Umbenhauer v. Woog

• Decision Date: 10 July 1992
• Docket Number: No. 91-1881,91-1881
• Citation: 969 F.2d 25
• Parties: Richard A. UMBENHAUER, Trustee in Bankruptcy of Xouth, Inc., d/b/a Woog International, James L. Galbally, Jr., Samuel L. Yankell, YRC, Inc., Appellants, v. Philippe-Guy WOOG, Les Produits Associes-Broxo, S.A., M.I.H., S.A., Appellees.
• Court: U.S. Court of Appeals — Third Circuit

Page 25

969 F.2d 25

23 Fed.R.Serv.3d 997

Richard A. UMBENHAUER, Trustee in Bankruptcy of Xouth, Inc., d/b/a Woog International, James L. Galbally, Jr., Samuel L. Yankell, YRC, Inc., Appellants, v. Philippe-Guy WOOG, Les Produits Associes-Broxo, S.A., M.I.H., S.A., Appellees.

No. 91-1881.

United States Court of Appeals, Third Circuit.

Argued April 10, 1992.

Decided July 10, 1992.

Bardyl R. Tirana (Argued), Washington, D.C., Joseph M. Greitzer, Greitzer & Locks, Philadelphia, Pa., for appellants.

Joseph M. Donley (Argued), Johanna Smith, Kittredge, Donley, Elson, Fullem & Embick, Philadelphia, Pa., for appellees.

Before: BECKER, COWEN and GARTH, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge:

This appeal presents for our review the district court's order dismissing the complaint of plaintiffs who had attempted to serve process by international mail on two Swiss defendants. The district court held that service of process on the Swiss defendants had been insufficient. Although we agree with the district court that the plaintiffs' attempt to serve process on the Swiss defendants has not yet succeeded, we hold that dismissal of the plaintiffs' complaint for insufficient service of process, under the circumstances present here, constituted an abuse of the district court's discretion. Here, the plaintiffs were not subject to any time limitations prescribed in Fed.R.Civ.P. 4(j), and the plaintiffs have demonstrated that they retain a reasonable prospect of serving process successfully.

In addition, we note that the plaintiffs attempted to serve process under Fed.R.Civ.P. 4(i)(1)(D), which authorizes service on a party in a foreign country "by any form of mail ... to be addressed and dispatched by the clerk of the court to the party to be served." The plaintiffs' attempt failed solely because the district court clerk, in accordance with a policy of the Administrative Office of the United States Courts, refused to comply with Rule 4(i)(1)(D). Although the United States Department of State has instructed district court clerks not to serve process under Rule 4(i)(1)(D) on defendants in countries which, like Switzerland, object to that method of service, we hold that objections from foreign governments, as well as requests of the United States Department of State, cannot justify non-compliance with the Federal Rules of Civil Procedure.

We will therefore vacate the order of the district court which dismissed the plaintiffs' complaint for insufficient service of process, and we will remand this case to the district court with instructions to reinstate the plaintiffs' complaint and, according to the plaintiffs' wishes, either execute the plaintiffs' letters rogatory, allow the plaintiffs to make a new attempt at serving process under Pennsylvania law pursuant to Rule 4(c)(2)(C)(i), or have service of process made by the district court clerk under Rule 4(i)(1)(D).

I.

On August 26, 1988, Xouth, Inc. ("Xouth"), a corporation that had been established to market Swiss oral hygiene dental products in the United States, filed a voluntary petition in bankruptcy under Chapter 7 of the Bankruptcy Code. On August 24, 1990, Xouth's trustee in bankruptcy and several of Xouth's creditors ("plaintiffs") filed a complaint against Dr. Philippe-Guy Woog, who had served as Xouth's chairman, and against Les Produits Associes-Broxo, S.A. and M.I.H., S.A., two foreign corporations that had been affiliated with Xouth. The plaintiffs alleged that the defendants had committed bankruptcy fraud, common law fraud, conspiracy to defraud, conversion, and breach of contract in connection with loans that the plaintiffs had made to Xouth.

On filing their complaint in the district court in the Eastern District of Pennsylvania, the plaintiffs' attempted to serve process on Dr. Woog, a citizen of Switzerland, and Les Produits Associes-Broxo, S.A., a Swiss corporation (hereinafter "Swiss defendants"). The plaintiffs initially attempted to serve process under Fed. Rules of Civ. P. 4(i)(1)(D), which authorizes service "by any form of mail, requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the party to be served." However, the district court clerk informed the plaintiffs that, at the request of the United States Department of State, the Administrative Office of the United States Courts had instructed its clerks not to serve process on Swiss citizens under that Rule. ¹ The plaintiffs subsequently received from the Department of State a circular entitled "Judicial Assistance in Switzerland," which advised that service should be effected on Swiss defendants through letters rogatory; i.e., letters from U.S. courts to corresponding foreign courts. The circular also advised that service could be effected on the Swiss defendants by international registered mail, but that a judgment resulting from such service may not be enforceable in Switzerland.

The plaintiffs next attempted to serve process on the Swiss defendants under Fed.R.Civ.P. 4(c)(2)(C) by sending a copy of the summons, the complaint, and a federal acknowledgement of service form (Form 18-A) directly to the Swiss defendants on December 17, 1990. When the Swiss defendants failed to acknowledge service, the plaintiffs filed a motion in the district court for a judgment of default. The Swiss defendants countered with a motion under Fed.R.Civ.P. 12(b)(5) to dismiss the plaintiffs' complaint for insufficiency of process because, under Fed.R.Civ.P. 4(c)(2)(C)(ii), process is not considered served until it is acknowledged.

The district court denied the plaintiffs' motion for a default judgment and granted the Swiss defendants' motion to dismiss the plaintiffs' complaint. The plaintiffs filed a motion for reconsideration, arguing that they had served sufficient process under Fed.R.Civ.P. 4(c)(2)(C)(i), which allows service of process under state law, and that relevant state law did not require acknowledgment of service. ² In the alternative, the plaintiffs asked the district court to facilitate their service of process on the Swiss defendants either by executing letters rogatory, which the plaintiffs provided to the court, or by instructing the district court clerk to make service under Fed.R.Civ.P. 4(i)(1)(D). The district court denied the plaintiffs' motion, holding, among other things, that no service could be effected, inasmuch as the complaint had earlier been dismissed, leaving no operative complaint to which service could attach.

The plaintiffs argue on appeal, as they did before the district court, that they properly served process on the Swiss defendants pursuant to Pennsylvania's Rules of Civil Procedure, as authorized by Rule 4(c)(2)(C)(i), and not pursuant to Rule 4(c)(2)(C)(ii). The plaintiffs also argue that the clerk of the district court improperly declined to serve process on the Swiss defendants under Rule 4(i)(1)(D), and that the district court judge should have permitted service of process on the Swiss defendants by executing letters rogatory.

II.

We have plenary review over the district court's holding that the plaintiffs had not properly served process on the Swiss defendants. We review for abuse of discretion the district court's decision to dismiss the complaint. See, e.g., Richardson v. Ingram Corp., 374 F.2d 502, 503 (3d Cir.), cert. denied, 389 U.S. 866, 88 S.Ct. 134, 19 L.Ed.2d 139 (1967); Novak v. World Bank, 703 F.2d 1305, 1310 (D.C.Cir.1983).

We have plenary review over the district court's refusal to require the district court clerk to serve process on the Swiss defendants under Rule 4(i)(1)(D).

III.

Rule 4(c)(2)(C) of the Federal Rules of Civil Procedure provides two methods for serving process in a federal action. ³ Rule 4(c)(2)(C)(ii), (hereinafter "federal service provision"), affords a uniquely federal method of serving process, whereby a plaintiff may attempt to serve process by sending to the defendant a summons, complaint and two copies of a "notice and acknowledgement" form, (Form 18-A), via first-class mail. Upon receipt of these documents, the defendant may either acknowledge service, in which case process will have been properly served, or may do nothing, in which case the plaintiff must resort to personal service. ⁴ See generally Stranahan Gear Co., Inc. v. NL Industries, 800 F.2d 53, 56 (3d Cir.1986).

Alternatively, process may be served under Rule 4(c)(2)(C)(i), (hereinafter "state-law service provision"), which permits service of process in accordance with state law. The plaintiffs claim that they effectively served process on the Swiss defendants under Pennsylvania law, as permitted by the state-law service provision, because Pennsylvania law provides that process is served on an out-of-state defendant upon the defendant's receipt of the summons and complaint through any form of mail service providing a return receipt. See Penn.Rules Civ.P. 403, 404. The record here contains the returned receipts, which evidence the Swiss defendants' receipt of the summons and complaint. (A. 23, 27).

Although the plaintiffs accurately characterize Pennsylvania law, the record clearly reveals that the plaintiffs served process under the federal service provision and not under the state-law service provision. Had the plaintiffs simply mailed copies of the summons and complaint to the Swiss defendants, the requirements of Pennsylvania law would have been satisfied and process would have been served. However, in addition to the summons and complaint, the plaintiffs mailed to the Swiss defendants Form 18-A, the standard federal "notice and acknowledgment" form. By mailing that form, the plaintiffs unequivocally identified their intent to serve process under the federal, and not the state-law, service provision.

Form 18-A reads, in part:

The enclosed summons and complaint are served pursuant to [the federal service provision] of the Federal Rules of Civil Procedure.

You must complete the acknowledgment part of this...