Greenland Asset Management Corporation, Plaintiff, v. MicroCloud Hologram, Inc. F/K/A and as Successor-In-Interest to Golden Path Acquisition Corporation, Wei Peng, Guohui Kang, and Bei Zhen, Defendants. (2023)

The following e-filed documents, listed by NYSCEF document number (Motion 001) 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24 were read on this motion for ALTERNATE SERVICE.

In this action for breach of contract and for breach of the Securities Act of 1933 and the Exchange Act of 1934 (and their implementing regulations), plaintiff, Greenland Asset Management Corporation moves to deem its service on defendant MicroCloud Hologram, Inc. effective under Business Corporation Law (BCL) § 307 (c) (2). Alternatively, Greenland asks this court to grant leave to serve MicroCloud by alternate means under CPLR 311 (b). After full briefing, and shortly before oral argument on the motion, Greenland filed a supplemental letter application for an order deeming MicroCloud to have been properly served under CPLR 303. The motion and the (untimely) supplemental application are denied.

DISCUSSION

I. The Branch of Greenland's Motion for an Order Deeming Effective its BCL § 307 Service on MicroCloud

BCL § 307 (a) provides that in any case in which a non-domiciliary would be subject to the personal jurisdiction of New York Courts under CPLR article 3, an unauthorized foreign corporation is subject to the same jurisdiction. Greenland alleges that MicroCloud is an unauthorized foreign corporation that is publicly traded on the Nasdaq Stock Exchange in New York. Greenland and MicroCloud also entered into a Registration Rights Agreement (RRA). (NYSCEF No. 19 at 3.) Under § 6.11 of the RRA, MicroCloud submitted to the nonexclusive jurisdiction of any state or federal court in Manhattan over actions arising out of or relating to the Agreement. (NYSCEF No. 15 at 11.) Plaintiff contends that the combination of the Nasdaq listing and RRA § 6.11 make MicroCloud subject to personal jurisdiction in New York.

Greenland represents that in April 2023 personally delivered the summons and complaint to the Secretary of State, paid the statutory fee, and sent MicroCloud notice of service by registered mail in compliance with BCL § 307 (b). (NYSCEF No. 19 at 4.) Plaintiff also contends that because Greenland filed the required affidavit of service and affidavit of compliance, service was complete under BCL § 307(c)(2) in June 2023. (Id. at 5.)

MicroCloud argues that neither listing on NASDAQ nor consent in the RRA is sufficient to confer general jurisdiction on MicroCloud and thus that BCL § 307 does not apply. (See NYSCEF No. 22 at 2.) MicroCloud also argues that even if BCL § 307 applies, plaintiff's service of process is defective because the receipt attached to Greenland's affidavit of compliance is unsigned and appears to be from just before Greenland mailed the notice of service, not from after MicroCloud received the notice. (Id. at 4.)

A foreign corporation is subject to New York jurisdiction under CPLR 301 if "it has engaged in such a continuous and systematic course of 'doing business' here that a finding of its 'presence' in this jurisdiction is warranted." (Holness v Mar. Overseas Corp., 251 AD2d 220, 222 [1st Dept 1998], quoting Landoil Resources Corp. v Alexander & Alexander Servs., 77 NY2d 28, 33 [1990].) A corporation listing its shares on a stock exchange does not constitute doing business in the State and does not confer jurisdiction. (See Deer Consumer Products, Inc. v Little, 35 Misc 3d 374, 387 [Sup Ct, NY County 2012].) However, "foreign corporations not doing business in New York may consent to be sued herein and thereby confer personal jurisdiction on our courts even though the cause of action may have arisen outside the state." (Berner v United Airlines, 2 Misc 2d 260, 266 [Sup Ct, NY County 1956], affd sub nom. Berner v United Airlines, Inc., 3 AD2d 9 [1st Dept 1956], affd sub nom. Berner v United Airlines, 3 NY2d 1003 [1957].) MicroCloud has consented to the jurisdiction of this court under RRA § 6.11 of RRA. BCL § 307 (a) is therefore applicable here.

Greenland does not, however, satisfy the requirements of BCL § 307 (c) (2). That paragraph provides that where a plaintiff served defendant by mailing process to the Secretary of State, the plaintiff must file an affidavit of compliance, attaching a signed return receipt or other official proof of delivery. Here, the return receipts provided by Greenland are unsigned; and Greenland has not provided other official proof of delivery (or refusal by MicroCloud to accept delivery). (See NYSCEF No. 18 at 7-12.) At most, plaintiff has shown that it likely mailed copies of the notice of service to MicroCloud. That is not enough. (See SST Found. v Intern. Footnotes (HK) Ltd., 2008 WL 10589514, at *3 [Sup Ct, NY County 2008] [explaining that "service under BCL § 307 [b] [2] is . . . not effective upon mailing"].) The branch of Greenland's motion to deem service effective under BCL § 307 (c) (2) is denied.

II. The Branch of Greenland's Motion for an Order Permitting Alternative Service on MicroCloud under CPLR 311 (b)

Alternatively, Greenland asserts that service on MicroCloud in the Cayman Islands or in China through the Hague Service Convention is impracticable within the meaning of CPLR 311 (b). Greenland therefore asks this court to permit it to serve MicroCloud by email to its counsel.

In particular, Greenland alleges that service through the Hague Convention on companies incorporated in the Cayman Islands or the People's Republic of China is impracticable because that method takes six months, or more. (NYSCEF No. 19 at 6.) Greenland also represents that in May 2023, plaintiff's counsel formally (but unsuccessfully) asked MicroCloud's counsel to accept service of the complaint, putting it on notice of the litigation. (Id.) Therefore, Greenland asserts, service by email to MicroCloud's counsel would be an appropriate, and permissible, service method. This court disagrees.

Expedient service on a corporation under CPLR 311 (b), or on individuals under CPLR 308 (5), requires a threshold showing that service by ordinary means is impracticable under the particular circumstances of the case. Here, Greenland relies on the somewhat conclusory representation of counsel that "[f]rom reviewing publicly available records" and conferring with co-counsel who "is familiar with the Chinese legal system," he "understand[s] that it takes an average of at least six months and sometimes much longer to serve companies incorporated in the Cayman Islands or the People's Republic of China through the Hague Service Convention." (NYSCEF No. 13 at ¶ 8.) Counsel does not, however, attempt to explain why the time entailed in Hague Convention service will alone establish impracticability for CPLR 311 (b)/308 (5) purposes. And recent Appellate Division precedent is to the contrary. (See Joseph II. v Luisa JJ., 201 AD3d 43, 48-49 [3d Dept 2021] [holding that an estimated 18-20-week period to complete Hague Convention service on a defendant in Italy did not render service impracticable within the meaning of CPLR 308 [5]].)¹

Greenland's request for an order permitting CPLR 311 (b) alternative service on MicroCloud is denied.

III. Greenland's Untimely Letter Application for an Order Deeming Effective its CPLR 303 Service on MicroCloud

Finally, in a letter application submitted six weeks after the motion return date, Greenland asks this court to hold that Greenland effectively served MicroCloud under CPLR 303 by sending the summons and complaint to MicroCloud's counsel on August 31, 2023. (NYSCEF No. 24 at 1.) This court is skeptical that the application is properly before the court, given its untimeliness—and that Greenland's own submission shows that it had the information needed to effect service under CPLR 303 on April 11, 2023, before Greenland had even attempted to serve MicroCloud under BCL § 307. (Compare NYSCEF No. 24 at 4 [Exhibit A to letter application], with NYSCEF No. 4 [affidavit of service on MicroCloud].) But even if this court were to consider the application, it would be without merit.

Plaintiff argues that under CPLR 303, a non-domiciliary that commences an action in a New York court becomes amenable to the service of a summons for a new action by a defendant in the first action; that MicroCloud can therefore be served under CPLR 303; and that they properly served MicroCloud under CPLR 303 by emailing and mailing the initiating papers in this action to MicroCloud's counsel on August 31. (See NYSCEF No. 24 at 1-2.) But CPLR 303 permits service on a nondomiciliary's attorney only "pursuant to section 308" of the CPLR. CPLR 308 (1)-(4) does not permit serving a defendant solely by email, certified mail, or regular mail. Nor did Greenland request—much less obtain—leave to deliver process to MicroCloud's counsel for purposes of CPLR 303 through alternative means under CPLR 308 (5). Greenland's August 2023 attempt to serve MicroCloud under CPLR 303 was invalid.

Accordingly, it is

ORDERED that the branch of Greenland's motion for an order deeming it to have properly served MicroCloud under BCL § 307 is denied; and it is further

ORDERED that the branch of Greenland's motion for leave to serve MicroCloud by alternative means under CPLR 311 (b) is denied; and it is further

ORDERED that Greenland's letter application for an order deeming it to have properly served MicroCloud under CPLR 303 is denied.

Dated: October 26, 2023

Hon. Gerald Lebovits

J.S.C.

FOOTNOTES

1.   The Legislature enacted CPLR 311 (b) to enable courts to authorize expedient service on corporations, just as courts had long been able to authorize expedient service on individuals under CPLR 308 (5). Caselaw construing impracticability under CPLR 308 (5) is thus instructive here. (See e.g. David v Total Identity Corp., 50 AD3d 1484, 1485 [4th Dept 2008] [relying on CPLR 308 [5] precedents to determine whether service on a corporate defendant was impracticable for purposes of CPLR 311 [b]].)

Gerald Lebovits, J.