2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 5-4-2009 

# C hi ang v . U S S m all B u s Admn P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 07-2686

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2009

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. It h as be e n a c c ept e d for inclusion in 2009 D e c i sion s b y an author i z e d a dmini s tr at or of V i ll anova U nive r sity S choo l of L a

w Di git al Reposit ory

. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

w . vi ll anova . e du . Re c omme nde d C it at ion " C hi an g v . U S S m all B us Admn" (2009). 2009 D e cisio n s . P ape r 1411. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2009/1411NOT P RE CE DE NT I AL UNI T E D S T AT E S CO UR T OF AP P E AL F O R T H E T H IR D C IR C U IT N o. 07- 2686 GAI L WATS ON C HI ANG; C A L E D O N IA S P R IN G S , IN C .,

A p p e llan ts v . U N I TED STA TES SM A LL B U SI N ESS

ADMI NI S T RA T I ON O n A p p ea l from the U n it ed S tat es D istri ct C o u rt fort he D i s t r i ctof the V i r gi n I s l ands ( D . C . C i vi l N o. 00- cv- 00071) D istri ct Ju d g e: H o n . H arv eyB artl e, II I S u b mi t t e d Un d e rT h i r d Ci r c u i tL AR 3 4 . 1 ( A)

A pr i l 23, 2009 B E FO R E : B A R R Y , H A R D I M A N and C O W E N , C i r cui tJ udges

( Fi l ed: M ay4, 2009) OP I NI ON C O W E N , C i r cui tJ udge2

G ai l W at son C hiang an d h er V i rgi n Isl and ’s based c om pan y , C al edo nia Spri ng s, Inc . , ap p ea l from the D istri ct C o u rt ’s ord er d ism issi n g the A m en d ed C o m p lai n t fo r fa il u re t o t i m el ys erve the U . S. Sm al l B us i nes s A dm i ni s t r at i on and the A t t orneyG ener al of the U n it ed S tat es (c o ll ec ti v ely“the G o v ern m en t”). B ec au se A p p ell an ts, w h o w ere r epr es ent ed bycouns el , i nexpl i cabl ydel ay ed foral m os tfoury ear s befor e per fec t i ng s ervi ce on the SB A and the A t t or neyG ener al , w e fi nd thatthe D i s t r i ctC our tdi d not abus e i t s di s cr et i on i n decl i ni ng t o gr antan ext ens i on of t i m e fors ervi ce of pr oces s and d ism iss in g A p p e llan ts’ A m e n d e d C o m p lain t w ith o u t p re ju d ice . A c c o rd in g ly , w e w ill a f f ir m . I. O n O c to b e r 3 1 , 2 0 0 0 , C h ian g f iled a n A m e n d e d C o m p lain t o n b e h a lf o f h e rse lf and the companys he runs w i t h herfatherand herhus band, C al edoni a Spr i ngs , I nc. T he t hr e e c ou ntA mend e d Compl a i nta l l e ge d b r e a c h o f c on t r a c ta nd fi du c i a r ydu t ybythe U . S. Sm al l B us i nes s A dm i ni s t r at i on ( “SB A ”) and di s cr i m i nat i on agai ns tC hi ang. T he al l egat i ons ar os e outof a tw el ve y earcour s e of de al i ng betw een Cal edoni a Spr i ngs and th e S B A . T he A m ended Com pl ai ntw as pr oper l ys erved on the U . S. A t t orneyforthe D i s tr i ct of the V i rgi n Isl and s i n N ov em ber of 2 00 0. A cop yof the A m end ed C om plai nt w as al so m ai l ed t o t he A t t or neyG ener al ; how everan af fi davi tfr om the A t t orneyG ener al ’ s O ffi ce s t at es t hati thas no r ecor d of eve rhavi ng r ece i ved the compl ai nt . B oth t he or i gi nal3

C om pl ai ntand the A m ended Com pl ai ntw er e per s onal l ys erved on C ar l C hr i s t ens en, an E conomi c D evel opm entSpeci al i s tforthe SB A ; how everthe D i s t r i ctC ourtfound nothi ng i n t he r ecor d t o es t abl i s h t hatC hr i s t ens en w as author i zed t o acc epts ervi ce on be hal f of th e S B A . N o f

u rt h e r a tte m p ts to p e rf

e c t s e rv ic e w e re m a d e a t th a t tim e . In Ju lyo f

2 0 0 4 , ap p ro x im a telyf

o u r y e a rs a f

ter th e f ili n g o f th e o rig in a l C o m p lain t, t he G overnm entent er ed a l i m i t ed appe ar ance and fi l ed a mot i on t o di s m i s s forl ack of pr opers ervi ce. N o s i gni fi cantact i vi t yoccurr ed on the D i s t r i ctC our tdocketbetw een the f illin g o f th e A m e n d e d C o m p la in t a n d th e f ilin g o f th e G o v e rn m e n t’ s m o tio n to d is m is s . F o ll o w ing the f

il ing o f th e G o v ern m en t’ s m o ti o n to d ism iss, C h iang ’s hu sb an d , P eter, s entcopi es of the A m ended Com pl ai ntbycert i fi ed mai l t o t he SB A and t o t he A t t orney G e n e ra l, f

in a lly e f f e c tin g p ro p e r s e rv ic e . I n rul i ng on t he G overnm ent ’ s m ot i on, the D i s t r i ctC our tconduct ed a tw o- s t ep anal y s i s , cons i der i ng fi r s tw hetherA ppel l ant s had s how n good caus e as t o w hytheyhad n o t c o m p lie d w ith th e re q u ir e m e n ts o f R u le 4 o f

th e F e d e ra l R u le s o f

C iv il P ro c e d u re . F in d in g th a t A p p e llan ts h a d f a iled to o f

f e r a n yre a so n f

o r th e ir n o n -c o m p lian c e w ith req u ir em en ts of

R u le 4, th e D istri ct C o u rtthen co n side red w h ethe r an yad d it ion al fa ctors exi s t ed thatw arr ant ed gr ant i ng A ppel l ant s an ext ens i on of t i m e i n w hi ch t o s erve the A m ended Com pl ai nt , des pi t e the l ack of good caus e s how n. T he D i s t r i ctC our tw as not per s uaded thatr el i ef w as j us t i fi ed on ac countof the expi r at i on of the s t atut e of lim itatio n s, w h ich w o u ld b a r th e re f ili n g o f th e a c tio n , b e c a u se n o o th e r f a c to r w e ig h e d in4

f a v o r o f g ra n tin g a n e x ten sio n o f tim e . F in d in g n o re a so n to e x e rc ise its d isc re tio n to ext end the t i m e fors ervi ce, t he D i s tr i ctC our tdi s m i s s ed the A m ended Com pl ai ntw i t hout p re ju d ice f o r f a ilu re to e f

f e c t p ro p e r se rv ice . C h ian g f iled a tim e lya p p e a l. II. T h is C o u rt re v ie w s a d is m is s a l p u rs u a n t to R u le 4 (m ) f o r a b u s e o f

d is c re tio n . B o ley v. K a ym a rk , 1 2 3 F .3 d 7 5 6 , 7 5 8 (3 d C ir. 1 9 9 7 ). W e h a v e ju risd ictio n o v e r th is a p p e a l p u rs u a n t to 2 8 U .S .C . § 1 2 9 1 a n d 2 8 U .S .C . § 1 2 9 4 . Pr opers ervi ce i s an es s ent i al s t ep i n es t abl i s hi ng a di s t r i ctcour t ’ s per s onal juri sd ict ion o v er the d ef en d an ts. R u le 4(i) of

the F ed era l R u les o f C ivil P roc ed u re v ery cl ear l ys et s outt he r equi r ement s fors ervi ce of a s um m ons and compl ai nton t he U ni t ed St at es and i t s agenc i es . “The pl ai nt i ff i s r es pons i bl e forhavi ng the s um m ons and compl ai nts erved w i t hi n t he t i m e al l ow ed byR ul e 4( m ) . ” Fed. R . C i v. P. 4( c) ( 1) . “I f a defe nd ant i s not s erved w i t hin 120 day s aft er the co m plai nt i s fi l ed, the co urt. . . m ust di s m i s s t he ac t i on w i t houtpr ej udi ce a gai ns tthatdefe ndantoror derthats ervi ce be m ade w i t hi n a s peci fi ed t i m e. ” Fed. R . C i v. P. 4( m ) . I f a pl ai nt i ff c an s how “good ca us e” f or t he fa i l ur e t o t i m el ys erve a de fenda nt , “the courtm us text end the t i m e fors ervi ce f oran appr opr i at e per i od. ” I d. T hi s C i r cui thas equat ed good ca us e w i t h t he conc eptof ex cu sab le ne g lect. S ee P etruc ell i v. B o h ri n g er & R atzing er, 46 F . 3 d 1 2 9 8 , 1 3 1 2 (3d C ir . 1 9 9 5 ). D i s t r i ctcour t s conducta tw o- par tanal y s i s w hen det erm i ni ng w hethert o ext end the5

t i m e fors ervi ce of

a s um m ons and compl ai nt . B ol ey , 123 F. 3d at758. Fi r s t , the di s t r i ct c o u rt m u st d e ter m in e “ w h e th e r g o o d c a u se e x ists f o r a p lain tiff ’s f

a ilu re to e f

f e c t ti m e ly s ervi ce. ” I d. I f good ca us e does notexi s t , the di s t r i ctcour tm us tthen “c ons i derw hether to g ra n t a d is c re tio n a ry e x te n s io n o f tim e .” Id . A . M andator y E x t ens i on f or G ood C ause A s how i ng of good ca us e “r equi r es a demonstr at i on of good fa i t h on the partof the par t ys eeki ng an enl ar gementand s om e r eas onabl e bas i s fornoncompl i ance w i t hi n t he t i m e s peci fi ed i n t he rul es . ” M C I T el ecomm s . C orp. v. T el econc ept s , I nc. , 71 F. 3d 1086, 1097 ( 3d C i r . 1995) . I ndeed, t he “pr i m aryfocus ” of the good ca us e i nqui r y“i s on t he pl ai nt i ff’ s r eas ons fornotcompl y i ng w i t h t he t i m e l i m i ti n t he fi r s tpl ace . ” B ol ey , 123 F . 3 d at 75 8 (qu o ti n g M C I, 7 1 F . 3 d at 10 9 7 ). D es pi t e A ppel l ant s ’ ar gum ent s t o t he contr ary , theyhave nots how n good caus e for an ext ens i on of t i m e fors ervi ce. T he D i s t r i ctC our tw as pr es ent ed w i t h not hi ng thatw as s u f f ic ie n t to e x c u s e A p p e lla n ts ’ l a c k o f d ilig e n c e . S e e B o le y , 1 2 3 F .3 d a t 7 5 8 . A ppel l ant s pr oper l ys erved the A m ended Com pl ai nton t he U . S. A t t orneyforthe D i s t r i ct of the V i r gi n I s l ands butt heyi gnor ed the unequi vocal i ns t ruct i ons of R ul e 4( i ) and us ed unauthor i zed met hods of s ervi ce on the SB A and the A t t orneyG ener al . A ppel l ant s have o f f e re d n o e x p lan a tio n f

o r w h yth e yw e re u n a b le to c o m p lyw ith th e re q u ire m e n ts o f R u le 4( i ) . N orhave A ppel l ant s expl ai ned w hyi tt ook t hem al m os tfoury ear s t o m ove foran enl ar gementof t i m e and c om pl et e s ervi ce. I ndeed, A ppel l ant s di d noteven a s k foran6

ext ens i on of t i m e unt i l aft ert he G overnm enthad fi l ed i t s m ot i on t o di s m i s s . T he fa ctt hat Ap p e l l a n t s i n i t i a l l yma d e g o o d f a i t h e f f o r t s t o s e r v e th e At t o r n e yGe n e r a l a n d th e S BA , w hi ch mayhave putt hem not i ce of the l egal act i on, i s of no cons equenc e. T he “a bs ence of pr ej udi ce a l one ca n nevercons t i tut e good ca us e t o excus e l at e s ervi ce. ” M C I , 71 F. 3d a t 1 0 9 7 . B . D i s cre t i on t o E x t end T i m e f or Servi ce Ev e n i f g o o d c a u s e i s n o ts h o wn , o t h e rf a c t o r s ma ywa r r a n ta n e x t e n s i o n o f t i me fors ervi ce. Pet rucel l i , 46 F. 3d at1307. A di s t r i ctcour tm aycons i deractual not i ce of t he l egal act i on; pr ej udi ce t o t he def endant ; the s t atut e of l i m i t at i ons on t he under l y i ng caus es of ac t i on; t he conduc tof the def endant ; and w hetherthe pl ai nt i ff i s r epr es ent ed by c o u n se l, i n a d d iti o n to a n yo th e r f a c to r th a t m a yb e re lev a n t w h e n d e c id in g w h e th e r to g ran t an e x tens ion o r dism iss th e c o m p lai n t. S ee F ed . R . C iv. P. 4(m ) N o tes o f A d v isory C o m m itte e o n 1 9 9 3 a m e n d m e n ts ; B o le y , 1 2 3 F .3 d a t 7 5 9 . A ppel l ant s pr es entt w o fac t or s thatcuti n favorof an e xt ens i on of t i m e thatthey a rg u e w e re n o t p ro p e rlyc o n sid e re d b yth e D istric t C o u rt. F irst, A p p e llan ts a ss e rt th a t a d ism issal w ith o u t prejud ice w o u ld ef fe cti v elyb ar the irac ti o n b ec au se in the f o u r y ea rs t hati tt ook t he G overnm entt o fi l e i t s m ot i on t o di s m i s s , the s t atut e of l i m i t at i ons expi r ed on t he thei runder l y i ng caus es of ac t i on. Second, A ppel l ant s cont end thatthe G o v ern m en t had ac tual n o ti ce o f th e leg al ac ti o n d esp it e im p erf ec t service , an d there fo re w o u ld n o t s u f

f e r a n yp re

ju d ic e o n a c c o u n t o f

th e d e la y .7

A lth o u g h th e e x p ira tio n o f th e sta tu te o f

lim itatio n s a n d th e lac k o f p re ju d ice c u t in f a v o r o f e x ten d in g th e tim e f

o r se rv ice , w h e n b a lan c e d a g a in st th e o th e r f a c to rs in th is case, i tcann ot be sai d thatt he D i stri ctC ou rtabu sed i t s di scr et i on i n d eny i ng A pp el l ants ’ r eques tforan ext ens i on of t i m e fors ervi ce of pr oces s . T he runni ng of the s t atut e of l i mi t a t i o n s ma yb e “ a f

a c t o rs u p p o r t i n g th e d i s c r e t i o n a r yg r a n t i n g o f a n e x t e n s i o n o f

t i me t o m ake s ervi ce unde rR ul e 4( m ) , ” B ol ey , 123 F. 3d at759, buti t“does notr equi r e the d istric t co u rt to e x ten d tim e f o r se rv ice o f

p ro c e ss ,” P e tru c e lli , 4 6 F .3 d a t 1 3 0 6 (e m p h a sis a d d e d ). A d istric t co u rt m a y“ still d ism iss th e c a se , ev e n a f ter c o n sid e rin g th a t th e sta tu te of l i m i t at i ons has run and the r efi l i ng of an a ct i on i s barr ed. ” I d. I n addi t i on, the D i s tr i ct C our tfound thatA ppel l ant s had bee n puton not i ce bya l ett erfr om the U . S. A t t orney fol l ow i ng t he i m pr opers ervi ce of t he or i gi nal compl ai ntthatthe G overnm entw as e x p e c tin g p e rf

e c t se rv ice a n d w o u ld n o t w a iv e a n yd e f e c ts. S til l, i t to o k A p p e llan ts a lm o st f o u r y e a rs to p e rf

e c t se rv ice o n th e S B A a n d th e A tto rn e yG e n e ra l. D u rin g th is t i m e A ppel l ant s , w ho w er e r epr es ent ed bycouns el , di d notas k t he D i s t r i ctC our tforan e x te n s io n o f

tim e f o r s e rv ic e u n til th e yw e re f a c in g a m o tio n to d is m is s . III . G i ven A ppel l ant s ’ l ack of expl anat i on forthe foury eardel ayi n per fec t i ng s ervi ce on t he G overnm entand the otherdetr act i ng fac t or s , w e fi nd thatthe D i s t r i ctC our tdi d not abus e i t s di s cr et i on i n deny i ng A ppel l ant s ’ r eques tforan ext ens i on of t i m e fors ervi ce ofA p p e llan ts a rg u e th a t th e D istric t C o u rt a b u se d its d isc re tio n b e c a u se it ref u se d to 1 gi ve them re as onabl e t i m e t o cur e a f ai l ur e of s ervi ce on the A t t orneyG ener al and the S B A a f ter th e yh a d p ro p e rlyse rv e d th e U .S . A tto rn e yf o r th e D istric t o f

th e V irg in Is l and s, as r equ i red byR ule 4( i )( 4). A l t ho ug h the D i stri ctC ou rtdid not di rect l yadd res s t hi s ques t i on, i tcan be gl eane d fr om the court ’ s di s cus s i on of w hethert o gr antan e x ten sio n o f

tim e f o r se rv ice u n d e r R u le 4 (m ) th a t th re e a n d a h a lf y e a rs is n o t a re a so n a b le tim e in w h ich to c o m p lete se rv ice u n d e r R u le 4 (i). T h is is n o t an u n re a so n a b le c o n c lu sio n . A c c o rd in g ly , the D istric t C o u rt d id n o t d e p riv e A p p e llan ts o f th e re a so n a b le tim e a llo w e d b yR u le 4 (i ) t o p e rf e c t s e rv ic e o n th e G o v e rn m e n t.

8 pr oces s and di s m i s s i ng t he A m ended Com pl ai nt . C ons equent l y , w e w i l l aff i r m the or der 1 o f th e D is tr ic t C o u rt .