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Case of the Day: Hubei Gezhouba Sanlian Indus. Co. v. Robinson Helicopter Co.

Today’s case of the day, Hubei Gezhouba Sanlian Indus., Co. v. Robinson Helicopter Co. (9th Cir. 2011) (mem.), is all of one paragraph long, but it is highly interesting. According to the District Court’s decision, here are the facts:

The plaintiffs, Sanlian and Pinghu, were Chinese firms doing business in Hubei Province. The defendant, Robinson Helicopter Co., was a California firm. After one of Robinson’s R-44 helicopters crashed in the Yangtze River, Sanlian and Pinghu sued Robinson in the Los Angeles County Superior Court on theories of negligence, strict liability, and breach of implied warranty. Robinson sought to stay the action on forum non conveniens grounds, arguing that the Chinese courts would afford it with due process of law and agreeing to toll the statute of limitations, “submit to the jurisdiction of the appropriate court in China” and to “abide by any final judgment rendered in China.” The Superior Court granted Robinson’s motion, and Sanlian and Pingu then sued Robinson in the Higher People’s Court of Hubei Province.

Although the lower court’s decision does not say so, according to Sanlian and Pinghu’s brief, it was not disputed that the Chinese courts forwarded a request for service of process, with the summary of the document to be served an all other required documents, to the United States central authority. A process server left the Chinese court’s summons, the complaint, etc. with Robinson’s receptionist, after being authorized to do so by the administrative assistant to Robinson’s general counsel. The general counsel, Tim Goetz, actually received the papers and passed them along to lawyers in Hong Kong and to Robinson’s dealer in China, which promised to send a representative to the trial. But the representative was barred from attending the trial because she was not a party. The process server executed a certificate showing compliance with Article 5(a) of the Hague Service Convention, which was filed with the Chinese court. Although Robinson failed to appear or defend in the Chinese court, the judges held an evidentiary hearing. They issued a judgment for Sanlian and Pinghu. Robinson did not appeal (although Goetz did write to the Ministry of Justice “objecting” to the judgment).

Sanlian and Pinghu then brought an action in the U.S. District Court for the Central District of California for recognition and enforcement of the judgment under California’s enactment of the Uniform Foreign Money-Judgments Recognition Act (California has since repealed the statue and replaced it with the Uniform Foreign-Country Money Judgments Recognition Act). The court found, as a matter of fact, that Robinson had received sufficient actual notice of the Chinese action to allow it to defend. It entered a judgment for Sanlian and Pinghu, and Robinson appealed.

Robinson presented three arguments of note in the appeal: (1) an argument that the Chinese judgment should not be recognized because service of process was improper; (2) an argument that it would be inequitable to enforce the judgment because China does not enforce American judgments; and (3) an argument that the judgment could not be enforced because it was no longer enforceable in China.

Robinson’s argument about service of process boiled down to an assertion that the service was improper because the process server did not deliver the Request for Service Abroad form required by Article 3 of the Convention or the Summary of the Document to be Served required by Article 5 on Robinson. Robinson’s argument on the Request for Service Abroad form seems incorrect. As I read Article 3, the requirement is that the Request for Service Abroad form, with the summons and complaint annexed, must be delivered to the central authority, not that the Request for Service Abroad form must be served on the defendant. Article 5, first paragraph, requires service of “the document”, i.e., the judicial or extra-judicial document to be served, not the Request for Service form. Robinson did have a point, though, about the Summary of the Document to be Served, which, under Article 5, paragraph 4, should have been served with the summons and complaint. The Ninth Circuit summarily, and properly, rejected this argument, however. It reasoned: “[B]ecause [Robinson] has not shown that California courts may refuse to recognize foreign money judgments on grounds other than those listed in the UFMJRA, any technical non-compliance with the Convention … cannot serve as an independent basis for non-recognition of the PRC judgment.” I would expand on this holding as follows: the only potentially relevant grounds for refusal of recognition were lack of personal jurisdiction (which is a mandatory ground for non-recognition) and a lack of sufficient notice to enable the defendant to defend (which is a permissive ground). There clearly had been sufficient actual notice. Under § 5(a) of the UFMJRA:

The foreign judgment shall not be refused recognition for lack of personal jurisdiction if–

* * *

(3) the defendant prior to the commencement of the proceedings had agreed to submit to the jurisdiction of the foreign court with respect to the subject matter involved.

Thus even if a defect in the service under the Convention had the effect of depriving the Chinese court of personal jurisdiction, Robinson’s earlier stipulation that it would submit itself to the Chinese court’s jurisdiction deprived that argument of any force. An insufficiency in the mode of service of process is not an independent ground for refusal of recognition under the statute.

Robinson’s argument about lack of reciprocity fails for the same reason–a lack of reciprocity is simply not grounds for refusal of recognition under the statute. Moreover, Robinson could hardly make this argument with a straight face, given that the case was before the Chinese court only because that’s where Robinson asserted it had to be.

Section 2 of the UFMJRA does require that the judgment be “final and conclusive and enforceable where rendered.” Robinson argued that under Chinese law, the judgment was no longer enforceable in China and thus could not be enforced in California. I can express no view on the argument about Chinese law, nor did the Ninth Circuit. Instead, the court held that because Robinson had stipulated that it would “abide by any final judgment rendered in China,” it was estopped to argue that the judgment was not enforceable in China. Accepting Robinson’s argument “would create the perception that the California court was ‘misled’ in granting [Robinson’s] forum non conveniens motion and ‘would impose an unfair detriment'” on the plaintiffs. This seems the weakest part of the court’s analysis. If, as Robinson argued, Chinese law required the plaintiffs to seek an execution within six months of the date of the judgment, then it’s not clear to me that a stipulation to “abide by” the Chinese court’s judgment is sufficient to create an estoppel. (I note that in the new statute that has replaced the UFMJRA, the test is whether the foreign judgment, “under the law of the foreign country where rendered, is final,” not whether the judgment is enforceable where it was made). But I think the court was troubled by the lack of equity in Robinson’s position.

A few comments on the decision. First, as in the Lago Agrio case, we see American lawyers outsmarting themselves by arguing for a forum non conveniens dismissal in circumstances where that seems to make almost no sense. How could Robinson have thought that it would be better off litigating against two Hubei Province companies on their home turf than litigating against them in California? And having made that decision, how could Robinson have defaulted?

Second, if Robinson had an argument about improper service of process, was it not an argument for the Chinese court to consider? Isn’t the U.S. certificate of compliance with the Hague Convention prima facie evidence that service was proper, and wasn’t it Robinson’s burden to rebut that point in China? That, at least, is what I think would happen in a U.S. court faced with a certificate of compliance with the Convention.

Third, it’s worth comparing the issue of estoppel here with the Second Circuit’s recent Chevron decision. There, of course, the issue was discussed much more thoroughly (the Ninth Circuit’s decision is nonprecedential and unpublished). In Chevron, the court found no estoppel, but Chevron’s stipulation there had been subject to its right to challenge the Ecuadorian judgment on grounds permitted by New York law, and Chevron’s fraud and due process claims plainly fell within that exception to the scope of the stipulation. It seems to me that despite the differing outcomes, the two cases are consistent with each other.