In a 15 page decision signed yesterday, April 5, 2011, Judge Sontchi of the Delaware Bankruptcy Court determined that when a company receives pleadings in a bankruptcy case, even if served on their “doing business as” name, they have received proper service. Judge Sontchi’s opinion is available here.
Select AirCargo (“AirCargo”) had provided services to Advanced Marketing Services, Inc., (“AMS”) under the name PAC. AirCargo and PAC were the same company – identical in all but name. It’s exactly like when a person, like myself, goes by their middle name. Nothing is different but the name.
AMS and several of its affiliates entered Chapter 11 bankruptcy protection in December of 2006. In November of 2007, the Court confirmed their chapter 11 Plan, and Curtis Smith was appointed as the Plan Administrator. As the Plan Administrator, part of Mr. Smith’s job was to prosecute preference actions, including the action against PAC.
AirCargo had filed a claim in the bankruptcy case, so it had been receiving notices in the bankruptcy case. When Mr. Smith brought the preference action, he served the complaint on PAC. But AirCargo confused the documents related to the preference action with those related to the main bankruptcy case, and never filed an answer. Opinion at *4. Because no response was filed, Mr. Smith obtained a default judgment against PAC for the entire amount in controversy. Not until the U.S. Marshal’s Office levied Select AirCargo’s bank accounts for roughly $77,000, did they appear to realize what was happening and file a motion to vacate the default judgment. Opinion at *5-6.
Judge Sontchi’s Opinion
Judge Sontchi declined to vacate the default judgment and provided multiple reasons why service was proper on AirCargo. These reasons include: (1) AirCargo and PAC used the same address, (2) AirCargo did business with AMS under the name PAC, and (3) AirCargo filed its claim under the name PAC.
As to AirCargo’s defense that they confused the preference pleadings with those of the underlying bankruptcy, Judge Sontchi said “Select AirCargo was culpable in receiving, yet ignoring, numerous pleadings it received from the Plaintiff and orders from the Court.” In other words, mailings from the Court are never “Junk Mail”.