BioQ Pharma Incorporated v. GS Holding

Background

BioQ filed a complaint arising from what it described as a failed negotiation with GS Holding, Star Capital Investments LLC, and Gurmeet Singh Bhamrah. The complaint listed the defendants’ address as Dubai, United Arab Emirates. BioQ filed proofs stating that summonses had been served on the defendants through substituted service on Muhammad Jaseer by Process Service Network, LLC.

The clerk entered default against GS Holding and Star Capital on March 14, 2023, but declined to enter default against Bhamrah because BioQ had not personally delivered the summons and complaint as required by Federal Rule of Civil Procedure 4(f)(2)(C)(i). BioQ later sought default against Bhamrah and ratification of the defaults against GS Holding and Star Capital. In the alternative, BioQ asked permission to serve Bhamrah by international courier or by delivery to a receptionist at his last known business address. GS Holding and Star Capital moved to set aside the clerk’s entry of default.

Motion to Set Aside Default

Under Federal Rule of Civil Procedure 55(c), a court may set aside an entry of default for “good cause.” The court considered three factors: whether the defendants’ culpable conduct caused the default, whether they had a potentially valid defense, and whether setting aside default would prejudice BioQ. Defaults are generally disfavored because cases should be decided on their merits when reasonably possible.

The court found that GS Holding and Star Capital had not acted culpably. They presented evidence that they genuinely believed BioQ had not properly served them under United Arab Emirates law and therefore believed they were not required to respond. They also moved to set aside the default about six weeks after it was entered. The court found no evidence that they delayed responding in bad faith or to gain an advantage.

The court also found that the defendants met the relatively low requirement of showing a potentially meritorious defense. They alleged that BioQ’s service was likely insufficient because Process Service Network was not shown to be authorized by the United Arab Emirates to serve process. The court did not decide whether service was actually valid at this stage; it concluded only that the defendants had alleged enough facts for this factor.

Finally, the court found that BioQ had not shown the kind of tangible harm required to establish prejudice. Additional delay and having to litigate the case on its merits were not enough. Because all three factors favored setting aside default, the court granted GS Holding and Star Capital’s motion to set aside default and denied as moot BioQ’s request to ratify the clerk’s entry of default against those entities.

Alternative Service

Federal Rule of Civil Procedure 4(f)(3) permits a court to authorize alternative methods for serving a defendant in a foreign country when the method is reasonably calculated to notify the defendant and give the defendant an opportunity to respond. The court explained that BioQ had not shown that it meaningfully attempted service in compliance with United Arab Emirates law or why it could not comply with those requirements.

The court also concluded that BioQ’s proposed methods—leaving process at a business location without requiring a signature or delivering it to a receptionist—appeared to conflict directly with United Arab Emirates service rules. The court therefore denied BioQ’s motion for alternative service without prejudice. It directed BioQ to attempt service on Bhamrah under Federal Rule 4(f) and United Arab Emirates service rules before renewing the request, and allowed a renewed request only if that attempt failed.

Disposition

The court granted the defendants’ motion to set aside default, denied BioQ’s motion for default as moot, and denied BioQ’s motion for alternative service without prejudice. GS Holding and Star Capital were ordered to file any motions responding to the complaint within 28 days of the order. BioQ was ordered to file either proof of service or a declaration describing its efforts to serve Bhamrah within 42 days.