Court Opinion

ID: 3174039
Source: CourtListenerOpinion
Date Created: 2016-02-05 08:29:29.475144+00
Date Added: 2024-06-11T12:15:39.022908
License: Public Domain

FILED
                           NOT FOR PUBLICATION                             FEB 01 2016

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, ex rel                 No. 15-55312
John Lee Miller and JOHN LEE MILLER,
                                                 D.C. No. 8:10-cv-00526-AG-MLG
              Plaintiffs - Appellees,

 v.                                              MEMORANDUM*

THE PUBLIC WAREHOUSING
COMPANY KSC, AKA Agility and PWC,

              Defendant - Appellant.

                   Appeal from the United States District Court
                      for the Central District of California
                   Andrew J. Guilford, District Judge, Presiding

                       Argued and Submitted January 4, 2016
                               Pasadena, California

Before: M. SMITH, WATFORD, and FRIEDLAND, Circuit Judges.

      The district court determined that Plaintiff John Lee Miller properly served

process on Defendant, The Public Warehousing Company, K.S.C., (PWC) through

its U.S. subsidiary, Agility Logistics Corporation (Agility), as a “general manager”

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
under California Code of Civil Procedure (CCCP) § 416.10(b). We have

jurisdiction under 28 U.S.C. § 1292(b), and we remand for further development

concerning the relationship between Agility and PWC.

      The Federal Rules of Civil Procedure permit service upon a corporation

within the United States as prescribed by the law of the forum state or the state in

which service is made. Fed. R. Civ. P. 4(h)(1)(A) & 4(e)(1). California law, in turn,

permits service upon a corporation by delivering a copy of the summons and the

complaint to “a general manager” of the corporation. CCCP § 416.10(b). A related

service-of-process statute, California Corporations Code (CCC) § 2110, permits

service of process upon a foreign corporation transacting business in California by

serving “its general manager in this state.” The term “general manager” is not

defined in either statute.

      In Cosper v. Smith & Wesson Arms Co., the California Supreme Court,

interpreting a predecessor to CCC § 2110, held that the service-of-process statutes are

satisfied if service is effected on an agent “of sufficient character and rank to make it

reasonably certain that the defendant will be apprised of the service made.” 346 P.2d
409, 413 (Cal. 1959) (quoting Eclipse Fuel Eng’g Co. v. Super. Ct., 307 P.2d 739, 745

(Cal. Dist. Ct. App. 1957)). The court further held that an agent meets that

requirement if it provides the defendant with “the opportunity for regular contact with

                                           2
its customers and a channel for a continuous flow of business into the state,” id. at 414

(internal quotation marks omitted), and the defendant enjoys through the agent

“substantially the business advantages that it would have enjoyed ‘if it conducted its

business through its own offices or paid agents in the state.’” Id. (quoting Eclipse

Fuel, 307 P.2d at 742).

      The California lower courts’ decisions following Cosper have been less than

perfectly consistent. One line of cases has not permitted service on a parent through

its subsidiary. See, e.g., Gen. Motors Corp. v. Super. Ct., 93 Cal. Rptr. 148 (Cal. Ct.

App. 1971). On the other hand, the most recent decision from the California Court of

Appeal declares outright that “California law allows service on a foreign corporation

by serving its domestic subsidiary.” Yamaha Motor Co., Ltd. v. Super. Ct., 94 Cal.

Rptr. 3d 494, 498 (Cal. Ct. App. 2009) (capitalization altered); see also Gibble v.

Car-Lene Research, Inc., 78 Cal. Rptr. 2d 892 (Cal. Ct. App. 1998); Sims v. Nat’l

Eng’g Co., 34 Cal. Rptr. 537 (Cal. Ct. App. 1963). The Yamaha court acknowledged

the “anomaly” that an agent without “any real control over [its] principal[]” might be

considered a “general manager” of that principal, but considered itself bound by

Cosper and permitted service upon Yamaha-Japan through its American subsidiary.
94 Cal. Rptr. 3d at 501-02.

                                           3
      Two features appear to distinguish the latter line of cases from the former.1

First, where service was permitted, the parent corporation was foreign and otherwise

not readily available for service within California. See Gen. Motors, 93 Cal. Rptr. at

151 (“In both Eclipse and Cosper the corporations involved . . . had in effect

attempted to maintain a rather low silhouette within the state by operating through

subsidiaries and contract representatives.”); Yamaha, 94 Cal. Rptr. 3d at 502. Second,

service through a subsidiary as general manager requires a sufficiently close

connection with the parent. This depends upon the frequency and quality of contact

between the parent and the subsidiary, the benefits in California that the parent derives

from the subsidiary, and the overall likelihood that service upon the subsidiary will

provide actual notice to the parent. See Yamaha, 94 Cal. Rptr. 3d at 501; Cosper, 346
P.2d at 414.

      Here, the former requirement is met: PWC is a foreign corporation that is

otherwise not readily available for service within California. But on the latter

requirement, the record shows merely that PWC holds itself and its subsidiaries out

      1
      The concurrence makes much of the distinction between CCC § 2110 and
CCCP § 416.10. We are not persuaded, however, that the two District Court of
Appeal cases cited by the concurrence provide a sound basis for reading “a general
manager” in CCCP § 416.10 significantly more narrowly than how the California
Supreme Court defined “general manager in this State” in Cosper, 346 P.2d at 413-
14.
                                           4
as a single integrated global “Group,” and that the Group issues a single financial

statement consolidating the finances of PWC and all its subsidiaries. On remand, the

district court shall permit Miller to obtain and introduce evidence concerning the

nature of the relationship between Agility and PWC—specifically, considering the

factors articulated by Cosper, 346 P.2d at 414—before determining whether service

upon Agility was sufficient to effect service upon PWC. The district court may also

consider whether service was adequate on other grounds. Each party shall bear its own

costs on appeal.

VACATED and REMANDED.

                                         5
                                                                            FILED
USA ex rel. Miller v. The Public Warehousing Co., 15-55312                      FEB 1 2016
                                                                         MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS
FRIEDLAND, Circuit Judge, concurring in the judgment:

      I agree that the district court’s order should be vacated and remanded. But I

would instruct the district court to apply the definition of Cal. Corp. Code § 2110’s

phrase “general manager in this state” provided in Cosper v. Smith & Wesson Arms

Co., 346 P.2d 409 (1959) (in bank), only if the court finds that PWC is doing

business in California.

      In my view, the district court erred when it imported the definition for

“general manager in this state” as used in Cal. Corp. Code § 2110 into the separate

service-of-process statute, Cal. Code Civ. P. § 416.10(b), which provides for

service on an entity’s “general manager.” In Cosper, the California Supreme Court

set forth a two-part test for evaluating whether an agent qualifies as a foreign

corporation’s “general manager in this state” within the meaning of the predecessor

to § 2110 so that service on that agent could constitute valid service on the

defendant corporation: (1) the agent must be “of sufficient character and rank to

make it reasonably certain that the defendant will be apprised of the service made,”

and (2) the agent must be “performing services for [the foreign corporation] and

providing it with the opportunity for ‘regular contact with its customers and a

channel for a continuous flow of business into the state.’” 346 P.2d at 413-14

(quoting Sales Affiliates v. Super. Ct., 214 P.2d 541, 542 (Cal. Ct. App. 1950))
(analyzing the statutory predecessor to § 2110). In my view, the second

component is intertwined with the threshold requirement for service under § 2110

that the foreign corporation be engaged in intrastate business in California.

Cosper, 346 P.2d at 412-13 (“The validity of the service of process pursuant to [the

predecessor to § 2110] depends first on whether the foreign corporation is ‘doing

business in this State’ within the meaning of the statute.”); see Cal. Corp. Code §

2100.

        If PWC is not doing business in California, I believe service must be

evaluated under § 416.10(b). Although few California courts have defined the

term “general manager” in that provision, those that have done so have required

that the agent on whom process is served be engaged in managing the defendant

corporation’s business as a whole in order for service on that defendant to be

effective. See Bakersfield Hacienda, Inc. v. Super. Ct., 18 Cal. Rptr. 812, 816

(Cal. Ct. App. 1962) (defining “general manager” as used in the predecessor to

§ 416.10(b) as “one who has general direction and control of the business of the

corporation as distinguished from one who has the management only of a

particular branch of the business”); Brovelli v. Super. Ct., 12 Cal. Rptr. 374, 379

(Cal. Ct. App. 1961), vacated on other grounds, 364 P.2d 462 (Cal. 1961) (in

bank) (“The history of [the predecessor to § 416.10(b)] . . . demonstrates that the

Legislature did not intend to provide for service of process upon any agent of a
corporation who had some managerial function, but only upon one whose

functions are to manage the corporation’s affairs in general.”). 1

      I agree with the majority that, if the district court on remand determines that

service was not effectuated under § 2110 or § 416.10(b), it should consider

whether PWC has been properly served through other means.

1
 Though vacated, the Court of Appeal decision retains instructive value for issues
not addressed on review. See Grupe v. Cal. Coastal Comm’n, 212 Cal. Rptr. 578,
588 n.9 (Cal. Ct. App. 1985).