Timely Service Abroad in Diversity Suits
![Figure climbing a globe](/SiteCollectionImages/WisconsinLawyer/2000/11/diversity.jpg) |
by Daniel J. La Fave |
Serving process on a defendant in a foreign land can be a daunting task.
Yet in the global world of e-commerce the need for such an undertaking
is becoming increasingly more common. The recent decision of the U.S.
District Court for the Eastern District of Wisconsin in Rodgers v.
IMA S.r.l.
1 highlights a threshold challenge that
counsel face in commencing a diversity action that is governed by
Wisconsin substantive law - ensuring that service is effectuated within
90 days of filing suit, as required by sections 801.02
and 893.02
of the Wisconsin Statutes. This 90-day period provides little room for
error when attempting to shepherd service through the Byzantine thicket
of the Hague Convention on Service Abroad of Judicial and Extrajudicial
Documents in Civil or Commercial Matters.2 Yet the
consequence of failing to comply with sections 801.02
and 893.02
can be the dismissal of one's action as time-barred, as occurred in
Rodgers. This harsh outcome reveals an Erie trap for
the unwary practitioner.
An Erie Reprise
For many, the mention of Erie R. Co. v. Tompkins3 conjures up nightmarish memories from law school. Yet
failure to learn and apply the lessons that Erie and its
offspring teach (that is, that state law on statute of limitations -
including integral service of process requirements - governs diversity
cases) can produce the type of equally nightmarish procedural reality
that the plaintiffs encountered in Rodgers.
In its landmark 1938 decision in Erie, the U.S. Supreme
Court overruled the venerable 1848 opinion authored by Justice Story in
Swift v. Tyson,4 which held that federal
courts exercising diversity jurisdiction need not apply state common law
in matters of "general jurisprudence." The vehicle for this doctrinal
watershed was a negligence lawsuit brought by Tompkins, a Pennsylvania
citizen, against Erie, a New York-based railroad, in the
Southern District of New York. Tompkins sued for personal injuries he
sustained in Pennsylvania from a passing Erie train while he
was walking alongside the railroad tracks on a footpath. Erie
contended that the common law of Pennsylvania controlled, and that,
under it, the company owed no duty to trespassers such as Tompkins. In
keeping with Swift, the trial court declined to follow
Pennsylvania law, concluding instead, as a matter of "general law," that
the railroad owed Tompkins a duty of care. Following an adverse jury
verdict, Erie appealed.
In reversing, and deciding to scrap the almost century-old
Swift doctrine, the Erie court pointed out that
Swift had led to discrimination in favor of noncitizens,
irregular and inequitable application of state law, and forum
shopping.5 To check these abuses, the Erie
court established the rule that "[e]xcept in matters governed by the
Federal Constitution or by Acts of Congress, the law to be applied in
any [diversity] case is the law of the state."6
Subsequently, in Guaranty Trust Co. of N.Y. v. York,7 the U.S. Supreme Court held that the Erie
doctrine applied to suits in equity as well as to actions in law, and
concluded that a state statute of limitations should be applied and
serve to bar an equity action brought in federal court. In so holding,
the York court noted that "the intent of . . . [Erie] was to
insure that, in all cases where a federal court is exercising
jurisdiction solely because of the diversity of citizenship of the
parties, the outcome of the litigation in the federal court should be
substantially the same, so far as legal rules determine the outcome of a
litigation, as it would be if tried in a state court."8
Four years after deciding York, the U.S. Supreme Court once
again held that a state statute of limitations barred a lawsuit filed in
federal court in Ragan v. Merchants Transfer & Warehouse
Co.9 There the plaintiff filed suit roughly a
month before the governing two-year statute of limitations ran, but did
not serve the defendant until more than 60 days later. The plaintiff's
delay in effecting service made his action untimely under a Kansas
statute, comparable to Wis. Stat. section 893.02,
which required service within 60 days from the date of the summons in
order for the action to be deemed commenced within the meaning of the
statute of limitations. In upholding the dismissal of the lawsuit as
time-barred, the Ragan court held that the Kansas service law
was "an integral part of the state's statute of limitations."10 In so ruling, the Ragan court rejected the
plaintiff's argument that Rule 3 of the Federal Rules of Civil Procedure
governed the manner in which an action was commenced for purposes of
tolling a state statute of limitations. The court explained, "We cannot
give [the cause of action] longer life in the federal court than it
would have had in the state court without adding something to the cause
of action. We may not do that consistently with Erie R. Co. v.
Tompkins."11
Rodgers: Caught in an Erie Trap
Rodgers involved a product liability action brought by a
Wisconsin resident against several foreign defendants for injuries he
sustained while using a pasta-making machine manufactured in Italy, and
sold to his employer in Milwaukee. The plaintiff filed suit in the U.S.
District Court for the Eastern District of Wisconsin just days before
the three-year statute of limitations ran.12 Initially
operating under the assumption that he had 120 days from the date of
filing his lawsuit within which to effectuate service (in keeping with
Rule 4(m) of the Federal Rules of Civil Procedure), plaintiff's counsel
waited more than two months to send the summons and complaint to a
company for translation and eventual service in accordance with the
Hague Convention. An additional two months passed before the defendants
finally were served. Shortly thereafter, the defendants moved for
summary judgment on the grounds that the action was time-barred, since
the plaintiffs had failed to comply with the 90-day time limit for
effectuating service set forth in sections 801.02
and 893.02
of the Wisconsin Statutes. As the excerpts set out in the accompanying
sidebar reveal, these two statutes specify that an action is not deemed
"commenced" for the purpose of tolling a statute of limitations unless
service is completed within 90 days of filing suit - a period that may
not be enlarged.13
In resisting this motion, similar to the plaintiff in Ragan,
the plaintiffs argued that the Wisconsin service rules conflicted with
Rule 3 of the Federal Rules of Civil Procedure, which provides that "[a]
civil action is commenced by filing a complaint with the court." The
plaintiffs additionally contended that they were required to effectuate
service under the Hague Convention, which trumped Wisconsin law under
the Supremacy Clause of the U.S. Constitution, and that since there was
no dispute that the defendants had been properly served in accordance
with the Hague Convention, the action should be deemed timely. The
plaintiffs noted, moreover, that contrary to their initial position in
requesting a time extension to serve the foreign defendants, the 120-day
time limit of Rule 4(m) of the Federal Rules did not apply, as the rule
expressly states that, "This subdivision does not apply to service in a
foreign country."14
The Flexible Due Diligence Service Standard
Notably, although not mentioned by the Rodgers plaintiffs in
their briefs, several courts in other jurisdictions have adopted a
"flexible due diligence" standard for determining timely service of
foreign defendants in the absence of any set deadline under the Federal
Rules of Civil Procedure. Under this standard, courts assess the
reasonableness of the plaintiff's efforts to effect service under the
circumstances, and consider the prejudice to the defendant from any
delay.15
Significantly, however, these cases either do not involve diversity
claims based on state law,16 or do not implicate
state-imposed constraints on timely service of process.17 As such, they do not trigger Erie or its
progeny as to timely service requirements, since there is no controlling
state law on commencement of the action for tolling purposes that would
be overridden by applying this flexible alternative federal standard.
Nevertheless, this line of authority provides at least a veneer of
respectability to the plaintiffs' arguments in Rodgers - a
position that strikes sympathetic chords insofar as a plain reading of
the Federal Rules suggests there is no time limit for service in a
foreign country.
It also seems harsh and inequitable to throw a plaintiff out of court
for failing to meet a state service deadline when he or she has no
meaningful way to combat the often lengthy delays one encounters in
directing court papers through the various central processing
authorities that have been established by the nations that abide by the
Hague Convention. However, the Rodgers plaintiffs could not
press this equitable argument because they clearly would have been able
to meet the 90-day time limit had counsel not delayed for two months
while supposedly researching service abroad.
Going to Prom
In rejecting the plaintiffs' arguments, and dismissing the case as
time-barred, the Rodgers court principally relied upon the
Wisconsin Court of Appeals' decision in Conservatorship of Prom v.
Sumitomo Rubber Indus. Ltd.18 There the court
upheld the dismissal of the plaintiffs' product liability action against
a Japanese tire manufacturer for failure to comply with the then 60-day
service requirement of section 801.02
of the Wisconsin Statutes. In doing so, the court ruled that the Hague
Convention did not preempt section 801.02
because the Hague Convention did not provide a time period for service
of process to be completed. As such, there was no conflict between its
provisions and those of section 801.02.19
The Prom court also rejected the plaintiffs' argument that
section 801.02
was unconstitutional as applied, since it deprived them of their due
process rights. In doing so, the court noted that "Prom could
have met the 60-day service period with advance planning about the
translation needs for service upon a foreign defendant [that is, having
the pleadings translated before filing them with the court]."20
Walker: Applying A Contemporary Erie
Offspring
Although not mentioned in the Rodgers court's decision, the
U.S. Supreme Court's 1980 decision in Walker v. Armco Steel
Corp.21 provides further support for applying the
90-day service requirement set forth in sections 802.01 and 893.02 to
Wisconsin diversity claims. Walker involved a similar Oklahoma
statute, which, like the immediate predecessor to Wisconsin's current
90-day rule and the Kansas rule in Ragan, deemed an action to
be "commenced" for statute of limitations purposes only if service of
the summons on the defendant had been completed within 60 days.
In upholding the dismissal of the plaintiff's product liability
action as time-barred, the Walker court found that, in
diversity actions, "Rule 3 governs the date from which various timing
requirements of the Federal Rules begin to run, but does not affect
state statutes of limitations."22
As it had in Ragan, the court reasoned that the Oklahoma
statute was an integral part of the state's statute of limitations, and
helped to promote the purpose of having such statutes (that is, giving
the defendant a deadline after which it has "peace of mind" and no
longer has to defend against stale claims).23
The Walker court distinguished the intervening 1965 decision
in Hanna v. Plumer,24 which held that the
manner in which process was served was controlled by Rule 4(d)(1) of the
Federal Rules of Civil Procedure, by pointing out that the analysis in
Hanna is premised on a "direct collision" between the Federal
Rule and a state law.25 The court found no such
"unavoidable" conflict between Rule 3 and the Oklahoma timely service
requirement, and concluded that the two rules could peaceably coexist
side-by-side, "each controlling its own intended sphere of coverage
without conflict."26 Given the passive nature of the
exception Rule 4(m) carves out for service in a foreign country (that
is, the rule does not affirmatively state that no time limit exists),
there is even less potential for an unavoidable collision course between
Rule 4 and a state timely service rule than was present between Rule 3
and the Oklahoma "commencement" rule.
Such a reading of Walker is confirmed by Tso v.
Delaney,27 where, in upholding the dismissal of
certain defendants in a negligence action due to plaintiffs' failure to
timely serve them, the Seventh Circuit pointed out (albeit "buried" in a
footnote) that, by virtue of Walker, the service limits set
forth in section 893.02
of the Wisconsin Statutes control when an action is commenced for
statute of limitations purposes in a Wisconsin diversity action,
notwithstanding the longer, 120-day, service period permitted under Rule
4.28
A Precedential Companion to Rodgers
The court's decision in Rodgers joins Briones v. Toyota
Motor Corp.29 as the only two published federal
decisions that address (and both reject) a challenge to a state's
service requirement as being overridden by the Hague Convention. Briones
offers a sobering glimpse at the obstacles plaintiffs can encounter in
trying to serve defendants under the Hague Convention. There the
plaintiff had attempted no fewer than five times to serve Toyota, only
to have the central processing authority in Japan reject all but one of
them. Unfortunately for the plaintiff, the one attempt that finally
cleared the Japanese processing bottleneck was not even close to
complying with the 90-day service limit provided by Kansas law to toll
the governing two-year statute of limitations. As in Rodgers,
the Briones court dismissed the action as time-barred for failure to
make timely service on the defendant.30
Considering Other Service Options
As mentioned earlier, in contrast to Briones, the plaintiffs in
Rodgers plainly could have met the 90-day service limitation
had they been aware of it before filing suit (as was true in
Prom). However, given the uncertainties involved in shepherding
court papers through foreign service processing authorities, a cautious
approach is advisable, and other means of effectuating service outside
of the Hague Treaty framework should be explored.
One possible alternative to serving via the Hague Convention is
service via the Wisconsin Secretary of State, which was raised in
Prom.31 Whether this option is available
turns on whether the defendant has sufficient contacts with Wisconsin to
be deemed to be "transacting business" in the state.32
It is uncertain though, whether such an option can be pursued in federal
court, as Rule 4 indicates that leave of court may need to be obtained
before such "other means" are used.33
Another possibility is service by registered mail. However, there is
conflicting authority on whether that is a viable alternative. One line
of authority holds that service of process by mail is acceptable,34 while another line, including Prom,
"conclude[s] that art. 10 [of the Hague Convention] does not permit
service of process by mail."35
Conclusion
Whatever the means, one thing is certain - a plaintiff who brings a
diversity action in Wisconsin must comply with the 90-day service
requirement of sections 801.02
and 893.02,
or face certain dismissal. To avoid the Erie trap that the
plaintiffs fell into in Rodgers, counsel must not be lulled
into complacency by the absence of any set deadline for service of
defendants in foreign countries contained in Rule 4(m), since it does
not displace state rules on statutes of limitations, which include
timely service requirements that are engrafted in them, as with section
893.02.
Given the precedential climate created by cases like Prom and
Rodgers, courts are not likely to look sympathetically on
parties who delay in having pleadings translated for filing and
subsequent service abroad, and thereafter "run out of time" to
effectuate proper service.
The guiding principles in approaching service abroad in diversity
cases should be to plan carefully in advance of filing, attempt to use
as many different manners of service as possible, and file early in the
limitations period so as to permit refiling if timely service cannot be
made on the first attempt. In this way, practitioners can best hope to
avoid reviving their Erie nightmares from law school.
Postscript
Shortly before this article was to be sent to press, the Washington
Supreme Court responded to two certified questions from the Ninth
Circuit Court of Appeal in Broad v. Mannesmann Anlagenbau A.G.,36 regarding "tension" between the service requirements
imposed by the Hague Convention and Washington's 90-day time limit to
effectuate service of process. In Broad, the plaintiffs filed a personal
injury suit against a German manufacturer three days before the
three-year limitations period expired. They then directed a request to
have the defendant served to the appropriate German central authority.
However, the German central authority rejected the request because the
plaintiffs had failed to have the court papers translated into German.
By the time the plaintiffs corrected the error and obtained valid
service, 125 days had elapsed.
In reviewing the district court's summary judgment dismissal of the
case on the basis that the action had not been commenced in a timely
fashion, the Ninth Circuit concluded that the lower court had failed to
"consider the tension this case presents between Washington's 90-day
time limit for service of process and the Hague Convention's requirement
that plaintiffs relinquish control over service to a designated central
authority for an indefinite period of time."37
The Washington Supreme Court answered the first question in the
negative, ruling that transmittal of documents to a designated central
authority under the Hague Convention for service of process is not
substituted service on an agent of the defendant.38
However, the court answered the second question in the affirmative,
holding that there should be an exception to the 90-day service limit,
and that it "is extended and the statue of limitations further tolled
once the necessary complying documents are transmitted to the designated
central authority for service on the defendant, provided they are
transmitted within 90 days of filing the complaint."39
In so ruling, the Washington Supreme Court reasoned that the Hague
Convention stands as a "positive rule of law," which could prevent
timely commencement of suit. As such, the court determined that an
exception to the 90-day service rule should be recognized in keeping
with one of its prior decisions and the policing underlying a tolling
statute, which provided that "'[w]hen the commencement of an action is
stayed by ... a statutory prohibition, the time of the ... prohibition
shall not be a part of the time limited for the commencement of the
action.'"40 (Wisconsin has a parallel provision in
Wis. Stat. section 893.23.)
The Washington Supreme Court made it clear that in order to qualify
for the exception, a party had to provide the required translated
documents within the 90-day period. Because there was a fact question as
to when the plaintiffs had transmitted translated documents to the
German central authority, the court declined to rule on the defendant's
contention that the plaintiffs' failure to effect timely service was due
to their own delay, and not due to the relinquishment of control over
service to the central authority.41
Presumably, the Ninth Circuit will conform to the Washington Supreme
Court's response. However, in its decision certifying the two questions
the Ninth Circuit reserved ruling on the plaintiffs' argument that Rule
4(m) of the Federal Rules of Civil Procedure should govern, and that
under it there was no deadline for service of process on a foreign
defendant. The Ninth Circuit remarked that once the Washington Supreme
Court had ruled, "we will be in a position to determine both whether a
conflict exists between state and federal law and which law applies."42 Given the open material factual question that lingers
following the Washington Supreme Court's ruling, the similarity between
the Washington tolling statute and Wisconsin's counterpart, and the
Ninth Circuit's reserved ruling on plaintiffs' Rule 4(m) argument, this
case merits continued close monitoring by those trying to keep abreast
of this developing area of the law.
Endnotes
1 Rodgers v. IMA
S.r.l., Case No. 99C390, 2000 WL 272315 (E.D. Wis. Feb. 23,
2000).
2 Nov. 15, 1965, 20 U.S.T.
361, 658 U.N.T.S. 163.
3 Erie R. Co. v.
Tompkins, 304 U.S. 64 (1938).
4 Swift v. Tyson, 41
U.S. 1 (1842).
5 Erie, 304 U.S. at
74-75.
6 Id. at 78.
7 Guaranty Trust Co. v.
York, 326 U.S. 99 (1945).
8 Id. at 109.
9 Ragan v. Merchants
Transfer & Warehouse Co., 337 U.S. 530 (1949).
10 Id. at 532.
11 Id. at
533-34.
12 See Wis. Stat.
§ 893.54(1).
13 Wis. Stat. §
801.15(2)(a).
14 Fed. R. Civ. P.
4(m).
15 See James v. Rutil
(S.r.l.), Case No. IP 95-530-C-B/S, 1997 WL 151174 (S.D. Ind. March
14, 1997), at *5 (collecting authority).
16 See, e.g., Cargill
Ferrous Int'l, a Division of Cargill Inc. v. M/V Elikon, 154 F.R.D.
193 (N.D. Ill. 1994) (action brought under Carriage of Goods by Sea Act,
46 U.S.C. § 1300, et seq.; service pursuant to Hague Convention
deemed adequate although it did not occur until almost eight months
after filing).
17 See, e.g., Lucas v.
Natoli, 936 F.2d 432 (9th Cir. 1991) (in per curiam decision
holding that 120-day service provision of the predecessor to Rule 4(m)
was inapplicable to service in a foreign country).
18 Conservatorship of
Prom v. Sumitomo Rubber Indus. Ltd., 224 Wis. 2d 743, 592 N.W.2d
657, rev. denied, 599 N.W.2d 409 (Wis. 1999).
19 Id. at 755, 592
N.W.2d at 663.
20 Id. at 763, 592
N.W.2d at 666.
21 Walker v. Armco
Steel Corp., 446 U.S. 740 (1980).
22 Id. at 751.
23 Id.
24 Hanna v.
Plumer, 380 U.S. 460 (1965).
25 Walker, 446
U.S. at 749.
26 Id. at 752.
27 Tso v. Delaney,
969 F.2d 373 (7th Cir. 1992).
28 Id. at 376
n.7.
29 Briones v. Toyota
Motor Corp., Civ. A. No. 85-2365-S, 1986 WL 21345 (D. Kan. July 2,
1986).
30 Id. at *2;
Rodgers, 2000 WL 272315, at *3.
31 Prom, 224 Wis.
2d at 758-59, 592 N.W.2d at 664 (discussing Wis. Stat. §
180.847(4)).
32 Id.
33 Fed. R. Civ. P.
4(f)(3).
34 See Patty v. Toyota
Motor Corp., 777 F. Supp. 956, 958 (N.D. Ga. 1991) (collecting
cases).
35 Prom, 224 Wis.
2d at 757-58, 592 N.W.2d at 664. See also Patty, 777 F. Supp. at 958
(collecting cases that hold, as Prom, that the use of the words
"send judicial documents" in article 10(a) does not mean or include
service of process).
36 No. 68804-4, 2000 WL
1357497 (Wash. Sept. 21, 2000).
37 Broad v. Mannesmann
Anlagenbau AG, 196 F.3d 1075, 1077 (9th Cir. 1999).
38 Broad, 2000 WL
1357497, at *9.
39 Id.
40 Id. at *6
(quoting RCW 4.16.230). See also id. at *7 ("we hold that the analysis
of Seamans [v. Walgren, 82 Wash. 2d 771, 514 P.2d 166 (1973)]
and the policy underlying RCW 4.16.230 applies to toll the statute of
limitations once the necessary documents are sent to the central
authority, provided they are transmitted within the 90-day period").
41 Id. at *8.
42 Broad, 196 F.3d
at 1078.
Wisconsin Lawyer