Rockefeller Technology Inv. v. Changzhou Sinotype Technology Co. 6 /1/18 CA2/3 Case Details ( 2018 )

Filed 6/1/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
ROCKEFELLER TECHNOLOGY B272170
INVESTMENTS (ASIA) VII,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No. BS149995)
v.
CHANGZHOU SINOTYPE
TECHNOLOGY CO., LTD.,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County, Randolph Hammock, Judge. Reversed and
remanded with directions.
Law Offices of Steve Qi and Associates, Steve Qi and May
T. To; Law Offices of Steven L. Sugars and Steven L. Sugars for
Defendant and Appellant.
Paul Hastings, Thomas P. O’Brien, Katherine F. Murray,
and Nicole D. Lueddeke for Plaintiff and Respondent.
_________________________
This appeal concerns an aborted international business
deal between Changzhou SinoType Technology Company, Ltd.
(SinoType), a Chinese company, and Rockefeller Technology
Investments (Asia) VII (Rockefeller Asia), an American
investment partnership. When the relationship between the two
entities soured, Rockefeller Asia pursued contractual arbitration
against SinoType in Los Angeles. SinoType did not appear or
participate in the arbitration proceeding, and the arbitrator
entered a default award in excess of $414 million against it. The
award was confirmed and judgment entered, again at a
proceeding in which SinoType did not participate.
Approximately 15 months later, SinoType moved to set
aside the judgment on the grounds that it had never entered into
a binding contract with Rockefeller Asia, had not agreed to
contractual arbitration, and had not been served with the
summons and petition to confirm the arbitration award in the
manner required by the Convention on the Service Abroad of
Judicial and Extrajudicial Documents in Civil or Commercial
Matters, Nov. 15, 1965, 20 U.S.T. 361, T.I.A.S. No. 6638
(hereafter, Hague Service Convention or Convention). The trial
court acknowledged that the service of the summons and petition
had not complied with the Hague Service Convention, but
concluded that the parties had privately agreed to accept service
by mail. The court therefore denied the motion to set aside the
judgment.
We reverse. As we discuss, the Hague Service Convention
does not permit Chinese citizens to be served by mail, nor does it
allow parties to set their own terms of service by contract.
SinoType therefore was never validly served with process. As a
result, “no personal jurisdiction by the court [was] obtained and
2
the resulting judgment [is] void as violating fundamental due
process.” (County of San Diego v. Gorham (2010)
186 Cal.App.4th 1215, 1227.) The trial court therefore erred in
denying the motion to set aside the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Parties and the MOU
SinoType is a Chinese company headquartered in
Changzhou, China that develops and licenses Chinese fonts.
Kejian (Curt) Huang (hereafter, Curt)1, a citizen and resident of
China, is SinoType’s chairman and general manager.
Rockefeller Asia is an American investment partnership
headquartered in New York. Faye Huang (hereafter, Faye) is
Rockefeller Asia’s president.
In 2007 and 2008, Curt and Faye met several times in
Los Angeles to discuss forming a new company to market
international fonts. On February 18, 2008, they signed a four-
page Memorandum of Understanding (MOU), the legal
significance of which is disputed. The MOU stated that the
parties intended to form a new company, known as World Wide
Type (WWT), which would be organized in California and have its
principal offices in the Silicon Valley. SinoType would receive an
87.5 percent interest in WWT “and shall contribute 100% of its
interests in the companies comprising Party A, i.e., Changzhou
SinoType Technology.” Rockefeller Asia would receive a
12.5 percent interest in WWT “and shall contribute 100% of its
1 Because two principals share a last name (although they
are not related to one another), for clarity we refer to them by
their first names.
3
interests in the companies comprising Party B, i.e., Rockefeller
Technology Investments (Asia) VII.”
The MOU provided that “[t]he parties shall proceed with all
deliberate speed, within 90 days if possible, to draft and to all
execute long form agreements carrying forth the agreements
made in this Agreement, together with any and all documents in
furtherance of the agreements.” It also provided, however, that
“[u]pon execution by the parties, this Agreement shall be in full
force and effect and shall constitute the full understanding of the
Parties that shall not be modified by any other agreements, oral
or written.”
The MOU contained several provisions governing potential
disputes between the parties, as follows:
“6. 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.
“7. The Parties hereby submit to the jurisdiction of the
Federal and State courts in California and consent to service of
process in accord with the notice provisions above.
“8. In the event of any disputes arising between the
Parties to this Agreement, either Party may submit the dispute
to the Judicial Arbitration & Mediation Service in Los Angeles
for exclusive and final resolution pursuant to according to [sic] its
streamlined procedures before a single arbitrator . . . . Disputes
shall include failure of the Parties to come to Agreement as
required by this Agreement in a timely fashion.”
4
B. The 2013 Arbitration
The relationship between the parties soured, and in
February 2012, Rockefeller Asia filed a demand for arbitration
with the Judicial Arbitration & Mediation Service (JAMS) in Los
Angeles.2 SinoType did not appear at the arbitration, which
proceeded in its absence.
The arbitrator issued a final award on November 6, 2013.3
He found as follows:
Rockefeller Asia is a special-purpose entity organized to
provide capital to support technology companies in Asia. Its
partners include Rockefeller Fund Management Co., LLC.
In February 2008, SinoType and Rockefeller Asia entered
into a MOU in which they agreed to form a new company (WWT).
Each party was to contribute its entire interest in its business to
WWT. In return, SinoType was to receive an 87.5 percent
interest, and Rockefeller Asia was to receive a 12.5 percent
interest, in WWT. In 2008, Rockefeller Asia was funded with
stock worth $9.65 million.
2 Rockefeller Asia contends the demand for arbitration was
properly served in accordance with the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards of
June 10, 1958, codified as title 9 of the United States Code,
sections 201 et seq. However, the propriety of the service of the
arbitration demand is not before us, and thus we do not reach the
issue.
3 The award stated that because SinoType had not appeared,
the case proceeded under Article 27 of the JAMS International
Rules, which authorizes an arbitrator to proceed by default where
one party has failed to appear.
5
In 2010, the parties sought additional investors to buy a
10 percent interest in WWT. The highest offer, obtained in
May 2010, was for $60 million. After receiving this offer,
SinoType insisted that Rockefeller Asia agree to a reduction of its
interest. When Rockefeller Asia refused, SinoType unilaterally
terminated the MOU.
Rockefeller Asia’s damages expert opined that Rockefeller
Asia’s damages included three components: loss of its
12.5 percent interest in WWT; loss of its control premium, which
the expert valued at 10 percent of WWT’s total value; and loss of
its anti-dilution rights, which the expert valued at 6.25 percent of
WWT’s total value. Thus, Rockefeller Asia’s damages were equal
to 28.75 percent (12.5% + 10% + 6.25% = 28.75%) of WWT’s value.
The expert opined that WWT’s value at the time SinoType
terminated the MOU was $600 million, and therefore Rockefeller
Asia’s damages at termination were approximately $172 million
($600,000,000 x .2875 = $172,500,000). However, the expert
opined that Rockefeller’s damages should be valued at the time of
the arbitration, not the time of the termination. He estimated
SinoType’s value at the time of arbitration using “the ‘wave’
method . . . which assumes that [the company’s] value has grown
over the same interval at the same rate as other firms ‘riding the
same economic wave.’ ” The expert selected Apple Corporation as
the “comparator firm,” and estimated SinoType’s current value by
assuming a 240 percent increase between July 2010 and
February 2012—i.e., the same increase that Apple experienced
during a comparable period. The expert thus estimated
Rockefeller Asia’s damages to be $414 million, which was “28.5%
of the estimated total value of [SinoType] of $1.440 billion, using
the wave method.”
6
The Arbitrator “accept[ed] the evidence presented through
[Rockefeller Asia’s expert] concerning the percentage values of
the control premium and the anti-dilution clause,” and also
“adopt[ed] [Rockefeller Asia’s] proposal to set the date of
valuation at February 2012.” Based on the foregoing, the
arbitrator awarded Rockefeller Asia $414,601,200.
C. Order Confirming the Arbitration Award
Rockefeller Asia filed a petition to confirm the arbitration
award. Subsequently, it filed a proof of service of summons,
which declared that it had served SinoType in China by Federal
Express on August 8, 2014, in accordance with the parties’
arbitration agreement.
Following a hearing at which SinoType did not appear, on
October 23, 2014, the trial court confirmed the arbitration award
and entered judgment for Rockefeller Asia in the amount of
$414,601,200, plus interest of 10 percent from November 6, 2013.
D. SinoType’s Motion to Set Aside the Judgment
On January 29, 2016, SinoType filed a motion to set aside
the judgment and to quash service of the summons. The motion
asserted that the order confirming the arbitration award and
resulting judgment were void because SinoType had not been
validly served with the summons and petition to confirm.
SinoType explained that because it is a Chinese company,
Rockefeller Asia was required to serve the summons and petition
pursuant to the Hague Service Convention. Rockefeller Asia did
not do so. Instead, it served SinoType by Federal Express, which
is not a valid method of service on Chinese citizens under the
Convention. Moreover, the parties had not intended the MOU to
be a binding agreement, and thus the MOU’s provision for mail
service was not enforceable.
7
In support of its motion, SinoType submitted the
declaration of Curt Huang, which stated in relevant part as
follows:
Curt met Faye in 2007. Faye introduced herself as the
CEO of Rockefeller Pacific Ventures Company and offered to
introduce Curt to Nicholas Rockefeller (Rockefeller), who Faye
said might be interested in investing in a project. Curt met with
Rockefeller in July 2007 and discussed forming a new company
that would develop software with fonts in many different
alphabets and languages. Rockefeller expressed interest in the
project. However, “[t]he name of the Rockefeller entity which
Nicholas Rockefeller proposed to do business with SinoType
changed on several occasions” and Curt “grew increasingly
uncomfortable about the lack of clarity as to which company
Nicholas Rockefeller proposed to do business with SinoType.”
The parties met several more times in 2007 and 2008, but
they did not make significant progress in consummating a deal.
In February 2008, Faye offered to prepare a document referred to
in Chinese as a “bei wang lu.” According to Curt, a “bei wang lu”
is a memorandum of understanding between parties that records
the current state of negotiations; it “does not necessarily reflect
terms to which the parties have agreed” and “is often used where
there has been no real progress in a business meeting to
memorialize the discussion so that the parties can pick up on the
negotiations at a later meeting.” The signing of a “bei wang lu”
“does not create a binding contract.” In contrast, Curt said, there
are three other kinds of Chinese agreements: a “yi xiang shu” is
“a letter of intent and reflects the intentions of the parties to
enter into an agreement before a formal contract exists;” a “xie
yi” is an agreement “which is usually, but not always legally
8
binding;” and a “he tong” is “a formal contract, which is legally
enforceable.”
In February 2008, Faye presented Curt with a draft
“bei wang lu.” Curt said he had only about 10 minutes to review
the document, but he told Faye that many of the proposed terms
were unacceptable, including the designation of “Party B” as
Rockefeller Asia (an entity Curt said he had never heard of), the
anti-dilution protections for Rockefeller Asia, and the failure to
indicate the amount of Rockefeller Asia’s proposed contribution to
the project. Curt was reluctant to sign the document, but was
convinced to do so by Faye’s assurances that the terms would be
modified in a long-form agreement (or “xie yi”) that would be
drafted within 90 days. Curt ultimately signed the document
“because I knew it was not a binding document and I wanted to
see progress on the deal. I felt the MOU would push Rockefeller
to draft the long form agreement within 90 days.”
When he signed the MOU, Curt “had no intention to waive
SinoType’s right to service of process or [to] agree[] to arbitration.
Because I only had ten minutes to review the MOU, I did not
even know that it contained a statement saying SinoType would
agree to alternate service. I believed that the ‘bei wang lu’ had
no legal implications and all of the terms would be negotiated
and modified later in the actual contract.”
In February 2010, Faye and Rockefeller told Curt they
wanted a 12.5 percent equity in the new venture. Curt said he
would be willing to give them equity on a commission basis once
they raised capital, but he would not consider giving them any
equity in the new company before they had raised funds.
In June 2010, Faye emailed Curt a draft Stock Purchase
Agreement and other ancillary agreements. The draft “was not
9
something to which [Curt] could or would ever agree.” Curt told
Faye he would not sign the draft documents. Communications
between the parties ended in March 2011.
Curt received a letter at the end of January 2012 that
referenced arbitration. He did not believe he had to respond to
the letter because it was not a court document. He received
subsequent FedEx packages and emails from Rockefeller, but he
did not open them.
In March 2015, Curt heard from a client that Rockefeller
Asia was alleging that SinoType owed it money. He then sought
the advice of counsel, who opened the FedEx packages. That was
when Curt learned an arbitrator had awarded Rockefeller Asia
more than $414 million, which Curt said was more than 70 times
SinoType’s total revenue for the entire period from 2009 to 2013.
Rockefeller Asia did not transfer stock to SinoType, nor did
it ever propose to do so.
E. Rockefeller Asia’s Opposition to Motion to Set Aside
the Judgment
Rockefeller Asia opposed SinoType’s motion to set aside the
judgment, urging that the motion was untimely; the 2008 MOU
was valid and enforceable; and the summons and petition to
confirm the arbitration award had been properly served. In
support of its opposition, Rockefeller Asia submitted Faye
Huang’s declaration, which stated in relevant part as follows:
By the end of 2007, Rockefeller Asia and SinoType had
decided to enter into a formal arrangement. On February 18,
2008, Faye and Curt executed the MOU. “At no point did I
represent to Curt in either the English or the Mandarin Chinese
language that the 2008 Agreement would not be considered an
enforceable agreement . . . . There would be no purpose for Curt
10
and me to sign the 2008 Agreement if that document was to be
considered a nullity. At no point did Curt state that he disagreed
with a single term in the [MOU] or inform me that the . . .
provisions were not exactly as we had agreed.”
Upon the signing of the MOU, “an Assignment of
Partnership Interests was executed by the Rockefeller Parties
pursuant to which they transferred their partnership interest,
which had a value of $9.65 million, to SinoType per the terms of
the [MOU].”
Faye declared that “Curt and I intended the [MOU] to be
effective and binding immediately, as its term provided that it
could be modified only in a writing signed by both parties.
However, we also anticipated that, while the short-form
agreement would suffice for our mutual needs, a long-form
agreement that would satisfy the very strenuous and impersonal
requirements of the international investment community would
be necessary to attract additional institutional investors in the
future. Therefore, the [MOU] called for the parties to try to have
the long-form agreement available ‘with all deliberate speed,’
within 90 days if possible.” However, the 90-day guideline for
preparing the long-form documents “proved impossible.” Due to
the 2008 recession, no third-party financing was on the horizon,
and thus “the parties continued to operate under the binding
2008 Agreement.” Throughout this time, Rockefeller Asia
“continued to perform and to supply tangible and intangible
resources to SinoType.”
According to to Faye’s declaration, SinoType survived the
economic downturn in large part because of Rockefeller Asia’s
efforts, and by 2009 SinoType’s internal evaluation showed that
its then-current value approached $500 million and would
11
increase in five years to almost $2 billion. Ultimately, however,
the relationship between the companies began to deteriorate, and
in July 2010, SinoType informed Rockefeller Asia that it had
abrogated the MOU and Rockefeller Asia no longer owned a 12.5
percent interest in SinoType. Further, Curt told Faye that as a
Chinese company, SinoType was immune to American legal
remedies and would refuse to participate in any legal process in
the United States.
F. Order Denying Motion to Set Aside Judgment
On April 15, 2016, the trial court denied the motion to set
aside the judgment. The court found that service by Federal
Express was permitted by the MOU, which the arbitrator had
found to be a binding contract. Further, although the court found
that Rockefeller Asia had not properly served SinoType under the
Hague Service Convention, it concluded that the parties were
permitted to contract around the Convention’s service
requirements. It explained: “To allow parties to enter into a
contract with one another and then proceed to unilaterally
disregard provisions out of convenience, like the one at issue
here, would allow parties to simply return to their respective
countries in order to avoid any contractual obligations. As aptly
noted by [Rockefeller Asia] in its opposition, this would
essentially result in anarchy and turn the entire international
arbitration law on its head. . . . Furthermore, this court cannot
find (and [SinoType] has not provided) any case law that would
indicate parties are not permitted to contractually select
alternative means of service and thus they are not able to waive
the service provisions within the Hague Convention.”
Finally, the court said, “assuming for the sake of argument
that somehow [Rockefeller Asia] was actually required to serve
12
the Summons and Petition in this action upon [SinoType] in the
manner suggested by [SinoType] (to wit, vis-a-vis the protocols
established by the Chinese government), once [SinoType] was
‘served’ with the Summons and Petition in the manner which
actually occurred in this case it had an obligation do something –
to do exactly what it is doing now – to specially appear and to file
a motion to quash. This is what is called acting with ‘diligence.’
. . . [¶] The law is well settled that if a party is seeking to obtain
relief from this court’s equitable powers, it must act with
reasonable diligence. [Citations.] Thus, to the extent that
[SinoType] is also seeking to have this court exercise its broad
equitable powers to grant the requested relief, under the totality
of the circumstances it respectfully declines to grant such
equitable relief due to the lack of reasonable diligence by the
defendant in seeking relief . . . .”
SinoType timely appealed from the order denying the
motion to set aside the judgment.4
4 SinoType has filed a request for judicial notice in
connection with this appeal. Such notice is available in the trial
court “and, independently, in the Court of Appeal (Evid. Code,
§ 459) which is not bound by the trial court’s determination.”
(Volkswagenwerk Aktiengesellschaft v. Superior Court (1981)
123 Cal.App.3d 840, 852, superseded on other grounds as stated
in American Home Assurance Co. v. Societe Commerciale
Toutelectric (2002) 104 Cal.App.4th 406, 409.) We grant the
request as to the Hague Service Convention and articles 260 and
261 of the Civil Procedure Law of the People’s Republic of China
(exhibits 3, 4, and 5), and otherwise deny it. (See Noergaard v.
Noergaard (2015) 244 Cal.App.4th 76, 81, fn. 1 [judicial notice of
Hague Convention]; Societe Civile Succession Richard Guino v.
Redstar Corp. (2007) 153 Cal.App.4th 697, 701, superseded by
statute on another ground as stated in Hyundai Securities Co.
13
DISCUSSION
SinoType contends the trial court was required to set aside
the judgment because Rockefeller Asia never properly served it
with the summons and petition to confirm the arbitration award.
Specifically, SinoType urges that: (1) mail service in China is not
authorized by the Hague Service Convention; (2) the
Convention’s service provisions were not superseded by the MOU;
and (3) Rockefeller Asia’s failure to properly serve the summons
and petition rendered the judgment void and, thus, subject to
being set aside at any time.
Rockefeller Asia agrees that the Convention does not
permit mail service in China, but it urges that parties may by
contract set their own terms of service. Rockefeller Asia further
urges that it served the summons and petition on SinoType in the
manner provided by the MOU; and, in any event, SinoType’s
motion to set aside the judgment was untimely.
As we now discuss, the Hague Service Convention does not
permit parties to set their own terms of service by contract.
Instead, it requires service on foreign parties to be carried out as
specified in the Convention by the receiving country. China does
not permit its citizens to be served by mail, and thus SinoType
was not validly served with the summons and petition. In the
absence of proper service, the trial court never obtained personal
jurisdiction over SinoType, and thus the judgment against
SinoType necessarily was void. Because a void judgment can be
set aside at any time, SinoType’s motion to set aside the
Ltd. v. Ik Chi Lee (2013) 215 Cal.App.4th 682, 693 [judicial notice
of law of a foreign nation].)
14
judgment necessarily was timely. The trial court therefore erred
in denying SinoType’s motion to set aside the judgment.
I.
Standard of Review
We review the order denying SinoType’s motion to set aside
the judgment for an abuse of discretion. (J.M. v. G.H. (2014)
228 Cal.App.4th 925, 940; County of San Diego v. Gorham (2010)
186 Cal.App.4th 1215, 1225 (Gorham).) “ ‘ “The abuse of
discretion standard . . . measures whether, given the established
evidence, the act of the lower tribunal falls within the permissible
range of options set by the legal criteria.” ’ [Citation.] The scope
of the trial court’s discretion is limited by law governing the
subject of the action taken. [Citation.] An action that
transgresses the bounds of the applicable legal principles is
deemed an abuse of discretion. [Citation.] In applying the abuse
of discretion standard, we determine whether the trial court’s
factual findings are supported by substantial evidence and
independently review its legal conclusions. [Citation.]” (In re
Marriage of Drake (2015) 241 Cal.App.4th 934, 939–940.)
II.
Rockefeller Asia Did Not Properly Serve
SinoType with the Summons and Petition to
Confirm the Arbitration Award
A. The Hague Service Convention
The Hague Service Contention “is a multinational treaty
formed in 1965 to establish an ‘appropriate means to ensure that
judicial and extrajudicial documents to be served abroad shall be
brought to the notice of the addressee in sufficient time.’ (Hague
Convention preamble, 20 U.S.T. 361, 362, T.I.A.S. No. 6638,
reprinted in 28 U.S.C.A. Fed.R.Civ.P. 4, note, at 130 (West Supp.
15
1989).) The Hague Convention provides specific procedures to
accomplish service of process. Authorized modes of service are
service through a central authority in each country; service
through diplomatic channels; and service by any method
permitted by the internal law of the country where the service is
made. (See [Hague Service Convention], arts. 2–6, 8, 19; see also
discussion in Bankston v. Toyota Motor Corp. (8th Cir. 1989)
889 F.2d 172, 173.) Each signatory nation may ratify, or object
to, each of the articles of the [Hague Service Convention].
([Hague Service Convention], art. 21.)” (Honda Motor Co. v.
Superior Court (1992) 10 Cal.App.4th 1043, 1045 (Honda Motor
Co.).) Both the United States and China are signatories
(sometimes referred to as “contracting States”) to the Hague
Service Convention. (Hague Conference on Private International
Law, 14: Convention of 15 November 1965 on the Service Abroad
of Judicial and Extrajudicial Documents in Civil or Commercial
Matters (Apr. 11, 2018) Status Table
[as of May 31, 2018].)
In the United States, state law generally governs service of
process in state court litigation. However, by virtue of the
Supremacy Clause, United States Constitution, Article VI, the
Convention preempts inconsistent methods of service prescribed
by state law in all cases to which the Convention applies. (See
Volkswagenwerk Aktiengesellschaft v. Schlunk (1988) 486 U.S.
694, 699 [108 S.Ct. 2104, 100 L.Ed.2d 722] (Volkswagenwerk).)
Thus, although a summons issued by a California state court
generally must be served pursuant to the Code of Civil Procedure
(§§ 413.10 et seq.), service in the present case was governed by
the Hague Service Convention, not the Code of Civil Procedure.
16
(See Honda Motor Co., supra, 10 Cal.App.4th at p. 1049 [“the
preemptive effect of the Hague Convention as to service on
foreign nationals is beyond dispute”].)
B. The Convention Does Not Permit Mail Service on
Citizens of Countries That, Like China, Have Filed
Objections to Article 10 of the Convention
Article 2 of the Convention provides that each contracting
state shall designate a “Central Authority” that will receive
requests for service from other contracting states. (Hague
Service Convention, supra, 20 U.S.T. at p. 362.) Article 5
provides that the Central Authority of the state addressed “shall
itself serve the document or shall arrange to have it served by an
appropriate agency, either –
“(a) by a method prescribed by its internal law for the
service of documents in domestic actions upon persons who are
within its territory, or
“(b) by a particular method requested by the applicant,
unless such a method is incompatible with the law of the State
addressed.” (Hague Service Convention, supra, 20 U.S.T. at
pp. 362-363.)
Article 10 of the Convention provides for alternative
methods of service if permitted by the “State of destination.” As
relevant here, it says: “Provided the State of destination does not
object, the present Convention shall not interfere with . . . the
freedom to send judicial documents, by postal channels, directly
to persons abroad.” (Hague Service Convention, supra, 20 U.S.T.
at p. 363, italics added.)
China has filed a “reservation” to Article 10, which states
that it “oppose[s] the service of documents in the territory of the
People’s Republic of China by the methods provided by Article 10
17
of the Convention.” (Hague Conference on Private International
Law, Declaration/Reservation/Notification
[as of May 31, 2018].) Accordingly, foreign
plaintiffs “cannot rely on Article 10’s allowance for service via
‘postal channels’ because [China] is among the countries who
have formally objected to such means of service, rendering Article
10 inapplicable.” (Prince v. Government of People’s Republic of
China (S.D.N.Y. Oct 25, 2017, No. 13-CV-2106 (TPG)) 2017 WL
4861988, p. *6; see also Zhang v. Baidu.com Inc. (S.D.N.Y. 2013)
932 F.Supp.2d 561, 567 [mail service of summons and complaint
on Chinese defendant did not constitute proper service: “[T]he
Hague Convention allows for service through ‘postal channels,’
but only if ‘the State of destination does not object.’ . . . China
has objected.”]; and see Pats Aircraft, LLC v. Vedder Munich
GmbH (D. Del. 2016) 197 F.Supp.3d 663, 673 [“Germany . . . has
specifically objected to service by mail under the Hague
Convention. [Citation.] As such, service of process upon a non-
resident defendant in Germany must comply with the other
relevant service provisions of the Hague Convention.”]; RSM
Production Corp. v. Fridman (S.D.N.Y May 24, 2007, No. 06 Civ.
11512 (DLC)) 2007 WL 1515068, p. *2 [“The Hague Service
Convention . . . prohibits service through certified international
mail or Federal Express International Priority mail on
individuals residing in the Russian Federation due to that
country’s objection to Article 10”]; Shenouda v. Mehanna (D.N.J.
2001) 203 F.R.D. 166, 171 [“Article 10 permits parties to send
judicial documents via postal channels or through judicial officers
in the receiving nation. [Citation.] This provision, however, is
inapplicable here because Egypt has objected to Article 10 in its
18
entirety.”]; Honda Motor Co., supra, 10 Cal.App.4th at p. 1049
[“Since the attempted mail service on Honda was improper under
the Hague Convention, the trial court should have granted the
motion to quash service on defendant Honda.”].)
Accordingly, because China has objected to Article 10,
Rockefeller Asia’s mail service of the summons and petition on
SinoType was not effective under the Hague Service Convention.
C. Parties May Not Contract Around the Convention’s
Service Requirements
Rockefeller Asia concedes that mail service on Chinese
citizens by foreign litigants is not permitted under the
Convention. It urges, however, that parties can “contract
around” the Convention’s service requirements. For the reasons
that follow, we do not agree.
“In interpreting an international treaty, we are mindful
that it is ‘in the nature of a contract between nations,’ [citation],
to which ‘[g]eneral rules of construction apply.’ [Citations.] We
therefore begin ‘with the text of the treaty and the context in
which the written words are used.’ [Citation.] The treaty’s
history, ‘ “the negotiations, and the practical construction
adopted by the parties” ’ may also be relevant. [Citation.]”
(Société Nat. Ind. Aéro. v. U.S. Dist. Court (1987) 482 U.S. 522,
533–534 [107 S.Ct. 2542, 2550, 96 L.Ed.2d 461] (Société).)
By its own terms, the Convention applies to “all cases, in
civil or commercial matters, where there is occasion to transmit a
judicial or extrajudicial document for service abroad.” (Hague
Service Convention, supra, 20 U.S.T. at p. 362, italics added.)
This language “is mandatory.” (Volkswagenwerk, supra, 486 U.S.
19at p. 699, italics added; see also Société, supra, 482 U.S. at p. 534,
fn. 15 [same].)5
Further, the Convention emphasizes the right of each
contracting state—not the citizens of those states—to determine
how service shall be effected. For example, Article 2 of the
Convention provides that each state shall organize a Central
Authority “which will undertake to receive requests for service
coming from other contracting States”; Article 5 provides that
each state shall effect service in the manner requested “unless
such a method is incompatible with the law of the State addressed
[i.e., the receiving state]”; and Article 11 provides that the
Convention “shall not prevent two or more contracting States
from agreeing to permit . . . channels of transmission other than
those provided for in the preceding articles.” (Hague Service
Convention, supra, 20 U.S.T. at pp. 362-364, italics added.) As
relevant here, Article 261 of the Civil Procedure Law of the
People’s Republic of China (of which we have taken judicial
notice) provides that a request for judicial assistance “shall be
conducted through channels stipulated to in the international
5 In contrast, the United States Supreme Court has held that
the Hague Convention on the Taking of Evidence Abroad in Civil
or Commercial Matters (Evidence Convention), 23 U.S.T. 2555,
T.I.A.S. No. 7444, which does not contain analogous mandatory
language, does not “purport to describe the procedures for all
permissible transnational discovery and exclude all other existing
practices.” (Société, supra, 482 U.S. at p. 534.) The court found
the Evidence Convention’s omission of mandatory language
“particularly significant in light of the same body’s use of
mandatory language in the preamble to the Hague Service
Convention, 20 U.S.T. 361, T.I.A.S. No. 6638.” (Id. at p. 534,
fn. 15.)
20
treaties concluded or acceded to by the People’s Republic of
China. . . . Except for the circumstances specified in the
preceding paragraph, no foreign agency or individual may serve
documents . . . within the territory of the People’s Republic of
China without the consent of the in-charge authorities of the
People’s Republic of China.” Permitting private parties to avoid a
nation’s service requirements by contract is inconsistent with
Article 261, as well as with the Convention’s stated intention to
avoid infringing on the “sovereignty or security” of member
states. (See Hague Service Convention, supra, 20 U.S.T. at
p. 364.)
Finally, as we have said, the Convention expressly allows
each “State of destination” to decide whether to permit mail
service on its citizens by foreign defendants. (See Hague Service
Convention, supra, 20 U.S.T. at p. 363 [Convention does not
prohibit mail service “[p]rovided the State of destination does not
object”], italics added.) The Convention does not include an
analogous provision allowing private parties to international
contracts to agree to accept service by mail.
Rockefeller Asia does not offer any “plausible textual
footing” (Water Splash, Inc. v. Menon (2017) __ U.S. __, __ [137
S.Ct. 1504, 1509–1510, 197 L.Ed.2d 826]) for the proposition that
parties may contract around the Hague Service Convention, but
instead relies on two cases from other jurisdictions, neither of
which is persuasive. The first, Alfred E. Mann Living Trust v.
ETIRC Aviation S.A.R.L. (N.Y. App. 2010) 78 A.D.3d 137, 141,
910 N.Y.S. 2d 418 (Alfred E. Mann), provides no textual analysis
to support the New York Court of Appeal’s conclusion that the
requirements of the Convention may be waived by contract; the
court simply says that it can see “no reason why” it should reach
21
a contrary conclusion. The analysis of Masimo Corp. v. Mindray
DS USA Inc. (C.D. Cal., Mar. 18, 2013) 2013 WL 12131723 is
equally cursory; the district court stated: “The Court sees no
reason why parties may not waive by contract the service
requirements of the Hague Convention, especially given that
parties are generally free to agree to alternative methods of
service. [Defendant] provides no authority to the contrary, and
the Court’s position is in accord with [Alfred E. Mann].” (Id. at
p. 3.)6
Consistent with the Convention’s language, we therefore
conclude that parties may not agree by contract to accept service
of process in a manner not permitted by the receiving country.
Accordingly, because service on SinoType was effected by
international mail, which is not a permitted form of service on
Chinese citizens under the Convention, we conclude that
SinoType was not validly served with the summons and petition
to confirm the arbitration award.
III.
Because SinoType Was Not Properly Served
with the Summons and Petition, the Court
Did Not Acquire Jurisdiction Over SinoType,
and the Resulting Judgment Is Void
Having concluded that SinoType was not validly served
with the summons and petition, we now consider the effect of the
6 The two remaining cases on which Rockefeller Asia relies
address the Hague Convention on Taking of Evidence Abroad, not
the Hague Service Convention. (Image Linen Services, Inc. v.
Ecolab, Inc. (M.D. Fla., Mar. 10, 2011) 2011 WL 862226, pp. *4–5
& fn. 6; Boss Mfg. Co. v. Hugo Boss AG (S.D.N.Y., Jan. 13, 1999)
1999 WL 20828, p. *1.)
22
invalid service. SinoType contends that because it was not
properly served with the summons and petition, the trial court
did not acquire jurisdiction over it, and the resulting judgment
thus is void. Rockefeller Asia disagrees, contending that the
judgment was valid because SinoType had actual notice of the
proceedings and did not timely move to set aside the judgment.
As we now discuss, SinoType is correct.
A. A Judgment Obtained in the Absence of Proper
Service of Process Is Void
Compliance with the statutory procedures for service of
process “ ‘ “is essential to establish personal jurisdiction.” ’
[Citation.]” (Renoir v. Redstar Corp. (2004) 123 Cal.App.4th
1145, 1152 (Renoir).) Thus, in Honda Motor Co., supra,10 Cal.App.4th 1043, the court held that service on a Japanese
corporation that did not comply with the Hague Service
Convention had to be quashed even though the Japanese
defendant had actually received the summons and complaint.
The court explained: “[Plaintiff’s] arguments share a common
fallacy; they assume that in California, actual notice of the
documents or receipt of them will cure a defective service. That
may be true in some jurisdictions, but California is a jurisdiction
where the original service of process, which confers jurisdiction,
must conform to statutory requirements or all that follows is
void. [Citations.] . . . [¶] . . . [¶] Plaintiff argues that it is
ridiculous, wasteful and time consuming to reverse the trial court
just to force plaintiff to go through the motions of a service under
the convention, when there is no question but that Honda has
notice of the action, its attorneys stand ready to defend it, and no
practical aim can be accomplished by quashing the service.
However, plaintiff cites no authority permitting a California
23
court to authorize an action to go forward upon an invalid service
of process. The fact that the person served ‘got the word’ is
irrelevant. [Citations.] ‘Mere knowledge of the action is not a
substitute for service, nor does it raise any estoppel to contest the
validity of service.’ [Citation.] ‘[O]ur adherence to the law is
required if we are ever to instill respect for it.’ [Citation.] The
Abrams court[7] felt it could not rewrite the work of the California
Legislature; how much less are we able to rewrite a federal
treaty.” (Honda Motor, supra, 10 Cal.App.4th at pp. 1048–1049,
italics added.)
Where the defendant establishes that he or she has not
been served as mandated by the statutory scheme, “no personal
jurisdiction by the court will have been obtained and the
resulting judgment will be void as violating fundamental due
process. (See Peralta [v. Heights Medical Center, Inc. (1988)]
485 U.S. [80,] 84.)” (Gorham, supra, 186 Cal.App.4th 1215, 1227,
italics added [reversing order denying motion to set aside a
default judgment because plaintiff had not been properly served
with the summons and complaint]; see also Renoir, supra,
123 Cal.App.4th at p. 1154 [“Because no summons was served on
any of the defendants and the defendants did not generally
appear in the proceeding, the trial court had no jurisdiction over
them. Therefore, the California judgment was void, as is the
order denying the motion to vacate the California judgment.”];
7 In re Abrams (1980) 108 Cal.App.3d 685, 695 [annulling
contempt judgment against witness because witness subpoena
had not been personally served as required by statute; “the
process was not served in the manner required by law and
defendant may not be criminally punished for failure to obey the
subpoena.”].)
24
Lee v. An (1008) 168 Cal.App.4th 558, 564 [“[I]f a defendant is not
validly served with a summons and complaint, the court lacks
personal jurisdiction and a . . . judgment in such action is subject
to being set aside as void.”].)8
As we have discussed, SinoType was not served with the
summons and petition in the manner required by the Hague
Service Convention. Accordingly, the court did not acquire
personal jurisdiction over SinoType, and the resulting judgment
was void.
B. SinoType’s Motion to Set Aside the Judgment Was
Timely
The final issue before us is whether the trial court abused
its discretion by failing to set aside the void judgment. SinoType
contends that a void judgment is “void ab initio . . . a nullity” that
may be set aside at any time. Rockefeller Asia disagrees,
contending that “ ‘[o]nce six months have elapsed since the entry
of judgment, a trial court may grant a motion to set aside that
judgment as void only if the judgment was void on its face.’ ”
There is a wealth of California authority for the proposition
that a void judgment is vulnerable to direct or collateral attack
“ ‘ “at any time.” ’ ” (Strathvale Holdings v. E.B.H. (2005)
126 Cal.App.4th 1241, 1249, italics added, quoting People v.
American Contractors Indemnity Co. (2004) 33 Cal.4th 653, 660.)
8 “A lack of fundamental jurisdiction is ‘ “ ‘an entire absence
of power to hear or determine the case, an absence of authority
over the subject matter or the parties.’ [Citation.] . . .” [¶]
. . . “[F]undamental jurisdiction cannot be conferred by waiver,
estoppel, or consent. Rather, an act beyond a court’s jurisdiction
in the fundamental sense is null and void” ab initio.’ ” (Kabran v.
Sharp Memorial Hospital (2017) 2 Cal.5th 330, 339.)
25
For example, in Gorham, supra, 186 Cal.App.4th 1215, the Court
of Appeal held that the failure to vacate a void judgment entered
nearly 10 years earlier was an abuse of discretion. The court
explained: “[W]here it is shown that there has been a complete
failure of service of process upon a defendant, he generally has no
duty to take affirmative action to preserve his right to challenge
the judgment or order even if he later obtains actual knowledge
of it because ‘[w]hat is initially void is ever void and life may not
be breathed into it by lapse of time.’ [Citation.] Consequently
under such circumstances, ‘neither laches nor the ordinary
statutes of limitation may be invoked as a defense’ against an
action or proceeding to vacate such a judgment or order.
[Citation.]” (Id. at p. 1229.)
In so concluding, the court specifically rejected the
proposition that the judgment would be set aside only if void “on
its face”: “Although courts have often also distinguished between
a judgment void on its face, i.e., when the defects appear without
going outside the record or judgment roll, versus a judgment
shown by extrinsic evidence to be invalid for lack of jurisdiction,
the latter is still a void judgment with all the same attributes of a
judgment void on its face. [Citation.] ‘Whether the want of
jurisdiction appears on the face of the judgment or is shown by
evidence aliunde, in either case the judgment is for all purposes a
nullity—past, present and future. [Citation.] “. . . All acts
performed under it and all claims flowing out of it are void . . . .
No action upon the part of the plaintiff, no inaction upon the part
of the defendant, no resulting equity in the hands of third
persons, no power residing in any legislative or other department
of the government, can invest it with any of the elements of
power or of vitality.” [Citation.]’ [Citation.] In such cases, the
26
judgment or order is wholly void, although described as ‘voidable’
because court action is required to determine the voidness as a
matter of law, and is distinguishable from those judgments
merely voidable due to being in excess of the court’s jurisdiction.
[Citation.] Consequently, once proof is made that the judgment is
void based on extrinsic evidence, the judgment is said to be
equally ineffective and unenforceable as if the judgment were void
on its face because it violates constitutional due process. (See
Peralta v. Heights Medical Center, supra, 485 U.S. [at p.] 84.)”
(Gorham, supra, 186 Cal.App.4th at p. 1226, italics added.)9
Similarly, the Court of Appeal in Falahati v. Kondo (2005)
127 Cal.App.4th 823, held that the trial court erred in failing to
grant a motion to set aside a default judgment filed 10 months
after entry of judgment. It explained that although a motion for
relief from a default judgment under Code of Civil Procedure
sections 473, subdivision (b), or 473.5, subdivision (a), usually
must be filed within six months from entry of the judgment, “[a]
void judgment can be attacked at any time by a motion under
9 The Gorham court also rejected the plaintiff’s contention
that the trial court was not required to vacate the judgment
because the defendant had actual knowledge of it: “Knowledge
by a defendant of an action will not satisfy the requirement of
adequate service of a summons and complaint. [Citations.] . . .
[I]t has been said that a judgment of a court lacking such
personal jurisdiction is a violation of due process (Burnham v.
Superior Court of Cal., Marin County (1990) 495 U.S. 604, 609),
and that ‘a default judgment entered against a defendant who
was not served with a summons in the manner prescribed by
statute [to establish personal jurisdiction] is void.’ (Dill v.
Berquist Construction Co. (1994) 24 Cal.App.4th 1426, 1444.)”
(Gorham, supra, 186 Cal.App.4th at pp. 1226–1227, 1229.)
27
Code of Civil Procedure section 473, subdivision (d).” (Id. at p.
830, italics added; see also Deutsche Bank National Trust
Company v. Pyle (2017) 13 Cal.App.5th 513, 526; Lee v. An,
supra, 168 Cal.App.4th at pp. 563–564.)
The present case is analogous. Because SinoType was
never properly served with the summons and petition, the trial
court never obtained personal jurisdiction over it. The resulting
judgment—whether or not void on its face—“was . . . therefore
void, not merely voidable, as violating fundamental due process.”
(Gorham, supra, 186 Cal.App.4th at p. 1230.) It therefore could
be set aside “at any time” (People v. American Contractors
Indemnity Co., supra, 33 Cal.4th at p. 660)—including, as in this
case, 15 months after entry of the judgment.10
10 Because we have found the judgment to be void, we do not
address SinoType’s contention that there was no binding
arbitration agreement between the parties. If the parties wish to
do so, they may raise this issue with the trial court in petitions to
confirm/vacate the arbitration award after properly filing and
serving such petitions.
28
DISPOSITION
The order denying the motion to set aside the judgment is
reversed. The case is remanded to the trial court with directions
to vacate the judgment, vacate the order granting the petition to
confirm, and quash service of the summons and petition.
Appellant’s motion for judicial notice, filed January 2, 2018, is
granted as to exhibits 3, 4, and 5, and is otherwise denied.
Appellant is awarded its appellate costs.
CERTIFIED FOR PUBLICATION
EDMON, P. J.
We concur:
EGERTON, J. DHANIDINA, J.*
* Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
29