Jeff Feyko v. Yuhe International Inc et al, No. 2:2011cv05511 - Document 161 (C.D. Cal. 2013)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART LEAD PLAINTIFFS MOTION TO AUTHORIZE SERVICE ON INDIVIDUAL DEFENDANTS LOCATED ABROAD BY SERVING DEFENDANT YUHE INTERNATIONAL, INC.S U.S. COUNSEL PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 4(f)(3) 141 by Judge Dean D. Pregerson: Lead Plaintiffs Motion is GRANTED as to Gao and Yingjun, but DENIED as to Gang. (lc). Modified on 9/12/2013 (lc). Modified on 9/12/2013 (lc).
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Jeff Feyko v. Yuhe International Inc et al Doc. 161 1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 JEFF FEYKO, individually and on behalf of all others similarly situated, 13 14 15 Plaintiff, v. YUHE INTERNATIONAL, INC., GAO ZHENTAO and HU GANG., 16 17 Defendants. ___________________________ 18 ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 11-05511 DDP (PJWx) ORDER GRANTING IN PART AND DENYING IN PART LEAD PLAINTIFF’S MOTION TO AUTHORIZE SERVICE ON INDIVIDUAL DEFENDANTS LOCATED ABROAD BY SERVING DEFENDANT YUHE INTERNATIONAL, INC.’S U.S. COUNSEL PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 4(f)(3) I. Background 19 [Docket No. 141] Lead Plaintiff has sued Yuhe, a Nevada company headquartered 20 in China that traded on the NASDAQ, three of its officers, its 21 outside auditor, and the underwriters of its secondary stock 22 offering. 23 18-28, Docket No. 133.) 24 this case other than the three Yuhe officers named as defendants: 25 Chief Executive Officer Zhentao Gao (“Gao”), Chief Accounting 26 Officer Jiang Yingjun (“Yingjun”), and former Chief Financial 27 Officer Hu Gang (“Gang”) (collectively the “Individual 28 Defendants”). (Second Consolidated Amended Complaint (“SCAC”) ¶¶ All defendants have entered appearances in The Individual Defendants are alleged to have Dockets.Justia.com 1 violated Sections 10(b) and 20(a) of the Securities Exchange Act of 2 1934 (the “Exchange Act”) and Sections 11 and 15 of the Securities 3 Act of 1933 (the “Securities Act”). 4 states, and Lead Plaintiff does not dispute, that Gao and Yingjun 5 remain at Yuhe, but Gang resigned in July 2012. 6 2:21-25.) 7 and secondary offering documents that Lead Plaintiff has alleged 8 contain false statements of material fact regarding Yuhe’s alleged 9 purchase of thirteen breeder farms from Dajiang. (See generally SCAC.) Yuhe (Docket No. 145 at These Individual Defendants signed various 10-Ks, 10-Qs (SCAC ¶¶ 51, 54, 10 56, 58, 59, 63, 66 and 68.) 11 represents Yuhe in this action. 12 Plaintiff’s Motion to Authorize Service on Individual Defendant 13 Yuhe International, Inc.’s U.S. Counsel Pursuant to Federal Rule of 14 Civil Procedure 4(f)(3). 15 II. Legal Standard 16 Sidley Austin LLP (“Sidley”) Presently before the Court is Lead Rule 4(f)(3), permits service in a place not within any 17 judicial district of the United States “by ... means not prohibited 18 by international agreement, as the court orders.” 19 Circuit has held: The Ninth 20 As obvious from its plain language, service under Rule 21 4(f)(3) must be (1) directed by the court; and (2) not 22 prohibited by international agreement. No other 23 limitations are evident from the text. In fact, as long 24 as court-directed and not prohibited by an international 25 agreement, service of process ordered under Rule 4(f)(3) 26 may be accomplished in contravention of the laws of the 27 foreign country. 28 2 1 Rio Properties, Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1014 2 (9th Cir. 2002) (emphasis added). 3 discretion to “determin[e] when the particularities and necessities 4 of a given case require alternate service of process under Rule 5 4(f)(3).” 6 which requires that “the method of service crafted by the district 7 court must be reasonably calculated, under all the circumstances, 8 to apprise interested parties of the pendency of the action and 9 afford them an opportunity to present their objections.” Id. at 1016. District Courts have the Service should not offend due process, 10 (internal quotation marks and citation omitted). 11 Id. III. Analysis 12 Yuhe first argues that Lead Plaintiff should have attempted to 13 serve the Individual Defendants pursuant to the Hague Convention. 14 Many district courts disagree. 15 Integrated Energy, Inc., 285 F.R.D. 560, 564-65 (C.D. Cal. 2012) 16 (“These courts rejected contentions . . . that the Hague Convention 17 provided the only means to effect service on a defendant residing 18 in China.”) (citing cases). 19 Properties supports these district courts. 20 in Rio Properties were located in a country that was not a 21 signatory to the Hague Convention, Rio Properties 284 F.3d at 1015 22 n. 4, this distinction makes no difference. 23 specifically permits service pursuant to the Hague Convention, and 24 the Ninth stated in Rio Properties stated that “court-directed 25 service under Rule 4(f)(3) is as favored as service available under 26 Rule 4(f)(1) or Rule 4(f)(2).” 27 conclusion follows from the plain language of Rule 4(f)(3), which See, e.g., Brown v. China The Ninth Circuit’s holding in Rio Although the defendants Id. at 1015. 28 3 Rule 4(f)(1) The Circuit’s 1 only requires that service “be (1) directed by the court; and (2) 2 not prohibited by international agreement.” 3 Id. at 1014. For similar reasons the Court rejects Yuhe’s argument that 4 Lead Plaintiff should have made other efforts to serve the 5 Individual Defendants, before filing this Motion. 6 matter, it is unclear what Yuhe could have done besides initiating 7 service pursuant to the Hague Convention. 8 have approved a Rule 4(f)(3) service when, “plaintiffs have shown 9 the difficulty of serving the unserved defendants located abroad” As an initial Regardless, other courts 10 and “[d]efense counsel have refused to accept service on behalf of 11 the unserved defendants on the ground that they do not represent 12 the international defendants.” 13 07-05182 WHA, 2008 WL 2415186, at *3 (N.D. Cal. June 12, 2008). 14 Both conditions are present here, as Yuhe’s counsel has refused to 15 accept service and Lead Plaintiff has demonstrated the lengthy, 16 costly, and uncertain nature of serving individuals in China. 17 (Brody Decl. Exs. B, C; see generally Kim Decl.); see Vanleeuwen v. 18 Keyuan Petrochemicals, Inc., No. CV 11-9495 PSG JCGX, 2012 WL 19 5992134 (C.D. Cal. Nov. 30, 2012) (“While it may be possible for 20 Plaintiffs to serve Tao in China through ordinary procedures, doing 21 so may be an unproductive and unnecessary exercise. 22 the present circumstances, the Court finds it appropriate to permit 23 alternative service [of counsel or the registered agent of the 24 corporation for which Tao was CEO].”) 25 In re LDK Solar Sec. Litig., No. C As such, in Yuhe also argues that Sidley is not authorized to accept 26 service of the Individual Defendants, and therefore granting this 27 Motion would be improper under Jimena v. UBS AG Bank, which held 28 “service of process on an attorney is ineffective unless the 4 1 attorney has specific authority to accept service in the action.” 2 No. CV-F-07-367 OWW/SKO, 2010 WL 2465333, at *7 (E.D. Cal. June 10, 3 2010). 4 service requirement does not necessarily apply in the Rule 4(f)(3) 5 context. 6 whether the Court, not anyone else, should authorize service. See 7 In re China Educ. Alliance, Inc. Sec. Lit., CV 10-9239 CAS JCX, 8 2011 WL 6846214 (C.D. Cal. Dec. 29, 2011) (“[A]uthorizing service” 9 of individual defendants via their company’s counsel). 10 However, Jimena recognized that the authority-to-accept- Indeed, the whole point of a 4(f)(3) motion is to decide Yuhe also states that authorizing service in this case 11 violates due process. 12 have found that due process permits authorizing service on counsel 13 for the company that employs foreign individual defendants. 14 *3; Brown, 285 F.R.D. at 566 (C.D. Cal. 2012) (“Even if the 15 individual defendants are not actively involved in directing the 16 litigation, their close connection to China Integrated makes it all 17 but certain that when Gao, Li, and Guo are served through the 18 company’s counsel or its agent, they will receive notice of the 19 suit.”); Vanleeuwen, 2012 WL 5992134 at *3. 20 process concerns with granting Lead Plaintiff’s Motion as to Gao 21 and Yingjun. 22 However, this Court joins the others that Id. at Thus, there are no due However, Gang is different because he resigned from Yuhe over 23 a year ago. 24 district have authorized Rule 4(f)(3) service and some have not. 25 Rose v. Deer Consumer Products, Inc., CV 11-03701 DMG MRWX, 2011 WL 26 6951969 (C.D. Cal. Dec. 29, 2011) (authorizing service); In re 27 China Educ. Alliance, Inc. Sec. Litig., No. CV 10-9239 CAS, 2011 WL 28 3715969 (C.D. Cal. Aug. 22, 2011) (not authorizing service). In circumstances such as Gang’s, some courts in this 5 This 1 Court finds service of Gang is inappropriate. 2 As the In re China Educ. Alliance court held: 3 [I]t would be difficult to ensure compliance with due 4 process concerns. 5 “easy” for CEU's agent to deliver process to each 6 individual; the inquiry is whether the service is 7 constitutionally “reasonably calculated” to reach these 8 defendants, and without any apparent affiliation between 9 the individuals and CEU, this Court cannot simply rely on 10 It is irrelevant whether it would be the agent to deliver the summons and complaint. 11 2011 WL 3715969, at *3. 12 Gang on due process grounds. 13 IV. Conclusion 14 15 Thus, the Court DENIES the Motion as to For the reasons stated herein, Lead Plaintiff’s Motion is GRANTED as to Gao and Yingjun, but DENIED as to Gang. 16 17 IT IS SO ORDERED. 18 19 20 Dated: September 12, 2013 DEAN D. PREGERSON United States District Judge 21 22 23 24 25 26 27 28 6
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