Case of the Day: In re Sinohub Securities Litigation

The case of the day is In re Sinohub Securities Litigation (S.D.N.Y. 2013). The lead plaintiff, Ellsworth Investments Ltd., sought leave under FRCP 4(f)(3) to serve three of the individual defendants, Henry T. Cochran, Daniel Chi Keung Lui, and Lei Xia, by service on Sinohub’s lawyer in Boston. All three of the individual defendants were former officers of Sinohub, and all three resided in China. Ellsworth was a US citizen, but Ellworth believed that the other individual defendants were Chinese nationals. Sinohub’s lawyer acknowledged that he was regularly in touch with Cochran but that he had only been in touch with the others on a couple of occasions, which Cochran had arranged.

The judge gave a correct overview of FRCP 4(f)(3)—it’s not disfavored; it doesn’t violate any international agreement if the method of service authorized does not call for any document to be transmitted abroad—and allowed that the proposed method of service as to Cochran. The court denied the motion as to the two Chinese former officers. This seems clearly correct insofar as it did not seem that service on Sinohub’s US lawyer was likely to lead to actual notice. The judge also noted that because two of the defendants were Chinese, Ellsworth should try the Hague Service Convention first. This is permissible, though as I have noted a few times, I don’t think that comity weighs strongly in favor of denying a motion in a case like this, where the method of service the plaintiff seeks to use does not require transmission of a document into the foreign country.

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