Case of the Day: Carney v. Beracha

The case of the day is Carney v. Beracha (D. Conn. 2014). Carney was the court-appointed receiver for Highview Point Partners, LLC. The court had appointed him as receiver in connection with an enforcement action by the Securities and Exchange Commission against Francisco Illarramendi for alleged violation of the federal securities laws. Carney, once appointed, filed actions against Moris Beracha and Bradleyville, Ltd., among others, to recover property for the purpose of distributing it to the victims of the fraud Illarramendi is alleged to have committed.

Beracha and Bradleyville moved to dismiss for insufficient service of process. Beracha was a Venezuelan national. He had homes in Caracas and in New York, though the decision does not make clear where he had his domicile or even his principal residence. Carney effected service by leaving the summons and complaint with the concierge at Beracha’s residence in New York, and the judge held this service was sufficient under FRCP 4(e)(2)(B), which permits service by “leaving a copy of each at the individual’s dwelling or usual place of abode with someone of suitable age and discretion who resides there.” This could be right, but it’s not clear from the decision that it is right. Assuming the concierge was of “suitable age and discretion,” did he reside in Carney’s “dwelling or usual place of abode?” I assume this is a New York City apartment building: is it likely the concierge lived in the building, and if so, would that be sufficient (i.e., is residing somewhere in the building the same as residing in the defendant’s “dwelling or usual place of abode?”) But even if service on the concierge would have been sufficient if Beracha actually resided in the New York apartment, did he reside there for purposes of FRCP 4(e)? He claimed to reside in Venezuela. Interested readers may want to have a look at 4A Wright & Miller [section] 1096, which discusses the considerations bearing on the phrase “dwelling or usual place of abode”—an important point the court simply doesn’t address.

Bradleyville also challenged the sufficiency of service. Carney served the firm, which had been a British Virgin Islands company, by service on its registered agent in the BVI. But at some point prior to the service, Bradleyville ceased to be a BVI company and became a Nevis company. The (BVI) Business Companies Act § 184(5) provides:

Where a company is continued under the laws of a jurisdiction outside the Virgin Islands
(a) the company continues to be liable for all of its claims, debts, liabilities and obligations that existed prior to its continuation as a company under the laws of the jurisdiction outside the Virgin Islands; [ellipsis] (d) service of process may continue to be effected on the registered agent of the company in the Virgin Islands. [ellipsis]

But for various reasons of BVI law, the judge held that Bradleyville had not been “continued” for purposes of the statute. The judge therefore ordered the service quashed, observing that Carney could readily serve Bradleyville by serving its registered agent in Nevis.

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