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“Better Late Than Never” Argument Rejected by the Appellate Division First Department

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  • Posted on: Oct 27 2017

CPLR § 306-b provides:

Service of the summons and complaint, summons with notice, third-party summons and complaint, or petition with a notice of petition or order to show cause shall be made within one hundred twenty days after the commencement of the action or proceeding, provided that in an action or proceeding, except a proceeding commenced under the election law, where the applicable statute of limitations is four months or less, service shall be made not later than fifteen days after the date on which the applicable statute of limitations expires. If service is not made upon a defendant within the time provided in this section, the court, upon motion, shall dismiss the action without prejudice as to that defendant, or upon good cause shown or in the interest of justice, extend the time for service.

On October 10, 2017, the Appellate Division, First Department, decided Goldstein Group Holding, Inc. v. 310 E. 4th St. Hous. Dev. Fund Corp., 2017 NY Slip Op 07086, an opinion that, like Aesop’s Fables, is short, but contains many valuable lessons.  The First Department in Goldstein, unanimously affirmed the Supreme Court’s dismissal of plaintiff’s complaint for lack of personal jurisdiction because “…plaintiff failed to serve defendant within 120 days after commencement of the action and failed to show that its time for service should be extended for good cause or in the interest of justice…” as is required by CPLR §306-b.

The facts in Goldstein are simple, but not typical.  The plaintiff was the substituted plaintiff in a prior foreclosure that was dismissed for lack of personal jurisdiction because the person served with process on behalf of the defendant corporation, Brandstein, was no longer its president at the time of service and was otherwise not authorized to accept service of process.  Three months later, plaintiff commenced a new action, which was the subject of the First Department’s decision.  Unbelievably, plaintiff served Brandstein again, mistakenly believing, based on “rank speculation”, that, in the interim, he had become defendant’s president again.  Plaintiff seemingly learned of its mistake and served the defendant’s actual president, albeit more than 120 days after the commencement of the action.

In granting the defendant’s motion to dismiss the second foreclosure action commenced by plaintiff, the First Department recognized plaintiff’s lack of prudence and stated that “[b]y attempting service on Brandstein, who plaintiff should have known was not authorized to receive service, and making no effort to learn the identity of the current officers, plaintiff failed to act with reasonable diligence in trying to effect service….”  Accordingly, “good cause” could not be demonstrated.

In addition, plaintiff failed to formally cross-move for an extension of time to serve the complaint and, instead, simply requested the extension in its opposition papers.  The First Department did not reach the merits of the procedural issue of whether a formal cross-motion was necessary because it believed that the Supreme Court properly exercised its discretion in denying the extension request on the merits.

Take Away

There are several valuable lessons to be learned from Goldstein.  First, plaintiffs should be diligent in serving process promptly after the commencement of the action.  Second, if an entity is the party to be served, make sure that sufficient research is performed to determine which individuals can be served to obtain jurisdiction over the entity.  Third, make sure that all information is clearly conveyed to the process server.  (In the age of social media, it is easy to find and forward to the process server, photographs of the individuals to be served.)  If there is any question whatsoever about who to serve, simply serve the entity through the Secretary of State.  The defendant in Goldstein appears to be a New York Corporation, so it is not clear why the Goldstein plaintiff failed to serve defendant through the Secretary of State, at least, the second time around.  Third, do not rely on informal requests for relief in opposition papers.  Pay the motion fee and formally cross-move if any affirmative relief from the court is being sought.  This way you know that if your request is denied, a request for relief from an appellate court will be entertained.

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