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Published online by Cambridge University Press: 27 February 2017
Plaintiff Sheets sought sanctions under Rule 11 of the Federal Rules of Civil Procedure against defendants, the Yamaha Motor Co. Ltd. (Yamaha Japan) and its wholly owned American subsidiary, Yamaha Motors Corp., U.S.A. (Yamaha U.S.A.), for misconduct in discovery and frivolous insistence that service on the foreign parent be made in conformity with the Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, better known as the Hague Service Convention. Plaintiff had effected service under the Louisiana long-arm statute, which permitted service on the subsidiary as involuntary agent for the defendant parent company in an action arising out of business transacted or tortious conduct occurring in the state. The U.S. District Court for the Eastern District of Louisiana initially awarded $25,000 in sanctions to the plaintiff. On appeal, the U.S. Court of Appeals for the Fifth Circuit remanded the decision for further findings by the district court on the grounds for imposing sanctions. The district court held (per Schwartz, J.): in light of the decision of the Supreme Court in Volkswagenwerk Aktiengesellschaft v. Schlunk, involving a state service statute virtually identical to that of Louisiana, the defendants’ failure to waive service under the Hague Convention needlessly increased the cost of litigation and was properly the subject of Rule 11 sanctions.
1 Opened for signature Nov. 15, 1965, 20 UST 361, TIAS No. 6638, 658 UNTS 163 [hereinafter Convention].
2 Sheets v. Yamaha Motors Corp., U.S.A., 657 F.Supp. 319 (E.D. La. 1987), aff’d in part, rev’d in part, 849 F.2d 179 (5th Cir. 1988).
3 849 F.2d at 186. The circuit court found the holding below unclear as to the specific behavior the district court was penalizing and the rules or provisions on which it had relied. The Fifth Circuit thus requested additional findings on remand that would set forth more specifically the basis for the award. Id.
4 108 S.Ct. 2104 (1988), summarized in 82 AJIL 816 (1988).
5 No. 82-4402, slip op. at 10. Because the district court could not “clearly delineate what other [attorneys’] fees were needlessly incurred as a result of defendants’ alleged wrongful conduct,” it denied the plaintiff’s remaining request for sanctions. Id. at 10–11.
6 849 F.2d at 182 n.2.
7 657 F.Supp. at 323 n.8.
8 The Convention, which applies “in all cases, in civil or commercial matters, where there is occasion to transmit a judicial or extrajudicial document for service abroad,” requires that documents be served through a “Central Authority” in the receiving state, which may request translation of served documents into the official language of that state. Convention, supra note 1, Arts. 1, 3 and 5.
9 849 F.2d at 182 n.2.
10 Id. at 185, 657 F.Supp. at 323. Sanctions were also based on the failure of Yamaha U.S.A. to acknowledge that Yamaha Japan had independently patented an improvement similar to the invention claimed by plaintiff. 657 F.Supp. at 323–24.
11 849 F.2d at 186.
12 Id. at 185 n.5. The court further noted that “[t]he two corporations appear to have had legitimate business reasons for insisting on this right, including avoidance of judicial piercing of the corporate veil and imposition of liability on one corporation for the acts of the other.” Id. The Fifth Circuit’s decision in Sheets makes no mention of the Supreme Court’s decision in Schlunk, which had been handed down several weeks before.
13 Slip op. at 4.
14 Id. at 10. Plaintiff asked for $9,300 in such expenses. In light of the Fifth Circuit’s skepticism “as to the propriety of the breadth of the [district] court’s award of sanctions in this case,” 849 F.2d at 185, Judge Schwartz may have granted the lower award on remand as a way of chastising defense counsel in the case without risking the scrutiny that a higher award would provoke upon further appeal. The court found the plaintiff’s claimed investment of 31 billable hours on the treaty service effort to be excessive. Instead, the district court found 16 billable hours at $75 per hour more than sufficient to compensate plaintiff for the legal skills employed in serving Yamaha Japan under the Hague Service Convention. Slip op. at 9.
15 For a sampling of the various standards used to decide Rule 11 cases, see Scwarzer, Rule 11 Revisited, 101 Harv. L. Rev. 1013, 1015 (1988).
16 Characterizing defense strategy in the case as “obfuscatory,” the district court “could only speculate whether defense counsel had been instructed to ‘play hard ball’, no matter what the issue, a strategy which hardly frees the Court and the parties to direct their attention to matters truly at issue.” Slip op. at 4, 5.
17 Published foreign commentary on Schlunk is still not available, but the views of other states parties on the case were on the agenda for the special meeting of central authorities under the Hague Service Convention (and the Hague Evidence Convention) convened by the Hague Conference on Private International Law, April 17–20, 1989. The Hague Conference’s report on this special meeting will undoubtedly reflect the position of certain states on the Schlunk ruling and related issues.
18 See Schlunk, 108 S.Ct. at 2114 (Brennan, J., concurring).