The Zenus Fund LLC v. The Phoenix Fund LLC et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
OPINION AND ORDER
Pending before the Court is Defendants Phoenix Fund, LLC
(“Phoenix Fund”), Franciso J. Rivera Fernández, and Edgar J.
Rivera’s (collectively, “Defendants”) Motion to Dismiss Complaint
for Lack of Personal Jurisdiction Over […] Phoenix Fund, LLC, Mr.
Francisco J. Rivera Fernández and Mr. Edgar J. Rivera (“Motion to
Dismiss”). (Docket No. 12). Defendant’s Motion to Dismiss is
DENIED.
I. BACKGROUND
This is a civil action premised on federal question and
supplemental jurisdiction. Plaintiff The Zenus Fund LLC (“Zenus
Fund”) commenced this litigation on July 7, 2025, alleging in its
Complaint for Violations of the Federal Securities Laws
(“Complaint”) that Defendants engaged in securities fraud, in
violation of Section 10(b) of the Securities Exchange Act of 1934,
ZENUS FUND LLC,
Plaintiff,
v.
THE PHOENIX FUND LLC, FRANCISCO J.
RIVERA FERNÁNDEZ, EDGAR J. RIVERA,
Defendants.
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15 U.S.C. § 78j; Rule 10b-5 promulgated thereunder, 17 C.F.R. §
240.10b-5; Section 410 of Puerto Rico’s Uniform Securities Act of
1963, P.R. Laws Ann. tit. 10 § 890(b); breach of contract, in
violation of Article 1163 of Puerto Rico’s Civil Code of 2020,
P.R. Laws Ann. tit. 31 § 9315; bad faith, in violation of Article
1164 of Puerto Rico’s Civil Code of 2020, P.R. Laws Ann. tit. 31
§ 9316; and unjust enrichment, in violation of Article 1526 of
Puerto Rico’s Civil Code of 2020, P.R. Laws Ann. tit. 31 §
10771.[1] (Docket No. 3).
Zenus Fund’s claims arise from Defendants’ purported failure
to provide an agreed-upon total amount of $35 million in capital
investments between 2020 and 2024. (Id. at 2–6 ¶¶ 8–25). As alleged
in the Complaint, Defendants committed to invest in Zenus Fund
through a series of convertible promissory notes and equity
subscription agreements and to hold themselves out as Zenus Fund’s
“Lead Investor.” (Id. at 3 ¶ 18). Yet, despite repeated assurances
of financial capacity and intent to perform, Phoenix Fund
consistently defaulted on its obligations and funded only $23.325
million, often late and in piecemeal fashion. (Id. at 5–6 ¶¶ 19–
25). Phoenix Fund also failed to provide audited financial
statements and regulatory documentation, further compromising
compliance and investor confidence. (Id. at 5 ¶ 20).
On August 13, 2025, Zenus Fund informed the Court that,
despite multiple attempts, it has been unable to effectuate
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personal service process on Defendants. (Docket No. 6). Upon
examination of Zenus Fund’s Motion Requesting Authorization for
Service of Process by Publication and Sworn Statement Regarding
Non-Service of Summons, (Docket Nos. 6, 6-1), the Court permitted
Zenus Fund to serve Defendants by publication, via a newspaper of
general circulation, and ordered that a copy of the Complaint and
summons be sent to the Defendants’ last known addresses by
certified mail with return receipt requested, within ten days of
the summons’ publication. (Docket No. 7). Zenus Fund filed proof
that service by publication was made on August 29, 2025, as to
each of the Defendants pursuant to Puerto Rico Rule 4.6 of Civil
Procedure,1 and that a copy of the Complaint along with the summons
were sent to them individually by certified mail with return
receipt requested on September 2, 2025. (Docket No. 9).
Thereafter, Defendants responded by filing their Motion to
Dismiss, where they allege that the service of process by
publication was insufficient because the summons published in El
Vocero failed to state the time within which the Defendants were
required to appear and defend. (Docket No. 12). As such, Defendants
seek dismissal of this civil action for insufficient service of
1 Zenus Fund indicates in Plaintiffs’ Motion Submitting Proof of Service by
Publication to Defendants The Phoenix Fund LLC, Francisco J. Rivera Fernández
and Edgar J. Rivera that service by publication was made via El Nuevo Día
newspaper, (Docket No. 9), yet all exhibits attached thereto indicate that
service by publication was made via El Vocero newspaper. (Docket Nos. 9-1 to 9-
5).
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process. (Id.). In response, Zenus Fund filed an Opposition to
Motion to Dismiss (“Opposition”), (Docket No. 14), and a Motion
Reiterating Opposition to Motion to Dismiss, (Docket No. 15),
acknowledging that that the service by publication did not indicate
the time within which the Defendants shall appear and defend, yet
also exhorting the Court to quash such service by publication and
– rather than dismissing the civil action – grant Zenus Fund twenty
days to serve Defendants properly.
II. LEGAL STANDARD
A. Fed. R. Civ. P. 4
“Before a federal court may exercise personal jurisdiction
over a defendant, the procedural requirement of service of summons
must be satisfied.” Omni Cap. Int’l, Ltd. v. Rudolf Wolff & Co.,
Ltd., 484 U.S. 97, 104 (1987). “[S]ervice of summons is the
procedure by which a court having venue and jurisdiction of the
subject matter of the suit asserts jurisdiction over the person of
the party served.” Miss. Publ’g Corp. v. Murphree, 326 U.S. 438,
444-45 (1946).
“Today, service of process in a federal action is covered
generally by Rule 4 of the Federal Rules of Civil Procedure.” Omni
Capital Int’l, 484 U.S. at 104. Under Rule 4(a), a proper summons
must “state the time within which the defendant must appear and
defend.” Fed. R. Civ. P. 4(a)(1)(D).
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In addition to the established federal procedures,
individuals and corporations may be served by “following state
law for serving a summons in an action brought in courts of general
jurisdiction in the state where the district court is located or
where service is made” – thus allowing service of process in
accordance with the procedures permitted under Puerto Rico law.
Id. 4(e)(1), 4(h)(1)(A). Accordingly, Puerto Rico Rule of Civil
Procedure 4.6 allows the services of summons by publication, P.R.
Laws Ann. tit. 32, app. III. R. 4.6, so long as such summons comply
with Puerto Rico Rule 4.2’s requisite of stating “the term within
which these rules require the defendant to appear before the
Court.” P.R. Laws Ann. tit. 32, app. III. R. 4.2.
“Whenever service of process is attempted pursuant to a
procedural rule of Puerto Rico, this Court is bound by the
interpretations of that rule by the Supreme Court of Puerto Rico.”
Culebra Conservation & Dev. Auth. v. Wit Power II, 108 F.R.D. 349,
352 n.5 (D.P.R. 1985); see Gibbs v. Paley, 354 F. Supp. 270, 272
(D.P.R. 1973) (If “[s]ervice was attempted pursuant to a procedural
rule of Puerto Rico” then “[t]his Court is bound by definitive
interpretations of that rule by the Supreme Court of Puerto
Rico.”); see also Hosp. Mortg. Group, Inc. v. Parque Indus. Río
Cañas, Inc., 653 F.2d 54, 57 (1st. Cir. 1981).
B. Fed. R. Civ. P. 12(b)(5)
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“A Rule 12(b)(5) motion is the proper vehicle for challenging
the mode of delivery or the lack of delivery of the summons and
complaint.” 5B Wright & Miller’s Federal Practice and Procedure §
1353 (3d ed. 2010); Rivera-Otero v. Amgen Mfg. Ltd., 317 F.R.D.
326, 328 (D.P.R. 2016). A party filing a motion under Rule 12(b)(5)
“is essentially contesting the manner in which process of service
was performed.” Ramírez De Arellano v. Colloides Naturels Int’l,
236 F.R.D. 83, 85 (D.P.R. 2006). When service of process has been
challenged, the plaintiff bears the burden of proving service was
properly executed. Rivera-López v. Mun. of Dorado, 979 F.2d 885,
887 (1st. Cir. 1992).
“Motions under Rule 12(b)(5) differ from other motions
permitted by Rule 12(b) in that they provide a district court with
a course of action other than dismissing the case when the
defendant prevails.” 5B Wright & Miller’s Federal Practice and
Procedure § 1354 (3d ed. 2010). Under Rule 12(b)(5), “district
courts possess broad discretion either to dismiss the action or to
retain the case and quash the service made on the
defendant.” Ramírez De Arellano, 236 F.R.D. at 85. Accordingly,
“[i]t is well known that the dismissal of the action under Fed. R.
Civ. P. 12(b)(5) is inappropriate when there is a ‘reasonably
conceivable means’ through which service may be obtained and
jurisdiction acquired over the defendant.” Ortiz v. Reyes, 05-CV-
1721, 2006 WL 940703, at *4 n.1 (D.P.R. Apr. 10, 2006); see also
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LD White Sugar Corp. v. Able Sales Co., 19-CV-2099, 2021 WL
11962976, at *1 (D.P.R. Mar. 24, 2021); Monefeldt v. United States,
24-CV-1220, 2025 WL 566328, at *2-3 (D.P.R. Feb. 20, 2025). Hence,
when the defects in the initial service of process are curable,
“the Court should treat a motion to dismiss as a motion to quash
service of process in the alternative and retain the case pending
effective service.” Ramírez de Arellano, 236 F.R.D. at 85 n.4.
III. ANALYSIS
This District Court has abided by the general rule that, when
a defective summons is curable, a Rule 12(b)(5) motion may be
treated as a motion to quash service of process – thus, ordering
a plaintiff to properly redo service of process, rather than
dismissing the civil action. In this case, the service of process
by publication was made pursuant to Rule 4.6 of Puerto Rico’s Rules
of Civil Procedure and, hence, this Court is legally bound by the
Supreme Court of Puerto Rico’s interpretation as to whether the
procedural fault at play is curable or fatal.2
The Supreme Court of Puerto Rico has determined that Rule
4.2’s requirements entail “strict compliance,” Chase Manhattan
Bank, N.A. v. Polanco Martínez, 131 D.P.R. 530, 535 (P.R. 1992);
2 As this civil action arises from federal question, the Erie doctrine is
inapplicable. See generally Erie R.R. v. Tompkins, 304 U.S. 64 (1938); see also
Guar. Tr. Co. v. York, 326 U.S. 99, 108-09 (1945).
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Rodríguez v. Nasrallah, 118 D.P.R. 93, 98 (P.R. 1986), further
emphasizing that compliance with the Commonwealth’s procedural
rules shall be “rigorous, faithful and strict” when service of
process is made by publication. Medina Garay v. Medina Garay, 161
D.P.R. 806, 819 (P.R. 2004) (emphasis included in original); see
also Márquez Resto v. Barreto, 143 D.P.R. 137, 143 (P.R. 1997);
Marrero Albino v. Vázquez Egean, 135 D.P.R. 174, 177 (P.R. 1994);
Reyes v. Oriental Fed. Savs. Bank, 133 D.P.R. 15, 21 (P.R. 1993).
As it specifically pertains to service by publication in a federal
action – when such service of process was conducted in accordance
with Puerto Rico law – the Supreme Court of Puerto Rico has
indicated that failure to indicate in the published summons the
time within which Defendants shall appear and defend is a flaw
that renders the service of process insufficient and,
consequently, strips the federal court from jurisdiction. Marrero
Albino, 135 D.P.R. at 177.
None of the summons that were published in El Vocero as to
each of the Defendants satisfy either federal Rule 4(a)(1)(D)’s
and or Puerto Rico Rule 4.2’s requisite of specifying the time
within which Defendants shall appear and defend. (Docket No. 9-
1). Plaintiff concedes as much in their Opposition. (Docket No.
14).
Thus, Zenus Fund’s service by publication in El Vocero, made
on August 29, 2025, was procedurally flawed and insufficient for
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this Court to establish personal jurisdiction over Defendants.
Senior Loiza Corp. v. Vento Dev. Corp., 760 F.2d 20, 24 (1st. Cir.
1985) (holding that Rule 4.6 “sets out the exclusive method through
which a court may obtain jurisdiction over a party solely by way
of publication, and any significant failure to comply with its
requirements will cause the nullity” going forward).3 Yet, in light
of this District Court’s general practice of treating a Rule
12(b)(5) motion to dismiss as a motion to quash service of process
– along with Zenus Fund’s diligent efforts in prosecuting the case;
Defendants’ appearance before this Court; and Defendants’
knowledge about the claims against them – the Court DENIES
Defendant’s Motion to Dismiss, QUASHES Zenus Fund’s service of
process by publication, and GRANTS Zenus Fund twenty-one (21) days
to either coordinate a waiver of service of process with Defendants
or personally serve Defendants.
In accordance with federal Rule 4(d)(2), if Defendants refuse
to sign a waiver without good cause or purposefully avoid formal
service of process, then Defendants will be responsible for bearing
the expenses that Zenus Fund incurs in effectuating service of
process, including attorney’s fees. Fed. R. Civ. P. 4(d)(2)(A)-
(B).
3 Although the First Circuit cites Rule 4.5 of Puerto Rico’s Rules of Civil
Procedures, in 2009 such rules were amended – taking effect as of July 1, 2010
- and service of process by publication passed from being Rule 4.5 to Rule 4.6,
yet under the same legal standard.
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IV. CONCLUSION
The Court DENIES Defendants’ Motion to Dismiss.
IT IS SO ORDERED.
In San Juan, Puerto Rico, on January 7, 2026.
/s/ Gina R. Méndez-Miró
GINA R. MÉNDEZ-MIRÓ
UNITED STATES DISTRICT JUDGE
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