Korean-English Language Barrier Is Not Excusable Neglect

Lack of Korean Translation in Litigation Can Be Costly

Korean legal translation services and Korean deposition interpreting services play an important role in international litigation and international arbitration in Asia. A Korean Steel manufacturer learned two lessons the hard way in the Fifth Circuit Court of Appeals recently:

• First, failing to hire an English to Korean translator to translate international commercial documents can cost the company $1.5 million.

• Second, when a company’s lawyers don’t understand the Hague Service Convention, they might accidently waive the convention’s protections by failing to raise them in the trial court.

The Jinil Steel Company (Jinil) supplied steel on credit to a second Korean company, WooSung Hitech (WooSung). WooSung then sold the steel to ValuePart, Inc., an American company that relied heavily on WooSung for its material. Because WooSung sometimes missed payments to Jinil, Jinil entered into a direct payment guarantee with ValuePart, obliging the American company to pay Jinil directly if WooSung missed making future payments.

Soon, ValuePart experienced its own difficulty paying its bill to WooSung, sending WooSung into the Korean bankruptcy courts in June 2016. Jinil then attempted to enforce ValuePart’s guarantee to pay WooSung’s debt. When Jinil’s collection efforts and demands for payment from ValuePart were unsuccessful, Jinil hired an Italian law firm to pursue its rightful claims.

ValuePart filed for Chapter 11 bankruptcy in October 2016 in Texas. The bankruptcy claims agent mailed Jinil notice of the bankruptcy petition noting that all creditors had only until March 7, 2017, to file their proof of claim. Any proofs of claim filed thereafter would be barred.

In January 2017, a Jinil account manager emailed the claims agent asking why the court sent the notice to Jinil. ValuePart’s bankruptcy claims agent responded by informing Jinil’s account manager that Jinil could file a proof of claim and reiterated that March 7 was the final day such claims would be permitted.

Almost a year after the Bar Date, Jinil finally filed a proof of claim, and only after the company owners’ son, who studied in the U.S., came across the Jinil account manager’s 2017 email with the U.S. bankruptcy claims agent.

Jinil moved for its proof of claim to be accepted on grounds of the following excusable neglect:

The Korean-English language barrier prevented it from understanding the single mailed notice in English, and it didn’t fully understand US bankruptcy laws.

The bankruptcy court rejected Jinil’s argument, as did the U.S. District Court for the Northern District of Texas. Jinil appealed to the Fifth Circuit Court of Appeals which issued its ruling on March 20, 2020.

The court held that Jinil’s lack of a fluent English speaker could not provide an escape from the fact that Jinil had actual notice of the proceedings as evidenced by the 2017 email between Jinil’s account manager and the court’s claims agent. Jinil at least knew that it may have to take further steps to protect its interests.

Noncompliance with Hague Service Convention issue is waived for failure to brief

Jinil also argued on appeal that the bankruptcy court’s claims agent failed to comply with the method of service required under the Hague Service Convention, since both the U.S. and Korea were signatories. Jinil had only mentioned the Hague Convention during the bankruptcy court hearing on their motion to allow the late filing of the proof of claim. The Hague Convention was not cited in Jinil’s written motion and it wasn’t briefed for the hearing judge to consider. Consequently, the Fifth Circuit ruled the Hague Convention argument was waived.

English to Korean translators would have saved Jinil more than $1.5 million

Every company doing business internationally must engage qualified legal translation services to avoid being blindsided by multimillion dollar losses. By failing to invest in the modest cost of a professional English to Korean translator, the Jinil Steel Company ultimately lost $1.5 million plus fees for lawyers to litigate and appeal a losing case through three courts.

Jinil compounded this first mistake with a second error, hiring lawyers who failed to recognize the strength of the Hague Service Convention’s protections. The Convention’s purpose is to protect companies like Jinil from the precise catastrophe it suffered.

If you are in-house counsel to a business operating in international commerce, don’t repeat Jinil’s mistakes. Reach out to All Language Alliance, Inc. for the services of a professional legal translator and legal interpreter fluent in Korean, Mandarin, Arabic, Urdu, Turkish, Hebrew, Punjabi, Cantonese, Russian, Mongolian, and other languages.

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