Alleged defect in service of process excused

Listen to this article

Where a foreign company argued that it wasn’t properly served because an affidavit evidencing service was materially defective, but actual notice remedies any defects of service, and the company had notice of the case within the statutorily required timeframe, the alleged defect was of no moment.

Background

This case comes out of a long series of litigation concerning Matt Martorello and his short-term loan schemes. Breakwater Holdings LLC is one of Martorello’s companies allegedly entangled within his elaborate corporate web. Breakwater is incorporated under the laws of the Cook Islands. Breakwater now comes before the court challenging the adequacy of the service of process.

Personal service

It is beyond dispute that there was no actual personal service on one of Breakwater’s agents. Plaintiffs tried unsuccessfully to serve Martorello, but service was never effectuated. As a result, plaintiffs’ first theory of service, service on Breakwater’s officer or agent, fails.

Substitute service

Plaintiffs also attempted, this time successfully, substitute service on Breakwater in accord with Va. Code § 8.01-329. That provision applies equally to defendants located outside of the United States.

To effectuate substitute service, a plaintiff may serve “process or notice … on the Secretary of the Commonwealth of shall be deemed to be the statutory agent of such person.” The plaintiff is required to file an affidavit stating: (1) defendant is properly subject to substitute service and (2) “the last known address of the person to be served.” Plaintiffs satisfied that requirement.

Breakwater nevertheless argues that plaintiffs cannot use Virginia’s substitute service provision because “Breakwater is not subject to personal jurisdiction under Virginia’s long-arm statute.” Furthermore, says Breakwater, plaintiffs failed to complete the part of the affidavit of service form specifying which subsection of Virginia’s long-arm statute provided jurisdiction. According to Breakwater, that renders the affidavit defective. Each argument is unavailing.

It is true that this court does not have jurisdiction pursuant to Virginia’s long-arm statute. But, as detailed in a separate memorandum opinion, this court does have personal jurisdiction over Breakwater pursuant to federal law.

Substitute service is appropriate “[w]hen the exercise of personal jurisdiction is authorized by [Chapter 9 of the Virginia Code].” Chapter 9 includes not only Virginia’s long-arm statute but also Va. Code Ann. § 8.01-330 which states: “A court of this State may exercise jurisdiction on any other basis authorized by law.” Therefore, federal law can serve as a basis for personal jurisdiction for substitute service of process.

Second, Breakwater argues that the affidavit was materially defective because it failed to provide Breakwater’s correct “last known address.” The court would be required to do a more fact intensive analysis to determine if the address plaintiffs listed qualifies as the “last known address” of Breakwater. However, it is not necessary to make that finding because under Virginia law, actual notice remedies any defects of service.

The record in this case shows that Breakwater has repeatedly shown that it is fully aware of the proceedings. In addition, as required by Fed. R. Civ. P. 4 (m), Breakwater had notice of the proceedings within 90 days of the complaint being filed. Plaintiffs first filed the complaint on April 24, 2019. On June 28, 2019, 65 days after the complaint was filed, Breakwater filed a motion to dismiss the case.

Thus, Breakwater had notice of the case within the statutorily required timeframe and thus the alleged defect is of no moment. Service statutes are designed to ensure that “the method chosen will inform the party to be served of the pending litigation.” In this case, Breakwater was, and is, fully informed about the litigation.

Breakwater Holdings LLC’s motion to dismiss denied.

Galloway v. Martorello, Case No. 3:19-cv-314, Aug. 11, 2023. EDVA at Richmond (Payne). VLW 023-3-485. 11 pp.