Rubicon Global Ventures, Inc. v. Chongquing Zongshen Group

• Court: Court of Appeals for the Ninth Circuit
• Decided: March 13, 2014
• Docket: 10-36148
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION MAR 13 2014

MOLLY C. DWYER, CLERK UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

RUBICON GLOBAL VENTURES, INC., No. 10-36148 et al, D.C. Nos. 3:09-cv-00818-HA Plaintiff - Appellant, 3:09-cv-01397-HA 3:10-cv-00833-HA v. ORDER AND CHONGQUING ZONGSHEN GROUP AMENDED MEMORANDUM* IMPORT/EXPORT CORP., et al,

Defendant - Appellee.

RUBICON GLOBAL VENTURES, INC., No. 11-35045 et al, D.C. No. 3:05-cv-01809-HA Plaintiff - Appellant,

v.

CHONGQUING ZONGSHEN GROUP IMPORT/EXPORT CORP., et al,

RUBICON GLOBAL VENTURES, INC., No. 11-35090 et al, D.C. Nos. 3:09-cv-00818-HA

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. Plaintiff - Appellee, 3:09-cv-01397-HA 3:10-cv-00833-HA v.

Defendant - Appellant.

Appeal from the United States District Court for the District of Oregon, Portland Ancer L. Haggerty, District Judge, Presiding

Argued and Submitted July 9, 2012 Portland, Oregon

Before: PREGERSON and FLETCHER,** Circuit Judges, and WALTER, Senior District Judge.***

This matter is before the Court on a “motion to vacate and/or stay the

mandate to correct error regarding personal jurisdiction over Ying Zuo,” filed on

behalf of defendant-appellee Ying Zuo. We construe this motion as a motion to

recall the mandate issued on April 18, 2013. This Court may exercise its authority

to recall its mandate for “good cause” or to “prevent injustice[;]” however, the

power to do so should be exercised only in exceptional circumstances. Zipfel v.

** Judge Betty B. Fletcher was a member of the panel but passed away after the mandate issued. Judge W. Fletcher was drawn to replace her. *** The Honorable Donald E. Walter, Senior United States District Judge for Western Louisiana, sitting by designation. 2 Halliburton Co., 861 F.2d 565, 567 (9th Cir. 1988) (internal citations omitted).

Based on a factual error in the Court’s reading of the relevant complaint, the Court

incorrectly found personal jurisdiction existed over Ying Zuo where it, in fact, did

not. Accordingly, finding that good cause exists to modify this Court’s prior

ruling, we exercise our discretion to grant the instant motion, recall the mandate

issued on April 18, 2013, and issue the following amended ruling.

Appellants Rubicon Global Ventures, Inc. and Z Motors, Inc. appeal, inter

alia: (a) the district court’s setting aside of the default judgments in District Court

Docket Nos. 3:05-cv-01809 (“Rubicon I”), 3:09-cv-00818 (“Rubicon II”), and

3:09-cv-01397 (“Rubicon III”) on the basis of insufficiency of service; and (b) the

district court’s dismissal of Ying Zuo and Zongshen USA Holdings, Inc. for lack

of personal jurisdiction. For the reasons below, we find that service was sufficient

on all appellees other than Zongshen Zuo. As to the dismissals for lack of personal

jurisdiction, we find no error in the district court’s rulings. We therefore affirm in

part, reverse in part, and remand for further proceedings consistent with this

amended memorandum disposition.

The district court set aside the defaults and default judgments on the grounds

that such judgments were void for insufficiency of service of process. The Ninth

Circuit has found that “[a] final judgment is ‘void’ for purposes of Rule 60(b)(4)

3 only if the court that considered it lacked jurisdiction, either as to the subject

matter of the dispute or over the parties to be bound, or acted in a manner

inconsistent with due process of law.” United States v. Berke, 170 F.3d 882, 883

(9th Cir. 1999) (internal citations omitted). As the district court’s rulings fit

squarely within the ambit of Rule 60(b)(4), this Court reviews said rulings de novo.

See Thomas P. Gonzalez Corp. v. Consejo Nacional De Produccion De Costa

Rica, 614 F.2d 1247, 1256 (9th Cir. 1980) (“[t]here is no question of discretion on

the part of the court when a motion is under Rule 60(b)(4)”).

“Service of process has its own due process component, and must be ‘notice

reasonably calculated . . . to apprise interested parties of the pendency of the action

and afford them an opportunity to present their objections.’” S.E.C. v. Ross, 504

F.3d 1130, 1138 (9th Cir. 2007) (quoting Mullane v. Cent. Hanover Bank & Trust

Co., 339 U.S. 306, 314 (1950)). “Under the federal rules, foreign corporations

may be served either (1) in accordance with the law of the state in which the

district court is located, Fed. R. Civ. P. [4(h)(1)(A)], or (2) by delivering a copy of

the summons and the complaint ‘to an officer, a managing or general agent, or to

any other agent authorized by appointment or by law to receive service of process.’

Fed. R. Civ. P. [4(h)(1)(B)].” Chan v. Soc’y Expeditions, Inc., 39 F.3d 1398, 1404

(9th Cir. 1994).

4 We agree with the district court that it was not necessary in this case for the

appellants to comply with the Convention on Service Abroad of Judicial and

Extrajudicial Documents in Civil Commercial Matters, November 15, 1965 (Hague

Service Convention), [1969] 20 U.S.T. 361, T.I.A.S. No. 6638. Instead, we must

apply Oregon law. In determining whether service is adequate under Oregon law,

the question is: “[w]as the method of service selected . . . ‘reasonably calculated to

apprise the defendant of the existence and pendency of the action?’” Baker v. Foy,

797 P.2d 349, 352 n. 6 (Or. 1990); Or. R. Civ. P. 7(D)(1). ORCP 7(D)(1) provides

guidance for types of service that “may meet the ‘reasonable notice’ standard of

adequate service,” and ORCP 7(D)(2) describes particular, non-exclusive methods

of service which may be used. Id. at 352. Rather than absolute compliance with

one of the methods specified in ORCP 7(D), “[w]hat is mandatory is that whatever

manner or method of service is employed by a plaintiff, it must satisfy the

aforementioned ‘reasonable notice’ standard of adequate service of ORCP

7(D)(1).” Id. Based on the totality of circumstances unique to this case, we find

that both ZS Group and ZSIE had sufficient, reasonable notice of the pendency of

the actions against them.

We first address service on Chongquing Zongshen Group (“ZS Group”),

which we understand to be one and the same as the entities commonly referred to

5 in this case as Zongshen Industrial Group, Co. Ltd. (“ZIGCL”) and Zongshen

Industrial Group (“ZIG”). ZS Group was served through Zongshen, Inc., as agent

of ZS Group. The record reflects that Zongshen, Inc. was 95 percent owned by ZS

Group, with the remaining 5 percent ownership held by Dexiu Yuan, who has

positions in both companies. We conclude that ZS Group had sufficient,

reasonable notice via service on Zongshen, Inc., given the following factors: (a) the

substantial common ownership links between the two entities; (b) Mr. Xie

Yenong’s 2004 letter to the EPA representing Zongshen, Inc. to be the agent for ZS

Group; and (c) the decision in Volkswagenwerk Aktiengesellschaft v. Schlunk, 486

U.S. 694 (1988), affirming an Illinois court’s finding that a domestic subsidiary

was an involuntary agent based on similar, even less compelling facts.

ZIGCL is the ultimate parent company of Chongquing Zongshen Group

Import/Export Corp. (“ZSIE”). As was the case with the domestic subsidiary in

Schlunk, Zongshen, Inc. was listed as the agent for service of process for ZSIE for

the purpose of receiving notices under the National Traffic and Motor Vehicle

Safety Act (“NTMVSA”). Not only was Zongshen, Inc. placed in the foreground

as the American face of all Chinese Zongshen entities, it was registered as ZSIE’s

agent for suits arising under the NTMVSA and shared officers with the other

Zongshen entities. Based on Schlunk, we find that ZSIE and Zongshen, Inc. were

6 so closely related that the latter was ZSIE’s agent for service as a matter of law,

“notwithstanding [ZSIE’s] failure or refusal to appoint [Zongshen, Inc.] formally

as an agent.” See Schlunk, 486 U.S. at 697.

As to Zongshen Zuo, the only service attempted was substitute service on his

spouse, Dexiu Yuan, at her usual place of abode in Florida. We agree with the

district court’s assessment that Zongshen Zuo was not served pursuant to ORCP

7(D)(2)(b), as the Florida residence was not his usual place of residence or abode.

Likewise, such service did not provide reasonable notice of suit as there is no

evidence that the summons and complaint were mailed to Zongshen Zuo in China

or that he otherwise received notice of the pendency of the actions against him.

Thus, we affirm the district court’s ruling as to insufficiency of service of process

on Zongshen Zuo.

The only remaining issue which this Court must address is the district

court’s dismissal of Ying Zuo and Zongshen USA Holdings, Inc. (“ZUSA”) for

lack of personal jurisdiction. We review a dismissal for lack of personal

jurisdiction de novo. Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218,

1223 (9th Cir. 2011), cert. denied, 132 S. Ct. 1101 (2012) (citing Boschetto v.

Hansing, 539 F.3d 1011, 1015 (9th Cir. 2008)). “Where, as in this case, the trial

court ruled on the issue relying on affidavits and discovery materials without

7 holding an evidentiary hearing, dismissal is appropriate only if the plaintiff has not

made a prima facie showing of personal jurisdiction.” Fields v. Sedgwick

Associated Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986). In determining whether

the appellants have met their burden, uncontroverted allegations in the complaint

must be taken as true, and conflicts over statements contained in affidavits must be

resolved in the appellants’ favor. Love v. Associated Newspapers, Ltd., 611 F.3d

601, 608 (9th Cir. 2010).

The appellants sought to allege specific personal jurisdiction over Ying Zuo,

which is personal jurisdiction arising out of a defendant’s contacts with the forum.

See Wells Fargo & Co. v. Wells Fargo Exp. Co., 556 F.2d 406, 412-413 (9th Cir.

1977). On June 7, 2010, the district court’s order regarding motions to set aside

the defaults and default judgments included the following ruling:

This court will not exercise general personal jurisdiction over defendant Ying Zuo. During the relevant time frame, defendant Ying Zuo was a college student and was not involved in the day-to-day activities of the corporate defendants and had no involvement with the alleged fraud that occurred. Accordingly, this court lacks specific personal jurisdiction over her.

The district court ordered further briefing on matters unresolved by its June 7

order. The appellees also filed motions for dismissal based on the district court’s

June 7 rulings. On August 25, 2010, the district court dismissed Ying Zuo for lack

8 of personal jurisdiction, ruling that there had “been no allegations of any conduct

by Ying Zuo that would subject her to this court’s jurisdiction or subject her to any

liability in these cases, through RICO or otherwise.” We now affirm that ruling, as

follows.

A careful reading of the operative Rubicon II complaint makes it clear that

the appellants had indeed failed to meet their burden, at that time, of establishing

personal jurisdiction over Ying Zuo. That complaint alleged:

The individual defendants include (1) Zuo Zongshen, who is the founder of the Zongshen corporate defendants, (2) Dexiu Yuan, who on information and belief resides in Florida, and is the incorporator, president and director of Zongshen Inc. [sic] and [ZUSA], and (3) Ying Zuo, who on information and belief resides in Florida and is vice president, secretary, treasurer and director of [ZUSA]. Defendant Zuo met with plaintiffs and made certain false representations to them in order to induce them to market Zongshen products as discussed below. Both defendants Dexiu and Ying conspired with the other defendants to sell illegal motorbikes in the United States through Zongshen, Inc., plaintiffs and other persons like plaintiffs.

Clearly, when read in the proper context, this paragraph is referring to Zuo

Zongshen by his first name, “Zuo,” and attributes to him the allegation that he “met

with plaintiffs and made certain false representations to them in order to induce

them to market Zongshen products[.]” This clarification contradicts the Court’s

earlier interpretation of these facts.

The basis for this Court’s initial misreading of the Rubicon II complaint was

9 twofold. First, there was a lack of appreciation for the reference to Zuo Zongshen,

rather than Ying Zuo, as “Zuo.” Second, there was a conflation of non-pertinent

allegations made in the later Rubicon IV complaint with those properly before the

Court in the amended Rubicon II complaint. The Rubicon IV complaint made

seemingly similar allegations to those at issue in the Rubicon II complaint;

however, the Rubicon IV allegations were much more fact-specific concerning

Ying Zuo’s relevant activities. The Rubicon IV complaint read as follows, as it

related to Ying Zuo:

[S]he was and is an officer and on the board of directors of a Zongshen company, [ZPM] commencing in 2004; . . . [and] she met with plaintiffs’ representatives before they created Z Motors, Inc., and made representations to plaintiffs causing the Oregon investors to form Z Motors, Inc., and take actions in Oregon in furtherance of the joint venture between plaintiffs and defendants.

The combination of the similar “Zuo” names and the more detailed allegations

contained in the Rubicon IV complaint allowed this Court to reach an inaccurate

legal conclusion regarding whether the operative Rubicon II complaint sufficiently

alleged personal jurisdiction over Ying Zuo.

In light of these clarified facts, the Court hereby amends its ruling to find

that the appellants failed to make a prima facie showing of personal jurisdiction

over Ying Zuo in Rubicon II. See Fields, 796 F.2d at 301; see also Swartz v.

10 KPMG LLP, 476 F.3d 756, 766 (9th Cir. 2007). Accordingly, the district court did

not err in dismissing Ying Zuo for lack of personal jurisdiction.

Lastly, the appellants attempted to allege personal jurisdiction over ZUSA

by virtue of the fact that ZUSA is a Zongshen entity, and all other Zongshen

entities are subject to personal jurisdiction. However, this cannot suffice to make

out a prima facie case for personal jurisdiction over ZUSA. Because the appellants

failed to allege sufficient facts for the court to assert personal jurisdiction over

ZUSA, there was no error in dismissing ZUSA.

Each party should bear their own costs.

AFFIRMED IN PART, REVERSED IN PART AND REMANDED.