Drafting for Service of Process Problems

A typical choice of forum clause does a few things: it designates an exclusive forum in which claims may be brought; and it contains waivers of the defenses of lack of personal jurisdiction, venue, and forum non conveniens. But typically—in my experience, anyway—it does not address the problem of service of process. So if there is a problem with service of process, whether because the defendant is attempting to make service difficult, or because, in a Hague Convention case, the central authority refuses to effect service for one reason or another, the choice of forum clause may be for naught.

I suggest considering a clause in which the foreign party irrevocably appoints an agent for service of process in the forum. This is not a new idea, but it has the potential to avoid many of the service of process problems we see in the cases. For one thing, the Hague Convention applies only in cases “where there is occasion to transmit a judicial or extrajudicial document for service abroad.” So by appointing a domestic agent for service of process, a potential plaintiff can avoid the need to resort to the Convention. For another thing, appointment of a reputable  agent avoids the problem of a foreign defendant ducking service.

The one problem I see with this approach is the irrevocability of the appointment. It wouldn’t do much good to appoint an agent for service of process if the principal (the defendant) could terminate the agency when a controversy develops! Let’s first consider the matter at common law, looking to the Restatement for guidance. The Restatement (Third) of Agency, § 3.12, doesn’t treat this as a real agency, but rather as a “power given for security”:

A power given as security is a power to affect the legal relations of its creator that is created in the form of a manifestation of actual authority and held for the benefit of the holder or a third person. This power is given to protect a legal or equitable title or to secure the performance of a duty apart from any duties owed the holder of the power by its creator that are incident to a relationship of agency under § 1.01

Some jurisdictions don’t accept this rule, requiring instead that the power must be held by the person for whose benefit the power is created. See, e.g., Pacific Landmark Hotel v. Marriott Hotels, Inc., 23 Cal. Rptr. 2d 555, 561 (App. Ct. 1993). This obviously wouldn’t work in the service of process context, because allowing the plaintiff to effect service on the defendant by serving process on the plaintiff itself would hardly comport with due process.

Some jurisdictions also require that the power must “accompany a proprietary interest” in the subject of the power. It’s not clear how this applies in the service of process context.

But in jurisdictions without these peculiarly restrictive rules, a power to accept service given to a third party, for the benefit of the prospective plaintiff, should work. And it has been approved (well, maybe not exactly on all fours) in a few cases: Society of Lloyd’s v. Cohen, 108 Fed. Appx. 126 n.13 (5th Cir. 2004); Brooklyn Fed. Sav. Bank v. 140 West Assocs., LLC, 29 Misc.3d 1237(A) (Sup. Ct. 2010).

Unless you’re sure that the law of the forum will permit an irrevocable power, you probably shouldn’t rely exclusively on an irrevocable power. However, I think it’s worth including in a standard forum selection clause. You could treat the domestic agent as a backup in case service by a more traditional means doesn’t work. Also, in the worst case the only problem with the clause is that the agency is revocable; but as long as the defendant has not revoked it, it should work in just about any jurisdiction. And it seems to me that even if the defendant claims to have secretly revoked the agency, under notions of apparent authority, a secret revocation won’t be effective.

Just think about it the next time you are drafting a forum selection clause—and let me know how it works!

2 responses to “Drafting for Service of Process Problems”

  1. […] Cir. 2011). The case illustrates a trap for the unwary in drafting forum selection clauses. In an earlier post, I dealt with another aspect of these clauses, namely, appointment of an agent for service of […]

  2. […] Cir. 2011). The case illustrates a trap for the unwary in drafting forum selection clauses. In an earlier post, I dealt with another aspect of these clauses, namely, appointment of an agent for service of […]

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