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Realty Executives International, Inc. v. Lugo

United States District Court, D. Arizona

March 31, 2016

Realty Executives International, Inc. Plaintiff,
v.
Otto E. Lugo, et al., Defendants.

ORDER

PAUL G. ROSENBLATT, District Judge.

Pending before the Court is Defendants' Motion (1) to Set Aside Clerk's Entry of Default and (2) to Dismiss this Action for Insufficient Service of Process, Improper Venue and for Lack of Personal Jurisdiction (Doc. 26). Having reviewed the parties' memoranda and the relevant record, the Court finds that the defendants were not properly served with process and that the plaintiff should be given leave to properly re-serve the defendants.[1]

Background

According to the Complaint, this action for trademark infringement, false designation of origin, and breach of contract arose from a Regional Development Agreement and a Franchise Agreement between plaintiff Realty Executives International, Inc. and the four named defendants, Otto E. Lugo, Linda Bonarelli Lugo, Long Island Partners, Inc. dba Realty Executives West, and Huntington Homes, Inc. dba Realty Executives Northshore. The Lugos are a married couple residing in New York; Mr. Lugo is the president of Long Island Partners, a New York corporation, and Mrs. Lugo is the president of Huntington Homes, a New York corporation. The Complaint alleges that the defendants entered into franchise or subfranchise agreements which permitted them to use the plaintiff's Realty Executives logotypes, service marks, trademarks, and business information in order to operate Realty Executives franchises within specific geographic regions. The Complaint further alleges that the defendants have continued to use the plaintiff's intellectual property notwithstanding that the plaintiff terminated their right to do so.

Motion to Dismiss for Insufficient Service of Process[2]

The defendants have moved in part to dismiss this action pursuant to Fed.R.Civ.P. 12(b)(5) on the ground that none of the defendants were properly served pursuant to federal and/or New York state law. Since the defendants have challenged the sufficiency of service, the plaintiff bears the burden of demonstrating that proper service was made. Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir.2004). Pursuant to Fed.R.Civ.P. 4(e), service of process may be made in conformity with federal law, the law of the forum state, or the law of the state where service is made. Since the plaintiff argues that the defendants were properly served with process in New York in compliance with New York's Civil Practice Law Rules ("CPLR"), the Court will resolve the service issues solely under New York law. The Court concludes that none of the defendants were properly served in the manner required by the CPLR and that the deficiencies in the manner of service are apparent from the face of the plaintiff's affidavits of service without reference to the defendants' submitted controverting evidence.

A. Otto Lugo

All four of the plaintiff's affidavits of service were signed by Rick Amatulli, the plaintiff's New York process server. According to the affidavit of service (Doc. 12) regarding Otto Lugo, Mr. Amatulli served Mr. Lugo with a copy of the summons and complaint on July 15, 2015 at 2:27 p.m. at the address of Long Island Partners Inc.-Realty Executives West in West Hempstead, New York, Mr. Lugo's place of work, through a "suitable age person" named Noreen Khan. The affidavit states in relevant part that Ms. Khan is 30 years old and that she is an agent of the defendant's company who accepted service for Mr. Lugo personally. The affidavit further states that Mr. Amatulli completed service by mailing a copy of the summons and complaint on July 15, 2015 by first class mail in an envelope marked "Personal and Confidential" that was addressed to Long Islands Partners Inc.-Realty Executives West at its West Hempstead, New York address.

In a controverting affidavit submitted by the defendants (Exhibit E to Doc. 26-1), Noreen Khan states in part that she is employed as a part-time secretary for Realty Executives West, that Mr. Amatulli never asked her about her employment status or whether she was authorized to accept any documents for Mr. Lugo personally at the corporate address, that she told him that she was not authorized to sign for any documents or packages on behalf of Mr. Lugo personally, and that he dropped an envelope on her desk after asking her how to spell her name. Ms. Khan does not state anything about her age in her affidavit.[3]

The issue here is whether Mr. Lugo was properly served pursuant to CPLR 308, which governs personal service on a natural person. CPLR 308(2), which is the subsection applicable here, provides in relevant part that service on an individual may be made

by delivering the summons within the state to a person of suitable age and discretion at the actual place of business... of the person to be served and by... mailing the summons by first class mail to the person to be served at his or her actual place of business in an envelope bearing the legend "personal and confidential[.]"... [P]roof of service shall identify such person of suitable age and discretion and state the date, time and place of service[.]...

The Court concludes, based solely on the face of the affidavit of service, that Mr. Lupo was not properly served pursuant to CPLR 308(2). New York law recognizes that service pursuant to CPLR 308(2) is a two-step process in which a proper delivery and a proper mailing are both essential. See Zarcone v. Condie, 62 F.R.D. 563, 567 (S.D.N.Y.1974) (Court ruled that service under CPLR 308(2) was defective because the plaintiff "complied with only one prong of the two prong requirement contained in Section 308(2)."); Phillip v. City of New York, 2012 WL1598082, at *2 (E.D.N.Y. May 7, 2012) ("The first two steps of personal service pursuant to ยง 308(2), delivery and mailing of the summons, are jurisdictional requirements, and failure to properly perform either of them results in dismissal of the action."); Gay v. Carlson, 1992WL309819, at *4 (S.D.N.Y. Oct. 15, 1992) ("In order for service to be effected under New York law, both prongs of Section 308(2) must be satisfied.") Service on Mr. Lugo was deficient because the plaintiff has not established that the mailing component of CPLR 308(2) was strictly complied with inasmuch as the affidavit of service does not specify that a copy of the summons and complaint addressed to Mr. Lupo was mailed to him - the affidavit merely states that a copy addressed to Long Island Partners Inc. - Realty Executives West was mailed.

B. Long Island Partners

According to the affidavit of service (Doc. 13) regarding Long Island Partners, Inc. dba Realty Executives West, Mr. Amatulli also served it on July 15, 2015 at 2:27 p.m. at its West Hempstead, New York address by service on Noreen Khan as its "authorized agent." Mr. Amatulli states that he informed Ms. Khan of the contents of the service documents in compliance with state statutes. In her controverting affidavit, Ms. Khan states that Amatulli never told her what document he was delivering to her, that she told him that she was not authorized to sign for any documents ...


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