Judge: Michael E. Whitaker, Case: 21SMV01618, Date: 2025-04-01 Tentative Ruling

Case Number: 21SMV01618    Hearing Date: April 1, 2025    Dept: 207

TENTATIVE RULING

BACKGROUND

            This lawsuit arises from a business dispute. 

            Plaintiff PacTec Holdings, LLC (“PacTec” or “Plaintiff”) alleges Individual Defendants James Zhu (“Zhu”) and Gary Ge (aka Yongchang Geng), while employed by Plaintiff, through their companies Defendants Fanli, Inc. (“Fanli”); Shanghai Zhongyan Information Technology Co., Ltd. (“SZ”); Shanghai Xiangrui Enterprise Management Consulting Firm Co., Ltd. (“Defendants”) surreptitiously competed with Plaintiff and stole business opportunities from Plaintiff, in violation of their employment agreements, fiduciary duties, and ethical obligations. 

            The Court has issued an Order to Show Cause why the action should not be dismissed as to Defendant Zhu for failure to serve the summons and complaint within three years pursuant to Code of Civil Procedure sections 583.210 et seq.  Plaintiff has filed a written opposition to the OSC. 

Zhu has also filed a motion to dismiss the action for failure to serve within three years, or in the alternative, to Quash Service of the Summons, which PacTec has opposed, and to which Zhu has replied.        

REQUEST FOR JUDICIAL NOTICE

            PacTec requests judicial notice of the following:

Exhibit L: A true and correct copy of the a (sic) page on the website of U.S. Embassy & Consulates in China, available at https://china.usembassy-china.org.cn/healthalert-u-s-consulate-general-shanghai-peoples-republic-of-china-april-11-2022/.

Exhibit M: A true and correct copy of the a (sic) page on the website of U.S. Embassy & Consulates in China, available at https://china.usembassy-china.org.cn/healthalert-china-announcement-on-lockdown-measures/

Exhibit N: A true and correct copy of the a (sic) page on the website of U.S. Embassy & Consulates in China, available at https://china.usembassy-china.org.cn/healthalert-shanghai-extended-temporary-waiver-of-pre-flight-covid-test-and-dogimport-permit.

            Courts may take judicial notice of facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.  (Evid., § 452, subd. (h).) 

            Here, the official website for the U.S. Embassy & Consulates in China is a source of reasonably indisputable accuracy, and Zhu has not disputed the accuracy of or otherwise challenged the exhibits.  Therefore, the Court grants PacTec’s request for judicial notice.

EVIDENTIARY OBJECTIONS

            The Court rules as follows with respect to Zhu’s evidentiary objections:

1.     Overruled

2.     Sustained

3.     Overruled

4.     Sustained

5.     Sustained

6.     Overruled

7.     Overruled

FACTUAL BACKGROUND

            The Complaint was filed against Zhu on October 1, 2021.  On November 3, 2021, Plaintiff first attempted to serve Zhu in China pursuant to the Hague Service Convention.  (Gonzalez Decl. ¶ 2.)  A work address was located for Zhu, but residential addresses in China are not discoverable due to strict privacy laws.  (Su Decl. ¶¶ 4, 5 and Exs. C, D.)  The summons and complaint were delivered to the work address by FedEx on November 29, 2021.  (Gonzalez Decl. ¶ 4.)

            As of April 25, 2022, the request to serve Zhu was still with the local Shanghai court.  (Su Decl. ¶ 12, Ex. F.) 

            On November 20, 2023, PacTec’s counsel received by email a set of documents pertaining to their request to serve Zhu pursuant to the Hague Service Convention.  (Su Decl. ¶¶ 14, 15 and Exs. F, G.)  The documents revealed the package had not been served due to insufficient postage.  (Su Decl. ¶ 15a, Ex G.)  A mailing slip also included handwriting indicating “address lacks detail; there are three buildings; missing building number and floor number.”  (Ibid.)

            Zhu’s employer, Fanli Digital, has the same address as its parent company, SZ, which Plaintiff has successfully served at that address via the Hague Convention before.  (Su Decl. ¶ 16.)  Accordingly, on December 13, 2023, Plaintiff’s counsel submitted a new request to serve Zhu at that location.  (Su Decl. ¶ 16 and Ex. H.)  However, this attempt also failed. 

            In the meantime, Zhu has had actual notice of this lawsuit, as evidenced by public disclosures Fanli has made about this case in its annual reports for the years 2021, 2022, and 2023.  (Su Decl. ¶ 9f.)

            On September 11, 2023, Plaintiff also reached out to Defendant’s counsel, requesting that they accept service on behalf of Zhu, but counsel indicated they were not authorized to accept service on Zhu’s behalf.  (Su Decl. ¶¶ 21-22 and Ex. J.)  On August 14, 2024, Plaintiff’s counsel asked Zhu’s counsel again to accept service, but Counsel reiterated that they lacked the authority.  (Su Decl. ¶¶ 23-24 and Ex. K.)

            On August 22, 2024, PacTec applied ex parte to serve Zhu by publication in the Los Angeles Daily Journal.  On August 30, 2024, the Court denied the application on the grounds that a Los Angeles newspaper is not “most likely to give actual notice” to Zhu.  (Minute Order, Aug. 30, 2024.)

            On October 15, 2024, PacTec applied again ex parte to serve Zhu by publication in the Yangtse Evening News, which the Court granted.  Subsequently, however, the Yangtze Evening News rejected PacTec’s request to publish the summons for Zhu.  (Su Decl. ¶ 30.)

            On October 25, 2024, PacTec submitted a third ex parte application to serve Zhu by publication in the Shanghai Daily, the Jiangsu Economic News, or the Los Angeles Daily Journal, which the Court granted in part on October 29, 2024, authorizing service by publication in the Jiangsu Economic News or the Shanghai Daily.  (Minute Order, Oct. 29, 2024.)

            The summons was published in the Jiangsu Economic News on November 1, 8, 15, and 22, 2024, with service deemed complete as of November 28, 2024.  (Su Decl. ¶¶ 33, 34, Ex. BB.)

            On January 14, 2025, Zhu appeared specially and moved to dismiss for failure to serve within 3 years, or in the alternative, to quash for failure to effectuate service on the grounds that the Jiangsu Economic News does not publish in the same province as Shanghai and is therefore not most likely to give Zhu actual notice.

ANALYSIS

                          I.          Dismiss

Under Code of Civil Procedure section 583.210, “[t]he summons and complaint shall be served upon a defendant within three years after the action is commenced against the defendant.”  “If service is not made in an action within the time prescribed in this article […] the action shall be dismissed by the court on its own motion or on motion of any person interested in the action.”  (Code Civ. Proc., § 583.250.)

“In computing the time within which service must be made” the Court excludes any time during which:

(a) The defendant was not amenable to the process of the court.

(b) The prosecution of the action or proceedings in the action was stayed and the stay affected service.

(c) The validity of service was the subject of litigation by the parties.

(d) Service, for any other reason, was impossible, impracticable, or futile due to causes beyond the plaintiff’s control.  Failure to discover relevant facts or evidence is not a cause beyond the plaintiff’s control for the purpose of this subdivision.

(Code Civ. Proc., § 583.240.)

Here, three years from the October 1, 2021 filing date is October 1, 2024, yet Plaintiff did not effectuate service on Zhu until November 28, 2024, approximately three years and two months later. 

            Plaintiff argues that service was impossible or impracticable during a 2-month period of time in April and May 2022, when Shanghai was locked down due to COVID-19.  (Su Decl. ¶¶ 25-26 and Ex. L, M, N, O, P, Q, R, S, T, U, V, W.)

            Further, the Court finds that in light of the difficulties serving Zhu in China in compliance with the Hague Service Convention, service on Mr. Zhu has not been practicable.

            Therefore, Plaintiff has demonstrated that, when deducting two months during which service was impossible or impracticable due to the COVID-19 lockdown, plus the impracticable obstacles Plaintiff has encountered trying to serve Zhu in China, dismissal is not warranted.   

                        II.          Quash

“A defendant, on or before the last day of his or her time to plead or within any further time that the court may for good cause allow, may serve and file a notice of motion for one or more of the following purposes:  (1) To quash service of summons on the ground of lack of jurisdiction of the court over him or her. (2) To stay or dismiss the action on the ground of inconvenient forum.”  (Code Civ. Proc., § 418.10, subd. (a)(1)-(2).) 

“In the absence of a voluntary submission to the authority of the court, compliance with the statutes governing service of process is essential to establish that court’s personal jurisdiction over a defendant. When a defendant challenges that jurisdiction by bringing a motion to quash, the burden is on the plaintiff to prove the existence of jurisdiction by proving, inter alia, the facts requisite to an effective service.” (Dill v. Berquist Construction Co. (1994) 24 Cal.App.4^th 1426, 1439–1440; accord Lebel v. Mai (2012) 210 Cal.App.4^th 1154, 1160 [“It was incumbent upon plaintiff, after the filing of defendant’s motion to quash, to present evidence discharging her burden to establish the requisites of valid service on defendant”]; Summers v. McClanahan (2006) 140 Cal.App.4^th 403, 413 [“when a defendant challenges the court’s personal jurisdiction on the ground of improper service of process “the burden is on the plaintiff to prove the existence of jurisdiction by proving, inter alia, the facts requisite to an effective service” ”].)  A declaration of service by a registered process server establishes a presumption that the facts stated in the declaration are true. (Evid. Code, § 647; Rodriguez v. Cho (2015) 236 Cal.App.4^th 742, 750.)

“In order to obtain in personam jurisdiction through any form of constructive service there must be strict compliance with the requisite statutory procedures.” (Zirbes v. Stratton (1986) 187 Cal.App.3d 1407, 1417, quoting Stamps v. Superior Court (1971) 14 Cal.App.3d 108, 110.)  

First, “[a] summons may be served by personal delivery of a copy of the summons and of the complaint to the person to be served.”  (Code Civ. Proc. § 415.10.)  Alternatively, a plaintiff may serve an individual defendant “by leaving a copy of the summons and complaint at the person’s dwelling house, usual place of abode, usual place of business, or usual mailing address . . . , in the presence of a competent member of the household or a person apparently in charge of his or her office, place of business, or usual mailing address . . . , at least 18 years of age, who shall be informed of the contents thereof, and by thereafter mailing a copy of the summons and of the complaint by first-class mail, postage prepaid to the person to be served at the place where a copy of the summons and complaint were left.” (Code Civ. Proc., § 415.20, subd. (b).)

Zhu moves to quash service of the summons by publication on the grounds that the notice was published “in an obscure periodical with no discernible connection to Shanghai, China, where Mr. Zhu lives” and is therefore insufficient to apprise Zhu of the lawsuit consistent with the requirements of California Law.

In opposition, Plaintiff does not respond to this argument.  Although the Court issued an Order on October 29, 2024, granting Plaintiff’s ex parte application to serve Zhu via publication either in the Jiangsu Economic News or the Shanghai Daily, the Court was unaware that the Jiangsu Economic News was not a newspaper of general circulation in Shanghai such that it would be “most likely to give notice” to Zhu.  (See Code Civ. Proc., § 415.50.)

Notably, the Court previously denied Plaintiff’s request to serve Zhu by publication in a Los Angeles newspaper on the grounds that such publication would not be “most likely to give actual notice” to Zhu.  (Minute Order, Aug. 30, 2024.) 

It does not matter that, in addition to publishing the summons in the Jiangsu Economic News, Plaintiff’s counsel forwarded the editions of the Jiangsu Economic News in which the summons was published and an affidavit of publication to Zhu’s counsel.  (Su Decl. ¶¶ 31-34 and Ex. AA-BB.)  If the Jiangsu Economic News is not in general circulation in Shanghai where Zhu resides, such publication cannot effectuate proper service on Zhu.

CONCLUSION AND ORDER

For the foregoing reasons, the Court grants in part and denies in part Zhu’s motion.  The Court quashes the service purportedly effectuated via publication in the Jiangsu Economic News, but denies Zhu’s request to dismiss for failure to serve the summons and complaint within three years under Code of Civil Procedure section 583.250. 

In particular, the Court finds that service was impossible or impracticable during the 2-month period of time when China was locked down due to COVID-19 in April and May 2022, and was also otherwise impracticable due to the difficulties Plaintiff has encountered attempting to locate and personally serve Zhu in China through the Hague Service Convention or otherwise. 

And for the same reasons that service of the summons on Zhu has been impossible or impracticable since the commencement of the action, the Court discharges the Order to Show Cause re: Dismissal at this time. 

Plaintiff shall provide notice of the Court’s ruling and file the notice with a proof of service forthwith. 

DATED: April 1, 2025                                   ________________________________

                                                                        Michael E. Whitaker

                                                                        Judge of the Superior Court