Contractors Comp. Trust v. $49.99 Sewer Man, Inc.

74 Misc.3d 385

161 N.Y.S.3d 726

CONTRACTORS COMPENSATION TRUST, Plaintiff,

v.$49.99 SEWER MAN, INC. et al., Defendants.

Index No. 908373-19

Supreme Court, Albany County, New York.

Decided on January 6, 2022

E. Stewart Jones Hacker Murphy, LLP, Attorneys for Plaintiff, (Thomas J. Higgs, of counsel), 28 Second Street, Troy, New York 12180

Allen W. Potts, Self-Represented Defendant

Dale B. Stuhlmiller, Self-Represented Defendant

Richard M. Platkin, J. Plaintiff Contractors Compensation Trust ("Trust") is a group self-insured trust organized pursuant to the Workers’ Compensation Law and attendant regulations. Defendants are alleged to be former members of the Trust or individuals associated with former Trust members.

The Trust commenced this commercial collection action on December 3, 2019 through the electronic filing of a summons and verified complaint naming 1,411 defendants. The Trust alleges that defendants failed to pay the deficit assessment issued to them on December 12, 2013 (see NYSCEF Doc No. 1 ["Complaint"]).

On December 2, 2020, the Trust moved for entry of a default judgment against many of the named defendants based on their failure to answer the Complaint or otherwise appear in this action (see NYSCEF Doc Nos. 442-443). By Decision & Order dated August 11, 2021 (see NYSCEF Doc No. 765 ["Prior Decision"], reported at 72 Misc. 3d 1217[A], 2021 N.Y. Slip Op. 50787[U], 2021 WL 3557549 [Sup. Ct., Albany County 2021] ), the Court denied the motion.

The Court first concluded that the corporations and other business entities against whom the motion was directed ("Corporate Defendants") had not been properly served under Business Corporation Law ("BCL") § 306 and Limited Liability Company ("LLC") Law § 303 by the Trust's delivery to the New York Secretary of State of a flash drive containing an electronic copy of the 809-page Complaint and 242-page "Schedule A" (see 2021 NY Slip Op 50787[U], *1, *3).] And given the lack of clarity in the record as to whether the "Individual Defendants" also were served via a flash drive, the Court denied the Trust's motion as to them, but did so "without prejudice to renewal upon papers showing proper service of process" (id. , pp. 7-8).

The Trust now moves for leave to reargue/renew its motion for entry of a default judgment or, alternatively, for an extension of time to re-serve the Corporate Defendants and Individual Defendants (collectively, "Subject Defendants"). Defendants Allen W. Potts and Dale B. Stuhlmiller have filed papers in opposition to the motion.

DISCUSSION

A. Reargument/Renewal

A motion for reargument "is addressed to the sound discretion of the court and is properly granted upon a showing that the court overlooked or misapprehended the facts and/or the law or mistakenly arrived at its earlier decision" ( Loris v. S & W Realty Corp. , 16 A.D.3d 729, 730, 790 N.Y.S.2d 579 [3d Dept. 2005] [internal quotation marks and citation omitted]; see CPLR 2221 [d] [2] ; Cascade Bldrs. Corp. v. Rugar , 154 A.D.3d 1152, 1154, 63 N.Y.S.3d 543 [3d Dept. 2017] ). Such a motion "is not designed to provide an unsuccessful party with successive opportunities to reargue issues previously decided, or to present arguments different from those originally presented" ( Degraw Constr. Group, Inc. v. McGowan Bldrs., Inc. , 178 A.D.3d 772, 773, 111 N.Y.S.3d 898 [2d Dept. 2019] [internal quotation marks and citation omitted]; see Matter of Mayer v. National Arts Club , 192 A.D.2d 863, 865, 596 N.Y.S.2d 537 [3d Dept. 1993] ).

Initially, the Court observes that it raised the manner of service on its own initiative, based on the requirement that a movant for a default judgment demonstrate that the defaulting parties were properly served (see Prior Decision, pp. 3, 7; CPLR 3215 [f] ; 306 [a]; Daniels v. King Chicken & Stuff, Inc. , 35 A.D.3d 345, 345, 827 N.Y.S.2d 186 [2d Dept. 2006] ; Nemetsky v. Banque Dev. De La Republique Du Niger , 59 A.D.2d 527, 527, 397 N.Y.S.2d 353 [2d Dept. 1977], affd 48 N.Y.2d 962, 425 N.Y.S.2d 277, 401 N.E.2d 388 [1979] ).¹ As the Trust did not have an opportunity to address the specific statutes and regulations relied upon by the Court in denying the motion (see Prior Decision, pp. 4-5), it is proper to grant reargument.

1. Corporate Defendants

In contending that the Corporate Defendants properly were served, the Trust relies on the Uniform Rules for the New York State Trial Courts ("Uniform Rules"), which permit service of initiating papers "by electronic means if the party served agrees to accept such service" ( 22 NYCRR 202.5-b [f] [1]; accord 22 NYCRR 202.5-bb [b] [3]). The Trust asserts that the Secretary of State is the Corporate Defendants’ statutory agent for service of process (see BCL § 304 [a] ; LLC Law § 301 [a]) and argues that the agent's acceptance of "service of the Complaint by flash drive," together with "the statutory fee paid by Plaintiff [for] said service," constitutes an agreement to accept service by electronic means that is binding on the Corporate Defendants (Higgs Aff., ¶¶ 22-26).

The Court begins its analysis with BCL § 304 (a),² by which the Secretary of State is designated as the "agent of every domestic corporation and every authorized foreign corporation upon whom process against the corporation may be served." "In addition to such designation of the secretary of state, every domestic corporation or authorized foreign corporation may designate a registered agent in this state upon whom process against such corporation may be served" (id. § 305 [a]). The term "process" is defined in this context to mean "judicial process and all orders, demands, notices or other papers required or permitted by law to be personally served on a domestic or foreign corporation, for the purpose of acquiring jurisdiction of such corporation" (id. § 102 [11] [emphasis added]).

The method of service upon a corporate agent is prescribed by BCL § 306. "Service of process on a registered agent may be made in the manner provided by law for the service of a summons, as if the registered agent was a defendant" ( id. § 306 [a] ). In contrast, "[s]ervice of process on the secretary of state as agent of a domestic or authorized foreign corporation" must be made "by personally delivering to and leaving with the secretary of state ... duplicate copies of [the] process together with the statutory fee" (id. [b]). "Service of process on [a] corporation shall be complete when the secretary of state is so served" (id. ).

Thus, the BCL contemplates the service of "papers" ( BCL § 102 [11] ) and provides that service on the Secretary of State, as the statutory agent for a corporation, shall be "complete" when "duplicate copies" of the initiatory papers have been personally delivered ( id. § 306 [b] ). There simply is nothing within this framework that allows the Secretary of State to relax the statutory requirements for service of process or to accept service on behalf of a corporation by a method other than the one established in BCL § 306 (b) (see Cedar Run Homeowners’ Assn., Inc. v. Adirondack Dev. Group, LLC , 173 A.D.3d 1330, 1330-1331, 102 N.Y.S.3d 740 [3d Dept. 2019] [requiring strict compliance with the statutory requirements for service of process on an LLC]).³

Against this backdrop, it is apparent that the Trust's reliance on the Uniform Rules is misplaced. The rule allowing electronic service where "the party served agrees to accept such service" ( 22 NYCRR 202.5-b [f] [1]) cannot be read to apply to the Secretary of State acting as a statutory agent for a corporation. In such cases, the Secretary of State is limited to accepting process served via the method prescribed by BCL § 306 (b), and service is not complete until made in accordance with such method. Indeed, a contrary interpretation of the Uniform Rules would place them in an impermissible conflict with the statutes governing service of process on corporations and other business entities (see generally Travis v. New York State Dept. of Envtl. Conservation , 185 A.D.2d 714, 715, 585 N.Y.S.2d 929 [4th Dept. 1992] ; Framan Mech., Inc. v. Dormitory Auth. of the State of N.Y. , 63 Misc. 3d 1218[A], 2019 N.Y. Slip Op. 50583[U], *5, 2019 WL 1747007 [Sup. Ct., Albany County 2019] ).

Further support for this conclusion is found in the State Legislature's recent enactment of an optional program for electronic service of process on corporations and other business entities. Effective January 1, 2023, business entities may, at their option, "make[ ] an affirmative choice to receive service of process through electronic means" (L 2021, ch 56, part KK, §§ 1, 1-b). Such service shall be made by "[e]lectronically submitting a copy of the process to the department of state together with the statutory fee ... through an electronic system operated by the department of state" (id. , § 2). Even if this new legislation had been in effect at pertinent times, however, service on the Corporate Defendants still would be improper because (i) the Corporate Defendants did not affirmatively elect to receive service by electronic means, and (ii) the Complaint was delivered on a flash drive, rather than through a secure portal operated by the Department of State (see Prior Decision, p. 6 [highlighting security concerns associated with flash drives of uncertain provenance]).

Accordingly, the Trust has failed to demonstrate that the Court overlooked or misapprehended the facts and/or the law or otherwise erred in concluding that the Corporate Defendants had not been properly served under BCL § 306 and LLC Law § 303.

2. Individual Defendants

The Trust argues that, because "[n]one of the Individual Defendants objected to service of the Complaint on the flash drive, ipso facto , the Individual Defendants accepted service by electronic means" and waived any objection thereto (Higgs Aff., ¶¶ 37-44). The Trust also invokes CPLR 2101 (f) (see id. , ¶ 40), which allows for the correction of defects "in the form of a paper," and CPLR 3211 (e), which...