In Re: Heckmann Corporation Securities Litigation

Filing 113

MEMORANDUM OPINION Haberkorn's motion for leave to serve process by alternative means #89 under Fed.R.Civ.P. 4(f)(3) is granted in part and denied in part. Signed by Judge Mary Pat Thynge on 11/22/2011. (cak)

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

IN RE HECKMANN CORPORATION

:

SECURITIES LITIGATION

:
:

C. A. No. 10-378-LPS-MPT

:
:

CLASS ACTION

MEMORANDUM OPINION

PROCEDURAL BACKGROUND
This class action is for alleged violations of the federal securities laws on behalf
of all shareholders who held common stock of Heckmann Corporation (“Heckmann”) as
of September 15, 2008 and were entitled to vote on the Merger between Heckmann and
China Water and Drinks Inc. (“Merger”) (“China Water”). Xu Hong Bin (“Xu”) was Chief
Executive Officer and President of China Water from June 2007 until the October 30,
2008 Merger. Soon after the Merger, Heckmann announced Xu’s resignation from the
Heckmann Board. On May 8, 2009, Heckmann disclosed prior management had
misrepresented the strength of China Water’s business,1 and cancelled the common
stock issued to former China Water management.2
Xu filed a complaint against Heckmann in the Court of Chancery for the state of
Delaware for cancellation of his shares of Heckmann common stock. Heckmann

1
2

D.I. 52 at 117.
Id. at 118.

responded with counterclaims against Xu, which alleged he had perpetrated massive
fraud. In the Chancery action, Xu was represented by Kenneth J. Nachbar, Esq.
(“Nachbar”) and Israel Dahan (“Dahan”) (combined “Chancery counsel”)3 from June 1,
2009 to April 26, 2011 when the matter was dismissed with prejudice.
The initial complaint in the present matter was filed on May 6, 2010. On August
12, 2010, the court appointed Matthew Haberkorn (“Haberkorn”) to serve as lead
plaintiff pursuant to 15 U.S.C. 78u-4(a)(3)(B). Each defendant, with the exception of Xu,
has appeared through counsel and participated in extensive motion practice.
PARTIES’ POSITIONS
Chancery Counsels’ Position:
In opposition to Haberkorn’s motion for leave to serve process by alternative
means, Nachbar/Dahan assert because they are Xu’s former counsel in an action
resolved over six months ago and have had no subsequent communications with him,
the motion should be denied.4 Further, as former Chancery counsel, they assert no
knowledge of the current whereabouts of their former client.5
Nachbar and Dahan argue under FED.R.CIV.P. 4(f), the availability of alternative
service is within the court’s discretion.6 Due process concerns under Rule 4(f) are
satisfied while there is regular contact between counsel and the client.7 According to
Nachbar and Dahan, Haberkorn’s contention that due process concerns are also

3

Kenneth J. Nachbar is a member of the firm of Morris, Nichols, Arsht & Tunnell. Israel Dahan is
a member of the firm of Cadwalader, Wickersham & Taft.
4
D.I. 94 at 1-2.
5
Id. at 2.
6
Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).
7
Rio Props. v. Rio Int’l Interlink, 284 F.3d 1007, 1017 (9th Cir. 2002).

2

addressed where counsel have not been in contact with a former client is inaccurate,
because courts have held Rule 4(f)(3) service is not authorized on a foreign defendant’s
lawyer where communications have not occurred between the two.8 Thus, Haberkorn’s
motion to compel Xu’s former attorneys to locate and accept service of his behalf,
despite their lack of contact with him, is unduly burdensome and violates due process.9
In their analysis, Chancery counsel distinguish the cases cited by Haberkorn. In those
matters, counsel were either obviously in contact with their clients, or never denied the
apparent lines of communication with them, compared to the instant matter where the
attorneys deny any recent communication with Xu.10 Nachbar and Dahan note a former
relationship with counsel fails to meet the regularity of contact and communication
required under due process to warrant Rule 4(f) alternative service.11 They maintain the
facts here are analogous to those in 1st Tech., LLC v. Digital Gaming Solutions, S.A.,12
where a motion to serve the defendant’s former counsel was denied because of due
process considerations. Since they no longer represent Xu, they can not accept service
in the absence of any recent contact with him and their lack of any knowledge regarding
his present whereabouts.
Haberkorn’s Position:
Haberkorn seeks service of process on Xu by alternative means allegedly
permitted under Rule 4(f)(3). Haberkorn has previously attempted service by other

8

Madu, Edozie & Madu v. Socket Works Ltd Nigeria, 265 FRD 106, 116 (S.D.N.Y. 2010) (where
counsel did not know defendant’s location).
9
D.I. 94 at 5.
10
Id.
11
Id. at 6.
12
No. 4:08 CV 586, 2009 WL 879463, at *9 (E.D. Mo. Mar. 30, 2009).

3

available means, including translation of the amended complaint into Mandarin Chinese,
and procedures authorized under the Hague Convention. Haberkorn contacted
Nachbar to ascertain whether he would accept service on Xu’s behalf.13 After receiving
no reply, Haberkorn notified Nachbar that service would be issued in accordance with
Rule 4(f)(1) at the address indicated in Xu’s verification in the Chancery action.14 As a
result, Haberkorn issued a summons to Xu at the address contained in the Chancery
action pursuant to procedures authorized by the Hague Convention, which included
translation of the summons and amended complaint into Mandarin Chinese and
transmittal of relevant documents to the People’s Republic of China Ministry of Justice.15
On July 8, 2011, notification was provided that service of process failed because the
address was “not sufficient enough” for service.16
Thereafter, Haberkorn sent another letter to Nachbar requesting he accept
service for Xu. Subsequently, Nachbar advised neither he nor his firm were authorized
to accept service for Xu, and his representation of Xu terminated with the Chancery
action.17 Haberkorn further notes counsel for the parties in the Chancery action
regularly communicated throughout that litigation. Haberkorn argues he has no other
means to serve Xu and seeks the court’s relief.
Haberkorn asserts his prior efforts constitute reasonable attempts to effectuate

13
14
15
16
17

D.I. 90 at 6.
Id. at 7.
Id. at 8.
Id.
Id.

4

service on Xu, and therefore, the court’s intervention is now necessary.18 Haberkorn
maintains Rule 4(f)(3) provides the court broad discretion to permit service by means
not prohibited by international agreement.19 Once a plaintiff has shown the court’s
intervention is necessary, it may allow for a means of service not prohibited by
international agreement and comports with constitutional due process.20 To comply with
due process, the method of service must be calculated, under the circumstances, to
provide notice of the pendency of the action and allow the opportunity to present
objections.21 Haberkorn proposes to serve Xu through his former counsel in the
Chancery action. Haberkorn avers this method of service is not prohibited by any
international agreement and is consistent with due process.22 Since the Hague
Convention does not apply to service made on a domestic agent, other international
agreements must be referenced to determine whether such process is appropriate.23
Haberkorn relies on Knit With24 and Prediction25 to support no international agreement
prohibits this type of service.
Haberkorn further contends numerous courts have recognized service of process
upon a defendant’s attorney as comporting with due process when the defendant has

18

See Knit With v. Knitting Fever, Inc.,No. 08-4221, 2010 WL 4977944, at *3 (E.D. Pa. Dec. 7,
2010). See also Marlabs Inc. v. Jakher, C.A. No. 07-4074, 2010 WL 1644041, at *3 (D.N.J. April 22,
2010) (finding alternate service under Rule 4(f)(3) necessary where the plaintiff made numerous
unsuccessful attempts to serve the defendant in accordance with Hague Convention procedures).
19
D.I. 90 at 9.
20
Knit With, 2010 WL 4977944 at *4.
21
Mullane, 339 U.S. at 314.
22
See id. See also LG Electronics, Inc. v. Asko Appliances, Inc., C.A. No. 08-828, 2009 WL
1811098, at *4 (D. Del. June 23, 2009).
23
D.I. 90 at 11.
24
2010 WL 4977944, at *5.
25
No. 09 Civ. 7459, 2010 WL 1050307, at *2 (S.D.N.Y. Mar. 22, 2010).

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maintained contact with counsel. Haberkorn argues due process does not require an
attorney currently represent the client: it only requires contact between an attorney and
client be so regular that notification through counsel would reasonably advise a client
about the pending action.26 Haberkorn claims although representation of Xu has ended,
the contact between Chancery counsel and Xu authorizes service through alternative
means.
Haberkorn also asserts a factor in the court’s analysis in determining appropriate
means for service of process includes the prevention of further delay in the present
litigation.27
Recently, Haberkorn obtained from Xu’s deposition in the Chancery action his
email address used by him since his departure from China Water.28 Since obtaining this
information, Haberkorn seeks to modify his motion to request an order of service on Xu
through use of his email address.29 Haberkorn contends this method of service is
reasonably calculated under the circumstances to reach Xu and comport with due
process.30 Haberkorn relies on Prediction31 and Phillip Morris32 in support of his position
of use of email for effective service arguing such service should be authorized by the

26

D.I. 90 at 12, citing Rio Props., Inc., 284 F.3d at 1017.
LG Electronics, Inc., 2009 WL 1811098, at *4 (“Further, and in the alternative, this Court finds
that, pursuant to Rule 4(f)(3), service upon an attorney is warranted in order to prevent further delays in
litigation.”); see Rule 4(f) (3) (a foreign individual may be served in a foreign jurisdiction “by other means
not prohibited by international agreement, as the court orders”).
28
D.I. 110 at 2.
29
Id.
30
Id.
31
2010 WL 1050307, at *2.
32
Phillip Morris USA Inc. v. Veles Ltd., No. 06 CV 2988, 2007 WL 725412, at *3 (S.D.N.Y. Mar.
12, 2007).
27

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court.33
DISCUSSION
Standard of Review
Under Rule 4(f), service of process on any individual not within any judicial
district of the United States may be performed in one of three ways:
(1) 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;
(2) If there is no internationally agreed means, or if an international agreement
allows but does not specify other means, by a method that is reasonably
calculated to give notice:
a. as prescribed by the foreign country’s law for service in that country in
an action in its courts of general jurisdiction;
b. as the foreign authority directs in response to a letter rogatory or letter
of request; or
c. unless prohibited by the foreign country’s law, by:
i. delivering a copy of the summons and of the complaint to the
individual personally; or
ii. using any form of mail that the clerk addresses and sends to the
individual and that requires a signed receipt; or

33

D.I. 110 at 2

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(3) by other means not prohibited by international agreement, as the court
orders.34
The plain language of Rule 4(f)(3) provides service of process must be directed
by the court and must not be prohibited by any international agreement.35 The court may
require the plaintiff to show that reasonable efforts to serve the defendant have been
made and proven unsuccessful, and the court’s intervention is necessary to prevent
more futile attempts at service.36 However, it is not necessary that a plaintiff first attempt
every permissible type of service prior to seeking relief from the court under rule 4(f)(3).37
No matter what type of service is authorized under rule 4(f)(3), the service must
comply with the notions of due process. Under the due process clause, the primary
function of service is notification of a legal action in a manner and time to allow a
defendant to respond and present defenses and objections. Whether to permit
alternative service under Rule 4(f)(3) falls within the court’s discretion. Effective service
under Rule 4(f)(3) requires notice that is reasonably calculated, under the totality of the
circumstances, to inform of the pending the action and allow the opportunity to respond
and object.38 Further, Rule 4(f) does not denote any hierarchy or preference of one
method of service over another.39 Service under Rule 4(f)(3) is not a last resort or

34

Fed.R.Civ.P. 4(f)(1)-(3)
Rio Props. Inc., 284 F.3d at 1014.
36
Id.
37
Id. at 1016. See also 1st Technology, LLC at *8
38
Mullane, 339 U.S. at 314. See also FMAC Loan Receivables v. Dagra, 228 F.R.D. 531, 533
(E.D. Va. 2005)(“Under Rule 4(c)(3) the court has the power to approve any method of service that is
reasonably calculated to give notice to [the defendant].”).
39
FMAC Loan Receivables, 228 F.R.D. at 534.
35

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extraordinary relief.40
Use of Rule 4(f)(3) for service upon Xu’s Chancery counsel.
Rule 4(f)(3) does not permit service upon Xu’s Chancery counsel because under
the circumstances, such service would not be reasonably calculated to contact Xu. Rule
4(f) due process concerns are satisfied so long as there is regular contact between the
attorney and the defendant.41 Here, Xu’s former counsel deny any knowledge of his
present whereabouts, and further refute any contact with him since their representation
concluded.42
The present facts are analogous to 1st Technology, LLC v. Digital Gaming
Solution.43 For service of process by alternative means under Rule 4(f)(3), the only two
requirements are service as directed by the court, which is not prohibited by any
international agreement. No other limitations exist within the rule.44
“A court cannot authorize service on a foreign defendant’s lawyer unless there
has been adequate communication between the two.”45 In 1st Technology, the court
concluded since four months had passed from when counsel had last represented the
defendant, and there was no indication the lawyers maintained any contact with their
former clients thereafter or were aware of their current location, serving the defendants
40

Id.
Rio Props. Inc., 284 F.3d at 1017.
42
D.I. 94 at 6.
43
2009 WL 879463, at *2-3. (where the plaintiff’s attempt to serve the defendants in Costa Rica
was unsuccessful. A motion for alternative service on their US lawyers and via e-mail was granted. The
US lawyers claimed they no longer represented the defendants and were unable and unwilling to accept
service on their behalf. The US lawyers ceased representing the defendants more than four months prior
to the attempted service.)
44
Rio Props. Inc., 284 F.3d at 1014.
45
1stTechnology, 2009 WL 879463, at *9.
41

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former counsel would not be reasonably calculated to appraise of the lawsuit and allow
the defendants to present objections or otherwise respond.46 In applying the analysis
under 1st Technology to the present matter, Nachbar and Dahan can not be served on
Xu’s behalf. There is no indication they know of his recent location, or have had contact
with him since the conclusion of their representation in April 2011. Such circumstances
fail to support service on counsel as notifying Xu of the present action against him.47
The present facts and those of 1st Techology are distinguishable from Knit With.
In Knit With, the defendants had recent and regular contact with their attorney, and they
had actual notice of the action.48 Here, Chancery counsel have had no contact with Xu
since the termination of their representation. Therefore, the analysis in Knit With does
not apply, and service upon domestic counsel is not warranted under Rule 4(f)(3).
Use of service on Xu via email.
The same analysis and Rule applies to authorizing service via email. So long as
the method of service is reasonably calculated to reach the defendant and allow the
opportunity to object and respond to the litigation, service through email comports with
the due process clause.49 Rule 4(f)(3) was adopted to provide flexibility to the federal
courts in dealing with questions of alternative method of service of process.50 For
46

Id. The court in 1st Technology noted unless the defendant has been in constant
communication, or in contact with his attorney regarding the legal proceedings at hand, such alternative
service would likely be ineffective and has not been previously authorized.
47
See also Prediction Co., 2010 WL 1050307, at *2. (stating since the attorney and client have
had recent contact, strongly indicates counsel would be successful in forwarding the summons and
complaint to the defendant, and therefore, alternate service through former counsel was approved.); LG
Electronics, Inc. v. Asko Appliances,C.A. 08-848, 2009 WL 1811098, at *4. (noting recent regular contact
between the defendant and his lawyer clearly demonstrates the defendant is on notice of the complaint.)
48
Knit With, 2010 WL 4977944, at *3.
49
Mullane at 314.
50
In Re Int’l Telemedia Assoc. Inc., 245 B.R. 713, 721(Bkrtcy.N.D.Ga. 2000).

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effective and authorized service on Xu through email, the evidence must show it will
reasonably notify him of pendency of this action. Here, no evidence has been
presented that Xu can not be reached at the email address since he disclosed that
information at his previous deposition.51
The courts have not definitively spoken as to whether email is allowed as an
alternative method of service; however, no court has stated such service is
impermissible under the FED R. CIV. P.52
[C]ommunication by facsimile transmission and electronic mail have now
become a commonplace in our increasingly global society. The federal
courts are not required to turn a blind eye to society’s embracement of
such technological advances. When an email address is the only
available means of communication with a defendant there is no logical or
legal reason not to use it.53
In In re International Telemedia, the defendant’s preferred means of
communication was through email or facsimile and volunteered such contact
information.54 As a result, the court found service through those methods was
reasonable to provide real notice of the pending action.55 Here, in his deposition in the
Chancery matter, Xu represented that his email address is one he has used since his
involuntary departure from China Water.56 Since Chancery matter only ended within the
past seven months, it can therefore be concluded that service through email is

51

D.I. 110 at 2.
In re Int’l Telemedia Assoc., Inc., 245 B.R. at 721 (stating no court has rejected service of
process via electronic mail on its face).
53
Id. at 722 (wherein the defendant had concealed his location and evaded service. The court
determined a defendant should not be able to evade service by confining his location to modern
technological means and Rule 4(f)(3) was designed to prevent such gamesmanship by a party).
54
Id.
55
Id.
56
Id.
52

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reasonably calculated to reach Xu.
Courts have approved email service of process as an appropriate means of
service pursuant to Rule 4 under the proper circumstances.57 In Phillip Morris USA, Inc.,
the plaintiff was unsuccessful in serving the defendants through internationally approved
means.58 The plaintiff, however, demonstrated the defendants likely were reachable
through email because it was the manner in which the defendants regularly conducted
business. Under those circumstances, the defendants probably would receive notice of
the action through service by email.59 Here, there is no evidence that Xu will not be
reached at the email address provided during the pendency of his Chancery action.60
“When faced with an international business scofflaw, playing hide-and-seek with
the federal court, email may be the only means of effecting service of process.”61 In Rio
Props. Inc., email was the only means reasonably calculated to appraise the defendant
of the lawsuit.62 There, the court held due process required “nothing more.”63 “[W]hen
an email address is the only available means of communication with a defendant, there
is no logical or legal reason not to use it.”64 Therefore, since service on Xu via email is
reasonably calculated to reach him, it is not inconsistent with due process, and is an
acceptable means of service.

57

Phillip Morris USA Inc. v. Veles Ltd., 06 CV 2988(GBD), 2007 WL 725412, at *3.
Id.
59
Id. See also Prediction Co. LLC, 2010 WL 1050307, at *2 (finding it was reasonably likely the
defendant would receive the summons and complaint at his most recently used email address, and
therefore service through email was appropriate).
60
D.I. 110 at 2.
61
Rio Props. Inc., 284 F.3d at 1014.
62
Id.
63
Id. at 1015.
64
In re Int’l Telemedia Assoc., Inc., 245 B.R. at 722 (internal citations omitted).
58

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Compelling Chancery counsel to disclose Xu’s last known contact information.
The court can compel chancery counsel to surrender Xu’s contact information
because it is not subject to the attorney-client privilege. The declarations by Nachbar
and Dahan fail to assert that they do not have any contact information for Xu.65 During
representation in the Chancery litigation, and more recently, payment of their fees,
Nachbar and Dahan likely have contact information for Xu, which can be used by
Haberkorn for service of process.
The attorney-client privilege protects only disclosures that are necessary to
obtain informed legal advice, and that would not have been made without the protection
of the privilege.66 “Attorneys may be questioned as to their clients’ whereabouts and
whether they have had contact with them.”67 Such information is exactly what Haberkorn
seeks from Xu’s Chancery counsel.
Where clients’ contact information may be covered by the privilege is the
exception. Those cases involve when the client disclosed his address for the specific
purpose of obtaining legal advice, and the address itself was at the heart of the advice
sought.68 In Litton Industries, the plaintiffs sought to depose an attorney for the sole
purpose of ascertaining his client’s whereabouts.69 The court held the attorney-client

65

D.I. 94 at 11-14 (The attorneys declare their representation of Xu ceased with the termination of
the Chancery action. Further, they assert no direct communications with Xu during their representation,
and no communications with him since the conclusion of the Chancery litigation.)
66
Matter of Walsh, 623 F.2d 489, 494 (7th Cir. 1980).
67
Id. “The privilege is improperly invoked, as a general rule, to protect a client’s identity, or
components thereof, i.e. fact of employment, compensation, address.” Burden v. Church of Scientology of
California, 526 F.Supp. 44, 45 (1981) (holding that asking an attorney his client’s identity, address and
compensation at deposition was proper and not protected by the attorney-client privilege).
68
Litton Industries, Inc. v. Lehman Bros. Kuhn Loeb Inc., 130 F.R.D. 25, 26 (1990).
69
Id.

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privilege did not protect the whereabouts of the client because the privilege does not
protect all communications between an attorney and his client.70 Here, similar to Litton
Industries, the information identifying the client is unprotected by the attorney-client
privilege because there is no evidence that any location information was communicated
in confidence, or related to the legal advice sought. Thus, this court may compel the
Chancery counsel to disclose all last known contact information for Xu.
THEREFORE, IT IS ORDERED that:
1. Haberkorn’s motion for leave to serve process by alternative means (D.I. 89)
under FED.R.CIV.P 4(f)(3)is granted in part and denied in part. Consistent with this
memorandum order, Haberkorn may attempt service of Xu through email and at the
contact information provided by his former counsel.
2. IT IS FURTHER ORDERED that former Chancery counsel shall provide on or
before December 12, 2011 to Haberkorn’s counsel their last known contact information
regarding Xu, including but not limited to address(es), email address(es) and facsimile
contact(s).
Date: November 22, 2011

70

/s/ Mary Pat Thynge
UNITED STATES MAGISTRATE JUDGE

Id.

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