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Rio Props. v. Rio Int'l Interlink - 284 F.3d 1007 (9th Cir. 2002)

Rule:

The United States Constitution does not require any particular means of service of process, only that the method selected be reasonably calculated to provide notice and an opportunity to respond. In proper circumstances, this broad constitutional principle unshackles the federal courts from anachronistic methods of service and permits them entry into the technological renaissance. Although communication via email and over the Internet is comparatively new, such communication has been zealously embraced within the business community. 

Facts:

Plaintiff-appellee Las Vegas hotel and casino operator Rio Properties, Inc. ("RIO"), wishing to protect its exclusive rights in the "RIO" name, registered numerous trademarks with the United States Patent and Trademark Office. RIO sued defendant-appellant Rio International Interlink ("RII"), a foreign Internet business entity, asserting various statutory and common law trademark infringement claims. Pursuant to a court order, RIO served RII by regular mail to its attorney and its international courier, and by email to its Internet address. RII filed a motion to dismiss for insufficient service of process and lack of personal jurisdiction. Although RII belatedly complied, in part, with RIO's discovery request, the district court granted RIO's motion for sanctions and entered default judgment against RII. Citing RII's reprehensible conduct and bad faith, the district court additionally directed RII to pay reasonable attorneys' fees and costs to RIO. RII appealed the sufficiency of the court-ordered service of process, the district court's exercise of personal jurisdiction as well as the propriety of the default judgment, and the award of attorneys' fees and costs.

Issue:

Were the alternative methods, including by email, of service by plaintiff US-company on defendant foreign Internet business entity constitutionally acceptable?

Answer:

Yes.

Conclusion:

Affirming, the United States Court of Appeals considered Fed. R. Civ. P. 4(f)(3), which permits service in a place not within any judicial district of the United States "by means not prohibited by international agreement as may be directed by the court. The Court applied this standard of review: A court of appeals reviews a district court's decision regarding the sufficiency of service of process for an abuse of discretion. The Court first held that the alternative service was proper because the defendant-appellant RII actively evaded the conventional means of service attempted by plaintiff-appellee RIO. RIO was not required to attempt every conventional means of service before requesting alternative service. Further, email service was an appropriate alternative as the method of communication preferred by the RII.  The Court of Appeals reviews a district court's decision regarding the sufficiency of service of process for an abuse of discretion. The Court agreed with the district court's handling of this case and its use of FRCP 4(f)(3) to ensure the smooth functioning of our courts of law.

Next, the Court concluded that each alternative method of service of process ordered by the district court was constitutionally acceptable. Each method of service was reasonably calculated, under these circumstances, to apprise RII of the pendency of the action and afford it an opportunity to respond. The Constitution does not require any particular means of service of process, only that the method selected be reasonably calculated to provide notice and an opportunity to respond. Tje Court noted, however, that, except for the provisions recently introduced into Fed. R. Civ. P. 5(b), email service is not available absent a FRCP 4(f)(3) court decree. Accordingly, the Court leaves it to the discretion of the district court to balance the limitations of email service against its benefits in any particular case. In this case, the district court performed the balancing test admirably, crafting methods of service reasonably calculated under the circumstances to apprise RII of the pendency of the action.

Next, the Court explained that a district court's determination of whether  personal jurisdiction can be exercised is a question of law, subject to de novo review. Applying a three-part test, the Court held that the factors weighed overwhelmingly in favor of the reasonable exercise of personal jurisdiction over RII. RII's advertisements in the forum state, and the injury to RIO in the forum, were sufficient to provide personal jurisdiction over RII. Finally,FII's multiple transgressions during the litigation justified the sanction of default judgment.

Next, as for the entry of default judgment, the Court explained that it reviews for an abuse of discretion the district court's decision under Fed. R. Civ. P. 37, and it will overturn a dismissal sanction only with a definite conviction that it was clearly outside the acceptable range of sanctions. Applying a five-factor test, the Court found that while the public policy favoring disposition of cases on their merits weighed against default judgment, that single factor was not enough to preclude imposition of this sanction when the other four factors weighed in its favor.

Finally, upon reviewing the fee award for an abuse of discretion, the Court found that the district court awarded awarded RIO reasonable attorneys' fees and costs after determining RII acted willfully and in bad faith.  

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