Case of the Day: American Express v. Rui
Posted on May 1, 2019
The case of the day is American Express Co. v. Rui (D. Ariz. 2019). Amex brought a claim against Xiongwen Rui, a former executive, seeking to claw back compensation Rui had received before quitting and going to work for a Chinese competitor. After several failed attempts at service, Amex brought a motion to serve process by alternate means, seeking to serve the summons on Rui’s US counsel by email. The motion, which was ex parte, represented that Rui lived in Arizona and traveled to China from time to time for work. The court granted the motion and authorized the alternate service. Rui then moved to dismiss for insufficient service of process.
The first thing that might surprise you was that Amex had both moved to serve process by alternate means and asserted that Rui lived in Arizona. FRCP 4(f)(3) permits alternate service, but only in cases where the defendant is abroad. What gives? It turns out that Arizona law provides for alternate methods of service when service is otherwise impracticable. The more you know! Since FRCP 4(e)(1) incorporates state law methods of service in cases of service in the United States, alternative service was permissible.
However, the ex parte representation about Rui’s residence was not correct, and the court found that Amex knew it. In Amex’s defense, while it seems that Rui’s lawyers had told Amex’s lawyers that Rui lived in China, they had not given his Chinese address, so in a sense Rui’s Arizona address was indeed his last known address. Rui had apparently only “agreed to provide his Chinese address.” Maybe both sides are playing games here. Nevertheless, the judge was right to say that Amex should have explained the facts to the court in its ex parte papers. Perhaps the best approach would have been to say, “Rui claims he lives in China but he hasn’t told us where. We should be allowed to serve process by email either way.”
You might say that the lawyers should be sanctioned in some way for the false impression they created, but was it material to the motion? In other words, if Amex was having trouble serving process, and if the alternate method of service it proposed was available no matter where Rui lived, did the omission matter? It seems to me that the court was right to say that it did. A decision under FRCP 4(f)(3) is discretionary, and the judge found that if he had known Rui lived in China and was willing to give his address, he would not have authorized alternative service. I don’t know that such a decision would have been wise, but it certainly would have been within the judge’s discretion. The judge therefore quashed the service.