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North Carolina Mutual Life Insurance Company v. Stamford Brook Capital, LLC

United States District Court, M.D. North Carolina

September 27, 2019

NORTH CAROLINA MUTUAL LIFE INSURANCE COMPANY, a North Carolina Corporation, Plaintiff,
v.
STAMFORD BROOK CAPITAL, LLC a Delaware limited liability company, et al. Defendants.

          MEMORANDUM OPINION AND ORDER

          LORETTA C. BIGGS UNITED STATES DISTRICT JUDGE

         Plaintiff North Carolina Mutual Life Insurance Company (“NCM”) brings this action against several corporate and individual defendants for claims related to alleged mismanagement and misappropriation of trust assets. (ECF No. 97.) Eleven of NCM’s claims are directed at Defendant David Wasitowski (“Wasitowski”).[1] (Id.) Wasitowski moves to dismiss the claims against him for insufficient service of process and improper venue.[2] (ECF No. 150 at 1.) In the alternative, Wasitowski asks this Court to transfer this action to the Southern District of New York, pursuant to 28 U.S.C. § 1404(a). (Id.)

         For the reasons that follow, Wasitowski’s motion and request to transfer will be denied.

         I. BACKGROUND

         NCM’s claims against Wasitowski constitute only a portion of a large and protracted case. To address the issues at hand, a full rendition of the case’s allegations and procedural history is unnecessary; instead, the Court relays only those details important to its consideration of Wasitowski’s motion and request to transfer.

         NCM filed its original complaint on September 23, 2016. (ECF No. 1.) On August 2, 2018, NCM filed an amended complaint naming, for the first time, Wasitowski as an additional defendant. (ECF No. 97.) To briefly summarize the allegations in the amended complaint, NCM “entrusted Defendants, ” including Wasitowski, “with safekeeping and properly investing approximately $34, 000, 000 of its assets” (the “Trust Assets”) in April of 2015. (Id. at 3; 6–8.) Under the relevant management agreements, (ECF Nos. 1-1 at 2; 1-2 at 3), investment of the Trust Assets was supposed to be limited to certain “Eligible Assets”-cash or securities which complied with the insurer investment requirements outlined in N.C. Gen. Stat. § 58-7-173. (ECF No. 97 ¶ 27.) However, rather than properly invest the Trust Assets, NCM alleges that Defendants “engaged in a concerted fraudulent scheme to transfer [NCM]’s assets into improper investments”-ineligible financial vehicles which they owned or controlled-“and to convert such assets for their own benefit.” (See Id . at 3.)

         The amended complaint characterizes Wasitowski, along with Defendants Michael Flatley, Bradley Reifler, and Steven D. Fickes, as the perpetrators of this alleged scheme. (See, e.g., id. ¶¶ 34, 37, 40.) Of special relevance to the motion currently before the Court, NCM alleges that “[o]n or about December 17, 2014, Wasitowski, Flatley, and Fickes traveled to Durham, North Carolina in order to meet with senior executives of [NCM]” and “persuade” them to make reinsurance changes that would allow Defendants to “gain access to, and control over, the Trust Assets.” (Id. ¶ 37.)

         The record shows the following related to service of the amended complaint on Wasitowski: On August 13, 2018, a summons was issued for Wasitowski at his last known address, 39 Fairmont Road West, Califon, New Jersey (the “Califon residence”). (ECF No. 99-1.) Two days later, on August 15, NCM had copies of the summons and amended complaint delivered to the Califon residence via Federal Express (the “First Service”). (ECF No. 104 ¶ 3(ii).) Although the delivery was addressed to David Wasitowski, an individual named “E. Witkinski” appears to have signed for the documents. (ECF No. 104-2 at 1.) Wasitowski claims not to know anyone by the name of “E. Witkinski.” (ECF No. 168-1 ¶ 5.)

         The Califon residence is owned by Wasitowski’s wife, Olha Wasitowski. (ECF Nos. 160-1 ¶ 5; 168-1 ¶ 3.) Although he lived at the Califon residence until July 31, 2018, Wasitowski avers that he has lived at a different location-5 Laga Court, Ringoes, New Jersey (the “Ringoes residence”)-since August 1, 2018. (ECF 152 ¶ 2.) Wasitowski neither confirms nor denies actually receiving the summons and complaint that were sent to the Califon residence. (See ECF Nos. 152, 168-1.)

         In late August 2018, Wasitowski-who reports to have been “shocked to learn that [he] had been named a defendant”-reached out to attorney Greg Smith (“Smith”) to discuss how to respond to the amended complaint. (ECF Nos. 152 ¶ 12; 153 ¶ 4.) Smith agreed to represent Wasitowski for the “limited purpose of exploring” a potential out-of-court resolution to NCM’s claims against him. (ECF No. 153 ¶ 5.) To that end, Smith contacted NCM’s counsel on August 27 to initiate negotiations. (Id. ¶ 7.)

         The issues of effective service and time to respond to the amended complaint were discussed throughout the parties’ dialogue. While NCM claims that it “never agreed that it had not obtained proper service” via the First Service to the Califon residence, it “did agree to hold off on moving forward with the lawsuit” against Wasitowski while negotiations were ongoing. (ECF No. 160-2 ¶ 6.) Wasitowski, calling the First Service “purported, ” (ECF No. 153 ¶ 7), insisted that he needed “at least 60 days, and preferably 90 days, to respond to the amended complaint.” (ECF No. 168-2 ¶ 5.) Thus, the parties conducted themselves as follows: NCM never conceded that the First Service was ineffective, but expressed a willingness to delay the effective date of service during negotiations; Wasitowski never acknowledged that the First Service was sufficient, but displayed a full awareness of the claims against him and hoped to extend his time to respond.

         Negotiations between the parties ultimately proved unsuccessful. (ECF No. 160-2 ¶ 8.) On October 12, Smith contacted NCM to ask “what [NCM was] thinking concerning service of the complaint.” (ECF No. 153 ¶ 13.) NCM did not respond until November 28. (Id. ¶ 14; ECF No. 160-2 ¶ 9.) At that point, however, Wasitowski “was in no mood to do NCM any favors” and, believing that “NCM had failed to serve him in a timely manner, ” refused to agree on a date by which he would be required to respond to the amended complaint. (ECF Nos. 153 ¶ 15; 160-2 ¶ 10.) “Out of an abundance of caution, and to avoid any argument regarding improper service, ” (ECF No. 160-2 ¶ 11), NCM caused Wasitowski to be personally served at his place of work on December 7 (the “Second Service”)[3]-127 days after the filing of the amended complaint. (ECF Nos. 144 ¶ 4; 144-1.)

         Wasitowski now moves to dismiss NCM’s claims on the bases of insufficient service of process and improper venue. (ECF No. 150.) If this Court declines to dismiss NCM’s claims, Wasitowski requests that this action be transferred to the Southern District of New York. (Id.)

         II. SERVICE OF PROCESS

         For motions to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(5), the plaintiff bears the burden of establishing that service of process has been performed in a manner that satisfies the requirements of Rule 4 of the Federal Rules. See Elkins v. Broome, 213 F.R.D. 273, 275 (M.D. N.C. 2003). The Court may construe the elements of Rule 4 liberally if it is clear that a defendant had actual notice of the pending suit. Karlsson v. Rabinowitz, 318 F.2d 666, 668 (4th Cir. 1983). Still, while purely “technical” violations may not invalidate service of process, “the rules are there to be followed, and plain requirements for the means of effecting service of process may not be ignored.” Armco, Inc. v. Penrod-Stauffer Bldg. Sys., Inc., 733 F.2d 1087, 1089 (4th Cir. 1984).

         To recap the service-related events outlined above: NCM first attempted to serve Wasitowski by Federal Express on August 15, 2018. (ECF No. 104 ¶ 3(ii).) Thereafter, the parties entered into negotiations for several months, wherein both the effective date of service and the time allotted to respond were recurring points of discussion. (See ECF Nos. 153, 160- 2, 168-2). Then, on December 7, 2018, Wasitowski was indisputably served in person. (ECF Nos. 144 ¶ 4, 144-1.) Wasitowski contends that process was insufficient because the First Service was invalid and the Second Service, though otherwise proper, was untimely. (ECF No. 151 at 8–11).

         As explained below, this Court retains some doubt as to the effectiveness of the First Service. However, in keeping with the Fourth Circuit’s “strong preference that [claims] be decided on their merits, ” Aikens v. Ingram, 652 F.3d 496, 523 (4th Cir. 2011), this Court will exercise its discretionary authority under Rule 4(m) and extend the time to serve the amended complaint up to and including December 7, 2018, the date when Wasitowski was definitively served.

         A. Sufficiency of the First Service

          Federal Rule of Civil Procedure 4(e)(1) permits a plaintiff to serve a defendant by “following state law for serving a summons . . . in the state where the district court is located.” Fed.R.Civ.P. 4(e)(1). Under North Carolina law, service may be executed “[b]y depositing with a designated delivery service authorized pursuant to 26 U.S.C. § 7502(f)(2) a copy of the summons and complaint, addressed to the party to be served, delivering to the addressee, and obtaining a delivery receipt.” N.C. R. Civ. P. 4(j)(1)(d). The parties do not dispute that Federal Express is a “designated delivery service.” Nor is there any contention that the First Service delivery was addressed to the wrong party. The parties do ...


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