SUBSTITUTED SERVICE AND THE HAGUE SERVICE CONVENTION.

• Author: Dodge, William S.

Table of Contents Introduction 1488 I. The Hague Service Convention 1491 II. Notice Under the Due Process Clauses 1494 III. Substituted Service on Affiliated Companies 1498 IV. Substituted Service on State Officials 1506 A. The Statutory Landscape 1507 B. Implications for the Hague Convention 1519 C. Notice Concerns 1527 Conclusion 1529 INTRODUCTION

First year courses in Civil Procedure typically focus on the Federal Rules of Civil Procedure and related federal doctrines and statutes. But state law plays an important role in civil litigation, including transnational litigation, even in federal courts. Under the Erie doctrine, for example, state law governs the conflict of laws and the enforcement of foreign judgments. (1) The Federal Rules expressly incorporate state rules on personal jurisdiction. (2) The same is true for service of process, including service on defendants located abroad. Although Federal Rule 4(f) governs service in a foreign country, (3) Federal Rule 4(e)(1) alternatively permits service within the United States by "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." (4) As this Article discusses, state statutes on substituted service often permit service within the state even when the defendant is located abroad. (5)

When a foreign defendant is located in a country that has joined the Hague Service Convention, an additional set of rules and procedures come into play. (6) This treaty interacts with state law in two important ways. On the one hand, as the U.S. Supreme Court held in Volkswagenwerk Aktiengesellschaft v. Schlunk, the Convention "pre-empts inconsistent methods of service prescribed by state law in all cases to which it applies." (7) But on the other hand, state law defines the applicability of the Convention. By its terms, the Convention applies only "where there is occasion to transmit a judicial or extrajudicial document for service abroad." (8) The Supreme Court held that this question turns on "the internal law of the forum state." (9) In Schlunk, Illinois law provided that a foreign parent company could be served by substituted service on its U.S. subsidiary. (10) Because service on the foreign company's agent was completed within the United States, there was no occasion to transmit documents for service abroad, and the Convention did not apply. (11) This Article contributes to the growing literature on the role of state law in transnational litigation (12) by examining substituted service under state law today and when it allows parties to avoid the Hague Service Convention. (13) The Article focuses on two kinds of substituted service. The first is the kind found in Schlunk, service on an affiliated U.S. company as an involuntary agent of the foreign defendant. (14) Most states that have considered the question allow the use of affiliated companies as involuntary agents for service only when there are grounds for piercing the corporate veil. (16) But courts in important states like California, Illinois, and Massachusetts have followed more liberal approaches that focus on whether the defendant is likely to receive notice. (16)

The second kind of substituted service involves service on a state official--typically, the secretary of state--as an agent of the foreign corporation. (17) Statutes authorizing such service usually require either the state official or the plaintiff to send a copy of the process to the defendant, and many courts have held that such a requirement to transmit documents abroad makes the Hague Service Convention applicable. (18) Some courts, however, have interpreted such statutes to provide that service is complete when the state official is served, making the Convention inapplicable. (19) These decisions are problematic both because they replicate the practice of notification au parquet that the Convention aimed to eliminate (20) and because they raise questions of constitutionally adequate notice. (21)

Part I begins with an overview of the Hague Service Convention, its interpretation in Schlunk, and the rules that govern service of process in state and federal courts. Part II reviews the due process requirements of adequate notice articulated in Mullane v. Central Hanover Bank & Trust Co. (22) and considers their implications for substituted service. Part III reviews state laws permitting substituted service on affiliated companies as involuntary agents. It argues that veil piercing is too restrictive a test for determining whether an affiliated company should be deemed an agent for service of process and that courts should focus instead on whether service on the U.S. affiliate will provide constitutionally adequate notice to the foreign defendant. Part IV turns to state laws permitting substituted service on state officials. It argues that the Due Process Clauses require either the state official or the plaintiff to transmit a copy of the process to the foreign defendant even when state law does not, making the Convention applicable in all such cases. Part V briefly concludes.

1. THE HAGUE SERVICE CONVENTION

   The Hague Service Convention aims "to ensure that judicial and extrajudicial documents to be served abroad shall be brought to the notice of the addressee in sufficient time" and to "simplify[] and expedit[e] the procedure." (23) To accomplish these aims, the Convention requires each state-party to designate a Central Authority to receive requests for service. (24) Upon receiving a request, the Central Authority serves the document in accordance with the receiving state's own law (25) and sends a certificate of service to the applicant. (26) The Convention permits service by other means, including diplomatic and consular agents and postal channels, so long as the receiving state has not objected to these. (2) ' And service may be made through any other method that is permitted under the law of the receiving state for documents coming from abroad. (28)

   The Convention's fundamental concern that the addressee receive actual notice is reflected in two provisions on default judgments. Article 15 provides that a court shall not enter a default judgment unless (1) the document was served by a method the receiving country uses for domestic actions, (2) the document was actually delivered to the defendant by another method provided in the Convention, or (3) the document was transmitted by a method provided in the Convention and at least six months have elapsed. (29) Article 16 provides relief from a default judgment if the defendant did not have knowledge of the document served and has a prima facie defense on the merits. (30) But of course these provisions guarding against default judgments without notice apply only if the Convention itself applies. (31)

   The Hague Convention applies "in all cases, in civil or commercial matters, where there is occasion to transmit a judicial or extrajudicial document for service abroad."" (52) In Schlunk, the Supreme Court held that this question "must be determined by reference to the law of the forum state." (33) Illinois permitted substituted service on a foreign corporation, allowing a plaintiff to use the defendant's domestic subsidiary as an "involuntary agent" for service. (34) Under the Due Process Clause, service must provide "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." (35) But the Court concluded that "[w]here 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." (36)

   The defendant in Schlunk argued that if forum law determined the applicability of the Convention, "countries could circumvent the Convention by defining methods of service of process that do not require transmission of documents abroad." (37) In particular, such an interpretation would allow notification au parquet, a method of service used in some civil-law countries under which service is made by depositing documents with a government official. (38) The Court had no doubt that the Convention's drafters wanted to eliminate notification au parquet. (39) But the question of substituted service on government officials was not before the Court, and there was no similar indication in the drafting history that the Convention was intended to eliminate substituted service on subsidiaries. (40) Finally, the Court expressed doubt "that this country, or any other country, will draft its internal laws deliberately so as to circumvent the Convention in cases in which it would be appropriate to transmit judicial documents for service abroad." (41)

   The Federal Rules on service abroad are designed to work in tandem with the Hague Service Convention. Federal Rule of Civil Procedure 4(h)(2) governs the service of corporations outside the United States and permits all of the means available for serving individuals abroad under Rule 4(f) except personal service. (42) Rule 4(f)(1) authorizes service by "internationally agreed means" and refers specifically to the Hague Convention. (43) Rule 4(f)(2) applies if there is no treaty or the treaty permits other means of service and is limited to means of service prescribed by foreign law, directed by a foreign authority, or at least not prohibited by foreign law. (44) And Rule 4(f)(3) allows courts to order other means of service, but only if they are "not prohibited by international agreement." (45) Several states have adopted rules modeled on Federal Rule 4(f) for service of process abroad. (46)

   But substituted service on an affiliated company or a government official does not occur abroad--it occurs in the United States, which is why it may potentially avoid the Hague Service Convention. (47) In federal courts, Federal Rule 4(h)(1) governs...