Case of the Day: Power Electric Distribution v. Hengdian Group Linix Motor

The case of the day is Power Electric Distribution, Inc. v. Hengdian Group Linix Motor Co. (D. Minn. 2015). Power Electric purchased custom-made motors from Linix, a Chinese company, for resale to manufacturers in the United States. Their agreement required disputes to be resolved through arbitration in Minneapolis administered by the AAA, and both parties consented to the jurisdiction of the state and federal courts in Minnesota for entry of judgment on an arbitral award. When a dispute arose, Power Electric began an arbitration. Linix participated in the arbitration, which ended in an award for more than $1.5 million for Power Electric, plus a return of tooling, an accounting of all motors Linix sold to FBD (one of Power Electric’s customers), and a royalty on those sales. Power Electric moved to confirm the award. It served the summons on Linix by personal service in China. It was evident that Linix was aware of the proceedings, but Linix took no action except to send a letter asking Power Electric to “Please proceed according to the Hague Convention.” The court entered a judgment confirming the award. Prior to entry of the judgment, Linix had satisfied the $1.5 million damages award, but there was a dispute about the accounting and payment of royalties.

Linix sought relief from the judgment on the grounds that the service of process was improper. The judge acknowledged that the service did not comply with the Convention (China does not permit service under Article 10), but the judge nevertheless held that the judgment was valid because Linix had had actual knowledge of the proceedings, relying primarily on an unpublished SDNY decision. In my view cases like this can’t be right. The Convention is exclusive. And frankly, even in the domestic context, FRCP 4 is exclusive. There are some cases about substantial compliance with the law governing service, but here Power Electric didn’t substantially comply.

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