Free Letter - District Court of Delaware - Delaware

Case 1 :04-cv—00865-GIVIS Document 8 Filed 03/18/2005 PqVgLem_1r&oEt]g%h' LLP
Suite 1800
Michael P. Kelly §i§?l.“.;ll1'§°’S“"‘”
_ Vlhlmington, DE 19899
Managmg Partner tel 302.984.63OU
tax 202.984.6ses
Fax 302.984.6399 ` vwvw.mccarte•:c0m
[email protected]
@lCC/XRTER
March 18, 2005
ATTORNEYS AT LAW
BY HAND
Honorable Gregory M. Sleet
United States District Court
844 N. King Street
Lock Box 19
Wilmington, Delaware 19801
_ Re: Capitol Cleaners v. Transcontinental Insurance Company
C.A. No.: 04-865 (GMS)
Dear Judge Sleet:
Please accept this letter as a formal response to the Court’s March 15, 2005 Order, in which it
directed Plaintiff Capitol Cleaners and Launderers, Inc. ("Plaintiff") to show good cause that the
above action should not be dismissed pursuant to Fed. R. Civ. P. 4(m) for the lack of service on
the CNA Insurance Companies, Inc. and CNA Insurance Group, Inc. (collectively, the "CNA
entities").
Defendant Transcontinental Insurance Company ("Transcontinental") was properly served
through the Insurance Commissioner of Delaware on or before July 8, 2004. As such, Rule 4(m) »
does not permit dismissal of the entire action. At most, Rule 4(m) would allow dismissal only of
the CNA entities. 1 Under the circtunstances of this case, however, there is no warrant even for
that step.
Counsel for the Plaintiff diligently tried to effect service of process on the CNA entities. When .
the initial complaint was filed by Plaintiff, service on CNA Insurance Company was attempted
by serving the Insurance Commissioner of Delaware, in accordance with Delaware law. The
- Insurance Commissioner rejected service on April 27, 2004 by sheriff’s return filed with the
Superior Court of the State of Delaware on May 2, 2004. On May 27, 2004 Plaintiff filed an
amended complaint adding the CNA entities and Transcontinenta1.2 Pursuant to Delaware law, _
I Fed. R. Civ. P. Rule 4(m) states "[i]f service ofthe summons and complaint is not made upon a defendant within
120 days after the tiling ofthe complaint, the court, . . . on its own initiative after notice to the plaintiff shall dismiss
the action without prejudice as to that defendant or direct that service be ejected within a specyied time; provided `
that y' the plaintw shows good cause for the failure, the court shall extend the time for service for an appropriate
period. y
2 Transcontinental was effectively served on June 23, 2004 via the Insurance Commissioner of Delaware. Paragraph y
# 2 of Transcontinental’s removal notice makes ajudicial admission that it was served on or about July 8, 2004. As
such, perfection of service on Transcontinental is undisputed.
rumrronn smrrunn new your cm mzwrmr vnrunrrvnrn wrrmrmmm nmrmonr T
asu.z7s.emo zoa.sz4.1soo z1z.e¤s.eaoo mszz.4444 z1s.9m.srm¤ zo2.sa4.r~>zo¤ 41o.sss.asoo p

Case 1:04-cv—00865-Gl\/IS Document 8 Filed 03/18/2005 Page 2 of 3
Honorable Gregory M. Sleet
March 18, 2005
Page 2
%/ICCARTER
‘ ENGLISH
those entities then were served through their registered agent, which the Delaware Secretary of
State identified as the Corporation Trust Company.3 Notwithstanding, the Corporation Trust
Company would not accept service on behalf of the CNA entities, stating that it no longer served
as the registered agent for these entities because its fees had not been paid. On July 8, 2004, the
sheriff rettuned service writs for the CNA entities stating non est inventus, and further noting that
the entities are void. (See Exhibit A, Superior Court docket). On July 13, 2004,
Transcontinental and the CNA entities filed the Notice or Removal, thus bringing this case in
front of Your Honor. Transcontinental and the CNA entities also filed an answer to Plaintiffs
Motion for Remand. In the answer, Transcontinental admitted it is a proper party and that
Transcontinental is only licensed to use the CNA service mark. This CNA service mark is owned
by CNA Financial Corporation Delaware, which is a domestic entity in good standing. (See
Exhibit B, Delaware Secretary of State good standing statement, CNA licensing disclosure and
CNA USPTO service mark ownership record). Transcontinental has affiliated itself with and
held itself out as being a part of the CNA entities. (See Exhibit C, Transcontinental policy.) This
relationship could create liability on behalf of the CNA entities, thus making those CNA entities
relevant and necessary parties to the pending litigation. `
Under Delaware law, moreover, the CNA entities, notwithstanding their delinquent tax status
and the sheriff’s non est inventus and void returns on July 8, 2004, continue as Delaware
corporate entities. There is no record that a certificate of dissolution was filed with the Delaware
Secretary of State for either CNA entity, which is a requirement of 8 Qc; Q, § 275(d) and 8 Del.
Q. §l03 (“ a certificate of dissolution shall be executed, acknowledged and filed.") (emphasis
added). Furthermore, 8 E Q § 277 states that "[n]o corporation shall be dissolved . . . under
F this chapter until all franchise taxes due to or assessable by the State including all franchise taxes .
due . . . have been paid by the corporation.” These CNA entities, although inactive, have not and
cannot be dissolved until the franchise taxes due are paid and a certificate of dissolution is filed.
The CNA entities remain legal domestic entities under Delaware law, and are necessary and
relevant parties to this litigation. Therefore, pursuant to Delaware law, because the CNA entities
are valid domestic entities, there is no diversity jurisdiction in this case. Because this Court lacks .
subjectmatter jurisdiction, it should not dismiss this case or the CNA entities. Rather, Plaintiff
respectfully requests that the Court act on the motion for remand and send this case back to the
Superior Court of the State of Delaware for further adjudication, thus avoiding piecemeal
litigation.
3 Likewise, the Delaware Secretary of State identifies The Corporation Trust Company as the registered agent for
the owner ofthe service mark Transcontinental is licensed to use, which is CNA Financial Corporation.
2 I

Case 1:04-cv—00865-G|\/IS Document 8 Filed 03/18/2005 Page 3 of 3
Honorable Gregory M. Sleet
March 18, 2005
Page 3
@ICCARTER
‘ ENGLISH
Thank you for your time and attention to this matter. Counsel is available at the Court’s
convenience should Your Honor have any questions regarding this matter.
Respéizwtihilly su ,'_,ed
;f;_,·! Z`, I J} /`/ff,
s' .·*’
ff '
I Michael P. Kelly
MPK/jz V
‘ cc: Daniel A. Griffith, Esq.
wu; l036l9.0l . d
3