Friday, April 3, 2020
California Supreme Court:
Corrigan Says That Under Convention, Service by Mail Is Ineffective in China—but Convention Does Not Apply Where Parties Agreed That Service Would Be Via Federal Express
By a MetNews Staff Writer
A Los Angeles Superior Court judge got it right—and the Court of Appeal got it wrong in reversing him—in holding that effect must be given to the parties’ express waiver of the formal requirements for foreign service under the Hague Convention, the California Supreme Court decided in an opinion filed yesterday.
The upshot is that Judge Randolph Hammock did not err in denying a motion by a Chinese company, Changzhou SinoType Technology Co., Ltd., to set aside a judgment against it, obtained by a New York-based company, Rockefeller Technology Investments (Asia). Judgment was for $414,601,200, plus 10 percent interest, bringing the total, as of 2016, to more than $500 million.
Justice Carol Corrigan wrote for a unanimous court in reversing a June 1, 2018 decision by Div. Three of this district’s Court of Appeal holding that the Superior Court lacked jurisdiction because SinoType had not received formal service of process. SinoType had agreed in a memorandum of understanding (“MOU”) with Rockefeller that service was to be effected via Federal Express or a similar service.
In that 2008 MOU, it was provided that any disputes would be resolved by binding arbitration, utilizing Judicial Arbitration & Mediation Service (“JAMS”) in Los Angeles. Rockefeller instituted such a proceeding in 2012.
SinoType did not appear, and the mediator, retired Court of Appeal Justice Richard Neal who served on Div. Seven of this district, in 2012 awarded a default judgment to Rockefeller.
Service at each step was provided to SinoType by Federal Express and email.
Rockefeller in 2014 brought an action in the Los Angeles Superior Court seeking confirmation of the award, with service of the summons and petition taking place by Federal Express and email. Judge Rafael Ongkeko in 2014 confirmed the award; SinoType in 2016 moved to set aside the ensuing judgment based on lack of jurisdiction in the Superior Court.
Hammock, on April 15, 2016, denied the motion, saying:
“To allow parties to enter into a contract with one another and then proceed to unilaterally disregard provisions out of convenience, like the one at issue here, would allow parties to simply return to their respective countries in order to avoid any contractual obligations. As aptly noted by the plaintiff in its opposition, this would essentially result in anarchy and turn the entire international arbitration law on its head. This court respectfully declines to do so.”
He added that “even under Chinese law there is no logical and/or legal reason why Chinese companies should not be able contractually agree to a manner of service as was in the instant case.”
Hammock also observed that SinoType, in seeking equitable relief, failed to act with reasonable diligence.
Court of Appeal Presiding Justice Lee Edmon said in her 2018 opinion that the parties’ agreement that service would be “via Federal Express or similar courier” was a nullity. She explained:
“[T]the Hague Service Convention does not permit parties to set their own terms of service by contract. Instead, it requires service on foreign parties to be carried out as specified in the Convention by the receiving country. China does not permit its citizens to be served by mail, and thus SinoType was not validly served with the summons and petition.”
“In the absence of proper service, the trial court never obtained personal jurisdiction over SinoType, and thus the judgment against SinoType necessarily was void. Because a void judgment can be set aside at any time, SinoType’s motion to set aside the judgment necessarily was timely. The trial court therefore erred in denying SinoType’s motion to set aside the judgment.”
The jurist pointed out that the Hague Convention “emphasizes the right of each contracting state—not the citizens of those states—to determine how service shall be effected.” She added:
“The Convention does not include an analogous provision allowing private parties to international contracts to agree to accept service by mail.”
Corrigan saw it differently, saying:
“[I]f the Convention applied here, and assuming service by Federal Express constitutes a species of service by mail, China’s objection to foreign mail service…would preclude direct service via Federal Express, regardless of whether California law authorized such service.”
But, she said, the convention does not apply, setting forth:
“[W]e conclude that the Convention applies only when the law of the forum state requires formal service of process to be sent abroad. We further conclude that, because the parties’ agreement constituted a waiver of formal service of process under California law in favor of an alternative form of notification, the Convention does not apply.”
The justice quoted the court’s 1857 opinion in Gray v. Hawes as saying (with italics being in the original):
“To sustain a personal judgment the Court must have jurisdiction of the subject-matter, and of the person….Where the jurisdiction of the Court as to the subject-matter has been limited by the Constitution or the statute, the consent of parties cannot confer jurisdiction. But when the limit regards certain persons, they may, if competent, waive their privilege, and this will give the Court jurisdiction.”
“Holding that the Convention does not apply when parties have agreed to waive formal service of process in favor of a specified type of notification serves to promote certainty and give effect to the parties’ express intentions. Conversely, to apply the Convention under such circumstances would sow confusion and encourage gamesmanship and sharp practices.”
She went on to say:
“Requiring formal service abroad under California law where sophisticated business entities have agreed to arbitration and a specified method of notification and document delivery would undermine the benefits arbitration provides. Uncertainty with respect to service would require court intervention to resolve, increase the time and cost of dispute resolution, and potentially call into question long-final arbitration awards. Such a result appears contrary to the Legislature’s attempts to position California as a center for international commercial arbitration.”
The case is Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd., 2020 S.O.S.
Representing SinoType were Steve Qi and May T. To of the Law Offices of Steve Qi and Associates in Alhambra, as well as Alhambra attorney Steven L. Sugars. Acting for Rockwell were downtown Los Angeles attorneys Thomas P. O’Brien, Katherine F. Murray, and Nicole D. Lueddeke of Paul Hastings and Steven A. Blum and Gary Ho of Blum Collins LLP.
Copyright 2020, Metropolitan News Company