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Case of the Day: Bidonthecity.com LLC v. Halverston Holdings Ltd.

The case of the day is Bidonthecity.com LLC v. Halverston Holdings Ltd. (S.D.N.Y. 2014). The case involved a joint venture gone wrong. The plaintiff sought to serve one of the defendants, Halverston Holdings Ltd., BVI, a British Virgin Islands company, by Fedex. The UK has not objected to service by postal channels on the BVIs’ behalf, and the judge correctly held that Fedex is within the postal channel.

The more difficult question was service on RBC-TV Moscow, a Russian corporation. The plaintiffs sought to effect service by personal delivery and by mail. The judge correctly held that under FRCP 4(h)(2), personal delivery is not an available method of delivery for use on a corporation abroad. Service by mail won’t work, either, as Russia has objected to service by mail under Article 10(a) of the Hague Service Convention.

Parade in Red Square
Just Like Old Times!
The plaintiffs didn’t make a simple mistake here. Rather, they were trying to grapple with Russia’s unilateral refusal to execute requests for service from the United States under the Convention. I have noted that refusal twice before. The fact of the matter is that Russia’s refusal to honor the treaty does not make permissible what the Convention makes impermissible. I don’t know enough public international law to know what would have to happen to change this analysis: certainly Russia has not withdrawn from the Convention.

All’s well that ends well. RBC-TV had hired a US lawyer to argue its position on service of process and other issues. And so the judge, correctly, authorized the plaintiff to serve RBC-TV by service on its US counsel. I’ve said it before: if you want to make a service of process argument, run silent, run deep. (I’ll do a post on this idea at some point. I think it’s right, even though I can think of some objections).

Photo credit: RIA Novosti/Grigory Sysoev

Case of the Day: Henry F. Teichmann, Inc. v. Caspian Flast Glass OJSC

The case of the day is Henry F. Teichmann, Inc. v. Caspian Flat Glass OJSC (W.D. Pa. 2013). The facts of the case are not clear from the decision, but it appears that Caspian Flat Glass, the defendant, was a Russian company. Russia, as we know, has unilaterally suspended cooperation with the United States under the Hague Service Convention, and letters rogatory, while technically possible, are never effective in practice. Teichman sought leave to make service by email under FRCP 4(f)(3). The judge, understandably but wrongly, granted the motion. Rule 4(f)(3) authorizes the court to grant leave to serve process by means that violate the foreign law, but not by means that violate applicable international agreements. Here, the judge concluded that the Convention does not prohibit service by email, citing In re Potash Antistrust Litig., 667 F. Supp.2d 907 (N.D. Ill. 2009), MacLean-Fogg Co. v. Ningbo Fastlink Equip. Co., 2008 WL 5100414 (N.D. Ill. 2008), and RSM Prod. Corp. v. Fridman, 2007 WL 1515068 (S.D.N.Y. 2007). As I noted in my 2011 year in review post on service by email, MacLean-Fogg was a case where the defendant’s address was unknown and the Convention therefore did not apply. RSM is not a service by email case, and it’s not clear to me why the judge cited it. As I noted in the prior post, I read Potash as a case about whether service by email in Russia specifically is permitted (perhaps under Article 19 of the Convention) because Russian law permits it; but it’s important not to confuse that point with a general, and, I think, erroneous statement that the Convention itself permits service by email. For the most recent statement of my view on service by email under the Convention, you can refer to my post on the PCCare247 case. I continue to be on the warpath about this.

I understand why judges don’t want to leave US plaintiffs with no good options for service of process in Russia. Russia’s refusal to comply with the Convention is highly problematic. But the Convention is pretty specific on this point. Under Article 14, “Difficulties which may arise in connection with the transmission of judicial documents for service shall be settled through diplomatic channels.”

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.