12Mar
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Since 2017, the time to complete service of process in China under the Hague Service Convention has more than doubled. As of 2019, the total time to effect service is two years. The Chinese Central Authority (CCA) has asserted that the two years required to complete service is necessary due to the many layers of the Chinese judicial system. However, this assertion appears somewhat faulty when you consider that prior to 2019 the CCA routinely completed service in less than nine months and the Chinese judicial system had just as many layers then as it does presently.

We have, accordingly, recommended that clients who require service upon a Chinese defendant file for a default judgment under Article 15 of the Convention and have ourselves assisted many of these clients in obtaining Article 15 default judgments against Chinese defendants.[1] But an important practical principle of law comes into play when said default judgment is sufficiently large: Opposing counsel will file a motion to have the default judgment set aside.

We have now reviewed several of these motions and observed that opposing counsel tends to raise 7 common arguments to have an Article 15 default judgment set aside. These arguments are outlined below.

Argument #1: Violation of Due Process

Opposing counsel frequently asserts that it is a violation of due process to impose a default judgment against a defendant when the defendant has not been served.[2] In the case of default judgments under the Hague Convention, due process is defined under Article 15. Since the Convention is a treaty, under the Supremacy Clause of the Constitution, the Hague Service Convention due process requirements for issuing a default judgment take precedence over state and federal requirements.[3] Accordingly, when the requirements of Article 15 are met, due process has been given and US courts may properly grant a default judgment; not withstanding opposing counsel’s misplaced argument to the contrary.

And yet, this does not prevent opposing counsel from misconstruing case law.  Citing the Nevada Supreme Court in Grupo Famsa,[4] the New Jersey trial court stated “compliance with the Hague Convention does not necessarily satisfy due process.”[5] More specifically, the New Jersey court stated that it was not “convinced that a constitutional inquiry is inappropriate or unnecessary where the Hague Convention applies. Indeed, a due process inquiry is necessary to ensure the veracity of the certificate when the underlying facts are contested.”

There are two key problems with the New Jersey court’s opinion:

  1. First, case law makes it clear that when a Central Authority issues a Hague Certificate of Service (HCS), the courts are not to review the Central Authority’s decision.[6]
  2. Second, the Grupo case upon which the New Jersey court relied is a seriously flawed case.

In Grupo, the Mexican Central Authority effected service by serving an “employee in [Grupo’s] legal department.”[7] Under Nevada law, a corporation must be served by delivering the documents to be served to “the president or other head of the corporation, secretary, cashier, managing agent, or resident agent.”[8] The defendant filed a motion to quash service asserting that the person served on behalf of Grupo was a mere “hostess” without authorization to accept service.[9]

Although evidence was introduced that service upon a hostess was proper under Mexican law, the Nevada Supreme Court granted Grupo’s motion to quash service stating that the Mexican Central Authority’s service “amounted to no more than handing off judicial documents to the equivalent of ‘a greeter at Wal-Mart’.”[10]

The reason Grupo is flawed is because a Central Authority is only authorized to serve a defendant “by a method prescribed by its internal law for the service of documents in domestic actions upon persons who are within its territory.”[11] Under the Supremacy Clause, this provision of the Convention means that when a conflict between the method of service in the requesting and rendering countries’ laws exist, service is controlled by the rendering country’s laws.

Yet, despite having evidence that service of process upon Grupo was proper under the Mexican law, the Nevada Supreme Court ignored the rules of service under the Convention, as well as the principle of law that as a “sovereign” the Mexican government (here doing business as the Mexican Central Authority) needs to follow its own procedural rules and not those of the United States.

To further flush out why the Nevada Supreme Court is in error, let us consider a situation where the foreign country’s case law is in English. (This is necessary because Mexican laws are all in Spanish.[12]) Under Ontario law, service of process is proper upon a corporate defendant if the documents to be served are delivered to any person “in apparent control or management of any place of businesses.”[13] Of course, whether a person is “in apparent control” of a business is an evidentiary concern.[14]

Still, it is not hard to imagine that a hostess who controls the only egress into a business establishment would be deemed “in apparent control of the business.” But we will never know for sure whether the hostess in Grupo controlled the defendant’s place of business since the Nevada courts did not gather such information.[15]

Finally, due process requires that any attorney that files a motion to set aside a default judgment against a Chinese defendant must stipulate that the defendant has not been served. Key elements needed to set aside a default judgment are whether the defendant engaged in “culpable” conduct and whether the plaintiff would be prejudiced.[16] As a rule, from the time a defendant has been served it will take the Chinese Central Authority a year to issue an HCS. Accordingly, sometimes opposing counsel will know that their defendant has been served and are attempting to delay the inevitable proceeding. Moreover, setting aside an Article 15 default judgment and forcing a plaintiff to litigate the case would clearly be prejudicial to the plaintiff.

Argument #2: Every Central Authority Functions Differently

It is fair to say that no two Central Authorities are truly comparable. Key metrics that can differentiate Central Authority performance include (but are not limited to):

  • the average time to effect service,
  • the variation in time to effect service (i.e., how reliably a Central Authority will effect service), and
  • whether the Central Authorities return inquiries regarding the status of service.

While the average time Central Authorities effect service varies from country to country, the majority of Central Authorities provide Tier One service and will effect service and reliably issue Hague Certificates within 6-7 months of receiving a request for service.[17] For such countries, Article 15 default judgments are a non-issue.

Second Tier Central Authorities in other countries may require 7-12 months to issue an HCS and rarely, if ever, provide updates.[18] Yet, when it comes to default judgments it is important to remember that these Second Tier Central Authorities do reliably issue an HCS within 12 months. So, even though these Central Authorities do not provide updates, their reliability for issuing an HCS tends to mitigate the need for providing status updates.

Accordingly, for Second Tier Central Authorities, it is reasonable for courts not to grant Article 15 default judgments unless the Central Authority has had the request for service for more than 12 months and has not issued an HCS, or responded to requests for status updates.

And then there is China.

Prior to the third quarter of 2017, the Chinese Central Authority was like Central Authorities in the second group – it rarely provided status updates, but would routinely issue an HCS 8-10 months after receipt of a request for service. Then suddenly, in late 2017, the Chinese Central Authority put the brakes on issuing certificates. While, on average, LLS ships 3-4 requests for service per month to the CCA, the most recent HCS that we have received from the CCA was shipped in the first quarter of 2017.

From the date a Chinese defendant is served, it now takes the CCA one year to transmit the HCS to the US. During this year-long delay in transmitting confirmation of service the CCA maintains “radio silence” and only rarely affirmatively acknowledges a request for an update on service.

These problems are not unique to LLS — international process servers both within the US and abroad are experiencing the same foot-dragging by the CCA. Multiple complaints concerning the CCA’s performance have been filed with the Hague Conference and the Department of Justice – and yet nothing changes at the CCA.

Argument #3: “Every Reasonable Effort” Not Satisfied

Briefly, Article 15 states that it is permissible for a court to issue a default judgment when the following three conditions have been meet:

  1.  a Central Authority has been in receipt of the of request for service for more than six months,
  2. the Central Authority has not issued a Hague Certificate of Service (viz. a proof of service), and
  3. every reasonable effort has been made to contact the Central Authority to see if there are extenuating circumstances that warrant the trial court to grant more time for service.

Items (1) and (2) are usually easily proven with an affidavit of due diligence.

But when it comes to item (3) what does “every reasonable effort” mean?

For Tier One and Two Central Authorities we would agree with case laws that one attempt to contact these organizations does not constitute “every reasonable effort.”[19] This is especially true when a plaintiff receives an affirmative response from a Central Authority.[20]

But recall that no two Central Authorities are exactly the same; and the CCA is in a tier by itself. The CCA habitually ignores entreaties from the Hague Convention and the Department of Justice to improve its services. Accordingly, given the CCA’s track record with non-responsiveness, requesting more than one update on the status of a particular service would be an exercise in futility.[21]

Argument #4: Policy Does Not Stipulate a Time Limit for Effecting Service

While the purpose of the Hague Convention is “to ensure that judicial and extrajudicial documents to be served abroad shall be brought to the notice of the addressee in sufficient time,”[22] the Convention does not impose an obligatory time period within which the foreign central authority must effect service. Outside the pride a Central Authority gets for providing Tier One service, with the exception of Article 15, there is nothing in the Convention to motivate or compel a Central Authority to provide Tier One service. Accordingly, it is not in the United States’ interest to allow Article 15 to become moot by imposing too many onerous requirements on what constitutes “every reasonable effort.”

Argument #5: Jurisdiction Issues

In recent years, the Supreme Court has narrowed the scope of a court’s personal jurisdiction over foreign corporate defendants.[23] Courts now only have jurisdiction over defendants when the defendant is “at home” within the court’s geographic jurisdiction.

While a detailed discussion of the recent changes to the laws concerning jurisdiction is beyond the scope of this communication, suffice to say issues of jurisdiction are often included in motions to quash service or to set aside default judgments.[24] Here it is only important to remember that jurisdiction is independent of the service under the Hague Convention.

Argument #6: Errors in Preparation of Hague Forms

In one defendant’s motion to set aside a default judgment, it was asserted that the Hague forms submitted (USM-94) contained minor errors (e.g., the wrong font was used). The defendant in this case failed to cite the source of their authority, or their expertise in completing Hague request forms. This of course makes the defendant’s assertions laughable since this argument is premature at best and, more likely, an attempt at pettifogging.

The CCA knows how to reject a request for service – and usually does so within months of receiving the request for service. So, if the CCA really had a problem with how the Hague request forms were prepared, it would likely summarily reject the request for service and issue a Hague Certificate of Non-Service (HCNS). Accordingly, if there were substantial errors in the Hague forms’ preparation, there would be no need to file an Article 15 default judgment because the CCA would have issued an HCNS.

As a footnote, LLS prepares its Hague forms expertly. Indeed, the CCA uses LLS’s work product on their web page to demonstrate how they want their forms prepared.[25]

Argument #7: Obfuscation

The final defense strategy to have an Article 15 default judgment set aside is obfuscation; i.e. the inclusion of irrelevant case law. There is an old attorney adage that goes like this:

When the law is on your side argue the law

When the facts are on your side argue the facts

When neither the law nor facts are on your side, just argue

Some attorneys seem to embrace this mantra. For example, in motions to set aside Article 15 default judgments, attorneys have included irrelevant case law concerning service by other means[26] and service where Hague service was not considered by the court.[27]

How LLS Can Help

At LLS, we’re familiar with the complications of serving process in China and have a proven success record. With more than 35 years experience effecting service abroad, our team of international litigation specialists is the leading US provider of international service of process.

If you require assistance servicing process in China (or any other country) contact the professionals at Legal Language today.

Call us at 1-800-788-0450 or simply fill out our free quote form.

Notes
[1] For example, Groat v La Mere Cycles, No. 27-CV-15-14928 (Hennepin County MN 2018).
[2] FRCP 55(a); King v Taylor, 694 F.3d 650, 655 (6th  Cir. 2012); and Wright & Miller: Federal Practice & Procedure §2682 at 388-392 (4th Ed. 2018).
[3] As a ratified treaty, the Hague Convention is “the supreme Law of the Land.” See U.S. Const. Art. VI, cl. 2; Ackermann v. Levine, 788 F.2d 830, 838-39 (2d Cir. 1986).
[4] Grupo Famsa v. Eighth Jud. Dist. Ct., 371 P.3d 1048, 1051 (Nev. 2016).
[5] Celgene Corporation v. Gupta, No. 2:17-cv-5308-KM-JBC, Dist. Court, D. New Jersey 2018.
[6] The execution of a HCS by the destination country’s Central Authority is “prima facie evidence” that service of process was proper. Northrup King v Compania Productora Semillas Algodoneras Selectas, SA, 51 F.3d 1383 (8th Cir 1995). “[T]o rebut the prima facie case established by the completed [Hague] certificate of service requires a defendant to show lack of actual notice of the proceedings or that the defendant was prejudiced in some way as a result of the alleged deficiency.” Myrtle v. Graham, 2011 WL 446397 at *2 (E.D. La. 2011).  An appearance to defend against service is evidence of actual notice. Bevilacqua v. US BANK, Case No. 3D15-1684 (3rd Dist. Fl. App).
[7] Grupo, 371 P. 3d 1049-50.
[8] NRCP, Rule 4(d)(1).
[9] Grupo, 371 P. 3d 1050.
[10] Id. at 1051.
[11] Hague Convention, Article 5(a).
[12] The Mexican judicial system does not believe it has an obligation to publish English translation of its statutes and case opinions.
[13] Catherine Walsh: General Jurisdiction over Corporate Defendants under the CJPTA: Consistent with International Standards? 55(1) Osgoode Hall Law Journal 163, 174 (2018).
[14] Fiore v. Stamford Winair Company, CV095021310 (Superior Court of Connecticut May 28, 2009).
[15] At a minimum the Nevada Supreme Court elected not to publish such information; and we did not find a published opinion for the Nevada trial court.
[16] King, 694 F.3d at 655.
[17] Such countries include: Australia, Belgium, Canada, Denmark, France, Germany, Greece, Hong Kong, Iceland, Italy, Japan, Korea, Norway, Poland, Portugal, Spain, Sweden, Turkey, Ukraine (if the documents are transmitted in English and Ukrainian), and the United Kingdom.
[18] For example: Mexico and India.
[19] Brown v Allen, 2010 WL 11507324; Lipenga v Kambalame, 2015 WL 9484473; Harper v WW Grainger, 2013 WL 2470751; Universal Trading & Investing v Kiritchenko, 2007 WL 660083; and Silverman v. Iberico, No. 89-0432-OG 1990 U.S. Dist. LEXIS 5264, at *3 (D.D.C. April 30,1990).
[20] Lipenga v Kambalame, 2015 WL 9484473; Harper v WW Grainger, 2013 WL 2470751; and Universal Trading & Investing v Kiritchenko, 2007 WL 660083.
[21] We are not aware of any published case opinion on what constitutes “every reasonable effort” to interface with the CCA. Still, we do not believe that a court would require multiple update attempts given the CCA’s track record.
[22] Hague Convention, supra note 1 at preamble.
[23] Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017); Daimler Ag v. Bauman, 571 U.S. 117 (2014).
[24] For example see Cucuz v Rosta International Limited, 2017 WL 2213572.
[25] See https://assets.hcch.net/upload/forms14guide.pdf at 13 where the CCA states that the Hague form we submitted was “a well completed Summary.”
[26] FKA Distributing v YISI Technology, 2017 WL 4129538
[27] OGM v Televisa SA, 2009 WL 1025971.

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