The opinion of the court was delivered by: ROVNER
This is an action brought by Emerson Lenoir, a former employee of the Federal Deposit Insurance Corporation ("FDIC"), to challenge the termination of his employment. After working at the FDIC for approximately two years and one month, plaintiff's employment was terminated on the ground that his involvement in loan transactions at the bank by which he had previously been employed and for which the FDIC had become receiver created a conflict with his position as Liquidation Assistant. Plaintiff's lawsuit is brought against the FDIC and various individual defendants. Count I of his complaint alleges that defendants deprived him of property and liberty without due process of law in violation of the Fifth Amendment to the United States Constitution. Count II alleges that defendants breached plaintiff's employment contract in violation of state law. Count III alleges racial discrimination pursuant to Title VII of the Civil Rights Act of 1964. Before the Court is defendants' motion to dismiss.
Plaintiff filed his complaint on September 11, 1987. On or about September 18, 1987, he attempted service upon defendants by sending copies of the summonses and complaints by certified mail, together in the same package, to the FDIC's Chicago Regional Office. The individual defendants, with the exception of Jack Pleasant and Bruce Pederson and the possible exception of Gary Holloway, signed and returned notice and acknowledgment forms. On December 1, 1987, during a status hearing, plaintiff's counsel acknowledged that he had not served the United States Attorney for the Northern District of Illinois and the Attorney General of the United States as required by Fed.R.Civ.P. 4(d)(4) and (5). On December 29, 1987, plaintiff personally served the United States Attorney. He served the Attorney General by mail on December 31, 1987.
The individual defendants contend that the complaint should be dismissed against them because they have not been properly served. With respect to defendants Jack Pleasant and Bruce Pedersen, plaintiff concedes the inadequacy of service, and those two defendants are therefore dismissed from the case. Plaintiff contends that the remaining individual defendants were properly served pursuant to Fed. R. Civ. P. 4(c)(2)(C)(ii), which provides for service "by mailing a copy of the summons and of the complaint (by first-class mail, postage prepaid) to the person to be served, together with two copies of a notice and acknowledgment conforming substantially to form 18-A and a return envelope, postage prepaid, addressed to the sender."
Defendants argue that the attempted service did not comply with Rule 4(c)(2)(C)(ii) for three reasons. First, defendants contend that the envelope was not specifically addressed to the individual defendants. Defendants cite no case law or rationale in support of this argument. The Court finds that the failure to specifically address the envelope to the individual defendants does not render the service defective, especially in light of the fact that defendants received actual notice. Cf. Jaffe v. Federal Reserve Bank of Chicago, 100 F.R.D. 443, 445 (N.D. Ill. 1983) ("When notice is actually given a person, it matters not a whit whether he or she receives it at home, at work, at play or anywhere else.").
Second, defendants contend that plaintiff failed to enclose a stamped return envelope as required by Rule 4(c)(2)(C)(ii). The failure to include both the notice and acknowledgment forms and a return envelope is generally held to render service defective. See, e.g., Norlock v. City of Garland, 768 F.2d 654, 655-56 (5th Cir. 1985); Quann v. Whitegate-Edgewater, 112 F.R.D. 649, 652-53 (D. Md. 1986). But see Kitchens v. Bryan County National Bank, 825 F.2d 248, 255-56 (10th Cir. 1987) (despite omission of return envelope and notice and acknowledgment form, service complied with spirit of Rule 4; federal courts take a permissive attitude when defendants receive actual notice). However, of these two requirements, inclusion of the notice and acknowledgment is the more important. Where they are submitted and only the return envelope is omitted, service is not considered invalid in the absence of prejudice to the defendants. See United Services Auto Association v. Cregor, 617 F. Supp. 1053, 1055 (N.D. Ill. 1985).
Third, defendants argue that service was defective because it was delivered by certified mail rather than first-class mail. Congress considered an amendment to Rule 4 which would permit service by certified or registered mail, return receipt requested. There was a concern, however, that such a procedure would be inadequate to ensure actual notice. Congress therefore specifically rejected such a procedure, requiring instead the use of first-class mail with an enclosed notice and acknowledgment form and providing that mail service was not complete unless and until that form was signed and returned. See Bernard v. Strang Air, Inc., 109 F.R.D. 336, 337-38 (D. Neb. 1985); Fed.R.Civ.P. 4, Original Practice Commentary at C4-19 (reprinted at 28 U.S.C.A. Rule 4, 1988 Supp.). Thus where service is attempted by certified mail, without inclusion of the notice and acknowledgment form, service is improper. E.g., Bernard, 109 F.R.D. at 336-37. See also Chronister v. Sam Tanksley Trucking, Inc., 569 F. Supp. 464, 469-70 (N.D. Ill. 1983) (service improper where use of certified mail was one of several defects, including failure to enclose proper notice and acknowledgment form). Here, the notice and acknowledgment forms were enclosed and the recipients signed and returned them. In light of the completion of actual notice and the lack of prejudice to defendant from the use of certified rather than first-class mail, the Court finds that the defect is not grounds for dismissal.
Defendants argue that Count I of the complaint, which alleges deprivation of property and liberty without due process of law, fails to state a claim.
Defendants contend that plaintiff's claim for deprivation of property without due process fails because he did not have a property interest in his continued employment at the FDIC. Plaintiff's position fell in the category of excepted service. See 5 U.S.C. §§ 3301-02; 5 C.F.R. § 213. Defendants emphasize that the due process protections afforded to employees in the competitive service do not apply to employees in the excepted service. See United States v. Fausto, 484 U.S. 439, 108 S. Ct. 668, 98 L. Ed. 2d 830 (1988). Defendants also rely on Castro v. United States, 775 F.2d 399, 406 (1st Cir. 1985), which held that excepted service employees at the FDIC have no property interest in the renewal of their temporary appointments. Plaintiff distinguishes Castro on the ground that he was terminated prior to the expiration of his appointment rather than merely denied a renewal upon the expiration of his appointment. Furthermore, the cases cited by defendants ...