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Petrie v. Pension Advisors, Inc.

United States District Court, D. Kansas

May 26, 2017

KEVIN PETRIE and DIANA PETRIE, Plaintiffs,
v.
PENSION ADVISORS, INC., Defendant.

          MEMORANDUM AND ORDER

          ERIC F. MELGREN UNITED STATES DISTRICT JUDGE.

         Plaintiffs Kevin and Diana Petrie filed a Complaint against the Defendant Pension Advisors, Inc. (“PAI”), asserting various claims arising from a defective pension plan drafted by PAI. The Complaint went unanswered, and a clerk's entry of default was entered against PAI. Shortly thereafter, PAI filed a Motion to Vacate the Clerk's Entry of Default and for Leave to File Responsive Pleading (Doc. 5). For the reasons stated below, the Court grants PAI's motion.

         I. Factual and Procedural Background

         The Petries filed their Complaint on January 26, 2017. They attempted to serve a summons on PAI via certified mail. It was mailed to PAI at 501 SE 4th Street in Bartlesville, Oklahoma. The summons specifically named Trevor Sutterfield as the intended recipient. Sutterfield is PAI's registered agent. Also located at 501 SE 4th Street is Sutterfield Financial Group, Inc. Trevor Sutterfield is the registered agent for Sutterfield financial as well.

         On January 30, the summons was received and signed for by Rachel Holdredge. PAI claims that Holdredge is the receptionist for Sutterfield Financial. PAI asserts that instead of forwarding the summons to PAI, Holdredge “treated [it] as if it were any other piece of mail, ” and so the summons did not immediately reach PAI. Nonetheless, PAI explains that sometime later “the Complaint ultimately found its way to someone at Pension Advisors.” PAI contends that it intended to contest the Complaint, and forwarded it on to its insurance company for consideration. But the Complaint went unanswered. On March 28, the Petries moved for a clerk's entry of default. At that time, PAI contends that its insurer was reviewing the claim and assigning defense counsel. On March 29, the clerk entered default against PAI pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. The Court's docket reflects that the entry of default was mailed to PAI via regular mail, but PAI claims it never received such notice.

         PAI asserts that it only became aware of the default on April 10. And on April 11, this motion to vacate the clerk's entry of default was filed (Doc. 5). In that motion, PAI argues that the Petries have not demonstrated proper service, and thus were not entitled to an entry of default. Further, PAI argues that the Court should vacate the entry of default because the Petries would not be prejudiced and PAI has a meritorious defense to the claims. Additionally, PAI seeks the Court's leave to file a response to PAI's Complaint. The Petries oppose PAI's motion, which is ripe for the Court's consideration.

         II. Discussion

         A. Motion to Vacate

         The decision to set aside an entry of default lies within the Court's discretion.[1] Because the Petries obtained a clerk's entry of default, as opposed to a default judgment, PAI must show good cause.[2] The good cause standard is fairly liberal because “[t]he preferred disposition of any case is upon its merits.”[3] Three factors guide the Court's consideration of whether to vacate a clerk's entry of default: (1) whether PAI's culpable conduct caused the default; (2) whether the Petries will be prejudiced if the entry of default is set aside; and (3) whether PAI has a meritorious defense.[4] The Court will consider each factor in turn.

         1. PAI's Culpability

         a. Service of Process

         PAI argues that it bears no culpability for the entry of default because it was not properly served. According to PAI, although the Petries mailed the summons to the correct office building, it was received and signed for by Rachel Holdredge, a receptionist for Sutterfield Financial-a separate company located in the same building as PAI. Instead of forwarding the summons to PAI, she treated it like regular mail and apparently never passed it on to Trevor Sutterfield, PAI's registered agent.

         The Petries disagree, noting that PAI and Sutterfield Financial are closely related. Trevor Sutterfield is listed as the registered agent for both businesses. The businesses' respective websites identify Trevor Sutterfield as the vice president of PAI and the president of Sutterfield Financial, and indicate that the business share several employees. Additionally, PAI and Sutterfield Financial share the same phone and fax numbers. PAI does not allege that any other business occupy the building at ¶ 4th Street.

         Rule 4 of the Federal Rules of Civil Procedure govern service of process. Relevant here, Rule 4(e)(1) provides that service may be completed by following the forum state's law. Under Kansas law, service upon a corporation is governed by K.S.A. § 60-304(e).[5] Service may be made on a corporation by:

(1) Serving an officer, manager, partner or a resident, managing or general agent;
(2) leaving a copy of the summons and petition or other document at any of its business officers with the person having charge thereof; or
(3) serving any agent authorized by appointment or by law to receive service of process, and if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the defendant.
Service by return receipt delivery on an officer, partner or agent must be addressed to the person at the person's usual place of business.[6]

         Here, the Petries sent the summons to PAI via certified mail. It was specifically addressed to Trevor Sutterfield, PAI's registered agent, at PAI and Sutterfield's place of work.[7] Rachel Holdredge signed for the summons, acknowledging receipt of the Complaint addressed to PAI and Trevor Sutterfield. As this Court explained in Drummond v. Armata Logistics, Inc., [8] given these facts the Petries have demonstrated sufficient service. “Kansas statute § 60-304(e) simply requires that ‘service by return delivery on an . . . agent . . . be addressed to the person at the person's usual place of business.' There is no requirement in the statute that delivery be accepted only by that registered agent.”[9] By sending the summons via certified mail addressed to PAI's registered agent at his ordinary place of business, the Petries properly served PAI.

         PAI argues that this case is distinguishable because here, unlike in Drummond, the person who received service was not employed by PAI. Therefore, PAI contends that this case presents defective service “because the complaint was received by an individual who was not employed by PAI, located on a different floor from PAI, and not authorized to accept service on behalf of PAI.” This argument misreads Drummond and PAI's purported distinction carries no weight. In Drummond, it was impossible to tell who had signed for the documents.[10] All that was known was that it was not the registered agent.[11] Therefore, the recipient's employment status had no bearing on the analysis in Drummond, because the recipient's identity was unknown. Accordingly, PAI fails to distinguish the instant case from Drummond.

         For the reasons stated above, the Court finds that the Petries have demonstrated proper service on PAI. And so the Court rejects PAI's argument that it cannot be held culpable because it was not properly served. That said, the fact that PAI was properly served does not automatically mean that the entry of default will stand. The Court will still ...


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