How California Broke the Hague Service Convention
September 8, 2022
The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters sets forth the rules for serving process on a defendant in another country that is party to the Convention. Under the terms of the Convention, service by mail is not permitted if the nation where the foreign defendant is based objects to service via postal channels. A recent pair of state cases from California has upended this rule. These cases hold that—the terms of the Convention notwithstanding—parties may provide for service by mail on a foreign defendant merely by writing a clause to that effect into their agreement.
This line of cases has already attracted extensive criticism (see here and here and here). In this post, I critique these cases from a different angle. I argue that these decisions misapply basic principles of contract interpretation to reach an outcome that is inconsistent with the plain text of the agreements. Purely as a matter of contract law, these decisions are deeply flawed.
The Convention and Its Workarounds
Article 1 of the Convention provides that it “shall apply in all cases, in civil or commercial matters, where there is occasion to transmit a judicial or extrajudicial document for service abroad.” The U.S. Supreme Court has held that “[t]his language is mandatory” and that service must be completed in accordance with the Convention “in all cases to which it applies.” Courts and scholars have, however, identified two contractual workarounds by which U.S. plaintiffs may avoid the Convention when serving foreign defendants.
First, if the foreign defendant has appointed an agent in the United States to receive process on its behalf, the Convention is inapplicable. In such cases, service may be completed entirely within the United States. Since there is no need to send documents abroad, the Convention does not apply by its terms.
Second, if the foreign defendant agrees to waive service altogether, then the Convention is inapplicable. In such cases, there is no need to transmit documents abroad because there is no need to transmit documents at all. Waiving service entirely is, however, inadvisable for a number of reasons. First, the ability of a party to waive service ex ante is contested under existing U.S. law. There is no guarantee that a waiver of service will be effective. There is also a strong possibility that other nations will not recognize this waiver of service, throwing into doubt future efforts to enforce the resulting judgment. Second, it would be foolish for foreign defendants to waive service because they may not learn of a lawsuit filed against them in the United States until it is too late to respond. Nevertheless, a complete waiver of service represents a second means by which parties who wish to contract around the Convention may achieve this goal.
The problems in California began with Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Company, Ltd. In 2008, Rockefeller, a partnership based in New York, and SinoType, a company headquartered in China, signed a four-page memorandum of understanding stating their intent to form a new company. This memorandum contained a provision stating that the parties “shall provide notice in the English language to each other at the addresses set forth in the Agreement via Federal Express or similar courier, with copies via facsimile or email, and shall be deemed received 3 business days after deposit with the courier.” SinoType listed an address in China. The memorandum further stipulated that the parties “consent to service of process in accord with the notice provisions above.”
Rockefeller subsequently sought to confirm a default arbitral award against SinoType in California state court. It sent a copy of the summons to SinoType via Federal Express at the Chinese address listed in their agreement. Although it received the Federal Express envelope in China, SinoType did not appear at the hearing in California. In 2016, SinoType filed a motion to set aside the judgment and to quash service. It argued that because it was a Chinese company, and because China (like the United States) is a party to the Convention, any service provided to it had to comply with the Convention. Since the Convention does not permit Chinese nationals to be served via Federal Express, it argued, the company had never been properly served with the summons nor the petition to confirm the arbitral award.
The California Supreme Court declined to quash service. It held that the Convention was inapplicable because the foreign defendant in its contract had agreed to waive service altogether. It held that “the parties’ agreement constituted a waiver of formal service of process under California law” and that “the parties waived formal service in favor of informal notification through Federal Express or similar courier.” Since the informal notification requirements had been satisfied, the court held that the trial court had personal jurisdiction over SinoType.
This interpretive gloss on the parties’ contract is extremely difficult to square with the text of the agreement. There is nothing in it suggesting that the parties intended to “waive” service of process. To the contrary, the agreement specifically mentions “service of process” and states that it may be accomplished by sending documents to China via Federal Express. Since the parties’ own agreement calls upon the U.S. party to transmit documents abroad, it is clear that the Convention applies by its terms. The California Supreme Court did not, however, see it this way.
An Interpretive Breakdown
To identify the precise nature of the court’s mistake, consider the following pair of contractual provisions. The first provision waives service altogether and specifies that informal notice is sufficient:
Each party hereby waives formal service of process. Instead, each party consents to informal notice by Federal Express or similar courier at the addresses set forth in the Agreement.
The second provision does not waive service. It merely specifies that service shall be provided via Federal Express:
Each of the Parties hereby consents to service of process by Federal Express or similar courier at the Addresses set forth in the Agreement.
These provisions are not the same. There is no basis for a court to conclude that the second provision constitutes a waiver of service of process because the plain language of that provision specifically contemplates service of process. And yet the California Supreme Court did precisely this in Rockefeller. Going forward, it appears that any California contract which calls for service of process by Federal Express or registered mail will be interpreted as a formal waiver of service of process. It is difficult to believe that this is what most parties intend when they write such provisions in their contracts.
Seagate Technology LLC v. Goel, a case decided in August 2022 by the California Court of Appeal, makes clear the problems with the interpretive rule laid down in Rockefeller. In Seagate, a U.S. plaintiff attempted to serve an Indian defendant by U.S. mail. Under the terms of the Convention, the service was ineffective because India is a party to the Convention and objects to service by postal channels. The issue in Seagate was whether the Convention applied when the parties had specified that service was to be provided by U.S. mail. The relevant clause stated:
The parties agree to service of process by U.S. mail for any action in the Selected Courts to enforce the Settlement Documents at the addresses set forth for Notice in paragraph 38 above.
The California Court of Appeal, citing Rockefeller, held that this language constituted a formal waiver of service of process and that the Convention did not apply. This conclusion is, again, difficult to defend. There is absolutely nothing in the quoted language suggesting that the parties intended to waive service. They were merely specifying the method by which service was to be provided. This is why the contract specifically referenced “service of process.” Nevertheless, the court held that the parties had “agreed to waive formal service of process under California law in favor of informal notification.” The Convention was deemed inapplicable and the service effective.
The rule of contract interpretation adopted by the California courts in these cases has the potential to create significant foreign relations problems for the United States. As Ted Folkman points out, this rule will create conflict with our treaty partners who object to service by postal channels in their territory. Viewed purely through the lens of contract interpretation, however, the rule is just as troubling. The California courts have taken a contract provision that specifies a method for serving process and transformed it into an outright waiver of the same.