A recent decision by the Honorable Linda S. Jamieson again demonstrates that the Justices of the Westchester Commercial Division will not decide matters on procedural technicalities, and usually will go out of their way to decide a case on the merits. The matter involved service of process, and an apparent default in appearance.
First, some background. In New York, the easiest way to serve a summons on an entity is usually by serving the Secretary of State. Provisions of the Business Corporation Law, Not-for-Profit Corporation Law, Limited Liability Company Law, and Partnership Law allow service of process upon the Secretary of State as the statutory agent for entities registered with the Department of State. Rather than hire a process server to attempt personal service on the business, you can serve process by having someone hand deliver two copies of the summons and complaint (or other process) to the New York Secretary of State in Albany, together with the statutory fee of $40. The best part of serving the Secretary of State is that it is quick and, as a matter of law, effective.
Courts, however, are reluctant to allow a plaintiff/petitioner to use service on the Secretary of State as a way to avoid giving actual notice to the entity being served. That was what happened in In re C&M Bagel, Inc. v. Semp Realty LLC, Index No. 51985/2019.
In that special proceeding to designate an arbitrator, the petitioner, C&M Bagel, served the petition on the respondent, Semp Realty, via the Secretary of State. Initially, Justice Jamieson found that “[d]espite proper service of the petition and accompanying documents by serving the Secretary of State … the Court received no opposition to the petition from respondent.” Justice Jamieson then granted the relief sought by the petitioner and directed service of the Order on the respondent by overnight mail.
Days later, the respondent filed a motion to renew and vacate the Court’s order, arguing that it never received the papers from the Secretary of State’s office, and was unaware of the petition. The respondent also argued that for the previous ten years, the petitioner corresponded with the respondent directly, and paid rent, at a specific address, and should have served the papers at that address. In an affidavit, the respondent’s managing member said that he believed the petitioner “attempted to ‘pull a fast one’ on me by serving the Secretary of State and hoping I would not receive the Notice of Petition and Petition in time to answer.” Perhaps significantly, the parties had been embroiled in litigation for some time, and the respondent also argued that the petitioner’s attorney could have just asked the respondent’s attorney to accept service of the papers.
Justice Jamieson recognized that service was proper, but still determined that the proceeding should be decided on the merits:
“It turns out that although petitioner did nothing wrong by serving the Secretary of State, petitioner also well knew that respondent had a preferred address at which it received mail. Petitioner used this alternate address many times over the years, including within months before commencing this special proceeding. To ensure that justice is done, the Court vacates the Decision.”
Takeaway: Service on the Secretary of State may be entirely appropriate, and effective, but that doesn’t mean it is enough. If you know how to find your adversary or your adversary’s attorney, and they haven’t appeared in the case, give them a heads up that you’ve served via the Secretary of State.
To learn more about new developments in the Westchester Commercial Division, please subscribe to the Westchester Commercial Division Blog.