Glencore Ltd. v. Occidental Argentina Exploration and Production, Inc.

Filing 18

MEMORANDUM AND ORDER GRANTING IN PART AND DENIED IN PART 10 MOTION to Dismiss Plaintiff's Complaint.(Signed by Judge Keith P Ellison) Parties notified.(sloewe)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
GLENCORE LTD.,
Plaintiff,
VS.
OCCIDENTAL ARGENTINA
EXPLORATION AND PRODUCTION,
INC.,
Defendant.

§
§
§
§
§
§
§
§
§
§
§

CIVIL ACTION NO. H-11-3070

MEMORANDUM AND ORDER

Pending before the Court is a Motion to Dismiss filed by Defendant Sinopec
Argentina Exploration and Production, Inc. (“Sinopec” or “Defendant”), formerly known
as Occidental Argentina Exploration and Production, Inc.1 (Doc. No. 10.) At issue in the
pending motion is whether Defendant has been served properly. Defendant contends that
Plaintiff must effect service pursuant to the Hague Convention on the Service Abroad of
Judicial and Extrajudicial Documents in Civil or Commercial Matters, 20 U.S.T. 361
(1965) (the “Hague Convention”). Plaintiff responds that, because it served Defendant in
the United States, the Hague Convention does not apply and service was proper. After
considering Defendant’s motion, all responses thereto, and the applicable law, the Court
concludes that the motion must be GRANTED IN PART and DENIED IN PART.
1

According to Defendant’s motion, Occidental Argentina Exploration and Production, Inc. changed its
name to Sinopec Argentina Exploration and Production, Inc., effective February 22, 2011. (Doc. No. 10 at
1.) For the purposes of this Memorandum and Order, the Court will assume that Defendant has so changed
its name.

1

I.

BACKGROUND
This is a maritime case in which Plaintiff Glencore Ltd. (“Plaintiff” or

“Glencore”) seeks to recover demurrage for an ocean vessel. (Compl. ¶ 1, Doc. No. 1.)
Plaintiff’s claim arises under a maritime contract for the delivery of crude oil to a vessel
in Argentina for carriage into the United States. (Id.) Defendant Sinopec is a foreign
corporation, and, according to Defendant, it is “organized under the laws of the Cayman
Islands, registered as a branch under the laws of Argentina, and [ ] based in Buenos
Aires.” (Doc. No. 10 at 1.) On June 2, 2009, the parties entered into a contract under
which Glencore agreed to buy and Sinopec agreed to sell 500,000 barrels of Canadon
Seco crude oil to be loaded on a vessel at the port of Caleta Olivia, Argentina (the
“Canadon contract”). (Canadon contract, Doc. No. 15-A.) The Canadon contract includes
the following provision:
Documentation instructions: Any accounting instructions and
documentation, including invoices and/or loading and shipping documents
covering the crude oil delivered hereunder, should be sent to . . .
(Canadon contract ¶ 19.) The Canadon contract also expressly incorporates Occidental
Crude Sales, Inc.’s “General Terms and Conditions F.O.B. Sales of Crude Oil” (the
“GTCs”), dated January 1995, to the extent the GTCs are “not inconsistent with the terms
and conditions contained herein.” (Canadon contract ¶ 18.) The GTCs include a section
titled “Notices,” which provides as follows:
All notices and other communications required to be given hereunder shall
be sufficient if sent by letter, telegraph, telex, facsimile machine or cable
to the address of the Party specified below. All notices or statements must
be given in writing, or if given orally, must be promptly confirmed in
2

writing. . . . Either Party hereto may from time to time by written notice
change its address.
(GTCs at 27, Doc. No. 35-A.) The address of the seller is identified as “Occidental Crude
Sales, Inc. (International), c/o Occidental Energy Marketing, Inc., 5 Greenway Plaza,
Suite 2400, Houston, Texas 77046.” (Id.)
Glencore notified Defendant of its demurrage claim in an email sent on January 5,
2011 to “Occidental Argentina, c/o Occidental Energy Marketing, Inc., 5 Greenway
Plaza, Houston, Texas 77046–0506.” (Doc. No. 15-C.) In an email dated January 10,
2011, Andrew Wu, Senior Counsel for Occidental Energy Marketing, Inc. in Houston,
replied to Glencore’s email, stating that he was “house counsel for Occidental with
respect to the demurrage claim in your letter . . . .” (Doc. No. 15-D.) Mr. Wu’s address on
that email is listed as “5 Greenway Plaza, Suite 110, Houston, Texas.” Id. Defendant now
moves to dismiss based upon ineffective service of process.
II.

LEGAL STANDARD
District courts “cannot exercise jurisdiction over a defendant which has not been

served properly.” J.O. Alvarez, Inc. v. Rainbow Textiles, Inc., 168 F.R.D. 201, 203 (S.D.
Tex. 1996); see also Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344,
350 (1999) (“In the absence of service of process (or waiver of service by a defendant), a
court ordinarily may not exercise power over a party the complaint names as
defendant.”). “When service of process is challenged, the party on whose behalf it is
made must bear the burden of establishing its validity.” Naranjo v. Univ. Surety of Am.,
679 F. Supp. 2d 787, 795-96 (S.D. Tex. 2010) (quoting Aetna Bus. Credit Inc. v.
Universal Décor and Interior Design, 635 F.2d 434, 435 (5th Cir. 2009)) (internal
3

quotation marks omitted). Actual notice of the claim is insufficient. Bell v. Holloway,
2007 WL 4613029, at *2 (S.D. Tex. Dec. 31, 2001) (citing McGuire v. Sigma Coatings,
Inc., 48 F.3d 902, 907 (5th Cir. 1995)).
Federal Rule of Civil Procedure 12(b)(5) authorizes the dismissal of an action for
insufficient service of process. Fed. R. Civ. P. 12(b)(5). A district court has broad
discretion either to dismiss a case for improper service of process or to quash service and
grant the plaintiff time in which to serve a defendant properly. Brown v. Mississippi
Cooperative Extension Serv., 89 F. App’x 437, 439 (5th Cir. 2004).
III.

ANALYSIS
Because the United States and Argentina are signatories to the Hague Convention,

Defendant contends that Plaintiff must serve it in accordance with the requirements set
forth in the Hague Convention. Defendant also urges that Plaintiff’s attempt to effect
service within the United States fails under Rule 4 of the Federal Rules of Civil
Procedure. In response, Glencore argues that it properly served Defendant in the United
States, rendering the Hague Convention inapplicable.
A. Rules Governing Service on a Foreign Corporation
Rule 4 of the Federal Rules of Civil Procedure sets forth the requirements for
service of process. Rule 4(h) governs service of process on a foreign corporation, and
states that, unless otherwise provided by federal law, a foreign business entity must be
served as follows:
(1) in a judicial district of the United States:
(A) in the manner prescribed by Rule 4(e)(1) for serving an individual;
or
4

(B) 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 receiver service of process—if the
agent is one authorized by statute and the statute so requires—by
also mailing a copy of each to the defendant; or
(2) at a place not within any judicial district of the United States, in any
manner prescribed by Rule 4(f) for servicing an individual, except
personal delivery under (f)(2)(C)(i).
Fed. R. Civ. P. 4(h).
If service is being made in a judicial district of the United States, Rule 4(h) directs
parties to Rule 4(e)(1), which allows service to be made in any way that complies with
the law of either the state in which the action was brought or the state in which service is
made. If a corporation is to be served abroad, parties must look to Rule 4(f), which allows
for service “by any internationally agreed means . . . that is reasonably calculated to give
notice, such as those authorized by the Hague Convention.” Fed. R. Civ. P. 4(f)(1).
Because the United States and Argentina are both signatories to the Hague
Convention, the Convention specifies the means by which plaintiffs must serve foreign
entities located in Argentina. The Supreme Court has directed that “compliance with the
Convention is mandatory in all cases to which it applies.” Volkswagenwerk
Aktiengesellschaft v. Schlunk, 486 U.S. 694, 705 (1988). Nonetheless, the Hague
Convention does not override state laws that allow foreign corporations to be served
domestically. See Schlunk, 486 U.S. at 706–07 (upholding the validity of serving process
on a foreign corporation by serving the corporation’s domestic subsidiary where that
method of service was authorized by Illinois law). Thus, if domestic service on a foreign
corporation were effected properly, the Hague Convention would not require additional,
international service. Schlunk, 486 U.S. at 707
5

B. Plaintiff’s Attempt to Effect Service in Texas
Plaintiff contends that it validly served process pursuant to the terms of the
parties’ contractual agreement. Plaintiff avers that, by its terms, the Canadon contract
“avoids the need for service under the Hague Convention.” (Doc. No. 16 at 3.) As
Plaintiff notes, the Supreme Court recognizes that “the Due Process Clause does not
require an official transmittal of documents abroad every time there is service on a
foreign national.” Schlunk, 486 U.S. at 707. Instead, “[w]hen service of a domestic agent
is valid and complete under both state law and the Due Process Clause, our inquiry ends,
and the [Hague] Convention has no further implications.” Id. Plaintiff contends that it
effected service on Defendant’s domestic agent pursuant to Rule 4(h)(1)(B), and that it
therefore does not need to serve Defendant in Argentina pursuant to the Hague
Convention.
1. Service on Defendant’s agent
Plaintiff contends that, under Schlunk, it was permitted to serve Defendant’s
domestic agent in the United States. Defendant does not dispute this interpretation of the
law, but counters that the entity on whom the lawsuit was served is not its domestic
agent, and that domestic service was therefore improper. As noted above, Rule 4(1)(h)(B)
allows service upon a foreign corporation to be accomplished by delivering a copy of the
summons and complaint to an agent authorized to receive service of process. This Court
has recognized that the Fifth Circuit construes Rule 4(h) narrowly, and requires “that the
corporate entity sought to be served must have actually authorized the agent to accept
service of process on its behalf.” WesternGeco LLC v. Ion Geophysical Corp., 2010 WL
6

2266524, at *3 (S.D. Tex. June 2, 2010) (citing Lisson v. ING Groep, 262 F. App’x 567,
569 (5th Cir. 2007) (unpublished) (per curiam)). Thus, in the Fifth Circuit, “delivery to a
purported agent does not constitute service on the would-be principal, even if the ‘agent’
represents himself to be so authorized or accepts service.” Fyfee v. Bumbo Ltd., 2009 WL
2996885, at * 3 (S.D. Tex. Sept. 16, 2009) (citation omitted) (internal quotation marks
omitted). Defendant contends that, under these standards, Plaintiff has not fulfilled its
service obligations under Rule 4(h)(1)(B), as Defendant does not have a registered agent
for service of process in Texas. Plaintiff maintains that the parties’ agreement designates
such an agent when it provides information regarding where notices must be sent.
The Court finds it completely clear that the provisions in the parties’ agreement
which provide a contractual contact do not designate an agent for service of process.
Especially because the Fifth Circuit reads service requirements narrowly, the Court
cannot assume, where the contract does not so provide, that a contact provided in a
contract is also the agent for service of process.
2. Method of Service
Plaintiff also contends that its method of service is proper because Section 12 of
the GTCs—the notice provision quoted above—authorizes service on Defendant in
Texas. Defendant urges that Section 12 of the GTCs conflicts with Section 19 of the
Canadon contract, and that it is therefore not incorporated into the Canadon contract.
Defendant also argues that, even if it is incorporated, Section 12 of the GTCs does not
authorize service in Texas. Because the Court concludes that Section 12, even if

7

incorporated, does not govern service of process, the Court does not need to consider
whether Section 12 is incorporated into the Canadon contract.
In attempting to prove that Section 12 of the GTCs governs service of process,
Plaintiff points to cases outside of the Fifth Circuit holding that contracts with “notice”
language govern service of process. However, the contractual language in the cases cited
by Plaintiff is distinguishable from the contractual language at issue in this case. For
example, in Marlowe v. Argentine Naval Comm’n, cited by Plaintiff, the district court
held that contractual language regarding “[a]ll notices, requests, demands, or other
communications” covered service. 604 F. Supp. 703, 704 (D.D.C. 1985) (emphasis
added). In Saunders Real Estate Corp. v. Consulate General of Greece, 1995 WL
598964, at *2 (D. Mass. Aug. 11, 1995), the court held that language providing that
“notices shall be effective when delivered” covered service.
Interestingly, in two subsequent opinions, the court that decided Marlowe
distinguished between contractual language governing “all notices”—like the contract at
issue in Marlow—and language governing “required notices.” See Underwood v. United
Republic of Tanzania, 1995 WL 46383, at *2 (D.D.C. Jan. 27, 1995) (notice provision
covering those notices “required or permitted herein” did not include service of process);
Int’l Road Fed’n v. Democratic Republic of the Congo, 131 F. Supp. 2d 248, 251 n.2
(D.D.C. 2001) (distinguishing the language in Marlowe from that in Underwood).
Similarly, the court in Berdakin v. Consulado de la Republica de El Salvador considered
a contractual provision stating that “[w]henever under this Lease a provision is made for
any demand, notice or declaration of any kind, it shall be in writing and served either
8

personally or sent by registered or certified United States mail.” 912 F. Supp. 458, 466
(C.D. Cal. 1995) (emphasis added) (internal quotation marks omitted). The court
concluded that this language applied only to demands, notices, and declarations provided
for by the lease; because the lease did not mention service of process, its notice provision
did not cover service. Id.
Here, Section 12 of the GTCs refers to “[a]ll notices and other communications
required to be given hereunder.” (GTCs at 27 (emphasis added).) This language patently
does not cover service of process, as service is not a notice or communication required to
be given under the contract. Cf. Camphor Techs., Inc. v. Biofer, S.P.A., 50 Conn. Supp.
227, 232 (Conn. Super. 2007) (“As indicated by the word ‘hereunder,’ the notice
provision applies to notices given to either party under the contract. Service of process . .
. does not fall within the provisions of the contract. . . . Thus, the agreement between the
parties does not control the proper method of notice, including service of process.”).
Especially in light of the Fifth Circuit’s “restrictive view of service of process rules,”
WesternGeco, 2010 WL 2266524, at *3, this language cannot be construed to apply to
service of process.
IV.

CONCLUSION
Because the parties’ contract neither designates an agent for service of process nor

provides for a method of service, the Court concludes that Defendant has not properly
been served under any recognized method for effecting service on a foreign corporation.
District courts have discretion to either dismiss a case for improper service, as Defendant
requests, or to quash service and grant the plaintiff time in which to serve the defendant
9

properly. See Brown v. Mississippi Coop. Extension Serv., 89 F. App’x 437, 439 (5th Cir.
2004); George v. U.S. Dept. of Labor, Occupational Safety & Health Admin., 788 F.2d
1115, 1116 (5th Cir. 1986) (“The district court enjoys a broad discretion in determining
whether to dismiss an action for ineffective service of process.”). After weighing these
two options, the Court hereby QUASHES service, and grants Plaintiff thirty (30) days in
which to serve Defendant properly pursuant to the Federal Rules of Civil Procedure.
IT IS SO ORDERED.
SIGNED this 22nd day of February, 2012.

KEITH P. ELLISON
UNITED STATES DISTRICT JUDGE

10