RCC Ventures, LLC v. Brandtone, Ltd

Filing 24

OPINION AND ORDER re: 20 MOTION for Order to Show Cause for Default Judgment. Accordingly, RCC's motion for default judgment is DENIED, the order to show cause issued by the Court on July 14, 2017 (ECF No. 19) is VACATED, and the hearing sche duled for August 11, 2017 is adjourned. In addition, RCC is ORDERED TO SHOW CAUSE, no later than August 4, 2017, why this action should not be dismissed for failure to effectuate service in accordance with Federal Rule of Civil Procedure 4(h)(2). RCC is further ORDERED to serve a copy of this order on Brandtone Holdings Limited and to file proof of service on the docket. SO ORDERED. (Signed by Judge Gregory H. Woods on 7/28/2017) (anc)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
RCC VENTURES, LLC
:
Plaintiff,
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-against:
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BRANDTONE HOLDINGS LIMITED,
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Defendant. :
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USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: 7/28/17

1:17-cv-1585-GHW
OPINION AND ORDER

GREGORY H. WOODS, District Judge:
Plaintiff RCC Ventures, LLC (“RCC”) initiated this action on March 2, 2017 against
Defendant Brandtone Holdings Limited (“Brandtone”), an Irish business corporation with a
principal place of business in Dublin. Am. Compl. (ECF No. 7) (“AC”) ¶ 3. RCC is a debt advisory
company that, among other things, introduces business to institutional lenders and arranges for
institutional lenders to providing funding to businesses. AC ¶ 5. Brandtone is a mobile marketing
firm. AC ¶ 6. RCC seeks damages for amounts allegedly owed it by Brandtone under an exclusive
debt financing agreement.
On March 6, 2017, RCC filed with the Court an affidavit of service of a summons and the
amended complaint. ECF No. 10. The affidavit indicates that service of process was made on
“Brandtone, Inc. s/h/a Brandtone Holdings Limited” through the New York Secretary of State. Id.
In a May 1, 2017 letter to the Court, RCC described “Brandtone, Inc.” as Brandtone’s “wholly
owned subsidiary.” ECF No. 12. On June 14, 2017, RCC informed the Court of its intention to
request a certificate of default and to move for default judgment. ECF No. 14. The Court issued an
order the next day, advising RCC that the Court “will carefully scrutinize the issue of service of
process prior to granting any default judgment,” and directed RCC to “the ample case law holding

that service of process on a subsidiary does not constitute valid service on the parent merely by
virtue of the parent-subsidiary relationship.” ECF No. 15.
Shortly after entry of the Court’s June 15, 2017 order, RCC began the process of pursuing a
default judgment against Brandtone. Upon RCC’s request, the Clerk of Court issued a certificate of
default on July 6, 2017. ECF No. 17. The Court then issued an order to show cause why default
judgment should not be entered against Brandtone on July 14, 2017. ECF No. 19. In accordance
with the Court Individual Rules of Practice in Civil Cases, RCC supported its motion for default
judgment with an attorney’s affidavit, a memorandum of law, and other required materials. ECF
Nos. 21-22.
Despite the Court’s order explaining that it would carefully scrutinize whether service on
Brandtone’s wholly owned subsidiary amounted to proper service on Brandtone before granting
default judgment, RCC’s discussion of service on Brandtone was limited to the following: “On
March 23, 2017, Plaintiff served the Summons and Complaint personally on Nancy Dougherty, the
authorized agent in the Office of the Secretary of State of the State of New York.” Mem. of Law
(ECF No. 21) at 4; see also Decl. of Chris Han (ECF No. 22) (“A copy of the Summons and
Amended Complaint was served on Defendant on March 23, 2017 by personal service made on
Nancy Dougherty, the authorized agent in the Office of the Secretary of State of the State of New
York.”). RCC presented no argument as to why its method of service was effective as to Brandtone,
nor did RCC address the case law specifically cited by the Court in its June 15, 2017 letter.
“A court may not properly enter a default judgment unless it has jurisdiction over the person
of the party against whom the judgment is sought, which also means that he must have been
effectively served with process.” Acceptance Ins. Co. v. Home Med. Of Am., Inc., No. 04-cv-9338
(WHP), 2005 WL 3471780, at *2 (S.D.N.Y. Dec. 20, 2005) (quoting Copelco Capital, Inc. v. Gen. Consul
of Bolivia, 940 F. Supp. 93, 94 (S.D.N.Y. 1996)); see also Licci v. Lebanese Canadian Bank SAL, 673 F.3d

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50, 59 (2d Cir. 2012) (stating that “[t]he lawful exercise of personal jurisdiction by a federal court
requires,” inter alia, “plaintiff’s service of process upon the defendant [to] have been procedurally
proper”); Aspex Eyewear, Inc. v. Cheuk Ho Optical Int’l Ltd., No. 00-cv-2389 (RMB), 01-cv-1315
(RMB), 2005 WL 3501900, at *1 (S.D.N.Y. Dec. 21, 2005) (“A default judgment ‘obtained by way of
defective service is void ab initio and must be set aside as a matter of law. Plaintiff has the burden of
demonstrating that service was proper.” (quoting Howard Johnson Int’l v. Wang, 7 F. Supp. 2d 336
(S.D.N.Y. 1998), aff’d, 181 F.3d 82 (2d Cir. 1999))).
As the Court has already informed RCC, service of process on a subsidiary does not
automatically constitute valid service on the parent. See, e.g., Ehrenzeller v. McLane Foodservice, Inc., No.
13-6872, 2014 WL 325640, at *2 (E.D. Pa. Jan. 29, 2014) (“It is well-established that service upon
the subsidiary does not constitute valid service upon the parent merely because of the relationship
between the corporate entities.”); Gilderhus v. Concentrix Corp., 825 F. Supp. 2d 414, 432 n.23
(W.D.N.Y. 2011) (“It is hornbook law that service of process on a subsidiary does not constitute
service on a parent corporation, nor does service on a parent constitute service on the subsidiary.
Except in exceptional circumstances not present here, the law respects separate corporate identities
even where one corporation may wholly own another . . . .” (quoting Sansui Elecs. Corp. v. Am.
Southern Ins. Co., No. 88-cv-6184, 1992 WL 77591, at *4 (S.D.N.Y. Mar. 26, 1992))).
Because RCC has not demonstrated that service on Brandtone’s wholly owned subsidiary
constituted effective service on Brandtone itself, the Court concludes that RCC has failed to make a
prima facie showing of proper service of process. Accordingly, RCC’s motion for default judgment is
DENIED, the order to show cause issued by the Court on July 14, 2017 (ECF No. 19) is
VACATED, and the hearing scheduled for August 11, 2017 is adjourned. In addition, RCC is
ORDERED TO SHOW CAUSE, no later than August 4, 2017, why this action should not be
dismissed for failure to effectuate service in accordance with Federal Rule of Civil Procedure 4(h)(2).

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RCC is further ORDERED to serve a copy of this order on Brandtone Holdings Limited,
and to file proof of service on the docket.
SO ORDERED.
Dated: July 28, 2017
New York, New York

_____________________________________
GREGORY H. WOODS
United States District Judge

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