NY Court of Appeals Rules that New York Rules Govern Service of Process Outside the United States
February 26, 2009
Owen C. Pell
DOWNLOAD PDF: Complete Morgenthau v. Avion Resources Ltd. Decision
The New York Court of Appeals (the State's highest court) has held that when serving process in a foreign country, what matters is whether the method of service complies with New York law – not whether that method is allowed in the country of service. Non-US parties should be aware that, absent a treaty expressly governing service from the United States in their country, they may be served in a New York state court action by any of the methods permitted under the New York Civil Practice Law and Rules (the "CPLR") – which could include service by mail.
In Morgenthau v. Avion Resources Ltd.,1 the Court confirmed the reach of CPLR § 313, which provides that parties otherwise subject to the jurisdiction of New York courts "may be served with the summons without the state, in the same manner as service is made within the state." While it had long been settled that § 313 applies to service in other US states,2 Morgenthau addressed service outside the United States.
Morgenthau is a civil forfeiture action in which the New York district attorney sought to seize funds belonging to various Brazilian defendants. In carrying out service of process in Brazil the district attorney used various methods authorized under CPLR § 313 and other CPLR sections — including service involving notices mailed into Brazil. Under Brazilian law, however, service from abroad should have been done via letters rogatory3 or letters of request through diplomatic channels. Defendants moved to dismiss the action for lack of valid service.
The Court of Appeals reversed lower court rulings dismissing the action for failure to serve process in conformity with Brazilian law. The Court held that the plain terms of CPLR § 313 prevail absent a treaty expressly precluding them (for example, the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters4 — to which Brazil is not a party). Accordingly, the district attorney did not have to comply with Brazilian law and could serve the defendants by any method allowed under the CPLR.5 This could include service via a mailing to a party's place of business or residence, or alternate methods ordered by a court — such as service on a party's last counsel of record.
An interesting aspect of the ruling was the Court's comment on the doctrine of comity, under which New York courts will under certain circumstances respect the actions or laws of foreign states. In refusing to allow Brazilian law to trump the CPLR, the Court noted that
[w]e have, on occasion, addressed comity principles in cases where a party to New York litigation is asking a New York court to give effect to the laws of another jurisdiction, [but] we have never applied the doctrine to import the laws of a foreign country into a New York lawsuit — and we decline to do so in this case.6
Morgenthau will make it much easier for plaintiffs to serve non-US defendants outside the United States. This will be an especially powerful weapon in judgment enforcement actions targeting the US assets of non-US parties. After Morgenthau, non-US parties will have to be much more vigilant regarding service by mail — a method expressly prohibited in many nations. Given that a party's time to respond is calculated from the date of service, it now will be much more important for businesses susceptible to suit in New York courts especially banks and other financial institutions — to have procedures in place to ensure that deliveries and mail — are reviewed carefully for attempted service of process. But Morgenthau should not be seen as a panacea. Parties should be strongly cautioned that notwithstanding the ruling, service that does not comport with local law may well complicate any future attempts to enforce a New York judgment in a given foreign state, as use of a method viewed as improper may allow enforcement to be denied.7
Owen C. Pell
1 212 819 8891
Owen Pell is a litigation partner in the New York office of White & Case. Kim Haviv, an associate at the Firm, assisted with the preparation of this alert.
1 11 N.Y.3d 383, 869 N.Y.S.2d 886 (2008).
2 Dobkin v. Chapman, 21 N.Y.2d 490, 236 N.E.2d 451 (1968).
3 A method under international law in which notice of suit is transmitted by a court in one nation to a governmental authority in the receiving nation, which authority then delivers the notice and confirms delivery to the foreign court.
4 20 UST. 361. While Brazil and the United States are parties to the Inter-American Convention on Letters Rogatory, that treaty only sets out procedures for using letters rogatory, it does not override local law by mandating their use. 11 N.Y.3d at 391, 869 N.Y.S.2d at 891.
5 Like CPLR § 313, Federal Rule of Civil Procedure 4(k)(1)(A) establishes personal jurisdiction by service of summons on a party who is otherwise subject to the jurisdiction of the state in which the federal court sits. Although the Court noted that its ruling was consistent with applicable federal court procedures for service (11 N.Y.3d at 389, 869 N.Y.S.2d at 889, n.9), it should be noted that the federal rule involved (Federal Rule of Civil Procedure 4(f)) is more restrictive than the New York rule, and would not permit service based on, for example, attaching notice to the door of a business followed by a mailing (so-called "nail and mail" service permitted under the CPLR).
6 11 N.Y.3d at 390, 869 N.Y.S.2d at 890 (citations omitted and emphasis added).
7 As such, after Morgenthau, courts will have to consider how to exercise discretion in ordering alternate service in a foreign state, and it remains to be seen whether comity may play a role in the exercise of judicial discretion.
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