Case of the Day: In re Carthage Trust

The case of the day is In re Carthage Trust (C.D. Cal. 2013). I love this case (even though the judge got it wrong)!

The plaintiff was Schuyler Moore. Two of the defendants were Grasselle S.A., a British Virgin Islands company, and Philip Egglishaw, a British national residing in Switzerland. Moore sued them and others in the Los Angeles County Superior Court. Grasselle and Egglishaw removed the case to the Central District of California and moved to dismiss for insufficient service of process.

Moore had attempted to serve Grasselle by mailing the petition (return receipt requested)—but not a summons—to a post office box on the British Virgin Islands, even though Grasselle’s registered agent for service of process and Grasselle’s registered office were at a different address (the post office box Moore used was the address of a prior registered agent). Moore served Egglishaw via the Swiss Central Authority under Article 5 of the Hague Service Convention.

The issue in the case wasn’t the means Moore used to effect service. The issue was the timing of the service in light of the removal of the case from the California courts to the federal courts. (I haven’t written about these issues before at Letters Blogatory, but keep your eyes open for the ABA’s new treatise on the International Aspects of US Civil Litigation, edited by James Berger of King & Spalding. I’m the author of the chapter on service of process, and I deal with tricky issues raised by removal the federal courts among others). Under California law, Grasselle was entitled to receive the petition but there was no requirement of service of a summons. But had the case been commenced in the federal court in the first instance, Moore would have had to serve a complaint and the summons. Grasselle and Egglishaw removed the case within ten days after Moore mailed the petition to Grasselle, but under California law, service becomes effective only ten days after mailing. The issue as to Egglishaw is somewhat simpler: Moore had transmitted the papers to the Swiss central authority at the time of the removal, but the central authority had not effected the service before the removal.

The relevant federal statute is 28 U.S.C. § 1448, which provides:

In all cases removed from any State court to any district court of the United States in which any one or more of the defendants has not been served with process or in which the service has not been perfected prior to removal, or in which process served proves to be defective, such process or service may be completed or new process issued in the same manner as in cases originally filed in such district court.

So the issue is this: the service was not perfected under California law at the time of the removal. So under § 1448, did the California service become a nullity on account of the removal? Or did the steps Moore had taken prior to the removal, namely the mailing to Grasselle, continue to have effect notwithstanding the removal?

The judge, without much analysis, held that under § 1448, Moore’s attempt at service was ineffective. The judge’s view was that upon the removal, Moore was required to start over. I disagree. Here is an excerpt from my treatment of the issue in the forthcoming treatise (with the footnotes omitted):

It is clear that if the state court has not yet issued a summons, any summons issued after the removal is void, because the removal divests the state court of power to act. But the effectiveness of a state court’s summons issued before removal but not served before removal is a more difficult issue. [ellipsis]
In Beecher v. Wallace, [381 F.2d 372 (9th Cir. 1967)], the Ninth Circuit held that a state court’s summons becomes a nullity upon removal, and if the defendant has not been served at all at the time of removal, the plaintiff must obtain and serve a new federal summons. If, on the other hand, the defendant has been served but the service has not been perfected or was defective in some way, then the service may be perfected or completed as in the state court. Other courts that have considered the question have allowed plaintiffs to serve an already-issued state court summons after removal. The interpretative question seems to be whether the statutory phrase “in the same manner as in cases originally filed in such district court” should be read to modify both the statutory provision for completion of service and the statutory provision for issuance of new process, or whether it should be read to modify only the latter provision. The better view seems to be that the phrase “in the same manner as in cases originally filed in such district court” modifies only the statutory provision for issuance of new process, since otherwise one has to say that the statute provides that the plaintiff may “complete[]” service of process already commenced in the state court only by starting over in the federal court.

So I think that the judge was wrong both as a matter of the proper construction of the statute and (at least as to Grasselle) as to the governing precedent, which, in the Ninth Circuit, supports my view. In my view, under § 1448, service that has already been set in motion before removal should be allowed to continue to completion.

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