The case of the day is Rockefeller Technology Investments (Asia) VII v. Changzhou Sinotype Technology Co. (Cal. 2020). I wrote about the intermediate appellate decision in October 2018, and I briefly noted the new decision last week. Sinotype was a Chinese company. The parties were negotiating towards a contract to form a new company, and they had an interim memorandum of understanding that provided:

The Parties shall provide notice in the English language to each other at the addresses set forth in the Agreement via Federal Express or similar courier, with copies via facsimile or email, and shall be deemed received 3 business days after deposit with the courier.

The Parties hereby submit to the jurisdiction of the Federal and State Courts in California and consent to service of process in accord with the notice provisions above.

In the event of any disputes arising between the Parties to this Agreement, either Party may submit the dispute to [JAMS] in Los Angeles for exclusive and final resolution … according to its streamlined procedures before a single arbitrator … pursuant to California law ….

When negotiations broke down, Rockefeller sought arbitration. It gave notice of the arbitration to SinoType via FedEx and email in China. SinoType did not appear in the arbitration, and the arbitrator awarded $414 million in damages. Rockefeller filed a petition under California law to confirm the award. It transmitted the petition and summons to SinoType in China via FedEx and email. SinoType defaulted and the court confirmed the award. SinoType then appeared and move to set aside the judgment for insufficient service of process.

Let me start by explaining how I think the case should have come out. On the facts as just given, it seems clear that the parties agreed to service of process via FedEx without accounting for China’s objection, under Article 10(a) of the Service Convention, to service by postal channels. (If service by FedEx is acceptable at all, it is acceptable because it is analogous to service by post, and the accepted view is that private couriers such as FedEx are within the meaning of the term “postal channels” in Article 10(a)). The Convention is exclusive, which means that when it applies (as it did here), you have to use a method of service that it authorizes or at least permits. Rockefeller did not use one of the methods the Convention authorizes, such as service via the central authority. It attempted to use service under one of the methods the Convention permits, namely postal service under Article 10(a), but that Article gives each state party the right to object to service by postal channels within its territory. China has made such an objection. There is, therefore, no provision of the Convention that authorizes or permits the service here. The service was ineffective, and the judgment is therefore void. Easy case.

Not so easy, according to the California Supreme Court. The court did not contest the view I have just given head-on. Rather, it relied on a construction of California law that seems implausible to me (though of course the court is the final word about California law, which shows you what I know!) and also a construction of the Convention that I think is wrong. First let’s look at the California law. The California arbitration statute provides that a petition to confirm an arbitral award “shall be served in the manner provided in the arbitration agreement for the service of such petition and notice,” and in the absence of an agreement, “in the manner provided by law for the service of summons in an action.” In the court’s view, the parties’ agreement evidenced an intent “to supplant any statutory service procedures with their own agreement for notification via Federal Express.” Okay, but why, then, did Rockefeller serve a summons as well as the petition (p.4 of the opinion), rather than just a notice, as the statute seems to suggest? In any case, the court’s view was that because the parties had waived formal service of process in this way, the Convention did not apply.

There are two main problems with this conclusion. The first turns on the very odd notion of what constitutes “formal service of process.” The fact is that Rockefeller sent SinoType documents that had the legal effect, in the United States, of bringing SinoType before the court in a compulsory way. (The California court would no doubt respond that SinoType had already agreed to be brought before the California court by consenting to jurisdiction, but even in cases where a party waives a personal jurisdiction defense in advance, it is still necessary to serve process unless the party has also waived service, which is precisely what is at issue here). Service of these documents had legal effect in a way that, say, service of a request for waiver of service under FRCP 4(d) would not, precisely because it is compulsory. In my view the idea of “formal service of process,” as the California court is using it here, has to be broad enough to prevent a state from avoiding the Convention by providing for a non-standard method of service in a particular case and then asserting that the Convention does not apply to that method of service because it is not “formal service of process.” For American law purposes we may make such a distinction if we like, but for purposes of the Convention, “formal service of process” has to mean “delivery of documents that bring the defendant before the court by virtue of having been delivered on him.” (I reserve the right to tinker with the wording here, but you get the idea).

Why does this matter? The reason why many states object to service under Article 10 within their territories is that it allows someone other than a competent person under their own laws to do things on their territory that they regard as part of their judicial sovereignty, such as summoning defendants to court on pain of default. So a defendant can waive objections to service by post all day long, but the objection isn’t there for the benefit of the defendant, it’s there for the benefit of the state. It is not for the defendant to waive.¹This is a less simple matter than it appears at first. Suppose the defendant appears and answers the complaint and fails to raise insufficient service of process as a defense? Then it seems clear that the defense is waived. So in a sense a defendant does have a power of waiver after the fact. There are some approaches to this that I won’t cover here.

Now the second problem. Why does the court think that the Convention applies only to “formal service of process,” rather than to the transmission of any judicial or extrajudicial document abroad for service, which is what the Convention itself provides? That’s a rhetorical question. In both Volkswagen and Water Splash, the US Supreme Court’s two looks at the Convention, the court has, in dicta, suggested that in fact the Convention does only apply to formal service of process. But this has to be wrong. In ¶ 77 of the Practical Handbook (4th ed. 2016), the Permanent Bureau notes:

Judicial documents for the purposes of the Convention are instruments of contentious or non-contentious jurisdiction, or instruments of enforcement. Judicial documents include writs of summons, the defendant’s reply, decisions and judgments delivered by a member of a judicial authority, as well as witness summons (subpoenas), and requests for discovery of evidence sent to the parties even if these are orders delivered as part of evidentiary proceedings.

As a matter of American law, we would not say that these documents, with the exception of summonses and subpoenas, or other writs not specifically named in the Handbook, are “process,” yet they are still judicial documents subject to the Convention. And in any case, what about extrajudicial documents, which as ¶ 78 states include documents such as “notices served by creditors upon debtors,” “notifications to beneficiaries of a deceased estate,” and many other kinds of documents that plainly are not process in our sense of the word?

You might say that in practice the Convention cannot be read that broadly, because otherwise litigation would grind to a halt as every document would have to be served via the Convention. Not so, because in nearly every case the first thing the foreign defendant does is hire a lawyer to appear on its behalf, and under FRCP 5 or analogous state rules, service of all documents is then made on the lawyer, not the party. The difficult only arises in cases of default such as this, where the summons and complaint and then a request for entry of default are likely the only documents that have to be served. There may be a difficult case of a foreign individual litigant who appears pro se (not a problem for corporate defendants, because corporations cannot appear pro se), but that’s not this case.

In short, the California Supreme Court’s decision seems to me to be wrong. It may be too much to ask for another US Supreme Court case on the Convention in just a few years, but regardless, other states should not follow California’s lead.

• 1
  This is a less simple matter than it appears at first. Suppose the defendant appears and answers the complaint and fails to raise insufficient service of process as a defense? Then it seems clear that the defense is waived. So in a sense a defendant does have a power of waiver after the fact. There are some approaches to this that I won’t cover here.