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California Appellate Court Holds Parties Cannot Contract Around Service Requirements of Hague Service Convention

Changzhou Sinotype Technology Co., Ltd. (“Changzhou”) is a Chinese company that develops fonts. Changzhou and Los Angeles-based investment firm Rockefeller Technology Investments (Asia) VII (“Rockefeller”), entertained the idea of a joint venture to create a Silicon Valley-based company to develop and market international fonts.

The parties signed what Rockefeller characterized as a memorandum of understanding, and which Rockefeller believed was binding. However, Changzhou characterized the document as a “bei wang lu,” a type of memorandum understood in Chinese to merely record the current state of negotiations, and that the signing of a “bei wang lu” “does not create a binding contract.

After negotiations ultimately broke off, Rockefeller initiated an arbitration, citing the memorandum’s arbitration provision. Changzhou did not respond to the demand for arbitration, nor did it appear or participate in the arbitration Rockefeller filed in California. The arbitrator entered a default award in excess of $414 million against Changzhou.

Rockefeller brought an action to confirm the award in California state court. It effected service on Changzhou in China via mail, as had been “agreed” in the memorandum. Changzhou did not appear in the action, and judgment confirming the award entered in Rockefeller’s favor.

Approximately 15 months later, Changzhou moved to set aside the judgment on the grounds that it had never entered into a binding contract with Rockefeller, 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 (the “Hague Service Convention”).

The court denied Changzhou’s petition to vacate, finding service was effective in the action to confirm the award, even though it had not complied with the Hague Service Convention, as the parties were free to contract around the Convention, and had done so.

Changzhou appealed and a California intermediate appellate court reversed, finding that parties may not ‘contract around’ the Hague Service Convention. “[T]he 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. [Changzhou] therefore was never validly served with process.”

The Appellate Court also did not credit the argument that Changzhou waited too long to challenge service, finding that a lack of personal jurisdiction is not curable, and that “[t]here is a wealth of California authority for the proposition that a void judgment is vulnerable to direct or collateral attack ‘at any time.’” (emphasis added).

Rockefeller Technology Investments (Asia) VII v. Changzhou Sinotype Technology Co., Ltd., No. B272170 (Cal. Ct. App. June 1, 2018)

©2011-2019 Carlton Fields, P.A.

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About this Author

John C. Pitblado, Insurance Lawyer, Carlton Fields
Shareholder

John Pitblado has extensive experience in a wide range of litigation on behalf of insurers in the property and casualty, title, life, health, and reinsurance industries, including coverage, class action, ERISA, and other litigation involving contract disputes, bad faith, statutory unfair insurance and trade practices, RICO, fraud, and misrepresentation claims. John also has experience handling regulatory matters, including market conduct examinations and complaints before state insurance regulatory authorities.

John is a member of the firm’s insurance industry group, and data...

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