Kravitz v. Deacons (In re Advance Watch Co.), Nos. 15-12690, 17-01137, 17-01155, 17-01159 (Bankr. S.D.N.Y. June 29, 2018) [click for opinion]

In late 2017, Plaintiff Peter Kravitz, as Creditor Trustee (the "Trustee") of the Creditor Trust of Advance Watch Company Ltd., filed a complaint with the US Bankruptcy Court for the Southern District of New York against three defendants—each companies residing in and subject to the laws of Hong Kong and each similarly situated for purposes of the action (collectively "Defendants"). The Trustee sought a default judgment after Defendants failed to respond to the complaint.

Federal Rule of Civil Procedure 55(a) provides that a court "must enter [a] party's default" when "a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and the failure is shown by affidavit or otherwise." Under Rule 55(b)(1), if "a plaintiff's claim is for a sum certain or a sum that can be made certain by computation, the Clerk must enter judgment against the defaulting party in the amount of the claim."

The court considered whether the Trustee had properly served the summons and amended complaint, such that a default judgment could be entered. Service of process on foreign defendants requires a plaintiff to comply with both US and foreign law. Under Federal Rule of Civil Procedure 4(h)(2), service of a summons and complaint on a foreign corporation must be made "in any manner prescribed by Rule 4(f) for serving an individual, except personal delivery under (f)(2)(C)(i)." In turn, Rule 4(f)(1), which governs service of process upon a foreign defendant, states that service on an individual in a foreign country may be obtained "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." In particular, service "pursuant to the Hague Convention is mandatory when serving a foreign defendant in a signatory country," such as China.

Looking to the Hague Convention, the court noted that Article 5(a) provides that the central authority of the foreign state must serve the documents "by a method prescribed by its internal law for the service of documents in domestic actions upon persons who are within its territory." In this case, the Hong Kong High Court rules on service of process, "to which the Court must look pursuant to Article 5(a)," provide that service of process, among other methods, "must be served personally on each defendant by the plaintiff or his agent."

The court concluded that the Trustee appropriately served the summons and amended complaint on each Defendant. The Hong Kong High Court's bailiff's assistant personally served the summons and amended complaint on each Defendant at its Hong Kong address, where service was voluntarily accepted. This led the court to rule that the "requirements for proper service of process under Article 5(a) of the Hague Convention have been met." Similarly, the court was satisfied that the Hague Convention's Article 6 proof of service requirement, through production of a certificate, was met, even though the certificate only stated that service was made on the specified date at each Defendant's address. The court noted that the additional, "missing information"—namely the means used under Hague Convention Article 5 or the identify of the person to whom the documents have been delivered—"was supplied in the Affirmation of Service" that the Hong Kong High Court's bailiff's assistant later completed.

The court then explained why there was proper service of a second group of documents—the certificate of default, underlying declaration from the Trustee's attorney, and notice of presentment. The court stated that Rule 5 of the Federal Rules of Civil Procedure governs the service of judicial documents "other than the summons and the complaint." The court also observed that "Rule 5 does not distinguish between domestic and foreign defendants," and noted that the Hague Convention does not apply to service of documents other than the summons and complaint. Since Rule 5 of the Federal Rules alone governed the analysis, the court concluded that the Trustee had properly served the second group of documents since those documents were sent by US mail to each Defendant's "last known address." Specifically, the Trustee sent the certificate of default to each Defendant at its last known address in Hong Kong by first class mail. In the court's view, this was sufficient to comport with the requirements of Federal Rule 5.