Opinion
3:22-cv-01101-JR
03-16-2023
UNITED STATES OF AMERICA, Plaintiff, v. AQUATHERM GmbH; AQUATHERM INC.; AQUATHERM, L.P.; RIDGELINE MECHANICAL SALES, LLC; FERGUSON ENTERPRISES, LLC; and, AETNA NA, L.C. Defendants.
FINDINGS AND RECOMMENDATION
JOLIE A. RUSSO UNITED STATES MAGISTRATE JUDGE
Plaintiff United States of America brings this action for breach of express and implied warranties, as well as unjust enrichment. Plaintiff seeks to recover the cost of replacing defective pipes in the Timberline Lodge (“Lodge”). Defendant Aquatherm GmbH moves to dismiss for lack of personal jurisdiction and insufficient service pursuant to Fed.R.Civ.P. 12(b)(5). The motion should be denied.
BACKGROUND
Prior to the instant action, plaintiff retrofitted a number of federal buildings using a type of plastic pipe made of random copolymerized polypropylene (“PP-R pipes”) that is manufactured by Aquatherm GmbH. In March 2021, plaintiff initiated suit against Aquatherm GmbH and several other defendants regarding the allegedly defective PP-R pipes installed in the Edith Green-Wendell Wyatt Federal Building in Portland, Oregon (“Edith Green action”). As part of that case, plaintiff served Aquatherm GmbH, a German company, through the Hague Convention (“Convention”), and the Court resolved personal jurisdiction challenges pursuant to Fed.R.Civ.P. 4(k). While this suit regards the PP-R pipes installed in the Lodge, the allegations involving Aquatherm GmbH are substantially similar to those raised via the Edith Green action. See generally United States v. Aquatherm GmbH, Case No. 3:21-cv-00335-JR.
That is, in 2013, the Forest Service sought to repair plumbing in the Lodge, a historic ski resort on Mount Hood, Oregon. Compl. ¶ 1 (doc. 1). The Lodge is owned by plaintiff, acting through the Forest Service, and is operated by a private corporation under a special permit from the Forest Service. Id. at ¶ 14.
The plumbing renovation included replacement of nearly all potable-water piping, both hot and cold water systems, providing water to guest rooms and the kitchen. Id. at ¶ 15. For this project, the Forest Service hired contractors that used PP-R pipes, which were reputed to be cheaper, longer lasting, and more environmentally friendly than other pipe materials such as copper or steel. Id. at ¶ 16. The contractors purchased PP-R pipes for installation in or around 2013, and the project was substantially complete in January 2014. Id. at ¶¶ 20, 23.
The PP-R pipes in the Lodge began to leak in 2019. Id. at ¶ 28. The PP-R pipes have allegedly failed repeatedly and will continue to fail “because they are defective and unsuitable both for ordinary use and for use in the Lodge specifically.” Id. at ¶¶ 28-30. After repeated leaks, plaintiff commissioned an independent contractor to investigate, who concluded the PP-R pipes have degraded and all PP-R pipes in the Lodge need to be replaced. Id. at ¶ 31. The Forest Service estimates the cost of repairs will be in the range of $2 million. Id.
On July 28, 2022, plaintiff filed the dispositive complaint in this case alleging claims for breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, and unjust enrichment.
On October 24, 2022, plaintiff moved for alternative service of process for Aquatherm GmbH under Fed.R.Civ.P. 4(f)(3) on the grounds that service through the Convention would delay this action, add undue financial costs, and impede coordination of discovery for this suit and the Edith Green action. Pl.'s Mot. Alt. Serv. 5-6 (doc. 28). This Court granted plaintiff's motion on November 14, 2022, as follows:
The Court has thoroughly reviewed plaintiff's Motion for Alternative Service of Process Under Fed.R.Civ.P. 4(f)(3) in which it seeks permission to serve defendant Aquatherm GmbH “via email upon Anne Cohen, who is U.S. counsel for Aquatherm GmbH in a related case in this district” - i.e., United States v. Aquatherm GmbH, Case No. 3:21-cv-00335-JR. Courts routinely authorize alternate service “on domestic counsel as involuntary agents for their clients abroad,” provided that “notice [is] 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.” Calista Enter. v. Tenza Trading, 40 F.Supp.3d 1371, 1376 (D. Or. Aug. 24, 2014) (citation and internal quotations omitted). Here, because service upon Cohen would be completed in the United States, the Hague Convention would not be triggered. And such service would give Aquatherm GmbH notice sufficient to satisfy the Due Process Clause. That is, Cohen already has actual notice of this lawsuit and, as counsel of record for both Aquatherm GmbH and its U.S. affiliates in the related case, she is presumably in reasonable contact therewith. Finally, plaintiff has furnished evidence sufficient to establish that serving Aquatherm GmbH through the Hague Convention would unnecessarily delay this action and impose needless costs. Therefore, plaintiff's Motion for Alternative Service of Process Under Fed.R.Civ.P. 4(f)(3) is Granted.Min. Order (doc. 30).
LEGAL STANDARD
Under Fed.R.Civ.P. 12(b)(5), dismissal is appropriate when service of process is insufficient. Once service is challenged, the plaintiff bears the burden of establishing that service was valid via substantial compliance with Fed.R.Civ.P. 4. Brockmeyer v. May, 838 F.3d 798, 801 (9th Cir. 2004). Service upon a foreign defendant must be conducted in accordance with Fed.R.Civ.P. 4(f), which in relevant parts states that service is permissible “by any internationally agreed means of service that is reasonably calculated to give notice, such as those authorized by the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents [or] by other means not prohibited by international agreement, as the court orders.”
While actual notice alone does not constitute proper service, “Rule 4 [is] ‘a flexible rule that should be liberally construed so long as a party receives sufficient notice of the complaint.'” Sec. & Exch. Comm'n v. Ross, 504 F.3d 1130, 1140 (9th Cir. 2007) (quoting Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F2.d 685, 688 (9th Cir. 1988)). “The court may consider evidence outside the pleadings in resolving a Rule 12(b)(5) motion.” Fairbank v. Underwood, 986 F.Supp.2d 1222, 1228 (D. Or. 2013). Proper service is a required predicate for the exercise of personal jurisdiction. See, e.g., Sec. & Exch. Comm'n v. Internet Sols. for Bus., 509 F.3d 1161, 1165 (9th Cir. 2007).
DISCUSSION
Aquatherm GmbH seeks dismissal from this suit for lack of personal jurisdiction and insufficient service of process. Def.'s Mot Dismiss 7, 14 (doc. 43). Aquatherm GmbH argues that plaintiff was required to effectuate service by following Fed.R.Civ.P. 4(f)(1), using internationally agreed upon means (i.e. the Convention) to serve foreign defendants. Id. at 14-18. Aquatherm GmbH also argues that failure to translate the complaint and attachments into German violates the Convention. Id. at 19. Relatedly, Aquatherm GmbH asserts this Court lacks personal jurisdiction. Id. at 21-27.
Conversely, plaintiff contends service was proper, consistent with Fed.R.Civ.P. 4(f)(3) and this Court's November 14, 2022, Minute Order. Pl.'s Resp. to Mot. Dismiss 15-17 (doc. 46). Plaintiff argues that, while translation is required for documents served via the Convention, this requirement does not apply because service was completed within the United States (by transmitting the documents to U.S. counsel for Aquatherm GmbH). Id. at 16 n.15. Plaintiff asserts personal jurisdiction is proper because service of process was sufficient, and Aquatherm GmbH has sufficient minimum contacts and has been afforded due process. Id. at 18-24.
Initially, any issues surrounding personal jurisdiction (except those directly emanating from insufficient service of process) were fully raised and resolved by this Court in the Edith Green action. In particular, the Court held that personal jurisdiction over Aquatherm GmbH was proper under Fed.R.Civ.P. 4(k)(2) (assuming it was lacking under Fed.R.Civ.P. 4(k)(1)). See generally United States v. Aquatherm GmbH, 2022 WL 2437571 (D. Or. July 5, 2022). Thus, the sufficiency of service is the sole issue before the Court.
The Convention applies in all civil and commercial cases “where there is occasion to transmit a judicial or extrajudicial document for service abroad.” Convention Done at the Hague, Ger - U.S., Nov. 15, 1965, T.I.A.S. No. 6638 (Feb. 10, 1969). However, as noted in the November 14, 2022, Minute Order, courts routinely authorize service “on domestic counsel as involuntary agents for their clients abroad.” Calista, 40 F.Supp.3d at 1376 (collecting cases). “Where service on a domestic agent is valid and complete under both state law and the Due Process Clause,” the Convention is not implicated. Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 707 (1988). A district court has authority to “determine[e] when the particularities and necessities of a given case require alternate service of process under Rule 4(f)(3).” Rio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1016 (9th Cir. 2002).
The Convention is a multilateral treaty designed to provide a straightforward way to effect service abroad. Volkswagenwerk, 486 U.S. at 698. Dozens of countries, including the United States and Germany, have ratified, or acceded to the Convention. Id. This Court acknowledges the supremacy and importance of treaties including the Convention, and their role in facilitating comity among nations. However, the Supreme Court has held that not all service upon foreign defendants requires transmission of service documents abroad, and in such instances the Convention has “no further implications.” Id. at 707.
Contrary to Aquatherm GmbH's argument, the Ninth Circuit has resolved there is no preferred method of service under Fed.R.Civ.P. 4(f). Rio Props., Inc., 284 F.3d at 1015. Specifically, the Ninth Circuit held that “4(f)(3) is neither a ‘last resort' nor ‘extraordinary relief' [rather] it is merely one means among several” for service on a foreign defendant, even when other mechanisms of service have not been attempted. Id. (internal citation omitted). In fact, many courts have authorized alternative service via Rule 4(f)(3) even for defendants based in Convention countries. See, e.g., Updateme Inc. v. Axel Springer SE, 2018 WL 306682, *1, *3 (N.D. Cal. Jan. 5, 2018); RSM Prod. Corp. v. Fridman, 2007 WL 2295907, *1, *6 (S.D. N.Y. Aug. 10, 2007); Forum Fin. Grp., LLC v. President, Fellows of Harvard College, 199 F.R.D. 22, 24 (D.Me. 2001). Accordingly, Aquatherm GmbH's advocated-for method of service under Rule 4(f)(1) - i.e., under the Convention - is co-equal to the method actually pursued by plaintiff under Fed.R.Civ.P. 4(f)(3) - i.e., “by other means not prohibited by international agreement, as the court orders.” Therefore, the fact that plaintiff did not first attempt service under Rule 4(f)(1) does not render that service insufficient, especially considering the particular facts of this case as detailed herein.
In Updateme, the court granted alternative service on United States-based counsel for a German company that did not have offices, officers, or employees in the United States. Updateme Inc., 2018 WL 306682 at *3. In that case the German-based company was interrelated with United States-based defendants and all were represented by the same counsel. Id. In RSM, service on a Russian defendant was proper through United States-based counsel who represented the same defendant in another federal court action. RSM Prod. Corp., 2007 WL 2295907 at *4. Service was deemed proper under a similar set of facts in Forum. 199 F.R.D. at 24.
Aquatherm GmbH's claim that their local counsel was not authorized to receive service is misplaced. Numerous courts have authorized service on United States counsel “without requiring any specific authorization by the defendant for the recipient to receive service on its behalf.” Freedom Watch, Inc. v. Org. of the Petrol. Exp. Countries, 766 F.3d 74, 83 (D.C. Cir. 2014) (collecting cases); see also Brown v. China Integrated Energy, Inc., 285 F.R.D. 560, 565-566 (C.D. Cal. 2012) (“[d]ue process does not require that the individuals served on behalf of foreign defendants have . . . been authorized to accept service on their behalf.”).
Further, there is no authority supporting Aquatherm GmbH's assertion that the documents must be translated into German regardless of method of service. Def.'s Mot Dismiss 19 (doc. 43). Notably, in support of this argument, Aquatherm GmbH cites to a number of cases which involve application of the Convention. The sentences of the Convention that address translation requirements relate only to documents “to be served under the first paragraph above.” Convention Done at the Hague, Article 5, Ger - U.S., Nov. 15, 1965, T.I.A.S. No. 6638 (Feb. 10, 1969). In other words, the translation requirement applies only to legal documents transmitted abroad following Convention procedures.
A number of particularities distinguish the instant case, further validating the authorization of alternative service. First, this action and the Edith Green action are related. Aquatherm GmbH has retained the same local counsel in both cases - i.e. Ms. Cohen - and plaintiff has been in direct communication with local counsel regarding each lawsuit. Pl.'s Mot. Alt. Serv. 3 (doc. 28). Plaintiff effectuated service under the Convention in the Edith Green action, a process which took approximately six months. Id.; Jamieson Decl. Ex. A, at 6 (doc. 29). Many “courts have recognized that delay and expense are factors that legitimately bear” on a court's discretionary ability to authorize alternate service. /n re OnePlus Tech (Shenzhen) Co., 2021 WL 4130643, *3 (Fed. Cir. Sept. 10, 2021) (collecting cases). In addition, it is believed that Aquatherm GmbH has custody or control of a substantial amount of discoverable material. Pl.'s Mot. Alt. Serv. 5-6 (doc. 28). The lengthy process of service via the Convention would thus “impede coordination of discovery,” and cause an “unwarranted” delay. See Tart Optical Enters. v. Light Co., 2019 WL 9048860, *1, *9 (C.D. Cal. Mar. 18, 2019) (holding that service on a foreign individual via the Convention was unnecessary and would cause significant delay when that individual was already involved in the suit as owner of a defendant-company, which had been served with “closely related . . . claims” via the Convention).
Moreover, the fact that Germany has objected to alternative methods of service under Article 10 of the Convention is immaterial for two reasons. First, as already explained, the Convention does not control service that is completed within the United States. Volkswagenwerk, 486 U.S. at 707; Updateme Inc. 2018 WL 306682 at *3; RSM Prod. Corp. 2007 WL 2295907 at *4. Second, Article 10 regards transmission of documents “by postal channels,” and makes no mention of electronic transmission. Convention Done at the Hague, Ger - U.S., Nov. 15, 1965, T.I.A.S. No. 6638 (Feb. 10, 1969). As such, a number of courts have determined that transmission of service documents via email is not controlled by Article 10 of the Convention, and “no authority ‘expressly provides or implies that email service is prohibited by international agreement.'” Meyer v. Mittal, 2022 WL 1000774, *1, *2 (D. Or. Apr. 4, 2022) (citing Will co. v. Kam Keung Fung, 2020 WL 6709712, *2 (W.D. Wash. Nov. 16, 2020)). Stated differently, the “majority of district courts in the Ninth Circuit [have held] that the Hague Convention does not prohibit email service.” Id. at *2 (collecting cases).
Aquatherm GmbH argues Broad v. Anlagenbau supports the assertion that Germany's objection to Article 10 bars service of process on their local counsel. Def.'s Mot Dismiss 18 (doc. 43). Broad involved transmission of service documents abroad (to Germany), thus requiring compliance with the Convention and raising a question of preemption of state law by the Convention. Broad v. Anlagenbau AG, 141 Wash.2d 670, 674, 10 P.3d 371 (2000) (en banc). As such, Broad is unlike the instant case, which does not require transmission of service documents abroad.
Lastly, this Court must consider whether service of process on Aquatherm GmbH via email to their U.S. counsel comports with due process. To do so, foreign nationals must either be assured personal service, or “substituted service that provides ‘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.'” Volkswagenwerk, 486 U.S. at 705 (quoting Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)). Aquatherm GmbH has actual notice of this case and the opportunity to respond and present defenses. Pl.'s Mot. Alt. Serv. 3 (doc. 28). And Aquatherm GmbH has raised no meaningful concerns about how their due process rights have been infringed through alternate service upon their counsel. Def.'s Mot. Dismiss 23-27 (doc. 43).
RECOMMENDATION
For the reasons stated above, Aquatherm GmbH's motion to dismiss (doc. 43) should be denied. Likewise, Aquatherm GmbH's request for oral argument is denied as unnecessary.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have fourteen (14) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties shall have fourteen (14) days within which to file a response to the objections. Failure to timely file objections to any factual determination of the Magistrate Judge will be considered as a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to this recommendation.