Savage & Associates, P.C. ex rel. Teligent, Inc. v. Williams Communications (In re Teligent Services, Inc.)
Savage & Associates, P.C. ex rel. Teligent, Inc. v. Williams Communications (In re Teligent Services, Inc.)
Opinion of the Court
OPINION AND ORDER
This bankruptcy appeal arises out of an adversary proceeding initiated by Savage and Associates, P.C. (“Savage”) as the unsecured claim estate representative for and on behalf of Teligent, Inc. and twenty one other debtors. Savage seeks to avoid preferential payments allegedly made by Teligent to Williams Communications Solutions (“NextiraOne”) and Williams Communications (‘Wiltel”) during the ninety day period (“Preference Period”) prior to Teligent’s voluntary Chapter 11 Bankruptcy filing.
In a memorandum opinion, the Bankruptcy Court held that (1) Savage failed to timely serve Wiltel with the complaint pursuant to Federal Rule of Civil Procedure 4(m) and Federal Rule of Bankruptcy Procedure 7004(a); (2) Savage did not show “good cause” for the thirteen month delay; (3) the circumstances did not call for the court to exercise its discretion in deeming Savage’s late service as timely; (4) Savage may not amend the complaint to include Wiltel as a defendant because the amendment does not relate back to the original complaint; and (5) Teligent did not remit any of the payments to NextiraOne during the Preference Period.
The issues raised on appeal are (1) whether the Bankruptcy Court abused its discretion in holding that Savage did not show good cause for its thirteen month delay in effecting service on Wiltel; (2) whether the Bankruptcy Court abused its discretion in refusing to deem the delayed service as timely under the Federal Rules of Civil Procedure; (3) whether the Bankruptcy Court abused its discretion in denying Savage’s motion to amend the complaint; and (4) whether the Bankruptcy Court erred as a matter of law in granting NextiraOne’s motion for summary judgment.
I. BACKGROUND
A brief review of the relevant facts and procedural history are set forth below. For a full recitation, see the Bankruptcy Court’s May 13, 2005 Opinion and Order.
Teligent filed a voluntary Chapter 11 bankruptcy petition on May 21, 2001. In the restructuring plan, Savage was appointed as the debtors’ representative in charge of recovering preferential creditor payments made by Teligent during the Preference Period.
Upon receiving the complaint, Nexti-raOne learned that it was not the recipient of the transfers.
Seventeen months after filing the complaint, at the deposition of George Vareld-zis, a key financial officer for NextiraOne, Savage learned yet again that NextiraOne had never received the transfers at issue.
Upon receipt of the complaint, Wiltel filed a motion to dismiss on the ground that Savage’s service was untimely as it was made thirteen months after the statute of limitations had expired.
On January 19, 2005, Bankruptcy Judge Alan L. Gopper heard arguments on Wil-tel’s motion to dismiss. During oral argument, Wiltel’s counsel admitted on the record that Wiltel had in fact been the recipient of all of the Preference Period transfers at issue.
The Bankruptcy Court also granted Wil-tel’s motion to dismiss pursuant to Rule 12(b)(5) on the ground that Savage had failed to show good cause for its delay in serving the proper defendant and that the circumstances did not warrant exercising the court’s discretion to extend the service deadline under Rule 4(m).
A. Appeals of Bankruptcy Court Orders
1. Final Order
The district courts are vested with appellate jurisdiction over bankruptcy court rulings.
2. Standard of Review
A district court functions as an appellate court in reviewing judgments rendered by bankruptcy courts.
A bankruptcy court’s exercise of its equitable authority is reviewed for abuse of discretion.
A. The Bankruptcy Court Correctly Held that Savage Did Not Show Good Cause for Its Delayed Service
Savage sought to serve Wiltel seventeen months after filing the original complaint and thirteen months after the 120 service period had expired. Federal Rule of Civil Procedure 4(m) allows for a plaintiff to serve a defendant after the 120 day service period in certain circumstances.
[I]f the plaintiff shows good cause for the failure [to serve the defendant within 120 days], the court shall extend the time for service for an appropriate period.35
Accordingly, Savage had the burden of proving good cause for the thirteen month delay in service.
In an attempt to do so, Savage claims that Teligent’s records did not reflect Wil-tel and NextiraOne as distinct entities.
However, the possible confusion by Savage does not excuse a thirteen month delay in service on Wiltel. Three of the checks did have Wiltel’s former name on them, four of the checks were addressed directly to Wiltel, and all of the checks had Wiltel’s address somewhere on the check.
Savage simply did not perform a diligent search of the records before serving Nexti-raOne rather than Wiltel.
B. The Bankruptcy Court Did Not Abuse Its Discretion in Refusing to Deem Savage’s Late Service to Be Timely
The Bankruptcy Court has the discretion to extend the period for service of the complaint absent a showing of good cause
C. The Bankruptcy Court Correctly Denied Savage’s Motion to Amend the Complaint Pursuant to Rule 15(c)
Around the same time that Savage finally attempted to serve Wiltel with the original complaint, Savage sought to amend that complaint by adding Wiltel as a defendant.
(c) Relation Back of Amendments. An amendment of a pleading relates back to the date of the original pleading when
(2) the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, or
*602 (3) the amendment changes the party or the naming of the party against whom a claim is asserted if the foregoing provision (2) is satisfied and, within the period provided by Rule 4(m) for service of the summons and complaint, the party to be brought in by amendment (A) has received such notice of the institution of the action that the party will not be prejudiced in maintaining a defense on the merits, and (B) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against the party.51
Rule 15(c) permits a time-barred claim to be prosecuted under the “relation back” doctrine. The rule is “intended to preserve legitimate suits despite ... mistakes of law at the pleading stage.”
The Bankruptcy Court correctly found that Wiltel did not possess the knowledge required to satisfy Rule 15(c)(3).
It is true that Wiltel’s counsel learned of these proceedings within the 120 day service period during an email exchange with Savage regarding a different proceeding.
Savage claims that Turner “must have” learned the specifics of the claims brought against NextiraOne during his conversation with Carbino.
Savage further claims that Turner’s conversation with Carbino should have, at the very least, caused him to be concerned that Wiltel was involved in the proceeding. But a non-party has no duty to discover that someone is trying to sue him. Given the lack of notice to Wiltel, the Bankruptcy Court did not abuse its discretion in holding that the amendment did not relate back to the original complaint.
D. The Bankruptcy Court Correctly Granted NextiraOne’s Summaiy Judgment Motion
Savage also appeals the Bankruptcy Court’s decision to grant summary judgment for NextiraOne.
IV. CONCLUSION
For the reasons discussed above, the Bankruptcy Court’s Order dismissing the claims against Wiltel and granting summary judgment in favor of NextiraOne is affirmed. The Clerk of the Court is directed to close this appeal.
SO ORDERED.
. See Complaint ("CompL”) ¶¶ 3-21.
. See Savage & Assocs. v. Williams Commc’ns (In re Teligent Servs., Inc.), 324 B.R. 467, 471-78 (Bankr.S.D.N.Y. 2005).
. See Memorandum of Law for Petitioner-Appellant Savage & Associates as the Unsecured Claim Estate Representative for and on behalf of Teligent, Inc., et al. ("Appellant's Mem.”) at 1-2.
. See id.
. See Compl. Intro, (naming "Williams Communications” as the defendant).
. See Fed.R.Civ.P. 4 (providing 120 days to effectuate service). See also Appellant’s Mem. at 7.
. Savage disputes that Teligent had records of Wiltel’s name and address notwithstanding the fact that Teligent named Wiltel as a creditor in its Chapter 11 bankruptcy filing and pursued a separate Preference Period lawsuit against Wiltel. Savage also claims that Teli-gent had only one vendor code for all Williams' entities, but this is dubious and irrelevant because Teligent's listing of both Williams Communication and Williams Communication Solutions as vendors in its Chapter 11 filing demonstrates Teligent's awareness of the distinct entities.
. See NextiraOne's Reply Memorandum of Law (“Reply”) at 3.
. See id. See also Fed.R.Civ.P. 4(m) (providing that service must be made within 120 days after filing the action).
. In one email dated August 26, 2003, Denise Savage, lead counsel for Savage, wrote to
. See Reply at 3.
. See id. at 4.
. See id.
. See Appellant’s Mem. at 8.
. See id. at 10.
. See id.
. See Savage, 324 B.R. at 478.
. See 28 U.S.C. § 158(a).
. See id. § 158(a)(1).
. In re Palm Coast, Matanza Shores Ltd. P'ship, 101 F.3d 253, 256 (2d Cir. 1996).
. See In re Sanshoe Worldwide Corp., 993 F.2d 300, 305 (2d Cir. 1993) ("[Appellant] relies on several cases for the reasonable proposition that the district court acts as an appellate court in reviewing a bankruptcy court's judgments.").
. See Fed. R. Bankr.P. 8013 ("Findings of fact ... shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.”). Accord In re Cody, Inc., 338 F.3d 89, 94 (2d Cir. 2003).
. In re Manville Forest Prods. Corp., 896 F.2d 1384, 1388 (2d Cir. 1990) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948)).
. Anderson v. City of Bessemer City, 470 U.S. 564, 574, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985).
. See In re Cody, 338 F.3d at 94; In re 139-141 Owners Corp., 313 B.R. 364, 367 (S.D.N.Y. 2004).
. See Schwartz v. Aquatic Dev. Group, Inc. (In re Aquatic Dev. Group, Inc.), 352 F.3d 671, 673 (2d Cir. 2003). See also Yadidi v. Herzlich (In re Yadidi), 274 B.R. 843, 847 (9th Cir. BAP 2002) ("The application of § 105 power is reviewed for abuse of discretion.”).
. Schwartz, 352 F.3d at 678 (quoting Zervos v. Verizon N.Y., Inc., 252 F.3d 163, 169 (2d Cir. 2001)).
. In re Integrated Resources, Inc., 147 B.R. 650, 656 (S.D.N.Y. 1992) (quoting The Comm. of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1069 (2d Cir. 1983)).
. See Fed.R.Civ.P. 4(m).
. Id.
. See Mason Tenders Dist. Council Pension Fund v. Messera, No. 95 Civ. 9341, 1997 WL 221200, at *3 (S.D.N.Y. Apr. 1, 1997).
. See Appellant’s Mem. at 6.
. Id.
. See id. at 6-7.
. See id. at 5-6.
. See Savage, 324 B.R. at 471.
. Teligent’s chapter 11 bankruptcy filing lists Wiltel as a separate vendor with an address that matches the address on four of the five checks at issue.
. See, e.g., In re Motel 6 Sec. Litig., No. 93 Civ. 2183, 1995 WL 431326, at *2 (S.D.N.Y. July 20, 1995) (holding that a party’s diligence is a factor to consider in determining good cause).
. See In re Motel 6 Sec. Litig., No. 93 Civ. 2183, 1995 WL 649930, at *1 (S.D.N.Y. Nov. 6, 1995) (any showing of good cause will be balanced against " '(1) the plaintiff’s reasonable efforts to effect service and (2) the preju
. Wiltel has shown that prior to and during the delay in service, several employees who worked on the transactions between Teligent and Wiltel left the company, and that the loss of these employees would impede Wiltel’s ability to defend against this adversarial proceeding.
. See National Union Fire Ins. Co., 1994 WL 463009, at *3 ("Where it is apparent that an attorney’s ignorance, inadvertence, or 'misplaced reliance’ promulgated the failure to serve process, courts have shown no leniency."). See also Sullivan v. Hall (In re Hall), 222 B.R. 275, 280 (Bankr.E.D.Va. 1998) ("Plaintiff has done nothing to warrant the Court’s exercise of its discretion. To allow relief under these circumstances would otherwise render the procedural requirements of the Bankruptcy Rules and Rules of Civil Procedure a nullity, and contradict Chapter 7's expeditious fresh start policy by extending the 120 days and the statute of limitations indefinitely.”).
. See AIG Managed Mkt. Neutral Fund v. Askin Capital Mgmt., 197 F.R.D. 104, 109 (S.D.N.Y. 2000).
. See Petrucelli v. Bohringer & Ratzinger, 46 F.3d 1298, 1306 (3d Cir. 1995) (“the running of the statute of limitations does not require the district court to extend time for service of process.”). See also Rupert v. Metro-North Commuter R.R., No. 95 Civ. 4283, 1996 WL 447745, at *2 (S.D.N.Y. Aug. 7, 1996).
. See Schwartz, 352 F.3d at 678.
. See Appellant’s Mem. at 8.
. Fed.R.Civ.P. 15(c) (emphasis added). See In re Enron Corp., 298 B.R. 513, 522 (Bankr.S.D.N.Y. 2003) (holding that Rule 15(c) is the only vehicle for adding a party after the statute of limitations has run).
. Soto v. Brooklyn Corr. Facility, 80 F.3d 34, 36 (2d Cir. 1996).
. Both parties concede that Wiltel’s amendment satisfies Rule 15(c)(2).
. Keller v. Prince George’s Cty., 923 F.2d 30, 33-34 (4th Cir. 1991).
. See id.
. See Savage, 324 B.R. at 474, for an account of that proceeding brought by Savage against Wiltel.
. See Wiltel’s Reply Memorandum of Law at 5.
. 08/29/03 Savage email.
. See Appellant's Mem. at 27.
. See 08/29/03 Savage email.
. See 1/12/05 Affidavit of Andrew Turner, Counter-Designation of Wiltel Communications, LLC, of Items to Be Included in Record on Appeal, ¶¶ 5-6.
. See Keller, 923 F.2d at 33-34. See also Gleason v. McBride, 869 F.2d 688, 693 (2d Cir. 1989) (holding that even if two entities use the same counsel this does not satisfy the notice requirement under Rule 15(c)). "[T]here must be some showing that the attorney(s) knew that the additional defendants would be added.” Id.
. See Savage, 324 B.R. at 477.
. Although Savage purports to challenge the Bankruptcy Court’s summary judgment decision dismissing NextiraOne as a party in its statement of the issues on appeal, it does not address this argument in its Memorandum of Law.
.If Wiltel had attempted at some later date to deny that it received the check addressed to NextiraOne, it would have been judicially es-topped from doing so. See In re Adelphia Commc’ns., 367 B.R. 84, 91 (S.D.N.Y. 2007) ("when a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, it may not thereafter, simply because its interests have changed, assume a contrary position”).
Reference
- Full Case Name
- In re TELIGENT SERVICES, INC., Debtors. Savage & Associates, P.C. as the Unsecured Claim Estate Representative for and on behalf of Teligent, Inc. v. Williams Communications
- Cited By
- 20 cases
- Status
- Published