Case of the Day: In re GLG Life Tech Corp. Securities Litigation

The case of the day is In re GLG Life Tech Corp. Securities Litigation (S.D.N.Y. 2012). Luke Zhang, a Canadian national, was the chairman and CEO of GLG. The plaintiffs brought a securities fraud class action against him, GLG, and GLG’s chief financial officer, Brian R. Meadows. GLG and Meadows appeared and responded to the complaint. But when the plaintiffs sought to serve the summons and complaint on Zhang at GLG’s Vancouver headquarters, their process server was told that Zhang lived in China. The process server advised the plaintiffs that “Zhang should be served at a residential address” and that “finding Zhang’s home address in China would cost at least $5,000, with no guarantee of success.” Not very promising! The plaintiffs instead tried to locate Zhang via various internet searches, all with no success. As far as the decision discloses, the plaintiffs did not seek leave to take discovery from GLG for the limited purpose of obtaining Zhang’s address,1 although the plaintiffs did informally ask GLG’s lawyers for the address and did seek a waiver of service from its lawyers—but all to no avail.

The plaintiffs then sought leave to serve process on Zhang by alternate means, namely (1) by service on GLG’s lawyers, (2) by service on GLG’s registered agent for service of process in Washington, and (3) by email (though the plaintiffs said they would need to take limited discovery in order to obtain the email address. After the plaintiffs filed their motion, GLG’s lawyer offered for the first time to provide Zhang’s residential address, but the plaintiffs rejected the offer. GLG’s lawyer offered the address up anyway, including it in its brief in opposition to the plaintiffs’ motion. But there was no affidavit or other evidence to prove that the proffered address was correct.

Zhang argued that GLG lacked standing to oppose its motion, but the judge did not make much of this, electing to treat GLG’s memorandum of law as a submission by an amicus curiae and to proceed to the merits. The judge correctly noted that he had discretion to order service by alternate means and that alternate means are not disfavored and are not a last resort. While some courts require a showing of some kind before authorizing service by alternate means, and while some courts, as a matter of comity, insist on a first attempt to serve process via the mechanisms of the foreign state, the judge rejected these approaches in the circumstances, noting that Zhang was not a Chinese national and that service under the Hague Service Convention could take many months.

The judge approved service on GLG’s counsel, noting that it was virtually certain that such service would provide notice to Zhang, GLG’s chairman and CEO and thus that there was no due process problem. The decision was well within his discretion.

  1. In a securities fraud case, this can require some motion practice, as ordinarily all discovery is stayed during the pendency of a motion to dismiss under the Private Securities Litigation Reform Act.

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