TVL Int’l, LLC v. Zheijiang Shenghui Lighting Co., No. 3:19-CV-00393-RJC-DCK (W.D.N.C. Feb. 2, 2021) [click for opinion]
In 2014, Plaintiff TVL International, LLC (“TVL”), a Delaware corporation, and Defendants Zheijiang Shenghui Lighting Co., Ltd. (“Zheijiang”), a Chinese LED light bulb manufacturer, and SengLED USA, Inc. (“SengLED”), Zheijiang’s U.S. subsidiary, executed a non-disclosure agreement relating to their efforts to jointly develop a “battery back-up LED light bulb”. By 2015, the parties had stopped working together and eventually developed their own LED products.
TVL alleged that Zheijiang and SengLED, in the course of their LED product development, breached the non-disclosure agreement and violated state and federal trade secret laws. Pursuant to arbitration provisions in the non-disclosure agreement, TVL submitted these claims to the American Arbitration Association (“AAA”) in North Carolina. In 2019, an arbitration panel awarded TVL $3 million in compensatory and punitive damages, interest, and fees.
Shortly thereafter, TVL filed a petition to confirm the arbitration award in the United States District Court for the Western District of North Carolina. TVL served the petition and summons via email and FedEx on Defendants’ outside counsel and SengLED’s registered agent.
Defendants moved to dismiss the petition, claiming that mail and email service were insufficient service of process under Federal Rule of Civil Procedure 4 and the Federal Arbitration Act (“the FAA“). Defendants contended that TVL was required to serve SengLED, a Georgia corporation, by marshal pursuant to the FAA’s rules for service on non-residents of the district where the action was filed and to serve Zheijiang, a foreign corporation, in accordance with the Hague Service Convention.
In its opposition, TVL argued that service was proper because Defendants “expressly consented” to service by mail and email by incorporating the AAA’s Commercial Arbitration Rules in the non-disclosure agreement and by consenting to those rules before the arbitral tribunal. The Commercial Arbitration Rules explicitly provide for service on a party’s “representative” “by mail” or “e-mail” in connection with “any court action … for the entry of judgment on any award made”. TVL also asserted that Defendants had actual notice of the petition, which satisfied the requirements of the FAA.
The magistrate judge agreed with TVL and held it was “abundantly clear” Defendants’ motion should be denied because: “(1) Defendants had actual notice of the Petition, which is sufficient under the FAA when the court action relates to an arbitration proceeding, during which the Defendants consented to personal jurisdiction in this Court; and (2) Defendants specifically consented to service via mail and email[.]” The magistrate reasoned that, according to Fourth Circuit precedent, when a party receives actual notice, the rules regarding service of process should be liberally construed. Moreover, “[i]n cases resulting from arbitration proceedings where the parties have consented to the jurisdiction of the district court, the sole purpose of service is to provide notice that a court action has commenced”. Accordingly, the magistrate recommended denial of Defendants’ motion to dismiss.