The case of the day is In re Takata (S.D. Fla. 2017). The Takata multi-district litigation is the case involving allegedly defective Takata air bags. One of the defendants was BMW, the German automaker. The plaintiffs sought to serve process via the Hague Service Convention, but the Regional Court in Munich refused to serve the documents on the grounds that the plaintiffs were seeking statutory “penalties” and that the action was therefore not civil or commercial; that the plaintiffs’ claims for punitive damages might be subject to a “split recovery” statute; and that because the plaintiffs sought establishment of a liability fund, and because (the Munich court said) only the German authorities could establish such a fund, the Central Authority would refuse to execute the request on the grounds that it would prejudice Germany’s sovereignty or security. In other words, the central authority pointed to Article 1, which defines the scope of the Convention, and Article 13, which provides the very limited grounds on which a central authority can refuse to execute a request within the scope of the Convention. The plaintiffs sought leave to serve process on BMW’s US counsel under FRCP 4(f)(3).
It’s not surprising that the Special Master who was deciding the motion granted the motion, noting among other things that this method of service minimized the offense to German law (since it did not involve service on German territory), and noting that there was no requirement that the plaintiffs pursue all available appeals from the Munich court’s decision before resorting to FRCP 4(f)(3).
More interesting is the discussion of the Convention issues. FRCP 4(f)(3) cannot be used to authorize service that would violate an international agreement. The Special Master went a bit wrong here, I think. He concluded that FRCP 4(f)(3) was available because the Convention did not apply, and that the Convention did not apply because the German court’s ruling on that issue was dispositive, citing the Bunk case. I haven’t written about the case on the blog, but here is the discussion from my chapter in the new ABA treatise (without footnotes):
There are very few American cases [about what counts as “civil or commercial”] on point, as one would expect, since in general it is unnecessary to obtain leave of the U.S. court before transmitting documents for service abroad and since in practice the decision whether to refuse to execute a request for service on these grounds will be made by the central authority of the state in question, not by the U.S. court. The most noteworthy case is United States ex rel. Bunk v. Birkart Globistics GmbH, a False Claims Act case in which the relators alleged that the German defendants had conspired to defraud the United States. A False Claims Act case arguably falls close to the line between civil and noncivil cases, both because it can carry substantial punitive damages and because it is a qui tam claim a private relator brings on behalf of the government rather than on behalf of him- or herself.
The plaintiffs transmitted the documents to the German Central Authority, which in turn transmitted them to the appropriate German court for service on the defendants. After some of the defendants were served, the defendants petitioned the appropriate German court to declare the service unlawful on the grounds that the case was not “civil or commercial.” They relied in part on the refusal of the central authority in another German Land in the same case to execute the request for service. The German courts ultimately concluded that the action was not civil or commercial given its public and punitive nature, and the German Central Authority therefore refused to execute the requests for service. The district court deferred to the views of the German court and central authority on the grounds that under the convention it was for the German central authority to determine whether the request complied with the convention and that deferring to the foreign authority promoted comity, particularly as the U.S. court “ha[d] no practical ability to require the German Central Authority to effect service under an international convention that it has determined does not apply.” But in practice this was a victory for the plaintiffs, not the German defendants, since the point of the judge’s decision was to authorize service by alternate means that might not have been permitted under the convention, had it applied.
I don’t agree with the idea of deferring to the foreign central authority on this issue. The issue is best considered autonomously under the Convention rather than under the law of the sending state or the receiving state. The German court may simply have gotten it wrong. It’s true that when you serve process on US counsel of a foreign defendant, the Convention doesn’t apply, but that’s not because the foreign court has decided that the case is not within the scope of the Convention, but rather because no judicial document is being transmitted abroad for service.
The Special Master did note contrary German decisions (you may want to refer back to Peter Bert’s 2013 post, but the Special Master was not persuaded. Again, I think the best course is not to try to decide whether German courts have gotten it right or wrong, but rather just to apply the autonomous, liberal approach to deciding what is within the scope of the Convention. One consequence of this approach is that the foreign court could hold that the Convention does not apply while the US court could hold that the Convention does apply, and in that case it may be difficult to find an available method of service. But as today’s case shows, in such cases alternate methods that do not run afoul of the Convention will be available in many if not all such cases.