Jones Stephens Corp v. Costal Ningbo Hardware Manufacturing Co., LTD et al

Filing 120

MEMORANDUM OPINION. Signed by Chief Judge Karon O Bowdre on 6/7/2019. (JLC)

FILED
2019 Jun-07 PM 02:17
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
JONES STEPHENS CORP.,
Plaintiff,
v.
COASTAL NINGBO HARDWARE
MANUFACTURING CO., LTD, et
al.,
Defendants.

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CIVIL ACTION NO.
2:17-CV-00748-KOB

MEMORANDUM OPINION
A simple question comes before the court in this convoluted insurance
matter: did Plaintiff Jones Stephens Corp. properly serve Defendant Coastal
Ningbo Hardware Manufacturing Co., LTD?
In its motion to dismiss, Coastal Ningbo, a corporation residing in China,
contends that Jones Stephens did not properly serve it because Jones Stephens only
served an individual in California who was not an agent authorized by Coastal
Ningbo to receive service of process on its behalf. (See Doc. 105). So Coastal
Ningbo asks the court to dismiss it from this case or, in the alternative, quash the
defective service.
As further explained below, the court finds that Jones Stephens has not met
its burden of showing that it properly served Coastal Ningbo because Jones
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Stephens has only shown that it served Coastal Ningbo’s U.S. mail forwarder—not
its agent authorized to receive service of process. So the court will quash the
defective service on Coastal Ningbo and afford Jones Stephens another opportunity
to perfect service on that defendant.
I.

STANDARD OF REVIEW
Coastal Ningbo moves for dismissal under Federal Rule of Civil Procedure

12(b)(2), “lack of personal jurisdiction”; Rule 12(b)(5), “insufficient service of
process”; and Rule 12(b)(6), “failure to state a claim upon which relief can be
granted.” Because the court will resolve Coastal Ningbo’s motion on grounds of
insufficient service of process, the court will only apply the Rule 12(b)(5) standard
of review.
A Rule 12(b)(5) motion to dismiss challenges the court’s personal
jurisdiction over a defendant for insufficient service of process. To invoke the
court’s personal jurisdiction on a defendant requires service of process; so if a
plaintiff fails to properly serve a defendant according to one of the methods of
service in Rule 4, the court will, on a timely motion, dismiss all claims against the
defendant. Pardazi v. Cullman Med. Ctr., 896 F.2d 1313, 1317 (11th Cir. 1990).
And, when a defendant challenges service of process, the plaintiff bears the burden
of showing that it properly served the defendant under Rule 4. Reeves v. Wilbanks,
542 F. App’x 742, 746 (11th Cir. 2013) (citing Aetna Business Credit, Inc. v.
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Universal Decor & Interior Design, Inc., 635 F.2d 434, 435 (5th Cir. 1981)).
II.

BACKGROUND
From June 2007 to August 2015, Jones Stephens, an Alabama corporation,

regularly purchased plumbing products from Coastal Ningbo in China and sold
them in the United States. Coastal Ningbo allegedly maintained U.S. general
liability insurance on any products it sold to Jones Stephens, named Jones Stephens
as an additional insured party on its insurance policies, and agreed to defend and
indemnify Jones Stephens against claims arising out of Coastal Ningbo’s products.
Some unknown parties who are not involved in this case sued Jones
Stephens for property damage allegedly caused by Coastal Ningbo’s products that
Jones Stephens sold in the U.S. But, according to Jones Stephens, Coastal Ningbo
repudiated its obligation to defend and indemnify Jones Stephens against those
claims. Jones Stephens also alleges that Coastal Ningbo and the other defendants
in this case—Coastal Ningbo’s insurance carrier, Great American E&S Insurance
Co., and the insurance brokers and agents involved in negotiating the insurance
coverage, New Century Insurance Services, Inc., and AmWINS Insurance
Brokerage of California, LLC—conspired to retroactively modify the Great
American insurance policies to exclude Jones Stephens from coverage under those
policies.
Jones Stephens filed its complaint in this case on May 9, 2017. At first,
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Jones Stephens unsuccessfully sought to serve Coastal Ningbo in China through
the Hague Convention. Then, during the course of discovery with Great American,
Jones Stephens learned that Coastal Ningbo’s “U.S. Administrator,” Wen Chen
Liao, lived in California. So Jones Stephens served Mr. Liao copies of Coastal
Ningbo’s summons and the amended complaint at his residence in California on
September 28, 2018. (See Doc. 84).
Coastal Ningbo responded to the amended complaint by filing a motion to
dismiss. (Doc. 105). The other defendants also moved to dismiss the amended
complaint. The court granted in part and denied in part the other defendants’
motions to dismiss and deferred ruling on Coastal Ningbo’s motion to dismiss
because of Coastal Ningbo’s unique personal jurisdiction and service of process
arguments. (See Docs. 114 and 115).
The court next addresses Coastal Ningbo’s contention of insufficient service
of process. In doing so, the court finds that Jones Stephens did not properly serve
Coastal Ningbo and the court has no need to address Coastal Ningbo’s other
arguments for dismissal.
III.

DISCUSSION
As the court mentioned above, Jones Stephens has the burden of showing

that it properly served Coastal Ningbo. See Reeves, 542 F. App’x at 746 (citing
Aetna, 635 F.2d at 435).
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Jones Stephens contends that it properly served Coastal Ningbo under
Federal Rule of Civil Procedure 4(h)(1)(B). Rule 4(h)(1)(B) provides that a
plaintiff may serve a foreign corporation by “delivering a copy of the summons
and of the complaint to an officer, a managing or general agent, or any other agent
authorized by appointment or by law to receive service of process” in any judicial
district of the United States.
Jones Stephens asserts that Mr. Liao, who Jones Stephens served at his
residence in California, is such an agent authorized by Coastal Ningbo to receive
service of process on its behalf.
At all times relevant to this matter, Mr. Liao worked as a customer service
representative for New Century. (Doc. 112 at 88). New Century’s precise
relationship with Coastal Ningbo remains unclear to the court. Jones Stephens
only vaguely alleges that New Century was one of “the insurance brokers and
agents involved in negotiating the insurance coverage made the basis of this action
and negotiating the exclusion which ultimately forms the basis of this action.”
(Doc. 68 at ¶ 4). And the short excerpt of Mr. Liao’s deposition on the record only
establishes that Coastal Ningbo was New Century’s client. (Doc. 112 at 86–91).
But Mr. Liao’s deposition establishes the limited nature of his relationship
with Coastal Ningbo. New Century assigned Mr. Liao to serve as “U.S.
Administrator” for Coastal Ningbo. (Doc. 112 at 89–90). No evidence shows that
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he ever worked directly for Coastal Ningbo. As “U.S. Administrator,” Mr. Liao
was responsible for forwarding Coastal Ningbo’s mail delivered to his personal
address in California, coordinating inspections with Coastal Ningbo,
“corresponding with audits, inspections, and claims” with Coastal Ningbo, and
“acted as a bridge” between Coastal Ningbo and its insurance carrier. (Id. at 89,
91). New Century paid Mr. Liao $250 annually to serve as U.S. Administrator.
(Id. at 90).
But no evidence exists that Coastal Ningbo authorized Mr. Liao to receive
service of process on its behalf. Rather, Mr. Liao testified several times at his
deposition that he only forwarded Coastal Ningbo’s mail: “[n]ot involvement [with
audits], all forwarding”; “I was given the . . . instruction and then . . . I just need
to—basically just forwarding”; “I just need to forward[] the information bridging
the . . . carrier and then the client’s side. And then I don’t need to do anything
except forwarding”; “I received mails, but . . . I don’t read them. I don’t open
them”; and “[s]o basically when I have mail, I just forward them.” (Id.).
So, Jones Stephens has only established that Mr. Liao forwarded mail to
Coastal Ningbo. But Jones Stephens’s burden requires more; Jones Stephens must
show that Coastal Ningbo authorized Mr. Liao to receive service of process on its
behalf. See Fed. R. Civ. P. 4(h)(1)(B); Prewitt Enterprises, Inc. v. Org. of
Petroleum Exporting Countries, 353 F.3d 916, 925 (11th Cir. 2003) (“‘Absent
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consent, this means there must be authorization for service of summons on the
defendant.’”) (emphasis in original) (quoting Omni Capital Int’l, Ltd. v. Rudolf
Wolff & Co., 484 U.S. 97, 104 (1987)).
Jones Stephens could satisfy its burden by showing, for example, that
Coastal Ningbo told Mr. Liao that he could accept service on its behalf; that
Coastal Ningbo authorized New Century to direct Mr. Liao to accept service on its
behalf; that Mr. Liao was an officer at Coastal Ningbo; or that Mr. Liao notified
Coastal Ningbo of this lawsuit. See, e.g., Drill S., Inc. v. Int’l Fid. Ins. Co., 234
F.3d 1232, 1238–39 (11th Cir. 2000) (finding that the plaintiff properly served the
defendant corporation by serving its president); Vlahos v. Frederick J. Hanna &
Assocs., P.C., 430 F. Supp. 2d 1375, 1377 (N.D. Ga. 2006) (finding that the person
who the plaintiff served was more likely an agent of the defendant corporation
because that person did, in fact, notify the defendant of the lawsuit); Woodbury v.
Sears, Roebuck & Co., 152 F.R.D. 229, 235 (M.D. Fla. 1993) (finding that the
plaintiff failed to serve the defendant corporation by serving its “file maintenance
leader,” a “clerical staff employee”); Muhammad v. HSBC Bank USA, Nat. Ass’n,
2010 WL 2573550, at *2 (S.D. Ala. June 9, 2010) (“Simply mailing a certified
envelope containing the summons and complaint to [the defendant corporation’s
attorney] is clearly not sufficient to satisfy the service of process requirements set
forth in Rule 4.”). Jones Stephens has made none of these or similar showings.
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A mail forwarder is not automatically an agent authorized to receive service
of process on behalf of its principal. So Jones Stephens has failed its burden of
showing that it properly served Coastal Ningbo.
Having found service on Coastal Ningbo lacking, the court “has broad
discretion either to dismiss [Coastal Ningbo] or quash the defective service and
afford [Jones Stephens] an opportunity to effect valid service.” James v. City of
Huntsville, Ala., 2015 WL 3397054, at *5 (N.D. Ala. May 26, 2015). Jones
Stephens’s efforts to serve Coastal Ningbo in China through the Hague Convention
appear ongoing. So the court will quash the defective service on Mr. Liao and
allow Jones Stephens to continue to pursue service on Coastal Ningbo through the
Hague Convention or any other method authorized by the Federal Rules of Civil
Procedure.
IV.

CONCLUSION
By separate order, the court will GRANT IN PART Coastal Ningbo’s

motion to dismiss (doc. 105) to the extent that it asks the court to quash Jones
Stephens’s purported service on Coastal Ningbo. The court will QUASH service
on Coastal Ningbo and allow Jones Stephens to continue to pursue service on
Coastal Ningbo through the Hague Convention or any other method authorized by
the Federal Rules of Civil Procedure.

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DONE and ORDERED this 7th day of June, 2019.

____________________________________
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE

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