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Case of the Day: Symantec v. Acronis

The case of the day is Symantec Corp. v. Acronis, Inc. (N.D. Cal. 2013). Symantec sued Acronis, Inc., Acronis International GmbH, and the curiously named OOO Acronis for infringement of its patents for backup, recovery, and security software. OOO Acronis, the developer of the allegedly infringing software, was a Russian entity with its place of business in Moscow. Symantec attempted to serve process on OOO Acronis by personal service on Alex Pinchev, Anthony Folger, Laurent Dedenis, and Ravi Jacob in the United States. According to the evidence Symntec offered, Pinchev was CEO of all of the Acronis entities and the ultimate decision-maker for them; Folger was CFO of Acronis Inc. and responsible for finance at all Acronis entities; and Dedenis was in charge of global sales for Acronis. For its part, OOO Acronis submitted an affidavit stating that the individuals were not “employees, officers or directors of OOO Acronis.”

OOO Acronis moved to dismiss for insufficient service of process. 1 Under FRCP 4(h)(1)(B), service on a corporation is permissible by delivering the papers to “an officer, a managing or general agent, or any other agent authorized by appointment or law to receive service of process.” As we saw in the Brighton Collectibles case, the test in the Ninth Circuit is not formal but functional. The question is whether the representative is “so integrated with the organization that he will know what to do with the papers.” Here Folger and Pinchev, at least, clearly met the test. Thus the judge correctly denied OOO Acronis’s motion.

Notes:

  1. Symantec also sought a declaration that its attempts at service were effective. Regular readers will know that I don’t like these motions.

Case of the Day: Brighton Collectibles v. Winston Brands

The case of the day is Brighton Collectibles, Inc. v. Winston Brands, Inc. (S.D. Cal. 2013). Brighton, which makes and sells women’s fashion accessories, had registered copyrights on several designs, including the “Heart Conch” jewelry design and the “Charmaine Heart” jewelry design. It sued Urban Trend (HK), Ltd., a Hong Kong company, for copyright infringement, and it served process on Urban Trend by serving the registered agent for service of process of a US affiliate, Urban Trend, LLC. Urban Trend moved to dismiss for insufficient service of process.

The judge rejected Urban Trend (HK)’s challenge to the service, in essence applying the rule of Volkswagen, though, oddly, without citing the case. Under FRCP 4(e)(1), service could be made by means prescribed by California law. California law, in turn, permits service on a corporation “by delivering a copy of the summons and the complaint … to … a general manager, or person authorized by the corporation to receive service of process.” A “general manager,” under the California precedents, is “any agent of the corporation ‘of sufficient character and rank to make it reasonably certain that the defendant will be apprised of the service made.” A domestic distributor, salesman, or advertiser for a foreign manufacturer may be a general agent “as long as the domestic entity provides the foreign entity an open channel for the regular flow of business from the foreign entity into California.” Here, although Urban Trend LLC did not sell the particular products at issue in the case, it did generally sell the Hong Kong entity’s women’s fashion products in California. (The court distinguished a colorful hypothetical in which a US subsidiary of a foreign car manufacturer was exclusively in the business of “importing koi fish”, in which case the subsidiary could not be considered the general agent of the foreign company despite the parent/subsidiary relationship). The judge reached the same conclusion under FRCP 4(h)(1)(B), which provides that as a matter of federal law, it is proper to serve a corporation by service on its “managing or general agent.” The Ninth Circuit precedent again provided for a broad construction of the term “managing or general agent”:

Despite the language of the Rule, service of process is not limited solely to officially designated officers, managing agents, or agents appointed by law for the receipt of process. The rules are to be applied in a manner that will best effectuate their purpose of giving the defendant adequate notice. Thus, the service can be made upon a representative so integrated with the organization that he will know what do do with the papers. Generally, service is sufficient when made upon an individual who stands in such a position as to render it fair, reasonable and just to imply the authority on his part to receive service. Generally, the determination of whether a given individual is a ‘managing or general agent’ depends on a factual analysis of that person’s authority within the organization.

Other factors the judge considered included the similarity of the two entities’ business, the fact that press releases described them as a single enterprise with offices in Hong Kong and California, and the fact that they share a website.

I can’t comment on the California law issues that arose in the case under FRCP 4(e). The Ninth Circuit precedent on the interpretation of FRCP 4(h)(1)(B) seems to me liberal but permissible. I would suggest, though, that in cases that depend on the Volkswagen principle—cases, that is, where service would have to be made abroad but for the fact that the court holds that the law of the forum does not require transmission of the document abroad—courts should consider whether reasons of comity or due process suggest they should give the term “managing or general agent” a narrower construction than it would have in a purely domestic case.

Case of the Day: Glencore Ltd. v. Occidental Argentina Exploration & Production

The Case of the Day is Glencore Ltd. v. Occidental Argentina Exploration & Production, Inc. (S.D. Tex. 2012). Glencore had a contract with Sinopec, a Cayman Islands corporation doing business in Buenos Aires, for the delivery of crude oil to a vessel in Argentina for shipping to the United States. The claim was for demurrage. Sinopec moved to dismiss for insufficient service of process.

Glencore had not attempted to comply with the Hague Service Convention. Instead, it attempted to serve process on a Sinopec agent in Texas. This is not a bad approach, since under Article 1 of the Convention, service in the United States avoids bringing the Convention into play altogether. The judge found, however, that Sinopec had not authorized its Texas agent to be an agent for the receipt of service of process. To me the interesting point in the judge’s discussion is the apparent discounting of the possibility that the agent may have had apparent authority to accept service:

… Rule 4(1)(h)(B) allows service upon a foreign corporation to be accomplished by delivering a copy of the summons and complaint to an agent authorized to receive service of process. This Court has recognized that the Fifth Circuit construes Rule 4(h) narrowly, and requires “that the corporate entity sought to be served must have actually authorized the agent to accept service of process on its behalf.”

What is the rationale for this? Why should we not simply import the law of agency wholesale into Rule 4 and say that an agent with actual or apparent authority to receive service of process is acceptable? Apparent authority still requires a “manifestation” (in the language of the Restatement) by the principal to the third person. In other words, Sinopec would be on the hook only if it had somehow communicated to Glencore that the agent was authorized to accept service of process, even if Sinopec had not affirmatively authorized the agent to accept service of process.