Tag Archives: default judgment

Case of the Day: Wuxi Taihu Tractor Co. v. The York Group, Inc.

The case of the day is Wuxi Taihu Tractor Co. v. The York Group, Inc. (Tex. App. 2014). York, a Delaware firm that manufactured and sold coffins sued Wuxi, a Chinese firm, for unfair competition and other torts. York served process on Wuxi by service on the Texas Secretary of State, who then mailed the summons and complaint directly to Wuxi in China. Wuxi entered a pro se appearance and filed, but did not serve, an answer that asserted, among other things, that Wuxi had not properly been served with process. There was some procedural wrangling. The judge ordered Wuxi to retain a lawyer, but Wuxi didn’t. Eventually the case was called for trial and Wuxi did not appear, so the judge entered a default judgment. Wuxi sought review.
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Case of the Day: Bleier v. Bundesrepublik Deutschland

Brandenberg GateThe case of the day is Bleier v. Bundesrepublik Deutschland (N.D. Ill. 2011). The case is a putative class action. The plaintiffs claim that they are the holders of pre-WWII German bonds, on which Germany ceased making repayments in 1933. The substantive point in the case was whether the court had subject-matter jurisdiction in light of requirements of German law, and of a post-war treaty between the US and Germany, that only bonds that had been “validated” through an administrative procedure prescribed by German law are enforceable. A second substantive question was whether Germany, its ministry of finance, and its central bank were immune from suit under the FSIA. The point relevant to Letters Blogatory was procedural: Germany also raised a defense of insufficient service of process under the FSIA.

The plaintiffs first sought to make service via the German central authority under the Hague Service Convention, but the central authority refused to execute the request under Article 13, which permits a state to refuse to execute a request that “would infringe its sovereignty or security.” Rather than seeking to comply with FSIA, the plaintiffs moved for leave to effect service by email to Germany’s counsel of record. Ordinarily, this is an appropriate tactic, but in the context of FSIA—well, let’s just say that it’s a good thing that when the case was assigned to a new judge, the new judge didn’t just adopt the position of the prior judge, else any victory by the plaintiffs at trial would surely have been reversed on appeal. The FSIA’s four methods of service, attempted in the prescribed order, are mandatory and must be strictly complied with (at least when attempting service on a foreign state rather than an instrumentality of a foreign state).

The plaintiffs also sought to serve the German central bank via the German central authority, and they filed a motion suggesting that the central authority had executed the request for service, even though, for reasons that are unclear, the central authority had not returned the certificate of service to the plaintiffs. On the other hand, the bank denied that it had been served. So the plaintiffs moved for leave to serve the German central bank by alternate means. But because the alternate means were not among the means prescribed by the FSIA, and because the central bank had moved, in a German court, to quash service in Germany (this is another instance of the curious procedure we saw in Tang v. CS Clean Systems AG), the court denied the motion without prejudice, pending a resolution of the German proceeding. It explained:

If the German court has ruled by now on the motion to quash, and has quashed service, Plaintiffs may re-file the motion to serve by an alternate method, § 1608(b)(3)(C), but Plaintiffs must explain specifically how the proposed alternative is “consistent with the law of the place where service is to be made,” id. If the German court has not quashed service, then Plaintiffs may move to deem service effectuated if [the bank] still disputes the effectiveness of service.

The plaintiffs, in light of this order, have filed a motion to “deem service effectuated.” I have previously criticized the use of post facto motions to “validate” questionable service of process or to deem questionable service of process effective, on the grounds that insufficient service of process is an affirmative defense that should be raised by the defendant rather than by way of a request for an advisory opinion. Here, however, while I might have chosen a different name for the motion, the plaintiffs make a strong point: there’s no question that the plaintiffs transmitted the appropriate documents to the German central authority, and although six months have past and they have made efforts to see to the central authority’s performance of its obligations, they have not received a certificate from the authority stating that service has been effected or stating, for that matter, that service has not been effected or that the authority has refused to attempt service. Article 15 of the Hague Service Convention generally prohibits default judgments “until it is established that” the document was properly served on the defendant, but Article 15(2)provides an exception:

Each Contracting State shall be free to declare that the judge, notwithstanding the provisions of the first paragraph of this Article, may give judgment even if no certificate of service or delivery has been received, if all of the following conditions are fulfilled—

(a) the document was transmitted by one of the methods provided for in this Convention,

(b) a period of time of not less than six months, considered adequate by the judge in the particular case, has elapsed since the date of transmission of the document,

(c) no certificate of any kind has been received, even though every reasonable effort has been made to obtain it through the competent authorities of the State addressed.

The United States has made such a declaration. So under Article 15(2), the US court is free to enter a default judgment. As in Scheck v. Republic of Argentina, another sovereign debt case, the foreign central authority probably would have been better off expressly refusing to execute the request on Article 13 grounds rather than simply refusing to be explicit about its refusal. If Scheck is rightly decided, then there would seem to be no FSIA exception to Article 15(2). See also Box v. Dallas Mexican Consulate General, 2009 WL 3163551, at *6 (N.D. Tex. 2009), judgment set aside on other grounds, 2010 WL 5437246 (N.D.Tex. 2010); Daly v. Llanes, 1999 WL 1067876, at *1 (S.D.N.Y. 1999).

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Case of the Day: Fish & Richardson PC v. Camtek Ltd.

We have frequently noted the that a foreign central authority’s certificate under Article 6 of the Hague Service Convention is prima facie evidence of service of process. In the discussion of Zions First Nat’l Bank v. Moto Diesel Mexicana, the case of the day from July 21, 2011, the Mexican defendant had been served with the papers but had argued that the service had not complied with Mexican law. The court refused to credit the defendant’s arguments in light of the central authority’s certificate, causing me to ask whether US courts mean it when they say that Article 6 certificates are merely prima facie evidence of service: aren’t they really close to conclusive?

Today’s case of the day, Fish & Richardson PC v. Camtek Ltd. (D. Minn. 2011), is an example of a case where the court, probably incorrectly in my view, rejects the plaintiff’s assertion that it had made service of process notwithstanding the central authority’s Article 6 certificate. But because the case arose on a motion for relief from a default judgment rather than on a motion to dismiss for insufficient service of process, I won’t say that the case was wrongly decided.

Fish & Richardson had defended Camtek, Ltd., an Israeli firm that manufacturers “Falcon” automated optical inspection equipment, in a patent infringement case in the District of Minnesota. F&R’s bill was more than $7 million. The case went to trial, and the verdict was that Camtek had infringed the plaintiff’s patent and was liable for $6.78 million in damages. Additionally, the court enjoined future sales of the “Falcon” product. Camtek dismissed F&R and refused to pay the outstanding portion of F&R’s bill.

F&R sent the summons and complaint to the Israeli central authority for service under Article 5(a), i.e., service “by a method prescribed by [Israeli] internal law for the service of documents in domestic actions upon persons who are within its territory.” The request for service contained an address for Camtek that, according to a later declaration from Camtek’s CFO, was incorrect. In fact, it appears that the address was the address for a post office in Israel where Camtek received its mail. The Israeli central authority returned a certificate stating that the documents had been served on Camtek pursuant to Israeli law. The court ultimately entered a default judgment against Camtek, at which point Camtek moved for relief from the judgment under Fed. R. Civ. P. 60(b)(4), which provides for relief from a void judgment, arguing that it had never been served with the summons and complaint. According to affidavits submitted by F&R, a postal clerk handed the papers to Erez Ashkenazi, a representative of Camtek. According to affidavits submitted by Camtek, Mr. Ashkenazi did not recall receiving the papers and claimed that he would have remembered them had he received them, and he denied that he had signed the acknowledgment form.

The court was in the unenviable position of having to weigh the competing affidavits, comparing specimens of Mr. Ashkenazi’s signature to the signature on the acknowledgment form, and so forth. The court also was faced with arguments from Camtek that the method of service (delivery by the central authority to the post office, and then delivery from the post office to the defendant) did not comply with Israeli law. These are precisely the kinds of determinations that an Article 6 certificate should allow the US court to avoid having to make. It seems particularly clear that the US court should not be in the business of second-guessing the foreign central authority as to whether the method of service used complied with the foreign law. But even on the factual dispute presented by this case, it’s not clear why the court should credit Mr. Ashkenazi’s affidavit, which doesn’t squarely deny receipt of the documents (or maybe even the authenticity of the signature on the acknowledgment form: the affidavit states: “I do not recognize any signatures on the document as my signature” and notes that the specimen signature he provided is “nowhere to be found” on the acknowledgment form), over the central authority’s certificate and the affidavit of the Israeli postal clerk who says she actually handed the documents to him.

If the sufficiency of service had arisen in this case on a motion to dismiss, I would readily say that the court had decided wrongly. But here, Camtek was seeking relief from a default judgment. There is an important policy in favor of deciding cases on the merits rather than by default, and any doubts should be resolved in favor of the defendant. Even so, on these facts, it’s not clear to me that Camtek was entitled to relief. But if the decision is wrong, it is less wrong than it would have been had the issue arisen prior to judgment.