In re PIRS Capital, LLC

Case Type:
Case Status:
22-1723 (8th Circuit, Dec 08,2022) Published
As had the U.S. District Court for the Western District of Arkansas (DC), the U.S. Court of Appeals for the Eighth Circuit (Circuit) affirmed the order, issued by the U.S. Bankruptcy Court for the Western District of Arkansas (BC) in April 2021, denying the motion of PIRS Capital, LLC (PIRS), a creditor of chapter 7 debtor Crossett Ford Lincoln (DR), to set aside a January 2018 default judgment for $157,214 against it and for trustee Renee Williams (TR) in an adversary proceeding launched by the TR to avoid and recover $156,864 allegedly transferred to PIRS within 90 days of the petition date.
Procedural context:
In March 2017, the TR initiated an adversary proceeding against the PIRS. The TR served the adversary complaint and summons by certified mail to the following address, with return receipt requested: "PIRS Capital, LLC, Attention: Alexander Parsol, Managing Partner, 40 Exchange Place, Suite 1607, New York, NY 10005." The TR got this information from the Proof of Claim filed by PIRS (POC), as confirmed by a search of the records of the New York Department of State (SOS). (There was only one discrepancy: the state's website listed the suite as 1606, not 1607. The TR ultimately determined that 1607 was the correct suite number.) By March 2017, two parts of this address had unknowingly been rendered out-of-date PIRS had moved to Suite 403 six months earlier, and the managed partner named in the POC and to whose attention the complaint and summons was sent--Alexander Parsol (Parsol)--had left the organization one year before. PIRS, however, had failed to update the POC or the SOS of these changes. Regardless, the summons and complaint mailing was delivered to PIRS at its 40 Exchange Place office on March 17, and a return receipt was signed by “A. Larranaga,” then a PIRS assistant underwriter who was not authorized to receive service. Subsequently, the TR filed a motion for entry of default and motion for default judgment and a notice of hearing on that combined motion at the 1607 address. An entry of default and then a default judgment followed. PIRS failed to respond to any of these mailings, while none were returned as undeliverable. Two months after the entry of default judgment, the BC sustained the TR's objection to PIRS's POC. Copies of this order were sent to both Suite 1607 and Suite 403, with the record reflecting service at Suite 403. Claiming this was its first notice of any adverse action in the bankruptcy, PIRS researched, discovered the adversary proceeding, and asked the TR to vacate the default judgment. When the TR refused, PIRS turned to a motion seeking to void the judgment under Federal Rule of Civil Procedure 60(b)(4) (Civil Rule) because the complaint was served at the wrong address and under Civil Rule 60(b)(6) on the basis that this failure denied it a full and fair opportunity to litigate its defenses. The BC denied the motion, finding that the TR had properly effected service using the information from the SOS and POC and that PIRS's failure to respond was due to its mistakes. The DC affirmed. PIRS timely appealed.
Founded in 2012 as a new source of capital for small businesses, PIRS had agreements in effect to purchase accounts receivable from the DR on March 21, 2015, when Crossett filed its petition in the BC. The promptly filed POC was for $137,682 of unpaid advances; the document itself listed PIRS's address as 40 Exchange Place, Suite 1607, New York, NY 10005 and was signed by Parsol, who gave “Managing Partner” as his title and 40 Exchange Place, Suite 1607, as his address.
James B. Loken; Morris S. Arnold; and Jonathan A. Kobes

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