Williams v. Pirs Capital, LLC (In re Crossett Ford Lincoln LLC)
| Decision Date | 16 April 2021 |
| Docket Number | Case No.: 1:15-bk-70747,AP No.: 1:17-ap-07020 |
| Citation | 628 B.R. 646 |
| Parties | IN RE: CROSSETT FORD LINCOLN LLC, Debtor Renee S. Williams, Plaintiff v. Pirs Capital, LLC, et al., Defendants |
| Court | U.S. Bankruptcy Court — Western District of Arkansas |
Renee S. Williams, Renee S. Williams, P.A., Hot Springs, AR, for Plaintiff.
Charles T. Coleman, Jacob Post Fair, Gary D. Marts, Jr., Wright, Lindsey & Jennings LLP, Little Rock, AR, for Defendants.
Before the court is PIRS Capital, LLC's Motion to Set Aside Default Judgment ("Motion") filed on January 22, 2021, at docket entry 40. Two parties responded: Renee S. Williams, Chapter 7 Trustee ("Trustee"), filed her Response to PIRS Capital, LLC's Motion to Set Aside Default Judgment on January 29, 2021, at docket entry 46, and Maurice Bailey ("Bailey") filed his Maurice Bailey's Response to Motion to Set Aside Default Judgment on February 1, 2021, at docket entry 49. The court heard this matter on March 11, 2021. PIRS Capital, LLC appeared personally and by and through its counsel; Bailey appeared by and through his counsel; the Trustee appeared on her own behalf. At the conclusion of the trial, the court took this matter under advisement. For the reasons stated herein, the relief requested in the Motion is denied.
This court has jurisdiction over this matter under 28 U.S.C. §§ 1334 and 157. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (F). The following opinion and order constitute findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052.
The Trustee, acting in her capacity as the duly appointed Chapter 7 Trustee in the Crossett Ford Lincoln LLC ("Crossett Ford") bankruptcy, on March 14, 2017, sued PIRS Capital, LLC ("PIRS") in her Complaint to Avoid Preferential Transfers, for Turnover of Funds, and for Disallowance of Claims ("Complaint"). The Trustee served PIRS by correspondence dated March 14, 2017, with process by certified mail and addressed as follows:
PIRS Capital, LLCAttention: Alexander Parsol, Managing Partner40 Exchange Pl., Suite 1607New York, NY 10005
(Bailey's Exhibits B–C.) The service letter and accompanying materials were expositive and provided all the information the addressee needed to alert it of the lawsuit and the requirement to file a responsive pleading within a specified period. (Bailey's Ex. B.)
PIRS did not respond or otherwise appear. The Trustee, accordingly, obtained a default judgment. PIRS seeks relief from this burden on three bases: first, that service was improper and, thus, the judgment is void pursuant to Federal Rule of Civil Procedure 60(b)(4)1 as this court lacked jurisdiction; second, that PIRS never had a full and fair opportunity to litigate its defenses to the Trustee's action and should be accorded relief pursuant to Federal Rule of Civil Procedure 60(b)(6) ; and third, that the Trustee did not properly comply with the default procedures outlined in Federal Rule of Civil Procedure 55(b).2 The court need only address the first two issues as PIRS produced no proof and made no argument at trial concerning the third.3
PIRS suggests that service was insufficient on the bases that (1) Alexander Parsol ("Parsol"), the person named on the service letter, was no longer with PIRS, and that (2) while the building address was correct, PIRS had moved to a different suite. PIRS is correct on both points: Parsol was no longer with PIRS in March 2017, and PIRS had moved to a different suite in the same building prior to that time. Facially, service was to the wrong person at the wrong address, and insufficient service, as discussed below, renders a judgment void and amenable to being set aside upon application.
The Trustee, however, argues that she fully complied with her obligation to effect service on PIRS pursuant to Federal Rule of Bankruptcy Procedure 7004 "by mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process[.]" FED. R. BANKR. P. 7004(b)(3) (2021). Having done so, then presumably, this court had personal jurisdiction over PIRS as contemplated by Federal Rule of Bankruptcy Procedure 7004(f) to enter the default judgment. Thus, the inquiry is into the sufficiency of the Trustee's service of the Complaint in accordance with Federal Rule of Bankruptcy Procedure 7004(b)(3).
The Trustee served "PIRS Capital, LLC, Attention: Alexander Parsol, Managing Partner." (Bailey Ex. B.) Andrew Mallinger ("Mallinger"), PIRS's Chief Operating Officer, testified at trial on behalf of PIRS and indicated that Parsol had, at one time, held both a membership and a percentage interest in receivables owed to PIRS. (PIRS's Exhibit 1.) Mallinger testified that Parsol's relationship with PIRS terminated on February 1, 2016, and offered in support an Assignment of Membership Interest and Receivables. (PIRS's Ex. 1.) Further, Mallinger testified that the Crossett Ford deal was basically Parsol's, and he did not keep others in the loop. Regardless, the Merchant Agreement between Crossett Ford and PIRS, dated January 20, 2015, is bereft of any signature on behalf of PIRS or designation of the "Company Officer" involved. (PIRS's Ex. 4.) Mallinger also testified that after Parsol left, he, along with two others, became responsible for PIRS's operations.
If, however, Parsol left PIRS and was no longer with the company in March 2017, his name maintained a visible and consequential presence. Specifically, the Trustee's due diligence in ascertaining how best to comply with the rules concerning service led directly and exclusively to Parsol.
The Trustee looked to PIRS's Proof of Claim filed on April 24, 2015; the claim is based on "merchant cash advance[s]" in the amount of $137,682. (Bailey's Ex. A.) Parsol signed and filed the Proof of Claim as the "Managing Partner" of PIRS with an address of "40 Exchange Pl. #1607 New York NY 10005." (Bailey's Ex. A.) Parsol inserted his email address, aparsol@pirscapital.com, and the same address under the category of "[n]ame and address where notices should be sent." (Bailey's Ex. A.)
This notice language on the Proof of Claim is not insignificant, but rather is emphasized in the printed portion on the claim form in two additional places, each specifically tailored to the name and address provided. First, the accompanying Instructions for Proof of Claim Form provide that the name and address portion of the claim should be filled in with the 4 (Bailey's Ex. A.) Second, the same instructions note that the filer's date and signature line should also include an "address and telephone number if it differs from the address given on the top of the form for purposes of receiving notices." (Bailey's Ex. A.) On that portion, Parsol included his name as "Managing Partner," with the same address, telephone number, and email address. (Bailey's Ex. A.) Parsol is the only individual name that appears on the Proof of Claim; the two addresses are the same; PIRS has not amended or updated either; each plainly implicate service.
To "confirm that Mr. Parsol was the appropriate agent," the Trustee also researched the New York State Department of State (sometimes "DOS") records. A Division of Corporations printout reflecting a DOS filing date of May 29, 2013, and effective through February 27, 2017, states "None" under the Registered Agent category. (Bailey's Ex. K.) The "Selected Entity Address Information" category subtitled "DOS Process (Address to which DOS will mail process if accepted on behalf of the entity)" is as follows:
ALEXANDER PARSOL40 EXCHANGE PLACE, SUITE 1606NEW YORK, NEW YORK, 10005
(Bailey's Ex. K.)
Accordingly, as of March 2017, PIRS's Proof of Claim as well as the most current New York State Department of State website both reflected Parsol as the appropriate person for service of process with the latter having no substitute or other listed person as its agent for service. When asked why Parsol was still listed as the person to whom the New York State Department of State should mail process, Mallinger answered "[i]t was an administrative error." Parsol had left PIRS a year earlier.
The Trustee's certified mail service letter is addressed to PIRS to the attention of Parsol as its managing partner.5 (Bailey's Ex. B.) But Parsol did not sign for the letter. Rather, the separate return receipt, sometimes referred to as the "green card," reflects delivery on March 17, 2017, to an unreadable signature followed by the printed name: "A. LARRANAGA." (Bailey's Ex. C.) According to Mallinger, A. Larranaga ("Larranaga") was a PIRS's employee acting as an assistant underwriter on March 17, 2017. Additionally, Mallinger testified that Larranaga was not an officer, manager, or general agent and was not otherwise authorized to accept service. He further testified that Larranaga had no memory of signing for the letter or doing anything with it; Mallinger assumed it was forwarded to Parsol. Mallinger also testified that PIRS was frequently involved in litigation both as a plaintiff and defendant and was not aware of any other lawsuits sent to Parsol that PIRS did not receive.
The Trustee's letter did not, however, require the addressee's signature. The U.S. Postal Service Certified Mail Receipt reflects the Trustee paid a $3.35 "Certified Mail Fee." (Bailey's Ex. B.) The same receipt contains five check boxes under the category of "Extra Services & Fees." They are:
Return Receipt (hardcopy)Return Receipt (electronic)Certified Mail Restricted DeliveryAdult Signature...
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...to update bankruptcy and DOS records, and failing to ensure mail would be forwarded to its new address. In re Crossett Ford Lincoln LLC, 628 B.R. 646, 658-64 (Bankr. W.D. Ark. 2021). The district court affirmed for these reasons, carefully addressing the Rule 60(b)(4) and 60(b)(6) issues. P......