Case of the Day: Baker Hughes Inc. v. Homa

The case of the day is Baker Hughes Inc. v. Homa (S.D. Tex. 2012). Baker Hughes was an oil-field service company doing business in Texas. It was the developer of “CoreBright,” a fiber used in fiber-optic sensing. 1 Daniel Homa and Robert Harman were Baker Hughes employees. Both had signed non-disclosure and non-solicitation agreements. In 2010, according to the complaint, Homa and Harman, acting on behalf of Baker Hughes, formed a relationship with NBG Holding GmbH, FCT Fiber Cable Technology GmbH, and NBG Systems GmbH, all three of which were Austrian companies. The gist of the complaint is that Homa and Harman illicitly worked with the Austrian firms to begin competing with Baker Hughes in the fiber-optic business.

Texas law provides that the Texas Secretary of State is “an agent for service of process on a nonresident who engages in business in this state, but does not maintain a regular place of business in this state or a designated agent for service of process, in any proceeding that arises out of the business done in this state and to which the nonresident is a party.” Baker Hughes served the Austrian defendants by serving the summons and complaint on the Secretary of State. The Austrians argued that the service was impermissible because FRCP 4(f) did not authorize the method of service in question. But the judge rejected this argument, because the Austrian corporations had, by doing business in Texas, appointed the Secretary as their agent for service of process, and service was made in the United States and governed by Rule 4(e) rather than Rule 4(f).

I think this part of the decision is basically correct. 2 Even in a federal case, it seems to me that state law is still relevant to questions of agency. There could be a due process issue in such cases if the defendant did not have actual notice of the proceedings, but it seems clear that here the Austrians knew of the action and were well able to defend it.

There was another Austrian defendant that had not done business in Texas and thus had not appointed the Secretary as an agent for service of process. Baker Hughes sought leave to serve the summons and complaint on its US attorney or by email to Bauer, one of the defendant’s directors. The judge denied this motion on the grounds that Austrian law prohibited “the direct service of foreign legal documents by foreign authorities or by private individuals without the assistance or consent of Austrian authorities.” This portion of the decision may be correct with respect to service by email on Bauer, assuming Bauer was in Austria, but it seems clearly incorrect with respect to service on the defendant’s US lawyer. Austrian law, it seems to me, can’t have anything to say about service under US law that does not involve transmission of any documents into Austria. Moreover, this portion of the decision seems to be at odds with the decision on service on the Texas Secretary of State. If the judge’s conclusion that Austrian law forbids service on the US lawyer were correct, then Austrian law would also forbid service on the Secretary of State, or so it seems to me.

The basic rule, it seems to me, should be that a foreign state’s limitations on methods service of process can apply only when the plaintiff seeks to make service of process in the foreign state. If the service occurs in the United States, then only US law is relevant. Of course, if the plaintiff contemplates eventual enforcement of the judgment in the foreign state, then the foreign state’s law may indeed be relevant, but that has nothing to do, really, with the sufficiency of the service of process for US law purposes.

Notes:

  1. One the one hand, Baker Hughes says it owns the patents on CoreBright and the methods used to manufacture it. On the other hand, it claims that information relating to the technology is a trade secret. Odd. My guess is that if I were to dig in to the papers, I’d see that Baker Hughes wasn’t claiming that its patented invention and methods were not subject to trade secret protections.
  2. Note that Austria is not a party to the Hague Service Convention, so we need not consider whether the decision would be correct in a case governed by the Convention.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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