Case of the Day: State Farm v. Gree USA

The case of the day is State Farm Fire & Casualty Co. v. Gree USA, Inc. (S.D. Ind. 2019). State Farm sued Gree Electric Appliances, Inc. and Gree Electric Appliance Sales, both located in Hong Kong, as subrogee for its insured, Dennis Holdren, alleging that a fire in Holdren’s house was caused by a defect in a dehumidifier manufactured by Gree. State Farm served process on Gree by serving its US subsidiary (actually, a second-level subsidiary) in California. Gree moved to dismiss for insufficient service of process.

The judge got the basic issues right. Volkswagen holds that the law of the forum determines whether it’s necessary to transmit the summons abroad for service. Under FRCP 4(e), you can use the methods of service available under the state where the service is to be made. So the question is whether the service is good under California law. If it is, then the plaintiff should win the motion, and the Hague Service Convention doesn’t come into it (because there was no occasion to transmit the summons abroad for service).

The judge went on to hold that the service was good under California law. Is this right? The judge cited Falco v. Nissan North America, Inc., 987 F. Supp. 2d 1071 (C.D. Cal. 2013), for the proposition that under California law, a subsidiary is a “general manager” of the parent and thus, under California law, service on the subsidiary is good service on the parent. But all of the cases cited in Falco referred to facts that showed that the particular subsidiary had a sufficient relationship with the parent to make the service proper. It does not seem to me that there is a per se rule. The California cases seem a bit far-fetched to me—a parent might have a right to manage a subsidiary but in general a subsidiary does not have a right to manage a parent—but assuming California law is what Falco says it is, it’s not clear to me that the judge made findings sufficient to justify his ultimate conclusion here.

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