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MUIRHEAD v. ZUCKER

November 21, 1989

WILLIAM R. MUIRHEAD, and JOSEPH E. ALTOMARE, Plaintiffs,
v.
HARRY ZUCKER, LOREN GLASSMAN, and DANIEL SACHS, Defendants



The opinion of the court was delivered by: COHILL, JR.

 We stand here like the proverbial blind man holding the tail of an elephant. This is the third lawsuit between these parties, each suit pending in a different court, and each succeeding one farther removed from the core of the dispute. Holding only the tail, it is difficult for us to divine what shape the rest of this beast takes. Nevertheless we endeavor to hold up our end, so to speak.

 FACTS

 This matter comes to us on motions to dismiss, and so we accept the facts pleaded in the Complaint as true.

 Plaintiff William Muirhead is a businessman in Titusville, Pennsylvania and Plaintiff Joseph Altomare is an attorney in the same town. Muirhead and another gentleman were officers and principal shareholders of Drake Well Oil & Gas Associates, Inc. (Drake). Altomare served the corporation as legal counsel.

 Defendants were members of a limited partnership known as United Petroleum Group (United), with Defendant Harry Zucker as general partner. At some point, United obtained drilling rights to a certain tract of land from Consolidated Energy Corp., and began drilling operations.

 Unfortunately for United, Consolidated was deep in debt to its principal lender, Pennbank. By the terms of a mortgage and Security Agreement with Consolidated, Pennbank held liens against much or all of the real and personal property of Consolidated.

 Consolidated ultimately defaulted and Pennbank, perhaps not fancying its chances of squeezing blood from a stone, sold and assigned its interest in the liens to Drake.

 But Drake knew that if one could not squeeze blood from the rock of Northwestern Pennsylvania, it could squeeze oil. And lo and behold, United was pumping oil pursuant to Consolidated's drilling rights! Drake, with Altomare as counsel, began to foreclose and demanded that United's proceeds for oil pumped on Consolidated's drilling rights be paid over to Drake.

 Needless to say, United was not happy. United and its partners (defendants in this case) instituted suit against Drake in the Court of Common Pleas for Venango County, Pennsylvania, challenging the validity of the liens now held by Drake.

 Subsequently the United partners filed a civil RICO action against Muirhead and Altomare in the U.S. District Court for the Southern District of New York. Apparently this suit charges Muirhead and Altomare with wrongdoing in connection with Drake's efforts to enforce its liens against United.

 Soon after the RICO suit was instituted, the United partners sent a news release to the local newspaper in Muirhead and Altomare's hometown of Titusville. This release purports to describe the allegations of the RICO suit against Muirhead and Altomare. As a result of this release, the Titusville Herald published a story concerning the allegations against Muirhead and Altomare.

 Muirhead and Altomare claim that the allegations of the RICO Complaint and the contents of the news release are utterly false, and that the defendants knew them to be false when they published them. Thus Muirhead and Altomare have filed the instant case on the basis of diversity jurisdiction, charging defendants with libel, slander, malicious abuse of process and intentional infliction of emotional distress. All defendants have filed motions to dismiss the various Counts for failure to state a claim. In addition Defendant Zucker, who had delayed responding to the Complaint, seeks to set aside the default which has been entered against him.

 DISCUSSION

 1. Default

 When Defendant Harry Zucker did not file a timely responsive pleading after service of the Complaint and Summons, plaintiffs moved for the entry of default and the Clerk obliged. Default judgment has not been entered however. Zucker now seeks to set aside the default because plaintiffs entered a stipulation with Defendant Loren Glassman extending the time for all defendants to file a responsive pleading. Plaintiffs contend that the stipulation applied only to Glassman.

 We have reviewed the file and conclude that the default must be set aside, but not for the reason advanced by defendant. Rather, we conclude that plaintiffs' service of process in the case was defective under the Federal Rules of Civil Procedure.

 Rule 4 governs service of process and provides two principal alternatives for service of a Complaint and Summons on an individual. A plaintiff may select either Rule 4(c)(2)(C)(i) permitting service in accord with the law of the forum state, or Rule 4(c)(2)(C)(ii) which permits service ...


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