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Case of the Day: Zaft v. Golan

The case of the day is Zaft v. Golan (N.D. Fla. 2013). It’s an older case that just came across my screen and is worth a mention. Gidon Zaft, an American, and Yair Golan, an Israeli, were parties to a partnership agreement under which Zaft owned 70% of Royal Moroccan Inc., a Floridan corporation, and Golan owned 30%. The agreement had Florida choice of law and choice of forum agreements, and it provided:

All notices required or permitted under the terms of this Agreement shall be in writing and shall be
deemed to have been properly given and served when sent by overnight, Registered and/or Certified Mail, postage prepaid, returned receipt requested, properly addressed.

Zaft sued Golan on several business tort claims. According to the return of service, a process server personally served the documents on Golan in Israel, at the address specified for notices in the agreement. The court entered Golan’s default when Golan didn’t answer. Golan sought relief from the default on the grounds that he had not been properly served with process.
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Case of the Day: InvestorsHub.com v. Mina Mar Group

Mina Mar Group, the Canadian firm featured on March 22, is back in the Letters Blogatory news today. The last time we discussed Mina Mar, it was in the context of Belmont Partners, LLC v. Mina Mar Group, Inc., a case where Mina Mar tried, both in Canada and in the US, to escape from an unfavorable arbitral award. In today’s case of the day, InvestorsHub.com, Inc.  v. Mina Mar Group, Inc. (N.D. Fla. 2011), Mina Mar again finds itself on the losing side. According to the complaint, InvestorsHub.com ran a website on which investors could post comments on “investment-related topics.” Apparently, one of the “investment-related topics” was Mina Mar, and the investors’ comments were less than flattering. Mina Mar sued InvestorsHub.com and some of its employees for defamation in Ontario. The Ontario Superior Court entered a default judgment against them, awarding $75,000 in compensatory damages and $10,000 in punitive damages. The judgment, curiously, also contained a declaration that “all of the negative, defamatory and libellous postings made by Posters and members on the InvestorsHub.com web site are untrue and were made without any foundation nor basis for any of their content.” It ordered InvestorsHub and its employees to “apologize and publicly retract the libellous statements” and to provide the names and addresses of the posters who actually wrote the supposedly defamatory posts, and it enjoined InvestorsHub.com and its employees from “making or allowing to be made by any party or Poster, any statements or broadcast, whether orally or in writing and whether libellous, defamatory or not, in any newspaper, broadcast or electronic publication or on the web site(s), InvestorsHub.com, about the Plaintiffs” (emphasis mine). That’s quite a judgment!

Armed with this somewhat draconian judgment, Mina Mar came to Florida, filed the judgment in the Leon County clerk’s office, and apparently sought to enforce the judgment. But Mina Mar’s lawyers didn’t reckon with the SPEECH Act.

In an earlier post, we reviewed the main provisions of the Act, notably the provision allowing U.S. residents and businesses to bring declaratory judgment actions to obtain a declaration that foreign defamation judgments are not entitled to recognition or enforcement in the United States. And in fact foreign defamation judgments are not entitled to recognition and enforcement if the foreign country’s protections for freedom of speech are less vigorous than the First Amendment’s protections, or, in the case of a web site operator, the judgment is inconsistent with the limitations on liability in § 230 of the Communications Decency Act, which, summarized very colloquially, provides that web site operators that post comments written by others are not liable for defamation on account of what others have posted on their sites.

In light of the Act, Mina Mar surrendered, agreeing to entry of a judgment that contained the following terms:

14. The Mina Mar Parties now acknowledge that the Foreign Defamation Judgment is not enforceable in the United States and are agreeable to the entry of a final judgment in favor of the InvestorsHub Parties on both Counts of the Complaint.

* * *

19. The parties acknowledge, and the Court finds, that Canadian law does not provide as much protection of speech as the First Amendment, federal law, and Florida law. For example, the First Amendment  requires that a defamation plaintiff who is either a public official or public figure must prove that the  defendant made the defamatory statement with actual malice, meaning that the defendant either knew the statement was false or acted with reckless disregard to the statement’s truth or falsity. See New York  Times Co. v. Sullivan, 376 U.S. 254, 84 S. Ct. 710, 111 L. Ed. 2d 686 (1964); Curtis Publ’g Co. v. Butts, 388  U.S. 130, 87 S. Ct. 1975, 18 L. Ed. 2d 1094 (1967). The Canadian Supreme Court has specifically refused  to adopt the Sullivan actual malice standards for Canadian defamation actions. See Hill v. Church of Scientology, [1995] 2 S.C.R. 1130 (Can.) (stating that Court will not adopt Sullivan standard in Canada).  See also Grant v. Torstar Corp., [2009] 3 S.C.R. 640 (Can.) (modifying Canadian defamation law while still rejecting First Amendment standards); Rodney A. Smolla, Law of Defamation § 1:9.75, at 1-17 – 1-29  (describing differences between United States law and “the more plaintiff-friendly” Canadian defamation  law).
20. Nor does Canadian law provide the protections for freedom of on-line speech provided by the Communications Decency Act, 47 U.S.C. § 230.

I think this case is a good illustration of why the SPEECH Act makes sense. Maybe the posts on the website were libelous and maybe not. But a judgment that requires defendants to retract a statement, make an apology, and refrain from publishing even true statements on a topic is so far beyond the pale of US public policy that it can’t come as a surprise that the US courts would refuse to enforce it.

H/T to the Trial Warrior Blog, which points out that Mina Mar has not given up. Apparently, Mina Mar is seeking to hold the US defendants in contempt in Ontario. My prediction: the defendants refuse to appear, and whatever ruling Mina Mar obtains in Ontario will continue to be completely unenforceable in the US. The individual defendants may want to be careful about travel to Canada, though! Mina Mar’s lawyer’s letter on the contempt issue says that the company has spent “hundreds of thousands of dollars” in legal fees on the case. I wonder whether this was money well spent, given US law in this area.

Case of the Day: Chamberlain v. Integraclick, Inc.

The case of the day, Chamberlain v. Integraclick, Inc. (N.D. Fla. 2011), involves an attempt to serve process on a Canadian defendant. I am not a fan of the reasoning in this case. Chamberlain, Newcomer, and Adler, on behalf of themselves and other similarly situated, sued 1021018 Alberta Ltd., d/b/a Just Think Media, an Alberta corporation, and Integraclick, Inc., d/b/a Clickbooth, a Delaware corporation, accusing them of a scheme to defraud consumers on the internet; the details are unimportant. The defendants removed the case from the Leon County (Florida) Circuit Court to the U.S. District Court in Tallahassee. Just Think Media then moved to dismiss for insufficient service of process.

The plaintiffs sent a request for service abroad to the Alberta competent authority requesting service under Article 5(a) of the Hague Service Convention. (Practice pointer: the Applicant identified on the Request is apparently a professional process server. She identified Fed. R. Civ. P. 4(c)(2) as a source of her authority to make an application under the Convention. But how could Rule 4 apply if service was attempted before the case had been removed? She also referenced a “Florida Circuit Court Order”, but without the order attached, I can’t really comment on whether she met the requirement of Article 3, namely, that she be an “authority or judicial officer competent under the law of the State in which the documents originate.” It seems to me that even when it is proper for an attorney or a process server to act as the applicant, it is usually good practice to request appointment of a special process server, or service by the marshal, under Rule 4(c)(3), because in some cases foreign central authorities have objected to letters of request naming U.S. lawyers or process servers as the applicant).

The Alberta authorty’s certificate stated that service had not been made because “no one will accept service of the document.” As I point out below, it appears that the Alberta authority did not do everything it could to effect service under Alberta law.  But that is water under the bridge. The plaintiffs proceeded to serve process on the Florida lawyer who had appeared for both Just Think Media and Clickbooth. 

The court rejected Just Think’s motion to dismiss for two reasons. First, it held that Just Think could not complain of failure to make service as required by the Hague Convention when it appeared that Just Think had been ducking service in Alberta: “As Plaintiffs point out, Defendant  should not be permitted to ‘demand that Plaintiffs serve process under the Hague Convention, refuse to accept service when they do, and then cry foul.'” I don’t find this argument persuasive. It seems to me that if you can’t make service under Article 5(a), the appropriate remedy is to use an alternative method of service under Rule 4(f)(2) or (3), not to waive the requirement of service. Nor would the plaintiffs in this case be prejudiced by the court’s insistence on valid service, since another method of service appears readily available. Canada has not objected to service by mail in Hague Convention cases. Alberta law appears to permit service by mail in the circumstance of this case, even if the corporation refuses to accept the mail. I reason as follows. First, under § 20 of the Alberta Business Corporations Act, Just Think must have had a registered office on file with the Alberta government (or else it could not have incorporated). Second, under Section 256 of the BCA, service by registered mail to the registered office is permissible. Third, under Rule 11.2 of the Alberta Rules of Court, “Service by mail or recorded mail is not invalid by reason only that” the addressee refuses the mail or “the addressee no longer resides or is otherwise not present at the address and has not provided the postal service with a current mailing address.” So unless I am misreading the Alberta rules on this—no doubt a distinct possibility—the plaintiffs could easily have effected service that would be valid under Alberta law and thus valid under Rule 4(f)(2)(A).

Second, the court held that service on the law firm that had entered an appearance for Just Think was sufficient because the lawyer was the agent of the client, even though there was no indication that the lawyer had been expressly authorized to accept service of process. This can’t possibly be right, since if it were, no one could ever successfully challenge the adequacy of service of process—service on the lawyer making the challenge would always be sufficient. The general understanding is that U.S. lawyers are not, by virtue of their status as attorneys, agents for receipt of service of process. That’s not to say that the court couldn’t have authorized service of process on the lawyer pursuant to Rule 4(f)(3), but I think the court was wrong to say that as a general matter service on the lawyer is sufficient to effect service on the client.