rules of Civil Procedure or New York law, in light of affidavits representing that the law firms were not authorized to receive service. See Michelson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 619 F.Supp. 727, 741-42 (S.D.N.Y.1985). Michelson's subsequent attempts to serve Conheeney and Waltuch were also held to be ineffective: He again attempted to serve Conheeney by mailing a copy of the amended complaint to his attorney. He did not serve Waltuch within 120 days after filing the amended complaint, as required by Fed.R.Civ.P. 4(j), or show good cause for the delay. Accordingly, the complaints against them were dismissed with prejudice. Michelson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 669 F.Supp. 1244, 1266-67 (S.D.N.Y.1987).

Simultaneously, Michelson attempted to re-serve BPS, CCM, and CCL, and he confronted arguments identical to those described above as to the ineffectiveness of that service. Michelson's certificate of service of March 12, 1985 indicates that he served BPS, CCM, and CCL at the addresses of their respective counsel.⁴ Soon after November 1, 1985, Michelson again attempted to serve the three moving defendants by mailing a copy of the complaint to counsel. In addition, Michelson informed the court at a hearing on January 30, 1985 and in a letter of September 29, 1987, that an attorney at Arnold & Porter, the law firm representing BPS, had told him that BPS would no longer contest jurisdiction, a representation that BPS has continually denied making.

Counsel for CCM, CCL, and BPS repeatedly advised Michelson that they were not authorized to accept service on behalf of their clients. Attorneys with Paul, Weiss, Rifkind, Wharton & Garrison ("Paul, Weiss"), counsel for CCM and CCL, so advised Michelson prior to and at the hearing of February 3, 1984, as well as on at least two subsequent occasions. Attorneys with Arnold & Porter, similarly cautioned Michelson in letters of March 19, 1985 and January 21, 1986 that they were not authorized to receive service for BPS. The affidavits of Richard Rosen, an attorney with Paul, Weiss, and Alexander Bennett, an attorney with Arnold & Porter, reiterate these representations. Bennett's affidavit, as well as that of BPS assistant vice president Toni Neumaus, also state that BPS did not authorize its counsel to waive its defenses of lack of personal jurisdiction or ineffective service of process, and that no attorney at Arnold & Porter represented to the contrary to Michelson.⁵

II. DISCUSSION

There is no doubt that this court lacks jurisdiction over CCM, CCL, or BPS unless those defendants have been properly served with a summons and the complaint. Mississippi Publishing Corp. v. Murphree, 326 U.S. 438, 444-45, 66 S.Ct. 242, 245-46, 90 L.Ed. 185 (1946) ("Service of summons is the procedure by which a court having venue and jurisdiction of the subject matter of the suit asserts jurisdiction over the person of the party served."); SEC v. Gilbert, 82 F.R.D. 723, 726 (S.D.N.Y.1979) ("Jurisdiction attaches only when a defendant is properly served with the summons and complaint in an action."). Although the moving defendants are aware of the action, their notice of and participation in the action do not absolve the plaintiff of the responsibility to effect service in order to provide the court with personal jurisdiction.

Thus, before a court may exercise personal jurisdiction over a defendant, there must be more than notice to the defendant and a constitutionally sufficient relationship between the defendant and the forum. There also must be a basis for the defendant's amenability to service of summons. Absent consent, this means there must be authorization for service of summons on the defendant.

Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 108 S.Ct. 404, 409, 98 L.Ed.2d 415 (1987). See also Goldlawr, Inc. v. Heiman, 288 F.2d 579, 582 (2d Cir.1961) ("Although a defendant may have full knowledge that an action has been commenced against him, a court, nevertheless, lacks jurisdiction to enter a judgment against him unless jurisdiction over his person has been obtained in strict compliance with a statute designating the method of obtaining such jurisdiction.") (citing Wuchter v. Pizzutti, 276 U.S. 13, 48 S.Ct. 259, 72 L.Ed. 446 (1928)), rev'd on other grounds, 369 U.S. 463, 82 S.Ct. 913, 8 L.Ed. 2d 39 (1962).

To determine whether this court has personal jurisdiction over any of the moving defendants with respect to any of Michelson's claims, two questions must be addressed: 1) Did the New Mexico court obtain personal jurisdiction over CCL, CCM and/or BPS pursuant to the New...