Delex Inc v. Sukhoi Civil Aircraft Company , 193 Wash. App. 464 ( 2016 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DELEX INC., a New York corporation,
No. 73068-1-
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Trickey, A.C.J. — Sukhoi Civil Aircraft Company (SCAC), a Russian Federation
company, appeals the trial court's denial of its motion to vacate a default judgment that
Delex Inc., a New York corporation, obtained against it. SCAC claims that service of
process was improper because Delex did not follow the Hague Convention's required
procedures. Because the Russian Federation's refusal to serve Russians on behalf of
American litigants relieves Delex Inc. of the responsibility of complying with the Hague
Convention, we affirm.
FACTS
Delex alleges that it contracted with SCAC to lease office and warehouse storage
space from a third party landlord in Seattle on SCAC's behalf. Delex entered into a three-
year lease of the property but received no payment from SCAC at any time. Within the
first year, Delex surrendered the premises to the landlord.
Delex filed a complaint against SCAC for breach of contract in King County
Superior Court in March 2012. Delex served the summons and complaint on SCAC in
Moscow, Russia, through registered mail and personally on the head of SCAC's Foreign
Activity Legal Support Department in April 2012. SCAC never responded.
No. 73068-1-1/2
In August 2012, Delex moved for an order of default and default judgment. The
court granted Delex's motion, a $327,378.49 judgment against SCAC. A representative
of Delex e-mailed SCAC a copy of the default judgment later that month. Again, SCAC
never responded or satisfied any of the judgment.
In January 2015, the court issued a writ of execution to the King County sheriff to
seize SCAC's property, located in SeaTac and valued at approximately $420,000.
According to SCAC, the property included "highly sensitive U.S. aircraft technology and
components."1 SCAC appeared specially to move for relief from the default judgment and
to stay the sheriff's sale. The trial court denied SCAC's motion. SCAC appeals.
ANALYSIS
SCAC argues that the trial court erred by refusing to vacate the default judgment
entered against it. SCAC maintains that service was improper under the Hague
Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or
Commercial Matters, Nov. 15,1965, 20 U.S.T. 361, 658 U.N.T.S. 163 (hereinafter Hague
Convention). Delex responds that the United States Department of State (State
Department) and several federal courts have excused American litigants from attempting
service through Russia's "Central Authority" because the Central Authority no longer
serves Russians on behalf of Americans. We agree with Delex.
Under CR 60(b)(5), the court may relieve a party from a final judgment if that
judgment is void. A default judgment against a party is void if the court did not have
personal jurisdiction over that party. Ahten v. Barnes. 158 Wash. App. 343, 349, 242 P.3d
35 (2010). A court does not have personal jurisdiction over a party if service of the
Clerk's Papers at 89.
No. 73068-1-1/3
summons and complaint was improper. Ahten, 158 Wash. App. at 349.
Under Washington law, the plaintiff has the initial burden to show that service was
sufficient. Scanlan v. Townsend, 181 Wash. 2d 838, 847, 336 P.3d 1155 (2014). The
plaintiff can "establish service of process with an affidavit of service from a process
server." Scanlan, 181 Wash. 2d at 847. Then it is the defendant's burden to show by clear
and convincing evidence that service was improper. Scanlan, 181 Wash. 2d at 847. We
review de novo "the trial court's denial of a motion to vacate a final order for lack of
jurisdiction." ShareBuilder Sec. Corp. v. Hoang, 137 Wash. App. 330, 334, 153 P.3d 222
(2007).
Washington's CR 4(i)(1) offers parties several options for serving foreign litigants.
Service on a party in a foreign country is sufficient if it is made
(C) upon an individual, by delivery to the party personally, and upon a
corporation or partnership or association, by delivery to an officer, a
managing or general agent; or (D) by any form of mail, requiring a signed
receipt, to be addressed and mailed to the party to be served; or (E)
pursuant to the means and terms ofany applicable treaty or convention ...
The method for service of process in a foreign country must comply with
applicable treaties, if any, and must be reasonably calculated, under all the
circumstances, to give actual notice.
Delex served SCAC through the Russian Postal Service's registered mail and
received confirmation of delivery from the Postal Service. This manner of service
complies with CR 4(i)(1)(D). Delex also personally served the head of SCAC's Foreign
Activity Legal Support Department. Assuming that this department head is an officer or
a managing orgeneral agent ofSCAC, this method of service satisfies CR 4(i)(C). Delex
filed an affidavit describing both service methods.
The Hague Convention
SCAC does not challenge the sufficiency of either method of service under
No. 73068-1-1/4
Washington law. Instead, SCAC argues that service was improper because Delex did
not comply with the Hague Convention. The Hague Convention is a "multi-national treaty
that governs service of summons on persons in signatory foreign countries." Nuance
Commc'ns. Inc. v. Abbvv Software House, 626 F.3d 1222, 1237 (Fed. Cir. 2010). The
Russian Federation and the United States of America are both signatories.2 SCAC notes
that since the United States is a party to the treaty, the supremacy clause, United States
Constitution article VI, mandates compliance with its terms. See Broad v. Mannesmann
Anlaoenbau, AG, 141 Wash. 2d 670, 674-77, 10 P.3d 371 (2000). The Hague Convention
requires each member state to designate a Central Authority, which will serve litigants
within its own country. Hague Convention art. 2. The Hague Convention provides other
ways to serve litigants, including through postal channels and personal service, but it
allows member states to object to those other methods. Hague Convention art. 10.
Russia objected to those other methods.3
Ordinarily, the Hague Convention "applies 'where there is occasion to transmit a
judicial or extrajudicial document for service abroad.'" Broad, 141 Wn.2d at675 (quoting
Hague Convention art. 1). However, a dispute arose in 2003 between Russia and the
United States over fees charged by the United States.4 Russia declared in 2004 that it
2Hague Convention, 658 U.N.T.S. at 182; Accession of Russian Federation to Hague Convention on the
Service Abroad ofJudicial and Extrajudicial Documents in Civil orCommercial Matters, 2165 U.N.T.S.
200, 204,https://treaties.un.org/doc/Publication/UNTSA/olume%202165/v2165.pdf; seealso Convention
of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or
Commercial Matters: Members of the Organisation, Hague Conf. Priv. Int'l L,
https://www.hcch.net/en/instruments/conventions/status-table/?cid=17.
3 Declarations of Russian Federation to Hague Convention on the Service Abroad of Judicial and
Extrajudicial Documents in Civil orCommercial Matters, 2293 U.N.T.S. 114, 115,
https://treaties.un.ora/doc/Publication/UNTS/Volume%202293/v2293.pdf (hereinafter Russian Federation
Declaration); see also Declarations Reservations, Hague Conf. Priv. Int'l L,
https://www.hcch.net/en/instruments/conventions/status-table/notifications/?csid=418&disp-resdn.
4 Legal Considerations: International Judicial Assistance: Russia, U.S. Dep'tof State,
http://travel.state.gov/content/travel/en/legal-considerations/judicial/country/russia-federation.html (last
updated Nov. 15, 2013) (follow "Service ofProcess" hyperlink).
No. 73068-1-1/5
will "not apply the Convention" to states that charge for the services rendered by the
state.5 A State Department circular currently informs litigants that service through
Russia's Central Authority is not available:
In July 2003, Russia unilaterally suspended all judicial cooperation with the
United States in civil or commercial matters. ... [Rjequests sent directly by
litigants to the Russian Central Authority under the Hague Service
Convention are returned unexecuted.
Because of the Russian suspension of executing U.S. judicial assistance
requests in civil and commercial matters, we advise litigants that they may
wish to seek guidance from legal counsel in the Russian Federation
regarding alternative methods of service. The United States has informed
the Russian Federation on numerous occasions that in the absence of a
direct channel for U.S. judicial assistance requests, U.S. courts and litigants
will explore other methods to effect service of process.161
The State Department includes a disclaimer with its circular, noting that it is nottaking a
position on any pending litigation or expressing an opinion on the law.7
In Nuance, the Federal Circuit held that it was error for a district court to require a
party, Nuance, to serve a Russian litigant, Abbyy Production, through the Hague
Convention procedures. 626 F.3d at 1238. The court relied on the State Department's
circular, otherfederal cases, and a declaration from an expert in international service of
process to determine that Russia had categorically refused to serve litigants on behalf of
Americans. Nuance, 626 F.3d at 1238. The court rejected the argument that Nuance
had toattempt service through the Central Authority before seeking alternatives. Nuance,
626 F.3d at 1238. The court authorized Nuance to serve one of Abbyy Production's
5 Russian Federation Declaration, 2293 U.N.T.S. at 115 (declaration VIII). Russia specifically excludes
from this declaration foreign states whose costs are proper under the Hague Convention, article
12(2)(a) and (b). The United States argues that its fees are proper under those paragraphs. See
Legal Considerations, supra (follow "Service ofProcess" hyperlink). This is the basis ofthe dispute.
6 Legal Considerations, supra (follow "Service of Process" hyperlink).
7 Legal Considerations, supra.
No. 73068-1-1/6
corporate affiliates within California. Nuance. 626 F.3d at 1240.
Several other federal courts have held that service on Russian parties by American
litigants was proper even though it did not comport with the Hague Convention. In re
Cvphermint, Inc.. 445 B.R. 11, 15-17 (Bankr. D. Mass. 2011) (holding that alternative
service was "sufficient and proper" because service under the Hague Convention had
"been rendered impossible due to the unilateral action of the Russian Federation Central
Authority"); Microsoft Corp. v. John Does 1-18. No. 1:13cv139, 2014 WL 1338677, at*3-
4 (E.D. Va. Apr. 2, 2014) (court order) (allowing service on Russian litigant through
international courier and registered mail). Recently, a federal magistrate judge in Nevada
allowed a party to serve Russian litigants through e-mail and international express mail.
Smith v. Wolf Performance Ammunition, No. 2:13-cv-02223-JCM-NJK, 2015 WL 315891,
at *3 (D. Nev. Jan. 23, 2015) (court order) (authorizing service on Russianjitigants
through e-mail and international express mail). It does not appear that any court has
required a party to serve Russian litigants through the Central Authority since the dispute
between Russia and the United States began.
We agree with the federal courts that the Russian Central Authority's refusal to
serve Russian litigants on behalf of American litigants renders service under the Hague
Convention impossible for a plaintiff like Delex. Therefore, Delex must be allowed to
serve SCAC through alternative means.
SCAC argues that these federal decisions are inapplicable because "no lower
federal court has released a State court from the strictures of the Supremacy Clause of
the Constitution."8 Delex, on the other hand, claims that these lower court decisions are
8 Appellant's Reply Br. at 14.
No. 73068-1-1/7
binding on this court. Neither is correct. While the supremacy clause requires this court
to follow the United States Supreme Court's interpretations of federal law, it does not
prevent us from interpreting federal law altogether. See S.S. v. Alexander. 143 Wash. App.
75, 92, 177 P.3d 724 (2008). Lower federal court decisions that interpret federal law are
not binding on this court but are "entitled to great weight." Home Ins. Co. of N.Y. v. N.
Pac. Ry. Co., 18 Wash. 2d 798, 808, 140 P.2d 507 (1943).
SCAC insists that we cannot allow Delex to serve Russian litigants outside the
limited procedures of the Hague Convention because it would be altering the United
States position on the treaty, which we lack the authority to do. We reject this argument.
We are not abrogating the treaty.
By holding that Delex properly served SCAC, we, like several federal courts, are
doing no more than what the United States has explicitly warned the Russian Federation
that the United States courts would do. SCAC argues that, because of the supremacy
clause, state courts do not have the same authority as federal courts have to make this
decision. This argument confuses state law with state courts. In this decision, we, like
federal courts, are interpreting a federal treaty, not resolving a conflict between state and
federal law.
Charlton v. Kelly
SCAC, relying primarily on the century-old case Charlton v. Kelly, argues that
United States citizens must comply with the Hague Convention despite Russia's refusal
to do so. 229 U.S. 447, 473, 33 S. Ct. 945, 57 L. Ed. 1274 (1913). There, an American
court had to decide whether to extradite an American citizen to Italy in light of Italy's
refusal to extradite Italians to the United States. Charlton. 229 U.S. at 469-72. The Court
No. 73068-1-1/8
reviewed correspondence between the State Department and the Italian charge d'affaires
about the particular case. Charlton. 229 U.S. at 469-72. According to the United States,
Italy's refusal violated its bilateral extradition treaty with the United States. Charlton. 229
U.S. at 472-73. The Court held that breach rendered the treaty "voidable, not void."
Charlton. 229 U.S. at 473. The United States chose not to void the treaty but, instead,
appeared to waive its objections to Italy's breach. Charlton. 229 U.S. at 473.
Charlton does not control, as seen in the many federal court decisions that have
tackled this question without reference to Charlton. See, e.g.. Nuance. 626 F.3d 1222;
Microsoft. 2014 WL 1338677; Smith. 2015 WL 315891; Cvphermint, 445 B.R. 11. The
Court recognized in Charlton that the United States had to consider how its response to
Italy's interpretation of the treaty might impact the United States' treaties with other
countries. 229 U.S. at 473. Similarly, withdrawing from the Hague Convention as a
response by the United States to the Russian Central Authority's refusal to effect service
on behalf of American litigants would have far-reaching consequences.
The Hague Convention is a multilateral treaty. There is no mechanism in the
Hague Convention for the United States to abrogate the treaty with respect to Russia but
leave it in force with the other signatories. The United States' decision to honor its
bilateral treaty obligations in the face of a breach by the only other party is not comparable
to the United States' decision not to withdraw from the Hague Convention, which governs
its foreign service of process with more than 60 nations, based on the conduct of 1 nation.
Further, Delex's actions here are consistent with the State Department's circular.
Refusing to extradite the American in Charlton would have gone against the State
Department's clearly articulated position. 229 U.S. at 471-72. Here, the State
8
No. 73068-1-1/9
Department's stance is different. The State Department lists the Russian Federation as
a party to the Hague Convention in its "Multilateral Treaties in Force as of January 1,
2013."9 But, when offering information about the Russian Federation specifically, the
State Department warns that Russia's Central Authority will not serve Russians on behalf
of American litigants.10 Itstated, "The United States has informed the Russian Federation
on numerous occasions that in the absence of a direct channel for U.S. judicial assistance
requests, U.S. courts and litigants will explore other methods to effect service of
process."11 That is exactly what Delex did.
Article 15—Default Judgment
SCAC also contends that, even if it is true that the Russian Central Authority does
not process requests for American litigants, Delex could, and should, have attempted
service through the Central Authority and then sought a default judgment through article
15 of the Hague Convention, which SCAC refers to as a "jurisdictional safety valve."12
The Hague Convention allows for entry of default judgment under certain conditions:
[T]he judge... maygive judgment even if no certificate ofservice or delivery
has been received ifall of the following conditions are fulfilled -
a) the document was transmitted by one of the methods provided for in this
Convention,
b) a period oftime of not less than six months, considered adequate bythe
judge in the particular case, has elapsed since the date of the
transmission of the document,
c) no certificate of any kind has been received, even though every
reasonable effort has been made to obtain it through the competent
authorities of the State addressed.
Hague Convention art. 15.
9 U.S. Dep'tof State, Treaties in Force 410, http://www.state.gov/documents/organization/218912.pdf.
10 Legal Considerations, supra (follow "Service of Process" hyperlink).
n Legal Considerations, supra (follow "Service of Process" hyperlink).
12 Br. of Appellant at 22.
No. 73068-1-1/10
We do not require Delex to pursue a default judgment through this procedure for
three reasons. First, requiring Delex to send documents to Russia's Central Authority
that the Russian Authority would not serve on SCAC would be a waste of Delex's
resources. Second, it would cause unnecessary delay. Third, and most importantly, it
would not be calculated to give SCAC actual notice of the pending suit.
In this case, SCAC does not dispute that it had actual notice of the suit based on
Delex's other service. But, had Delex relied solely on the Central Authority to serve SCAC
and then taken the default judgment after six months as permitted underarticle 15, SCAC
would never have received notice of the suit. Therefore, we reject SCAC's argument that
Delex must have attempted to serve SCAC through the Central Authority even though it
knew that the Central Authority would not have served SCAC.
Prior Court Authorization
SCAC contends next that, even if service outside the Hague Convention
procedures may sometimes be proper, Delex would have had to receive prior approval
from the trial court before attempting it. SCAC supports this argument with citations to
federal cases where a party sought approval from the court under Federal Rule of Civil
Procedure (FRCP) 4(f)(3). See, e^, Smith. 2015 WL 315891, at *3 (court authorized
plaintiff to serve defendants under FRCP 4(f)(3)).
The requirement of prior approval in those cases comes from the Federal Rules of
Civil Procedure, which do not apply here. FRCP 4(f)(2)(C)(i) allows personal service on
a foreign individual. However, FRCP 4(h)(2), which governs foreign service on foreign
corporations, specifically prohibits litigants from effecting personal service on a foreign
corporation under FRCP 4(f)(2)(C)(i). So, in order to serve Russian litigants, some of the
10
No. 73068-1-1/11
plaintiffs resorted to FRCP 4(f)(3), which allows for service "byother means not prohibited
by international agreement, as the court orders." See, e.g.. Smith. 2015 WL 315891, at
*2.
By contrast, federal courts have not required prior approval of alternative service
methods from plaintiffs when the federal rules did not require it. See, e.g.. Microsoft. 2014
WL 1338677, at *3-4 (holding that service on a Russian individual was proper under
FRCP 4(f)(2)(A) and (C)(i) without requiring prior authorization from the court).
There was no reason for Delex to seek prior approval under the Washington court
rules. Although CR 4(i)(1)(G) authorizes service "as directed by order ofthe court," there
is no indication that Delex is relying, or needs to rely, on that manner of service. Delex's
service was proper under CR 4(i)(1)(C) and (D), which do not require prior court approval.
In short, we hold that Delex properly served SCAC.
Attorney Fees
Delex seeks attorney fees pursuant to RAP 18.1(a). We decline its request.
Attorney fees are not available absent "a contract, statute, or recognized ground
of equity." Ino Ino. Inc. v. Citv of Bellevue. 132 Wash. 2d 103, 142-43, 937 P.2d 154, 943
P.2d 1358 (1997). To "deter plaintiffs from seeking relief prior to a trial on the merits," an
award of attorney fees is often available on equitable grounds after a court has dissolved
"a wrongfully issued injunction or restraining order." Ino Ino. Inc.. 132 Wash. 2d at 143.
Delex argues that SCAC "obtained a temporary injunction ofa scheduled [sheriff's
sale based on improper legal arguments."13 It is mistaken. The only stay SCAC received
was a temporary stayfrom this court pending the outcome of its emergency motion for a
13 Br. of Resp't at 20.
11
No. 73068-1-1/12
stay during the appeal.14 That stay lasted three days.15 After a commissioner of this court
denied SCAC's emergency motion, SCAC deposited a $475,000 supersedeas bond. The
parties then agreed to quash the writ of execution, which was the basis for the sheriff's
sale.
Delex claims that this temporary stay of the sheriff's sale was tantamount to a
temporary restraining order but cites no authority for this position. Although SCAC does
not prevail on its legal arguments, Delex has not explained how the legal arguments were
improper. Delex is not entitled to attorney fees. Additionally, SCAC sought relief from
the sheriff's sale in order to have a trial on the merits. Here, attorney fees would not serve
the same equitable purpose as they do when awarded against plaintiffs who seek relief
before trial but do not prevail on the merits.
We affirm the trial court's denial of SCAC's motion to vacate the default judgment.
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WE CONCUR:
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14 Comm'r's Ruling Denying Emergency Mot. for Stay &Lifting Temporary Stay, at 3 (Wash. Ct. App. Feb.
27,2015).
15 Comm'r's Ruling at 8.
12