Langino & Han | PRODUCTS LIABILITY

Accountability Across Borders By Adam Langino and John Han

Reprinted with permission of Trial® (April 2020). Copyright© 2019 American Association for Justice®, Formerly Association of Trial Lawyers of America (ATLA®), www.justice.org/publications.

ubstantial trade relationships with foreign countries served in the same manner that documents are routinely served Shave led to the import of billions of dollars of products in that country. (Parties may select formal service under to the United States1—but one drawback arises when Article 5(a), service “by a particular method” under Article defective products harm U.S. consumers. In our practices, 5(b), or delivery to the addressee if it accepts servicevolun - many of the foreign manufacturers we deal with are based tarily.)Formalserviceisthemostconservative course to ensure in and . Attorneys bringing products liability a judgment entered in the will remain enforce- suits against defendants in these countries face challenges, able if the defendant defaults. Finally, the Request requires including how to effect service and how to enforce a judg- the applicant’s signature; the signer must be an attorney and, ment if one is obtained.2 Here are some techniques to overcome again, it should be you. these obstacles. Mail Form USM-94 and your translated documents to Service in Japan Japan’s designated Central Authority at: Ministry of Foreign Affairs Service of process to defendants in Japan must be made 2-2-1 Kasumigaseki Chiyoda-ku Tokyo under what is commonly referred to as Service 8 Convention.3 Strict compliance with its terms is required. 100-8919 Japan. As of December 2018, Japan no longer accepts direct ser - After your documents are received and processed, they vice on a Japanese company via mail, so your only option is will be referred by Japan’s Minister of Foreign Affairs to to followArticle 5of the convention.4 Translatethedocu ments the appropriate court of justice.9 If you selected box “a” youareserving into Japanese. Japan requires this under Article 5, within the Request section of Form USM-94, your docu- and itmakesnodifferencewhetherthedefendant’srepresenta - ments will be served by either special postal service or a tives understand English.5 marshal.10 A fee will be charged if a marshal completes ser - 11 Next, fill out Form USM-94, available on the U.S. Marshals vice, and you can expect a bill of less than $100. Service website,6 which must be completed to serve convention Finally, you wait. The process usually takes about six signatories. Form USM-94 has three parts: the Request, the months, and you should receive an affidavit of service (or Certificate, and the Warning and Summary. One mistake non-service) in the mail, which you can then file with the and the form will get kicked back, so make sure you fill court based on your local rules. it out yourself. Article 7 of the convention provides that the form may be completed in English.7 Service in HerearethreeessentialtipsforfillingouttheRequest. First, it Like in Japan, service on a mainland China-based defend- 12 requires the applicant’s contact information, which means you, ant must follow the convention. Chinarequiresthatservice be 13 the attorney; it is not referring to the client, process service effected through diplomatic channels under Article 5. In our company, or anyone else. Second, the Request requires you to experience, because U.S. lawyers are considered “officers choose how you want the documents to be served. Select box of the court,” a U.S.-admitted attorney can also sign the Form “a,”whichessentially says your documents will be “formally” USM-94 Request for service in China.

Colorado Trial Lawyers Association Trial Talk April/May 2020 15 PRODUCTS LIABILITY | Langino & Han

Two certified simplified Chinese however, service may be effected by Convention. To do this, however, you translations of the docu ments must be alternative means permitted under first may need to submit proof that the enclosed with the service form, along Chinese civil procedure law (such as convention process has failed. For in- with a receipt for a wire transfer for $95 service by mail or public announce- stance, in Federal Trade Commission v. to the “Supreme People’s Court of ment).16 Service on companies located PCCare247, Inc., a federal court granted China.”14 The package can then be in large cities such as Shanghai, Beijing, the plaintiff’s motion for leave to serve mailed to: or Shenzhen usually can be completed defendants based in by email or by International Legal within six months if all the paperwork Facebook, after the Indian Central Auth- Cooperation Center is well prepared. Generally, the Central ority had not responded in five months to Ministry of Justice of China Authority in China will return a a service request under the convention.17 33 Pinganli Xidajie certificate of service or non-service Enforcing Judgments in Japan Xicheng District, Beijing 100035 explaining why it could or could not People’s Republic of China.15 be accomplished. The United States is not party to any judgment recognition and enforce- We recommend using Federal Express Service can be substantially delayed (or unachievable) under the convention ment treaties. Consequently, separate to transmit service of process to mainland proceedings must be brought in other China because it provides documenta- if it is to a small municipality or if the destination address is inaccurate, which jurisdictions to “recognize” a U.S. tion that the request was delivered to the judgment before it can be enforced, a Central Authority. isnot uncommon for Chinese companies registered as foreign corporations in the process that can involve opening a fresh The Chinese Ministry of Justice United States. In those instances, service proceeding using the U.S. judgment as will tell the appropriate regional court may need to be pursued by leave of a evidence of a debt. This article’s discus - to effect service, usually personally. U.S. court using methods other than sion of enforcement is nonexhaustive— If personal service is impracticable, those outlined by the Hague Service for example, the appeals process is not

16 April/May 2020 Trial Talk Colorado Trial Lawyers Association Langino & Han | PRODUCTS LIABILITY covered—but it outlines the majorsteps exists at its principal place of business.21 enforce U.S. judgments. Hong Kong, a for the majority of judgments you likely “special administrative region” of China, When the appropriate Japanese court will try to enforce. applies the English system of law rather recognizes your U.S. judgment, it will than Chinese civil law and has fast, Applicable authority. Like the serve the defendant with a title of obli- reliable, and creditor-friendly courts. United States, Japan is not party to any gation and a compulsory execution deed treaties for the reciprocal recognition of requiring the Japan-based defendant to This creates opportunities for foreign judgments. But Japan’s juris- satisfy the judgment. Article 22 of the arbitrage when a judgment that is dictions take a uniform approach to the Civil Execution Act provides that a unenforceable in mainland China enforcement of foreign judgments, foreign judgment can be carried out by can nonetheless be enforced in Hong which is governed by Article 118 of compulsory execution.22 Kong. Companies based in mainland Japan’s Code of Civil Procedure and China commonly will have subsidiaries Although there may be exceptions, a Article 24 of its Civil Execution Act. incorporated in Hong Kong, often listed good rule of thumb is that you have10 on the Hong Kong Stock Exchange or Article 118 includes four requirements years from the day a foreign judgment with bank accounts in Hong Kong. that must be met for foreign pecuniary became final and binding to enforce it. Due to export restrictions on Chinese judgmentstobeenforceable:theforeign Neither Japan’s Code of Civil Procedure currency,manyChina-basedcompanies court issuing the judgment must have nor its Civil Execution Act speak directly maintain Hong Kong or U.S. dollar had jurisdiction (meaning that the U.S. to foreign judgments, but its Civil Code accounts in Hong Kong, which are not court would have had personal and sub - provides a 10-year limitation period subject to currency export controls. ject matter jurisdiction over the claim); for non-foreign judgment claims.23 the Japanese defendant received service Defendants could argue that imposing Similarly, many companies based in (or has appeared in the action volun- judgments older than 10 years would China are incorporated or have subsidi- tarily); the judgment and the foreign run afoul of Article 118’s requirement aries incorporated in offshore financial court’s proceeding were not contrary to that enforcement be in line with Japan’s centers that operate under English com - Japan’s public policy; and the foreign jur- public policy. mon law, such as the British Virgin isdiction reciprocally recognizes Japanese Islands or the . These judgments (this applies with U.S. courts).18 Enforcing Judgments in ties give options for enforcing pecuni- However, like most foreignjurisdictions, Mainland China ary U.S. judgments against China-based Japanesecourtsdo notrecognizeforeign Enforcement of foreign judgments defendants even if they are not recog- punitivedamages awards.19 in mainland China is less straightforward. nized in China. 24 Article 24 provides that a foreign Exceptfortworecentuniqueexceptions, Injunctive relief. Injunctions may be judgment must be executed without it is generally accepted that U.S. monetary obtained to aid U.S. enforcement pro - investigating its appropriateness, which judgments will not be recognized or ceedings. For example, a U.S. judg ment means that the merits of your claim may enforced by Chinese courts. This can creditor could bring a fresh proceeding in not be relitigated in Japan. But under embolden China-based defendants with Hong Kong to enjoin assets discovered Article 24, Japanese courts will not assetsprimarilylocatedinChinatoignore there under Section 21M of the Hong recognize a foreign judgment if it was U.S. judgments. But these judgments can Kong Ordinance.25 England not final and binding or did not meet be exported to other jurisdictions where a and other common law jurisdictions Article 118’s requirements.20 debtor has exposure. So as a first step, such as the have thoroughly investigate a defendant’s equivalent remedies.26 Similarly, a cre- Filing for enforcement. If your U.S. corporate, customer, shipping, banking, di torcan put a member of the defendant’s judgment checks these boxes, then file and other relationships to find assets in corporate family into interim receiver - it with the Japanese that jurisdictions friendly to U.S. creditors ship to make use of special discovery has jurisdiction over the defendant, or if and enforcement. powers to find and claw back assets that’s not ascertainable, with the district into the receivership estate. Even the court where the corporate defendant Enforcement-friendly jurisdictions. issuance of a receivership order can resides. Under Article 4 of Japan’s Code Multiple key financial and regional cause problems for the judgment debtor, of Civil Procedure, jurisdiction over a securities exchange centers in eastern as its trade partners may no longerknow person falls where he or she is domi- Asia, such as Hong Kong and Singapore, whom to deal with—the judgment ciled, and jurisdiction over a corporation use English common law and routinely

Colorado Trial Lawyers Association Trial Talk April/May 2020 17 PRODUCTS LIABILITY | Langino & Han debtor or the receiver. Creditors may be for evidence to support veil piercing or Adam Langino is of counsel at Cohen able to seek appointment of interim reverse veil piercing arguments once Milstein in Raleigh, N.C., and can be receivers over assets that require active judgment is entered. reached at [email protected]. management, which if left in the hands Encourage the defendant to appear. John Han is a partner at Kobre & Kim in of the debtor may reduce the value of Default judgments are enforceable but Hong Kong and can be reached at the asset. may leave the door open to relitigation [email protected]. of the merits. Entice a defendant to Think Creatively Endnotes: make at least a limited appearance by, 1 When enforcing U.S. judgments for example, taking discovery that In 2018, the United States imported the abroad, several other strategies can otherwise tells a one-sided story or most products from China, receiving goods valued at $539.5 billion. Japan help you overcome potential delays demonstrating the defendant’s U.S. and difficulties. was the fourth-largest supplier with enforcement exposure. Later, when goods valued at $142.6 billion. Office of Map out assets pre-judgment. enforcing the judgment outside the the U.S. Trade Representative, The There is only a narrow window to United States, this will reduce available People’s Republic of China, enforcea judgment before the defendant defenses such as denial of due process, https://ustr.gov/countries-regions/china- has a chance to restructure its affairs. defective service, or inadequate notice. mongolia-/peoples-republic-china; Office of the U.S. Trade Representative, Investigate and map out a prospective Maximizecompensatorydamages. judgment debtor’s corporate structure, Japan, https://ustr.gov/countries- Non-compensatory damagesgenerally regions/japan-korea-apec/japan. supply chains, shipping routes, and are not enforceable in China and Japan. customer and financial relationships in 2 If you are unable to serve a local If a claim is settled in part by a defendant domestic subsidiary under your own thesix months leading up toa judgment, facing joint and several liability, state in if not earlier. state’s law, serving the defendant in its the settlement agreement that payment own nation may be your only choice. Identify decision-makers. In addi- is credited to the punitive portion of the 3 The convention applies to contracting tion to finding assets, determine where judgment so that the full compensatory states, which include China, Japan, and the defendant’s decision-makers are damages still can be enforced abroad. the United States. Hague. Conf. on Private Int’l Law, Convention on the located and where they are subject to Enforcement by garnishing assets personal jurisdiction. Finding where Service Abroad of Judicial and piecemeal is neither a cost-efficient Extrajudicial Documents in Civil or executives or people with relationships nor a quick way to monetize a very large to the company are subject to discovery Commercial Matters (Nov. 15, 1965), judgment. When mapping out a de- www.hcch.net/en/instruments/convention can lead to important information and fendant’s corporate structure and s/full-text/?cid=17. legitimate additional leverage points if supply chains, also research any vul- 4 and when a judgment is not promptly Hague Conf. on Private Int’l Law, [Japan] nerabil ities that can be targeted for Declaration/Reservation/Notifi ca tion satisfied. For example, if you can identify legitimate disruption. (Dec. 21, 2018), www.hcch.net/en/instru facts that amount to fraudulent con- ments/ conventions/status-table/noti fica- Look for key bottlenecks in a veyance of company assets by the tions/ defendant’s management, that could defendant’s supply chain that could be ?csid=407&disp=resdn. interrupted through a ship attachment create opportunities to file for freezing 5 See Hague Service Convention, supra orders or to claw back the assets. or for a client relationship with a 60- note 3. days accounts payable that could be 6 Request for Service Abroad of Judicial or Develop evidence of alter ego garnished. The legitimate disruption in liability. Though difficult to achieve, Extrajudicial Documents, usmarshals.gov/ global supply or of a sensitive client forms/usm94.pdf. discovery also can be used to collect relationship could pressure the defendant 7 See Hague Service Convention, supra evidence that an otherwise U.S. to settle an outstanding judgment. judgment-proof entity may be the alter note 3. ego of one with greater jurisdictional To enforce judgments against 8 Hague Conf. on Private Int’l Law, exposure. Similarly, when a defendant defendants based in China and Japan, Japan—Central Authority & Practical is an undercapitalized subsidiary, use considerserviceandenforcementearly, Information (Jan. 17, 2019), www.hcch.net/ depositions and discovery to search and plan globally to reach beyond en/states/authorities/details3/?aid=261. U.S. borders. sss 9 Id. Ministry of Foreign Aff. of Japan,

18 April/May 2020 Trial Talk Colorado Trial Lawyers Association Langino & Han | PRODUCTS LIABILITY

Methods for a Court of a Foreign State quently Asked Questions and Answers, 24 In September 2018, the Shanghai First to Request Japan to Serve Judicial or https://assets.hcch.net/docs/5bbc302d- Intermediate People’s Court recognized a Extrajudicial Documents and Take 532b-40b1-9379-a2ccbd7479d6.pdf. judgment entered by the U.S. District Court Evidence (Dec. 28, 2018), www.mofa. 15 See id. for the Northern District of Illinois. (2017) go.jp/ca/cp/page25e_000251.html. Hu 01 Xie Wai Ren No.16. In June 2017, 16 Hague. Conf. on Private Int’l Law, 10 the Intermediate People’s Court of Wuhan “Marshal” in this context may refer to China—Central Authority & Practical recognized a Los Ange les Superior Court consular staff or other officials who Information (Jan. 17, 2019), default judgment. No. (2015) E Wu Han complete service. www.hcch.net/en/states/authorities/detail Zhong Min Shang Wai Chu Zi No. 00026. 11 Japan—Central Authority, supra note 8. s3/?aid=243. Both parties to the U.S. judgment enforced 12 17 If the defendant is based in a “special F.T.C. v. PCCare247, Inc., 2013 WL by the Wuhan court were Chinese nationals. administrative region” of China, such as 841037 (S.D.N.Y. Mar. 7, 2013). The Chinese court in the Wuhan case refer- Hong Kong, then options may be more 18 Japan Code of Civil Procedure, art. 118, enced a 2009 decision in which the Central flexible than in mainland China. Under as last amended by Act No. 36 of 2011. District of California recognized a judg ment Hong Kong law, for example, process 19 See, e.g., Craig I. Celniker et al., Litiga- entered by a Chinese court as a basis for can be served through local counsel tion and Enforcement in Japan: Overview, recipro city. The prevailing view is that without resorting to the Hague authority. Westlaw, https://tinyurl.com/yyjnmzhy. these decisions are limited to the facts of 13 Hague Conf. on Private Int’l Law, their cases and do not change the well- 20 Japan Civil Execution Act, art. 24, Act [People’s Republic of China] established precedent of non-recognition No. 4 of 1979. Declaration/Reservation/Notification, of U.S. judgments by Chinese courts. 21 Japan Civil Execution Act, art. 24, Act www.hcch.net/en/instruments/convention 25 Hong Kong High Court Ordinance (Cap. No. 4 of 1979. s/status-table/notifications/?csid=393& 4), Section 21M. disp=resdn. 22 Japan Civil Execution Act, art. 22. 26 The Eastern Caribbean 14 23 Hague. Conf. on Private Int’l Law, Japanese Civil Code, 174-2. (Virgin Islands) Act (Cap. 80), Section 24. [People’s Republic of China] Most Fre-

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