(Asia) v. Changzhou Sinotype Tech. Co.

233 Cal. Rptr. 3d 814, 24 Cal. App. 5th 115
CourtCalifornia Court of Appeal, 5th District
DecidedJune 1, 2018
DocketB272170
StatusPublished
Cited by4 cases

This text of 233 Cal. Rptr. 3d 814 ((Asia) v. Changzhou Sinotype Tech. Co.) is published on Counsel Stack Legal Research, covering California Court of Appeal, 5th District primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
(Asia) v. Changzhou Sinotype Tech. Co., 233 Cal. Rptr. 3d 814, 24 Cal. App. 5th 115 (Cal. Ct. App. 2018).

Opinion

EDMON, P.J.

*120This appeal concerns an aborted international business deal between Changzhou SinoType Technology Company, Ltd. (SinoType), a Chinese company, and Rockefeller Technology Investments (Asia) VII (Rockefeller Asia), an American investment *817partnership. When the relationship between the two entities soured, Rockefeller Asia pursued contractual arbitration against SinoType in Los Angeles. SinoType did not appear or participate in the arbitration proceeding, and the arbitrator entered a default award in excess of $414 million against it. The award was confirmed and judgment entered, again at a proceeding in which SinoType did not participate.

Approximately 15 months later, SinoType moved to set aside the judgment on the grounds that it had never entered into a binding contract with Rockefeller Asia, had not agreed to contractual arbitration, and had not been served with the summons and petition to confirm the arbitration award in the manner required by the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, Nov. 15, 1965, 20 U.S.T. 361, T.I.A.S. No. 6638 (hereafter, Hague Service Convention or Convention). The trial court acknowledged that the service of the summons and petition had not complied with the Hague Service Convention, but concluded that the parties had privately agreed to accept service by mail. The court therefore denied the motion to set aside the judgment.

We reverse. As we discuss, the Hague Service Convention does not permit Chinese citizens to be served by mail, nor does it allow parties to set their own terms of service by contract. SinoType therefore was never validly served with process. As a result, "no personal jurisdiction by the court [was] obtained and the resulting judgment [is] void as violating fundamental due process." ( County of San Diego v. Gorham (2010) 186 Cal.App.4th 1215, 1227, 113 Cal.Rptr.3d 147.) The trial court therefore erred in denying the motion to set aside the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Parties and the MOU

SinoType is a Chinese company headquartered in Changzhou, China that develops and licenses Chinese fonts. Kejian (Curt) Huang (hereafter, Curt)1 , a citizen and resident of China, is SinoType's chairman and general manager.

Rockefeller Asia is an American investment partnership headquartered in New York. Faye Huang (hereafter, Faye) is Rockefeller Asia's president.

*121In 2007 and 2008, Curt and Faye met several times in Los Angeles to discuss forming a new company to market international fonts. On February 18, 2008, they signed a four-page Memorandum of Understanding (MOU), the legal significance of which is disputed. The MOU stated that the parties intended to form a new company, known as World Wide Type (WWT), which would be organized in California and have its principal offices in the Silicon Valley. SinoType would receive an 87.5 percent interest in WWT "and shall contribute 100% of its interests in the companies comprising Party A, i.e., Changzhou SinoType Technology." Rockefeller Asia would receive a 12.5 percent interest in WWT "and shall contribute 100% of its interests in the companies comprising Party B, i.e., Rockefeller Technology Investments (Asia) VII."

The MOU provided that "[t]he parties shall proceed with all deliberate speed, within 90 days if possible, to draft and to all execute long form agreements carrying forth the agreements made in this Agreement, together with any and all documents *818in furtherance of the agreements." It also provided, however, that "[u]pon execution by the parties, this Agreement shall be in full force and effect and shall constitute the full understanding of the Parties that shall not be modified by any other agreements, oral or written."

The MOU contained several provisions governing potential disputes between the parties, as follows:

"6. The Parties shall provide notice in the English language to each other at the addresses set forth in the Agreement via Federal Express or similar courier, with copies via facsimile or email, and shall be deemed received 3 business days after deposit with the courier.

"7. The Parties hereby submit to the jurisdiction of the Federal and State courts in California and consent to service of process in accord with the notice provisions above.

"8. In the event of any disputes arising between the Parties to this Agreement, either Party may submit the dispute to the Judicial Arbitration & Mediation Service in Los Angeles for exclusive and final resolution pursuant to according to [sic ] its streamlined procedures before a single arbitrator .... Disputes shall include failure of the Parties to come to Agreement as required by this Agreement in a timely fashion."

*122B. The 2013 Arbitration

The relationship between the parties soured, and in February 2012, Rockefeller Asia filed a demand for arbitration with the Judicial Arbitration & Mediation Service (JAMS) in Los Angeles.2 SinoType did not appear at the arbitration, which proceeded in its absence.

The arbitrator issued a final award on November 6, 2013.3 He found as follows:

Rockefeller Asia is a special-purpose entity organized to provide capital to support technology companies in Asia. Its partners include Rockefeller Fund Management Co., LLC.

In February 2008, SinoType and Rockefeller Asia entered into a MOU in which they agreed to form a new company (WWT). Each party was to contribute its entire interest in its business to WWT. In return, SinoType was to receive an 87.5 percent interest, and Rockefeller Asia was to receive a 12.5 percent interest, in WWT. In 2008, Rockefeller Asia was funded with stock worth $9.65 million.

In 2010, the parties sought additional investors to buy a 10 percent interest in WWT. The highest offer, obtained in May 2010, was for $60 million. After receiving this offer, SinoType insisted that Rockefeller Asia agree to a reduction of its interest. When Rockefeller Asia refused, SinoType unilaterally terminated the MOU.

Rockefeller Asia's damages expert opined that Rockefeller Asia's damages included three components: loss of its 12.5 percent interest in WWT; loss of its control premium, which the expert valued at 10 percent of WWT's total value; and loss of its anti-dilution rights, which the expert *819valued at 6.25 percent of WWT's total value. Thus, Rockefeller Asia's damages were equal to 28.75 percent (12.5% + 10% + 6.25% = 28.75%) of WWT's value.

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Bluebook (online)
233 Cal. Rptr. 3d 814, 24 Cal. App. 5th 115, Counsel Stack Legal Research, https://law.counselstack.com/opinion/asia-v-changzhou-sinotype-tech-co-calctapp5d-2018.