Rio Properties, Inc. v. Rio International Interlink

Brief Fact Summary.

Plaintiff, a Nevada hotel and gambling company, sued Defendant, a Costa Rican Internet gambling business for trademark infringement. Plaintiff served Defendant by regular mail to its attorney and its international courier, and by email. Default judgment was entered against Defendant for its failure to comply with discovery orders. The trial court denied Defendant’s motion to dismiss for lack of personal jurisdiction and insufficient process. The court granted Plaintiff’s motion for sanctions, awarding monetary expenses and entering default against Defendant. Defendant appealed.

Synopsis of Rule of Law.

A party in federal court need not exhaust every method of service listed in Federal Rule of Civil Procedure 4(f) before requesting court authorization to use alternative methods.

Facts.

Rio Properties, Inc. (Plaintiff) is a Nevada hotel and gambling company. Rio International Interlink (Defendant) is a Costa Rican Internet gambling business. Plaintiff sued Defendant for trademark infringement. Plaintiff served process on Defendant’s international courier, IEC. IEC was not Defendant’s registered agent but forwarded process to Costa Rica. Defendant consulted California attorney John Carpenter. Carpenter contacted Plaintiff but refused to accept service. Plaintiff could not find another address for Defendant. Plaintiff moved the court to allow alternate service under Federal Rule of Civil Procedure (FRCP) 4(h)(2) and 4(f)(3), which was granted. Plaintiff mailed process to Carpenter and IEC and emailed Defendant. Defendant’s motion to dismiss for lack of personal jurisdiction and insufficient process was denied. Defendant filed an answer, but failed to meaningfully participate in discovery, even after an order and a warning from the judge. The court granted Plaintiff’s motion for sanctions, awarding monetary expenses and entering default against Defendant. Defendant appealed the sufficiency of the process, the court’s personal jurisdiction, and the sanctions to the United States Court of Appeals for the Ninth Circuit.

Issue.

Whether a party in federal court must attempt to serve process by every method listed in Federal Rule of Civil Procedure 4(f) before requesting approval of alternative methods from the court.

Held.

No. The trial court’s ruling is affirmed. A party in federal court need not exhaust every method of service listed in Federal Rule of Civil Procedure 4(f) before requesting court authorization to use alternative methods.

Discussion.

In federal court, a foreign business may be served process in the same way as an individual. FRCP 4. Rule 4(f)(3) allows service outside the United States by any manner “not prohibited by international agreement as may be directed by the court.” Thus, service is proper (1) in any way ordered by the court so long as (2) it is not prohibited by international agreement, even if against the laws of the country where service is made. There is no obligation that the serving party attempt other methods for serving foreign parties in Rule 4(f) before using a court-ordered alternative. The plain language and structure of Rule 4(f) makes clear that the methods available under 4(f)(1), (2), and (3) are all equally valid, and the notes of the advisory committee support this interpretation. The holding in Graval v. P.T. Bakrie & Bros., 986 F. Supp. 1326 (C.D. Cal. 1996), that alternative relief is only available after service is attempted by other means, like diplomatic channels or letters rogatory, is erroneous and based on an advisory committee note specific to Rule 4(f)(2), not all of Rule 4(f). Service must satisfy due process. This means service must be “reasonable calculated” to give the party notice and an opportunity to be heard. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950). Plaintiff was under no obligation to exhaust every enumerated method of service before asking the court to sanction alternative methods. Due process was satisfied. Defendant listed IEC’s address, had actual notice, and consulted Carpenter about the lawsuit. Email service was proper as it was the most likely to provide actual notice to Defendant. Defendant’s preferred method of contact was email. The unpublished case offered by Defendant in support of its position involved email service without court approval and is irrelevant. Email service is not appropriate in every case, but that a question for the district court.