Service Abroad ...

Rockefeller Tech. Inv. (Asia) VII) v. Changzhou Sinotype Tech. Co., Ltd., No. B272170 (D2d3 Jun 1, 2018)

Plaintiff, a US-based investment fund, won a $414 million default arbitration judgment against Defendant, a Chinese company. Over a year later, ChinaCo moved to vacate, arguing, among other things, that it was never properly served. The superior court declined to vacate. Although ChinaCo wasn’t properly served under the Hague Convention, the court found that it had consented to mail service in the underlying agreement that was the subject of the dispute, so resort to the Hague wasn’t necessary. 

On appeal, there’s a bit of a dispute over whether the underlying contract is actually a binding contract, with some interesting discussions regarding nuances of Chinese contract law. But at the end of the day, the Court of Appeal says that doesn’t matter, because China won’t let its citizens agree to service outside the Hague regardless. 

According to the Court: (1) as a ratified treaty, the Hague Convention preempts state law on service of foreign nationals;** (2) the Hague has a number of optional articles that signatory nations can agree or object to, including Article 10, which permits service though postal channels; (3) China has objected to Article 10; and (4) both the Hague and Chinese domestic law limit the avenues of service to official channels, so parties can’t contract around those limits to permit service through some other channel. 

Thus, ChinaCo wasn’t validly served with the arbitration demand. Which means that the arbitrator didn’t have personal jurisdiction. Which means the judgment was void. And since the judgment was void, it could be attacked under Code of Civil Procedure § 473(d), which doesn’t put a time limit on moving to vacate.

Reversed.

**Several times, the Court makes broad statements like “the Hague Service Convention does not permit Chinese citizens to be served by mail[.]” That statement seems overly broad to me. As the Hague’s official title makes clear, the Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters governs service abroad. It does not address service on foreign citizens when they are subject to service domestically. 

Indeed, that’s the essential holding of Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 699 (1988), a passage of which the Court here cites on the preemption point. In Schlunk, the Supreme Court said that, notwithstanding Germany’s ratification of the Hague, the German VW AG parent could be served in Illinois by substitute service on a U.S. sub based on an involuntary agency theory recognized under Illinois state law. The Hague didn’t apply, much less preempt, because service was not “abroad.” So had InvestCo properly followed California law to serve ChinaCo domestically, whether in California, § 413.10(a), or in some other state, § 413.10(b), it wouldn’t need to resort to the Hague, even though ChinaCo is a citizen of China.

Ultimately, that doesn’t make a difference here, because the contract listed ChinaCo’s service address in China. There’s not much of an argument that service was not, in fact, abroad. But if a Chinese citizen defendant had contracted to accept mail service at an address in the U.S.—such as through a stipulated domestic agent—the result should probably be different. Like almost every state, California law permits parties to contract to an appropriate manner of domestic service, see generally Nat’l Equip. Rental, Ltd. v. United Lumber Co., 24 Cal. App. 3d 1012 (1972), and if service is not abroad, California law would apply.