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Case of the Day: Zhang v. Baidu.com

We return today to Zhang v. Baidu.com, the case of the day from April 2, 2013. In the prior decision, the judge granted a motion to dismiss and denied a cross-motion for default judgment where China’s central authority had refused to serve the summons and complaint, citing Article 13 of the Hague Service Convention. The judge granted leave to Zhang to submit further arguments on the question whether he could serve Baidu.com’s US lawyers under FRCP 4(f)(3). I did not hold out much hope that the judge would get this one right, since he cited the much-maligned (by me) decision in Gurung v. Malhotra, but kudos to Judge Jesse M. Furman for correctly holding, in today’s decision, that an Article 13 objection by the state of destination does not bar alternate service on the foreign defendant’s US counsel.

Baidu argued that “ordering alternative service would effectively override China’s invocation of its own sovereignty and security.” That argument has surface appeal, but in my view Article 13 is aimed at allowing a foreign country to refuse a request to make service of process in its own territory when it believes the service would be contrary to its sovereign interests. If there is no request to the Chinese government for assistance in making service, and moreover, if there is no service in China’s territory, 1 then the sovereignty interests that Article 13 means to protect simply aren’t in play. More to the point, if a plaintiff does not attempt to transmit documents into a foreign country, then under Article 1 the Convention is inapplicable from the get-go. The judge specifically rejected Gurung’s suggestion to the contrary as inconsistent with the plain language of FRCP 4(f)(3); the Rule permits alternate service unless the means of service—not the fact of service itself—are contrary to international agreement. I hope this is the beginning of a reevaluation of the many failings of Gurung.

Notes:

  1. This point about the absence of service in Chinese territory is really just a subsidiary point, since FRCP 4(f)(3) permits service abroad that violates the law of the foreign state where service is made—though not service that violates the Hague Service Convention in cases where the Convention applies.

Case of the Day: Khan Resources v. Atomredmetzoloto

We return today to Khan Resources Inc. v. Atomredmetzoloto JSC, the case of the day from March 23, 2012. Thanks to IJA Brigade member Antonin Pribetić for bringing the case again to my attention! Here was my summary of the case from the prior post:

Khan Resources, Inc. and some affiliates entered into a joint venture with Atomredmetzoloto JSC (“AMRZ”), which is a subsidiary of the Russian State Atomic Energy Corporation—as its name suggests, a state enterprise. The purpose of the venture was to develop a uranium mine in Mongolia. In 2010, Khan sued AMRZ in Ontario for $300 million. The claims were for breach of fiduciary duty, tortious interference, and so forth. Khan sought to serve process via the Russian Ministry of Justice, which is the central authority for Hague Service Convention purposes, but the Ministry refused to execute the request for service, citing Article 13 …

Khan was successful in obtaining an order waiving the necessity of service in the lower court, but on appeal, the Superior Court of Justice reversed the decision.

In today’s case, the matter was at the Ontario Court of Appeal on appeal from the Superior Court. The court affirmed the lower court’s decision.

On the one hand, the provision in the Ontario rules of procedure that applies specifically to service in a Hague Convention state, Rule 17.05(3)(a), does not permit service by alternate means:

An originating process or other document to be served outside Ontario in a contracting state shall be served through the central authority in the contracting state. 1

On the other hand, Rule 16.08(a) provides:

Where a document has been served in a manner other than one authorized by these rules or an order, the court may make an order validating the service where the court is satisfied that the document came to the notice of the person to be served …

If I understand the decision correctly, the court held that the Convention was not just exclusive, but mandatory. Just to clarify terms, by “the Convention is exclusive,” I mean that where the Convention applies and a document is to be transmitted to the foreign state, the service must be by one of the methods prescribed or permitted by the Convention. By “the Convention is mandatory,” I mean that where the defendant is in a Hague Convention state, the plaintiff must serve the documents by a means prescribed or permitted by the Convention, full stop. In other words, if the Convention is mandatory there is no option for service without transmission of the document abroad. So, for example, you could not simply serve the document on the defendant’s lawyer in Canada, as a US plaintiff can do under FRCP 4(f)(3).

This may be right as a matter of Ontario law. I defer entirely on that issue to Antonin. If Ontario chooses to require documents to be served abroad in such cases, that’s entirely permissible. But I don’t think that the Convention itself requires that result. Article 1 makes it clear that the Convention applies only when there is occasion to transmit a judicial document for service abroad, and the determination whether there is such an occasion is to be made by the law of the forum. As the Hague Conference outline of the Convention states:

For the Convention to be applicable, the following requirements must be met: (i) a document is to be transmitted from one State party to the Convention to another State party for service in the latter (the law of the forum state determines whether or not a document has to be transmitted abroad for service in the other State—the Convention in non-mandatory), (ii) an address for the person to be served is known, (iii) the document to be served is a judicial or extrajudicial document, and (iv) the document to be served relates to a civil or commercial matter. If all these requirements are met, the transmission channels provided for under the Convention must be applied (the Convention is exclusive).

And courts including the US Supreme Court have construed the Convention as exclusive but non-mandatory in just this way.

Notes:

  1. The rule also permits service by one of the methods permitted by Article 10 of the Convention, but the parties agreed that that was not possible here.

Case of the Day: Zhang v. Baidu.com

The case of the day is Zhang v. Baidu.com, Inc. (S.D.N.Y. 2013). The plaintiffs were Jian Zhang, Guang Yang, Wa Xue, Tian Cheng Wang, Liqun Chen, Shenqi Fu, Shuyuan Song, and Yuhong Zhang, who described themselves as “promoters of democracy in China through their writings, publications and reporting of pro-democracy events.” They sued Baidu.com, the Chinese search engine, and the People’s Republic of China, for conspiring to prevent their “pro-democracy political speech” from showing up in Baidu search results. The complaint asserted claims for violations of federal civil rights statutes, 42 U.S.C. §§ 1981, 1983, and 1985, and under New York law.

The plaintiffs sent requests for service of process on both defendants to the Chinese Ministry of Justice, China’s central authority under the Hague Service Convention. 1 The Ministry refused to execute the request for service on the grounds, permitted by Article 13 of the Convention, that the “execution of the request would infringe the sovereignty or security of the People’s Republic of China.”

Baidu moved to dismiss for insufficient service of process, and the plaintiffs cross-moved for entry of default judgment against both Baidu and China. China had not appeared in the case.

The judge denied the motion for entry of default judgment. He properly refused to consider the propriety of China’s invocation of Article 13: “[T]he Court lacks jurisdiction to address whether China properly invoked Article 13. Indeed, the Convention is clear that difficulties which may arise in connection with the transmission of judicial documents for service shall be settled through diplomatic channels.” 2 The judge cited Davoyan v. Republic of Turkey, the case of the day from May 18, 2011, for this proposition. Fortunately, he did not follow the erroneous decision in Gurung v. Malhotra, where the judge incorrectly did consider whether the foreign state’s invocation of Article 13 was proper.

The judge also rejected the plaintiffs’ contention that noncompliance with the Convention was excused because the defendants had actual notice of the action. Easy.

Last, the judge rejected the argument that under Article 15 of the Convention a default judgment was proper. Article 15 deals with cases in which the plaintiff receives no response from the foreign central authority for six months, despite its best efforts. Here, the plaintiffs received a response, but not a response they liked.

The plaintiff requested leave to serve Baidu by alternate means under FRCP 4(f)(3), namely by service on its US counsel. This leads to the only sour note in the decision. The judge gave the plaintiffs an opportunity to be heard on that question, but citing the much-maligned (by me) Gurung, he wrote: “It is not clear whether a court may authorize an alternative means of service pursuant to Rule 4(f)(3) where, as in this case, the receiving nation has declined to effect service pursuant to Article 13 of the Hague Convention.” This seems clearly wrong. The Convention governs only service of process abroad. A foreign state cannot immunize its nationals from suit in the United States by refusing to serve them with process. If the plaintiff can effect service of process without transmitting a document to the foreign state, then the Convention is simply inapplicable. To take a hypothetical, suppose the president of Baidu traveled to the United States. Surely the plaintiffs could serve process on the company by delivering the summons and complaint to him. Service on Baidu’s counsel is no different.

The judge also ordered the plaintiffs to show cause why the claims against China should not be dismissed. Presumably the plaintiffs will respond that, having tried service under 28 U.S.C. § 1608(a)(2), they are now going to attempt service under the remaining options available under the FSIA.

I would like to editorialize for a moment to make two points. First: SDNY judges, stop citing and following Gurung! It’s a bad decision. Confident as I am that the judges of the SDNY have better thing to do than reading Letters Blogatory, I am working on an article about Gurung for publication in a law review, which I hope may catch their eyes. But if you’re a law clerk and you’re reading this, raise the issue with your judge!

Second, I think that leaving aside the service of process issues, this litigation is regrettable. Censorship of the internet and of search results is a big problem, not just for the authors whose work is censored but for China itself and for its development. That’s my view, anyway. But the plaintiffs’ lawyer in this case isn’t doing anyone any favors by bringing federal civil rights claims that seem to me at least to be plainly untenable. And we haven’t even begun to discuss the jurisdictional issues that both defendants are likely to raise, and that China in particular is likely to raise under the FSIA. Surely this is not the best way to promote a more open internet in China.

Notes:

  1. As an aside: this was a proper method of seeking to serve the Chinese state under the FSIA, since in the absence of a “special arrangement for service,” the first method a plaintiff must attempt is service “in accordance with an applicable international convention on service of judicial documents.” See 28 U.S.C. § 1608(a)(2).
  2. This is a reference to Article 14.