State Farm Fire and Casualty Company v. Amazon.com Incorporated et al

Filing 91

ORDER: IT IS ORDERED that Defendant LG Chem, Ltd.'s Motion to Dismiss, (Doc. 82 ), is DENIED. IT IS FURTHER ORDERED that Plaintiff State Farm Fire and Casualty Company re-serve Defendant LG Chem, Ltd. with federal process within 90 days of the date of this Order [see attached Order for details]. Signed by Senior Judge James A Teilborg on 5/16/18. (MAW)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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State Farm Fire and Casualty Company,
Plaintiff,

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ORDER

v.

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No. CV-17-01994-PHX-JAT

Amazon.com Incorporated, et al.,

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Defendants.

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Pending before the Court is Defendant LG Chem, Ltd.’s (“Defendant”) Motion to

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Dismiss (“Motion to Dismiss”). (Doc. 82). State Farm Fire and Casualty Company

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(“Plaintiff”) has responded (“Response”), (Doc. 84), and Defendant has replied

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(“Reply”), (Doc. 86).

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I.

Background

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Plaintiff brought this action on behalf of its insured, Hussein Zeitoun, following a

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fire in the insured’s home on June 23, 2016. The Court recounted the background facts of

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this case in its Order on Defendant Amazon.com’s Motion to Dismiss the Fourth

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Amended Complaint, (Doc. 85 at 1–2), and need not repeat them here. On June 23, 2017,

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Plaintiff filed its Second Amended Complaint in the Maricopa County Superior Court.

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(Doc. 84 at 1). The case was removed to this Court on that same date. (Doc. 82 at 3).

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Plaintiff provides that on September 1, 2017, it directed its foreign service expert to

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commence service on Defendant, pursuant to the Hague Convention on the Service

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Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters

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(“Hague Convention”). (Doc. 84 at 1). Plaintiff’s expert then transmitted the Second

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Amended Complaint and the Summons of the Maricopa County Superior Court to the

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South Korean Central Authority to serve on Defendant. (Doc. 80-1). Since that time,

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however, Plaintiff has filed both a Third Amended Complaint, (Doc. 33), and a Fourth

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Amended Complaint, (Doc. 72). Plaintiff has not served either of these amended

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complaints on Defendant, nor has it sent Defendant a federal summons. (Doc. 82 at 3–4).

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On March 5, 2018, Plaintiff filed a Certificate of Service to notify the Court that it had

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perfected service on Defendant on November 22, 2017. (Doc. 80-1); (Doc. 82 at 2).

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II.

Motion to Dismiss

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Defendant moves to dismiss the claims against it on two grounds. First, Defendant

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argues that because Plaintiff violated the Court’s prior order by failing to serve Defendant

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with the “operative complaint,” dismissal is appropriate pursuant to Federal Rule of Civil

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Procedure (“Rule”) 41(b). (Doc. 82 at 4–5). Second, Defendant argues that because

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Plaintiff failed to serve Defendant with a federal summons, dismissal is appropriate under

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Rule 12(b). (Id. at 5–6).

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a. Legal Standard

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“A party must be properly served for the Court to obtain personal jurisdiction over

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that party.” Hickory Travel Sys., Inc. v. TUI AG, 213 F.R.D. 547, 551 (N.D. Cal. 2003).

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Rule 12(b)(5) allows a party to move to dismiss claims against it for insufficient service

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of process. Fed. R. Civ. P. 12(b)(5). In order to survive a Rule 12(b)(5) motion to

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dismiss, a plaintiff must have complied with the requirements of Rule 4. See Rajbhandari

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v. U.S. Bank, 305 F.R.D. 689, 694 (S.D. Fla. 2015). Accordingly, a plaintiff must serve a

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summons with the copy of the complaint. Fed. R. Civ. P. 4(c)(1). That summons must

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both name the court that the defendant is being summoned to and “state the time which

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the defendant must appear and defend.” Fed. R. Civ. P. 4(a)(1). Although normally a

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court must dismiss a defendant who remains unserved within 90 days of the complaint

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being filed, there is an exception for attempts to serve individuals in a foreign country.

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Fed. R. Civ. P. 4(f)(1), (m). Furthermore, when a case is removed from state to federal

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court, and “any one or more of the defendants has not been served with process or in

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which the process served proves to be defective, such process or service may be

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completed or new process issued in the same manner as in cases filed in such district

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court.” 28 U.S.C. § 1448 (2012). This statute allows federal courts “discretion to give the

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plaintiff leave to perfect service or to dismiss the case and force plaintiff to refile.”

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Baumeister v. New Mexico Comm’n for the Blind, 409 F. Supp. 2d 1351, 1353 (D. N.M.

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2006). Dismissal for insufficient service of process is disfavored. See United Food &

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Commercial Workers Union v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir. 1984);

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United States ex rel. Thomas v. Siemens AG, 708 F. Supp. 2d 505, 516 (E.D. Pa. 2010);

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Schmidt v. Wilbur, 775 F. Supp. 216, 227 (E.D. Mich. 1991). Therefore, the Ninth Circuit

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holds “that ‘substantial compliance’ with Rule 4’s service requirements is sufficient so

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long as the opposing party receives sufficient notice of the complaint.” Straub v. A P

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Green, Inc., 38 F.3d 448, 453 (9th Cir. 1994) (citing Chan v. Soc’y Expeditions, Inc., 39

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F.3d 1398, 1404 (9th Cir. 1994); and then citing Direct Mail Specialists, Inc. v. Eclat

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Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir. 1988)). Finally, “[i]f the plaintiff

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fails to . . . comply with . . . a court order, a defendant may move to dismiss the action or

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any claims against it.” Fed. R. Civ. P. 41(b).

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b. Discussion

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Defendant first argues that the Court ordered Plaintiff to serve Defendant “with the

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operative Complaint in this case.” (Doc. 82 at 3). Because Plaintiff only served

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Defendant with the Second Amended Complaint, Defendant contends that Plaintiff

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violated a court order. (Id.) The Court rejects this argument. The Order that Defendant

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refers to does not order Plaintiff to serve Defendant with the operative complaint. Instead,

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it grants Plaintiff an extension to serve all defendants located in Korea and sets a deadline

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for Plaintiff to file proof of service. (Doc. 57 at 3). Because the Court never ordered

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Plaintiff to serve Defendant with the “operative complaint,” the Court rejects Defendant’s

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argument that it is appropriate to dismiss the claims against it on that basis.

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Defendant next argues that the Court should dismiss the claims against it because

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“Plaintiff attempted service . . . with an outdated and inoperative Second Amended

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Complaint, and a Summons from a court in which there is no active case.” (Doc. 82 at 5).

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For these reasons, Defendant argues, Plaintiff did not substantially comply with Rule 4.

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(Doc. 86 at 4). In response, Plaintiff argues that “[t]he letter and intent of service of

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process have been met” because Defendant had notice of this action and was able to hire

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legal counsel and file the pending Motion to Dismiss. (Doc. 84 at 2). The Court agrees

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with the Defendant that Plaintiff did not substantially comply with Rule 4, but will

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nonetheless deny the motion to dismiss.

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By failing to include the federal court summons, Plaintiff has not complied with

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four of the seven requirements of Rule 4(a)(1). By virtue of being a state court summons,

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this summons fails to “name the court[,] . . . state the time within which the defendant

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must appear and defend[,] . . . be signed by the clerk[,] . . . [or] bear the court’s seal.”

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Fed. R. Civ. P. 4(a)(1)(A), (D), (F), (G). The summons thus falls short of “substantial

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compliance” with the dictates of Rule 4. E.g., Ghosh v. City of Berkeley, No. C–14–2922

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MMC, 2015 WL 153209, at *2 (N.D. Cal. Jan. 12, 2015) (holding service of process

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insufficient for lack of clerk’s signature) (citing Ayres v. Jacobs & Crumplar, P.A., 99

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F.3d 565, 569–70 (3d Cir. 1996); and then citing Taylor v. Logic 20/20 Inc., No. C13–

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1199JLR, 2014 WL 1379603, at *3 (W.D. Wash. Apr. 8, 2014)).

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Although Plaintiff’s service of process is insufficient, the Court retains discretion

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in deciding whether to dismiss the action or to quash service. S.J. v. Issaquah Sch. Dist.

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No. 411, 470 F.3d 1288, 1293 (9th Cir. 2006) (citing Stevens v. Sec. Pac. Nat’l Bank, 538

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F.2d 1387, 1389 (9th Cir. 1976)). On this score, the Court is mindful that Plaintiff

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successfully went through the required steps to effect service under the Hague

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Convention 1 and that, at the time Plaintiff transmitted the documents to its foreign service

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expert, Plaintiff had not yet filed its Third Amended Complaint. (Doc. 84 at 1).

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Furthermore, Defendant has not claimed, and the record does not show, that the defective

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The Court recognizes the time and expense that proper service of process on a
foreign company can require. This is why Rule 4(d) places a duty on a foreign individual
to avoid unnecessary expenses. Fed. R. Civ. P. 4(d).
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summons prejudiced it in any way. United Food, 736 F.2d at 1382 (stating that dismissal

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under Rule 4 “is generally not justified absent a showing of prejudice”). Importantly, the

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subsequent amendments to the complaint did not alter the allegations Plaintiff made

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against Defendant in its Second Amended Complaint. (Compare Doc. 81-1, with Doc. 33,

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and Doc. 72). Therefore, although the summons was defective, it still informed

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Defendant of the nature of the claims against it. In such a situation, dismissal is

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disfavored in order to promote the policy—codified in the Rules—of disposing of cases

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on their merits. Fed. R. Civ. P. 1 (“These rules . . . . should be construed . . . to secure the

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just, speedy, and inexpensive determination of every action and proceeding.”); see also

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Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1083 (4th ed.

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2017). Because “the interplay of § 1448 and Rule 4(m) actually encourages courts to

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direct plaintiffs to perfect service,” the proper remedy is not to dismiss Plaintiff’s claims

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against Defendant, but instead to order Plaintiff to re-serve Defendant with federal

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process. Baumeister, 409 F. Supp. 2d at 1354–55 (citing Denver & Rio Grande W. R.R. v.

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Union Pac. R.R., 119 F.3d 847, 848–49 (10th Cir. 1997)); see also Hickory Travel Sys.,

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213 F.R.D. at 553 (stating that the court should retain jurisdiction “so long as there is a

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chance that the plaintiff still could accomplish service” citing Umbenhauer v. Woog, 969

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F.2d 25, 30 (3d Cir. 1992)).

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III.

Conclusion

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Based on the foregoing,

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IT IS ORDERED that Defendant LG Chem, Ltd.’s Motion to Dismiss, (Doc. 82),

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is DENIED.

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IT IS FURTHER ORDERED that Plaintiff State Farm Fire and Casualty

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Company re-serve Defendant LG Chem, Ltd. with federal process within 90 days of the

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date of this Order.

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Dated this 16th day of May, 2018.

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