This decision may impose unfortunate consequences, for example, on Japanese companies since on December 21, 2018, Japan formally objected to service by mail under the Hague Convention Article 10(a), resulting in added delay and expense of service.
In In re OnePlus Technology (Shenzhen) Co., Ltd., 2021-165 (Fed. Cir. Sep. 10, 2021), the Court of Appeals for the Federal Circuit denied OnePlus’s petition for writ of mandamus to the United States District Court for the Western District of Texas. In its petition, OnePlus sought dismissal of five patent infringement lawsuits brought by Brazos Licensing and Development based on Brazos’s failure to serve the complaint and summons on the Chinese company pursuant to the Hague Convention.
The Federal Circuit denied the petition, reasoning that Brazos acted with leave of the district court and that the district court did not abuse its discretion in permitting Brazos to bypass the Hague Convention to alternatively serve OnePlus by methods effected solely within the United States. The decision turned on the Federal Circuit’s interpretation of Fed. R. Civ. P. 4, which governs service of process on individuals and corporations.
Rule 4(e)(1) governs the service of individuals “within a judicial district of the United States” and provides generally that an individual may be served by complying with the law of the state in which the federal district court is located. Rule 4(h)(1) provides that service of a corporation may be completed “in the manner prescribed by Rule 4(e)(1)” or by delivering the papers to a corporate officer or agent. Rule 4(h)(2) states generally that a foreign corporation served outside the United States must be served “in any manner prescribed by Rule 4(f)...” Rule 4(f) provides for service on individuals “in a foreign country” in one of three ways:
(1) by any internationally agreed means of service that is reasonably calculated to give notice, such as the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents;
(2) if there is no internationally agreed means, or if an international agreement allows but does not specify other means, by a method that is reasonably calculated to give notice:
(A) as prescribed by the foreign country’s law for service in that country in an action in its courts of general jurisdiction;
(B) as the foreign authority directs in response to a letter rogatory or letter of request; or
(C) unless prohibited by the foreign country’s law; or
(i) delivering a copy of the summons and of the complaint to the individual personally; or
(ii) using any form of mail that the clerk addresses and sends to the individual and that requires a signed receipt; or
(3) by other means not prohibited by international agreement, as the court orders.
Although China is a signatory to the Hague Convention and provides a mechanism for serving complaints and other judicial documents on Chinese entities such as OnePlus, Brazos asked the district court for leave under Fed. R. Civ. P. 4(f)(3) to effect service using alternative methods. Despite OnePlus’s special appearance to oppose that request and Brazos’s ability to effect service under Rule 4(f)(1) pursuant to the Hague Convention, the district court permitted Brazos to serve the complaint and summons on attorneys in the United States who had previously represented OnePlus and on OnePlus’s registered agent for service in Hayward, California.
In its petition to the Federal Circuit, OnePlus argued that the federal rules require a plaintiff to comply with the applicable state long-arm statute, and the Texas long-arm statute requires transmitting the complaint and summons abroad to a foreign defendant. See Tex. Civ. Prac. & Rem. Code Ann. § 17.045; see also Sheets v. Yamaha Motors Corp., U.S.A., 891 F.2d 533, 536-37 (5th Cir. 1990) (“method of service [on foreign entities] prescribed by the internal law of the forum state). According to OnePlus, therefore, Brazos could not comply with the Texas long-arm statute without serving the papers abroad through the Hague Convention.
In rejecting that argument, the Federal Circuit relied on an earlier decision in Nuance Communications, Inc. v. Abbyy Software House, 626 F.3d 1222 (Fed. Cir. 2010) to distinguish between methods of service under Rule 4 that require leave of court, such as service under Rule 4(f)(3), and those methods that do not, such as Rule 4(e)(1) pursuant to a state’s long-arm statute. The Federal Circuit explained that service of process may be achieved under any Rule 4 method. See In re OnePlus, 2021-165 at 5-6. For example, in Nuance, the Federal Circuit held that “‘Rule 4(f)(3) is not subsumed within or in any way dominated by Rule 4(f)’s other subsections; it stands independently, on equal footing.’” Nuance, 626 F.3d at 1239 (quoting Rio Props., Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1015 (9th Cir. 2002)).
Similarly, the Federal Circuit rejected OnePlus’s argument that Rule 4(f)(3) is confined to authorizing alternative methods of service outside of the United States. See In re OnePlus, No. 2021-165 at 6 (citing Nuance, 626 F.3d at 1239). The Federal Circuit relied not only on Nuance but also other Ninth Circuit and district court precedent to conclude that Rule 4(f)(3) allows alternative service of foreign entities by methods effected within the United States. Id.; see also Nuance, 626 F.3d. at 1240 (“The court-ordered method of service must still be reasonable and comport with constitutional notions of due process”). The Federal Circuit concluded therefore that Rule 4(f)(3) authorized the district court to prescribe alternative service of OnePlus by methods effected solely within the United States.
Finally, OnePlus argued that the district court abused its discretion by authorizing the alternative service of process because Brazos presented no evidence that it had tried, but failed, to effect service through the Hague Convention procedures. Here, the Federal Circuit expressed “concerns” that the district court authorized the alternative service merely “because it regarded the Hague Convention procedure as slow and expensive.” In re OnePlus, 2021-165 at 7. The Federal Circuit cautioned that “Rule 4(f)(3) was not meant to displace the other rules for service in every instance in which alternative means of service are seen as more convenient.” Id.
The Federal Circuit nonetheless appeared guarded in its concern, acknowledging that “Rule 4(f)(3) is not a ‘last resort’ or a type of ‘extraordinary relief’ for a plaintiff seeking to serve process on a foreign defendant.” Id. The court cited numerous examples of district courts authorizing alternative means of service to avoid unnecessary delay and expense. Id. (citations omitted). The Federal Circuit noted further that “[t]he district has not announced that it intends to order alternative service in every case in which more conventional means of service would be merely inconvenient” and “[o]n the present record, we decline to find a clear abuse of discretion that would justify the issuance of a writ of mandamus.” Id. at 8.
Although the Federal Circuit expressed “concerns” about and cautioned against the overuse of alternative service under Rule 4(f)(3), this case is factually distinct and represents a departure from Nuance. At issue in Nuance was service on a corporate parent located in the Russian Federation, which had “‘unilaterally suspended all judicial cooperation with the United States in civil and commercial matters in 2003’” despite its membership in the Hague Convention. Nuance, 626 F.3d at 1237-38 (quoting J.A. 316). Alternative service in Nuance therefore was pursued not out of convenience but instead out of necessity. Here, the Federal Circuit affirmed the exercise of discretion in favor of alternative service under Rule 4(f)(3) merely for the avoidance of unnecessary delay and expense – provided that the discretion is not overused.
This decision may impose unfortunate consequences, for example, on Japanese companies since on December 21, 2018, Japan formally objected to service by mail under Hague Convention Article 10(a), resulting in added delay and expense of service. Although service of process through Japan’s “central authority” or Ministry of Justice is generally efficient and effective, the OnePlus decision may now invite plaintiffs to bypass the international convention – especially for companies that have a US subsidiary able to accept service on behalf of the parent or US lawyers or registered agents who arguably have connections to the overseas company.
In conclusion, OnePlus also may change the bargaining positions of plaintiffs and defendants when negotiating a request for a “waiver of service” under Rule 4(d)(1). That rule authorizes plaintiffs to send written requests for waiver of service to defendants, including overseas defendants. Under Rule 4(d)(3), an overseas defendant who accepts the request and waives service “before being served with process... need not serve an answer to the complaint... until 90 days after [the written request for waiver] was sent to the [overseas defendant].” Before OnePlus, overseas defendants had some assurance that even if they turned down a waiver request, formal service of process through diplomatic channels would likely consume considerable time. OnePlus, however, potentially disrupts those pre-existing expectations by providing plaintiffs with an option to bypass diplomatic channels and more quickly effect service.