Those not familiar with the Federal Rules of Bankruptcy Procedure are often surprised to learn that service by mail is sufficient in a bankruptcy proceeding. Federal Rule of Bankruptcy Procedure 7004(b)(3) authorizes service on a corporation (foreign or domestic) within the United States by first class mail as follows:
... by mailing a copy of the summons and complaint to the attention of an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process and, if the agent is authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant.
A recent decision in the Custom Food Products ("CFP") bankruptcy discusses what is required in order for service by mail to be deemed proper. In the CFP bankruptcy, the liquidating trustee (the "Trustee") brought suit against a defendant (the "Defendant"), alleging the Defendant received avoidable transfers under section 547 of the Bankruptcy Code. After the Trustee commenced the adversary action, he mailed the summons and complaint to Defendant's remittance address (a Chicago address) instead of Defendant's business address in North Carolina. Defendant's remittance address was a Bank of America lockbox which Defendant set up to receive payments only. See Decision at *2.
Defendant never filed a responsive pleading to the complaint, resulting in the court entering a default judgment against the Defendant. After the court entered a default judgment, the Trustee sent a copy of the judgment to Defendant's business address. After receiving the default judgment, Defendant filed a motion with the court seeking to have the default judgment set aside.
The court began its analysis by recognizing that Federal Rule of Civil Procedure 60(b)(4) allows the court to set aside a default judgment if the judgment is void. A default judgment is void if the complaint was never properly served. Decision at *3, citing Sun Healthcare Group, Inc. v. Mead Johnson Nutritional (In re Sun Healthcare Group, Inc.), 2004 Bankr. LEXIS 572 at *19 (Bankr. D. Del. Apr. 30, 2004). Pursuant to Federal Rule of Bankruptcy Procedure 7004(b)(3), proper service of a summons and complaint may be made upon a corporation by first class mail if it is sent to an officer or agent of the corporation. Decision at *3. Rule 7004(b)(3) requires "strict compliance ... particularly when the plaintiff knows the defendant's business address and the identity of the person designated to receive service of process. Id., citing In re Golden Books Family Entm't, 269 B.R. 300, 305 (Bankr. D. Del. 2001)(holding that service was not effective where pleadings were sent to a post office box addressed to the "assistant controller").
The court in CFP found that the Trustee's attempt to effectuate service by sending the complaint to the Defendant's remittance address "failed to comply with Rule 7004(b)(3)." Decision at *4. The court based its decision on the fact that the post office box where the complaint was sent was a lockbox at Bank of America and Bank of America was not authorized to receive service of process for the Defendant. The court also found significant that the Trustee knew the Defendant's business address.
Having found that there was no effective service, the court declared the default judgment void. Given the large number of avoidance actions filed in the Delaware Bankruptcy Court, the CFP decision is worth review as it looks at some of the requirements for proper service of process. The CFP decision was issued by the Honorable Peter J. Walsh. Judge Walsh previously served as the Chief Judge of the United States Bankruptcy Court for the District of Delaware.