Case of the Day: In re China Education Alliance Securities Litigation
Posted on January 11, 2012
The case of the day is In re China Education Alliance, Inc., Securities Litigation (C.D. Cal. 2011). Vinnie Apicella brought a securities class action against China Education Alliance, Inc., Xiqun Yu, Zibing Pan, Chunqing Wang, James Hsu, Lainzheng Zhang, and Yizhao Zhang. Because the case was subject to the Private Securities Litigation Reform Act, discovery was initially stayed. Apicella moved for leave to serve the individual defendants with the summons and complaint by alternate means, namely, by service on CEA’s agent for service of process. The judge denied the motion on the grounds that it was unclear whether any of the individuals were still affiliated with CEA. But she did lift the stay of discovery for the limited purpose of allowing Apicella to serve interrogatories aimed at determining the whereabouts of the individual defendants.
Although both Zhangs were later reelected as directors of CEA, the company, in response to the interrogatory, stated that it did not know their addresses. Apicella then renewed his motion for alternative service of process, this time seeking to make service on CEA’s US lawyer.
The judge granted the motion, finding that in the circumstances, service on the lawyer was reasonably calculated to provide notice to both Zhangs. The defendants asserted that the service would run afoul of the Hague Service Convention, since the documents would have to be mailed to China and China had objected to service by postal channels. The judge rightly rejected this argument on the grounds that the service was to take place in the United States, and that therefore the Convention did not apply. She might also have observed that the Convention did not apply because the defendants’ addresses were unknown.