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ALPS Property & Casualty Insurance Co. v. Fidlow

United States District Court, E.D. Virginia, Richmond Division

February 21, 2017

BENNETT J. FIDLOW, et. al, Defendants.


          Henry E. Hudson United States District Judge.

         This case involves an amalgam of interrelated lawsuits evolving from an unsuccessful attempt to purchase the rights to a film entitled "Birth of the Dragon."[1] The wake of this failed venture resulted in two separate lawsuits: one filed in the Superior Court for the City of Los Angeles, California, and the other in the United States District Court for the Eastern District of Virginia. This controversy is presently before the Court on Defendant Kylin Network (Beijing) Movie & Culture Media Co., Ltd.'s ("Kylin") Motions filed pursuant to Federal Rule of Civil Procedure 12(b)(5) to Quash Service of Process (ECF No. 34) and to Set Aside the Clerk's Entry of Default under Federal Rule of Civil Procedure 55(c) (ECF No. 37).

         Following the submission of supporting memoranda with accompanying affidavits by both Plaintiff ALPS Property & Casualty Insurance Company ("ALPS") and Kylin, the Court heard oral argument on February 6, 2017.[2]

         The central issue is whether Kylin was properly served by ALPS's process server in Los Angeles, California on August 10, 2016. Kylin contends that service was effected on the wrong individual and is thus invalid. ALPS counters that its process server verified the identity of the individual served as James Pang ("Pang"), Chief Executive Officer of Kylin. Alternatively, ALPS maintains that even if Pang was not the individual served, service was nonetheless effective on Kylin.

         The lawsuit that was originally filed in Los Angeles alleged legal malpractice on the part of Bennett J. Fidlow ("Fidlow") in the negotiation of Kylin's acquisition of the rights to "Birth of the Dragon." Kylin maintains that Fidlow breached his professional, fiduciary, and ethical duties during the negotiation process by causing Kylin to enter into an agreement with an entity that apparently owned no legal rights to the film. As a result of Fidlow's allegedly inept representation, as part of the deal, Kylin paid $1 million to the incorrect entity, as well as an additional $1 million to an agent facilitating the ineffectual transaction. According to Kylin, Fidlow "engaged in further misconduct by placing a false and unauthorized lien on the motion picture at issue in Kylin's name, and then attempting to extort Kylin's litigation counsel after Kylin demanded that the lien be removed." (Kylin's Mem. Support Mot. Quash 2, ECF No. 35.)

         In the lawsuit filed in this Court, ALPS seeks declaratory relief as to coverage on professional liability policies issued to Fidlow and his former law firm Schroder Davis. The dispute at issue involves the complaint in the declaratory judgment action.

         As mentioned above, the service of process controversy occurred on August 10, 2016. However, on May 20, 2016, APLS sent a written request to Pang and Leo Shi Young ("Young"), Chief Executive Officer of Kylin Pictures International, Inc.[3] ("Kylin Pictures"), requesting them to waive service of process in the pending declaratory judgment case in Virginia. (Pl's Br. Opp'n Ex. 1, ECF No. 38-1.) According to ALPS, a copy of that Request for Waiver was also sent to Kylin's counsel, Michael E. Weinstein ("Weinstein"). (Id.)

         In an attempt to resolve the malpractice action filed against Fidlow, the parties agreed to participate in mediation in Los Angeles on August 10, 2016. Prior to scheduling the mediation, Fidlow's attorney in the legal malpractice action confirmed with Kylin's counsel that Pang would be attending the mediation in person.[4] (Pl's Br. Opp'n Ex. 4 at ¶ 6, ECF No. 38-4.) Also attending the mediation was Young of Kylin Pictures, and Kylin's two California attorneys Weinstein and David Jonelis ("Jonelis"), along with a representative of ALPS, Fidlow's insurance carrier. (Id. at ¶¶ 10-12.)

         Also present at the mediation site was Marco Toscano ("Toscano"), a private process server affiliated with Santoni Investigations. According to Toscano's declaration, he was present on August 10, 2016, at the location where he had been informed that the mediation would take place. (Pl's Br. Opp'n Ex. 7, ECF No. 38-7.) Toscano had a picture of an individual identified to him as Pang. At 9:00 a.m., he observed an elevator stop and four individuals alight. (Id.) Three of the individuals emerging from the elevator did not resemble the photograph he had been given of Pang. The fourth person "looked like" Pang. (Id.) According to his declaration, Toscano approached the individual resembling Pang and asked if he was in fact James Pang. (Id.) The person responded affirmatively. (Id.) Toscano then advised the individual that he had a summons and complaint for him. The individual Toscano identified as Pang thanked him and "stretched his hand to receive the Summons and Complaint and walked away. He went to talk to the attorneys who were checking in with the receptionist." (Id.) Toscano filed his return of service with the United States District Court on September 15, 2016, reflecting personal service on Pang Hong (aka James Pang) on August 10, 2016, at 9:00 a.m. (Return of Service, ECF No. 22.) The return also reflects that Toscano is a registered process servicer in good standing in the judicial circuit in which the process was served.

         Later in the day on August 10, 2016, Weinstein sent an email to Timothy S. Beard ("Beard"), counsel for APLS, conveying the following message:

While I was attending a mediation today, a process server appeared and handed a stack of documents to Mr. Leo Shi Young, who was attending the mediation with me. The documents appear to be a summons and complaint against Kylin Network (Bejing) Movie & Culture Company, LTD, among others. I have no idea why you would attempt to serve Mr. Young with this lawsuit as Mr. Young is not an officer or employee of this company. Nor is he authorized in any way to accept service on behalf of this entity. In the future, please direct your efforts elsewhere."

(Pl's Br. Opp'n Ex. 8, ECF No. 38-8.)

         The following day, Beard responded: "[w]e have reviewed the facts and circumstances surrounding the service of process yesterday at 1900 Avenue of the Stars, Los Angeles, CA, and our conclusion is that service was valid and effective under Fed.R.Civ.P. 4." (Id.)

         On September 22, 2016, the Superior Court of the State of California stayed proceedings in the malpractice action against Fidlow until January 18, 2017, to enable the dispute to be resolved in Richmond, Virginia, in accordance with the forum selection clause of Fidlow's retainer agreement with Kylin. ...

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