FCCI Ins. Co. v. Marine Tech. Servs.

MEMORANDUM AND RECOMMENDATION

YVONNE Y. HO, UNITED STATES MAGISTRATE JUDGE

Pending before the Court are separate motions to dismiss and to strike, filed by Defendants Jerrod Monaghan and Bethany Schmidt, Dkt. 18, and Defendant Marine Tech Services, LLC (“MTS”) (collectively with Monaghan and Schmidt, “Defendants”), Dkt. 21. The motions were referred to the undersigned judge. Dkt. 32. After reviewing the motions, the responses filed by Plaintiff FCCI Insurance Company (“FCCI”), Dkt. 22, 23, the record, and the governing law, it is recommended that Defendants' motions be denied.

Background

This is a garnishment action to enforce a final judgment entered by this Court against Monaghan, Schmidt, and MTS in FCCI Insurance Company v. Marine Tech Services, LLC, et al., No. 4:20-cv-2716, Dkt. 55 (S.D. Tex. Aug. 3, 2021). The final judgment held Defendants jointly and severally liable for $1,154,475.45 in damages, pre-judgment interest, and post-judgment interest (which continues to accrue). Dkt. 1-1. Schmidt and Monaghan are spouses, Dkt. 21-3 (Declaration of B. Schmidt), and Monaghan is the president and sole manager of MTS, Dkt. 1 at 2; Dkt. 21-6 ¶¶ 1-2 (Defendants' answer in the underlying lawsuit).

FCCI filed its application for a writ of garnishment on November 1, 2022, which commenced this action. Dkt. 1. Based on an affidavit from its director, FCCI named Wells Fargo Bank, N.A. (“Wells Fargo”) and Bank of America, National Association (“Bank of America”) as garnishees who were indebted to Defendants. Dkt. 1, 1-2.

On November 8, 2022, FCCI filed a motion for issuance of writ of garnishment based on the same final judgment and affidavit. Dkt. 9. On November 18, 2022, the Court granted the motion ex parte and ordered Wells Fargo and Bank of America to remit up to $1,154,475.45 to FCCI from any accounts held by the Defendants. Dkt. 11. On November 21, the Clerk of Court issued the writs of garnishment to each of Defendants. Dkt. 11-1.

On December 1, both garnishees were served with FCCI's summons, Application for Writ of Garnishment (Dkt. 1), FCCI's Motion for Issuance of Writ of Garnishment (Dkt. 9), the Court's Order on Motion for Issuance of Writs of Garnishment (Dkt. 11), and the writs of garnishment to each Defendant (Dkt. 11-1), among other records on the docket. Dkts. 12, 13 (returns of service on Wells Fargo and Bank of America). Bank of America was dismissed as a garnishee by agreement of the parties, Dkts. 15, 16, but Wells Fargo answered, acknowledging the December 1 service date. Dkt. 14.

On December 5, Schmidt and Monaghan were served with the same documents, four days after those documents were served on the garnishees. Dkts. 17, 20. While Schmidt was personally served, Monaghan was served via substitute service through Schmidt, who is his co-resident and wife. Id. FCCI attempted to serve MTS on the same day, but MTS's registered agent for service (Monaghan) could not be located. Dkt. 23-1. FCCI's process server attempted service on MTS five more times within the next eight days, but Monaghan could not be located at MTS's address. Id. On December 28, 2023, Monaghan was ultimately located in Florida-and MTS was served with the same papers. Id.; Dkt. 19.

In the interim, Wells Fargo filed an answer, reporting that it maintained the following seven accounts for Defendants:

Account Number	Amount	Account Owner
Xxx8440	$3,822.33	Schmidt
Xxx5241	$3.55	Schmidt and Monaghan
Xxx7210	$20,038.13	Schmidt and Monaghan
Xxx7565	$5,903.46	Schmidt and Monaghan
Xxx0373	$3,514.69	Schmidt and Monaghan
Xxx7656	$103.73	MTS
Xxx3984	-$8.22	MTS

Dkt. 14 at 2.

On January 6, 2023, Schmidt and Monaghan moved to dismiss pursuant to Rule 12(b)(4) and 12(b)(5) and to strike pursuant to Rule 12(f). Dkt. 18. Their motions were combined with answers to FCCI's complaint. Id. They argued that FCCI's complaint should be dismissed or stricken because they were not properly served in accordance with Fed.R.Civ.P. 4 and Tex.R.Civ.P. 663a. Id. at 3-5, 8-10. On January 19, 2023, MTS filed a separate answer and motion to dismiss and to strike, raising substantially identical arguments and authorities as those briefed by Schmidt and Monaghan. See Dkt. 21.

Analysis

I. Legal standard: service of process

Federal Rule of Civil Procedure 12(b)(4) “allows a defendant to attack the form of the process, rather than the method by which it is served.” Intermoor Inc v. Wilson, 2016 WL 1107083, at *3 (S.D. Tex. Mar. 22, 2016); see Fed. R. Civ. P. 12(b)(4). Issues of form include, for example, when the party to be served is identified by the wrong name. Intermoor Inc., 2016 WL 1107083 at *3. “Rule 12(b)(5), in contrast, ‘permits a challenge to the method of service attempted by the plaintiff, or the lack of delivery of the summons and complaint.'” Id. (quoting Neely v. Khurana, 2008 WL 938904, at *2 (N.D. Tex. Apr. 7, 2008)).

“When service of process is challenged, the party on whose behalf it is made must bear the burden of establishing its validity.” Aetna Bus. Credit Inc. v. Universal Decor & Interior Design, 635 F.2d 434, 435 (5th Cir. 1981). The court lacks jurisdiction over a defendant, and dismissal is appropriate, unless the defendant was properly served with process in accordance with Rule 4. See generally id.; Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987) (“Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied.”).

II. Defendants failed to identify procedural defects with FCCI's service of process.

Defendants claim that this proceeding should be dismissed because FCCI “failed to take any actions to notify Defendants of the existence of this suit, or Plaintiff's Motion for Issuance of Writs of Garnishment, or the November 18, 2022 ex parte signed Order on the same, or the Writ of Garnishment itself.” Dkt. 18 at 3; Dkt. 21 at 3. Referencing case law applying the Texas Rules of Civil Procedure, Schmidt and Monaghan complain that FCCI's efforts never effectuated proper service. Dkt. 18 at 3-5; Dkt. 21 at 3-5. They fail, however, to identify any specific deficiencies in FCCI's compliance with the applicable rules. Instead, Defendants appear to argue that the Court's November 18, 2023 Order issuing the writs of garnishment was improper, because they were not served in accordance with Tex.R.Civ.P. 663a before this action commenced or before the writs of garnishment were issued. This argument is meritless, and Defendants' motions should be denied.

A. FCCI did not act improperly when it initiated this garnishment proceeding as a new action.

Defendants insinuate that FCCI brought this garnishment action to circumvent the rules and execute a legal ambush. For example, Defendants complain that “Plaintiff and Defendants have been litigating this matter since 2017,” yet “Plaintiff gave no notice to Defendants or their undersigned counsel of its actions before serving Monaghan and Schmidt.” Dkt. 18 at 2; Dkt. 21 at

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