Calderon-Serra, et al v. Banco Santander Puerto Rico, et al

Filing

OPINION issued by Rogeriee Thompson, Appellate Judge; Kermit V. Lipez, Appellate Judge and William J. Kayatta , Jr., Appellate Judge. Published. [12-2128]

Case: 12-2128

Document: 00116666045

Page: 1

Date Filed: 03/26/2014

Entry ID: 5810828

United States Court of Appeals
For the First Circuit
No. 12-2128
CÉSAR A. CALDERÓN SERRA,
TERESITA PALERM NEVARES a/k/a TESSIE CALDERÓN,
Plaintiffs, Appellants,
v.
BANCO SANTANDER PUERTO RICO, d/b/a Santander Puerto Rico
Corporation, f/k/a Banco Central Hispano, JOSÉ R. GONZÁLEZ; JUAN
S. MORENO; MARÍA CALERO; JOSÉ ÁLVAREZ; JAMES RODRÍGUEZ; HÉCTOR
CALVO; LOAN OFFICER A; LOAN OFFICER B; LOAN OFFICER C; INSURANCE
COMPANY A; INSURANCE COMPANY B; INSURANCE COMPANY C,
Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Gustavo A. Gelpí, U.S. District Judge]

Before
Thompson, Lipez, and Kayatta,
Circuit Judges.

Osvaldo Carlo Linares, with Carlo Defendini Díaz and
Pagán, Ortega & Defendini Law Offices, PSC, on brief, for
appellants.
Néstor M. Méndez Gómez and Sara L. Vélez Santiago, with
whom Jason R. Aguiló-Suro and Pietrantoni Méndez & Alvarez LLC were
on brief, for appellees.
March 26, 2014

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KAYATTA, Circuit Judge.

Date Filed: 03/26/2014

Entry ID: 5810828

Plaintiffs press a RICO claim

against their bank and others over what they claim was an unlawful
scheme to lend plaintiffs money in violation of federal margin
requirements limiting the extent to which securities can be used as
collateral for funds loaned to purchase the securities.

Granting

a motion to dismiss the complaint, the district court rejected
plaintiffs' RICO clam because the claim was based on conduct that
would have been actionable as securities fraud.
plaintiffs

argue

that

the

district

court

erred

On appeal,
because

the

complaint does not allege fraud "in connection" with the purchase
of securities.

We disagree, and we also sustain the district

court's unrelated ruling that plaintiffs failed to properly serve
the summons and complaint on two of the defendants.
I. Background
César A. Calderón Serra and Teresita Palerm Nevares (also
known as Tessie Calderón) sue Banco Santander Puerto Rico ("the
Bank");1 several officers or employees of the Bank or its parent
company (José R. González, Juan S. Moreno, María Calero, José
Álvarez, and Loan Officers A, B, and C); an officer of Santander
Securities Corporation, a wholly-owned subsidiary of the Bank
(James Rodríguez); an officer of Santander Insurance Agency (Héctor
Calvo); and several insurance companies which plaintiffs claim

1

Plaintiffs name the Bank as a defendant in the alternative,
based on a potential wrinkle in their RICO liability theory. For
present purposes, we treat the Bank as a defendant.
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hold relevant insurance policies.

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Entry ID: 5810828

Because the bulk of this appeal

arises from the district court's dismissal of plaintiffs' second
amended complaint2 under Federal Rule of Civil Procedure 12(b)(6),
we will assume the factual allegations in that complaint to be true
and

draw

from

them

any

reasonable

inferences

suggested

by

plaintiffs.
The Bank makes money, in part, by making loans to its
customers.

The Bank's subsidiary, Santander Securities, makes

money by selling and buying securities for its customers.

Most of

the individual defendants earn salaries, commissions, bonuses, and
other benefits when the Bank and Santander Securities conduct those
same

transactions.

The

Bank

enticed

plaintiffs,

with

what

plaintiffs thought were fixed-rate loans, to borrow money from the
Bank to buy and trade securities through Santander Securities. The
problem,

plaintiffs

claim,

is

that

the

Bank

intentionally

concealed, with false documentation and otherwise, that the entire
arrangement violated Regulation U, 12 C.F.R. Ch. II, Pt. 221, a
regulation issued by the Board of Governors of the Federal Reserve

2

We use "second amended complaint" to refer to the document
titled "Amended Complaint" which plaintiffs filed on November 2,
2011, as distinct from the "First Amended Complaint," which was
attached to plaintiffs' earlier motion for leave to amend but which
was not separately filed on the docket after that motion was
granted.
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Board pursuant to the Securities Exchange Act of 1934, 15 U.S.C.
§ 78a, et seq.3
By
restrictions

See 12 C.F.R. § 221.1(a).

its

express

upon

terms,

persons

Regulation

other

than

U

"imposes

brokers

or

credit
dealers

(hereinafter lenders) that extend credit for the purpose of buying
or carrying margin stock if the credit is secured directly or
indirectly by margin stock."

12 C.F.R. § 221.1(b)(1).

"Margin

stock" includes "[a]ny equity security registered . . . on a
national securities exchange."

Id. § 221.2.

In pertinent part,

Regulation U prohibits banks from loaning more than a certain
percentage of the value of the security used to secure the loan,
see id. § 221.3, thereby typically ensuring that the purchaser has
some of his own funds invested, and reducing the extent to which
holders of securities are over-leveraged. See Capital Mgmt. Select
Fund Ltd. v. Bennett, 680 F.3d 214, 221-22 & n.9 (2d Cir. 2012)
("In general, margin restrictions [including Regulation U] attempt
to reduce the counterparty risk associated with margin financing by
limiting the types of securities that can be posted by an investor
as collateral for a margin loan and limiting the amounts that can
be borrowed against that collateral.").

3

Plaintiffs allege that defendants may have "misrepresented
these transactions purposely . . . to federal regulators" and that
"[t]he loans were represented and booked by [the Bank] under loan
purposes, as being legal and proper, and no impropriety . . . was
mentioned to plaintiffs."
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The alleged violation of the margin requirements might
have benefited plaintiffs had the stock trading been successful.
Apparently, it was not.

After roughly $9 million in trades,

plaintiffs suffered a loss of nearly $3 million (including the cost
of borrowing).

Plaintiffs in effect allege that had the Bank not

loaned them the money, they would never have bought so many
securities, and thus not suffered as large a loss.
Plaintiffs sued, ultimately pursuing two claims under
federal law.

First, they sought to maintain a private cause of

action under Regulation U.

Second, in apparent pursuit of treble

damages and attorneys' fees, they asserted a cause of action under
the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18
U.S.C. §§ 1961-1968.
The district court dismissed the second amended complaint
as to two defendants for failure of service. It then dismissed the
remainder of the suit for failure to state a claim upon which
relief could be granted.

In making the latter ruling, the court

found, first, that there is no private right of action for a
violation of Regulation U.

Second, the court found that the

alleged

actionable

misconduct

was

not

under

RICO,

which,

as

amended, does not encompass private claims that would have been
"actionable as fraud in the purchase or sale of securities."
Private Securities Litigation Reform Act ("PSLRA"), Pub. L. No.
104–67, § 107, 109 Stat. 737 (1995), amending 18 U.S.C. § 1964(c).

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Plaintiffs appeal both the dismissal of their RICO claim and the
district court's determination that service was defective as to
some defendants.

Plaintiffs do not appeal the finding that

Regulation U provides no private right of action for its breach.
II. Analysis
A.

The district court correctly concluded that plaintiffs
failed to state a claim for relief under RICO.
Because the district court dismissed the case at the

pleading stage as inadequate to state a claim for relief, our
consideration on appeal of arguments plaintiffs have properly
preserved and presented is de novo. See Haag v. United States, 736
F.3d 66, 69 (1st Cir. 2013).
"Fraud in the sale of securities" is listed as a RICO
predicate act.

18 U.S.C. § 1961(1).

For a time, this opportunity

to use a securities fraud claim as a predicate act for a RICO claim
allowed private litigants to use RICO to threaten treble damage
liability in securities litigation. See Bald Eagle Area Sch. Dist.
v. Keystone Fin., Inc., 189 F.3d 321, 327 (3d Cir. 1999).

In

response, Congress adopted the PSLRA, which generally bars private
plaintiffs from bringing RICO claims based on "any conduct that
would have been actionable as fraud in the purchase or sale of
securities."
F.3d at 327.

18 U.S.C. § 1964(c); Bald Eagle Area Sch. Dist., 189
Congress meant not only to "eliminate securities

fraud as a predicate offense in a civil RICO action, but also to
prevent a plaintiff from pleading other specified offenses, such as
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mail or wire fraud, as predicate acts under civil RICO if such
offenses are based on conduct that would have been actionable as
securities fraud."

Bald Eagle Area Sch. Dist., 189 F.3d at 327

(alteration marks omitted) (internal quotation marks omitted).
Applying the PSLRA's bar on RICO claims requires a sort
of reverse Rule 12(b)(6) inquiry:

we ask whether the conduct in

question would be "actionable as fraud in the purchase or sale of
securities," in which case a RICO count based on such fraud as a
predicate act is not actionable.
Civ. P. 12(b)(6).

18 U.S.C. § 1964(c); see Fed. R.

Actions for fraud in the purchase or sale of

securities often arise under section 10(b) of the Securities
Exchange Act of 1934 and U.S. Securities and Exchange Commission
("SEC") Rule 10b-5.

See 15 U.S.C. § 78j (prohibiting the use of

"manipulative or deceptive device[s]" that violate SEC rules "in
connection with the purchase or sale of any security"); 17 C.F.R.
§

240.10b-5

(prohibiting,

inter

alia,

fraudulent

schemes

and

misleading omissions of material fact "in connection with the
purchase or sale of any security"); see also Stoneridge Inv.
Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157 (2008)
(noting the availability of an implied private right of action for
10b-5 violations). A typical 10b-5 securities fraud claim requires
proof of: "'(1) a material misrepresentation or omission; (2)
scienter, or a wrongful state of mind; (3) a connection with the
purchase or sale of a security; (4) reliance; (5) economic loss;

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and (6) loss causation.'"

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Hill v. Gozani, 638 F.3d 40, 55 (1st

Cir. 2011) (quoting Dura Pharm., Inc. v. Broudo, 544 U.S. 336,
341-42 (2005)).
In

contending

that

the

"bank

fraud"

they

claim

to

describe in their complaint was not actionable under Rule 10b-5,
plaintiffs make only one argument:

that the fraud was not in

"connection with the purchase or sale of a security."

We shall

limit

ex

our

consideration

accordingly.

See

Henderson

rel.

Henderson v. Shinseki, 131 S. Ct. 1197, 1202 (2011) ("[C]ourts are
generally limited to addressing the claims and arguments advanced
by the parties.").

As for why such a connection is lacking,

plaintiffs provide little insight. They seem to draw a distinction
between obtaining the loans and using the loaned funds to purchase
securities.

As the plaintiffs put it, the bank loans "made

possible the subsequent transactions," and "[w]ithout these loans
at extremely low rates these transactions would not have come
about."

Thus, we surmise that the crux of their argument is that

the alleged fraud arose "in connection with" the issuance of the
loans, and not "in connection with" the purchase of securities made
possible through the loan proceeds.

For the following reasons, we

reject this argument.
First, the complaint itself, as ultimately amended, draws
a tight connection between the alleged fraud and the purchase of
securities.

The stated facts commence with an allegation that

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"Defendants caused $5,000,000.00 worth of securities to be traded
in the name of the Plaintiffs."

Plaintiffs explain that each

purchase was "initially funded entirely on credit." The fraudulent
scheme

itself

is

described

thus:

"Defendants

engaged

in

a

continuous and ongoing scheme to grant loans for the purchase of
securities to various clients, without complying with Regulation U
margin requirements . . . ."

Plaintiffs further depict all

defendants at the bank, its parent company, and its broker-dealer
subsidiary as jointly engaged in a single scheme, pursuant to which
the bank "loans were extended exclusively for the purchase of
securities at Santander Securities . . . ."

Furthermore, the

damages sought equaled the change in the value of the purchased
securities, plus margin interest and minus any interest earned.
And the undisclosed material fact at the heart of the alleged fraud
was the existence of Regulation U, applicable precisely because the
purpose of the loans was to buy securities.
Second, the case law interpreting and applying the "in
connection with" requirement of Rule 10b-5 and related statutes
(referred to sometimes as the "transactional nexus" requirement)
offers no basis for finding such a tightly alleged connection to be
inadequate.

As a remedial statute, the Exchange Act and its

transactional nexus are to be interpreted "flexibly," although not
"so broadly as to convert every common-law fraud that happens to
involve securities into a violation of § 10(b)."

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SEC v. Zandford,

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535 U.S. 813, 819-20 (2002) (internal quotation marks omitted).
Accordingly, in Zandford, the Court found a sufficient nexus
between deceit and a securities transaction where the defendant
wrote himself a check from his client's discretionary account,
knowing that securities would be sold to cover the draft.
820-21.

Here, the defendants

Id. at

loaned money for the purpose of

purchasing securities, all or most of which, it appears, were to be
held in a pledge collateral account securing the loan.
In cases with materially similar facts to ours, two
other circuits have allowed causes of action under Rule 10b-5 to
proceed.

At least at the motion to dismiss phase, the Third

Circuit found the existence of a sufficient nexus between a failure
to disclose the interest terms of margin trading accounts and the
subsequent purchase of securities in the accounts.

Angelastro v.

Prudential-Bache Sec., Inc., 764 F.2d 939, 943-45 (3d Cir. 1985).4
Earlier, the Ninth Circuit concluded that misleading statements
about stock reports and the risks of buying on margin in a
declining market, as part of "a scheme to induce [the plaintiff] to
borrow

money

from

[the

defendant

4

and]

to

engage

in

Acknowledging the concern that allowing the action might
logically lead to liability for "other lending institutions which
made credit available for use in stock market transactions," id. at
945, the court opted for a case-by-case approach, and noted that
not "every bank loan for the purpose of purchasing securities is
necessarily within the purview of section 10(b). We decide only
the issue certified to us by the district court." Id. We follow
that wise example here, where, as we explain, the connection
involves more than the purpose of the loan.
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commission-producing securities purchases through [the defendant]"
also satisfied the transactional nexus.

Arrington v. Merrill

Lynch, Pierce, Fenner & Smith, Inc., 651 F.2d 615, 618-19 (9th Cir.
1981).
In the context of a more traditional 10b-5 case dealing
with a false or misleading stock tip, the Fourth Circuit identified
four (non-exhaustive) factors relevant to whether a particular case
satisfies the transactional nexus:
(1) whether a securities sale was necessary to the
completion of the fraudulent scheme; (2) whether the
parties' relationship was such that it would necessarily
involve trading in securities; (3) whether the defendant
intended to induce a securities transaction; and (4)
whether material misrepresentations were disseminated to
the public in a medium upon which a reasonable investor
would rely.
SEC v. Pirate Investor LLC, 580 F.3d 233, 244 (4th Cir. 2009)
(citations omitted) (quotation marks omitted).

As we see it, only

the first three factors are sensibly relevant to an assessment of
this case, and all three are satisfied by plaintiffs' complaint.
According to the complaint, the purpose of the scheme was both to
make loans and to sell securities; accordingly, selling securities
was a necessary component of the scheme and integral to the
relationship between the plaintiffs and the defendants.

And the

complaint specifically alleges that "[t]he scheme was designed to
produce interest," benefits, and commissions for the defendants,
including both the Bank and Santander Securities.

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The

Supreme

Page: 12

Court

has

Date Filed: 03/26/2014

also

construed

Entry ID: 5810828

parallel

"in

connection with" language in the Securities Litigation Uniform
Standards Act (SLUSA), which was adopted to further the same goals
as, and correct an unintended consequence of, the PSLRA.

Merrill

Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71 (2006).
In so doing, the Court explained that Rule 10b-5's "in connection
with"

requirement

'coincide[s]'

is

with

a

satisfied
securities

plaintiff or by someone else."
Court

reaffirmed

where

Dabit

but

"the

fraud

transaction--whether

Id. at 85.
clarified

alleged
by

the

Just this term, the

that

"[a]

fraudulent

misrepresentation or omission is not made 'in connection with'" the
purchase or sale of the securities covered by the SLUSA "unless it
is material to a decision by one or more individuals (other than
the

fraudster)

to

buy

or

to

sell

a

'covered

security.'".

Chadbourne & Parke LLP v. Troice, 134 S. Ct. 1058, 1066 (2014).
The

fraud

as

alleged

here

was

material

to-–indeed

generated–-the purchase of securities covered by the Exchange Act
and Rule 10b-5.

There has been no dispute as to whether the

plaintiffs actually bought securities covered by the Exchange Act
(in fact, they specifically allege that Regulation U governed the
transactions). And, although plaintiffs endeavored to plead around
how central securities are to the alleged fraudulent scheme, their
pleading makes clear their theory that, but for the alleged
misrepresentations and omissions, the plaintiffs would have bought

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fewer, if any, securities.

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(Hence their harm was driven at least

in part by the fall in the value of the securities.)

As such, the

alleged misrepresentations and omissions were necessarily material
to the plaintiffs' decision to purchase securities, and so the
misrepresentations and omissions were "in connection with" those
securities transactions.
We also note that this is not a case where the proceeds
of

an

independent

fraud

simply

happened

to

be

invested

in

securities, or where plaintiffs obtained the money they later
invested in a fraudulent scheme by selling securities.
Zandford, 535 U.S. at 820; Troice, 134 S. Ct. at 1071-72.

Cf.
Nor do

plaintiffs allege a scheme in which securities played only an
incidental or "happenstance" role.

Rezner v. Bayerische Hypo-Und

Vereinsbank AG, 630 F.3d 866, 871-72 (9th Cir. 2010) (finding no
PSLRA preemption where plaintiff pledged an interest in his bondholding account as substitute collateral in a loan scheme to
produce tax losses, as "the securities were merely a happenstance
cog

in

the

scheme.");

(distinguishing

the

see

Supreme

also

Troice,

Court's

134

S.

construction

Ct.

at

1068

of

the

"in

connection with" requirement from an interpretation that would
cover

a

borrower

who

misrepresented

his

creditworthiness

by

claiming that he held or would buy securities, or that would reach
a mortgage broker who misrepresented a loan's interest rate and
then sold the mortgage to a bank that securitized it); Ouwinga v.

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Benistar 419 Plan Servs., Inc., 694 F.3d 783, 791 (6th Cir. 2012)
(concluding that the PSLRA did not preempt a claim relating to an
abusive tax shelter, structured as a benefit plan that purchased
variable life insurance policies (securities), because "the fraud
and

the

securities

transactions

were

essentially

independent

events.").5
In sum, if the defendants fraudulently misrepresented or
failed to disclose the Regulation U margin lending restrictions as
part of a scheme to induce plaintiffs to purchase more securities
than they otherwise would have, such fraud would have been "in
connection with" the purchase or sale of securities within the
meaning of Rule 10b-5. Accordingly, the district court was correct
to reject what is plaintiffs' sole argument on appeal for evading
the PSLRA bar in this action.

5

We have also considered Anatian v. Coutts Bank
(Switzerland) Ltd., 193 F.3d 85, 87-88 (2d Cir. 1999), which holds
that claimed fraud relating to a series of loans was too far
removed from any securities transactions to support a Rule 10b-5
claim. So far as we can tell, it is at least questionable whether
the Anatian complaint would have satisfied the second and third
Pirate Investor factors (namely, whether the parties' relationship
would necessarily involve, or the defendants meant to induce,
securities transactions). See Anatian v. Coutts Bank, Switzerland,
Ltd., 97 CIV. 9280 (JSR), 1998 WL 526440, at *1-2 (S.D.N.Y. Aug.
21, 1998) aff'd 193 F.3d 85 (2d Cir. 1999). In any event, Anatian
does not apply here, where the nexus to a securities sale is both
more direct and more central to the scheme.
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B.

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The district court did not abuse its discretion in
dismissing the complaint as to two defendants for failure
of service.
We

review

for

abuse

insufficient service of process.

of

discretion

a

dismissal

for

Crispin-Taveras v. Municipality

of Carolina, 647 F.3d 1, 6 (1st Cir. 2011).6
Under Federal Rule of Civil Procedure 4, absent contrary
federal law, one way that a plaintiff may serve a defendant is by
"following state law for serving a summons in an action brought in
courts of general jurisdiction in the state where the district
court is located or where service is made[.]"

Fed. R. Civ. P.

4(e), (e)(1). See also Senior Loiza Corp. v. Vento Dev. Corp., 760
F.2d 20, 23 (1st Cir. 1985) (applying the prior version of the rule
to Puerto Rico).
Puerto Rico amended its Rules of Civil Procedure in 2009,
and the new rules have not yet been officially translated.
Calderón Serra v. Banco Santander P.R., No. 3:10-cv-1906-GAG, 2012
WL 3067609, at *3 n.1 (D.P.R. July 30, 2012) (citing P.R. Law Ann.
tit.

32,

app.

V,

R.

4.6).7

According

to

the

defendants'

6

Somewhat surprisingly, in view of the potentially different
preclusive effects of dismissals under Rules 12(b)(6) and 12(b)(5),
defendants have not volunteered to waive their lack of service
defense in the event that we affirm the RICO dismissal, nor do
plaintiffs waive their appeal of the Rule 12(b)(5) dismissal in the
event of such an affirmance. We therefore reach this issue, which
was the basis for the district court's dismissal as to defendants
Calvo and Moreno.
7

However, as the district court observed, the new Rule 4.6
largely mirrors the former Rule 4.5. Id.
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translation,

which

Page: 16

plaintiffs

do

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not

appear

to

Entry ID: 5810828

materially

challenge, the current rule provides:
(a) The court shall issue an order providing for a
summons by publication when the person to be served is
outside of Puerto Rico or . . . could not be located even
after pertinent efforts have been made . . . and it is
proved to the satisfaction of the court through an
affidavit stating the efforts made . . . . The order
shall provide that the summons shall be published only
once in a newspaper of general circulation in Puerto
Rico. The order shall also provide that, within the ten
(10) days following the publication of the summons, the
defendant shall be sent a copy of the summons and of the
complaint filed . . . to his/her last known address,
unless a sworn statement is made justifying that in spite
of the reasonable steps taken, which shall be stated, it
has been impossible to find any address of the defendant,
in which case the court will excuse compliance of this
provision.
Plaintiffs

sought

service

by

publication

for

three

defendants: José Álvarez, Juan Moreno Blanco ("Moreno"), and Héctor
Calvo.

To show their efforts at personal service,8 plaintiffs

offered an affidavit from private investigator Andrés Amador.
Regarding Moreno and Calvo, Amador averred that his efforts turned
up a last known address but little current information beyond
suggestions that each had left Puerto Rico.

He reported that

Álvarez's name was too common to produce workable leads, and
records checks had proved unavailing.

The district court granted

the motion.

8

Plaintiffs' initial motion was denied for lack of an
affidavit, and so we focus here on their second motion for service
by publication, which was granted.
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No one disputes that each summons was properly published.
Plaintiffs, however, failed to mail the defendants a copy of the
summons and complaint post-publication.

Accordingly, the three

defendants moved to dismiss the complaint for insufficient service
of process.

See Fed. R. Civ. P. 12(b)(5).

The court granted the

motion as to Moreno and Calvo, noting that Amador’s affidavit gave
a last known address for each, and so process should have been
mailed there. Calderón Serra, 2012 WL 3067609, at *4-5. The court
denied the motion as to Álvarez, however, concluding that although
there was no post-publication demonstration that it was impossible
to find his last known address, the original Amador affidavit
sufficed for that purpose.
On

appeal,

Id.9

plaintiffs

claim

that

because

Amador's

affidavit showed that there was no known current address for any of
the three defendants, no mailing was necessary.

This view is

contrary to the plain language of the Rule, which requires mailing
even where there is no current address, so long as the plaintiff
has a "last known address."

Indeed, were a current Puerto Rico

address known, service by publication would likely have been
unavailable.

We therefore agree with the district court that

plaintiffs should have mailed the summons and complaint to Moreno
and Calvo's last known addresses.

9

Later, the district court dismissed the action sua sponte
as to Álvarez when it dismissed the rest of the case. Id. at *6.
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Case: 12-2128

Document: 00116666045

Page: 18

Date Filed: 03/26/2014

Entry ID: 5810828

The Puerto Rico cases cited in plaintiffs' Rule 28(j)
letter do not compel the contrary result.
28(j).

See Fed. R. App. P.

Quoting Banco Popular v. S.L.G. Negron, 164 D.P.R. 855

(P.R. June 2, 2005) (trans.), plaintiffs suggest that the district
Cf. id. at

court should have ordered re-service, not dismissal.

874. However, their opening brief on appeal argued only that
plaintiffs complied with Rule 4.6, not that the sanction for
failure was too harsh.10 They have thus forfeited the latter claim.
See Lattab v. Ashcroft, 384 F.3d 8, 17 (1st Cir. 2004).

Moreover,

in Banco Popular, where the defendant's investigator found a
relative of the plaintiffs at their last known address, the Supreme
Court of Puerto Rico held that mailing the wrong version of a
summons after publication was inadequate service.
164 D.P.R. at 861, 874.

Failure to mail anything is at least as

grave as mailing the wrong thing.
service

here

was

Banco Popular,

adequate,

Banco

Thus, on the issue of whether
Popular

is

of

no

help

to

plaintiffs.
Plaintiffs also offer a Puerto Rico Court of Appeals
opinion affirming a decision to waive the post-publication mailing
requirement for lack of a known "effective" address for the

10

Plaintiffs' brief asserts that the "denial of excusing
Appellants from their compliance with Rule 4.6 is clearly
arbitrary." In context, however, this appears to be an objection
to the finding that plaintiffs did not satisfy the Rule. If it was
intended to convey anything else, it is so cryptic as to waive the
point. See United States v. Zannino, 895 F.2d 1, 17 (1st Cir.
1990).
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Case: 12-2128

Document: 00116666045

Page: 19

Date Filed: 03/26/2014

Entry ID: 5810828

defendants, such that there was no "reasonable possibility to
inform the respondent of the claim filed against him."

Maldonado

Pena v. Bear Guerrero, FAC2008-3621(403), 2010 WL 4394296 (TCA), at
*3-4 (P.R. Cir. July 8, 2010) (trans.) (internal quotation marks
omitted). This case is persuasive authority as to Puerto Rico law,
see CPC Int'l, Inc. v. Northbrook Excess & Surplus Ins. Co., 962
F.2d 77, 91 (1st Cir. 1992), but distinguishable.

Unlike in

Maldonado, the district court here did not excuse the plaintiffs
from the mailing requirement ex ante--nor, it seems, did plaintiffs
ask it to.

While it perhaps would not have been an abuse of

discretion for the district court to grant such a request had
plaintiffs made it (a question we need not decide), we see no error
in the district court's refusal to sanction plaintiffs' decision to
presume that compliance with the clear language of the rule would
be excused.

As such, we affirm the district court's dismissal of

the complaint as to Moreno and Calvo for failure of service.
III. Conclusion
For the foregoing reasons, the judgment of the district
court is affirmed.

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