Tuesday, March 20, 2007

Rule 4 v. Rule 5 Service

At the risk of being deemed a heretic, I must admit that FRCP 5 (Serving and Filing Pleadings and Other Papers) doesn't typically get my juices flowing. The Ninth Circuit issued an opinion on Friday--Employee Painter's Trust v. Ethan Enterp. Inc.--in which it discussed service under Rules 4 and 5 and affirmed the district court's entry of a $1 million default judgment.  Sound sexy?  Well, Rory and I actually spent quite a bit of time discussing the case this morning and concluded it might be a good teaching tool to highlight the basic difference between service under Rules 4 and 5.

Several trusts filed suit against a floor covering company and some of its officers seeking delinquent contributions.  The defendants generally appeared, but two months later their attorney withdrew.  The defendants did not replace their attorney.  The failure to do so violated a local rule requiring corporations to be represented by counsel at all times, and the local rule permitted the entry of a default judgment for failure to comply.  Three days after the defendant's attorney withdrew, the trust's motion to amend their complaint was granted.  The trusts attempted service on the defendants by mail and in person and ultimately were permitted to attempt service by publication.  The defendants failed to respond and the district court entered a default judgment against the defendants.  Weeks later, the defendants filed a Rule 60(b) motion seeking to set aside the default judgment.  The district court denied the motion.   

On appeal, the defendants relied primarily on alleged deficiencies in service to overturn the default judgment.  The court held that service of the amended complaint was governed by Rule 5 (not Rule 4) and that, therefore, the trust's service of the amended complaint by mail was adequate.  Rule 5 governed, the court said, because the amended complaint was a "pleading subsequent to the original complaint."  Rule 5(a) only requires service of an amended complaint according to Rule 4 where a party is in default for failure to appear and the pleading asserts new or additional claims for relief.  Because the defendants had already generally appeared, the defendants were not in default and, therefore, were subject to service under Rule 5's service by mail provision. 

A local rule for the Western District of Washington raises a potentially interesting wrinkle that the court did not discuss.  The local rule states:

[a corporation's] failure to obtain a replacement counsel by the date the withdrawal is effective may result in dismissal of the corporation's claims for failure to prosecute and/or entry of default against the corporation as to any claims of other parties."

The defendants did not obtain replacement counsel by the time their initial attorney withdrew.  Does the failure to do so place the defendants in default requiring service of an amended complaint under Rule 4?  Or, even if they are in "default" for not having an attorney under the local rule, are the defendants "in default for failure to appear" as required by Rule 5(a) before service of an amended complaint under Rule 4 is required? --Counseller


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