Opinion
Civil Action No. 18-1105
03-01-2019
NATIONWIDE MUTUAL INSURANCE COMPANY as Subrogee of DONNA BAUMAN, Plaintiff, v. GREE USA, INC., MJC AMERICA, LTD., GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI, and HONG KONG GREE ELECTRIC APPLICANCE SALES, LTD., Defendants.
Judge Nora Barry Fischer
Re: ECF No. 10 REPORT AND RECOMMENDATION
I. RECOMMENDATION
Pending before the Court is Defendants' Motion to Dismiss Plaintiff's Complaint Due to Insufficient Service of Process Pursuant to Rule 12(b)(5) or, in the Alternative, Motion to Quash, ECF No. 10. The Motion to Dismiss was filed on behalf of Defendants Gree Electric Appliances, Inc. of Zhuhai ("Gree China") and Hong Kong Gree Electric Appliance Sales, Ltd. ("Gree Hong Kong"). Gree China and Gree Hong Kong contend that Plaintiff's service of the complaint on each of them in California through Gree USA, Inc. ("Gree USA") is insufficient because Plaintiff failed to comply with the requirements of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents ("Hague Service Convention"), or with applicable law governing alternative service in the jurisdictions of Pennsylvania and California. ECF No. 11.
Because service of process on Gree China and Gree Hong Kong occurred in the United States and comported with Rule 4(e) of the Federal Rules of Civil Procedure and applicable California law, it is respectfully recommended that the Motion to Dismiss, ECF No. 10, be denied.
II. REPORT
A. FACTUAL AND PROCEDURAL BACKGROUND
This products liability action arises out of the alleged failure of a dehumidifier manufactured by Gree China, and distributed by Gree Hong Kong and Gree USA to retailers in Pennsylvania. ECF No. 1 ¶¶ 17, 18, 25. Plaintiff Nationwide Mutual Insurance Company filed this action on August 21, 2018, to recover personal and property damages sustained by its subrogee Donna Bauman, a Pennsylvania resident, after a fire allegedly caused by the failure of the Gree dehumidifier. Id. ¶¶ 25-27.
On August 24, 2018, a private process server delivered copies of the Summons, Complaint, and Statement of Disclosure for Gree China and Gree Hong Kong to "the person in charge of the business address" of Gree USA. ECF No. 18 at 1, and see ECF Nos. 4 and 5. In addition, a copy of each document was mailed to Ming Chu Dong, President and Chair of Gree China and Gree Hong Kong, at the Gree USA business address. It is undisputed that Ming Chu Dong is also known as Dong Mingzhu. ECF Nos. 4, 5, 19-5 at 3.
Plaintiff presents evidence of the interrelationship between the three Gree entities in the form of a supplemental corporate disclosure statement filed on July 12, 2017, in the matter of Gree USA, Inc. v. Sears Roebuck & Co., No. 17-cv-14928 (N.D. Illinois). Through the disclosure statement, Gree USA represented that it is a fully-owned subsidiary of Hong Kong Gree Electric Appliance Sales, Ltd., a Hong Kong Corporation, which itself is a fully-owned subsidiary of Gree Electric Appliance, Inc., a Chinese corporation. ECF No. 19-2. In addition, Plaintiff presents undisputed evidence indicating that Jun Ouyang is the Chairperson of Gree USA and is a current Director of Gree Hong Kong, and Dong Mingzhu serves as Chairperson of Gree China and Gree Hong Kong, and is a director of Gree USA. See, ECF No. 19-1 at 17; ECF No. 19-4 at 3 -8, 11, 14-15. Dong Mingzhu confirms that the purpose of Gree USA is to act as the distributor of Gree China products within the United States, with orders funneled through Gree Hong Kong. ECF No, 19-4 at 14.
Gree China and Gree Hong Kong contend that the symbiotic and interdependent relationship between the various Gree companies is insufficient to permit service of process through the business address of Gree USA and, accordingly, move to dismiss the complaint or, in the alternative, to quash service of process as to each defendant. ECF Nos. 10, 11, 25. Plaintiff has filed its opposition to the Motion and has provided undisputed corporate records and deposition testimony of various Gree China, Gree Hong Kong, and Gree USA corporate representatives. ECF Nos. 17, 18, 19. In addition, Plaintiff has filed a Supplemental Memorandum of Law disclosing that the United States District Court for the Eastern District of Michigan recently determined that service of process accomplished in the identical manner at issue here was effective under applicable rules of civil procedure. ECF No. 33, citing Nationwide General Insurance Company v. Gree USA, Inc., et al., 18-cv-12607 (Nov. 7, 2018 E.D. MI). The Motion to Dismiss or, in the Alternative to Quash, is ripe for review.
B. STANDARD OF REVIEW
To comport with due process, in the absence of service of process or a waiver of service by the defendant, a court ordinarily may not exercise power over a party named as defendant in the complaint. Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 350 (1999). Accordingly, pursuant to Federal Rule of Civil Procedure 12(b)(5), a complaint may be dismissed for insufficient service of process. Once a challenge to the sufficiency of service is lodged, "the party asserting the validity of service bears the burden of proof on that issue." Grand Entertainment Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 488 (3d Cir. 1993); and see 4A Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure § 1083 (1987)). This burden can be met by a preponderance of the evidence using affidavits, depositions, and oral testimony. Pristas v. Esper, No.17-1056, 2018 WL 1427089, at *5 (W.D. Pa. Mar. 22, 2018), citing State Farm Mut. Auto. Ins. Co. v. Tz'doko V'Chesed of Klausenberg, 543 F. Supp. 2d 424, 428 (E.D. Pa. 2008) (quoting Villanova v. Solow, No. 97-6684, 1998 WL 643686, at *1 (E.D. Pa. Sept. 18, 1998)).
C. DISCUSSION
Gree China and Gree Hong Kong seek dismissal of Plaintiff's Complaint against each of them on the basis that service of process was insufficient because Plaintiff did not comply with the Hague Convention and, in the alternative, if the Hague Convention does not apply, that service was improper under the law of the forum of the suit, in this case Pennsylvania, and under the law of the state where service was effectuated, in this case California. Plaintiff responds that compliance with the Hague Convention is not required where, as here, service was effectuated upon Gree China and Gree Hong Kong in compliance with California law.
Pursuant to Rule 4(h) of the Federal Rules of Civil Procedure, there are two methods for serving a foreign corporation:
(1) In a judicial district of the United States:
(A) in the manner prescribed by Rule 4(e)(1) for serving an individual; or
(B) by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or
by law to receive service of process and - if the agent is one authorized by statute and the statute so requires - by also mailing a copy of each to the defendant; or
In relevant part, Rule 4(e) provides that in regard to the service on a foreign corporation within a judicial district of the United States (pursuant to Rule 4(h)(1)(A)), service may be accomplished by:
(2) at a place not within any judicial district of the United States, in any manner prescribed by Rule 4(f) for serving an individual, except personal delivery under (f)(2)(C)(i).
(1) following state law for serving a summons in an action brought in court of general jurisdiction in the state where the district in located or where service is made....Fed. R. Civ. P. 4(e)(1)(italics added). Rule 4(f) provides that with regard to service of a corporation in a foreign country (as permitted by Rule 4(h)(1)(A)), service may occur 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.Fed. R. Civ. P. 4(f)(1).
1. Hague Convention
Gree Hong Kong and Gree China contend that dismissal is appropriate because neither entity was served in compliance with the Hague Convention. For this proposition, Defendants rely upon Volkswagenwerk Artiengesellschaft v. Schlunk, 486 U.S. 694 (1988), where the United States Supreme Court reviewed the history of the Hague Convention and its intended purpose "to provide a simpler way to serve process abroad, to assure that defendants sued in foreign jurisdictions would receive actual and timely notice of suit, and to facilitate proof of service abroad." Id. at 698. In situations where service occurs abroad, the Supreme Court agreed that "compliance with the Convention is mandatory in all cases to which it applies." Id. at 705. However, "there is no ... evidence in the negotiating history that the Convention was meant to apply to substituted service on a subsidiary ..., which clearly does not require service abroad under the forum's internal law." Id. at 704. In such instances, it is sufficient when "substituted service [] provides 'notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.'" Id. at 705. Thus, if Gree USA is an agent for purposes of service of process under the law of the state where service occurred, in this case California, compliance with the Hague Convention is not required.
2. California Law
California Code of Civil Procedure section 416.10 provides that service on a corporation may be made "[i]f authorized by any provision in Section ... 2110 ... of the Corporations Code ..., as provided by that provision. Cal. Civ. P. Code § 416.10(d). Section 2110, in turn, provides that service on a foreign corporation is valid if a copy of any process is delivered by hand "to any officer of the corporation or its general manager in this state." Cal. Corp. Code § 2110; and see, SKC Kolon PI, Inc. v. Kaneka Corp., No. 100725, 2010 WL 11553177, at *2 (C.D. Cal. Nov. 18, 2010).
California law defines "general manager" broadly, to include "any agent of the corporation of sufficient character and rank to make it reasonably certain that the defendant will be apprised of the service made." Falco v. Nissan North America, Inc., 987 F. Supp. 2d 1071, 1074 (C.D. Cal. 2013)(internal quotation marks and citations omitted). In this regard, under governing and persuasive California case law, service upon "a domestic subsidiary of a foreign corporation" is sufficient to qualify as service upon a general manager where the domestic subsidiary is performing functions that the foreign corporation would otherwise be required to undertake on its own. Id., citing Khachatryan v. Toyota Motor Sales, U.S.A., Inc., 578 F. Supp. 2d 1224 (C.D. Cal. 2008); Gray v. Mazda Motor of America, 560 F. Supp. 2d 928, 929-930 (C.D. Cal. 2008); Yamaha Motor Co., Ltd. v. Superior Ct., 174 Cal. App. 4th 264, 94 Cal. Rptr. 3d 494 (2009) (citing Cosper v. Smith & Wesson Arms Co., 53 Cal.2d 77, 84, 346 P.2d 409 (1959)). In each referenced case, the court concluded that due process is met through service upon a domestic subsidiary because the domestic sales arm of a foreign corporation provides business advantages that would be enjoyed if the foreign corporation conducted business in the jurisdiction on its own, and, due to the close relationship between the parent and subsidiary, it is "reasonably certain that [the foreign entity] would be apprised of the service of process." Falco, 987 F. Supp. 2d at 1077.
Here, based upon the undisputed evidence of record, this Court has no difficulty finding that Gree USA serves as the sales arm of Gree Hong Kong and Gree China, and that the relationship between each entity is sufficiently close that each foreign entity most certainly would have been apprised of service of process. Under such circumstances, California law permits service of process to be effectuated upon Gree USA as the general manager of Gree Hong Kong and Gree China.
In light of controlling California law permitting service upon a domestic sales conduit, Gree China and Gree Hong Kong posit that execution of service upon each of them through Jeanie Conley, identified by Plaintiff as the person apparently in charge of Gree USA's business address, and then mailing copies to Dong Mingzhu at the address for Gree USA in Chino Hills, California is insufficient. ECF Nos. 11 and 25. Defendants contend that Ms. Conley "is not Gree USA's designated agent for service of process," and that mailing to the physical address for Gree USA rather than to the foreign principal places of business renders service improper under California law. Id.
Defendants' argument has been rejected at least twice. See, Nationwide Property and Casualty Insurance Company v. Gree USA, Inc., No. 18-0881, 2018 WL 6419955 (S.D. Ohio Dec. 6, 2018); and see Nationwide General Insurance Company v. Gree USA, Inc., et al., 18-cv-12607 (Nov. 7, 2018 E.D. MI). In both instances, the court determined that service upon an individual with apparent authority at the designated subsidiary's place of business satisfies the alternative method of service contemplated by Cal. Civ. Proc. § 415.20, as follows:
The Court has reviewed IDS Property Casualty Insurance Company v. Gree USA, Inc., 18-1313, 2018 WL 6605896 (D. Minn. Dec. 17, 2018), where the district court determined that Volkswagenwerk Artiengesellschaft v. Schlunk, 486 U.S. 694 (1988), requires alternative domestic service to conform to the rules governing the forum state where suit has been filed. In the case before it, the Court therefore concluded that Minnesota law governed the determination of the propriety of substitute service. Id. at *2. The opinion does not cite any authority for this proposition, and this Court finds the holding unpersuasive in light of the broader provisions of Rule 4(e) of the Federal Rules of Civil Procedure permitting service under the rules of the state where the action is filed or the rules of the state where service is made.
In lieu of personal delivery of a copy of the summons and complaint to the person to be served as specified in Section ...416.10 ..., a summons may be served by leaving a copy of the summons and complaint during usual office hours in his or her office or, if no physical address is known, at his or her usual mailing address, other than a United States Postal Service post office box, with the person who is apparently in charge thereof, and by thereafter mailing a copy of the summons and complaint by first-class mail, postage prepaid to the person to be served at the place where a copy of the summons and complaint were left.See, Nationwide, 2018 WL 6419955 at *2, quoting Cal. Civ. Proc. § 415.20. In Falco, 987 F. Supp. 2d at 1079, the United States District Court for the Central District of California determined that this provision authorized service upon Nissan-Japan by a leaving a copy of a summons addressed to a senior official of Nissan-American with a lower level claims manager at Nissan-America's business address. The court found that the claims manager was apparently in charge of the office of the person to be served, and so service upon him, with a copy mailed to the senior domestic official fulfilled the requirements for substitute service under § 415.20(a). In addition, "it [did] not matter whether the person who received the papers was authorized to accept service of process on behalf of the corporation. [Rather, the] only requirement is that the person was apparently in charge of the office of the person to be served." Id.; and see Zond, LLC v. Fujitsu Semiconductor Ltd., 53 F. Supp. 3d 394, 399 (D. Mass. 2014)(the California "person apparently in charge" standard is lower than the federal "managing or general agent standard" standard set forth in Fed.R.Civ.P. 4(h); accordingly substituted service upon a receptionist is appropriate and authorized by § 415.20(a))
Gree China and Gree Hong Kong do not dispute that Ms. Conley is a person who was apparently in charge at the Gree USA business address at the time service was accomplished. Accordingly, pursuant to California's liberal substitute service provisions, the Court finds that service of Gree China and Gree Hong Kong at the business address of Gree USA was proper.
D. CONCLUSION
For the foregoing reasons, it is respectfully recommended that the Motion to Dismiss, ECF No. 10, be denied.
In accordance with the Magistrate Judges Act, 28 U.S.C. § 636(b)(1), and Local Rule 72.D.2, the parties are permitted to file written objections in accordance with the schedule established in the docket entry reflecting the filing of this Report and Recommendation. Failure to timely file objections will waive the right to appeal. Brightwell v. Lehman, 637 F.3d 187, 193 n. 7 (3d Cir. 2011). Any party opposing objections may file their response to the objections within fourteen (14) days thereafter in accordance with Local Civil Rule 72.D.2.
Respectfully submitted,
/s/ Maureen P. Kelly
MAUREEN P. KELLY
UNITED STATES MAGISTRATE JUDGE Dated: March 1, 2019 cc: The Honorable Nora Barry Fischer
United States District Judge
All counsel of record by Notice of Electronic Filing