A Chinese typeface development company must pay a $414 million default judgment against it, after the California Supreme Court said Thursday that it had agreed to accept service by mail.
A ruling by a lower court, dismissing the judgment, misinterpreted California law and could upend decades of contractual obligations, Judge Carol A. Corrigan wrote for the court.
Changzhou SinoType Technology Co. and Rockefeller Technology Investments Asia VII were in discussions to start a new company, but those fell through in 2011.
Rockefeller sought arbitration under the terms of an earlier agreement. Changzhou never appeared, and Rockefeller was awarded $414 million. It then sought to confirm that award in state court in Los Angeles, and once again Changzhou never appeared.
In both proceedings, Rockefeller sent summonses to Changzhou in China via Federal Express and email, as they had agreed in the earlier deal that included the arbitration agreement.
Changzhou later sought to set aside the default judgment.
The intermediate appeals court ruled that private entities can’t set their own terms for service, and that because the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters—the Hague Convention—doesn’t allow Chinese citizens to be served by mail, SinoType was never validly served.
The state high court disagreed.
A 2017 U.S. Supreme Court case determined that the Hague Convention doesn’t prohibit summons by mail. Different states disagree over whether FedEx and other private couriers are included as “mail,” and it’s also unclear whether email summons are prohibited, as the technology did not exist when the Hague Convention was first adopted in 1965.
Given this lack of certainty, it “makes no sense for California courts to upend the contracting parties’ agreements and expectations when the courts cannot agree on what the Hague Convention actually requires,” the court wrote.
The case is Rockefeller Tech. Invs. (Asia) VII v. Changzhou SinoType Tech. Co., 2020 BL 123461, Cal., No. S249923, 4/2/20.