Petition for Writ of Certiorari — Stone Consolidated, Inc. v. M/V Kapetan Martinovic

PILED

98 GRO MIIS Ms

No.

OFFICE OF THE CLERK

In The

Supreme Court of the United States

+

October Term, 1998

STONE CONSOLIDATED, INC.,

Petitioner,

vs.

M/V KAPETAN RNiARTINOVIC, Her Engines, Boilers, etc.,

In Rem, SOUTH ADRIATIC BULK SHIPPING LIMITED and

MILENA SHIP MANAGEMENT LIMITED,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Eleventh Circuit

PETITION FOR WRIT OF CERTIORARI

FRED S. CLARK

Counsel of Record

CLARK AND CLARK

Attorneys for Petitioner

P.O. Box 8151

Savannah, Georgia 31412

(912) 233-0300

148855 @ Counsel Press LLC

FORMERLY LUTZ APPELLATE SERVICES

(800) 274-3321 + (800) 359-6859

bE

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QUESTIONS PRESENTED FOR REVIEW

Where there was evidence in the record that service by

mail was successfully made on the agent for service in Chatham

County, Georgia and the acknowledgment was returned and

filed, though unsigned, and there is further evidence in the

record that after service was made the plaintiff was apprised of

the fact that there was an Executive Order in which the

defendant’s assets were a part of sanctions against the Serbs

for the Bosnian situation and, thus, refrained from further

service, and there is further evidence in the record that the

plaintiff can obtain jurisdiction over the defendant within the

Southern District of Georgia and no Motion to Dismiss was

filed, did the Court err in dismissing the action?

ii

LIST OF ALL PARTIES TO THE PROCEEDINGS

Stone Consolidated, Inc.

M/V KAPETAN MARTINOVIC

South Adriatic Bulk Shipping, Ltd.

Milena Ship Management, Ltd.

Fred S. Clark

M. Brice Ladson

John H. Clegg

American International Group Insurance Company

The petitioner has reached an agreement to be acquired by

Jefferson Smurlti Corp. Petitioner owns less than 99% of the

following subsidiaries:

Europapel, S.A.

Cannonages Robert Deluboc S.A.R.L.

WWG Weser-Werstoff-Gesellschaft mbH

MacMillan Bathurst

Maritime Containers, Ltd.

Paroco Ronstoffverwertung GmbH

Rohstaffhandel Kiel GmbH

Rosenblum Group Inc.

Stone-Billerud S.A.

GIA (Gessellschaft fuer Altpapier und Rohstaffe mbH)

ICO, Inc.

Indupa Venriebgsellschaft mbH & Co., KG

Indupa Grundstuacksgesellschaft mbH

L & M Corrugated Container Corp.

MacMillan Bathurst, Inc.

Aspsmill Inc.

Associated Paper Mills (Ontario) Ltd.

Compagnie d’Estacades de La Cascapedia Inc.

Stone Container (Hong Kong), Ltd.

Stone Cuntainer Japan Co. Ltd.

ili

Trans-Seal Corp.

Vennebegesellschaft Rohstaffhandel Kiel GmbH

ORPACK-Stone Corp.

Paper Recycling International LP

Produita Forestiers Petit Paris

Interstate Packaging Corp.

Financiere Carton Papier

Venepal-Stone Forestal, S.A.

Laimbeer Packaging Co. LLC

Mannkraft Corp.

Scienes Saugenay Ltee.

Tradpak Internacional S.A. de C.V.

Bridgewater Paper Co. Ltd.

Bridgewater Newsprint Ltd.

Canonnages MGC S.A.

Bridgewater Paper Leasing Ltd.

Cheshire Recycling Ltd.

Compagnie de Flottage due St. Maurico Limitee

Estrella de Osa S.A.

Shanghai Stone Millennium Packaging and Paper Co. Ltd.

Surling Fibre (Holdings) Ltd.

Surling Fibre Ltd.

Surling Recycling Ltd.

Stone-Consolidated Corp.

Stone-Consolidated (Europe) S.A.

Stone-Consolidated (US) Corp.

Cartonex Bernai S.A.

Cartonex S.A. 1.C.F.Y.F.

Comupac S.A.

Florida Coast Paper Corp.

Florida Coast Paper Finance Corp.

Florida Coast Paper Molding Co., LLC

Tradepak International, Inc.

Venepal S.A.C.A.

iv

TABLE OF CONTENTS

Page

Questions Presented for Review .................. i

List of all Parties to the Proceedings ............... ii

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Reasons for Granting the Writ .................... 4

COMBINE 8.8 SESS RA SS 7

TABLE OF CITED AUTHORITIES

Cases:

Brown v. Nichols, 8 F.3d 770 (11th Cir. 1993) ...... 6

Morse v. Elmira Country Club, 752 F.2d 35 (2nd Cir.

SORE souk den a hints Caso nd eae cee nh 4,5

Schnabel v. Wells, 922 F.2d 726 (11th Cir. 1991) .... 4,5

Stanga v. McCormick Shipping Corp., 268 F.2d 544 (Sth

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Table of Cited Authorities

Statute:

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Rule:

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Other Authority:

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APPENDIX

Appendix A — Opinion Of The United States Court Of

Appeals For The Eleventh Circuit Filed March 20,

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Appendix B — Order Of The United States District Court

For The Southern District Of Georgia, Savannah

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Appendix C — Order The United States Court Of

Appeals For The Southern District Of Georgia,

Savannah Division Filed May 19, 1997 ..........

Appendix D — Order Of The United States District Court

For The Southern District Of Georgia, Savannah

eo Oe. | eres re ere

Appendix E — Order Of United States Court Of Appeals

For The Eleventh Circuit Denying Petition For

Rehearing En Banc Filed July 14, 1998 ..........

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STATEMENT OF JURISDICTION

The judgment for the Court of Appeals for the Eleventh

Circuit was entered on March 20, 1998 and the Order denying

the Petition for Rehearing En Banc was entered on July 14,

1998, consequently this Petition for a Writ of Certiorari was

filed within ninety (90) days of that date. The jurisdiction of

this Court is invoked under 28 U.S.C. § 1254(1).

STATEMENT OF THE CASE

A. Factual Background

Appellant sued the Appellee for damage to a cargo of wood

pulp in the amount of $750,000. It was to have been transported

aboard the M/V KAPETAN MARTINOVIC. On or about June

25, 1992, officials of the United States Department of Treasury

seized the vessel pursuant to the blocked property restrictions

imposed by 31 C.F.R. § 585. The cargo was required to stay on

board until discharged on or about October 11, 1992 which

exposed the cargo to humidity, dampness, mold, dirt, rust and

dust and stains and other damaging conditions. Stone Container

sustained a loss of $399,907.40 as well as incurring expenses

of $18,351.67.

The Appellant filed the above action and served the

Appellees’ local agents, Gulf & Eastern Steamship and

Chartering for South Adriatic Bulk Shipping, Ltd. and Milena

Ship Management, Ltd. by mail. The acknowledgments were

returned unsigned. These were filed with a supporting affidavit.

During that time, John H. Clegg of Chaffe McCall of New

Orleans in November, 1993 called the Appellant’s attorney and

advised he represented the P & I Company covering the

Appellees. He requested a copy of the Complaint and it was

faxed it to him.

2

A contemporaneous note made on December 19, 1993 by

the Appellant’s attorney states that Jack Clegg informed this

attorney of the Executive Orders which blocked any transactions

involving any vessel in which a majority interest is held by an

entity in or operating from the Federal Republic of Yugoslavia.

That Order prohibited any action against the property. In the

discussion, it was also noted that Mr. Clegg said he would agree

to have Milena accept service.

Settlement discussions were begun, and on December 21,

1994 a computation of the loss for settlement purposes was

submitted to Mr. Clegg.

Based on the Executive Order, the Appellant refrained from

proceeding with service by a process server on the agent of the

Appellees or any other form of service.

Since the case was progressing in United States District

Court, a Notice of Joint Status Conference was received by the

Appellant’s attorney. In order to protect the claim in the Trial

Court Docket and in fear of a dismissal for failure to prosecute,

the Appellant’s attorney submitted a Motion for Default

Judgment with the proper attachments. A copy was mailed to

the Appellees on March 22, 1994. A Default Judgment Order

dated April 14, 1997 was entered by the Court.

The Defendants filed a Motion to Stay the Proceedings and

Set Aside Default after the Executive Order had been lifted.

There was no Motion to Dismiss. [emphasis ours]. One

contention of the Defendants was that Gulf & Eastern Steamship

and Chartering was not the Defendants’ agent for service of

process. However, the Appellant’s attorney earlier learned the

vessel was in Charleston, South Carolina, and referred the

matter to attorney John Hughes Cooper. Through his office, he

secured the services of the McNair Law Firm of Charleston,

3

South Carolina, to pursue a claim before the United States

Treasury Department Office of Foreign Assets Control. The

notice from that government office indicated that Gulf &

Eastern Steamship and Chartering which was the agent who

received the service by mail was listed as agent for the

Appellees through that process. Likewise Appellant obtained

and filed in the trial Court an affidavit of Stacy Whiddon who

stated he was employed as operations manager of Gulf &

Eastern which at the time served as ship’s agent for the vessel

KAPETAN MARTINOVIC.

B. Proceedings Below

Appellant filed suit on or about October 8, 1993, and

perfected service by mail on the Defendants’ agents. The

acknowledgment was returned unsigned, bur was filed with an

accompanying Affidavit. A default judgment was obtained on

April 14, 1994.

Appellee filed a Motion to Stay the Proceedings and Set

Aside the Default which was granted and, though the Appellee

did not request a dismissal, the Court ordered the action

dismissed.

The Appellee’s Motion which was not supported by any

Affidavit or any form of evidence alleged that service was not

made on the Defendants’ agents for service. The Appellant’s

failure to obtain service had been thwarted as the Plaintiff's

attorney had been apprised by one of the attorneys for the

Appellee that there was a Presidential Order protecting the

Appellants.

Appellee’s Motion to set aside the judgment was granted

based on a determination that service was not made on the agent

of the Appellee, even though the evidence showed that service

4

was made on the agent of the Appellee even though the

acknowledgment was returned though unsigned. The action was

also dismissed in its entirety even though there was evidence

in the record showing that the Appellant could serve the

Appellee and that the Appellant could proceed with the action

having jurisdiction in the Southern District of Georgia.

The United States Court of Appeals for the Eleventh Circuit

affirmed the ruling of the lower Court deciding only the issue

of effectiveness of the service. It relied entirely on its decision

in Schnabel v. Wells, 922 F.2d 726 (11th Cir. 1991) which held

that mail service provision required return of the

Acknowledgment Form and rejected the argument that actual

notice eliminates the requirement that the acknowledgment be

returned. No consideration was given in the opinion to the fact

that the Appellant therein had received a copy of the

acknowledgment unsigned and was shortly thereafter subjected

to an Executive Order protecting the Defendant’s assets and

—restricting further action against the assets. Further, the Court

ignored the case of Morse v. Elmira Country Club, 752 F.2d 35

(2nd Cir. 1984) which held that service by mail which was

received but unacknowledged would not constitute service.

Most important, the Court ignored the evidence in the record

that the Plaintiff could perfect service and proceed with the

action, thereby precluding the complete dismissal as is

authorized in Stanga v. McCormick Shipping Corp., 268 F.2d

544 (Sth Cir. 1959). The rehearing was denied without opinion.

REASONS FOR GRANTING THE WRIT

Rule 10(a) provides consideration governing the selection

of applications to review on certiorari. A reason for the Court

to consider this application which is included in Rule 10(a) is

that one United States Court of Appeals has entered a decision

in conflict with the decision of another United States Court of

5

Appeals on the same important matter. This conflict arises

between the ruling of the United States Court of Appeals for

the Eleventh Circuit in the instant case, citing in support of its

ruling its decision in the case of Schnabel v. Wells, 922 F.2d

726 (11th Cir. 1991). Conversely, the United States Court of

Appeals for the Second Circuit held service to be valid when

the Complaint was received but the mail service was not

acknowledged. Morse v. Elmira Country Club, 752 F.2d 35

(2nd Cir. 1984). Similarly, the ruling in the Court below did

not provide any guidance to a claimant who is confronted with

an Executive Order dealing with the Treasury Department

Regulations prohibiting any transaction that affects property

of a foreign national, especially where the claimant is in

jeopardy as it vvas in this instant case of losing its right to pursue

its claim by having the debtors !eave the country. In addition,

the Court of Appeals ruling conflicts with the decision in the

United States Court of Appeals for the Fifth Circuit of Stanga

v. McCormick Shipping Corp., 268 F.2d 544 (Sth Cir. 1959)

which holds that dismissal for failure to perfect service is

inappropriate unless it appears that “there is simply no

reasonably conceivable means of acquiring jurisdiction over

the person of a defendant”. The record contains uncontradicted

evidence that the Petitioner has the means of acquiring

jurisdiction over the person of each defendant.

I.

The Eleventh Circuit...

a. The Eleventh Circuit affirmed the ruling of the Trial

Court setting aside the judgment and dismissing the

case. The ruling setting aside the judgment for improper

service of process was based on its decision in the case

of Schnabel v. Wells, 922 F.2d 726 (11th Cir. 1991)

which declared invalid service by mail for which an

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acknowledgment had not been signed and filed. This

ruling conflicted with the second circuit case of Morse

v. Elmira Country Club, 752 F2d 35 (2nd Cir. 1984)

which held that service should not be deemed valid when

the Complaint was received, but the mail service was

not acknowledged. Morse v. Elmira Country Club, 752

F2d 35 (2nd Cir. 1984).

In addition the Eleventh Circuit held that the Trial Court

did not err in exercising its discretion in dismissing the case,

citing Brown v. Nichols, 8 F.3d 770 (11th Cir. 1993). This ruling

conflicted with the decision in the United States Court of

Appeals for the Fifth Circuit in the case of Stanga v. McCormick

Shipping Corp., 268 F.2d 544 (Sth Cir. 1959) which holds that

dismissal for failure to perfect service is inappropriate unless

it appears that there is simply no reasonably conceivable means

of acquiring jurisdiction over the person of a Defendant.

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CONCLUSION

This case presents a question of exceptional importance

on the issue of the effectiveness of service for which there is a

conflict in the Circuits, the issue of what action a party should

take when confronted with an Executive Order involving assets

of foreign governments and whether the fact that service is

made, although not perfected, should justify a dismissal where

the evidence in the record reflects that service can be perfected

and jurisdiction obtained against the defendants.

Therefore, for all of the foregoing reasons, we submit that

certiorari should be granted and the judgment and opinion of

the United States Court of Appeals for the Eleventh Circuit

should be subject to review by this Honorable Court.

Respecfully Submitted,

FRED S. CLARK

Counsel of Record

CLARK AND CLARK

Attorneys for Petitioner

P.O. Box 8151

Savannah, Georgia 31412

(912) 233-0300

APPENDIX

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APPENDIX A — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE ELEVENTH

CIRCUIT FILED MARCH 20, 1998

Ce en a ee ee eee Per

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 97-8601

Non-Argument Calendar

D. C. Docket No. CV493-256

STONE CONSOLIDATED, INC.,

Plaintiff-Appellant,

versus

M/V KAPETAN MARTINOVIC, her engines, boilers, etc., in

rem, SOUTH ADRIATIC BULK SHIPPING, LTD., MILENA

SHIP MANAGEMENT, LTD.,

Defendants-Appellees.

Appeal from the United States District Court

for the Southern District of Georgia

(March 20, 1998)

Before EDMONDSON, BIRCH and DUBINA, Circuit Judges.

2a

Appendix A

PER CURIAM:

Plaintiff-Appellant Stone Consolidated, Inc. (“Stone”)

appeals the district court order granting the motion of judgment

debtors/deiendants South Adriatic Bulk Shipping, Ltd. and

Milena Ship Management, Ltd. — the owner and manager of

the defendant vessel M/V Kapetan Martinovic (“Defendants”)

— to set aside a default judgment and to dismiss Stone’s

complaint raising claims in admiralty or maritime within the

meaning of Fed.R.Civ.P. 9(h). No reversible error has been

shown; we affirm.

The facts are set forth fully in the district court’s orders

dated 12 May 1997, 19 May 1997, and 18 June 1997. In

summary, Stone filed a complaint on 8 October 1993 and sought

to effect service upon Defendants (they are Maltese

corporations) by serving Gulf & Eastern Steamship Chartering

(“Gulf”), as agent for Defendants, by mail.' No signed

acknowledgment of receipt was returned. Stone, again

attempting to obtain the requisite executed forms, sent copies

of the acknowledgment and forms to an attorney for Defendants,

but no executed papers were returned. Stone claims that defense

counsel agreed to have Milena Ship Management, Ltd. accept

service. This claim, as well as the agency status of Gulf for

service of process, is disputed. Undisputed, however, is that no

written waiver of service was obtained. For over three years,

Stone made no further effort to serve Defendants.

1. Whether Gulf was the properly appointed agent of Defendants

for service of process is the subject of some dispute. Because, as

discussed below, we find no abuse of discretion in the district court’s

dismissal for failure to perfect service on Gulf, to resolve this disputed

point is not necessary.

3a

Appendix A

Effective 1 December 1993, Rule 4 of the Federal Rules

of Civil Procedure, which governs service of summons, was

amended. Whether assessed under old Rule 4(c)(2)(C) or under

new Rule 4(d), Stone’s purported service was defective.

Schnabel v. Wells, 922 F.2d 726, 728 (11th Cir. 1991), held

that the mail-service provisions of old Rule 4(c)\(2)(C) required

return of the acknowledgment form. Schnabel expressly rejected

the argument that actual notice to a defendant eliminates the

requirement that the acknowledgment be returned; we held that

alternate service must be effected when a defendant refuses to

respond to mailed service. Jd. Rule 4(d) changed the mail

provisions of the old rule to a “waiver” procedure but does not

obviate the need for return of the enclosed forms; return of the

executed requested waiver form renders further service efforts

unnecessary.”

Stone’s claim on appeal that the return of the unexecuted

acknowledgment form was sufficient to accomplish effective

service was considered fully by the district court. For the reasons

set forth in the district court’s orders of 12 May 1997 and 19

May 1997, we agree that an unsigned acknowledgment form

constitutes a legal nullity. Because Stone’s service was

defective, the district court properly set aside the default

judgment pursuant to Fed.R.Civ.P. 60(b)(4).

2. As explained by D.D. Siegel, “The New (Dec. 1, 1993) Rule 4

of the Federal Rules of Civil Procedure: Changes in Summons Service

and Personal Jurisdiction,” 151 F.R.D. 441, 455 (1994):

The mail service under the old rule was a category of actual

service of process, albeit (in the majority view) it took a

voluntary acknowledgment to effectuate it. The waiver

provision under Rule 4(d) . .. is not process service at all

and can’t be taken as such in any sense. It’s just a request

that the defendant make formal service unnecessary.

4a

Appendix A

Stone advances several arguments to the effect that service

was valid and, if not valid, good cause exists to excuse

noncompliance. Therefore, Stone claims error in the dismissal

of the complaint. We review the district court’s dismissal for

failure to achieve timely service pursuant to Rule 4(m) under

an abuse of discretion standard. See Brown v. Nichols, 8 F.3d

770, 775 (11th Cir. 1993) (applying abuse of discretion standard

of review under Rule 4(j), predecessor to Rule 4(m)).

Negligence, inadvertence, and mistake do not constitute good

cause for excusing timely service.’ See Prisco v. Frank, 929

F.2d 603, 604 (11th Cir. 1991).

The absence of good cause, however, no longer is

dispositive of a motion to dismiss for ineffective service. Under

Rule 4(j), the predecessor to Rule 4(m), a district court had

“no discretion to salvage an action once the court has found a

violation of Rule 4(j) and a lack of good cause.” Jn re Cooper,

971 F.2d 640, 641 (11th Cir. 1992). With the 1993 amendments,

in addition to redesignating Rule 4(j) as Rule 4(m), substantive

change was made to empower courts with discretion to extend

the time for service with no predicate showing of good cause.

See Henderson v. United States, 116 S.Ct. 1638, 1643-44

(1996). The district court concluded that Stone’s “salutary

neglect” in failing to address meaningfully the service

requirements or to seek an extension of the 120-day period

militated against relief.

3. Thus, as explained by the district court, Stone's mistaken

protestations that certain Executive Orders, which blocked further

passage of vessels owned by targeted entities — including the M/V

Kapetan Martinovic, excused Stone's failure to perfect service, are

unavailing.

Sa

Appendix A

We find no abuse of discretion in the district court’s

determination that no good cause existed to excuse Stone’s

failure. We also find no abuse of discretion in the district court’s

dismissal of the action without prejudice. Although Rule 4(m)

provides discretion to allow a permissive extension of time,

Stone advances no justification for permissive extension that

would cause us to conclude that the district court’s dismissal

was an abuse of discretion.

AFFIRMED.

6a

APPENDIX B — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE SOUTHERN DISTRICT OF

GEORGIA, SAVANNAH DIVISION FILED JUNE 18, 1997

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF GEORGIA

SAVANNAH DIVISION

CV 493-256

~ STONE CONSOLIDATED, INC.,

Plaintiff,

v.

M/V KAPETAN MARTINOVIC, her engines, boilers, etc.,

in rem, South Adriatic Shipping, Ltd., and Milena Ship

Management, Ltd.,

Defendants.

ORDER

Over defendants’ objection, plaintiff Stone Consolidated,

Inc. (“Stone”) again moves this Court for reconsideration, this

time with respect to both its 5/12/97 and 5/19/97 Orders. Doc.

## 25-28. On 5/12/97, the Court set aside, for lack of service, a

4/14/94 Default Judgment that it had previously granted to

Stone. In its 5/19/97 Order, the Court rejected Stone’s argument

that service by mail is perfected simply by a defendant’s return

of an unexecuted, Rule 4 acknowledgment form. Stone now

seeks to “perfect the record” and show that it at least did send

its Complaint and process to the defendant vessel’s agent. See

doc. # 25 (brief) at i-2 & Exh. A.

Ta

Appendix B

To that end, it offers an affidavit from the agent’s

“Operations Manager,” who describes the 1993 “procedure for

receiving suit papers in the ordinary course of business. .. .”

Doc. #25 (brief) Exh. A. Apparently one is supposed to assume

that, in light of that routine, Stone’s process must have been

forwarded to that defendant. The manager cites no personal

knowledge, however, nor the particular process employed in

this case.' And none of this, of course, overcomes the fact that

no defendant ever returned an executed Rule 4

Acknowledgment form. Hence, even if it were competent

evidence, the affidavit does not salvage Stone’s position.

Citing Stanga v. McCormick Shipping Corp., 268 F.2d 544,

554 (Sth Cir. 1959), Stone next contends that the Court should

not have dismissed its case some three years after the expiration

of Rule 4(j)’s (now 4(m)’s) 120-day limit; rather, it should have

at the very most quashed the defective service and granted Stone

another chance to perfect service. Though its facts and legal

basis are distinguishable on several grounds, Stanga can be read

1. In that regard, “[a]gency cannot be proved by evidence of mere

declarations of the alleged agent.” Wofford Oil Co. v. Story, 52 Ga. App.

496 (1936); Borg-Warner Acceptance Corp. v. Davis, 804 F.2d 1580,

1583 (11th Cir. 1986) (applying Georgia law) (“It is insufficient, as a

matter of law, to find that an agency relationship exists when the evidence

shows either that an agency was assumed or that an inference was drawn

based on a purported agent’s actions”) (citing Hinely v. Barrow, 169

Ga. App. 529 (1984)); see also US. v. Ziergler Bolt and Parts Co., 111

F.3d 878, 881 (Fed.Cir. 1997) (while an agent’s authority to accept

service on his principal’s behalf may be implied in fact, a party cannot

fabricate such implied authority from whole cloth in order to cure

deficient service, but must present facts and circumstances showing the

proper relationship between defendant and its alleged agent); Kral, Inc.

v. Southwestern Life Ins. Co., 999 F.2d 101, 104 n. 3 (Sth Cir. 1993)

(“authority is not created by the mere statements of the purported agent”).

8a

Appendix B

to support the result Stone now seeks. See also Jim Fox

Enterprises, Inc. v. Air France, 664 F.2d 63, 65 (Sth Cir. 1981);

Harris v. Browning-Ferris Industries Chem. Serv., 100 F.R.D.

775, 778 (M.D.La. 1984).

However, none of those cases involved the salutary neglect

exhibited by Stone in this case. For over three years Stone sat

still, not bothering to make any meaningful attempt to perfect _

service, despite the black-letter law set forth in Schnabel v,

Wells, 922 F.2d 726, 728 (11th Cir. 1991) (“If a defendant

receives mail service, but chooses not to respond, the plaintiff

must effect personal service. The defendant’s actual notice of

the lawsuit does not eliminate this requirement”) (emphasis

added); see also 5/12/97 Order at 2-3 (collecting cases in

accord). Indeed, Stone all along has steadfastly argued the

validity of its service, notwithstanding its abject failure to

adhere to Schnabel’s dictates.

Nor did Stone ever seek an extension under Rule 4(m).

See 4A Wright & Miller, Fep. Prac. & Proc.: Civit 2p § 1137

(1997 Supp. ) (“a plaintiff's failure to move for a Rule 6(b)

extension may be construed as an absence of good cause for

delay”). In its 5/12/97 Order, the Court found that Stone showed

no good cause for its failure to timely perfect service. See Brown

v. Nichols, 8 F.3d 770, 774-75 (11th Cir. 1993). Other courts

have held likewise where litigants have simply misread, or were

ignorant of, the rules governing service. See Tuke v. U.S., 76

F.3d 155, 157 (7th Cir. 1996) (failure to read a rule, and simple

legal ignorance, does not supply “good cause” for belated

service; upholding 120-day “bright line” rule under Rule 4(m));

Hunt v. Dept. of Air Force. Div. of USA, 29 F.3d 583, 587 (11th

Cir. 1994) (affirming district court’s dismissal, without

prejudice, of FTCA complaint where process was served on

United States 184 days after filing of original complaint).

9a

Appendix B

Because the degree of laxity exhibited here easily falls

within the continuum illuminated by, inter alia, Tuke and Davis

v. Belk-Hudson Company of Tifton, Inc., __ F.Supp. _, 1997

WL 254185 (M.D.Ga. 5/12/97). (Rule 4(m) dismissal where

plaintiff, inter alia, failed to perfect service by mail, then waited

until 117th day to attempt personal service, and used an

incompetent process server); see also Patterson v. Johnson,

No. A97A0208, __ Ga. App. __, 97 FCDR 1932 (5/9/97), no

“Stanga” second chance is warranted here. Exercising its

discretion, the Court instead reaffirms its earlier dismissal of

this case.

Given this result, it is not necessary to reach defendants’

remaining arguments concerning “re-reconsideration” motions.

Accordingly, plaintiff Stone Consolidated, Inc.’s “Motion For

Further Reconsideration” (doc. # 25) is DENIED. In that Stone

has appealed this case, see doc. # 26, the Clerk is directed to

include this latest round of filings in the record on appeal.

SO ORDERED, this 18 day of June, 1997.

s/ B. Avant Edenfield

B. AVANT EDENFIELD, JUDGE

UNITED STATES DIXTRICT COURT

SOUTHERN DISTRICT OF GEORGIA

10a

APPENDIX C — ORDER THE UNITED STATES COURT

OF APPEALS FOR THE SOUTHERN DISTRICT OF

GEORGIA, SAVANNAH DIVISION FILED MAY 19, 1997

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF GEORGIA

SAVANNAH DIVISION

CV 493-256

STONE CONSOLIDATED, INC.,

Plaintiff,

¥.

M/V KAPETAN MARTINOVIC, her engines, boilers, etc.,

in rem, South Adriatic Shipping, Ltd., and Milena Ship

Management, Ltd.,

Defendant..

ORDER

Plaintiff Stone Consolidated, Inc. (“Stone”) moves for

reconsideration of this Court’s 5/12/97 Order, which set aside

a 4/14/94 Default Judgment for lack of service. Stone first

argues that its service upon defendants was not defective

because “the Notice and Request for Waiver of Service was

returned to Plaintiff's Counsel unsigned.” Doc. # 22 at 2 | 4

(emphasis added). Stone reasons that, because F.R.C.P. 4(d)

does not spell out a signature requirement, service by mail is

perfected simply by a defendants return of an unexecuted

acknowledgment form.

lla

Appendix C

This contention is fatally flawed. Under either the pre- or

post-12/1/93 version of Rule 4, an unsigned acknowledgment

form constitutes a legal nullity. See Rule 4, 1982 Amendment

Legislative Statement, H.R. 7154 (“Section-By-Section

Analysis”) Section 3 (Rule 4(c)(2)(c)(ii) requires substantial

compliance with “Form 18A,” which “advises [the recipient]

“to sign and date the acknowledgment form and indicate

authority to receive service if the person served is not the party

to the action (e.g., the person served is an officer of the

organization being served). . .”) (emphasis added) , reproduced

in Federal Civil Judicial Procedure and Rules at 57 (West 1997)

id. at 48-49 (Rule 4 “1993 Amendments” Notes) (under the

1993 revision, new Rule 4(d) imported the old Rule 4(c) regime,

altering unrelated aspects, and replaced Form 18A with Forms

IA and 1B, which both require the recipient to return a “signed

waiver” form) (emphasis added).

Stone next argues that defendants’ “proper agent was

served” according to “unrefuted sworn testimony in the

record... .” Doc. # 22 at 2 § 7. That “testimony” consists of

two affidavits from Stone’s counsel. However, Stone’s 5/9/97

affidavit (doc. # 15) is as legally insufficient as its pre-default

affidavit (doc. #3), which specifies that Stone effected service

by mail on what it claims to be defendant M/V KAPTAN

MARTINOVIC’s “agents.” Doc. # 3 at 3. While the Notices

were returned, Stone concedes that “acknowledgments were

not signed.” Jd. (emphasis added).

Such omission spells doom for Stone. What is implicit in

the rule is made explicit by its prescribed forms: all

acknowledgments must be signed. Hence, whether the named

agents in fact were defendants’ is of no consequence because,

by counsel’s own admission, Stone never perfected service.

Accordingly, Stone’s Motion For Reconsideration is DENIED.

12a

Appendix C

SO ORDERED, this 19th day of May, 1997.

s/ B. Avant Edenfield

B. AVANT EDENFIELD, JUDGE

UNITED STATES STRICT COURT

SOUTHERN DISTRICT OF GEORGIA

13a

APPENDIX D — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE SOUTHERN DISTRICT OF

GEORGIA, SAVANNAH DIVISION FILED MAY 12, 1997

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF GEORGIA

SAVANNAH DIVISION

CV 493-256

STONE CONSOLIDATED, INC.,

Plaintiff,

v.

M/V KAPETAN MARTINOVIC, her engines, boilers, etc.,

in rem, South Adriatic Shipping, Ltd., and Milena Ship

Management, Ltd.,

Defendants.

ORDER

Pursuant to F.R.Civ.P. 60(b)(4), judgment debtors/

defendants South Adriatic Bulk Shipping, Ltd. (“SABS”) and

Milena Ship Management, Ltd. (“Milena”) move this Court to

set aside its 4/14/94 Default Judgment. Doc. # 6. They contend

that because plaintiff Stone Consolidated, Inc. (“Stone”) failed

to properly serve them, this Court lacked jurisdiction to render

any such judgment. Doc. # 8. In addition, defendants move for

an expedited hearing and ruling, as well as a Stay of execution

on the judgment. Docs. # 11-13; F.R.Civ.P. 62(b). Plaintiff has

opposed the motions, insisting that service was valid. Doc.

# 14. Stone also requests a bond under F.R.Civ.P. 65(c) in the

event this Court stays execution. Doc. # 17.

l4a

Appendix D

In arguing that the judgment is void, defendants point to

the plaintiffs affidavit in support of entry of default, which

plainly reveals that F.R.Civ.P. 4’s requirements were not met.

See doc. #3 at 3 (noting that service was effected by mail upon

defendants, purported agent, but that the “acknowledgments

[of service] were not signed”; when defense counsel was

subsequently contacted, he also failed to comply); see also doc.

# 9 Exh. C (copy of plaintiff Is original service-by-mail, Rule

4(c)(2)(C)(i1) forms reflecting signed-acknowledgment

requirement).

At the outset, the Court notes that the Complaint was filed

on 10/8/93 (doc. # 1), the Acknowledgments of Service were

evidently mailed to defendants on the same date (doc. # 9 Exh.

C), and Rule 4 was amended on 12/1/93.' Under either version

of Rule 4, however, service on these defendants is defective.

See Schnabel v. Wells, 922 F.2d 726, 728 (11th Cir. 1991) (“If

a defendant receives mail service, but chooses not to respond,

the plaintiff must effect personal service. The defendant’s

actual notice of the lawsuit does not eliminate this

requirement”) (emphasis added);? Jn Re Air Crash Disaster

Near Brunswick, Ga 4/4/91, 158 F.R.D. 693, 698 (N.D.Ga.

1. See generally D.D. Siegel, The New (Dec. 1, 1993) Rule 4 Of

The Federal Rules Of Civil Procedure: Changes in Summons Service

and Personal Jurisdiction, 151 F.R.D. 441 (1994) (Part I); 152 F.R.D.

249 (1994) (Part II).

2. In Manufacturers Hanover Trust Co. v. Ponsoldt, 51 F.3d 938

(11th Cir. 1995), the Eleventh Circuit clarified that, notwithstanding

Schnabel’s “personal service” alternative, the frustrated plaintiff is not

limited to that method of service alone. In fact, he may resort to other

methods, such as those available under State law. /d. at 940-41; see also

Rule 4(e) (1993).

15a

Appendix D

1994) (“a plaintiff must effect personal service upon a defendant

within 120 days of filing a complaint if that defendant elects

not to return the acknowledgment form or otherwise waive

formal service requirements”); accord Jones v. Navix Line, Ltd.,

944 F.Supp. 468, 471-72 (E.D.Va. 1996).

The “Schnabel” rule, though not universally followed, see

Szarejko v. Great Neck School Dist., 795 F.Supp. 81, 84-85

(E.D.N.Y. 1992), was embraced by the Advisory Committee

to the 1993 Rule 4 amendments. See F.R.Civ.P. 4(d)(2) (1993)

(1993 Advisory Committee Notes) (“Unless the addressee

consents, receipt of the request under the revised rule does not

give rise to any obligation to answer the lawsuit, does not

provide the basis for default judgment, and does not suspend

the statute of limitations in those states where the period

continues to run until service”). Indeed, the Committee

expressly noted that plaintiff's present interpretation of former

Rule 4 is flawed:

The provisions in former subdivision (c)(2)(C)(ii)

of this rule may have been misleading to some

parties. Some plaintiffs, not reading the rule

carefully, supposed that receipt by the defendant of

the mailed complaint had the effect of both

establishing the jurisdiction of the court over the

defendant’s person and of iviling the statute of

limitations in actions in which service of the

summons is required to toll the limitations period.

The revised rule is clear that, if waiver is not

returned and filed, the limitations period under such

a law is not tolled and the ac’ >n will not otherwise

proceed until formal service of process is effected.

Id.

l6a

Appendix D

Plaintiffs citation to opinions outside this Circuit, see doc.

# 14 at 6, does not overcome the result dictated by Schnabel.

Nor does the hearsay statement of defense counsel (“that he

would agree to have Milena accept service,” doc. # 14 at 1 4 3;

# 15 at 2) save the day for Stone. At most, it shows that

plaintiff's counsel was lulled into inaction by a defense

counsel’s false promise. While such conduct perhaps ought to

be the subject of a professionalism inquiry, it is not legally

significant here. Upon receipt of an oral assurance, a prudent

attorney follows up by obtaining a written waiver of service. If

that waiver fails to timely appear, the remedy is to pursue

alternative service, not complain of injustice after the expiration

of Rule 4(j)’s (now Rule 4(m)’s) time limit.

Claims that counsel “thought” he served an entity

“believed” to be acting as defendants’ agent similarly fall on

deaf ears. Plaintiff has never shown (and defendants in fact

deny, see doc. # 9 at 3) that the entity in question was

defendants’ agent for service of process. Indeed, Stone never

even obiained an acknowledgment from that purported “agent.”

And, plaintiff's reliance upon Sanderford v. Prudential Ins, Co.

of America, 902 F.2d 897 (11th Cir. 1990), is misplaced. Service

was not disputed in that case, see id. at 898-99; rather, the only

issue was whether a minor defect (i.e., failure to specify within

how many days defendant had to respond to the Complaint)

could be challenged collaterally. Jd. at 901.

Nor is plaintiff's predicament salvaged by Executive

Orders 12808 and 12810, which “blocked” further passage of

former Yugoslavian ships (including the M/V MARTINOVIC).

See Milena Ship Management Co. v. Newcomb, 995 F.2d 620,

623 (Sth Cir. 1993), cert. denied, 510 U.S. 1071 (1994); doc.

# 16. First, nothing in the Executive Orders prevents- the

perfection of claims held by American citizens against vessels

17a

Appendix D

presumed to be owned by the former Yugoslavia. Instead, the

Orders were aimed at interdicting any further transactions

inuring to the benefit of the Yugoslav government. See, e.g.,

Executive Order No. 12810 § 2(f). Suits against a Yugoslavian

interest could hardly be said to interfere with the Executive

Branch’s purposes.

Second, the “core function of service [under Rule 4] is to

supply notice of the pendency of a legal action, in a manner

and at a time that affords a defendant a fair opportunity to

answer the complaint and present defenses and objections.”

Henderson v. U.S., 116 S.Ct. 1638, 1648-49 (1996). Service of

process is a critical means by which this Court exercises

jurisdiction over parties. The President has no authority to divest

this Court of such function, cf. U.S. v. Noonan, 906 F.2d 952,

955-56 (3rd Cir. 1990) (President’s pardon power does not

authorize him to “tamper with judicial records”).

Notwithstanding any contrary indication by an Executive

Branch agency, see doc. # 16 at 2 (4/18/97 Office of Foreign

Assets Control memo), doubts concerning the Orders’ effect

on service of process could have been resolved by an appropriate

proceeding, see, e.g., Hinton v. Devine, 633 F.Supp. 1023

(E.D.Pa. 1986) (upholding constitutional challenge to Executive

Order), at a far earlier, more appropriate time.

For that matter, the Court finds it curious that Stone relies

upon the Executive Orders as an excuse for failing to perfect

service. If in fact the Orders “barred” proper Rule 4 service,

then they likewise should have prevented plaintiff from moving

for and obtaining its default judgment against defendants.

Finally, SABS and Milena urge this Court to dismiss

plaintiff's Complaint because Stone failed to exercise due

diligence in perfecting service within the 120 days provided

18a

Appendix D

by Rule 4(j) (now Rule 4(m)). This calls for the Court to assess

whether “good cause” excuses Stone’s omission. See Air Crash

Disaster, 158 F.R.D. at 699; see also Thompson v. Brown, 91

P.3d 20, 21 (Sth Cir. 1996) (noting that, in contrast to Rule

4(j), Rule 4(m) authorizes courts to grant extensions of the

120-rule even in the absence of good cause).

To show good cause, Stone must establish more than

“excusable neglect.” Jn Re Tussing, 200 B.R. 314, 317

(Bkrtcy.N.D. Ohio 1996). Mistakes, negligence, inadvertence

or ignorance of counsel do not alone constitute “good cause.”

Id., Indeed, for the same reasons that defendants are entitled to

Rule 60(b)(4) relief, Stone’s Complaint is dismissed without

prejudice pursuant to Rule 4(j). See Bann v. Ingram Micro,

Inc., 108 F.3d 625, 626 (Sth Cir. 1997) (dismissal without, rather

than with, prejudice is the proper remedy under Rule 4(m));

Air Crash Disaster, 158 F.R.D. at 699 (same under Rule 4(j)).

Even were the Court authorized to grant plaintiff relief under

Rule 4(j) without a good cause showing, Stone’s failure to make

even a minimal effort at the time (e.g., by moving this Court

for an extension of time prior to the expiration of Rule 4(j)’s

120-day period) militates against such relief.

Accordingly, defendants’ motions to set aside the default

judgment and to dismiss plaintiff's Complaint (doc. # 8) are

GRANTED. All other motions are DENIED as moot. The

Clerk is directed to promptly notify all counsel of this ruling.

SO ORDERED, this 12th day of May, 1997.

s/ B. Avant Edenfield

B. AVANT EDENFIELD

UNITED STATES DISTRICT COURT

SOUTHERN D.sTRICT OF GEORGIA

19a

APPENDIX E — ORDER OF UNITED STATES COURT OF

APPEALS FOR THE ELEVENTH CIRCUIT DENYING

PETITION FOR REHEARING EN BANC

FILED JULY 14, 1998

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. 97-8601

STONE CONSOLIDATED, INC.,

Plaintiff-Appellant,

versus

M/V KAPETAN MARTINOVIC, her engines, boilers, etc., in

rem, et al,

Defendants-Appellees.

On Appeal from the United States District Court for the

Southern District of Georgia

ON PETITION(S) FOR REHEARING AND SUGGESTION(S)

OF REHEARING EN BANC

(Opinion ,1ithCir.,19_ , F.2d_).

Before: EDMONDSON, BIRCH, and DUBINA, Circuit Judges.

PER CURIAM:

The Petition(s) for Rehearing are DENIED and no member of

this panel nor other Judge in regular active service on the Court

having requested that the Court be polled on rehearing en banc

20a

Appendix E

(Rule 35, Federal Rules of Appellate Procedure; Eleventh

Circuit Rule 35-5), the Suggestion(s) of Rehearing En Banc

are DENIED.

ENTERED FOR THE COURT:

s/ J.L. Edmonson

UNITED STATES CIRCUIT JUDGE