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CCP International Shipping v. Bankers Insurance Co.

United States District Court, D. Massachusetts

April 18, 2019

CCP INTERNATIONAL SHIPPING and YEMI ADEGBOYEGA, Plaintiffs,
v.
BANKERS INSURANCE COMPANY and BANKERS FINANCIAL CORPORATION, Defendants.

          MEMORANDUM AND ORDER ON MOTION TO DISMISS

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

         Plaintiffs CCP International Shipping (“CCP”) and Yemi Adegboyega claim that Defendants Bankers Insurance Company (“BIC”) and Bankers Financial Corporation (“BFC”)[1]breached a contractual agreement between the parties and violated Massachusetts General Laws Chapter 93A by improperly drawing upon a $50, 000 letter of credit posted by Plaintiffs as collateral for a surety bond. The $50, 000 letter of credit was to be drawn upon to pay any judgment or settlement arising from CCP's shipping business, but Plaintiffs claim that BIC or BFC drew upon the letter of credit when CCP was not liable for a settlement or judgment. See [ECF No. 1-3 at 4-7 (“Complaint” or “Compl.”) ¶¶ 4-6]. Defendants move to dismiss for insufficient service of process and failure to state a claim upon which relief can be granted. [ECF No. 8]; see Fed.R.Civ.P. 12(b)(5), 12(b)(6). For the reasons explained herein, the motion to dismiss is GRANTED, and the Complaint is dismissed without prejudice. Plaintiffs may amend the Complaint within twenty-one days, and then properly serve the defendant or defendants named in the amended complaint.

         I. BACKGROUND

         The following facts are drawn from the Complaint, the well-pleaded allegations of which are taken as true for purposes of evaluating Defendants' motion to dismiss. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014). Certain details are also culled from documents referred to in the Complaint and from documents whose authenticity is not disputed by the parties. See Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993).

         In December 2013, CCP posted a $50, 000 letter of credit issued by Bank of America as collateral for a surety bond issued by BIC. Compl. ¶¶ 4-5; see also [ECF No. 8-2 at 10]. The letter of credit was to be used to settle potential claims against CCP arising from its shipping business. Compl. ¶ 6. On January 13, 2015, without notifying Plaintiffs or settling any claim, BIC drew $50, 000 from the letter of credit. Id. ¶¶ 9-11.[2] BIC was non-responsive when CCP attempted to determine why the funds had been drawn. Id. ¶ 14.

         On April 30, 2018, prior to filing this action, CCP faxed Defendants a draft complaint. The next day, the parties discussed holding off litigation to give Defendants an opportunity to evaluate the situation. [ECF No. 15 at 1].[3] On May 11, 2018, Defendants wrote to CCP and explained that it was their position that BIC was entitled to draw upon the $50, 000 letter of credit because BIC had been informed that the letter of credit, the only collateral posted by CCP, would not be renewed, while claims could be made against the surety bond BIC had written in favor of CCP until December 2019. [ECF No. 16-1 at 4]. Defendants offered to compromise by releasing half of the collateral. Id.

         On June 7, 2018, Plaintiffs filed this action in Suffolk County Superior Court. See [ECF No. 14 at 2]. On June 14, 2018, Defendants offered to release the full $50, 000 in collateral in exchange for a release of claims and an acknowledgment of CCP's obligation to indemnify Defendants against potential claims. [ECF No. 16-1 at 7]. The offer was not accepted. On November 28, 2018, Plaintiffs served BFC by certified mail. [ECF No. 1-3 at 3]. Although Plaintiffs claim to have served both BFC and BIC, BIC maintains that it was not served, and the only summons filed with the Court was addressed to BFC alone. [ECF No. 8-2 at 1-3 (“Kesneck Aff.”) ¶ 9; ECF No. 1-3]. On December 21, 2018, Defendants removed the action to this Court. [ECF No. 1]. On January 16, 2019, Defendants filed the motion to dismiss, claiming insufficient service of process and failure to state a claim, [ECF No. 8]; on February 4, 2019, Plaintiffs filed a memorandum in opposition, [ECF No. 16]; and, on February 6, 2019, Defendants replied, [ECF No. 19].

         II. INSUFFICIENT SERVICE OF PROCESS

         “Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirements of service of process must be satisfied.” Cichocki v. Mass. Bay Cmty. Coll., 174 F.Supp.3d 572, 575 (D. Mass. 2016) (quoting Aly v. Mohegan Council-Boy Scouts of Am., No. 08-40099-FDS, 2009 WL 3299951, at *1 (D. Mass. Apr. 20, 2009)). Where, as here, the sufficiency of process is challenged under Rule 12(b)(5), the plaintiff bears the burden of proving proper service. Id. “[S]tate law governs the service of process prior to removal to the district court.” Osborne v. Sandoz Nutrition Corp., No. 95-1278, 1995 WL 597215, at *1 (1st Cir. 1995). If a defendant is not subject to the state court's jurisdiction prior to removal, for the federal court to obtain personal jurisdiction, the defendant must be served with process in accordance with Federal Rule of Civil Procedure 4. See Danastorg v. U.S. Bank Nat'l Ass'n, No. 1:15-cv-11512-ADB, 2016 WL 7851407, at *2 (D. Mass. May 3, 2016) (citing Echevarria-Gonzalez v. Gonzalez-Chapel, 849 F.2d 24, 28 (1st Cir. 1988)). The fact that a defendant has actual notice of the lawsuit is insufficient to establish personal jurisdiction. Id.

         Here, Plaintiffs have made no attempt to serve Defendants since removing this case, and the Court's personal jurisdiction over Defendants therefore turns on the adequacy of service prior to removal. See Osborne, 1995 WL 597215, at *2 (“We decline to use Section 1448 . . . to ‘breathe jurisprudential life in federal court to a case legally dead in state court.'” (quoting Witherow v. Firestone Tire & Rubber Co., 530 F.2d 160, 168 (3d Cir. 1976)). Massachusetts Rule of Civil Procedure 4(e) provides for service of a summons and complaint outside the Commonwealth, among other methods, “by any form of mail addressed to the person to be served and requiring a signed receipt.” Mass. R. Civ. P. 4(e). Massachusetts Rule of Civil Procedure 4(j) states:

If a service of the summons and complaint is not made upon a defendant within 90 days after the filing of the complaint and the party on whose behalf such service was required cannot show good cause why such service was not made within that period, the action shall be dismissed as to that defendant without prejudice upon the court's own initiative with notice to such party or upon motion.

Mass. R. Civ. P. 4(j). Massachusetts “Rule 4(j) was meant to be strictly construed.” Kennedy v. Beth Israel Deaconess Med. Ctr., Inc., 898 N.E.2d 529, 537 (Mass. App. Ct. 2009). “The focus of the court's inquiry as to good cause is the reasonableness and diligence of counsel's effort to effect service within the time required.” Id. Where a party files a motion to enlarge the time in which to complete service before the 90-day period expires, courts are called upon to exercise discretion. See Brunelle v. Blaise, No. 2004-00920, 2004 WL 2746313, at *5 (Mass. Super. Ct. Nov. 29, 2004) (holding that when a party moves for an extension before the 90 days expires “[n]o notice is required to be given to the other side and the extension may be granted without motion”). The good cause standard is more exacting where, as here, the 90-day period has expired before an extension is sought, and is ordinarily met only where the failure to make service is “due to causes over which the moving party had no direct control, ” Brunelle, 2004 WL 2746313, at *5, for example where a defendant evades service, see Kennedy, 898 N.E.2d at 537.[4]

         Defendants contend, as an initial matter, that BIC has not been served. Plaintiffs respond that they served BIC and BFC on November 28, 2018. [ECF No. 16 at 1].[5] Although Plaintiffs filed a certified mail receipt reflecting delivery of something to a person purportedly associated with BIC, see id. at 1-2, they have not demonstrated that BIC was served with a valid summons because the summons filed with the Court is directed to BFC only, [ECF No. 1-3 at 2]; see Mass. R. Civ. P. 4(b) (summons must “be directed to the defendant”).

         Plaintiffs' opposition to the motion to dismiss also seems to argue that service on BFC alone is sufficient to obtain personal jurisdiction over BIC because “Defendants operates [sic] in one unit” and “Plaintiffs in their dealing with the bond and Defendants Agent in California sent a document with letterhead Bankers Financial Corporation/Banker Insurance Company.” See [ECF No. 16 at 2]. Plaintiffs' assertion that they believed that Defendants were one entity is belied by the fact that they presented certified mail receipts for purported service on both Defendants (albeit without showing that they sent a properly addressed summons to BIC). See [ECF No. 16-1 at 1-2]. Conversely, Defendants filed an affidavit that explains their corporate ...


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