IDS Property Casualty Insurance Company v. Gree USA, Inc.
- David Doty
- 0:18-cv-01313
- U.S. District Court · District of Minnesota
- 10
In IDS Property Casualty v. Gree USA, Judge Doty quashed service on two foreign defendants, set aside their default, and kept the claims pending.
IDS Property Casualty Insurance Company and the Murphys’ claims against Gree China and Gree Hong Kong remain pending, but plaintiffs must properly serve those two defendants; the clerk’s defaults against them were set aside.
What happened
IDS Property Casualty Insurance Company v. Gree USA, Inc. concerns claims over a fire allegedly caused by a defective dehumidifier. IDS sued several companies, including Gree China and Gree Hong Kong, but those two companies did not answer after plaintiffs served documents in California. The clerk entered their default, and the companies asked the court to undo the default and dismiss the claims for improper service.
The court ruled that Minnesota law governed whether the Hague Convention applied. Because Minnesota law required service through the Minnesota Secretary of State and transmission of the documents to the foreign companies, the Hague Convention applied. Plaintiffs did not complete that process, so their service was ineffective. The court chose to quash the service rather than dismiss the claims because proper service might still be possible.
Judge Doty also found good cause to set aside the clerk’s entry of default against Gree China and Gree Hong Kong. He cited the companies’ prompt response, their potentially valid service argument, the absence of shown bad faith, and the lack of concrete prejudice to plaintiffs. The court granted the motion as described in the order, directed the clerk to set aside the default, and quashed plaintiffs’ purported service.
The detailed version
- IDS Property Casualty Insurance Company v. Gree USA, Inc. · No. 0:18-cv-01313
- David Doty
- Dec. 17, 2018
Background
This product-liability diversity case arose from an allegedly defective household dehumidifier that plaintiffs said caused a fire at Chad and Andrea Murphy’s home. IDS Property Casualty Insurance Company, which insured the Murphys, paid them for property damage and brought negligence and strict-liability claims against Gree USA, Inc., MJC America, Ltd., Gree Electric Appliances, Inc. of Zhuhai (Gree China), and Hong Kong Gree Electric Appliance Sales, Ltd. (Gree Hong Kong).
Gree China and Gree Hong Kong are Chinese corporations and did not have authorized service agents in the United States. Plaintiffs delivered the summons and complaint to a person at Gree USA’s California business address for delivery to Ming Chu Dong, and mailed copies to Dong at that address. Gree USA and MJC America answered, but Gree China and Gree Hong Kong did not. The clerk entered default against the two foreign corporations.
Service of Process
The defendants moved to vacate the clerk’s entry of default and to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(5) for insufficient service of process. They argued that, because they were foreign corporations, plaintiffs had to serve them under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. Plaintiffs argued that they had properly served the defendants under federal and California law and that the Hague Convention did not apply.
The court explained that the Hague Convention applies when the forum state’s law requires documents to be transmitted abroad for service. Minnesota was the forum state, so Minnesota law—not California law—controlled that question. Under Minnesota law, the defendants could be served through the Minnesota Secretary of State because they lacked domestic service agents. The court had previously determined that this method of service was not complete until the Secretary of State transmitted the documents to the foreign corporation. Because plaintiffs did not complete that transmission and did not serve the defendants abroad under the Hague Convention, service was ineffective.
Relief for Improper Service
The court held that ineffective service did not require dismissal. It had discretion either to dismiss the action or to quash the defective service while retaining the case. Because it was not certain that plaintiffs would be unable to complete proper service under the Hague Convention, the court quashed the purported service without dismissing the action against Gree China and Gree Hong Kong.
Default
The defendants also sought relief under Rule 60(b), but the court explained that Rule 60(b) applies to a default judgment, while the case involved only the clerk’s entry of default. The court therefore applied the good-cause standard under Rule 55(c). It considered whether the defendants’ conduct was blameworthy, whether they had a meritorious defense, and whether setting aside the default would cause concrete prejudice to plaintiffs.
The court found good cause. Gree China and Gree Hong Kong promptly challenged the default the day after it was entered, raised a potentially meritorious defense based on the Hague Convention, and were not shown to have acted in bad faith. The court also found no concrete prejudice because plaintiffs still had claims against Gree USA and MJC America and the related corporate entities were not expected to make discovery or access to evidence more difficult.
Disposition
The court granted the motion to vacate and dismiss as set forth in the order, directed the clerk to set aside the entry of default against Gree China and Gree Hong Kong, and quashed plaintiffs’ purported service on those defendants. The court did not dismiss the action against them.
Read the full 10-page opinion on CourtListener, the free public archive maintained by the Free Law Project.