In May 2009, the California Court of Appeal for the Fourth District decided a case that essentially upholds service of a foreign entity’s subsidiary in California is sufficient to effect service, in spite of the Hague Convention requirements. This will undoubtedly change the process by which foreign companies may be served in California, especially in these difficult economic times.
In Yamaha Motor Co. Ltd. v. Superior Court, a state appellate panel held that lawyers whose clients sue a foreign company can avoid the costly process of serving papers overseas by instead serving the company’s American subsidiary. The case arose from a lawsuit against Yamaha filed by Jack R. Connors, who was allegedly injured when he was riding a 2005 Yamaha Rhino recreational utility vehicle. Connors, and several other Yamaha Rhino drivers, sued Yamaha over the vehicles. Connors’ attorney filed some of the cases using the traditional Hague Service Convention method, but that method of serving defendants is both significantly more expensive and time consuming. Therefore, to avoid the costly and time consuming Hague Convention service requirements, Connors’ attorney served the complaint on Yamaha Motor Corp, USA, Yamaha’s wholly owned domestic subsidiary in the U.S. and the exclusive importer and distributor of Yamaha Rhinos.
The decision deeming this option acceptable offers an alternative to attorneys who previously had to comply with the Hague Service Convention when serving a foreign defendant. The Convention is an international treaty that was adopted in 1965 to allow service of judicial documents from one signatory state to another without going through diplomatic channels. Article 1 of the Convention says it applies "in all cases, in civil or commercial matters where there is occasion to transmit a judicial or extrajudicial document for service abroad."
The panel found that both federal and California state law supported their decision. The federal Supreme Court in Volkswagenwerk Aktiengeselschaft v. Schlunk held that when service is valid under state law on the American subsidiary of a foreign manufacturer, there is no need to serve papers in accord with the Hague Convention. The appellate panel drew support from California state law from the California Supreme Court case Cosper v. Smith & Wesson Arms Co. which ruled that service on the California representative of a foreign parent company is valid. In Cosper, a police officer whose revolver exploded on him sued the Massachusetts corporation that manufactured the firearm. The Massachusetts corporation, however, had no agents, salesmen, or other employees in California but it did have a contract with a California representative to promote, on a "non-exclusive basis" the sale of its products on the West Coast. The Supreme Court held that service on this representative was sufficient to serve the Massachusetts corporation because the representative was the "general manager in this State," and thus satisfied the "minimum contacts" requirement. In Yamaha, the relationship of the named defendant, Yamaha-Japan, to the American entity served, Yamaha-American, is much more intimate than that of the Cosper manufacturer and the non-exclusive sporting goods seller of Smith and Wesson’s products.
The Yamaha decision has very positive implications for plaintiffs in terms of keeping costs down and serving process in a more timely manner. As noted above, the plaintiff in Yamaha was able to save thousands of dollars by serving the American subsidiary instead of through the Convention requirements, which would include, for example, a $7,000 fee for translation of the complaint into Japanese. Furthermore, he was able to accomplish service in much less than the 90 days Connors’ attorney claims it would have taken to have had the complaint served on the Ministry of Justice in Tokyo.
While perhaps quicker and more cost effective, the Yamaha panel also warned of the potential downfalls of circumventing the Convention by serving American subsidiaries. In a footnote, the court cautioned that, "Easy is not necessarily better." The court cited Justice O’Connor’s reasons "to do it the hard way" from Volkswagenwerk Aktiengesellschaft: "Those who eschew [the Hague Service Convention’s] procedures risk discovering that the forum’s internal law required transmittal of documents for service abroad, and that the Convention therefore provided the exclusive means of valid service. In addition, parties that comply with the Convention ultimately may find it easier to enforce their judgments abroad. [citations omitted] For these reasons, we anticipate that parties may resort to the Convention voluntarily, even in cases that fall outside the scope of its mandatory application."
Possible Future Challenge
The Yamaha court also left room for future challenges to Cosper. In Cosper, the court "never really grappled with the anomaly that a mere non-exclusive sales representative could not really be described as a general manager in this state." The appellate panel in Yamaha went on to explain that "[t]o be a manager, much less a general manager, implies a measure of formal control. Neither the sales representative in Cosper, nor Yamaha-America here, have any real control over their principals—they simply did (or do) their master’s bidding," with Yamaha-America even more tightly controlled than the sales representative in Cosper. The panel made clear their disagreement with Cosper‘s reading of "general manager", but ultimately respected stare decisis.
In sum, while enforcing a judgment without having followed the Convention Service requirements may pose a very real problem for litigants, initial service may be effected on a foreign entity’s subsidiary all in an effort to avoid costs and the timely procedures set for the by the Convention.
Service Requirements Under the Hague Service Convention for Service in Mexico
Service of documents under the Hague Convention in Mexico is a 3-step process:
(1) Preparation of the Letter Rogatory Form;
(2) Translation of the Complaint and Letter Rogatory Form and obtaining proper certificates of authenticity from the County Superior Court and the California Secretary of State (notarization, verification, and apostilles); and
(3) Accomplishing Service in Mexico so that a judgment issued by the California Superior Court can be enforced by a Court in Mexico, which involves:
(a) Acceptance of U.S. papers by the Director General for Consular Services of the Mexican Ministry of Foreign Affairs;
(b) Acceptance of U.S. papers by the Superior Court for the State of Mexico;
(c) Physically serving an appropriate agent of the defendant company in Mexico; and
(d) Filing of the service documents with the Mexican Ministry of Foreign Affairs and the Superior Court for the State of Mexico, with transmission of the service documents back to us for filing in the Los Angeles Superior Court.
For more information please contact Norma García Guillén and Serena Martinez. Ms. García Guillén is an associate in the Business Trial and Latino Business Practice Groups in the firm’s Orange County office. Ms. Martinez is an associate in the Business Trial and Latino Business Practice Groups in the firm’s Orange County office.
 C.A. 4th/3, DAR (2009).
 "Alternative Method for Serving Foreign Companies Is Upheld by Appeals Court" John Roemer, Daily Journal, May 28, 2009 p1.
 Yamaha at n4.
 486 U.S. 694 (1998).
 53 Cal.2d 77 (1959).
 Id. at 8-9.
 Roemer, supra at 4.
 Yamaha at n1.
 Id. at 11.