The case of the day is Lombard-Knight v. Rainstorm Pictures, Inc. (Cal. Ct. App. 2015). Rainstorm was a California movie production company. It entered into two investment agreements with Fortnom & Co. SA, under which Fortnom was required to provide $300 million upon Rainstorm’s delivery to it of performance bonds. It turned out, according to the court, that “Fortnom was never formed and did not exist as a separate legal entity at the time the agreements were executed.” Oops! Both contracts were signed on Fortnom’s behalf by Anthony Lombard-Knight. Both agreements had arbitration clauses, and both contained the following provisions:
Paragraph 10 of the December 3 agreement contains an agreement to mediate or arbitrate “any controversy, dispute or claim arising out of or relating to this Agreement” before JAMS, “under the rules of the JAMS.” Paragraph 11 states that the agreement “shall be governed by, interpreted and enforced in accordance with the internal laws of the State of California and the Federal laws of the United States,” and that “[a]ny process in such proceeding may be served by, among other methods, delivering it or mailing it, by registered or certified mail, directed to, as applicable, the Investor’s or Rainstorm’s address as designated in this Agreement. Any such delivery or mail service shall have the same effect as personal service within the State of California.” Paragraph 11 further provides in pertinent part that “the parties hereby submit to the exclusive jurisdiction and venue of the State and Federal courts located in Los Angeles, California with respect to all matters concerning this Agreement, including, without limitation, the enforcement of any arbitration award.” Paragraph 12 provides that all notices shall be sent to “the respective addresses of the parties as set forth in the opening paragraph of this Agreement,” as well as to Attorney Michael Golland (Golland) at his Beverly Hills address.
A dispute about the contracts arose, and Rainstorm initiated arbitration, first against Fortnom and then, when it realized that Fortnom did not exist, against Lombard-Knight. The demands were sent by registered mail to the address indicated in the agreements as Fortnom’s address, as well as to Lombard-Knight by email. Lombard-Knight did not appear at the arbitration, which proceeded to an evidentiary hearing and an award in Fortnom’s favor for approximately $26 million.
Lombard-Knight sought to vacate the award (though there was some procedural complexity I won’t get into). The only ground I’m going to consider here is his claim that he was “not served properly under the Hague Service Convention, which applied to the arbitration proceedings.” The trial court disagreed, holding (without much discussion) that the Convention did not apply to service of arbitration documents, and Lombard-Knight appealed.
The obvious, though not obviously correct, answer to Lombard-Knight’s contention is that as the trial court held, the Convention applies only to the service of judicial and extra-judicial documents, and that a demand for arbitration or a notice of arbitration is outside the scope of the Convention. The court never had to reach the argument, because it held that Lombard-Knight’s petition to vacate was untimely under California law. But it’s worth looking at the draft of the new edition of the Practical Handbook on the operation of the Convention for guidance. According to Paragraph 77 of the draft:
Although a document issued in arbitration proceedings is not a “judicial” document for the purposes of the
Service Convention, it may be considered an “extrajudicial” document within the meaning of Article 17 of the Convention.
Article 17 provides:
Extrajudicial documents emanating from authorities and judicial officers of a Contracting State may be transmitted for the purpose of service in another Contracting State by the methods and under the provisions of the present Convention.
Article 17, with its use of the word “may,” seems to suggest that the Convention is not the exclusive means for service abroad of extrajudicial documents, as it is with respect to judicial documents such as summonses. Be that as it may, the draft Handbook discussion (fn. 136) suggests that the few courts that have considered the question, including courts in France and Greece, have held that the Convention does not apply to service of a notice or demand for arbitration. Indeed, in paragraph 80, the draft Handbook states:
However, requests for service for documents issued in arbitration proceedings would appear to be uncommon in practice because such documents are typically served in accordance with the arbitration rules chosen by the parties.
It’s unfortunate that the California appellate didn’t reach this point, which seems right to me. It would be good to have some American casees on point.