Timely Service Abroad in Diversity Suits

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.

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