Case of the Day: Codemasters Group v. SouthPeak Interactive
Posted on December 21, 2011
The case of the day is Codemasters Group Holdings Ltd. v. SouthPeak Interactive Corp. (E.D. Va. 2011). Codemasters, an English video game developer, had a video game distribution agreement with SouthPeak, a Delaware corporation doing business in Virginia. Codemasters’ claim was that SouthPeak, its distributor, had failed to pay invoices for games Codemasters had shipped to it. Codemasters and SouthPeak settled the dispute. Under the settlement agreement, SouthPeak promised to pay $2 million. The settlement agreement had an exclusive choice of court clause:
This Agreement shall be governed by, and construed in accordance with, English law. Any dispute arising out of or in connection with, or concerning the carrying into effect of, this Agreement shall be subject to the exclusive jurisdiction of the High Court of England, and the parties hereby submit to the exclusive jurisdiction of that court for these purposes.
Codemasters asserted that SouthPeak had failed to pay as promised and sued SouthPeak in the Eastern District of Virginia for $1.6 million. SouthPeak moved to dismiss for improper venue, and Codemasters voluntarily dismissed the case without prejudice. Codemasters then brought an action in the High Court, and it served the English process on the assistant to SouthPeak’s chairman, Terry Phillips. Codemasters also sent Mr. Phillips a letter notifying him of the action and the deadline for a response. SouthPeak failed to appear in the English action, and the High Court entered a default judgment for more than £817,000. The judgment became final under English law, and Codemasters brought an action for recognition and enforcement in the same Virginia court where it had first sued. It moved for summary judgment, and SouthPeak defended on grounds of lack of notice and personal jurisdiction, failure to mitigate damages, and a supposed breach of the settlement agreement that excused its nonperformance. The last two defenses, which go to the merits, are obvious non-starters, and the judge dealt with them summarily in a footnote. The real question in the case was the notice and jurisdiction question.
The judge quickly, and correctly, rejected the personal jurisdiction argument. Under § 5(a)(3) of the Uniform Foreign Country Money-Judgment Recognition Act, which Virginia has enacted, lack of personal jurisdiction is not grounds to refuse recognition and enforcement if the defendant, “prior to the commencement of the proceedings, had agreed to submit to the jurisdiction of the foreign court with respect to the subject matter involved.”
The judge also rejected the notice argument. Under the UFCMJRA, a judgment need not be recognized if the defendant “did not receive notice of the proceedings in sufficient time to enable him to defend.” SouthPeak argued that “notice” meant proper service of process, and it argued that the service of process had been defective. But the judge held that “notice” means “notice”, not “service of process.”
All this seems correct, but it does lead to an interesting result: insufficient service of process is not, in itself, a defense to recognition and enforcement under the UFCMJRA if the parties had a choice of forum agreement, as long as the defendant received sufficient notice of the foreign proceedings. Insufficient service of process is not one of the grounds for non-recognition in the statute, and § 5 of the statute provides that service of process in the foreign state is but one of the grounds on which the US court is required to reject challenges to the foreign court’s personal jurisdiction. We saw this issue in Hubei Gezhouba Sanlian Indus. Co. v. Robinson Helicopter Co., where the outcome was the same.