The Rock of Gibraltar… guaranteeing access to the Mediterranean since 1704.  USAF photo.

In 2016, I posted “Five Essential Things All Business Owners (and Their Lawyers!) Should Know Before Signing Global Contracts” with real people– and preventing lawyerly goof-ups– in mind.  But lately, I’ve realized that some elaboration is necessary.

Why those five things matter ought to be apparent.  But some nuance is necessary, so I offer a five-part series that elaborates on each point, more for than benefit of lawyers than for the business owners who want to venture abroad.

Those five things, in turn…

  1. Designate an agent for service in the United States.
  2. Include a choice of venue.
  3. Choose a governing law.
  4. Determine the operative language.
  5. Secure a guarantee of judgment debt.

To elaborate on Point Five…

Secure a guarantee of judgment debt.

Face it.  As I wrote in July, a lawsuit ain’t over ’til the client gets a check.  An eye toward enforcement of a judgment is absolutely critical when litigation is in the planning phase.  The key is to think about it even earlier– when the contract is in the drafting phase– in order to prevent a breach from occurring at all.  Our clients honestly don’t expect the other party to welch on the deal, but it’s our job to give them a reality check.  Even though we hope it never happens, we have to anticipate it, and if we can do that, well… an ounce of prevention truly is worth a pound of cure.

So think ahead to the end of a potential lawsuit.  You’ve done everything right– served properly, undertaken the perfect scope of discovery, won the right motions, and convinced a jury that your client was damaged as a result of the other party’s intransigence.  You’re awarded seven figures in damages and your client is ecstatic.*

But… harumpf.  Your losing opponent (let’s say they’re from China) has no assets in the United States except a $170,000 corporate apartment in Galveston.  At the outset, you tried to convince the client that choosing Chinese law, venue, and language would be a great hedge against a breach, but they insisted on… ‘Murica, damnit, we’re the greatest country in the world.  They insisted on fighting it out here because they feared litigating over there.

Your defendant, counselor, is a turnip.  As in “can’t get blood out of a…”

Forget about enforcing the judgment in China. Just don’t waste your time, because Chinese courts have enforced exactly ONE U.S. JUDGMENT in as long as anybody can remember.  One.  And that was between two Chinese citizens in a case that Chinese courts wouldn’t touch with a ten-foot pole.

What to do?

AHA!  While your client dissed your Chinese law/venue/language recommendation, they did have the good sense to act on your recommendation that they get a guarantee of judgment debt.  Exercise the guarantee, whatever form it takes, and you’re able to collect that vaunted check.

Whatever the type of transaction, there are always options.  Sure, they’re likely to increase the cost of the transaction, but car insurance increases my cost per mile on the road, and I wouldn’t be without my coverage (or my agent, Irvin).  I hope I never have to use it, but peace of mind is awfully nice.  And if something horrible happens, I know I won’t have to live in a van down by the river.

Options

  1. Collateral.  Okay, so they only have that condo in Galveston.  But they put it up as collateral on the contract, you file the proper lien, and you don’t have to litigate to enforce the judgment.  Just act on the lien.
  2. Letters of Credit.  Like a deep pocketed co-signer, banks provide letters of credit all the time.  They may not be willing to back a Chinese party directly, but maybe a Chinese bank would provide a guarantee to the U.S. bank.  Again, this kicks up the cost quite a bit, but when you win that seven-figure judgment, the U.S. bank pays it and then collects from the Chinese bank, who in turn goes after the breaching party in… China.
  3. Other U.S. parties who are beholden to the foreign party.  Company XYZ in Oregon owes the foreign party an amount equal to half of the judgment.  Yes, collect it, but if it’s written into the contract that you can seize those receipts, much easier to collect.
  4. Some other U.S. guarantor.  Perhaps not specifically a Letter of Credit, but functionally similar.  An affiliate of the foreign party, perhaps, who does have sufficient assets in the United States, offers collateral or other guarantee on the contract.
  5. Export Insurance.  Just as Irvin and State Farm have me covered in case of a car accident or fire or other horrible event, export insurors have your client covered if their overseas buyer refuses to pay the balance due on a high-value shipment.  If you don’t know who to contact, just Google “export insurance”. **  In truth, this isn’t really a judgment guarantee– it’s a deal guarantee.  You wouldn’t even have to litigate in such a situation.

The list goes on.  But the bottom line is this:  a courtroom victory is Pyrrhic if there’s no way to collect on it.  So make life easier on your client by providing some kind of assurance that they’ll be paid if the other guy breaches.  Yes, it’s a pain in the neck.  Yes, it can drive up the cost of contracting and thus drive up the cost of the entire relationship.  But a judgment following a lawsuit is utterly worthless if it can’t be enforced.  If the foreign party’s assets are all in a country that won’t recognize and enforce a U.S. judgment, litigating the matter is a massive waste of time.


* Set aside the fact that the transactional folks who write this agreement aren’t likely to litigate it, too.

** For a more personal touch, call my friend Dave Clark at ARI Global.  He’s originally from Nebraska, but we don’t hold that against him, especially since he’s the fellow who introduced me to the concept of export insurance in the first place.

Wikimedia Commons

An interesting story hit the blogosphere a couple of weeks ago (see “MtGox’s US customers try to find Mark Karpeles” over at the FinanceFeeds blog).  I won’t pretend to understand the mechanics of the case discussed– the Bitcoin phenomenon and the MtGox security breach lie far outside my expertise, and frankly, the whole concept is pretty complex and I don’t have the time to give it reasonable study.  Suffice to say that this case is a classic illustration of just how complex cross-border finance and cross-border litigation have become.

A particular paragraph in the post caught my eye:

Karpeles is a French citizen believed to be living in Japan, so service upon him is governed by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents. In order to effect service under the Hague Convention, a physical address is required.

Well, sort of.

Er, not exactly.

Wait… no.  That’s not right at all.

It is correct that in order to effect service under the Convention, you have to have an address.  But service on Karpelès is not “governed” by the Hague Service Convention unless and until the plaintiffs know his whereabouts.  He is merely believed to be living in Japan.  By its own terms (Article 1), the Convention doesn’t apply “where the address of the person to be served with the document is not known.”

In short, if the fellow can’t be found after a diligent search, adherence to the strictures of the Convention is unnecessary.  Frankly, adherence is impossible, because the primary bit of information necessary for a service request to a Hague Central Authority– Japanese, French, or otherwise– is where to find the guy.

So what is a litigant to do?  Well, do what the DNC did earlier this month: use Rule 4(f)(3) to serve him electronically (see my recent post “Twitter Service Hits the Bigtime“).  Or ask the court to appoint his U.S. counsel– if indeed he has counsel here**– as his agent for service, then serve him under 4(e)(2)(C).

The FinanceFeeds post went on to say that…

The Court agreed that the time for Mr Lack to file Proof of Service on Defendant Mark Karpeles should be extended to and through October 31, 2018.

That tells me that none of the lawyers in the room (including the judge) are reading the whole of Rule 4(m), the basis for the standard 90-day deadline to serve a defendant.  The last sentence of 4(m) is a beautiful little safe harbor for plaintiffs seeking to serve abroad:  “This subdivision (m) does not apply to service in a foreign country…”  [Emphasis mine.] *

Now, that doesn’t mean a plaintiff has unlimited time to get the job done– a reasonable diligence standard applies– but it does negate the need to extend anything.  The plaintiff merely has to not be dilatory (I had to look that up once) in his efforts to serve.  Yes, keep the court updated on your progress.  Yes, make sure the judge knows what you’re up against.  Don’t give up on the effort.  Just know that an ordinary extension of time isn’t necessary.

The takeaway from all this?  Not all is lost if a defendant can’t be located, and the Federal Rules of Civil Procedure account for that.

* At that, even assuming the plaintiffs do find an address, they shouldn’t expect a proof of service by the end of October.  Serving in Japan has been taking longer than normal lately– and “normal” is four months, at best.

** UPDATE (a day after posting):  Within hours of my post, up pops another FinanceFeeds article about this defendant, but in a different suit in N.D. Ill.  Apparently, yes, he does have U.S. counsel.  And the ability (not to mention, obligation) to waive.

Jimmy Sellers was my best friend in the sixth grade– and best man when Peggy and I got married.  We never went to an art museum in 1982.  [This is how we would have forged the thing.  Both of our moms were NCO wives, so we would have gotten smacked.  Hard.]

Alternate title:  How to Get a Judge to Sign a Letter Rogatory.

It’s actually quite simple.  Rather like getting your mom to sign your permission slip for a sixth grade field trip to the art museum.

No, really.  There’s not a whole lot of fanfare in asking a judge to sign a Letter Rogatory for service in a non-Hague country.  Although nothing really mandates its use,* this old-fashioned device can be critical to enforcing a judgment down the road.  Just mailing process to serve is usually a bad idea, and professional process servers don’t exist in civil law jurisdictions– at least not in the way we comprehend them in the common law.

If you might have to ask an overseas court to enforce a judgment against a defendant served in, say, Taiwan or Singapore, one of the first things that court will examine is how you served process.  The Letter Rogatory removes all doubt that service was effected according to the law of the jurisdiction where process is served.

Unquestionably, it is natural for a practitioner– especially a newly minted associate– to feel a bit of trepidation about the procedure.  Relax.  This instrument is a pro forma device, and courts understand its validity, because they use them to request judicial assistance from state to state.  Missouri judges send Letters Rogatory to Alabama and Oregon from time to time.  It’s not a daunting task, as long as counsel explains the logic to the court.  That just requires the right vocabulary, in a Motion for Issuance of Letters Rogatory:

  • Motion:  “Hey, judge, we need (XYZ) and would appreciate it if the Honorable Court would grant our request for (XYZ).”
  • Issuance:  The judge signs the Letter, making it an officially “issued” document.
  • Letter Rogatory:  Just a note from one judge to another, asking for a little help– for service of process, compulsion of evidence, the chance to have dinner with the Chief Justice of the Constitutional Court while the American judge is in Paris on a CLE adventure (hint, hint)
  • One more term worth noting:  Execution of the Letter.  That’s what the foreign** judge does when s/he orders her/his staff to do what the Letter asks.

Simply another way to keep the wheels of justice turning.  Don’t be intimidated by it.

Unless your mom was intimidating when you asked her if you could go on that field trip in 1982.  In that case, flowers are always good.


* Exception: Austria, at least for now.  Austrian law prohibits service of foreign process by any method that isn’t pursuant to a Letter Rogatory.  For now.

** Foreign is a term of art, meaning anything outside the jurisdiction.  It doesn’t just apply in a “you need a passport to go there” sense.  It can also mean in the “across State Line Road” sense.  French law is foreign to Missouri, but so is Kansas law.  (Around here, we Missourians argue that Kansas is foreign to everything, but that’s all in good fun.)

Raja Haji Fisabilillah Monument, Tanjung Pinang, Indonesia… right in the SIJOR Triangle. Achmad Rabin Taim via Wikimedia Commons.

A client emailed me the other day, asking how to serve a foreign defendant.  A pretty common occurrence that prompts either a “take a look at this blog” reply or a short & sweet rundown on what they need to do.  It comes up pretty regularly, and there’s really no good answer for it:  how do you best serve a defendant that isn’t in a Hague country? 

The answer that I quickly dashed off …  “forgive the law school answer here, but it depends“, followed by some brief detail.  One of the double-edged swords of the Hague Service Convention is that (on one hand) it provides certain, specific avenues to service, but it also (on the other hand) frequently limits those avenues.  Sure, a considered analysis is needed for serving defendants in England, France, and Canada.  But Mexico, China, and India… there’s one way to do it—period.

But what of those non-Hague places?  Well, a whole bunch of important questions will determine how to best serve.  For the purpose of illustration, let’s say your defendant is in the SIJORI Growth Triangle—an industrial compact of sorts, between Singapore, Malaysia, and Indonesia.  I pick that area because it’s seen a massive growth rate in recent years, and because all three countries lie outside Hague.  Let’s also say you’re in federal court, just for the sake of a simpler illustration.  Rule 4(f) will govern how you serve regardless of the defendant’s overseas location.

The bunch of questions:

  • Do you have an address for the defendant?  If not, find one.  Seriously—that is the ultimate threshold question.  I can’t help you if you don’t have this critical piece of information—although, I can help you find it.
  • (For rhetorical purposes…) Is the destination country a Hague Service Convention member?  Not in our illustration here, but if it were, the next question would be “do they object to Article 10?”  Set that aside for this discussion.
  • Where are the defendants’ assets?  The absolutely critical point, because if you have to go offshore to enforce a judgment, one of the very first things a foreign court will look at is the manner in which the defendant was served, and if they find it inappropriate, you’re done.  This makes perfect sense—because if they can reject an enforcement action on procedural grounds, they can avoid the tall weeds of substantive law.  [If the defendant has U.S. assets—or even Canadian or British assets—you can rest a bit easier.]
  • Does the defendant speak English?  If it’s an entity doing business in the U.S., it will be presumed competent in English.  But an individual… not so fast.  You may have to translate into Malay or Bahasa or any of a number of different dialects, to ensure that the defendant’s due process rights are respected—regardless of how you serve.  If the defendant isn’t in an English-speaking country, you may have to translate whether it’s an entity or not.  So be sure to keep things brief; federal court is a notice pleading venue, after all.  You don’t get paid by the word, but translators do.
  • How much is this defendant’s involvement really worth?  That will determine whether a more costly method (Letter Rogatory, local counsel…) is warranted, rather than simple mail service, or if the whole analysis is a waste of resources.
  • Is service by mail actually viable?  I’m not a big fan of mail service except in the rarest of circumstances.  It’s usually a bad idea.  But if the defendant has a history of actually allowing its employees to sign for FedEx or UPS deliveries, you’re probably going to be okay.
  • Does the law of the destination state prohibit service by mail?  This one’s doubtful outside the Hague list—but if the other country has a statute or caselaw that forbids mail service, it violates 4(f)(2)(C) [“unless prohibited by the foreign country’s law”].
  • Does the destination state prohibit personal delivery?  This one is also doubtful outside the Hague list, but again– if the other country has a statute or caselaw that forbids mail service, it violates 4(f)(2)(C).  In most civil law jurisdictions (essentially, everywhere that wasn’t once a British colony), service is a sovereign function or reserved to a guild monopoly.  You can’t necessarily just hire a guy to walk up to the defendant and hand him the documents.

It should be apparent that there isn’t an easy answer to the question, so the SIJORI defendant– whether in Singapore or Malaysia or Indonesia– necessitates some anaylsis.  To be sure, this isn’t an exhaustive list—but the ultimate point is that if the defendant doesn’t have accessible assets, you will have to enforce the judgment abroad, so that procedure should always be foremost in your mind when deciding how to serve.

“Just mail it” could be the worst thing you can do.  [Oh, and if you do decide to mail it, do it the right way!]

 

Smart folks here. Those terminals? That’s who you talk to when you get home. CBP photo.

I’m off to Montreal this week– a much-anticipated trip– for meetings and a conference, then on to Oxford next week to give a CLE lecture.  When I come back, I anticipate a bit of a smoother return because of a Customs & Border Protection program called Global Entry.  The scheme is designed primarily for frequent travelers, but even for people who venture abroad only once in a while, it’s awfully handy, and if nothing else, pays for itself in time saved.

Costs:

  • Twenty minutes to fill out the form.  Have your passport and driver’s license handy.
  • $100 for a five-year clearance.  Credit cards accepted (preferred?).
  • A trip to the airport (at least, the nearest airport with international connections) for an interview and fingerprint scan.  Yes, they’ll validate your parking.  Yes, CBP’s officers are regular people just like you and me.  It’s painless.

Benefits:

  • TSA Pre-Check is automatically included.  Keep your shoes on, keep your belt on, leave your laptop and liquids in your carry-on.  Did I mention that TSA Pre-Check is already $85?
  • No line at the port of re-entry into the United States (see the picture above).  You simply scan your passport and prints, enter your declarations on the touchscreen, and doors magically open for you.  This can save a half-hour’s wait (if not more) as the CBP officers process everybody else on your crowded flight.  Now, to be sure, U.S. citizens usually have a shorter wait than foreign visitors anyway, but your time is still worth it.
  • Partner programs for Canada and Mexico.
  • Easier access to China and the Far East.  As my interviewing officer explained, the People’s Republic of China and a few other east Asian nations have a comparable program, available to U.S. citizens with Global Entry clearance, that pre-clears known travelers for immigration and customs.  Apparently, the lines in Beijing are nightmarish, so if you plan to go to  the PRC more than once, it’s an even greater time-saver.
  • Easier renewals.  Much like your passport, renewing the thing is far easier than getting it in the first place.  Yes, you have repeat costs, but at twenty bucks a year, it’s a slam dunk.
These folks didn’t get the memo. I’ve waited in that line.  CBP photo.

Drawbacks:

  • Nobody from the United States government says “welcome home” to you.  Seriously– that’s awfully nice to hear after a lengthy sojourn abroad.  Here, it’s a touchscreen.  You literally get more love from your laptop.
  • That about covers it.

Even if you only fly abroad once every few years, get on this program instead of Pre-Check.  In any industry that views time as a valuable commodity (I’m talking to you, lawyers), this thing pays for itself in a single trip anywhere– not just abroad.  Road warriors, take note– if you spend a couple of hours of your life now, you’ll save several later on.  That will make you far more willing to go abroad and look your clients in the eye.

Taipei and the Taipei 101 Tower. Uwe Aranas via Wikimedia Commons.
Taipei and the Taipei 101 Tower. Uwe Aranas via Wikimedia Commons.

A bit of history is critical to knowing how to serve process in Taiwan.  Depending on who you talk to, there are two Chinas.  There’s the People’s Republic of China (PRC), the Communist-run mainland, and then there’s Taiwan, the Republic of China (ROC), which is the descendant of the Nationalist regime that ruled China prior to the Communist takeover in 1949, and moved to the island of Formosa.

The split is confusing, and given the massive amount of trade between the U.S. and both Chinas, it looms large over the manner of serving defendants located in either.  Officially, the world acknowledges only a single China, viewing Taiwan (the ROC) as a rogue territory rather than a sovereign nation.   The U.S., especially, regards Taiwan with a wink & a nod… essentially, “no, we don’t officially recognize you anymore, but we’re going to pretend we do for the sake of commerce.”  The policy of the United States is to observe a “One China” policy, but we also have pledged to defend Taiwan from invasion should the PRC decide to make One China a reality.

To the 23 million ethnic Chinese on the island, the ROC is its own nation, and that makes serving Taiwan defendants a bit tricky.    (For details on serving in the PRC, click here, and for Hong Kong here.)

Because it is not viewed as a sovereign, Taiwan can’t technically sign a treaty.*  Accordingly, the Hague Service Convention doesn’t apply.  And that at once complicates matters and makes serving a bit easier.  It’s easier because litigants have several service options available in Taiwan, while in the PRC, there is only one way to make it happen.  The complication lies is choosing the right one.

Before anything else, identify what is to be served.  A summons/complaint or other notice can be served by any of the following options.  BUT (and repeat after me here)… you can’t just SERVE a subpoena abroad (likewise any discovery demands, RFPs, etc.).  You must use a Letter Rogatory to compel evidence production in Taiwan, and evidence requests by this instrument must follow the same Cardinal Rules as Hague Evidence Requests-– dramatically different from serving a summons or notice.  Now, on to options for serving other documents, particularly summons & complaint combos…

Option 1:  Letter Rogatory

  • First, have a Letter Rogatory issued by the court hearing the case.  The court will expect you to provide the document, but the judge signs it.
  • Next, translate the documents-all of them, including the Letter Rogatory.  Although the defendant may speak flawless English, omitting translated documents will prompt Taiwan courts to refuse execution of the Letter.  And for crying out loud, get the right written form of Chinese, which is traditional.  Simplified Chinese is a creature of Chairman Mao’s cultural revolution, so while they may perfectly understand it in Taiwan, it is considered an insult.  A very avoidable insult.
  • On that issue, if your translation provider doesn’t know what that means, find a different translation provider.
  • Next, send everything to the State Department with the appropriate fee.
  • Sit tight. It may take a while—likely several months months from submission to return of proof, if not more.
  • Be prepared to translate the response, which could be rather pricy.

Option 2:  Local Counsel

  • Hire an attorney in Taiwan to have service effected according to forum rules.***
  • Translation may or may not be necessary.
  • Make sure the proof is written up correctly, or it could be a pretty easy quash.

Option 3:  Mail

  • If the venue court allows it, give it a shot.  Now, I contend that mail service abroad is usually a horrible idea, but in Taiwan, it can be a huge cost saver, and in some cases, the only realistic way of providing notice.
  • Pay very close attention to the rules of the venue.  You can’t necessarily just drop the thing in your outbox and call it good.
  • Always bear in mind that if you mail service, the odds that an enforcement action will be denied go up dramatically.  If your defendant has no assets in the U.S., think twice about going down this avenue.

Again, the lack of Hague coverage in Taiwan is not an inhibiting factor– things can actually be easier and quicker, though not necessarily cheaper, than in the PRC.  Taiwan remains a perplexing foreign policy headache for the U.S.  It is a democratic country with free and fair elections, multiple parties, a sophisticated legal system, and republican form of government.  This tends to make service in Taiwan a much smoother ride than on the mainland.

Bonus practice tip… if you’re defense counsel, always question the validity of service effected on your overseas client.  The plaintiff may not have done it correctly.


* That said, it has been accepted as a member of the World Trade Organization and its various treaties… referred to as “Chinese Taipei” in an extension of the wink & nod.

** A bit of irony here…

Chiang’s portrait.
Kuomintang Archives via Wikimedia Commons.
And Mao. (All pictures taken in the PRC are public domain, as I understand it. This one is likewise from Wiki.)

*** A very obscure distinction to be wary of: corporate defendants in federal court can’t be served personally due to an exception in Rule 4(h)(2).

Brandenburg Gate, Ondřej Žváček via Wikimedia Commons.
Brandenburg Gate, Ondřej Žváček via Wikimedia Commons.

An interesting Catch-22 sometimes faces U.S. lawyers when they try to serve a complaint with punitive damages on a German defendant.  Germany’s public policy disdains punitive damages– indeed, until recently (that is, until the last couple of decades), they didn’t even conceptualize punitives in their legal thought process.  But an increase in American litigation has made the idea part of the zeitgeist, as it were.

The scenario:  lawyer files product liability suit against U.S. company and its German parent.  Suit is fairly straightforward and routine, including actual and punitive damages, no different than a garden-variety personal injury case.  Lawyer knows that she has to properly serve the German company, so she calls me or somebody like me, and we get a Hague request submitted to the appropriate German authority.  Three weeks later, a letter arrives that says “sorry, R.A.* Lukken, but we will not serve these documents because Missouri has a split-recovery statute.”

“Huh?” she and I both say in response.

I’ve seen rejections that include punitive damages, and I’ve seen requests including punitives make it through the process without a second glance.  Ted Folkman has addressed the issue many times at Letters Blogatory.  It was in connecting the dots between a Ted post and a recent split recovery rejection that I realized… in order to get around the problem, a bit of nuance illustrates why the Germans reject some, but  not all, punitive damage requests.  I leave the theoretical/jurisprudential analysis to Ted– this is about the nuts & bolts of how to get around the problem.

It is not that Germany disdains punitive damages.  Truly, such a rejection would violate the terms of the Hague Service Convention, which sets out two bases for rejection:  (1) you screwed up your paperwork,  and (2) the request somehow violates the destination state’s national sovereignty or security.  End of list.

  • “Sorry, but we think we have jurisdiction here”… not a valid basis for rejection.
  • “What you say they did?  Yeah, that’s not a bad thing, so we’re not going to serve this.”  Also not a valid basis for rejection.
  • “That company is owned by the state.”  Not technically valid, and the Germans will reluctantly serve as requested (although I’ve seen these get rejected, too).

So the “we won’t serve a complaint that includes punitive damages” is, on its face, also not a valid reason for rejection.  They will reluctantly serve those.  The question doesn’t turn so much on the scope of the verdict as on cui bono— who benefits– from it.

Who benefits from split recovery?  The state— usually to the detriment of the plaintiff and often of the lawyers who bore the cost to bring the matter to trial (bravo to Utah, which recently found split recovery unconstitutional).  This makes the civil suit seem not solely like a civil suit, but one with an element of criminal or (at least) administrative retribution to it.  And that is where foreign governments find the easiest basis to reject.  If it’s a criminal or administrative proceeding– thus leading to a fine or penalty, rather than compensation for a tort victim– it falls outside the scope of the Hague Service Convention.  Why?  Because the Convention pertains to Civil or Commercial Matters.

Simply put, in the German equation:

  1. This complaint will not only benefit the plaintiff, but the state of Missouri (or one of 9 others) as well.
  2. Such a retributive penalty falls outside the scope of a civil or commercial lawsuit.
  3. As it falls outside that scope, it also falls outside the Convention.
  4. Result: we aren’t going to serve it via the Hague procedure.**

The net result?  The nuts & bolts way around the problem?  Don’t worry about Hague channel rejection.  Don’t just jump to self-help, either, but know that with the right motion, you should be able to serve by an alternative method under the regular rules of the court.  That actually makes things easier in some cases.

Just make sure you have a plan for enforcing the judgment down the road.


*  R.A. stands for Rechtsanwalt— attorney– and lawyers are addressed as such.  In fact, we’re addressed formally in lots of places.  (R.A. stood for Resident Assistant during my sophomore year in college, but that was long ago and far away.)

** Egypt, historically, has rejected service requests for divorce petitions on similar grounds, determining that divorce is a family and religious law issue rather than a civil one.  We make no such distinction, but they do.  Since the fall of the Mubarak regime, Egypt’s judiciary has waffled a bit– and has allowed a few dissolutions to get through.

Yale Law Library... where the rules live. PENG Yanan via Wikimedia Commons.
Yale Law Library… where the rules live.  PENG Yanan via Wikimedia Commons.

An interesting and seemingly Hague-related case came to light this week, and it came specifically to my attention thanks to the NorCal IP Blog by the guys at Orrick Herrington.*   As it turns out, it isn’t a Hague case after all.  It’s a straight-up civil procedure question.

The case, in a nutshell:  Japanese company, Godo Kaisha IP Bridge 1 (Godo for our purposes here, but the judge calls them IPB), sues American company Xilinx  (ZY-links?) for patent infringement in E.D. Tex., the current hotbed of IP litigation.

Xilinx, as luck would have it, sued Godo for patent infringement in N.D. Cal.– the mother ship of IP litigation– the very next day, and asked the judge for leave to serve Godo via Godo’s U.S. counsel.  Motion granted.

The judge’s order, as you can see here, explores the interplay of Rule 4(f)(3) and the Hague Service Convention, but it misses a critical point in the analysis:  the Convention applies “where there is occasion to transmit a judicial or extrajudicial document for service abroad.”  It’s right there in Article 1.

If you can serve a foreign defendant in the U.S. (whether via a subsidiary or via its U.S. counsel), the Hague Service Convention is inapplicable.  Utterly irrelevant.  Moot.

But even more critical… so is Rule 4(f).**  It only applies to service at a place outside the U.S., not here at home.  If service is to be effective via a foreigner’s U.S. counsel, it must be pursuant to Rule 4(h)(1)(b)… that is, “by delivering a copy of the summons and of the complaint to (…) any other agent authorized by appointment or by law to receive service of process.”

The salient question, which I avoid exploring here, is whether U.S. counsel can be appointed by the judge hearing the case.  Ultimately, this shouldn’t even have been a Hague question– it should have been an analysis of Rule 4, its overseas procedures excepted.  Had the judge denied the motion, then plaintiff’s counsel would have been forced to serve in Japan, and only then would Hague procedures be implicated.

[Don’t even get me started on why everybody ought to just waive in the first place.  Sure, you wouldn’t have to hire me, but still…]


Update, 4/13/17:  Ted Folkman posted on a similar opinion out of the same district on this morning— the latest in a line of cases he’s explored over the years.  As Ted points out in the comments below, only one case, out of E.D. Mich., has gotten it right, but he squares the circle for the others quite nicely in his thoughts on the Michigan opinion.  I commend those thoughts to you.


* Hat tip to Daniel Justice (could there be a better surname for a lawyer?) and George Kanabe.

** Rule 4(f), in its entirety [applicable to corporations thanks to 4(h)(2)]:

(f) Serving an Individual in a Foreign Country. Unless federal law provides otherwise, an individual—other than a minor, an incompetent person, or a person whose waiver has been filed—may be served at a place not within any judicial district of the United States:

(1) by any internationally agreed means of service that is reasonably calculated to give notice, such as those authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents;

(2) if there is no internationally agreed means, or if an international agreement allows but does not specify other means, by a method that is reasonably calculated to give notice:

(A) as prescribed by the foreign country’s law for service in that country in an action in its courts of general jurisdiction;

(B) as the foreign authority directs in response to a letter rogatory or letter of request; or

(C) unless prohibited by the foreign country’s law, by:

(i) delivering a copy of the summons and of the complaint to the individual personally; or

(ii) using any form of mail that the clerk addresses and sends to the individual and that requires a signed receipt; or

(3) by other means not prohibited by international agreement, as the court orders.

[Author’s Note:  The following information is soon to become inaccurate, because Austria has announced its intent to join the Hague Service Convention.  How soon is dependent on the European Union authorizing Austria’s signature and ratification.  Frankly, any delay is pretty silly, because Austria is the only EU member that is not already party to the Service Convention, but stay tuned.  This space will be updated when the treaty enters into force for Austria and the Austrians state their declarations.]

Until a couple of years ago, I had two mental images of Austria.  One was bucolic Salzburg “in the last golden days of the thirties”—that of the Von Trapps and The Sound of Music.  The second was the snowy Vienna of Amadeus—that of footlit operas and an Emperor who looked a little too much like the vice-principal from Ferris Bueller’s Day Off.

Tell me I'm wrong.
Tell me I’m wrong.

In 2015, Woman in Gold changed that… the list now includes the works of Gustav Klimt and an epic legal battle arising from the Nazis’ theft of priceless art works.  I watched the film on a transatlantic flight and was thrilled, but bemused, because the young lawyer handling the case (Ryan Reynolds) walked into Austria’s consulate in Los Angeles with his client (Helen Mirren) and served process by sliding a summons through a banker’s window to a receptionist.

Alarm bells started going off in my head, because for one thing, you shouldn’t hire Deadpool to represent you.  Not even Wade Wilson can just walk into a consulate and drop a summons on the receptionist’s desk.  The Foreign Sovereign Immunities Act says otherwise.  (To be sure, I tried to contact Randy Schoenberg, the lawyer played by Reynolds, to see how he actually did it.  No answer.  Either he did it some other way and Hollywood embellished, or defense counsel didn’t know how easy it was to get that thing kicked.)

Woman in Gold, Gutav Klimt, 1907
Woman in Gold, Gustav Klimt, 1907

In any event, a fantastic movie with a compelling story, and a stunning work of art at the center of it all.

In a nutshell, there’s one way to properly effect service in Austria:  a Letter Rogatory, with a couple of twists:

  • Proper translation.  You can’t just send the Letter Rogatory and call it good.  It must be translated into German (along with the summons, complaint, and appendant documents—literally everything handed to the defendant) by an Austrian court-certified translator.  That’s a little guild monopoly* that increases costs usually by a factor of two or three.
  • Proper transmittal.  The Letter must be conveyed via diplomatic channels, upping the ante by another $2,275 fee payable to the State Department.

Two predictions that I anticipate when the Hague Service Convention kicks in…

  • Austria will most likely object to Article 10 methods—they already prohibit them by statute, as I understand it, so I doubt highly that their treaty declarations will indicate otherwise. Australia** joined the treaty only recently, and its declarations mirror its practice before accession to the Convention.  I imagine Austria will do likewise.
  • I also anticipate that the guild monopoly on translation will go away; Mexico has a similar requirement that has been, for the most part, overridden in practice by the Convention.

* Seriously—do we lawyers have a right to complain about guild monopolies?

** Don’t mix these up.  AustriaHow do we solve a problem like Maria?  Australia: How do we solve a problem like Crocodiles?  Or Crocodiles?  [They take opposite views of Article 10 methods, given the common law/civil law divide.]

Watch for it.  Two closely related ideas are going to become a huge deal in the next few weeks/months/years: Dumping (or Anti-Dumping, AD) and Countervailing Duties (CVD).  They go hand-in-hand as a legal specialty* called “AD/CVD”.   So what are they?

Dumping, in a nutshell:  let’s say the Republic of Kansas makes alarm clocks, and it costs them $2.00 to make a single clock.  The Kingdom of Missouri also makes alarm clocks, but production costs are only $1.75 each.   (Nobody else makes alarm clocks anywhere in the world.)  Clocks sell for $2.25 in the marketplace, and Missouri makes a tidy profit.  But Kansas doesn’t like this, so they flood the market with alarm clocks at $1.50 (they “dump” below-cost goods), and the government subsidizes the producers so they don’t lose.

Eventually, the Missouri clockmakers have to shut down, because to sell a clock, they have to lose a quarter on each unit.  That ain’t happening in the Show Me Kingdom.  We’ve got better things to do.

Once the Kansas clockmakers have no competition, though, the price goes to five bucks a unit.**  Missouri, justifiably, wants to lay waste to their western neighbor, so they undertake anti-dumping measures, perhaps by dumping hula hoops into Kansas or prohibiting Kansas imports or… tacking on a countervailing duty.

Countervailing Duties are tariffs (import taxes) charged by an importing country in order to offset subsidies given to producers in the exporting country.  Keeping the Kansas-Missouri clock analogy alive, Missouri assesses a countervailing duty of 75 cents on each Kansas clock, so they still sell for $2.25.  Missouri clockmakers don’t lose their shirts, and Kansas doesn’t take an unfair portion of the market.

CVD’s are purely retaliatory, and they don’t only pop up in dumping cases.

So why is this a thing?  Well, I’ll leave a more thorough description to my friends over at the China Law Blog, and today’s post, China is Getting Ready for a US-China Trade War.  Click on over and read, or the following may not make sense.

[Bear with me here.]  I’m 6’4″ and built like a tuba player.  I’ve been in exactly one fistfight in my life, and it was with a buddy who was justifiably pissed at me.  The reason that number is so low (mark my words here): guys my size don’t fight.  There are only two possible scenarios, and they’re both bad:

  • If the other fellow is smaller, I look like a bully when I beat him, and I look like a weakling when I lose.
  • If the other fellow is my size or bigger, I might beat him soundly, but it’s going to hurt like hell.  Win or lose, I’ll walk away bruised and limping, no question.

My point is this: as attractive as an America First policy might seem, it’s going to hurt, and it’s going to hurt badly.  Agricultural exports would take a major hit in a Sino-American rift.  Here in Kansas City, one of our biggest employers is already bracing for disaster if trade with Mexico is squeezed.  Win or lose, we’ll look like either a bully or a weakling, and we’ll walk away bruised and limping.


* Yeah, yeah.  We’re not supposed to say we “specialize.”  But if you only handle divorces and adoptions and you’re really good at them, you specialize in family law.  If all you do is wills and trusts and you’re really good at them, you specialize in estate planning.  Lawyers specialize.  But ethical rules say we can’t say as much, lest we give potential clients the false impression that we have certain expertise.  This is a concept only a lawyer could come up with… and it all started with that one jerk who did it wrong and made things difficult for the rest of us.

** A real world example of dumping: rare earth metals, which are needed in the manufacture of critical components in electronics, and which make cell phone recycling so lucrative.  Part of my J.D. thesis examined China’s dumping of rare earths into the U.S. market in the 1990s (before China joined the WTO), the end of rare earth mining in the U.S., and the subsequent skyrocketing of their costs.  Today, the industry is making a comeback in the U.S.