Orient Plus International Limited v. Baosheng Media Group Holdings Limited

Background

The plaintiffs sued thirteen corporate and individual defendants for alleged violations of federal securities laws. The operative complaint asserted claims under Sections 11, 12, and 15 of the Securities Act of 1933. The plaintiffs alleged, among other things, that Baosheng Media Group Holdings Limited failed to disclose a Chinese government investigation before its initial public offering and the investigation’s alleged effects on the company.

The plaintiffs successfully served the corporate defendants. They had not served seven individual defendants: current Baosheng director Sheng Gong; current Baosheng chief financial officer Yue Jin; former directors Yu Zhong, Zuohao Hu, Adam (Xin) He, and Wenxiu Zhong; and shareholder Yanjun Hu. The opinion states that these individual defendants were believed to live in China.

A process server unsuccessfully attempted to serve the individual defendants through Baosheng’s registered agent. Baosheng’s counsel declined to accept service for them, and the plaintiffs’ efforts to obtain residential addresses were unsuccessful. The plaintiffs found publicly available work email addresses for Yu Zhong, Zuohao Hu, and Yanjun Hu, but not for Wenxiu Zhong or Adam (Xin) He.

Legal standard

Federal Rule of Civil Procedure 4(f)(3) allows a court to order service on an individual in a foreign country by means that are not prohibited by an international agreement. The method must also be reasonably calculated to give the person notice and an adequate opportunity to respond. Courts generally consider whether the plaintiff reasonably attempted service and whether court intervention is necessary.

China is a party to the Hague Convention on service abroad. The court explained that the convention did not apply to service on Baosheng’s domestic agents because no judicial documents had to be sent abroad as part of that service. The court also concluded that the convention’s general prohibition on email service in China did not apply to Yu Zhong, Zuohao Hu, and Yanjun Hu because the plaintiffs had exercised reasonable diligence but could not find their physical addresses.

Court’s analysis

The court held that serving Sheng Gong and Yue Jin through Baosheng’s United States counsel or registered agent would satisfy due process. Their close connections to Baosheng, along with Baosheng’s public filing describing the lawsuit as a material legal proceeding, made it likely that they would receive notice.

The court also held that email service on Yu Zhong, Zuohao Hu, and Yanjun Hu would satisfy due process. The proposed addresses were publicly listed as professional contact information: Yu Zhong’s address appeared in a law-firm biography, Zuohao Hu’s appeared on a university faculty page, and Yanjun Hu’s appeared in a company annual report.

The court found that alternative service was warranted because the plaintiffs had already attempted service through the registered agent and Baosheng’s counsel. The court also considered the potentially lengthy process of serving defendants in China through the Chinese Ministry of Justice, particularly because the plaintiffs had already amended their complaint twice.

The plaintiffs separately sought expedited discovery despite the discovery stay under the Private Securities Litigation Reform Act. They requested only the information needed to serve Wenxiu Zhong and Adam (Xin) He. The court concluded that this limited discovery would not undermine the purpose of the stay, that denying it could substantially delay the case or prevent service, and that Baosheng would face little or no burden.

Disposition

The court GRANTED the plaintiffs’ motion for alternative service and expedited discovery. It authorized the plaintiffs to:

The Clerk of Court was directed to terminate the motion at ECF No. 67. The opinion’s conclusion spells Zuohao Hu’s name as “Zuchao Hu,” while the rest of the opinion identifies him as “Zuohao Hu.”