Delaware Business Bankruptcy Report : Delaware Business Bankruptcy Report : Morris James LLP Lawyers & Attorneys

Plastech filed a motion to dismiss, arguing that  (i) service was improper; (ii) the Court lacked personal jurisdiction over Plastech; and (iii) the additional claims in the amended complaint did not relate back to the filing of the original complaint, and were therefore time-barred under 11 U.S.C. § 546.  The trust filed an objection to the motion to dismiss, as well as a motion to amend the name of the defendant on the complaint.

First, Plastech argued that the Court lacked personal jurisdiction over it because the minimum contacts standard could not be satisfied.  Under Federal Rule of Bankruptcy Procedure 7004(d), nationwide service of process is allowed.  When service is made under Rule 7004(d), the defendant need only have minimum contacts with the United States.  Plastech, a Michigan-based company, argued that because Federal Rule of Civil Procedure 4(k)(1)(C) allows a court to exercise personal jurisdiction over a defendant who was served with a summons “as authorized by federal statute,” Rule 7004(d) service is insufficient because it is based on a rule, and not a statute.  The Court rejected this argument as inconsistent with prior holdings of the Court on this issue.

Second, Plastech contended that the complaint should be dismissed because service was made on an improper address.  However, the Court found that because the plaintiff cured this defect by serving an alias summons as prescribed by Rule 7004, the complaint would not be dismissed on the grounds of improper service.

Third, Plastech asked that the Court dismiss the claims related to the additional $5,669,111.99 of alleged transfers set forth in the amended complaint on the basis that they did not relate back to the original complaint, and were time-barred.  The statute of limitations on these claims expired approximately one month before the plaintiff filed the amended complaint.

Generally, an amended complaint will only relate back under Federal Rule of Bankruptcy Procedure 7015 if the facts and transactions in the amended pleadings rely upon those set forth in the original complaint.  Typically, in a preference action, this will mean that the additional transfers were part of a systematic series of payments.  The courts have also allowed amendment where the language was broad enough in the original complaint to capture the transfers, or evidenced an intention to avoid and recover all transfers.  Here, the Court found that the payments were of unequal amounts, and were made at irregular intervals.  Accordingly, they did not appear to be part of a systematic scheme of payments.  Also, the complaint lacked language evidencing the intent to capture all transfers made by the debtor to Plastech.  Therefore, the Court concluded that the payments alleged in the amended complaint did not arise out if the same transaction as those set forth in the original complaint, and did not relate back.  However, the Court granted the plaintiff leave to amend the complaint, if appropriate, to include allegations sufficient to establish that the additional transfers arose out of the same transaction or occurrence as those identified in the original complaint.

Finally, the Court addressed the plaintiff’s motion to amend the complaint to correct the name of the defendant.  The complaint named Plastech Engineered Products as the defendant.  However, the correct name of the entity was Plastech Engineered Products, Inc.  Plastech countered that the plaintiff failed to name a legal entity, and that the adversary proceeding should be dismissed.  The Court held that the mere addition of “Inc.” to the defendant’s name did not assert new facts or claims, and therefore granted leave to amend the complaint to correct the defendant’s name.