Case of the Day: Fellowes v. Changzhou Xinrui Fellowes Office Equipment Co.
Posted on September 18, 2012
The case of the day is Fellowes v. Changzhou Xinrui Fellowes Office Equipment Co. (N.D. Ill. 2012). Fellowes, an Illinois company, purchased paper shredders and other office products from Changzhou Xinrui Fellowes, a Chinese joint venture between Fellowes Hong Kong Ltd., apparently an affiliate of Fellowes, and Jiangsu Shinri Machinery Co. When Fellowes Hong Kong and Jiangsu got into a dispute, Jiangsu caused the joint venture to stop its shipments to Fellowes. Fellowes had to cancel thousands of orders from its customers and to find replacement manufacturers. Fellowes refused to pay some of the outstanding invoices on the grounds that it was entitled to a set-off on account of the damages it suffered because of Changzhou Xinrui’s failure to ship the goods it had purchased.
Changzhou Xinrui sued Fellowes in China for payment on the invoices, and Fellowes sued Changzhou Xinrui in Illinois seeking damages and an antisuit injunction. Fellowes sought a temporary restraining order and then a preliminary injunction to enjoin Changzhou Xinrui from prosecuting its lawsuit in China.The basis for Fellowes’s argument was that its purchase orders had incorporated its standard terms and conditions, which in turn contained a forum selection clause requiring disputes to be heard in the state or federal courts in Chicago.
The magistrate judge had recommended that the judge grant the motion for a preliminary injunction, and Changzhou Xinrui objected on the grounds that it had not received the requisite notice. FRCP 65(a)(1) permits a court to grant a preliminary injunction “only on notice to the adverse party.” Changzhou Xinrui asserted that the notice had not been transmitted by one of the methods permitted by the Hague Service Convention. (Instead, Fellowes sent the complaint, the TRO, and the notice of the hearing on a motion for a preliminary injunction, to Changzhou Xinrui via email).
The judge dismissed this argument without much analysis: “Rule 65 expressly requires only notice, not service of process. SEC v. Kimmes, 753 F. Supp. 695, 700-01 (N.D. Ill. 1990).”
I think the issue is worth more attention. I addressed the issue in a preliminary way in a post on Oct. 6, 2011. I’d like to expand on the point as follows:
- The transmission of the summons, complaint, TRO, and notice of the hearing probably violated the Hague Service Convention. The Convention applies whenever there is occasion to transmit judicial documents for service abroad. There can be no question that the documents here were judicial documents. The issue is whether they were transmitted “for service.” There is one view that says that the words “for service” limit the Convention’s scope to service of process in the strict sense, and that transmission of other judicial documents is not within the scope of the Convention. (See, for example, the proposal by Christopher Voltz I discussed on Nov. 7, 2011). But I don’t like this proposal for the reasons given in my post of April 26, 2012: if it’s right, then how do we account for the Convention’s application to transmission of extrajudicial documents? And why would the Convention refer specifically to “writs of summons” in some places (e.g., in Article 15) and not in Article 1 if the scope of the Convention was intended to be so limited? This point seems particularly clear from an American perspective, since we use the word “service” to refer both to service of process and to service of all other documents in the case, as FRCP 5 makes clear.
- That being said, does a violation of the Convention invalidate the notice, as a violation of the Convention would invalidate service of a summons? There’s no question that the notice and the motion for an injunction had to be served, see FRCP 5(a)(1)(D) & (E), and I assume that the service was improper because it didn’t comply with the Convention, for the reasons given above. But since the purpose of the notice is not jurisdictional in the way that the purpose of service of a summons is jurisdictional, why should a technical flaw in the service matter? (Let’s assume that there is no question about whether the Chinese defendant had actual notice of the motion for the injunction).
- I’m not suggesting that plaintiffs ought to serve notices in preliminary injunction cases in ways not permitted by the Convention. It’s difficult to know what the right thing to do is. On the one hand, the Convention is exclusive, and as a matter of US law, if my view about the scope of the Convention is right, the law requires the notices to be served under the Convention. On the other hand, the plaintiff faces no adverse consequences for violating the Convention (does the plaintiff’s lawyer face adverse consequences?), and the exigencies of the situation may require notice that is quicker than what the Convention allows in practice.