Federal District Court Opinions

WESTON FUNDING, LLC v. CONSORCIO G GRUPO DINA, (S.D.N.Y.
2006) WESTON FUNDING, LLC, Plaintiff, v. CONSORCIO G GRUPO
DINA, S.A. DE C.V., Defendant. 05 Civ. 9830 (RWS). United
States District Court, S.D. New York. August 31, 2006

REISS EISENPRESS LLP Attorneys for Plaintiff New York, NY,
By: SHERRI L. EISENPRESS, ESQ. MATTHEW SHEPPE, ESQ. Of
Counsel.

JONES DAY Attorneys for Defendant New York, NY, By: STEVEN
C. BENNETT, ESQ. Of Counsel.

OPINION

ROBERT SWEET, District Judge Page 2

Defendant Consorcio G Grupo Dina, S.A. de C.V. (“Dina”)
has moved under Rules 12(b) and 56, Fed.R.Civ.P., to
dismiss the complaint of plaintiff Weston Funding, LLC
(“Weston”), or in the alternative for summary judgment.
Weston has opposed Dina’s motions and has cross-moved under
Rule 15(a), Fed.R.Civ.P., to file a third amended
complaint. For the reasons set forth below, the motion of
Dina to dismiss for failure of service of process is
granted and the cross-motion of Weston is denied.

Prior Proceedings

Weston commenced this action on November 21, 2005 by the
filing of a complaint. On December 13, 2005, Dina moved to
dismiss or in the alternative for summary judgment, and
Weston filed both an amended complaint and a second amended
complaint (“SAC”). Weston cross-moved for leave to file a
third amended complaint on February 23, 2006. The Dina
motions and the Weston cross-motion were heard and marked
fully submitted on March 15, 2006.

The Parties

Weston is a Delaware corporation authorized to do business
in the State of New York, with its principal place of
business at 450 Park Avenue, Suite 2001, New York, NY
10022. Page 3

John Liegey (“Liegey”) is the sole member and President of
Weston.

Dina is a Mexican corporation.

The Facts Relating To The Transaction

The following facts are taken from the SAC and are assumed
to be true for the purposes of this motion.

Under an indenture dated August 8, 1994 (the “Indenture”),
Dina issued $164,000,000 of its 8% Convertible Subordinated
Debentures due August 8, 2004 (the “Debentures”). (SAC
¶ 7.) On February 26, 1999, Weston purchased
$5,221,000 of the Debentures. (SAC ¶ 8.) Dina did
not make its scheduled interest payment on January 15,
2001, nor any interest or principal payment thereafter, and
is currently in default. (SAC ¶ 9.) The Debentures
matured and became due and payable on August 8, 2004 (SAC
¶ 10), but Dina has not made payment to Weston on
the Debentures (SAC ¶ 11).

The Facts Relating To Service

The facts relating to service are drawn from the SAC, as
well as the affidavits and exhibits submitted by the
parties. Page 4

A court is entitled to consider the terms of any documents
attached to or referenced in the complaint. See Cortec
Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir.
1991) (“[T]he complaint is deemed to include any written
instrument attached to it as an exhibit or any statements
or documents incorporated in it by reference.”), cert.
denied, 503 U.S. 960 (1992); see also Barnum v. Millbrook
Care L.P., 850 F. Supp. 1227, 1232-33 (S.D.N.Y.) (“[I]f the
allegations of a complaint are contradicted by documents
made a part thereof, the document controls and the court
need not accept as true the allegations of the
complaint.”), aff’d, 43 F.3d 1458 (2d Cir. 1994). Here, the
complaint expressly references the Indenture dated August
8, 1994. (SAC ¶ 7.) A copy of the Indenture is
attached as Exhibit B to the Affidavit of Liegey dated
February 23, 2005 (the “Liegey Affidavit”).

In circumstances where jurisdictional issues such as
failure of service of process are presented, the factual
allegations of a complaint may be controverted. See LeBlanc
v. Cleveland, 198 F.3d 353, 356 (2d Cir. 1999) (“[W]here
jurisdictional facts are placed in dispute, the court has
the power and obligation to decide issues of fact by
reference to evidence outside the pleadings, such as
affidavits.”) The Court may consider additional documents
as a matter of judicial notice. On a motion to dismiss, in
addition to any allegation of the plaintiff’s complaint,
the court may “consider matters of which Page 5 judicial
notice may be taken under Fed.R.Evid. 201.” Kramer v. Time
Warner Inc., 937 F.2d 767, 773 (2d Cir. 1991).
Consideration of documents subject to judicial notice does
not necessarily convert a motion to dismiss into a motion
for summary judgment. See Graal Enterp., Ltd. v. Desourdy
Int’l 1949 Inc., No. 95 Civ. 0752 (LMM), 1996 WL 353003, at
*3 (S.D.N.Y. June 26, 1996) (court may consider pleadings
and “facts that are capable of accurate and ready
determination”) (internal quotation marks omitted). Rule
201 of the Federal Rules of Evidence generally permits a
court to take judicial notice of any facts “capable of
accurate and ready determination by resort to sources whose
accuracy cannot reasonably be questioned.” Fed.R.Evid.
201(b) (2).

Section 112 of the Indenture states that “[i]n respect of
this Indenture and the Securities, [Dina] irrevocably
appoints Bankers Trust Company, at its office at Four
Albany Street, New York, New York 10006, Attn: Corporate
Trust and Agency Group, as its authorized agent for service
of process in New York City.” (Indenture ¶ 112, at
14-15; Liegey Aff. Ex. B.)

Section 101 of the Indenture defines “Trustee” as “the
Person named as the `Trustee’ in the first paragraph of
this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this
Indenture, and thereafter `Trustee’ shall mean such
successor Trustee.” (Indenture ¶ 101, at 9; Liegey
Aff. Ex. B.) The first paragraph of Page 6 the Indenture
names “Bankers Trust Company, a New York banking
corporation . . . as Trustee. . . .” (Indenture, at 1;
Liegey Aff. Ex. B.)

Weston has asserted that Bankers Trust Company (“BTC”) was
acquired by Deutsche Bank A.G. on or about June 4, 1999.
(Liegey Aff. ¶ 5.) The Liegey Affidavit includes as
Exhibit C the text of a Deutsche Bank press release, which
states, in relevant part:

Deutsche Bank is buying all outstanding shares of Bankers
Trust for roughly US $9 billion. . . . After Bankers Trust
shareholders approved the transaction by a large majority
and all necessary approvals were received from the
relevant regulatory authorities, the acquisition becomes
effective on 4 June 1999. Bankers Trust will now rapidly
be integrated into Deutsche Bank.

(Liegey Aff. Ex. C; see also Press Release, Deutsche Bank,
Acquisition of Bankers Trust Successfully Closed (June 4,
1999), http://www.db.com/ir/en/releases_766.shtml.)

Weston also has asserted that on or about April 15, 2002,
BTC “amended its certificate of organization and filed with
the New York State Department of State a name change,
changing its name to Deutsche Bank Trust Company Americas
(`DBTCA’). DBTCA continued to operate . . . under the very
same charter pursuant to which BTC operated prior to the
name change.” (Liegey Aff. ¶ 5.) Page 7

Weston has attached as exhibits securities documents issued
on behalf of Dina which state that as of April 2, 2003, the
trustee under the Indenture was “Deutsche Bank Trust
Company Americas” (Dina Offer to Exchange, attached as
Liegey Aff. Ex. E), and that the Indenture was “amended by
the First Supplemental Indenture dated as of May 15, 2003,
between Dina and Deutsche Bank Trust Company Americas,
formerly known as Bankers Trust Company, as trustee” (Dina
Letter of Transmittal and Waiver, at 6, attached as Liegey
Aff. Ex. D).

The affidavit of service filed on February 23, 2006 and
attached as Exhibit F to the Liegey Affidavit states that
service was made on November 22, 2005 by serving Stanley
Burg (“Burg”) at 60 Wall Street. (Liegey Aff. Ex. F.) The
affidavit of service further states that Burg was known to
be the “trustee” of Dina. (Id.)

On November 23, 2005, Burg sent an e-mail to counsel for
Dina, stating in relevant part:

Please be advised that on November 22, 2005 we were
served with a Sum Complaint (CASE NUMBER 05 CV 09830 Judge
Sweet) Weston Funding, LLC, Plaintiff v. Consorcio G.
Grupo Dina, S.A. de C.V. addressed to the Co. c/o Deutsche
Bank, AG, New York.

. . .

Do you still represent the Company in this matter. Please
advise promptly.

Stan Burg Page 8 Stanley Burg Deutsche Bank Trust
Company Americas Trust & Securities Services MS NYC60-2720
60 Wall Street New York, NY 10005-2858

(Liegey Aff. Ex. G.)

Counsel for Dina replied to Burg by e-mail on November 29,
2005, stating, “Deutsche Bank is not authorized to accept
service of process on behalf of Dina in the Weston Funding
matter.” (Garcia Decl. Ex. B.) A copy of this e-mail
correspondence was transmitted by fax to counsel for Weston
on November 30, 2005.

Proof Of Service Has Not Been Established

Pursuant to Rule 12(b) (5), Fed.R.Civ.P., “a complaint may
be dismissed for insufficient service of process.” Howard
v. Klynveld Peat Marwick Goerdeler, 977 F. Supp. 654, 658
(S.D.N.Y. 1997) see also Hawthorne v. Citicorp Data Sys.,
Inc., 219 F.R.D. 47, 49 (E.D.N.Y. 2003) (“Without proper
service a court has no personal jurisdiction over a
defendant.”). On such jurisdictional matters, the plaintiff
bears the burden of proof. See Commer v. McEntee, 283 F.
Supp. 2d 993, 997 (S.D.N.Y. 2003) (“Once a defendant
challenges the sufficiency of service of process, the
burden of proof is on the plaintiff to show the adequacy of
service.” (quoting Klynveld, 977 F. Supp. at 658)). Page 9

Waiver of service, moreover, cannot lightly be inferred.
See Klynveld, 977 F. Supp. at 659 (requests for
“affirmative relief” by defendant not waiver of service
objection, where service objection presented “prior to or
simultaneously with the request for affirmative relief”).
Nor can defective service be ignored on the mere assertion
that a defendant had “actual notice.”[fn1] Russ Berrie &
Co. v. T.L. Toys (HK) Ltd., No. 01 Civ. 4715 (LMM), 2002 WL
31458232, at *2 (S.D.N.Y. Nov. 4, 2002) (“[A]ctual notice
of the action will not, in itself, cure an otherwise
defective service.” (internal quotation marks omitted));
see also Grand Entertainment Group, Ltd. v. Star Media
Sales, Inc., 988 F.2d 476, 492 (3rd Cir. 1993);
Mid-Continent Wood Prod., Inc. v. Harris, 936 F.2d 297,
300-01 (7th Cir. 1991); Echevarria-Gonzalez v.
Gonzalez-Chapel, 849 F.2d 24, 28 (1st Cir. 1988).

Weston has sought to establish proper service of process
in this action on the basis of service upon DBTCA. (See SAC
¶ 3; Pl.’s Mem. Opp’n at 14.) Weston, however, has
not met its burden to show that DBTCA was Dina’s agent for
service of process. See Lewis & Kennedy, Inc. v. Permanent
Mission of Botswana, No. 05 Civ. 2591 (HB), 2005 WL
1621342, at *2 (S.D.N.Y. July 12, 2005) (“plaintiff has the
burden to demonstrate proper service”); Pearson v. Bd. of
Educ., No. 02 Civ. 3629 (RCC), 2004 WL 2297354, at *4 Page
10 (S.D.N.Y. Oct. 12, 2004) (“once a defendant has raised a
bona fide question as to the propriety of service, the
burden of proving proper service rests with plaintiff”
(quoting Rates Technology, Inc. v. UTT Corp., 94 Civ. 0326,
1995 WL 86264, at *1 (S.D.N.Y. Mar. 2, 1995)).

Weston argues in the alternative that BTC and DBTCA are
the very same entity, or that DBTCA, as “the successor
Trustee stepping into the shoes of BTC [pursuant to] the
Indenture,” therefore is “Dina’s agent for service of
process.” (Pl.’s Mem. Opp’n at 13.) Neither argument is
availing.

Weston has failed to establish that BTC and DBTCA are the
same entity. In his affidavit in opposition to the Dina
motion, Liegey referred to the acquisition of BTC by
Deutsche Bank. Liegey does not claim any personal knowledge
regarding these other corporations. See Fed.R.Civ.P. 56(e)
(requiring that affiant have “personal knowledge,” and that
affidavit set forth “facts as would be admissible in
evidence”). Furthermore, Deutsche Bank’s acquisition of BTC
does not support the conclusion that DBTCA is BTC by
another name. Weston has alleged the existence of, but has
not submitted, an amended certificate of organization for
BTC changing its name to DBTCA. (Liegey Aff. ¶ 5.)
This mere allegation is insufficient to carry Weston’s
burden of proof on this issue. Page 11

Weston has asserted that because DBTCA is the successor to
BTC as trustee, it therefore is also the successor to BTC
as agent for service of process on Dina under section 112
of the Indenture. (SAC ¶ 3.) However, the express
language of the Indenture differentiates between the
“authorized agent for service of process,” specifically
naming “Bankers Trust Company” (Indenture ¶ 112),
and the “Trustee,” defined as the person named in the
Indenture “until a successor Trustee shall have become
such” (Indenture ¶ 101). The Indenture contains no
provision appointing the “Trustee” generally as agent for
service of process, nor does it provide for successorship
of an agent for service of process. Thus, the fact that
Dina’s offerings refer to DBTCA as the new “Trustee” does
not mean that DBTCA automatically became the “agent for
service of process.” (See Liegey Aff. Exs. D, E.)

The affidavit of service names Burg as the “trustee” of
Dina, without making reference to DBTCA. (See Liegey Aff.
Ex. F.) Burg’s e-mail to counsel for Dina does not suggest
that Burg ever “accepted service on behalf of Dina.” Burg,
moreover, was immediately informed by Dina’s counsel that
“Deutsche Bank is not authorized to accept service of
process on behalf of Dina. . . .” (Garcia Decl. Ex. B.)

Weston has advanced the proposition that “[i]f DBTCA is
not deemed to be the agent, Dina should be required to
designate an agent for service of process under the terms
of the Indenture.” Page 12 (Pl.’s Mem. Opp’n at 13 n. 6.)
The Indenture does not require that there be a successor
agent for service of process. Dina cannot be compelled
under the Indenture to name a successor (even though the
parties could easily have added a provision that required
such a designation). See Terwiliger v. Terwiliger, 206 F.3d
240, 245 (2d Cir. 2000) (“A court may neither rewrite,
under the guise of interpretation, a term of the contract
when the term is clear and unambiguous, nor redraft a
contract to accord with its instinct for the dispensation
of equity upon the facts of a given case.”).

Weston’s request that it be granted additional time to
effectuate service is unsupported by any showing of “good
cause.” Good cause to excuse deficient service generally
requires proof of “exceptional circumstances” that were
“beyond [the plaintiff’s] control.” Sleigh v. Charlex,
Inc., No. 03 Civ. 1369 (MBM), 2004 WL 2126742, at *4
(S.D.N.Y. Sept. 14, 2004) (quoting Nat’l Union Fire Ins.
Co. v. Sun, No. 93 Civ. 7170 (LAP), 1994 WL 463009, at *3
(S.D.N.Y. Aug. 25, 1994)). Weston has known of Dina’s
challenge to service since November 30, 2005. (See Garcia
Decl. Ex. B.)

Absent the amended certificate of organization and any
provision in the Indenture to provide for a successor agent
for the service of papers and any authority to establish
that a name change effectuates status as a successor agent
for the service of process, the better practice is to
dismiss the complaint without prejudice. See Fed.R.Civ.P.
4(m). Page 13

The Remaining Motions Are Dismissed Without Prejudice

Absent service, there is no jurisdiction for the court to
act further. Hawthorne, 219 F.R.D. at 49. Consequently,
the remaining motions are dismissed without prejudice.

It is so ordered.

[fn1] The fact that Dina’s attorneys have access to a copy
of the complaint does not constitute effective service of
process. See, e.g., Cruisephone, 278 B.R. at 333 (“An
attorney does not become his client’s agent for service of
process solely by reason of serving in the capacity as
attorney.”). Page 1