Case of the Day: Clear Spring v. Arch Nemesis

The case of the day is Clear Spring Property & Casualty Insurance Co. v. Arch Nemesis LLC (D. Kan. 2023). Arch Nemesis owned a yacht that sank off Mexico. It made a claim on Clear Spring, the insurer, which denied the claim and brought an action seeking a declaratory judgment that the policy was void. Arch Nemesis asserted a third-party claim against Concept Special Risks Ltd., the “underwriting agent” for Clear Spring, alleging fraud and negligent misrepresentation. Concept moved to dismiss on grounds of insufficient service of process, arguing that Arch Nemesis failed to serve it in accordance with The Hague Service Convention.

John Coyle has an excellent post at the Transnational Litigation Blog that explains the interesting reasons why an agreement for alternate service, which Clear Spring signed but Concept did not, cannot for that reason authorize service by alternate means on Concept. I want to focus on something else. The court, in its set-up of the issue, wrote:

But plaintiff need not serve defendant in accord with an international agreement when the parties to a contract consent beforehand “to submit to the jurisdiction of a given court [or] to permit notice to be served by the opposing party,” Nat’l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 316 (1964).

This reasoning is much too broad and should not be followed. Szukhent was a domestic dispute between a New York company and a Michigan resident. There was no international dimension, and the case came before the Service Convention came into force. Despite a California case to the contrary, because the Convention is exclusive, if you are serving a party in a foreign country, you must serve via one of the methods the Convention authorizes or permits. The limitations imposed by the Convention are limitations that states have imposed by agreement when they made the treaty, and they cannot be waived by private parties.1 In other words, if China does not permit service of process by mail to be made in China, private parties can’t make such service permissible by private agreement.

In today’s case, at the end of the day, this point will not matter much. Custom is apparently in England, which means, given the UK’s position under Article 10 of the Convention, that Arch Nemesis can retain an English solicitor to serve process, or else serve process by mail under FRCP 4(f)(2)(C)(2), without having to go through the Convention’s central authority mechanism. But in other cases, the point would have much more practical importance.

  1. That is not to say that a procedural default, e.g., failure to please insufficient service of process, can’t have the same practical effect as a waiver.

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