Jared Hubbard on the Texas Loophole

I’m happy to welcome new commenter Jared Hubbard to Letters Blogatory! Jared has a practice in Newburyport, and before that was most recently an associate with White & Case. He knows whereof he writes, because he’s admitted to practice in Texas, and he was counsel to OPEC in the Freedom Watch case, which I’ve covered before. Welcome, Jared!

One of the recent cases of the day, Chukapalli v. Mandava (Tex. Ct. App. 2017), raised an interesting loophole to international service requirements. In that case, the court reversed a default judgment as the plaintiff had not complied with the Hague Service Convention, but on remand no compliant service was required due to Texas Rule of Civil Procedure 123, which provides:

Where the judgment is reversed on appeal or writ of error for the want of service, or because of defective service of process, no new citation shall be issued or served, but the defendant shall be presumed to have entered his appearance to the term of the court at which the mandate shall be filed.

Another Texas case similarly found that no service was necessary following a reversal for failure to follow the Hague Service Convention. Velasco v. Ayala, 312 S.W.3d 783, 800 n.14 (Tex. Ct. App. 2009).

As one Texas court has explained the rule, “appellant by appealing this case has submitted himself to the jurisdiction of the district court and no new service is necessary.” Cates v. Pon, 663 S.W.2d 99, 102 (Tex. Ct. App. 1983). Nor does it look like a defendant may use a special appearance to challenge service under the Texas Rules. Boyo v. Boyo, 196 S.W.3d 409, 418 (“A special appearance under Rule 120a does not contest service of process; a special appearance contests … whether [a defendant] has sufficient contacts with Texas to satisfy due process and the Texas long arm statute.”).

The Texas rules on service are thus very different from the Federal Rules, where the failure to properly serve the defendant will result in dismissal of the case. Indeed, there are certain cases under the Federal Rules where “the formal requirements of service of process give rise to a ‘loophole’ enabling a defendant to evade service of process.” See Freedom Watch, Inc. v. OPEC, 766 F.3d 74, 84 (D.C. Cir. 2014). Certain international organizations like the United Nations and OPEC have Headquarters Agreements treaties with their host countries prohibiting service without the consent of their Secretary Generals. In these cases, there can be no service under the Federal Rules without the consent of the defendant.

In Texas, however, as long as the plaintiff is able to get a default judgment, the defendant can get the default judgment reversed but cannot continue to contest service in the Texas courts. Nor does there appear to be any discretion in the Rule allowing a court to take considerations of international comity into account, although the defendant can still challenge the court’s jurisdiction if they are otherwise immune from suit. But international organizations that can only be served with their consent or foreign states that can only be served in compliance with the FSIA may be limited in their use of lack of service as a defense before Texas courts or the courts of any state that has a similar rule on its books.

The only way out, where applicable, may be for a defendant that qualifies for removal under 28 USC § 1441 to remove the case to federal court and challenge the default judgment there, as the Texas Rules will not apply to a reversal of default judgment by a federal court. See Gray v. Permanent Mission, 443 F.Supp. 816 (S.D.N.Y. 1978) (allowing the defendant to challenge service of process under the FSIA in federal court following a state court default judgment).

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