JOHNSON v. SMITH (2021)

United States Court of Appeals, Sixth Circuit.2021-01-28No. No. 20-5505

Summary · law.co

Holding. The court affirmed the bankruptcy court's dismissal of Johnson's complaint for failure to complete proper service of process within 90 days, holding that Bankruptcy Rules 7004(e) and (g) are enforceable, that early improper service does not constitute good cause to extend the deadline under Civil Rule 4(m), and that Johnson failed to demonstrate the reasonable, diligent effort required to satisfy the good cause standard.

David Johnson filed an adversary proceeding in bankruptcy court against Joseph Smith in August 2018. The summons was issued on August 28, 2018, but Johnson did not properly serve Smith or his attorney within the required seven-day window under Bankruptcy Rule 7004(e) and (g). When the bankruptcy court set aside the entry of default in November 2018 for improper service, Johnson waited 75 days before requesting an alias summons in March 2019—nearly 191 days after initiating the case. This fell well outside the 90-day service deadline under Federal Rule of Civil Procedure 4(m).

When Smith moved to dismiss for failure to complete service within 90 days, Johnson argued that the earlier service on September 13, 2018 (even though improper) should constitute "good cause" to extend the deadline under Civil Rule 4(m). The bankruptcy court rejected this argument, finding that Johnson had not demonstrated the "reasonable, diligent effort" required to show good cause. Instead, Johnson's inaction for extended periods—particularly the 75 days between the November order and his request for an alias summons—demonstrated a lack of diligence. The bankruptcy court dismissed the complaint.

On appeal, Johnson contended that Civil Rules supersede Bankruptcy Rules regarding service requirements, or alternatively that the improper but effective service should excuse the 90-day deadline. The appellate court rejected both arguments, affirming the dismissal and holding that Bankruptcy Rules 7004(e) and (g) are enforceable and that Johnson failed to establish good cause for extending the service deadline.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether Bankruptcy Rules 7004(e) and (g) governing service within seven days and upon the debtor's attorney are enforceable or superseded by Civil Rules
Whether improper service that provided actual notice constitutes good cause to extend the 90-day service deadline under Civil Rule 4(m)
Whether inaction for extended periods after a court order demonstrates the reasonable, diligent effort necessary to establish good cause

Procedural posture

This appeal challenges a bankruptcy court's dismissal of an adversary proceeding for failure to complete service of process within the required 90-day period.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

This is an appeal from the bankruptcy court by way of the district court.

“On appeal from a district courts review of a bankruptcy courts order, we review the bankruptcy courts order directly rather than the intermediate decision of the district court.” In re Greektown Holdings, LLC, 917 F.3d 451, 455–56 (6th Cir. 2019).

By their own terms, the Federal Rules of Civil Procedure “apply to bankruptcy proceedings to the extent provided by the Federal Rules of Bankruptcy Procedure.” Fed. R. Civ. P. 81(a)(2). As relevant here, Bankruptcy Rule 7004(a) applies Civil Rule 4(m) to adversary proceedings, so the plaintiff must comply with both rules. Under Bankruptcy Rule 7004(e), the summons and complaint must be served within seven (7) days after the summons is issued and, if not, then “another summons will be issued.” But under Civil Rule 4(m), if the summons is not served within 90 days, the court must dismiss the action unless the plaintiff has shown “good cause” for failing to serve within 90 days; then the court may extend the deadline for service. Generally, “good cause” means “a reasonable, diligent effort to timely effect service of process.” Pearison v. Pinkertons Inc., 90 F. Appx 811, 813 (6th Cir. 2004). Mere “lack of prejudice and actual notice are insufficient,” as are “[m]istake of counsel or ignorance of the rules.” Massey v. Hess, No. 1:05-CV-249, 2006 WL 2370205, at *4 (E.D. Tenn. Aug. 14, 2006) (relying on Moncrief v. Stone, 961 F.2d 595, 597 (6th Cir. 1992)). We review for abuse of discretion the courts determination of “good cause.” Nafziger v. McDermott Intl, Inc., 467 F.3d 514, 521 (6th Cir. 2006).

David Johnson initiated an adversary proceeding against the debtor, Joseph Smith, by filing a complaint in the bankruptcy court, and the court clerk issued a summons on August 28, 2018. Sixteen (16) days later, on September 13, 2018, the summons was delivered to Smiths wife at their residence. When Johnson sought and received an entry of default from the clerk, Smith moved to set it aside because Johnson had not served a copy of the summons and complaint on his attorney, as required by Bankruptcy Rule 7004(g). On November 28, 2018, the bankruptcy court granted the motion, finding that Johnson had not only failed to serve Smiths attorney but had not served Smith within seven days as required by Bankruptcy Rule 7004(e), so there was no service.

Johnson took no further action for 75 days and, on February 11, 2019, the bankruptcy court ordered him to appear on March 14, 2019, to show cause as to why the court should not dismiss his complaint for failure to prosecute. On March 6, 2019 (23 days after the issuance of the show-cause order), Johnson requested service of an “alias summons,” which the court clerk sent that same day via United States mail.

That was 191 days after Johnson filed his adversary proceeding.

On April 8, 2019, Smith moved the court to dismiss the action because Johnson had not completed proper service of process within 90 days as required by Civil Rule 4(m). Johnson argued that the improper service on September 13, which gave Smith actual notice of the action, should constitute “good cause” for the court to extend the deadline. The bankruptcy court rejected that argument, found that Johnson had not shown “good cause,” and further opined:

[T]he November Order setting aside the entry of default should have caused [Johnson] to read and timely comply with the rules․ [H]ad [Johnson] made a ‘reasonable effort’ and acted ‘diligently’ to serve [Smith] and counsel after entry of the November Order, the Court would be inclined to allow this case to proceed. However, [Johnson] failed to prosecute this matter for an additional 77 days, even waiting an additional three weeks following entry of the Show-Cause Order to request issuance of and serve the alias summons.

Bankr. Ct. 3:18-ap-3034, Dkt. No. 24 at p. 5. The court dismissed the complaint.

On appeal, Johnson argues that the Civil Rules trump the Bankruptcy Rules, so the Bankruptcy Rules at issue here—i.e., 7004(e) and (g), requiring service within seven days and on the debtors attorney, respectively—are unenforceable, and service was effected on September 13, satisfying Civil Rule 4(m). Alternatively, Johnson argues that the service on September 13 established good cause to extend the deadline and the bankruptcy court abused its discretion by refusing to do so. For the reasons already given, we cannot agree with either argument.

We AFFIRM the judgment of the bankruptcy court.

FOOTNOTES

. The district court remanded and ordered the bankruptcy court to specify whether the dismissal was with or without prejudice. Because that determination is “purely ministerial,” we have jurisdiction to decide this appeal. See In re Wohleber, No. 19-3223, 833 F. Appx. 634, 637-38 (6th Cir. Nov. 18, 2020).

. The bankruptcy court noted that the summons contained an incorrect mailing address for Smith and that the summons was apparently sent to that incorrect address, so “arguably, [Smith] still has not been properly served.” Bankr. Ct. 3:18-ap-3034, Dkt. No. 24 at p. 3 n.3. But we need not consider this additional aspect in this decision.

ALICE M. BATCHELDER, Circuit Judge.