The case of the day is Neelon v. Krueger (D. Mass. 2013). The facts alleged in the complaint, if true, are of the kind that call for a judicial smackdown. Daniel Neelon is a Massachusetts lawyer. According to the complaint, he was counsel to Georges Cohen, a Montreal businessman. Neelon, on behalf of Cohen, negotiated an agreement with Garrison Asia LLC, a Mongolian subsidiary of Garrison International Ltd., based in Toronto. Neelon’s negotiating counterpart was Blair Krueger, president and CEO of Garrison Asia and Garrison International. Under the agreement, in the event of a default lasting more than 72 hours, Cohen could cause the transfer of 100% of the shares in Garrison Asia to himself. The agreement contained a “pre-signed share transfer agreement” for that purpose. Less than two months after signing the agreement, according to Neelon, Garrison Asia defaulted. Acting through his Mongolian lawyer, Cohen exercised his rights, and all of the shares of Garrison Asia were transferred to him.
Krueger and Garrison International (which later changed its name to Desert Eagle Resources, Ltd.) threatened Neelon, according to the complaint, making “veiled threats about ‘ugly’ things that could happen to Neelon in Mongolia.” They made a complaint against Neelon and Cohen to the Mongolian Police State Investigation Office, which declined to press charges. According to the complaint, Krueger and Garrison International issued press releases accusing Neelon and Cohen of steeling Garrison Asia’s corporate stamp and using it to fraudulently transfer the shares to Cohen. The press releases also claimed that the Mongolian police had recommended that the charges against Neelon and Cohen go to trial. Krueger, according to the complaint, later sent an email to Joles Brossard, Cohen’s Quebec lawyer, raising questions about Neelon and indicating that Garrison International was going to make complaints against Neelon to the Massachusetts Bar Association (this shows some ignorance of the Massachusetts bar. The MBA is a private association of lawyers; complaints against lawyers for violations of the rules of professional conduct are heard by the Board of Bar Overseers). The email also accused Neelon of bribery in Mongolia and threatened to raise that issue with the appropriate US authorities in light of the Foreign Corrupt Practices Act. Last, the complaint alleges that Krueger was involved in the preparation of a blog post at onstockhouse.com titled “Alleged Criminal Daniel P. Neelon.” The purpose of all of this, according to Neelon, was to pressure him and Cohen to reverse the share transfer.
Neelon sued Krueger and Garrison International for defamation, unfair and deceptive business practices, and tortious interference with prospective economic relationships. Krueger and Garrison moved to dismiss for insufficient service of process.
Neelon had hired a Canadian process server, who served process on Desert Eagle Resoruces (Garrison International, by its new name) by serving the summons and complaint on Blugan Orgilsaikhan, who was at the company’s offices and who stated that she was authorized to accept service of process on its behalf. It seems like this should be good service, but is it?
Under FRCP 4(h)(2), service on a corporation outside the United States is permissible “in any manner prescribed by Rule 4(f) for serving an individual, except personal delivery under (f)(2)(C)(i).” The two potentially applicable provisions of Rule 4(f) are FRCP 4(f)(1), which permits service by the means “authorized by the Hague Convention”, and FRCP 4(f)(2)(A), which permits service “as prescribed by the foreign country’s law for service in that country in an action in its courts of general jurisdiction.” Let’s take FRCP 4(f)(2)(A) first. I will defer to my learned colleagues in Canada in case I’ve gotten this wrong, but it seems to me that under Rule 16.02(1)(c) of the Ontario Rules of Civil Procedure, service on a corporation is proper if the documents are left with “a person at any place of business of the corporation who appears to be in control or management of the place of business.” If Ms. Orgilsaikhan fits that bill, then the service was sufficient, and if not, not. The other possibility, FRCP 4(f)(1), is probably not any help to Neelon, since while the service of process he used may be permitted by the Hague Service Convention, it was not, in my view, affirmatively authorized by the Convention. Article 5 of the Convention authorizes service via the Central Authority of the foreign state. Article 10(c) merely permits service by a competent person. I have made this point in connection with service by mail in prior posts.
As to Krueger, Neelon’s process server visited his home and spoke with his wife, but apparently never managed to find Krueger himself and didn’t leave the documents at the house. Krueger’s argument was that Neelon had failed to make service within 120 days, as he claimed FRCP 4(m) required, but of course Rule 4(m), on its face, does not apply to foreign service. The judge denied the motion as to Krueger on precisely these grounds. The judge also denied the motion as to Desert Eagle Resources on Rule 4(m) grounds. It’s unclear from the decision whether Neelon is now required to make service on the two defendants again. I think the judge could have been clearer on the question whether he was simply holding that Neelon should have another chance to make service or whether he was holding that, as to Desert Eagle at least, the service Neelon already had made was sufficient.