The case of the day is NYKCool A.B. v. Pacific International Services, Inc. (S.D.N.Y. 2013). In 2011, the Court confirmed an $8.7 million dollar award in favor of NYKCool against Pacific Fruit, a company that markets and imports Bonita brand bananas in the United States. Before NYKCool could enforce the judgment, Pacific Fruit transferred all of its assets to Fruit Importers of America, which, like Pacific Fruit, was controlled by Alvaro Noboa, and which, after the asset transfer, replaced Pacific Fruit in the business of marketing and importing the bananas.
NYKCool sued Fruit Importers and obtained summary judgment. But Fruit Importers and other defendants controlled by Noboa then rendered themselves judgment proof by asset transfers. At the time of the transfer, Fruit Importers owed $4.5 million to Truisfruit, another company controlled by Noboa, which was in the business of supplying Ecuadoran bananas to Pacific Fruit and then Fruit Importers for sale in the United States. Fruit Importers transferred $3 million in accounts receivable to Truisfruit as part of the asset transfer and instructed its US customers to make further payments to Truisfruit.
NYKCool filed an amended complaint adding Truisfruit as a defendant. The magistrate judge, apparently sua sponte, made the following order:
Let service of a copy of this Order and the accompanying Declaration and Exhibits; if served upon TRUISFRUIT S.A. at El Oro 101 Interseccion Vivero—5 Junio, Guayaquil, Ecuador (service to be made concurrent with the amended complaint via Fed. R. Civ. P. 4(h)(2) and 4(f)), and if served upon Mess’rs Hill Rivkins LLP, to the attention of Mr. Michael D. Wilson, Esq., 45 Broadway, Suite 1500, N.Y., N.Y. 10006-3793, on or before 5 o’clock in the afternoon on 10/4/13, 2013 (service to be made either by courier, fax, hand or email); be deemed good and sufficient service.
The clerk transmitted the documents to Ecuador by FedEx. But there was no signed receipt—the address was accurate, but apparently Truisfruit refused delivery. NYKCool sought a default judgment after Truisfruit failed to answer the complaint.
Truisfruit argued that the service was defective because FRCP (f)(2)(C)(ii) requires a signed receipt. NYKCool argued that the judge’s order operated as an order under FRCP 4(f)(3) and thus that no return receipt was required.[efn_note]Note that Ecuador is a party to the Inter-American Convention on Letters Rogatory, but since that convention is not exclusive, service by alternate means need not be by a method authorized by the convention.[/efn_note]
The judge assumed that FRCP 4(f)(2)(C)(ii) governed, but he held, citing several precedents, that where service of process by mail is refused and the documents are returned to sender, the service is nevertheless valid.
Because Ecuador is not a Hague Service Convention state, there is no need, in this case, to consider whether the absence of a signed receipt matters when service under the Convention is made by postal channels. In most US jurisdictions, where the rule is that the Convention merely permits service by postal channels but does not affirmatively authorize it, I believe the outcome would be the same, since the question is whether the service complied with the law of the forum. But in the Second Circuit, which holds that the Convention affirmatively authorizes service by postal channels whether or not the law of the forum would otherwise permit it, it’s possible to ask whether the Convention itself imposes any requirements concerning return receipts, refused mail, and so forth.
Interestingly, the magistrate judge went on to hold that even if the service of process had been faulty, the Court would still have quasi in rem jurisdiction to the extent of the proceeds of the sale of bananas that Truisfruit had consigned to Redi Fresh, an independent US firm that had taken the place of Fruit Importers; those bananas had been attached earlier in the proceeding. I love quasi in rem jurisdiction and do not think we see enough of it.