Case of the Day: Oak Point Partners v. Lessing

The case of the day is Oak Point Partners v. Lessing (N.D. Cal. 2012). The claim was that EXDS, a US company, had loaned $23 million to Exodus GmbH, its German subsidiary. EXDS went into Chapter 11 bankruptcy proceedings, and Oak Point Partners, Inc., the plaintiff, bought all of its assets, including its rights against Exodus. Exodus, in turn, was in insolvency proceedings in Germany; Holger Lessing was its insolvency administrator. Oak Point made a claim in the German insolvency case, and Lessing denied it. Oak Point then sued Lessing.

Oak Point had requested that the appropriate German central authority serve the summons and complaint under Article 5(a) of the Hague Service Convention, that is, “by a method prescribed by its internal law for the service of documents in domestic actions upon persons who are within its territory.” The central authority completed an Article 6 certificate showing that service had been made by placing them in the mailbox because the recipient was not available (durch Einlegen in den Briefkasten, da der Empfänger nicht angetroffen wurde.). Lessing did not answer the complaint, and the court entered a default judgment in Oak Point’s favor.

Lessing then moved to set aside the default judgment on the grounds that it was void because he had not been properly served, and in the alternative on grounds of excusable neglect. Under FRCP 60(b)(4), a party may obtain relief from a void final judgment. Lessing submitted a declaration explaining that the documents had been placed in his law firm’s mailbox but that “due to an oversight,” they were mistakenly forwarded to an incorrect department within the firm and not brought to the attention of the lawyers responsible for the case. Lessing’s declaration also asserted that the service was improper under German law, because service by mail was improper as his law firm was open for business on the date of the service. Oak Point submitted a declaration by Steffen Schneider, a Frankfurt lawyer, asserting that the service was proper under German law.

The court disregarded—rightly, I think—both declarations and deferred to the German central authority’s Article 6 certificate: “Faced only with a facially valid certificate from the German Central Authority and Defendant’s own declaration that German law requires more, this Court cannot conclude that Defendant was not properly served.” The judge’s holding was in line with several cases we have seen, such as Zions First National Bank v. Moto Diesel Mexicana, Myrtle v. Graham, and Lake Road Trust Ltd. v. ABB Powertech. As a general rule, it seems right that a US court will not second-guess a foreign central authority’s assertion that the service of process complied with the applicable foreign law.

The court did, however, grant relief from the judgment for excusable neglect on grounds I will not discuss here. So while the decision should be a warning not to ignore process served via the central authority mechanism, it has limited in terrorem effect.

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