Lardy v. GLG Life Tech Corporation et al
Filing
60
OPINION AND ORDER: For the foregoing reasons, the motion for leave to serve process by alternative means Doc. # re: 40 MOTION to Serve LEAD PLAINTIFFS' MOTION FOR LEAVE TO SERVE PROCESS ON DEFENDANT LUKE ZHANG BY ALTERNATIVE MEANS file d by Steve Postich, Joseph Lardy, Dwight Wolfe, is granted. Pursuant to Fed. R. Civ. P. 4(f)(3), plaintiffs are authorized to serve Zhang by (1) serving counsel for GLG, in accordance with Fed. R. Civ. P. 5(b), with the summons, complaint, and this Opinion and Order (the service documents); and (2) serving the registered domestic agent of GLG with the same papers. (Signed by Magistrate Judge Gabriel W. Gorenstein on 11/9/2012) (ae)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: GLG LIFE TECH CORPORATION
SECURITIES LITIGATION
OPINION AND ORDER
11 Civ. 09150 (KBF) (GWG)
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GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE
APPEARANCES OF COUNSEL:
For Lead Plaintiffs:
Richard W. Gonnello
Francis P. McConville
Emily C. Komlossy
Faruqi & Faruqi, LLP
369 Lexington Avenue, 10th Floor
New York, NY 10017
For GLG Life Tech Corporation:
Keara Gordon
Timothy Birnbaum
DLA Piper LLP
1251 Avenue of the Americas, 27th Floor
New York, NY 10020-1104
Andrew Escobar
DLA Piper LLP
701 Fifth Avenue, Suite 7000
Seattle, WA 98104
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: GLG LIFE TECH CORPORATION
SECURITIES LITIGATION
OPINION AND ORDER
11 Civ. 09150 (KBF) (GWG)
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GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE
Plaintiffs in this matter have filed a complaint alleging that the defendants – GLG Life
Tech Corporation (“GLG”), Luke Zhang, and Brian R. Meadows – violated federal securities
laws. The plaintiffs successfully served GLG and Meadows, both of whom have appeared by
counsel and responded to the complaint. The plaintiffs now move for leave to serve Zhang by
alternative means pursuant to Rule 4(f)(3) of the Federal Rules of Civil Procedure. For the
reasons stated below, this motion is granted.
I.
BACKGROUND
Defendant Zhang is the Chairman and Chief Executive Officer of GLG and is a citizen of
Canada.1 Defendant Meadows is the Chief Financial Officer of GLG.2 GLG was served on
February 17, 2012, through its registered agent in the United States.3 Meadows was served at
1
See Schedule 13D, dated Aug. 8, 2012 (annexed as Ex. C to Declaration of Andrew R.
Escobar in Support of Defendant GLG Life Tech Corporation’s Opposition to Lead Plaintiffs’
Motion for Leave to Serve Process on Defendant Luke Zhang by Alternative Means, filed Aug.
27, 2012 (Docket # 44)), at 3; Consolidated Securities Class Action Complaint, filed May 10,
2012 (Docket # 27) (“Compl.”), ¶ 30.
2
See Form 6-K, dated June 1, 2012 (annexed as Ex. C to Declaration of Andrew R.
Escobar in Support of Defendants GLG Life Tech Corporation and Brian Meadows’ Motion to
Dismiss, filed June 25, 2012 (Docket # 33)), at 22.
3
See Affidavit of Service, filed Feb. 17, 2012 (Docket # 12).
GLG’s headquarters in Vancouver, Canada, on March 2, 2012, pursuant to the Hague
Convention on the Service Abroad of Judicial and Extrajudicial Documents, Convention done at
the Hague November 15, 1965, 20 U.S.T. 361, T.I.A.S. No. 6638 (“the Hague Convention”). 4
On the same day, the process server also attempted to serve Zhang at GLG’s
headquarters in Vancouver but was told “that Luke Zhang works permanently in China and has
for years.” See Certificate, dated Mar. 2, 2012 (annexed as Ex. B to Gonnello 1st Decl.).
Plaintiffs’ counsel then inquired with the process server about serving Zhang in China. See
Gonnello 2d Decl. ¶ 2. The process server stated that Zhang should be served at a residential
address, and informed counsel that finding Zhang’s home address in China would cost at least
$5,000, “with no guarantee of success.” Id. ¶ 6. Counsel chose to conduct a search by other
means, hoping to “minimize costs to the class.” Id. ¶ 8. This search included “(1) Google
searches; (2) Bloomberg law searches; (3) Accurint.com searches; and (4) any other methods
[members of his firm] could think of.” Id. Counsel also searched the Securities and Exchange
Commission’s EDGAR System, as well as the Canadian Securities Administrator’s SEDAR
system. Id.
On March 6, 2012, attorneys from the law firm of DLA Piper filed notices of appearance
on behalf of GLG. On March 9, 2012, plaintiffs’ counsel contacted GLG’s attorneys by phone
to seek a waiver of service of process from Zhang, and sent them a waiver of service document.
4
See Declaration of Richard W. Gonnello in Support of Lead Plaintiff’s Reply Brief in
Support of their Motion for Leave to Serve Process on Defendant Luke Zhang by Alternative
Means, filed Sept. 6, 2012 (Docket # 49) (“Gonnello 2d Decl.”), at 2; Request for Service
Abroad of Judicial and Extrajudicial Documents, dated Feb. 20, 2012 (annexed as Ex. A to
Declaration of Richard W. Gonnello in Support of Motion for Leave to Serve Process on
Defendant Luke Zhang by Alternative Means, filed Aug. 9, 2012 (Docket # 42) (“Gonnnello 1st
Decl.”)).
2
See Notice of Lawsuit and Request to Waive Service of Summons, dated Mar. 9, 2012 (annexed
as Ex. C to Gonnello 1st Decl.), at 2. A signed waiver form was never returned, however. See
Letter from Richard W. Gonnello to Andrew Escobar, dated Apr. 6, 2012 (annexed as Ex. D to
Gonnello 1st Decl.), at 2. On April 6, 2012, having had no success in his search for Zhang’s
residential address, plaintiffs’ counsel requested Zhang’s residential address from GLG’s
attorneys. See Gonnello 2d Decl. ¶ 9; Letter from Richard W. Gonnello to Andrew Escobar,
dated Apr. 6, 2012 (annexed as Ex. D to Gonnello 1st Decl.). He received no response. See
Gonnello 2d Decl. ¶ 9. On June 25, 2012, GLG and Meadows filed a motion to dismiss. See
Defendant GLG Life Tech Corporation and Brian Meadows’ Notice of Motion to Dismiss, filed
June 25, 2012 (Docket # 31).
On August 9, 2012, Lead Plaintiffs filed the instant motion for leave to serve process on
Zhang by alternative means.5 The motion papers suggest three potential methods of alternative
service: (1) service on GLG’s counsel; (2) service on GLG’s registered agent in Washington; or
(3) service on Zhang by email, assuming the existing stay of discovery is lifted and plaintiffs are
able to obtain Zhang’s email address through discovery. Pl. Mem. at 8–9.
On August 23, 2012, four days before a response to the motion was due, Andrew
Escobar, a lawyer for GLG and Meadows, for the first time offered to provide plaintiffs’ counsel
with Zhang’s residential address in China. Gonnello 2d Decl. ¶ 11. Plaintiffs’ counsel declined
this offer. Id. When it filed its brief opposing the motion, GLG included the purported address
in the text of its brief. See Defendant GLG Life Tech Corporation’s Memorandum of Law in
5
See Lead Plaintiffs’ Motion for Leave to Serve Process on Defendant Luke Zhang by
Alternative Means, filed Aug. 9, 2012 (Docket # 40); Lead Plaintiffs’ Opening Brief in Support
of Motion for Leave to Serve Process on Defendant Luke Zhang by Alternative Means, filed
Aug. 9, 2012 (Docket # 41) (“Pl. Mem.”); Gonnello 1st Decl.
3
Opposition to Lead Plaintiffs’ Motion for Leave to Serve Process on Defendant Luke Zhang by
Alternative Means, filed Aug. 27, 2012 (Docket # 43) (“Def. Mem.”), at 4. GLG does not state
the source of this address, however. Additionally, no affidavit has been filed indicating the
source of the address or providing any basis for believing that the address is in fact correct.6
II.
DISCUSSION
A.
GLG’s Standing to Oppose the Motion
The papers opposing plaintiffs’ motion to serve Zhang by alternative means were not
filed by Zhang but rather by GLG. Plaintiffs assert that because GLG was properly served, GLG
has no “standing” to oppose the motion as it has not suffered, nor will it suffer, a redressable
injury if the motion is granted. See Lead Plaintiffs’ Reply Memorandum of Law in Support of
their Motion for Leave to Serve Process on Defendant Luke Zhang by Alternative Means, filed
Sept. 6, 2012 (Docket # 48) (“Reply”), at 2–3.
There is case law suggesting that GLG does not have “standing” to oppose this motion.
See Madu, Edozie & Madu, P.C. v. Socketworks Ltd. Nigeria, 265 F.R.D. 106, 114–15
(S.D.N.Y. 2010) (“Co-defendants do not have standing to assert improper service claims on
behalf of other defendants.”); accord S.E.C. v. Lines, 2009 WL 2431976, at *2 (S.D.N.Y. Aug.
7, 2009). Indeed, the Second Circuit has stated that “[f]ederal courts as a general rule allow
litigants to assert only their own legal rights and interests, and not the legal rights and interests of
third parties.” Farrell v. Burke, 449 F.3d 470, 494 (2d Cir. 2006). Nonetheless, this does not
6
The Court assumes that the attorneys for GLG have accurately transmitted an address
that has been provided to them by someone at GLG who purports to have knowledge of the
address. The Court has no basis for determining, however, that the person who provided the
address had personal knowledge as to its correctness. Thus, the record is devoid of evidence as
to the address’s accuracy.
4
mean that this Court should “disregard [GLG’s motion] . . . in its entirety” as plaintiffs request.
Reply at 3. “District courts have broad discretion to permit or deny an appearance as amicus
curiae in a case.” Auto. Club of N.Y., Inc. v. Port Auth. of N.Y. & N.J., 2011 WL 5865296, at
*1 (S.D.N.Y. Nov. 22, 2011) (internal citations omitted). In light of the close connection
between GLG and Zhang, the Court will consider GLG’s submissions as those of an amicus
curiae with respect to plaintiffs’ motion because without such consideration, the Court “would
be hampered in issuing a ruling grounded on all the facts presented.” Madu, 265 F.R.D. at 114.
B.
Merits
Fed. R. Civ. P. 4(f) governs service of process on individuals “not within any judicial
district of the United States.” This rule establishes several methods for service on an individual
outside of the United States including “(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; . . . [and] (3) by other means not
prohibited by international agreement, as the court orders.” Id. at 4(f)(1), (3). A third method of
service, contained in Fed. R. Civ. P. 4(f)(2), governs service in situations where “there is no
internationally agreed means” of service or where “an international agreement allows but does
not specify other means” of service. Thus, on its face, Fed. R. Civ. P. 4(f) offers a choice
between methods of service. Because both China and the United States are signatories to the
Hague Convention, see Treaty Affairs Staff, Office of the Legal Adviser, U.S. Dep’t of State,
Treaties in Force: A List of Treaties and Other International Agreements of the United States in
Force on January 1, 2011 394–95, subsection (1) of Rule 4(f) is an available method of service
on a party residing in China.
“‘The decision whether to allow alternative methods of serving process under Rule
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4(f)(3) is committed to the sound discretion of the district court.’” Madu, 265 F.R.D. at 115
(quoting RSM Prod. Corp. v. Fridman, 2007 WL 1515068, at *1 (S.D.N.Y. May 24, 2007)).
Courts have repeatedly recognized that “there is no hierarchy among the subsections in Rule
4(f).” Advanced Aerofoil Techs., AG v. Todaro, 2012 WL 299959, at *1 (S.D.N.Y. Jan. 31,
2012); accord Swarna v. Al-Awadi, 2007 WL 2815605, at *1 (S.D.N.Y. Sept. 20, 2007).
Accordingly, “court-directed service under Rule 4(f)(3) is as favored as service under Rule
4(f)(1),” Rio Props., Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1015 (9th Cir. 2002), inasmuch as
it is “merely one means among several which enables service of process on an international
defendant.” Id. As one court has put it, service under Rule 4(f)(3) is “neither a ‘last resort’ nor
‘extraordinary relief.’” Id.
Nonetheless, before authorizing service under Rule 4(f)(3), some district courts have
required: “(1) a showing that the plaintiff has reasonably attempted to effectuate service on the
defendant, and (2) a showing that the circumstances are such that the court's intervention is
necessary.” United States v. Lebanese Canadian Bank SAL, 2012 WL 2035997, at *4 (S.D.N.Y.
June 6, 2012) (citing cases); accord Cold Spring Constr. Co. v. Spikes, 2012 WL 41967, at *2
(W.D.N.Y. Jan. 9, 2012). Imposing such a requirement has been viewed as necessary “in order
to prevent parties from whimsically seeking alternate means of service and thereby increasing
the workload of the courts.” Ryan v. Brunswick Corp., 2002 WL 1628933, at *2 (W.D.N.Y.
May 31, 2002). Thus, in cases involving service on a person residing in a country that is a
signatory to the Hague Convention, courts have often imposed a requirement that litigants first
attempt service by means of the Hague Convention before seeking court-ordered alternative
service under section 4(f)(3). See, e.g., Devi v. Rajapaska, 2012 WL 309605, at *2 (S.D.N.Y.
Jan. 31, 2012).
6
This Court concurs that there will undoubtedly be many instances where significant
efforts to make service under the Hague Convention should be required by a court before
alternative service is ordered. But nothing in Rule 4(f) itself or controlling case law suggests
that a court must always require a litigant to first exhaust the potential for service under the
Hague Convention before granting an order permitting alternative service under Rule 4(f)(3).
See Wright & Miller, 4B Federal Practice & Procedure: Civil 3d § 1134, at 333 (2002) (“The
only proscription on the district court's discretion is that the method not be prohibited by
international agreement.”).7
Some courts have held that “principles of comity encourage the court to insist, as a
matter of discretion, that a plaintiff attempt to follow foreign law in its efforts to secure service
of process upon defendant.” C & F Sys., LLC v. Limpimax, S.A., 2010 WL 65200, at *2 (W.D.
Mich. Jan. 6, 2010). Inasmuch as Rule 4(f)(3) calls upon a court to exercise its discretion,
however, each case must be judged on its facts. In the present case, it is difficult to see how
principles of comity would be upset if alternative service is ordered on a defendant who is not a
citizen of China and has voluntarily and closely associated himself with a non-Chinese entity
7
The Supreme Court’s ruling in Volkswagenwerk Aktiengesellschaft v. Schlunk, 486
U.S. 694 (1988), is not to the contrary. While Volkswagenwerk noted in dictum that
“compliance with the [Hague] Convention is mandatory in all cases to which it applies,” id. at
705, Volkswagenwerk involved an interpretation of Article I of the Hague Convention, which
states that the Convention applies “where there is occasion to transmit a judicial or extrajudicial
document for service abroad.” Hague Convention, art. 1, 20 U.S.T. 361 *1. Volkswagenwerk
held only that the Hague Convention did not apply where service was made on a foreign
citizen’s agent within the United States. It held that the Convention did not apply because no
judicial document was actually transmitted for service abroad, id. at 707–08, even though it was
obvious that the domestic agent would ultimately transmit the service documents to the
defendant in the foreign country, see id. at 707 (“Whatever internal, private communications
take place between the agent and a foreign principal are beyond the concerns of this case.”).
Thus, Volkswagenwerk does not hold or even suggest that the Hague Convention must always
be complied with before alternative service is ordered.
7
that is already a served co-defendant.
Additionally, the Court is concerned that the length of time required for service under the
Hague Convention, approximately six to eight months, see Gonnello 2d. Decl. ¶ 7, may
unnecessarily delay this case. Courts have frequently cited delays in service under the Hague
Convention as supporting an order of alternative service under Rule 4(f)(3). See, e.g., Brown v.
China Integrated Energy, Inc., 2012 WL 2913537, at *1, *5 (C.D. Cal. July 17, 2012) (ordering
alternative service and noting that service of defendant under the Hague Convention would take
four to six months); Ackerman v. Global Vehicles U.S.A., Inc., 2011 WL 3847427, at *3–4
(E.D. Mo. Aug. 26, 2011) (authorizing service on defendant’s counsel “so as to not further
delay” the lawsuit); The Knit With v. Knitting Fever, Inc., 2010 WL 4977944, at *4–5 (E.D. Pa.
Dec. 7, 2010) (plaintiff granted leave to serve a defendant via counsel where Hague Convention
service would take up to three months and plaintiff sought a waiver of service from the
defendant before seeking leave to serve the defendant by alternative means); LG Elecs., Inc. v.
ASKO Appliances, Inc., 2009 WL 1811098, at *4 (D. Del. June 23, 2009) (authorizing service
on defendant’s counsel “to prevent further delays in litigation”).
As noted, two of the methods of service proposed by plaintiffs are (1) service on GLG’s
counsel; and (2) service on GLG’s registered agent in Washington. Use of these methods would
not run afoul of the Hague Convention since in both instances no documents would be
transmitted abroad. Volkswagenwerk Aktiengesellschaft, 486 U.S. at 703. Moreover, such
service comes within the scope of a court’s authority under Rule 4(f)(3), since that rule requires
only that service be “(1) directed by the court; and (2) not prohibited by international
agreement.” Rio Props., Inc., 284 F.3d at 1014. In many instances, courts have authorized
service under Rule 4(f)(3) on an unserved party’s counsel. See, e.g., Brown, 2012 WL 2913537,
8
at *4–5; Arista Records LLC v. Media Servs. LLC, 2008 WL 563470, at *1–2 (S.D.N.Y. Feb.
25, 2008); RSM, 2007 WL 2295907, at *1–3; Ehrenfeld v. Salim a Bin Mahfouz, 2005 WL
696769, at *3 (S.D.N.Y. Mar. 23, 2005).
Of course, a party seeking leave to serve an individual by counsel must show adequate
communication between the individual and the attorney. Compare Prediction Co. LLC v.
Rajgarhia, 2010 WL 1050307, at *2 (S.D.N.Y. Mar. 22, 2010) (finding adequate communication
between defendant and his counsel when the parties had “been in recent contact”), with Madu,
265 F.R.D. at 116 (citing the “absence of communication” between a firm and two unserved
parties when denying plaintiff’s request for leave to serve process on counsel). The
circumstances of this case make clear that service on counsel for GLG is virtually guaranteed to
provide notice to Zhang. Most obviously, Zhang is the Chairman and Chief Executive Officer of
GLG and it is impossible to imagine that a corporation’s attorney would not advise the
corporation’s Chairman and Chief Executive Officer of the fact that service destined for that
officer had been made upon its attorney. See Brown, 2012 WL 2913537, at *4 (unserved
officers’ and directors’ “close connection” with the corporation make it “all but certain” that
directors served through counsel “will receive notice of the suit”). The same is true for service
on GLG itself: obviously a corporation will inform its own Chairman and Chief Executive
Officer of a lawsuit pending against him.
As already noted, courts have held that parties should be dissuaded from “whimsically”
seeking alternative service under Rule 4(f)(3). Brunswick, 2002 WL 1628933, at *2. But the
request here is far from whimsical and was occasioned to some degree by the recalcitrance of the
company of which Zhang is CEO and whose actions he presumably controls. As previously
discussed, the attorneys for the corporation for which Zhang is the Chief Executive Officer
9
withheld his service address from plaintiffs for many months, Gonnello 2d Decl. ¶¶ 9–11,
releasing what purports to be his address – and for which no competent supporting evidence has
been provided – only after plaintiffs had gone through the expense of filing the instant motion.8
Given the certainty that service on GLG’s attorneys and/or GLG will result in notice to Zhang,
and given that service via the Hague Convention would be a pointless and lengthy exercise, an
order of alternative service is justified.
All that remains is to determine if the method of service passes constitutional muster
inasmuch as a proposed means of service “[e]ven if facially permitted by Rule 4(f)(3) . . . must
also comport with constitutional notions of due process,” Rio Props., Inc., 284 F.3d at 1016.
Due process requires that the method of service “provide[] notice reasonably calculated, under
all the circumstances, to apprise interested parties of the pendency of the action and afford them
an opportunity to present their objections.” Volkswagenwerk Aktiengesellschaft, 486 U.S. at
705 (internal citations omitted); accord Luessenhop v. Clinton Cnty, N.Y., 466 F.3d 259, 269 (2d
Cir. 2006) (citing Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950)); RSM,
2007 WL 2295907, at *4. As already discussed, service on counsel and GLG is certain to
apprise Zhang of the pendency of this action.
III.
CONCLUSION
For the foregoing reasons, the motion for leave to serve process by alternative means
(Docket # 40) is granted. Pursuant to Fed. R. Civ. P. 4(f)(3), plaintiffs are authorized to serve
Zhang by (1) serving counsel for GLG, in accordance with Fed. R. Civ. P. 5(b), with the
8
While GLG argues that Zhang’s address was easily accessible from GLG’s filings with
the Securities and Exchange Commission, they now give a different address at which service
should be made and fail to explain why the addresses differ from the addresses in the SEC filings
or why service on the newly revealed address is preferable. Def. Mem. at 4.
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summons, complaint, and this Opinion and Order (“the service documents”); and (2) serving the
registered domestic agent of GLG with the same papers.
SO ORDERED.
Dated: November 9, 2012
New York, New York
______________________________
GABRIEL W. GORENSTEIN
United States Magistrate Judge
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