Kelly Toys Holdings, LLC v. Top Department Store

Background

Kelly Toys Holdings, LLC, which manufactures and distributes Squishmallows plush toys, sued two China-based online retail stores—Top Department Store and Perfectdisc Squishmollaws.com—and three website addresses associated with those stores. The complaint asserted trademark counterfeiting, trademark infringement, false designation, and unfair competition claims under the Lanham Act.

The dispute addressed only service of process, not whether the defendants had infringed Kelly Toys’ trademarks. Kelly Toys’ counsel investigated physical addresses connected to the websites, shipping labels, and domain-registration information. The addresses found in California, London, New Jersey, and New York did not connect counsel to the defendants, and additional efforts by counsel’s Beijing office did not identify a physical address in China.

On January 21, 2022, the court authorized alternative service under Federal Rule of Civil Procedure 4(f)(3). The authorization allowed Kelly Toys to send the summons, complaint, and temporary restraining order to seven email addresses associated with the defendants. Kelly Toys sent those materials on January 28. Three of the emails were confirmed as delivered. Defendants later appeared, participated in settlement discussions, and moved under Rule 12(b)(5) to dismiss for insufficient service of process.

Arguments

Defendants argued that the Hague Service Convention applied because they were located in China and required service at their physical addresses. They contended that Kelly Toys’ email service was therefore deficient. Defendants also asserted that Kelly Toys could have found their addresses through other means, including a Google search, PayPal information, or customer-service emails.

Kelly Toys argued that the Hague Convention did not apply because its reasonable efforts had failed to identify defendants’ physical addresses. It also argued that, even if the Convention applied, the email service authorized by the court was permissible. The court resolved the first argument in Kelly Toys’ favor and did not reach the alternative arguments.

Court’s Analysis

The court explained that the Hague Service Convention does not apply when the address of the person or entity to be served is not known. Courts treat an address as “not known” when the plaintiff has exercised reasonable diligence but cannot discover a physical address.

The court found that Kelly Toys met that standard. Counsel had investigated addresses displayed on defendants’ websites, sent an investigator to several locations associated with the websites and shipping labels, contacted counsel for a shipping company after learning that one label appeared forged, searched domain-registration information, and asked Beijing-based counsel to locate the defendants in China. The court found these efforts credible, specific, and sufficiently thorough.

The court rejected defendants’ argument that Kelly Toys had to use every possible investigative method. It also found that defendants’ later disclosure of purported addresses did not show that Kelly Toys could reasonably have found those addresses when it was attempting service. The court therefore held that the defendants’ physical addresses were “not known” and that the Hague Convention did not apply.

The court then analyzed the email service under Rule 4(f)(3), which allows a federal court to order service on a foreign defendant by a method that is not prohibited by an international agreement and satisfies constitutional due process. Due process requires notice reasonably calculated to inform the defendant about the case and provide an opportunity to respond.

The court found that the email service satisfied those requirements. The court had specifically authorized the method; the email addresses were associated with the defendants’ websites or payment records; several emails were delivered without being returned; and defendants actually learned of the lawsuit, participated in settlement discussions, appeared through counsel, and defended the case. The court concluded that service by email was proper under Rule 4(f)(3).

Disposition

The court denied defendants’ motion to dismiss for deficient service. It directed the Clerk of Court to terminate the motion and stated that a separate order would schedule an initial pretrial conference. The opinion did not decide the underlying trademark claims or Kelly Toys’ alternative arguments concerning service under Rule 4(f)(2)(A).