Opinion
00 Civ. 2267 (SAS)
October 11, 2000
Alan M. Sclar, Esq., Silverman, Collura Chernis, P.C., New York, New York, For Plaintiff.
Fran Mulnick Parker, Esq., New York, New York, For Defendant Moishe Mana.
Eldad Gal, Esq., Yerushalmi Associates, LLP, New York, New York, For Defendants Yosef Kozousash and Spags, N.V.
Martin P. Unger, Esq., Blank Rome Tenzer Greenblatt, LLP, New York, New York, For Defendant Civres Investments Limited.
OPINION AND ORDER
Plaintiff Yellowave Corporation ("Yellowave") brings this action under Section 16(b) of the Securities Exchange Act of 1934 (the "Act"), 15 U.S.C. § 78p(b), seeking to recover alleged short swing profits from sales of Yellowave stock. Defendants Moishe Mana and Yosef Kozousash move to dismiss the Complaint for lack of personal jurisdiction. For the reasons stated below, the Complaint is dismissed as to Mana and Kozousash without prejudice.
I. Background
The Complaint alleges the following facts which are presumed true for purposes of this motion. Plaintiff is a New York corporation whose shares are publicly owned and traded on the Over-the-Counter Bulletin Board. See Complaint ¶¶ 6, 13. Defendant Mana is an individual of unknown domicile, with residences in both Florida and New York. See id. ¶ 7. Between September 1999 and November 30, 1999, Mana, by utilizing various nominees, acquired approximately 309,000 shares — more than ten percent — of Yellowave common stock. See id. ¶¶ 14-16. It is alleged that defendants Civres Investments Limited ("Civres"), Spags, N.V. ("Spags"), and Kozousash, an Israeli citizen domiciled in Israel, are alter egos of Mana, and that all of their purchases of Yellowave stock were for the benefit of Mana. See id. ¶¶ 19-21. Commencing in March 2000, Mana caused Civres, Spags and Kozousash to sell portions of their nominally-owned shares of Yellowave stock, in violation of the prohibition against short swing profits set forth in Section 16(b) of the Act. See id. ¶¶ 22, 23.
Plaintiff filed its Complaint on March 24, 2000. On April 26, 2000, plaintiff served defendants Civres and Spags. To date, plaintiff has not effectively served either Mana or Kozousash. See 8/22/00 Affirmation of Fran Mulnick Parker, counsel to Defendant Moishe Mana, in Support of Defendant's Motion to Dismiss ("Parker Aff.") ¶ 1; 9/11/00 Affirmation of Eldad Gal, counsel to Defendant Yosef Kozousash, in Support of Defendant's Motion to Dismiss ("Gal Aff.") ¶¶ 3, 9. On August 22, 2000, Mana moved to dismiss the Complaint based on lack of personal service. See 8/22/00 Notice of Motion to Dismiss. On September 11, 2000, Kozousash moved to dismiss for the same reason. See 9/11/00 Notice of Motion to Dismiss. Each motion is addressed below.
Plaintiff attempted to serve Mana on April 11, 2000 by leaving a copy of the Summons and Complaint with an individual believed to be Mana's employee at 449 West 14th Street, a building believed to be Mana's place of business. See Memorandum in Support of Defendant Moishe Mana's Motion to Dismiss for Lack of Service of Process and Personal Jurisdiction ("Mana Mem."), Ex. C to Parker Aff., at 2. Apparently, this service was defective because Mana's actual place of business is in Florida, not New York, and Mana does not maintain any corporate offices at 449 West 14th Street. See id. at 3. In a stipulation dated May 24, 2000, plaintiff agreed to quash the April 11 attempt at service of process. See 5/24/00 Stipulation, Ex. D to Parker Aff., ¶ 1.
II. Discussion A. Service of Process on Mana
If service of the summons and complaint is not made upon a defendant within 120 days after the filing of the complaint, the court . . . shall dismiss the action without prejudice as to that defendant or direct that service be effected within a specified time; provided that if the plaintiff shows good cause for the failure, the court shall extend the time for service for an appropriate period.
Fed.R.Civ.P. 4(m). The purpose of this Rule is to promote "diligent prosecution of civil cases." National Union Fire Ins. Co. v. Sun, 93 Civ. 7170, 1994 WL 463009, at *3 (S.D.N.Y. Aug. 25, 1994). "The Second Circuit has held that dismissal is mandatory when a party is not served within the 120-day time limit and where there is no showing of good cause." Ogbo v. New York State Dept. of Taxation and Fin., 99 Civ. 9387, 2000 WL 1273840, at *2 (S.D.N.Y. Sept. 6, 2000) (citing Zankel v. United States, 921 F.2d 432, 436 (2d Cir. 1990)). While Rule 4(m) does not define "good cause", courts have ruled that "mistake or inadvertence of counsel . . . does not constitute 'good cause' justifying failure to effect timely service of process." Meija v. Castel Hotel, Inc., 164 F.R.D. 343, 345 (S.D.N.Y. 1996); see also Zankel, 921 F.2d at 436 ("[A] judge is certainly not required to treat inadvertence or ignorance of the rules as 'good cause' or 'excusable neglect' for delay in service.").
Plaintiff filed the Complaint in this action on March 24, 2000. See supra Part I. Plaintiff has had nearly two hundred days in which to serve Mana, yet plaintiff has not presented good cause for its failure to do so. In fact, plaintiff has not submitted any opposition papers to Mana's motion. This Court therefore lacks personal jurisdiction over Mana and his motion to dismiss is granted. See National Union Fire Ins. Co., 1994 WL 463009, at *3 (dismissing complaint where plaintiff served defendant 194 days after filing and did not establish good cause for the delay).
Moreover, nearly 140 days have passed since Yellowave and Mana stipulated, on May 24, 2000, to quash the defective April 11 service of process. See supra note 1.
B. Service of Process on Kozousash
With respect to Kozousash, Rule 4(m) is inapplicable because Kozousash is a resident and citizen of the State of Israel, see supra Part I, and the 120-day service requirement does not apply to service in a foreign country. See Fed.R.Civ.P. 4(m) ("[S]ubdivision [4(m)] does not apply to service in a foreign country pursuant to subdivision (f) or (j)(1)."); D. Klein Son, Inc., v. Good Decision, Inc., 98 Civ. 4083, 1999 WL 349932, at *1 (S.D.N.Y. May 28, 1999). However, plaintiff does not have unlimited time in which to serve Kozousash. See In re Crysen/Montenay Energy Co., 166 B.R. 546, 553 (S.D.N.Y. 1994) ("The mere fact that Congress exempted foreign service from the 120-day requirement does not give litigants an unlimited time in which to complete service."). "Rather, where service is in a foreign country, the Court uses a flexible due diligence standard to determine whether service of process was timely." Travers Tool Co. v. Southern Overseas Express Line, Inc., 98 Civ. 8464, 2000 WL 194781, at *1 (S.D.N.Y. Feb. 17, 2000). Under this standard, the 120-day time limit is appropriate where plaintiff has not even attempted service in the foreign country. See Montalbano v. Easco Hand Tools, Inc., 766 F.2d 737, 740 (2d Cir. 1985) (court should apply the 120-day service requirement to service in a foreign country because plaintiff "has not exactly bent over backward to effect service [in the foreign country]"); D. Klein Son, 1999 WL 349932, at *1 ("The Court of Appeals for the Second Circuit has made it clear, however, that the 'foreign country exception to the 120-day period for service is simply inapplicable [where Plaintiff] never attempted to serve process in a foreign country.'") (quoting Montalbano, 766 F.2d at 740) (alteration in original).
Applying a flexible due diligence standard, I find that plaintiff has not proffered any adequate reason for its failure to serve Kozousash. Kozousash submitted this motion to dismiss on September 11, 2000, see supra Part I, over 170 days after the Complaint had been filed. Throughout this period of time, and up to the present, plaintiff has failed to serve Kozousash. In fact, plaintiff does not allege that it made any effort to serve Kozousash under Rule 4(f). Plaintiff's failure to file opposition papers to Kozousash's motion makes it apparent that plaintiff has acted in a dilatory fashion. Accordingly, this Court lacks personal jurisdiction over Kozousash and his motion to dismiss is granted.
Rule 4(f) states that service upon an individual in a foreign country "may be effected . . . by any internationally agreed means reasonably calculated to give notice, such as those means authorized by the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents (the "Hague Convention")." Fed.R.Civ.P. 4(f)(1). Defendant Kozousash is not aware of any application by plaintiff for service under the Hague Convention. See Gal Aff. ¶ 9.
IV. Conclusion
For the foregoing reasons, the Complaint is dismissed against Mana and Kozousash without prejudice.
SO ORDERED.