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Soares v. Boyd

United States District Court, E.D. Kentucky, Southern Division, Pikeville

March 11, 2019

PAUL F. SOARES, Plaintiff,
CLYDE BOYD, ROBERT SKEANS, NATURAL RESOURCES & ENERGY, a Kentucky Limited Liability Company, and JOHN DOES Defendants.



         This matter is before the Court on the Defendants' Motion to Set Aside Default Judgments and Motion to Dismiss. (DE 78). For the reasons stated below, the Defendants' Motion is GRANTED in part and DENIED in part.

         I. BACKGROUND

         At its core, the dispute in this case stems from a contract between Kentucky Minerals Limited (“KML”), the Lessor, and Natural Resources & Energy Limited Liability Company (“Natural Resources”), the Lessee. (DE 1-1 at 1.) The contract provides that KML seeks to sell its working interest in 900 acres known as “Vinson Properties” to Natural Resources in exchange for $700, 000 to be paid in accordance with the agreement. At the time of contract, Paul Soares was the president of KML, and Clyde Boyd was the president of Natural Resources. (DE 1-1 at 7.)

         Soares filed a Complaint on September 27, 2017 alleging claims for actual fraud, lost profits, breach of contract, conversion, and personal injury against Clyde Boyd, Robert Skeans, Natural Resources, and Does 1-50. (DE 1-1.) Soares also filed a Motion for Leave to Proceed in forma pauperis, which this Court granted. (DE 8-9). Accordingly, the Court ordered the Deputy Clerk in the Pikeville Clerk's Office to prepare a Service Packet for each of the named Defendants and send it to the United States Marshall Service (“USMS”) in Lexington Kentucky. (DE 10.) The USMS was then ordered, within 40 days of the order, to send a Service Report to the Pikeville Clerk's Office, to be filed in the record, stating whether service had been accomplished for each Defendant. The order went on to state that if the Defendant is “served by certified mail, the Service Report shall include (i) a copy of the green card showing proof of service or (ii) a statement that the green card was not returned from the U.S. Postmaster, along with a “Track-and-Confirm” report from the U.S. Postal Service showing that a proof of delivery does not exist.” (DE 10 at 2.)

         The Pikeville Clerk's Office prepared the Service Packets for each Defendant and delivered them to the USMS to effectuate service. (DE 11-12). The USMS attempted to effectuate service by FedEx Express Saver, which did not require any signature from the recipient. The Summons for Natural Resources and Boyd were returned executed via FedEx on December 13, 2017. (DE 13 and 14). The Summons for Skeans was returned unexecuted by the USMS. (DE 15). Following this attempt at service, Soares hired the Sheriff's Office of Floyd County, who personally served Skeans. (DE 34 at 4.) Additionally, Soares, himself, personally mailed a copy of the Complaint and Summons by certified mail. (DE 34 at 1-3.) Soares's Complaint went unanswered, and he moved for entry of default against each Defendant. (DE 19, 20, and 36). The Clerk entered default against all three Defendants. (DE 21, 22 and 37). Soares then moved for default judgement against Boyd and Natural Resources, and this Court, in accordance with the Federal Rules of Civil Procedure, granted his motion. (DE 28). Soares also filed a motion for default judgement against Skeans, which remains pending before the Court. (DE 62).

         Shortly thereafter, this Court received its first communication from the Defendants styled as a Motion to Set Aside Default Judgments and Motion to Dismiss, in which they collectively assert improper service of process and lack of subject matter jurisdiction. (DE 78). Based on the current pleadings, this Court finds it has subject matter jurisdiction under 28 U.S.C. § 1332 simply because Soares is a citizen of California, the Defendants are citizens of Kentucky, and the amount in controversy exceeds $75, 000. However, pursuant to Fed.R.Civ.P. 12(h)(3), the Court may reconsider this issue at any time. Regarding the improper service argument, after examining the effectuated service of the Defendants, this jurisdiction's service of process rules, and requirements for in forma pauperis (“IFP”) plaintiffs, the Court finds that each Defendant was improperly served.

         II. ANALYSIS

         A. Improper service.

         Boyd, Natural Resources, and Skeans did not receive proper service of process under the Federal Rules of Civil Procedure. Fed.R.Civ.P. 4(e) provides that an individual is served by (1) delivering a copy of the summons and complaint to the individual personally; (2) 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; (3) delivering a copy of each to an agent authorized by appointment or by law to receive service of process; or (4) any method permitted by state law in the state where the action is pending. Fed.R.Civ.P. 4(h) provides that a corporation must be served by (1) delivering a copy of the summons and complaint to an officer, managing, general agent, or any other agent authorized by appointment or law to receive service of process and by also mailing a copy of each to the defendant; or (2) any method permitted by the state's law.

         Kentucky law provides that a defendant can be served (1) through personal delivery, to the defendant or his agent, by a person authorized to deliver service; or (2) by registered or certified mail, return receipt requested. Ky. R. Civ. P. 4.01(1)(b), 4.04(2). “Service by registered mail or certified mail is complete only upon delivery of the envelope. The return receipt shall be proof of the time, place, and manner of service.” Ky. R. Civ. P. 4.01(1)(a). Service shall be made upon a corporation by serving an officer, managing agent, or any other agent authorized by appointment or by law to receive service on its behalf. Ky. R. Civ. P. 4.04(5). In Kentucky, service may be made on a corporation via certified mail only if it is served to an officer, managing agent, or any other agent authorized by appointment in accordance with Ky. R. Civ. P. 4.04(5). See Ky. R. Civ. P. 4.01, 4.04. See also Oyekunle v. Morgan & Pottinger, P.S.C., No. 3:14-CV-00401-TBR, 2014 WL 6977819, at *2 (W.D. Ky. Dec. 9, 2014). Process is effectively delivered to a person only when it is placed within his reach and he accepts it. Fleishman v. Goodman, 252 S.W.2d 691 (1934).

         Several courts have further elaborated on what constitutes effective service by certified mail in Kentucky. Under Kentucky law, delivery by certified mail is accomplished only if the defendant, or his agent, personally signs for the letter when it arrives. Treat v. Shedlofsky, No. 3:10-CV-00745-R, 2012 WL 122561, at *5 (W.D. Ky. Jan. 17, 2012); See also, e.g., Fleet v. Commonwealth of Kentucky Cabinet for Health & Family Servs., No. 3:15-CV-00476-JHM, 2016 WL 1241540, at *7 (W.D. Ky. Mar. 28, 2016) (There is a lack of valid service where a return receipt is signed by someone other than intended recipient or agent.); King v. Taylor, 803 F.Supp.2d 659, 668 (E.D. Ky. 2011) rev'd on other grounds 694 F.3d 650 (6th Cir. 2012) (Service of process was unquestionably defective where the Plaintiff attempted to serve an individual by mail and it was signed for by a person that was neither the intended recipient nor agent thereof.); Mitchell v. Money, 602 S.W.2d 687 (Ky. Ct. App. 1980) (Court held that service of process through certified mail was not sufficient to bind a decedent's estate when it was sent to the decedent's address and was signed for by his wife.); Douglas v. Univ. of Kentucky Hosp., No. 2006-CA-002149-MR, 2008 WL 2152209, at *3 (Ky. Ct. App. May 23, 2008) (Court ruled there was no service where the signatory was not the intended recipient.).

         In the present case, Soares did not comply with Fed.R.Civ.P. 4(e)(2) in serving Boyd or Fed.R.Civ.P. 4(h)(1)(B) in serving Natural Resources. Soares did not attempt personal service on either Defendant in accordance with the federal rules. It appears as if Soares attempted to serve each according to Kentucky law pursuant to Fed.R.Civ.P. 4(e)(1). But Soares also failed to comply with Kentucky law. Soares's only attempt to serve Boyd and Natural Resources was by FedEx Express Saver, which provided a return receipt but required no signature on behalf of the recipient. (DE 13-14). The receipts indicate that the Service Packets were “delivered, ” but they explicitly state “NO SIGNATURE REQUIRED.” (DE 13 at 4 and DE 14 at 4.) Service by FedEx without a signature is not sufficient under Kentucky law. See Treat, 2012 WL 122561 at *5. Moreover, without a signature, it is impossible to know whether the proper person or entity even received the Service Packet. Accordingly, the Court finds that neither Boyd nor Natural Resources were effectively served.

         Soares also did not effectively serve Skeans. Soares first attempted to serve Skeans by Federal Express Saver with a return receipt, but no signature required. The Summons was returned unexecuted due to an incorrect address. (DE 15). Soares then, himself, mailed a copy of the Summons and Complaint via certified mail to Skeans. (DE 34). Simultaneously, he hired the Sheriff's Office of Floyd County to personally serve Skeans. (DE 34 at 4.) Both attempts are insufficient.

         Fed. R. Civ. P. 4(c) governs who is permitted to effectuate service. It states that service is made by “any person who is at least 18 years old and not a party (emphasis added).” Soares is a “party” to this action, and therefore he cannot effectively serve any of the Defendants. Accordingly, Soares's attempt to serve Skeans himself by certified mail is insufficient.

         Additionally, the USMS was required to serve all Defendants on behalf of Soares because he is an IFP plaintiff. 28 U.S.C. § 1915(d) states that where a plaintiff is proceeding in forma pauperis, “the officers of the court shall issue and serve all process, and perform all duties in such cases.” Here, the USMS did not effectively serve Skeans.

         Generally, the plaintiff bears the burden for appointing an appropriate person to serve a copy of his complaint and the summons upon a defendant. Byrd v. Stone, 94 F.3d 217, 219 (6th Cir. 1996). However, for IFP plaintiffs, once reasonable steps have been taken to identify for the court the defendants named in the complaint, the burden shifts to the USMS to obtain his or her current address and to properly effectuate service. Id.; Treat, 2012 WL 122561 at *6. Here, Soares took the proper steps to effectuate service on all the Defendants. The USMS attempted to serve the Defendants, but its efforts were deficient under the law.

         Soares-because he is an IFP plaintiff-will not be penalized for this failure to properly effectuate service, and his action will not be dismissed at this time. See Byrd, 94 F.3d at 219-20. Instead, the Court will redirect the Pikeville Clerk's Office to issue a Summons for each of the named Defendants, and the USMS for the Eastern District of Kentucky will be directed to serve, in compliance with Federal and Kentucky law, the named Defendants with the Summons and Complaint on Soares's behalf. Fed.R.Civ.P. 4(c)(3); 28 U.S.C. § 1915(d).

         B. Setting aside the entries of default and default judgements.

         Fed. R. Civ. P. 55(d) states that “the court may set aside an entry of default for good cause, and it may set aside a final default judgement under Fed.R.Civ.P. 60.” Lack of notice and sufficient service of process intrinsically results in a lack of due process and effectively renders a judgment void. In re Allen, 417 B.R. 850, 854 (E.D. Ky. 2009); Insituform Technologies, Inc. v. AMerik Supplies, Inc., 588 F.Supp.2d 1349, 1352 (N. D. Ga. 2008) (“Where service of process is insufficient, the entry of default is void and must be set aside.”). Good cause to set aside an ...

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