Seventh Circuit Limits Email Service to Chinese SAD Scheme Defendants–Kangol v. Hangzhou Silk

There have been thousands of SAD Scheme cases in the Northern District of Illinois, but this extensive litigation activity has produced only a small handful of Seventh Circuit opinions. This lack of appellate review has played a major role in perpetuating the SAD Scheme. District court judges have repeatedly found ways to rationalize bogus arguments from plaintiffs (often because no defendant was around to correct them), even dicey arguments that seemed unlikely to survive an appeal. I and other SAD Scheme critics have long suspected that most key principles of the SAD Scheme would fail once reviewed by appellate courts–if only we could find a way to get the cases there.

This case is an example of that phenomenon. Many hundreds, or likely thousands, of Northern District of Illinois cases have authorized email service of process on Chinese defendants, collectively affecting tens or possibly hundreds of thousands of defendants. When the issue of email service to Chinese defendants finally reached the Seventh Circuit, a panel rejected the plaintiffs’ core argument.

In the process, the opinion likely overturns many hundreds of SAD Scheme cases that used email service of process to Chinese defendants. Many pending cases have lost jurisdiction, and perhaps prior defaults could be overturned. The ruling also should curb future SAD Scheme cases by jacking up litigation costs. As a result, this is a major SAD Scheme precedent.

This ruling also highlights the urgency of getting SAD Scheme cases before appellate courts. The SAD Scheme inexplicably has defied gravity in the district courts for years. I expect it will eventually come crashing down–if we can just get the appellate courts to weigh in.

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This is a standard SAD Scheme trademark enforcement. The plaintiff Kangol sued 25 defendants listed on a Schedule A, claiming the China-based merchants sold counterfeits on Alibaba. Kangol secured an ex parte TRO and got permission to serve the complaint via email.

The defendant in question, Hangzhou Silk, received the service email and began negotiating with Kangol. However, Hangzhou Silk didn’t make a court appearance. Kangol obtained a default judgment that included a court award of damages, which Kangol collected from Hangzhou Silk’s Amazon account. Hangzhou Silk finally appeared in court and contested the default on multiple grounds. The district court held that the Hague Convention permitted email service to Chinese defendants.

Does the Hague Convention Apply?

The court summarizes:

Article 1 states that the [Hague] Convention “shall apply in all cases, in civil or commercial matters, where there is occasion to transmit a judicial or extrajudicial document for service abroad” but “shall not apply where the address of the person to be served with the document is not known.”

Kangol first argued that emailing links to the summons and complaint wasn’t the transmission of a “document.” The court calls that argument “hardly credible.”

Kangol also argued that Hangzhou Silk’s address wasn’t known, so the Hague Convention didn’t apply. “Kangol asserts that its efforts to locate Hangzhou yielded several, conflicting addresses, and that those addresses were for ‘stalls at an open-air market.’ Hangzhou, on the other hand, maintains that its address is known and easily discoverable.” The district court didn’t resolve this fact dispute. The Seventh Circuit remands the case on this point.

[Personal note: Last summer, I did a 2-week, 5-city speaking tour of China, mostly to discuss the SAD Scheme. My photo album. My speaking companions included some counsel from the firm defending this case. After our presentation in Hangzhou, we went on an excursion to find this defendant’s physical location, which we accomplished easily.]

If the Hague Convention applies to this defendant, email service is not allowed:

The Convention’s text and structure demonstrate that, where it applies, it provides the permissible means of service and excludes all others. And because no provision of the Convention authorizes service by email in China, such service violates the Convention and Rule 4(f)(3) [cites include Smart Study, reaching the same conclusion in the Second Circuit]

The court summarizes its ruling:

if the Hague Service Convention applies, then service was improper because the Convention prohibits service by email in China. But the district court must first determine whether the Convention applies at all. We therefore reverse the district court’s denial of Hangzhou’s motion to vacate and remand with instructions for that court to consider whether the Convention applies

Implications

The 7th Circuit leaves open the possibility that plaintiffs can still serve Chinese defendants via email if a defendant’s physical address isn’t readily ascertainable. (A reminder that the INFORM Consumers Act now requires the disclosure of many online merchants’ addresses). Plaintiffs will surely claim they couldn’t readily find the defendant’s address–whether they actually tried or not–and keep requesting email service to Chinese defendants. In my post about Smart Study, I wrote:

Although many SAD Scheme plaintiffs hypothesize in their robo-filings that the defendants are Chinese counterfeiters, the reality is that far too often the plaintiffs’ lawyers haven’t researched the defendants’ locations (despite their Rule 11 obligation to do so if they are claiming the defendants are Chinese) and don’t have a clue where they actually are located….Plaintiffs may lean into their willful ignorance and simply claim they don’t know where the defendants are, so email service should be OK because the plaintiffs haven’t confirmed the defendants are in China. This move ought to be forcefully rejected by judges for the obvious failure to comply with Rule 11 and other ethics rules, but so long as defendants aren’t around to protest, judges might still allow it.

In contrast, if Northern District of Illinois judges vigorously apply this ruling and routinely reject email service on Chinese-based defendants, this ruling ought to have a major impact on the SAD Scheme. It will force plaintiffs to do more invidualized research about each defendant’s location and incur higher service costs for each defendant. Plaintiffs will rethink some of their shotgun litigation approaches to avoid those requirements.

Until we see what N.D. Ill. judges do with this ruling, I’m not sure if this ruling is just another minor speedbump for SAD Scheme plaintiffs or a major reduction in the scheme. In the short term, I expect SAD Scheme plaintiffs will keep doing exactly what they’ve done in the past and gamble on continued judicial acquiesence/apathy. I hope that judges call out plaintiffs if they try that.

Meanwhile, if you are a China-based SAD Scheme defendant who has been victimized by the scheme based on email service, you might check with your lawyer to see if this ruling opens up the possibility of dismissing your case and clawing back any seized assets.

Case Citation: Kangol LLC v. Hangzhou Chuanyue Silk Import & Export Co., Ltd., No. 25-2205 (7th Cir. May 29, 2026). Kangol was represented by a team from Calfee, Halter, & Griswold in Cleveland. Hangzhou Silk was represented by Wesley E. Johnson and Ben Solter of Cross-Border Counselors.