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Products and Ventures International v. Axus Stationary (Shanghai) Ltd.

United States District Court, N.D. California

April 11, 2017

Products and Ventures International, Plaintiff,
Axus Stationary (Shanghai) Ltd., et al., Defendants.


          Yvonne Gonzalez Rogers, United States District Court Judge

         Plaintiff brings this action against defendants alleging breach of contract and tort claims relating to a wooden pencil distribution agreement. Currently, plaintiff has served the following defendants: Axus Stationery (Hong Kong) Ltd. (“Axus HK”), Andre Viegas, Highton Ltd., Roberta Trading Corporation, Kenpark Ltd., Howin Investments Ltd., and Noblesse (Hong Kong) Limited (collectively, the “Served Defendants”). On January 18, 2017, the Court granted in part defendants' motion to dismiss, dismissing all claims against Axus HK, Highton Ltd., Kenpark Ltd., Howin Investments Ltd., and Noblesse (Hong Kong) Limited. Currently, the litigation is proceeding against Andre Viegas and Roberta Trading Corporation only.

         Plaintiff is continuing its efforts to serve four other defendants, who are located in the People's Republic of China (“PRC”), namely: Shanghai Marco Stationery Co. Ltd. (“Shanghai Marco”), Axus Stationery (Shanghai) Ltd. (“Axus Shanghai”), Shanghai Laikesheng Pen Material Co. Ltd. DBA Shanghai Lexon (“Shanghai Lexon”) and Peifeng (Brian) Xu (collectively, “Foreign Defendants”). After eleven months of attempting to serve the Foreign Defendants via the processes set forth under the Hague Convention, plaintiff now moves for substituted service under Rule 4(f)(3), seeking to perfect service on the Foreign Defendants through Hogan Lovells, LLP.

         Having carefully considered the papers submitted and for the reasons set forth below, the Court Grants Plaintiff's motion to effectuate service on the Foreign Defendants through Hogan Lovells, LLP.

         I. Background

         The Court adopts the background section in its order on defendants' motion to dismiss (Dkt. No. 144), and adds the following facts and procedural history relevant to the instant motion:

         Plaintiff filed its initial complaint in February 2016. (Dkt. No. 1.) In April 2016, the Court granted plaintiff's Motion to Enlarge Time to Serve Foreign Defendants under Fed.R.Civ.P. 4(m) and 6(b)(1), given plaintiff's diligent efforts to effect service on the Foreign Defendants through the Hague Convention. (Dkt. No. 54.) Since then, the Court has granted five stipulations extending plaintiff's time to serve Foreign Defendants. (Dkt. Nos. 85, 105, 138, 152, 184.)

         The Court dismissed the complaint for lack of personal jurisdiction in June 2016, but granted leave to amend and provided a period for jurisdictional discovery. (Dkt. No. 72.) In July 2016, the Court authorized substituted service on Viegas to be effected through Hogan Lovells, Viegas' counsel, based in the United States. (Dkt. No. 82.) Plaintiff filed its amended complaint on September 19, 2016. (Dkt. No. 100.) Defendants again filed a motion to dismiss, and the Court dismissed all parties and all claims except for Counts One and Two against Roberta Trading Corporation, breach of contract and of the implied covenant of good faith and fair dealing, and Counts Three and Four against Viegas, intentional interference with contract and with prospective economic advantage. (Dkt. No. 144.)

         With regard to the Foreign Defendants, plaintiff has updated the Court five times between May 2016 and March 2017 with its efforts to effectuate service. (Dkt. Nos. 65, 95, 120, 141, 170.) Plaintiff retained Harris Bricken LLP, a law firm with experience in serving defendants through the Hague Convention, and on May 12, 2016, plaintiff submitted the necessary documents for service to the Ministry of Justice (“MOJ”) of the PRC. On May 19, 2016, a representative of the MOJ confirmed receipt of plaintiff's service documents and stated that those documents would be transferred to the Supreme People's Court. (Dkt. No. 65.) Plaintiff further avers that Harris Bricken had confirmed that the MOJ forwarded plaintiff's service documents to the Supreme People's Court on May 23, 2016, but that the MOJ does not keep track of the documents once they have been forwarded to the Supreme People's Court. (Dkt. No. 170.) As of March 2017, the MOJ had no substantive updates on service of the Foreign Defendants. (Id.) According to Harris Bricken, service through these means has more recently been taking up to eighteen months to complete, and in some cases years. (Id.) To date, plaintiff has spent eleven months attempting to effectuate service on Foreign Defendants through the Hague Convention.

         II. Legal Standard

         Federal Rule of Civil Procedure 4(f)(3) provides that service upon an individual in a foreign country may be perfected by any “means not prohibited by international agreement, as the court orders.” Fed.R.Civ.P. 4 (f)(3). The Ninth Circuit has held thus with regard to court-ordered service pursuant to Rule 4(f)(3):

By all indications, court-directed service under Rule 4(f)(3) is as favored as service available under Rule 4(f)(1) or Rule 4(f)(2). Indeed, Rule 4(f)(3) is one of three separately numbered subsections in Rule 4(f), and each subsection is separated from the one previous merely by the simple conjunction “or.” Rule 4(f)(3) is not subsumed within or in any way dominated by Rule 4(f)'s other subsections; it stands independently, on equal footing. Moreover, no language in Rules 4(f)(1) or 4(f)(2) indicates their primacy, and certainly Rule 4(f)(3) includes no qualifiers or limitations which indicate its availability only after attempting service of process by other means.

Rio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1017 (9th Cir. 2002) (internal citations omitted). The Ninth Circuit further explained that a plaintiff need only “demonstrate that the facts and circumstances of the present case necessitate[] the district court's intervention, ” and that court-ordered service is “neither a ‘last resort' nor ‘extraordinary relief.'” Id. at 1015-16. Ultimately, the Court has discretion to determine whether alternative service of process is required. Id.

         Here, service of process between parties in the United States and the PRC is governed by the Hague Convention. Fed.R.Civ.P. 4(f)(1); see Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 705 (1988); see also Brockmeyer v. May, 383 F.3d 798, 804 (9th Cir. 2004). Courts have held that the Hague Convention does not prohibit service on a foreign defendant through counsel based in the United States. Brown v. China Integrated Energy, Inc., 285 F.R.D. 560, 565 (C.D. Cal. 2012); Richmond Techs., Inc. v. Aumtech Bus. Sols., No. 11-CV-02460-LHK, 2011 WL 2607158, at *13 (N.D. Cal. July 1, 2011); In re LDK Solar Sec. Litig., No. 07-CV-05182-WHA, 2008 WL 2415186, at *3 (N.D. Cal. June 12, 2008); Vanleeuwen v. Keyuan Petrochemicals, Inc., No. 11-CV-9495-PSG, 2012 WL 5992134, at *3 (C.D. Cal. Nov. 30, 2012); RSM Prod. Corp. v. Fridman, No. 06-CV-11512-DLC, 2007 WL 2295907, at *3 (S.D.N.Y. Aug. 10, 2007). Specifically, courts have allowed service “upon a foreign defendant's United States-based counsel” to prevent further delays in litigation. Richmond Techs., 2011 WL 2607158, at *13; Brown, 285 F.R.D. at 566. However, any alternative method of service must meet the requirements of due process in that it must be ‚Äúreasonably calculated, under all the circumstances, to apprise interested parties of the ...

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