State Farm Mut. v. Tz'Chesed of Klausenberg

• Decision Date: 26 February 2008
• Docket Number: Civil Action No. 06-3040.
• Parties: STATE FARM MUTUAL, AUTOMOBILE INSURANCE COMPANY, and State Farm Fire and Casualty Company, Plaintiffs, v. TZ'DOKO V'CHESED OF KLAUSENBERG, Beth Chana, Yeshiva Chatzar Hakodesh., Yeshiva Shearith Hapleth, and Yeshiva Yesode Hatorah, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

543 F.Supp.2d 424

STATE FARM MUTUAL, AUTOMOBILE INSURANCE COMPANY, and State Farm Fire and Casualty Company, Plaintiffs, v. TZ'DOKO V'CHESED OF KLAUSENBERG, Beth Chana, Yeshiva Chatzar Hakodesh., Yeshiva Shearith Hapleth, and Yeshiva Yesode Hatorah, Defendants.

Civil Action No. 06-3040.

United States District Court, E.D. Pennsylvania.

February 26, 2008.

COPYRIGHT MATERIAL OMITTED

Cy Goldberg, Goldberg, Miller & Rubin, PC, Philadelphia, PA, for Plaintiffs.

Jerry S. Goldman, Jerry S. Goldman & Associates, P.C., Philadelphia, PA, Richard A. Finkel, Meissner, Kleinberg, Finkel, LLP, New York, NY, for Defendants.

MEMORANDUM

BUCKWALTER, Senior District Judge.

Presently before the Court are Defendants Beth Chana, Yeshiva Shearith Hapleth, and Yeshiva Yesode Hatorah's Motion to Vacate Default Judgment and Dismiss (Docket No. 42) and Plaintiffs' Answer in Opposition (Docket No. 50); as well as Defendant Tz'Doko VChesed of Klausenberg's Motion to Dismiss or Transfer Venue (Docket No. 60) and Plaintiffs' Response (Docket No. 63). For the reasons stated below, Defendants Beth Chana, Yeshiva Shearith Hapleth, and Yeshiva Yesode Hatorah's Motion to Vacate is GRANTED and their Motion to Dismiss is DENIED. Defendant Tz'Doko VChesed of Klausenberg's Motion to Dismiss or Transfer Venue is DENIED.

I. BACKGROUND

This case arises out of another matter previously before this Court. In State Farm Mutual Automobile Insurance Co., et al. v. Metropolitan Family Practice, et al. (No. 03-969), the same plaintiffs as in this case, State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company (referred to collectively herein as "State Farm"), accused Metropolitan Family Practice (MFP), among other defendants, of engineering an insurance fraud scheme in which MFP submitted false insurance claims to State Farm. (Compl.¶ 22.) On April 17, 2007, this Court entered judgment against MFP.

State Farm now alleges that MFP has drained itself of the necessary funds to pay this judgment by transferring hundreds of thousands of dollars to various organizations in Brooklyn, New York. (Compl.¶ 15.) State Farm asserts that these transfers were fraudulent and brings claims against the alleged recipients, asserting that the transfers violated the Pennsylvania Uniform Fraudulent Transfer Act, 12 Pa. Cons.Stat. §§ 5101-5110, and/or the New York Fraudulent Conveyance Statute, N.Y. Debt. & Cred. §§ 270-281. Both of these state laws provide generally that it is fraudulent to transfer funds from an insolvent debtor, or a debtor who will become insolvent as a result of the transfer, to a recipient who provides nothing of value in return. 12 Pa. Cons.Stat. §§ 5105; N.Y. Debt. & Cred. § 275. According to State Farm, these transfers rendered MFP insolvent and were designed to frustrate enforcement of the judgment. (Compl. ¶¶ 28-29; 35-36.) State Farm further alleges that the defendants should be liable for punitive damages because their conduct was "malicious and outrageous." (Id. ¶¶ 30, 38.)

The Complaint, filed on July 11, 2006, names five defendants: (1) Tz'Doko VChesed of Klausenberg, (2) Beth Chana, (3) Yeshiva Chatzar Hakodesh, (4) Yeshiva Shearith Hapleth, and (5) Yeshiva Yesode Hatorah. (Compl.¶¶ 2-6.) One of the defendants, Tz'Doko VChesed, timely filed an answer on May 14, 2007. (Docket No. 23.) The other four defendants have never filed an answer. On May 16, 2007, State Farm filed a motion seeking default judgments against these other defendants (Docket No. 24), which this Court granted on June 6, 2007. (Docket No. 26.) On December 3, 2007, three of the defendants against whom default judgments had been ordered — Beth Chana, Yeshiva Shearith Hapleth, and Yeshiva Yesode Hatorah (the "Moving Defendants") — filed the present motion, which seeks to vacate the default judgment and dismiss the Moving Defendants from the action.

II. DISCUSSION

The Moving Defendants seek relief from the default judgment on two grounds. First, the Moving Defendants argue that, under Federal Rule of Civil Procedure 60(b)(4), the Court must vacate the default judgment and dismiss them from the action because the judgment is void. (Defs. Beth Chana, Yeshiva Shearith Hapleth, and Yeshiva Yesode Hatorah's Mem. Supp. Mot. Vacate and Dismiss 6-15.) Second under Rule 60(b)(1), they argue that the court should exercise its discretion and vacate for reasons of "mistake, inadvertence, surprise, or excusable neglect." (Id. at 10-11.) In addition, the Moving Defendants argue that, if their motion to vacate is granted but the case is not dismissed on the jurisdictional grounds, the Court should still dismiss based on the doctrine of forum non conveniens or transfer the venue to the Eastern District of New York. (Id. at 15-24.)

In a separate motion, Tz'Doko V'Chesed of Klausenberg argues that the case should be dismissed for lack of subject matter jurisdiction, or, in the alternative, requests that the Court transfer the venue.

Each of these issues is considered in turn.

A. Whether to Vacate and Dismiss

The Moving Defendants argue that the default judgment should be vacated and the case dismissed because (1) service was improper; (2) there were not sufficient contacts to find personal jurisdiction under the Pennsylvania long-arm statute and/or the U.S. Constitution; and (3) the Court lacked subject matter jurisdiction over Yeshiva Shearith Hapleth and Yeshiva Yesode Hatorah because the amount in controversy did not exceed $75,000. In its separate motion, Defendant Tz'Doko V'Chesed of Klausenberg also argues for dismissal because this Court lacks subject matter jurisdiction.

1. Service of Process

When sufficiency of service of process is challenged, the party asserting the validity of service bears the burden of proof. Grand Entm't. Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 488 (3d Cir.1993). The party must prove that service was effective by a preponderance of the evidence. Mowafy v. Noramco of Del., Inc., No. 05-733, 2007 WL 2828013, at *2 (D.Del. Sept. 27, 2007). To meet this burden, "[f]actual contentions regarding the manner in which service was executed may be made through affidavits, depositions, and oral testimony." Villanova v. Solow, No. 97-6684, 1998 WL 643686, at *1 (E.D.Pa. Sept. 18, 1998).

Under the Federal Rules of Civil Procedure, service may be effected "by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process," Fed.R.Civ.P. 4(h)(1)(B), or by "following state law for serving a summons ... in the state where the district court is located or where service is made." Id. R. 4(e) (referenced by id. R. 4(h)(1)(A)). Under the law of Pennsylvania, where this Court is located, service may be effected on a non-Pennsylvania resident by delivering the summons "at any office or usual place of business of the defendant to his agent or to the person for the time being in charge thereof." Pa. R. Civ. P. 402(a)(2)(iii). Interpreting this Pennsylvania rule, the Third Circuit has held that a person for the time being in charge "must either be an individual with some direct connection to the party to be served or one whom the process server determines to be authorized, on the basis of her representation of authority, as evidenced by the affidavit of service." Grand Entm't Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 486 (3d Cir.1993). The Pennsylvania Supreme Court has cited this decision with approval, and after analyzing a series of Pennsylvania cases faced with the question of what constitutes a person "for the time being in charge of," concluded, "[t]he common thread among these cases is that there must be a sufficient connection between the person served and the defendant to demonstrate that service was reasonably calculated to give the defendant notice of the action against it." Cintas Corp. v. Lee's Cleaning Servs., Inc., 549 Pa. 84, 700 A.2d 915, 920 (1997)

Here, Plaintiffs have provided affidavits indicating that a process server personally delivered the summons and complaint to each of the Moving Defendants at multiple addresses. (See Defs.' Mot. Vacate, Ex. A.) The affidavits further claim that each person accepting service on behalf of his or her respective organization represented that he or she was authorized to do so. (Id.) The Moving Defendants countered this evidence with declarations by the current office managers of each organization, each of which stated, among other things, that Malky Meyer, one of the people alleged to have accepted service, was "not (and never has been) an office manager ..., much less an individual authorized to accept service." (Herskovitz Decl. ¶ 10; Lipschitz Decl. ¶ 10; Wieder Decl. ¶ 10.) However, the declarations make no mention of who Meyer is; it is unclear that they even know of anyone by that name. At the subsequent hearing on the issue of service, the Moving Defendants then represented to the Court that Meyer was a teacher at the Beth Chana school. (Hr'g Tr. 10:14-16, Jan. 29, 2008.) This was the first time this fact came to light; State Farm indicated that it had never been told this information either. (Id. at 18:22-24.) No further admissible evidence — such as a denial that Meyer told the process server she was authorized to accept process — was offered by the Moving Defendants concerning Meyer.¹ Given these facts, even if we assume the Moving Defendants' representations concerning Meyer's occupation to be true, the Court concludes that service was effective under Pennsylvania law. A school teacher at a location with offices for all three Moving Defendants, which are acknowledged to be interrelated organizations, has a "direct connection to the party to be served." See Cintas, 700 A.2d at 920. Providing service to such a person, especially one who represents herself to be an agent, would be "reasonably calculated to give the defendant notice of the...