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In re Cutuli

United States District Court, M.D. Florida, Tampa Division

August 7, 2019

In Re GREGORY LEE CUTULI
v.
MEHRDAD ELIE, Appellee. GREGORY LEE CUTULI, Appellant,

          ORDER

          STEVEN D. MERRYDAY UNITED STATES DISTRICT JUDGE.

         After suffering a default judgment in an adversary proceeding, Gregory Cutuli appeals (Doc. 1) and argues (Doc. 5) that the bankruptcy court lacked personal jurisdiction because the plaintiff, Mehrdad Elie, failed to serve Cutuli's bankruptcy attorney with an “active” summons. Elie responds (Doc. 13) that the bankruptcy court possessed jurisdiction - despite the failure to serve Cutuli's attorney - because Cutuli received service by personal delivery rather than by mail.

         BACKGROUND

         In 2011 a state court in California entered a $14 million fraudulent-transfer judgment for Elie and against Cutuli. (Doc. 14 at 64) In June 2017, Cutuli petitioned (Bk. Doc. 1) for Chapter 7 bankruptcy. In July 2017, Cutuli's bankruptcy attorney disclosed (Bk. Doc. 19) in the bankruptcy action that Cutuli had paid the attorney a fee “to render legal service for limited aspects of the bankruptcy case” not including the “prosecution or defense of adversary proceedings.” (Bk. Doc. 19 at 1-2) (emphasis in original).

         On September 15, 2017, Elie sued (Ap. Doc. 1) for a declaration that Cutuli cannot discharge in bankruptcy the California judgment. On September 19, 2017, Elie mailed the summons and the adversary complaint to Cutuli's last known address. (Ap. Doc. 9) On September 25, 2017, Elie learned that Cutuli was incarcerated for bankruptcy fraud and had not received the summons and the complaint. Because Rule 7004(e) provides that a summons expires seven days after issuance, Elie requested (Ap. Doc. 12) an “alias summons” - a second summons - which the clerk issued (Ap. Doc. 13) the same day. Two days later, a process server personally served Cutuli with the alias summons and the complaint. (Ap. Doc. 14)

         Cutuli did not respond to the adversary complaint, and Elie moved (Ap. Doc. 16) for a clerk's default. Two days later, Cutuli's bankruptcy attorney filed (Ap. Doc. 17) a one-page objection stating that “[n]either the Complaint, nor the Summons have been served as required by applicable rules.” On December 14, 2017 - seventy-eight days after issuance of the alias summons and ninety days after the adversary proceeding began - Elie mailed a copy of the alias summons and the adversary complaint to Cutuli's attorney. (Ap. Doc. 18)

         In January 2018, Cutuli moved (Ap. Doc. 19) to dismiss the adversary complaint and argued that Elie failed to serve Cutuli within ninety days after the adversary proceeding began because Elie failed to serve Cutuli's attorney in accord with Rule 7004(g), Federal Rules of Bankruptcy Procedure, which states that “whenever service is made upon the debtor under this Rule, service shall also be made upon the debtor's attorney . . . .” Although Elie eventually mailed the alias summons to Cutuli's attorney, Cutuli argued the service lacked effect because Elie failed to mail the alias summons to Cutuli's attorney within seven days after issuance. On January 10, 2018, Elie responded (Ap. Doc. 21) to the motion to dismiss and argued that, because Cutuli received personal service of the summons and the complaint, Elie effected service despite the failure to serve Cutuli's attorney.

         At an April 17, 2018 hearing, the bankruptcy court denied the motion to dismiss (1) because the alias summons and the adversary complaint were “ultimately mailed” to Cutuli's bankruptcy attorney and (2) because the attorney disclosed in the bankruptcy action that he would not represent Cutuli in an adversary proceeding. (Ap. Doc. 41 at 7:10-15) The bankruptcy court ordered Cutuli to answer the complaint within twenty-one days. (Ap. Doc. 41 at 7:14-15)

         Cutuli did not answer the complaint, and Elie moved (Ap. Doc. 27) for a clerk's default. At a June 12, 2018 hearing on the motion for a clerk's default, Cutuli appeared pro se and stated that he would neither answer the complaint nor defend himself in the adversary proceeding. (Ap. Doc. 42 at 5:24-6:6) Three days later, the clerk entered (Ap. Doc. 32) a default. On July 17, 2018, the bankruptcy court granted (Ap. Doc. 35) Elie's motion for default judgment, and the clerk entered (Ap. Doc. 36) a judgment declaring the California judgment “non-dischargeable.”

         On appeal, Cutuli argues that, because Elie failed to serve Cutuli's attorney with an active summons, Elie failed to effect service on Cutuli and the bankruptcy court lacked personal jurisdiction to enter judgment against Cutuli. Elie responds that personally serving Cutuli with the summons and the complaint subjected Cutuli to the bankruptcy court's personal jurisdiction despite the failure to serve Cutuli's attorney with an active summons.

         DISCUSSION

         The resolution of this appeal requires determining (1) whether a plaintiff in an adversary proceeding must serve the debtor's attorney even if the plaintiff personally serves the debtor and, if so, (2) whether the failure to serve the debtor's attorney precludes the bankruptcy court's entering a default judgment against the debtor.

         1. The requirement to serve the debtor's attorney

         Rule 7004, Federal Rules of Bankruptcy Procedure, governs service of the summons and the complaint in an adversary proceeding and authorizes both personal service under Rule 7004(a) and mail service under Rule 7004(b). Rule 7004(a) states that Rule 4(e), Federal Rules of Civil Procedure - which permits service by personal delivery of the summons and the complaint - “applies in adversary proceedings.” And Rule 7004(b) states that “in addition to the methods of service ...


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