ALLENTOWN, Pa. (CN) – E*Trade Financial felt the sting of a $10,000 sanction after a federal judge found the company made “extraordinarily serious” bad-faith attempts to avoid being served with a petition.
“The actions E*Trade took to evade service of process in this case are extraordinarily serious when considering the small amount of money involved in this case in comparison to E*Trade’s business,” U.S. District Judge Eduardo Robreno wrote.
The judge slammed the New York-based company for evading service attempts of a lawsuit filed pro se by William and Bernadine Agnew. The couple initiated action in April 2010 after an arbitrator denied their $26,000 claim, whcih alleged that E-Trade had sold the couple’s stock at an unfavorable price and had failed to purchase stock as the couple requested.
“It is especially troubling that E*Trade, who is in the business of dealing directly with customers and whose appeal to the market is the ability to execute trades in the stock market without the need for a trained professional, appears to lack a policy for service of process that is clear and available to consumers,” the Sept. 9 decision states.
“Petitioners, as well as the U.S. Marshals Service, spent money, time, and effort attempting to serve E*Trade,” Robreno wrote. “Petitioners made many phone calls, sent letters, and made many court appearances in an attempt to serve E*Trade and yet, fifteen months after filing their claim, are still at the beginning.”
The judge explained that no E*Trade employee would answer the Agnews’ questions about who or what agency could accept service for E*Trade.
Even the U.S. Marshals had no luck when they were ordered in February 2011 to serve the petition once and for all. Workers at E-Trade’s Roseville, Ca., branch told one Marshal in April 2011 that the petition could be served at a location in Harrisburg, Pa., but another Marshal who attempted service there also had no luck and learned that E*Trade’s registered agent, Corporation Service Co, had not been stationed there for roughly six months.
The court finally entered a default judgment against E*Trade, “for what appeared to be E*Trade’s dilatory tactics in evading service of process,” when service was finally effectuated at a July 2011 hearing, Robreno wrote.
E*Trade’s attorney had received a copy of the petition around April 2010, but the attorney told the petitioners that the document was unacceptable because it lacked a case number and the name of the presiding judge – information that the petitions sent shortly thereafter.
Through it all, “E*Trade offered no reason for failing to waive service and no explanation for why E*Trade refused to allow local counsel to accept service,” the 21-page opinion states.
“E*Trade also offered no explanation for why the U.S. Marshal, when attempting service at the Roseville branch office, was given the Harrisburg address which was also incorrect.”
Robreno nevertheless set aside the default judgment, even though “E*Trade acted in bad faith, engaged in dilatory tactics, and engaged in willful misconduct that led directly to the default,” and the Agnews were “seriously prejudiced by the amount of effort and time spent in attempting to bring their claim.”
“The underlying merits of this case do not appear to be affected” by the delay, according to the court.
E*Trade, which must file a response to the petition by Sept. 30, declined to comment on pending litigation.