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Court of Appeal:
Substitute Service Not Effected by Sticking Copy of Petition in Mail Slot After Hours
By a MetNews Staff Writer
A process server’s blunder in not seeking to effect service at a party’s home rather than sticking the papers into a mail slot at an office past closing hours has possibly cost a litigant $5 million, in light of a Sixth District Court of Appeal opinion.
The unpublished opinion, by Justice Cynthia C. Lie, was filed Friday. It affirms an order by Santa Clara Superior Court Judge Shella Deen quashing service of process of a petition to correct an arbitration award.
The correction sought by Jeffrey Scharf and Sherril Smith-Scharf was the elimination of a $5 million component of an $83,844,086.26 arbitration award—that component being the inclusion of punitive damages—as well as removing an order to Scharf not to bad-mouth Scharf Investments, LLC or misrepresent his role there.
Scharf had founded the company, an investment advice firm, in 1983; Brian A. Krawez joined the firm in 2007 and became chief operating officer; the arbitrators determined the value of the minority shares owned by Scharf and Smith-Scharf and sold to Krawez.
100-Day Period
The award was made on Nov. 10, 2021 and served that day. Under Code of Civil Procedure §1288, Scharf and Smith-Scharf had 100 days within which to serve and file a petition for an order correcting the award.
They filed such a petition on Feb. 17, 2022, 99 days after the award was served on them. The process server went to Scharf Investments’s office that day, at 4:41 p.m.
Its normal closing time was 4 p.m., and Krawez wasn’t there. The process server did encounter a research analyst who was working late and simply asked him to tell Krawez that “Tom was looking for him.”
“Tom” returned the next day at 10:06 a.m. and found the office locked. He arrived a third time at 3:34 p.m. and again found the office locked.
President’s Day was Monday and the staff was taking a four-day holiday. With no mail service on Monday, a copy of the petition was not received until Tuesday.
Substantial Compliance Claimed
There was, Scharf and Smith-Scharf, maintained, substantial compliance with the service requirement under Code of Civil Procedure §415.20(b) which provides:
“If a copy of the summons and complaint cannot with reasonable diligence be personally delivered to the person to be served…, a summons may be served by leaving a copy of the summons and complaint at the person’s dwelling house, usual place of abode, usual place of business….in the presence of a competent member of the household or a person apparently in charge of his or her office…., at least 18 years of age, who shall be informed of the contents thereof.”
The section requires sending a copy by mail, with service deemed to have been effected 10 days after the mailing.
Notice Was Insufficient
Lie wrote:
“Because even liberal construction of the operative statutes requires more notice than the Scharfs afforded respondents here, we affirm.”
She explained:
“The Scharfs cite neither reason nor authority to justify why they or their process server could not have confirmed the office’s hours before attempting service and served the papers earlier in the day on February 17, before the office’s customary closing hour. And the record discloses no effort to serve Krawez at his residence, his next likeliest location after hours. Indeed, Krawez provided unrebutted evidence that he was home on February 17 until approximately 8:00 p.m., and that another ‘competent member of [his] household’ was at the residence for much of February 18. A service attempt at his house therefore would have had a high probability of success. On this record, accordingly, the reasonable diligence of the Scharfs’ service efforts is doubtful.”
‘Vestigial Belt’
The jurist added:
“[W]e reject the Scharfs’ suggestion at oral argument that the required act of personal delivery to a duly informed responsible person was intended merely as a vestigial belt to the mailing’s suspenders.”
The appellants relied on the California Supreme Court’s 1973 decision in Pasadena Medi-Center Associates v. Superior Court. There, a unanimous court proclaimed “the desirability of liberal construction” of what were then new statutes on service of process.
“At bottom, the Scharfs’ reliance on the eventual fact of notice to Krawez—to the exclusion of when it was received—exceeds liberal construction of the substituted service statute to excise the first of its requirements,” Lie wrote, pointing out:
“[M]ailing under section 415.20 is not authorized until ‘[]after’ the server has first left the summons and complaint or petition with a responsible person informed of their contents.”
The case is Scharf v. Scharf Investment, LLC, H050150.
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