Eastern District Of Texas Magistrate Recommends Denying Motion To Dismiss For Failure To Perfect Service Of Process
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  • Eastern District Of Texas Magistrate Recommends Denying Motion To Dismiss For Failure To Perfect Service Of Process

    On September 19, 2022, Magistrate Judge Payne of the U.S. District Court for the Eastern District of Texas issued a Report and Recommendation regarding certain foreign defendants’ motion to dismiss for failure to perfect service of process.  Arigna Tech. Ltd. v. Nissan Motor Co., No. 2:22-cv-00126-JRG-RSP (E.D. Tex. Sept. 19, 2022).  Judge Payne recommended denying the motion, finding that service on an agent of the foreign defendants’ U.S. subsidiary was proper.

    Plaintiff Arigna sued, for patent infringement, several German-based defendants: Continental AG, Conti Temic microelectronic GmbH, and ADC Automotive Distance Control Systems GmbH (collectively, “Continental”).  Instead of serving the Complaint via the Hague Convention, Arigna effected service through the registered agent in California of Continental Automotive Systems, Inc. (“CAS”), a U.S. subsidiary of Continental.

    Continental moved to dismiss on the grounds that such service was improper, and that service through the Hague Convention is required.

    Federal Rule of Civil Procedure 4(h)(1)(A), in conjunction with Rule 4(e)(1), allows for service of a foreign corporation “following state law for serving a summons in an action brought in courts of general jurisdiction in the state where the district court is located or where service is made.”  Judge Payne thus analyzed California service law.

    Judge Payne found that “service was proper under California law” because the Ninth Circuit had previously held that “California law allows service on a foreign corporation by serving its domestic subsidiary.”  U.S. ex rel. Miller v. Pub. Warehousing Co. KSC, 636 F. App’x 947, 949 (9th Cir. 2016).  Therefore, reasoned Judge Payne, because service was proper under California law, it is unnecessary to effect service under the more traditional Hague Convention approach.  See Schlunk, Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 1707 (1988) (“Where service on a domestic agent is valid and complete under both state law and the Due Process Clause, our inquiry ends, and the Convention has no further implications.”).

    Judge Payne also analyzed whether the appropriate person had been served.  Judge Payne determined that, under Cal. Civ. P. Code § 416.10(b), a corporation may be served through its “general manager,” defined by California courts as an agent who (1) is of sufficient character and rank to make it reasonably certain that defendant would be apprised of the service and (2) has given the defendant substantially the business advantages that it would have enjoyed if it conducted its business through its own offices or paid agents in the state.  See Cosper v. Smith & Wesson Arms Co., 53 Cal. 2d 77, 83–84 (1959).

    Judge Payne found that both criteria were established, focusing heavily on the fact that CAS is the U.S. subsidiary of Continental through which Continental conducts business in the United States, including the manufacturing of technologies related to the instant case.

    Because both criteria were met, Judge Payne recommended denying Continental’s motion to dismiss.

    This case is the latest example of a court permitting service of a foreign defendant via a U.S. subsidiary (especially in California) instead of requiring the plaintiff to use the Hague Convention.