WINN-DIXIE STORES, INC. v. EASTERN MUSHROOM MARKETING COOPERATIVE, INC.

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

WINN-DIXIE STORES, INC., et al., :

Plaintiffs, : CIVIL ACTION

v. :

:

EASTERN MUSHROOM MARKETING :

COOPERATIVE, et al., : No. 15-6480

Defendants. :

MEMORANDUM

Schiller, J. January 8, 2020

Now before this Court is Defendant-Franklin Organic Mushrooms, Inc.’s motion to dismiss

pursuant to Rule 12(b)(5) and Plaintiff-Winn-Dixie’s cross-motion for enlargement of time to

serve Franklin. Franklin’s motion will be denied and Winn-Dixie’s cross-motion will be granted.

While Franklin has not been served in the timeframe prescribed by Rule 4, the Court will allow

Winn-Dixie addition time to serve Franklin.

I. BACKGROUND

Franklin was a Connecticut company that once grew and sold mushrooms. (Mem. In

Supp. of Mot. to Dismiss Franklin Organic Mushrooms, Inc. Pursuant to Rule 12(b)(5) [Def.’s

Mem.] at 7.) Franklin once did business in Pennsylvania. (Id. at 6.). Pursuant to Pennsylvania’s

requirement that foreign companies designate an in-state registered address, 15 Pa.C.S.A. § 109,

Franklin designated the corporate service company “CT Corporation Philadelphia” as its in-state

address. (Id.)

In 2006 Franklin ceased production of agaricus mushrooms and sold its customer list. In

2008, Franklin sold its brand name. In 2010, it ceased all operation. (Id. at 7.)

Since 2006, Franklin has been a defendant in a class action lawsuit alleging that Eastern

Mushroom Marketing Collective – of which Franklin was once a member – and various affiliated

organizations conspired to raise the price of agaricus mushrooms. Several plaintiffs also filed their

own antitrust lawsuits. The most recent of these lawsuits– this one – was filed on December 7,

2015. (Compl., Dec. 7, 2015, ECF No. 1.)

On March 22, 2016, Winn-Dixie’s process server attempted to serve Franklin at CT

Corperation in Harrisburg by handing process documents to CT Corporation Senior Corporate

Operations Specialist Bob Sersh. (Proof of Service, March 28, 2016, ECF. 6.) That same day, CT

Corporation forwarded the summons and complaint to Milton Jacobson at the Connecticut Law

firm of Brown & Jacobson, PC via Federal Express 2-day service. (Pl.’s Suppl. in Further Supp.

of Pl.’s Cross-Mot. for Enlargement of Time to Serve Process on Franklin Farms and in Opp’n to

Mot. to Dismiss [Pl.’s Suppl.], Ex. 1, at 4.). On April 4, 2016, Michael D. Colonese, an attorney

at Brown & Jacobson, forwarded the materials to Franklin’s president Wilhem Meya via overnight

delivery. (Id., Ex. 1, at 4.)

This was not the end of the matter, and Franklin would not enter an appearance in this

lawsuit for another three years. In the meantime, this case was consolidated with the class action

and other individual actions for pre-trial purposes between April 12, 2017 and September 29, 2018;

Winn-Dixie filed its First Amended Complaint – again naming Franklin as a defendant – on

January 29, 2019; this Court granted in part and denied in part motions by various defendants to

dismiss the complaint – including dismissing the complaint against seven defendants due to

improper service – on April 8, 2019.

On April 10, 2019, chambers contacted Franklin’s counsel by email to request an entry of

appearance. According to Franklin, this was the first time James Rodgers, who represented

Franklin in the other antitrust cases, became aware of Winn-Dixie’s complaint. Rodgers entered

his appearance on April 15, 2019. Franklin answered Winn-Dixie’s complaint on July 12, 2019

and filed the instant motion on August 8, 2019.

II. DISCUSSION

A. Waiver and Timeliness

The crux of Franklin’s argument is that Winn-Dixie did not perfect service when it served

process at CT Corporation in Harrisburg, therefore Franklin has never actually been served in this

lawsuit. Winn-Dixie counters that Franklin waved this argument, and that Franklin’s motion is

untimely. The Court finds neither of Franklin’s argument availing.

First, Winn-Dixie argues that, under Rule 12(h), Franklin waived the argument that service

was improper because CT Corporation was not authorized to accept process on Franklin’s behalf.

(The Winn-Dixie Pl.’s Resp. In Opp’n To Franklin Organic Mushrooms, Inc.’s Mot. To Dismiss

Pursuant to Rule 12(b)(5) And Pl.’s Cross-Mot. For Enlargement of Time to Serve Process on

Franklin Farms [Winn-Dixie’s Resp.] at 7-8.) Under Rule 12(h), a party waives the defense of

improper service if it “fails to raise it by motion and does not include it in a responsive pleading.”

Barzanty v. Verizon PA, Inc., 361 F. App’x 411, 415 (3d Cir. 2010) (citing Fed. R. Civ. P. 12(h));

see also McCurdy v. Am. Bd. of Plastic Surgery, 157 F.3d 191, 194 (3d Cir. 1998) (“[I]f a defendant

seeks dismissal of the plaintiff's complaint pursuant to Rule 12(b)(5) on the ground that service of

process was insufficient or ineffective, it must include that defense either in its answer or together

with any other Rule 12 defenses raised in a pre-answer motion.”). In Franklin’s answer to Winn-

Dixie’s amended complaint, Franklin argued that it had been improperly served, because its in-

state agent was CT Corporation in Philadelphia rather than CT Corporation in Harrisburg. (Answer

to the First Am. Compl. by Franklin Farms, at 21.) It did not, however, argue that service was

improper because CT Corporation was not authorized to accept process on Franklin’s behalf.

The Court disagrees with Winn-Dixie’s reading of Rule 12(h). Under Rule 12(h), waiver

is triggered by a party’s “failing to . . . include [a defense listed in rule 12(b)(2)-(5)] in a responsive

pleading.” When a party raises the relevant defense in their answer, however an opposing party

cannot invoke waiver under 12(h) on the grounds that the moving party did not articulate the

precise legal theory it would ultimately use in its motion. For instance, in Veverka v. Royal

Caribbean Cruises Ltd., a personal injury plaintiff argued that the defendant cruise company had

waived a statute of limitations defense by failing to include the defense in its answer. 649 F. App’x

162, 166 n.2 (3d Cir. 2016). The Third Circuit rejected this argument because the company’s

answer had “claim[ed] all rights, immunities, exonerations and limitations of liability provided in

the terms and conditions of the cruise ticket”, and that the ticket contained a statute of limitations

provision. Id. Like the defendant in Veverka, Franklin did not waive its defense of improper service

by failing to include the precise theory of improper service it would ultimately use in the instant

motion. The fact that Franklin raised a defense of improper service in its answer is sufficient to

avoid waiver.

Second, Winn-Dixie argues that Franklin’s objection to service of process is untimely

because it filed this motion after first filing its answer to Winn-Dixie’s complaint. Rule 12(b)

requires a defendant to move before they file an answer to the complaint. However, federal courts

will consider a defense listed under 12(b) even when the movant did not make a pre-answer

motion, provided that the movant included the defense in their answer and promptly made the

relevant motion. 5C Charles Alan Wright, et al., Federal Practice & Procedure § 1361 (3d ed. 2017

update) (“A strict interpretation of the timing provision’s language leads to the conclusion that the

district judge must deny any Rule 12(b) motion made after a responsive pleading is interposed as

being too late. However, federal courts have allowed untimely motions if the defense was included

in the answer. In this context, the motion becomes tantamount to a motion for a pretrial hearing on

the defense under Rule 12(i).”); see Molnlycke Health Care AB v. Dumex Med. Surgical Prod.

Ltd., 64 F. Supp. 2d 448, 449 n.1 (E.D. Pa. 1999) (“Although the defendant filed this motion after

answering the complaint, that answer included lack of venue, lack of personal jurisdiction, and

failure to state a claim as affirmative defenses . . . . Courts in this circuit have been unwilling to

rule a motion untimely in such circumstances.”); see also Denari v. U.S. Dry Cleaning Servs.

Corp., Civ. A. No. 17-0031, 2017 WL 2779051, at *3 (E.D. Cal. June 27, 2017) (collecting cases).

Under such circumstances, “a court will look past the label chosen by the movant and treat the

motion as a request for a ruling on the defense made under former Rule 12(d), restyled in 2007 as

Rule 12(i).” King v. Taylor, 694 F.3d 650, 657 n.2 (6th Cir. 2012). This makes sense, as Rule 12(b)

requires parties to make the seven enumerated defenses (along with any others) in a responsive

pleading, but merely gives parties the option of asserting the defenses by pre-answer motion. Fed.

R. Civ. P. 12(b) (“Every defense to a claim for relief in any pleading must be asserted in the

responsive pleading if one is required. But a party may assert the following defenses by motion . .

. .”) (emphasis added). Reading Rule 12 as Winn-Dixie does would require a party to raise a

defense under Rule 12 via pre-answer motion, as failing to do so would render any subsequent

advocacy of the defense untimely. This would contradict the permissive language of Rule 12(b),

and thus the Court declines to read Rule 12(b) in such fashion. As a result, the Court will consider

the merits of Franklin’s motion.

B. Adequacy of Service

Franklin moves this Court to dismiss Winn-Dixie’s complaint for failure to effectuate

service in the time allotted by Rule 4. A party must be properly served before a federal court may

exercise personal jurisdiction over the party. Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., 484

U.S. 97, 104 (1987). “If a defendant is not served within 90 days after the complaint is filed, the

court . . . must dismiss the action without prejudice against that defendant or order that service be

made within a specified time. But if the plaintiff shows good cause for the failure, the court must

extend the time for service for an appropriate period.” Fed.R.Civ.P. 4(m). In a motion under Rule

12(b)(5), “the party asserting the validity of service bears the burden of proof on that issue.” Grand

Entm’t Grp., v. Star Media Sales, Inc., 988 F.2d 476, 488 (3d Cir. 1993).

A party seeking to serve a corporation like Franklin may do so by “following state law for

serving a summons in an action brought in courts of general jurisdiction in the state where the

district court is located . . . .” Fed.R.Civ.P. 4(h)(1)(B) and 4(e)(1). In Pennsylvania:

Service of original process upon a corporation or similar entity shall be made by

handing a copy to any of the following persons provided the person served is not a

plaintiff in the action: (1) an executive officer, partner or trustee of the corporation

or similar entity, or (2) the manager, clerk or other person for the time being in

charge of any regular place of business or activity of the corporation or similar

entity, or (3) an agent authorized by the corporation or similar entity in writing to

receive service of process for it.

Pa.R.C.P. No. 424.

Here, Winn-Dixie served Franklin at CT Corporation in Harrisburg. There is no question

such service was not made on an executive officer or person in charge of any regular place of

Franklin’s business – and thus the only question is whether CT Corporation was authorized in

writing to receive service on Franklin’s behalf. Winn-Dixie has presented no evidence that CT

Corporation was authorized in writing to accept service of process for Franklin. Because

Winn-Dixie bears the burden of proving that it properly served Franklin and has presented no

evidence upon which it could carry that burden, the Court finds that Winn-Dixie did not properly

serve Franklin on March 22, 2016. As a result, Franklin was not served within the time allotted by

Rule 4.

C. Remedy

Having found that Franklin was not served in the time allotted by Rule 4, the Court can

either give Winn-Dixie an extension of time to serve Franklin or, if an extension is unwarranted,

dismiss the complaint against Franklin. The Court finds that an extension is appropriate.

“District courts conduct a two-part analysis when determining whether to extend the time

for service of a summons and complaint.” Chiang v. U.S. Small Bus. Admin., 331 F. App’x 113,

115 (3d Cir. 2009) (citation omitted). “First, the district court must determine whether good cause

exists for a plaintiff's failure to effect timely service.” Id. A showing of good cause requires “a

demonstration of good faith on the part of the party seeking an enlargement” and “some reasonable

basis for noncompliance within the time specified in the rules.” MCI Telecomms. Corp. v.

Teleconcepts, Inc., 71 F.3d 1086, 1097 (3d Cir.1995). “[T]he primary focus is on the plaintiff's

reasons for not complying with the time limit in the first place.” Id. Here, Winn-Dixie’s only

explanation for why it failed to properly serve Franklin is that it relied on its process server’s

representation that service had been effectuated. The assumption that process was properly served

is insufficient, litigants cannot merely rely on the word of their process server that service has been

perfected. Petrucelli v. Bohringer & Ratzinger, 46 F.3d 1298, 1307 (3d Cir. 1995). As such, Winn-

Dixie has not shown good cause for failure to properly serve Franklin.

Second, since good cause has not been shown, this Court must consider whether to use its

discretion to grant an extension of time to perfect service. See Chiang, 331 F. App’x at 115. In

making this determination, a district court may consider actual notice of the legal action; prejudice

to the defendant; the statute of limitations on the underlying causes of action; the conduct of the

defendant; and whether the plaintiff is represented by counsel, in addition to any other factor that

may be relevant when deciding whether to grant an extension or dismiss the complaint. Id.

In the view of this Court, the appropriateness of a discretionary extension comes down to

two competing considerations. On one side is the fact that Winn-Dixie has consistently failed to

properly serve process. Winn-Dixie has failed to serve multiple defendants in the allotted time,

Winn-Dixie Stores, Inc. v. E. Mushroom Mktg. Coop., Civ. A. No. 15-6480, 2019 WL 1514215, at

*7 (E.D. Pa. Apr. 8, 2019), failed to properly serve Franklin, and never confirmed service to

Franklin despite Franklin’s years of inactivity.

On the other side, however, is the fact that Franklin has known about this litigation for

years. Franklin’s CEO, Wilhem Meya, received process documents in April of 2016, along with

an accompanying letter advising Meya to show the papers to a lawyer. (Pl.’s Suppl., Ex. 1, at 3.)

(“Dear Mr. Meya . . .This office recently received the enclosed service of process transmittal from

CT Corporation . . . It encloses a summons and complaint which names Franklin Farms, Inc. among

many other defendants . . . .I would suggest that you present the documents to your attorney.”)

Although service was improper, Franklin should have been aware of this litigation for the last three

and one-half years. This weighs in favor of granting Winn-Dixie a discretionary extension because

it means Winn-Dixie’s failure to properly serve Franklin delayed notification of this lawsuit by

only several weeks.

Ultimately, the Court finds that a discretionary extension is warranted for three reasons.

First, Franklin was not prejudiced by Winn-Dixie’s improper service. Franklin received Winn-

Dixie’s process documents about two weeks after process was “served” in Harrisburg and the

Court is unwilling to hold Winn-Dixie responsible for any prejudice to Franklin stemming from

its inactivity after that point. Second Franklin’s objection to Winn-Dixie’s service of process

comes more than three years after Franklin was first given notice of this lawsuit. In light of this,

the Court is wary of dismissing the Complaint, as it would contravene the general principle that

defendants wishing to object to service of process should do so promptly. Third, Winn-Dixie’s

failure to serve Franklin was clearly the result of its mistaken belief that Pennsylvania law

permitted plaintiffs to serve foreign corporations at their registered Pennsylvania address. While

this belief is apparently incorrect – Winn-Dixie cites no law to the contrary and the Court, in its

independent research, can find none – it is not so reckless a legal error as to justify painting Winn-

Dixie in the same light as a plaintiff genuinely indifferent to proper service.

The above factors do not excuse Winn-Dixie’s failure to correctly serve Franklin, and the

result could well be different had service never reached Franklin, or had Franklin made the instant

motion in 2016. However, in the present case, Winn-Dixie’s lack of bad faith or overt recklessness,

combined with a lack of prejudice to Franklin, tips the scale in favor of granting a discretionary

extension of time in which to serve Franklin.

III. CONCLUSION

For the foregoing reasons, Franklin’s motion to dismiss is denied and Winn-Dixie’s

cross-motion for an extension of time to serve Franklin is granted. An Order consistent with this

Memorandum will be documented separately.