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Keywords

defendantjurisdictionarbitrationattorneystatutecompliancesustainedcivil procedure

defendantjurisdictionstatutemotionvisa

Related Cases

National Development Co. v. Triad Holding Corp., 131 F.R.D. 408, 18 Fed.R.Serv.3d 54

Facts

In 1983 or 1984, the National Development Company (NDC) and Adnan Khashoggi negotiated a joint venture. They entered into a Shareholders Agreement and a Memorandum of Agreement, which included provisions for arbitration in case of disputes. After a series of events, including the dissolution of the joint venture and a failure to transfer funds, NDC filed a complaint in 1986 to compel arbitration. Khashoggi was served at his Olympic Tower apartment, but he did not appear in the action, leading to default judgments against him.

In 1986, Khashoggi entered the United States twice, both times on his Saudi Arabian passport with a visitor's visa. Altogether, he spent approximately thirty days at the Olympic Tower apartment in 1986 spread out over 7 different stays. The longest stays were for two eight day periods.

Issue

Did the court have personal jurisdiction over Khashoggi, and were the default judgments valid?

Khashoggi has now made a motion to vacate both default judgments pursuant to Rule 60(b)(4), Fed.R.Civ.P., on the grounds that each judgment is void because personal jurisdiction was lacking in each instance.

Rule

Service of process must comply with the Federal Rules of Civil Procedure and relevant state statutes, which require proper delivery to a person of suitable age and discretion at the defendant's dwelling or usual place of abode.

The relevant New York State statute for service of process is N.Y. C.P.L.R. § 308 (McKinney 1987). Subdivision 2 of § 308 provides for service of process: by delivering the summons within the state to a person of suitable age and discretion at the actual place of business, dwelling place or usual place of abode of the person to be served and by … mailing the summons to the person to be served at his last known residence …

Analysis

The court found that service of the original summons and complaint was valid as it was delivered to a suitable person at Khashoggi's apartment. However, the supplemental complaint was not served in accordance with the rules, as it was merely mailed to Khashoggi and his attorney without proper delivery. The court emphasized that while actual notice is important, it does not substitute for compliance with service requirements.

While NDC may not have literally complied with Rule 4(d)(1), the evidence shows conduct calculated to give actual notice to Khashoggi after process had been delivered to a person of suitable age at the premises attributable to the defendant. Notice under those circumstances is the underlying purpose of Rule 4.

Conclusion

The court sustained the default judgment compelling arbitration but vacated the judgment confirming the arbitration award due to improper service of the supplemental complaint.

The money judgment obtained by default was improperly procured and is void and is vacated with costs to the moving party.

Who won?

National Development Company prevailed in part, as the court upheld the original default judgment compelling arbitration based on valid service, but they lost the confirmation of the arbitration award due to improper service of the supplemental complaint.

NDC claims that it made proper service of the summons and complaint under either Rule 4(c)(2)(C)(i) or Rule 4(d)(1), Fed.R.Civ.P.

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