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American Institute of Certified Public Accountants v. Affinity Card, Inc.

United States District Court, S.D. New York
8 F. Supp. 2d 372 (1998)
ELI5:

Rule of Law:

Actual notice of a lawsuit does not cure a defective service of process. To be valid, service on a corporation must be made upon an officer, a managing or general agent, or another agent authorized to receive service, not merely an employee of a separate entity that shares office space.


Facts:

  • The American Institute of Certified Public Accountants (AICPA), Affinity Card, Inc. (Affinity), and Marine Midland Bank entered into a contract for a credit card program.
  • AICPA alleged that Affinity breached the contract by withholding information and failing to make required payments.
  • Affinity shared a suite of offices and a president, Greg Miller, with three other companies, including Primecard Corporation.
  • A process server hired by AICPA went to the shared office to serve the summons and complaint on Affinity.
  • The process server handed the documents to Patrick McDonald, who was the Assistant Vice-President of Primecard, not Affinity.
  • McDonald was not employed by Affinity, nor was he authorized to accept service of process on its behalf.
  • McDonald placed the documents in Greg Miller's office mailbox.
  • Greg Miller, Affinity's president, received the summons and complaint later that same day.

Procedural Posture:

  • The American Institute of Certified Public Accountants (AICPA) filed a breach of contract complaint against Affinity Card, Inc. (Affinity) in the U.S. District Court for the Southern District of New York.
  • AICPA filed an affidavit of service, claiming it had served the defendant.
  • Affinity did not answer or otherwise respond to the complaint within the allotted time.
  • AICPA applied for a default judgment, which the court entered against Affinity.
  • Affinity then filed a motion pursuant to Fed. R. Civ. P. 55(c) and 60(b)(4) to vacate the default judgment.

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Issue:

Does delivering a summons and complaint to an employee of a separate, co-located corporation, who is not an agent of the defendant, constitute effective service of process under Federal Rule of Civil Procedure 4(h)(1), even if the defendant's president receives actual notice of the lawsuit?


Opinions:

Majority - Scheindlin, District Judge.

No. Delivering a summons and complaint to an individual who is neither an employee nor an authorized agent of the defendant corporation constitutes ineffective service of process, and the defendant's actual notice of the lawsuit does not remedy this defect. Valid service is a prerequisite for a court to assert personal jurisdiction. Under Federal Rule of Civil Procedure 4(h)(1), service must be made on an officer, a managing or general agent, or an agent authorized to receive process. Patrick McDonald held no position with Affinity and was not authorized to accept service for it. Service is only sufficient on a non-designated person if they are so integrated with the organization that it is fair and reasonable to imply they have authority to receive service; McDonald, an employee of a separate company, did not meet this standard. While actual receipt of the summons is a factor, the Supreme Court has held that actual notice alone cannot cure an otherwise defective service. Therefore, because service was improper, the court lacked personal jurisdiction, and the resulting default judgment is void.



Analysis:

This case underscores the formal nature of service of process and clarifies that actual notice is not a substitute for legally compliant service. It establishes that for service to be valid on a corporation, it must be made on a person with a clear and sufficient connection to that specific corporate entity. The ruling serves as a strong precedent against arguments that service on an employee of a tangentially related company in a shared office space is sufficient, even if the documents reach the intended recipient. This decision reinforces the principle that personal jurisdiction is founded on proper notice as defined by procedural rules, not merely on the defendant's awareness of the litigation.

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