Daily Blast - April 02, 2020 - Lewis Brisbois Bisgaard & Smith LLP

In Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd. (Apr. 2, 2020, S249923) __Cal.5th___, the Supreme Court determined whether an arbitration agreement waving formal service of process can preempt the Hague Convention. This case arises from a contract between a California company and a Chinese company. (Slip opn., p. 2.) The contract included an agreement to submit to California jurisdiction and resolve all disputes through California arbitration. (Id. at pp. 1-2.) Additionally, both companies agreed to provide service of process, in the event of any dispute, through Federal Express or a similar courier. (Ibid.) Eventually, the relationship between the two businesses deteriorated and the California company requested arbitration. (Id. at p. 3.) The California company prevailed in the arbitration without the presence of the Chinese company. (Ibid.) The California company sought to have the trial court confirm the award and served the Chinese company with a summons mailed through Federal Express, as agreed to in the contract between the companies. (Id. at p. 4.) The trial court confirmed the arbitration award without the Chinese company appearing. It was not until the California company sought assignment of future royalty payments owed to the Chinese company that the Chinese company made a special appearance and filed a motion to quash for insufficiency of service of process. The Chinese company asserted it did not receive any notice of any proceedings against it until after the proceedings occurred. The Chinese company further argued the California company’s failure to comply with Hague Service Convention rules voided the trial court’s order confirming the arbitration award. The Court of Appeal reversed the decision of the trial court. (Ibid.) The Supreme Court granted review to resolve the issue of whether the California company followed proper service procedures. (Id. at p. 1.) The Supreme Court’s lengthy opinion reversing the Court of Appeal’s decision is attached.

First, the Supreme Court concluded waiving service of process is supported by California law. (Slip opn., p. 14.) The court then established arbitration contracts agreeing to settle disputes through California arbitration must be enforced by California law. (Id. at pp. 18-19.) Finally, the court confirmed the Chinese company waived all statutory service requirements when it signed the contract with the California company because the contract clearly specified an alternative means of service. (Id. at p. 22) The Chinese company thus agreed to be served through Federal Express mail. (Ibid.)

As to the Hague Convention, the question the Supreme Court analyzed was whether article 10(a) voided the service-by-mail requirement in the contract between the California company and the Chinese company. (Slip opn., p. 7.) Article 10(a) allows judicial documents to be sent internationally by mail as long as the receiving nation does not object to service by mail. (Ibid.) China objected to service by mail. (Id. at p. 5.) The court, citing the United States Supreme Court, stated that the Hague Convention only applies when service of process needs to be transmitted to an international destination. (Id. at p. 22, citing Volkswagenwerk Aktiengesellschaft v. Schlunk (1988) 486 U.S. 694, 707.) Whether service of process needs to be transmitted internationally is a matter decided by state law. (Slip opn., p. 22.) Since both companies waived formal service of process in accordance with California law in their contract mandating arbitration, the Hague Convention did not apply to this litigation. (Ibid.) The waiver of formal service of process obviated the need to follow statutory service requirements because both parties agreed to be served by mail through Federal Express. (Id. at pp. 22-23.) The court concluded by stating its policy enforcing waiver of service clauses in arbitration agreements promotes long-established California policy favoring arbitration agreements and will help make California a center for international arbitration. (Id. at pp. 23-24.)