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IDS Property Casualty Insurance Co. v. Gree USA, Inc.

United States District Court, D. Minnesota

December 17, 2018

IDS Property Casualty Insurance Company as subrogee of Chad and Andrea Murphy, Plaintiff,
v.
Gree USA, Inc., MJC America, LTD., Gree Electric Appliances, Inc. of Zhuhai, and Hong Kong Gree Electric Appliance Sales, LTD., Defendants.

          Marisa L. Saber, Esq. and Cozen O'Connor, counsel for plaintiff.

          Mark A. Fredrickson, Esq. and Lind Jensen Sullivan & Peterson, PA, counsel for defendants.

          ORDER

          David S. Doty, Judge

         This matter is before the court upon defendants Gree Electric Appliances, Inc. of Zhuhai's (Gree China) and Hong Kong Gree Electric Appliance Sales, Ltd.'s (Gree Hong Kong) motion to vacate the clerk's entry of default pursuant to Federal Rule of Civil Procedure 60(b) and to dismiss plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(5). Based on a review of the file, record, and proceedings herein, and for the following reasons, the court grants the motion.

         BACKGROUND

         This product liability case arises out of defendants' manufacture and distribution of an allegedly defective household dehumidifier. Defendants Gree China and Gree Hong Kong are Chinese corporations. Compl. ¶¶ 5-6. Defendants Gree USA, Inc. and MJC America, Ltd. are California corporations. Id. ¶¶ 3-4. Gree Hong Kong is the wholly owned subsidiary of Gree China and the majority owner of Gree USA.[1] Id. ¶ 47. Gree China manufactures dehumidifiers and, through Gree Hong Kong, sells the dehumidifiers under assorted brand-names to Gree USA and MJC America. Id. ¶¶ 16-18. Gree USA and MJC America, in turn, sell the dehumidifiers to retailers in the United States. Id. ¶ 19. Plaintiff IDS Property Casualty Insurance Company (IDS) is a Wisconsin corporation, and plaintiffs Chad Murphy and Andrea Murphy are Minnesota residents. Id. ¶ 2. The Murphys insured their home through IDS. Id. ¶ 29.

         On September 12, 2013, the United States Consumer Product Safety Commission (USCPSC) recalled 2.2 million Gree China manufactured dehumidifiers because of a suspected fire-causing defect. Id. ¶ 64. In January 2014, USCPSC expanded the recall to an additional 300, 000 dehumidifiers. Id. ¶ 66. On March 25, 2016, Gree China, Gree Hong Kong, and Gree USA collectively paid a $15, 450, 000 civil penalty to settle a product safety investigation initiated by USCPSC. Id. ¶ 73.

         The Murphys owned a Gree China manufactured dehumidifier. Id. ¶ 24. On April 15, 2016, their dehumidifier allegedly failed, causing a fire. Id. ¶ 27. IDS compensated the Murphys for smoke, water, and other property damage. Id. ¶ 29.

         On May 11, 2018, plaintiffs commenced this diversity action, raising negligence and strict liability-product liability claims. On May 16, 2018, defendants were served copies of the summons and complaint. See ECF Nos. 13-16. Gree China and Gree Hong Kong do not have authorized service of process agents in the United States. See ECF Nos. 15-16. To perfect service, plaintiffs delivered the summons and complaint to “Richard, the person in charge of 4195 Chino Hills Avenue #1026, Chino Hills, CA to be given to Ming Chu Dong President of [Gree China and Gree Hong Kong] and Director of Gree USA ... business and mailing address 4195 Chino Hills Avenue #1026, Chino Hills, CA.” ECF No. 16. On the same day, plaintiffs mailed first-class copies of the summons and complaint to Ms. Dong on Gree China's and Gree Hong Kong's behalf to Gree USA's Chino Hills, California, business location. Id.

         On August 21, 2018, Gree USA and MJC America answered the complaint; Gree China and Gree Hong Kong did not. ECF No. 17. On October 19, 2018, plaintiffs filed an application for entry of default against Gree China and Gree Hong Kong. ECF No. 33. On October 22, 2018, the clerk of court entered the requested default. ECF No. 34. The next day, Gree China and Gree Hong Kong filed the instant motion to dismiss the complaint against them, or alternatively to quash, for failure to perfect service and to vacate the clerk's entry of default. They argue that as foreign corporations, plaintiffs were required to serve them under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Convention). They also argue that plaintiffs failed to perfect service on them under either California or Minnesota law. Plaintiffs argue that they properly served Gree China and Gree Hong Kong under the Federal and California Rules of Civil Procedure and that the Hague Convention does not apply.

         DISCUSSION

         I. Standard of Review

          A case may be dismissed for insufficient service of process. Fed.R.Civ.P. 12(b)(5); Marshall v. Warwick, 155 F.3d 1027, 1030 (8th Cir. 1998). However, dismissal is not always required when service has been deemed improper. See Haley v. Simmons, 529 F.2d 78, 79 (8th Cir. 1976). “[A] federal court is without jurisdiction to render personal judgment against a defendant if service of process is not made in accordance with applicable federal or state statutory requirements.” Sieg v. Karnes, 693 F.2d 803, 807 (8th Cir. 1982).

         “When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). “The court may ...


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