Case of the Day: Phoenix Process Equipment Co. v. Capital Equipment & Trading


The case of the day is Phoenix Process Equipment Co. v. Capital Equipment & Trading Corp. (W.D. Ky. 2017). The decision was on a motion to reconsider the ruling we covered back in February. Here was my statement of the facts:

Phoenix was a Kentucky company that designs and manufactures water recycling equipment used to wash coal. Capital Equipment & Technology Corp., a Delaware corporation that used the trade name CETCO, was its distributor in Russia and Ukraine. The distribution contract was signed by its CEO, Alexander Chudnovets. Capital Equipment & Technology Corp. was dissolved in 2011, unbeknownst to Phoenix. Phoenix continued to do business with two other companies that used the CETCO name: Capital Equipment & Trading Corp., a Texas corporation, and Coralina Engineering, LLC, a Russian limited liability company. Chudnovets was the sole member of Coralina and the the CEO of Capital Equipment & Trading.

A dispute arose when Phoenix learned that Coralina was selling products very similar to its own within the distribution territory. Phoenix sued in the Jefferson Circuit Court, and the defendants removed the case to the District Cout. The claims for for breach of contract, unfair competition, violations of the Uniform Trade Secrets Act, civil conspiracy, and fraud. Coralina and Chudnovets moved to dismiss for insufficient service of process.

Phoenix served process on Chudnovets by certified mail to an address in Houston, which was the address on file with the Texas Secretary of State as the address of Chudnovets as the CEO of Capital Equipment & Trading Corp. The mail was forwarded to another address in Houston, “a high rise condominium building that Chudnovets has never been to.” It was delivered to the doorman.

Chudnovets argued that the service failed to comply with the Hague Service Convention. The judge rejected this argument on the grounds that under Texas law, service by mail to a place where “the defendant can probably be found” is sufficient.

On the motion for reconsideration, the judge gave a good explanation for why the Hague Service Convention did not apply—a useful point in light of the mistaken reasoning in yesterday’s case of the day:

The text of the rules reference the location of the service being effected, not the location of the individual to be served. Therefore, so long as the Texas Rules of Civil Procedure permitted service upon an individual abroad to be effected within the United States, then service of process fell wholly within Rule 4(e), and the Hague Convention is not implicated at all.

The court went on to reconsider its earlier decision on the Texas state law grounds that I found dubious in the last post: service by mail in Texas requires a signed receipt, so it was not enough that the service was made at a place where Chudnovets could “probably be found.”


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