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RoyaltyStat, LLC v. Intangiblespring, Corp.

United States District Court, D. Maryland

January 19, 2017

ROYALTYSTAT, LLC, Plaintiff,
v.
INTANGIBLESPRING CORP., et al., Defendants.

          MEMORANDUM OPINION

          PAULA XINIS UNITED STATES DISTRICT JUDGE.

         Plaintiff RoyaltyStat, LLC (“Plaintiff” or “RoyaltyStat”) filed a Complaint against Defendants Institute for IntangibleSpring Corp. (“IntangibleSpring”) and Raul Pacheco Quintanilla (“Pacheco” and collectively, “Defendants”). ECF No. 1. Plaintiff brings this action against Defendants for violations of the Copyright Act, Lanham Act, Maryland Uniform Trade Secrets Act, and Maryland state law in connection with alleged misappropriation of trade secrets and the use of false advertising.

         Currently pending before the Court is Defendants' Motion to Dismiss (ECF No. 20). The issues have been fully briefed, and the parties were granted a hearing on the matter which took place on January 18, 2017. See ECF No. 35. At oral argument, the parties agreed the Court has authority to convert this motion to one to quash process. See Vorhees v. Fischer & Krecke, 697 F.2d 574, 576 (4th Cir. 1983); Copeland v. Ecolab, Inc., No. CIV. WDQ-10-1158, 2011 WL 1837886, at *3 (D. Md. May 12, 2011); Witcher v. Mac Tools, Inc., 62 F.R.D. 708, 710 (M.D. N.C. 1974).

         For the reasons stated below, service on both Defendants shall be quashed. Defendants' motion to dismiss pursuant to Rule 12(b)(6) will be denied as moot and without prejudice to its renewal if service is properly effected.

         I. BACKGROUND

         Plaintiff RoyaltyStat is a limited liability company organized under the laws of the State of Maryland. RoyaltyStat provides its clients with a database of intellectual property royalty rates used for pricing and valuation in connection with litigation, corporate bankruptcy, business development, and mergers and acquisitions. ECF No. 1 at 5.

         Defendant IntangibleSpring is a corporation organized under the laws of the Republic of Panama. Defendant Pacheco is a former independent contractor of RoyaltyStat and an owner of shares in IntangibleSpring. According to Plaintiff, Pacheco currently resides in France, ECF No. 27 at 7, but according to the Defendants' counsel, Pacheco formerly resided in France but is now a resident of Mexico. ECF No. 21 at 2.

         On December 23, 2015, Plaintiff filed the instant lawsuit. ECF No. 1. Plaintiff alleges that Pacheco stole RoyaltyStat's customer list and proprietary data prior to being terminated and used this data to form IntangibleSpring, a competitor business.

         On December 30, 2015, Plaintiff attempted to personally serve attorney John DiGiacomo (“DiGiacomo”), ECF No. 27-3 at 2, who later entered his appearance on behalf of both Defendants on June 22, 2016. ECF No. 24. According to Plaintiff, DiGiacomo, through his law firm Revision Legal, PLLC, was the last legal counsel representing IntangibleSpring in the United States and in connection with IntangibleSpring's registration of its trademark. See Trademark Application, ECF No. 27-2 at 9-10. When the process server delivered the papers, DiGiacomo advised the process server that he was not authorized to accept service on behalf of IntangibleSpring. ECF No. 27 at 6.

         On March 18, 2016, Plaintiff served the Panamanian law firm, Zuniga y Asociadas, through Yamileth Sanchez. ECF No. 14; ECF No. 21-3 at 2. Zuniga y Asociadas is a “resident agent” of IntangibleSpring. ECF No. 27 at 4 (citing Panama Corporation and Foundation Name Search Results for IntangibleSpring, ECF No. 27-1 at 1); ECF No. 21-3 at 2. At Plaintiff's direction, a private process server hand delivered a copy of the Complaint, the Summons, and all other pleadings (in both Spanish and in English) to the offices of Zuniga y Asociadas. ECF No. 27 at 5.

         On April 25, 2016, a French bailiff attempted to personally serve Pacheco. According to bailiff's certificate, because “the aforementioned individual had left without a leaving a forwarding address, ” the French bailiff sent the summons and a formal record of the search “via registered mail with receipt confirmation” to the last known address of Pacheco. ECF No. 17 at 4.[1]

         Defendants IntangibleSpring and Pacheco now move to dismiss pursuant to Fed.R.Civ.P. 12(b)(5) and (b)(6) for insufficient service of process and for Plaintiff's failure to state a claim upon which relief can be granted. ECF No. 20 at 2.

         II. STANDARD OF REVIEW

         Under Rule 12(b)(5) of the Federal Rules of Civil Procedure, a defendant may move to dismiss for insufficient service of process. Fed.R.Civ.P. 12(b)(5). If service is contested, the plaintiff bears the burden of establishing that it effected proper service under Rule 4 of the Federal Rules of Civil Procedure. O'Meara v. Waters, 464 F.Supp.2d 474, 476 (D. Md. 2006); Dickerson v. Napolitano, 604 F.3d 732, 752 (4th Cir. 2010); Fed.R.Civ.P. 4.

         Actual notice is not the controlling standard, Mining Energy, Inc. v. Dir., Office of Workers' Comp. Programs, 391 F.3d 571, 576 (4th Cir. 2004); however, “when service of process gives the defendant actual notice of the pending action, the courts may construe Rule 4 liberally to effectuate service of process and uphold the jurisdiction of the court.” O'Meara, 464 F.Supp.2d at 476 (citing Karlsson v. Rabinowitz, 318 F.2d 666, 668 (4th Cir. 1963)); see also Armco, Inc. v. Penrod-Staufer Bldg. Sys., Inc., 733 F.2d 1087, 1089 (4th Cir. 1984). Nevertheless, “the rules are there to be followed, and plain requirements for the means of effecting service of process may not be ignored.” Armco, Inc., 733 F.2d at 1089. If a court finds that plaintiff has failed to effectuate service under the meaning of Rule 4, the court may either dismiss the complaint or quash service and allow the plaintiff to attempt service again. Miller v. Baltimore City Bd. of Sch. Comm'rs, 833 F.Supp.2d 513, 516 (D. Md. 2011) (citing Vorhees v. Fischer & Krecke, 697 F.2d 574, 575-76 (4th Cir. 1983)).

         III. ANALYSIS

         Defendants contend that each has not been properly served consistent with the requirements for service in a foreign country. Plaintiff disagrees as to Defendant IntangibleSpring, arguing that service on DiGiacomo constitutes valid service. As for Defendant Pacheco, Plaintiff claims to have satisfied Rule 4 in delivering the summons and complaint to his purported last known address in France. The Court finds that service on both Intangible Spring and Pacheco is insufficient. Plaintiff has provided the Court with no authority that service of Intangible Spring was valid under Panamanian Law and have improperly attempted service on an attorney unauthorized to accept service of process. Plaintiff's attempted service of Defendant Pacheco was improper because Plaintiff neither complied with the Hague Convention nor satisfied due process.

         “Valid service of process is a prerequisite to a district court's assertion of personal jurisdiction.” Persaud Companies, Inc. v. S. Md. Dredging, Inc., No. 12-2114, 2014 WL 640878, at *2 (D. Md. Feb. 18, 2014) (quoting Swaim v. Moltan Co., 73 F.3d 711, 719 (7th Cir. 1996)) (internal quotation marks omitted). “In the absence of service of process (or waiver of service by the defendant), a court ordinarily may not exercise power over a party the complaint names as defendant.” Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 350 (1999) (citing Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987)). “Accordingly, one becomes a party officially, and is required to ...


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