Thursday, August 23, 2018
Defendants Deemed Served Upon Admitting Knowledge of Action
By a MetNews Staff Writer
Attorneys for a Chinese government-owned group of companies being prosecuted by the U.S. Department of Justice admitted at a hearing on a motion to quash that their clients were actually aware of the summonses, which the Ninth U.S. Circuit Court of Appeals said yesterday is enough to consider the defendants served.
The defendants, steel manufacturing company Pangang Group Company, Ltd. and several of its subsidiaries, were first indicted for their alleged corporate espionage in 2012. The U.S. Department of Justice (“DOJ”) attempted to serve them by delivering summonses to the New Jersey office of one of the companies’ subsidiaries.
The defendants made a special appearance through attorneys Robert P. Feldman and John M. Potter, two California-based partners of Quinn Emanuel Urquhart & Sullivan, LLP, to quash the summons. U.S. District Judge Jeffrey S. White of the Northern District of California ruled that the DOJ had not properly effected service under the Federal Rules of Criminal Procedure, Rule 4.
The DOJ again attempted service, which was again quashed in 2013 after a special appearance by Feldman and Potter.
In 2016, Rule 4 was revised to allow service on “an organization not within a judicial district of the United States” by, among other methods, “any other means that gives notice.…” Relying on this new version of Rule 4, the DOJ served Quinn Emanuel with an updated summons in January 2017.
Catalyst for Revision
The 2016 revisions to Rule 4 were prompted by a request made by the DOJ to the federal advisory committee responsible for proposing changes to the federal criminal procedure rules.
Feldman submitted a comment letter to the advisory committee while it was considering the DOJ’s request. In it, he wrote that “the very act of challenging service might be said to conclusively establish the notice that would make service complete.”
In a memorandum to the committee, Jonathan J. Wrobleski, director of the DOJ’s Office of Policy and Legislation, wrote:
“The Quinn Emanuel commenters argue that the amendment might cause ‘a responsible foreign organization that wishes to contest service’ to face ‘a Hobson’s choice’ because if it appears to contest service it may be deemed to have notice. But feigning ignorance of a criminal summons of which the foreign organization does have notice (either by declining to appear, or by appearing and denying knowledge) is not a legitimate interest the criminal rules should protect.”
Delivery to Attorneys
FBI Special Agent Cynthia Ho delivered the revised summonses to Feldman and Potter by email and certified mail in January 2017. Feldman replied:
“We were not authorized to accept the summonses in 2012. We are not authorized to accept service of the summonses now. Nor are we obligated to send the summonses to Pangang and we will not do so.”
Feldman did not send the summonses to the firm’s clients, but he did inform them that the firm had received them. Nevertheless, the defendants did not appear at the January 2017 hearing or a status hearing the next month.
In April of that year, the Pangang companies made another special appearance through Feldman and Potter to quash service of the latest summonses. This time, White ruled against them, noting:
“At the hearing, the Pangang Group Defendants, through counsel, conceded that they have notice of these proceedings….Accordingly, the Court concludes that the Government has met its burden to show that it used a ‘means that gives notice’ to effect service on the Pangang Group Defendants.”
Ninth Circuit Opinion
Circuit Judge Sandra S. Ikuta wrote the opinion denying the defendants’ petition for writ of mandate. In it, she rejected the Pangang companies’ argument that a plain reading of the statute is appropriate.
“We disagree. As explained above, the words ‘by any other means that gives notice’ are not ambiguous, and we disfavor efforts to use canons of construction to introduce ambiguity into straightforward text.”
Ikuta credited the DOJ’s position that corporate criminal defendants have no legitimate interest in ignoring a valid summons.
As to the service on Feldman and Potter, she explained:
“To the extent the Pangang Companies argue that delivering a summons to an attorney who previously represented an institutional defendant does not necessarily constitute serving a summons on that defendant, we agree. Criminal Rule 4 does not list delivery of a summons to the foreign organization’s attorney. Therefore it is not a method that is presumed to provide notice, and ‘whether actual notice has been provided may be challenged in an individual case.’…This issue is not relevant here, however, because the Quinn Emanuel attorneys made a special appearance on the Pangang Companies’ behalf in 2017, and conceded that the Pangang Companies had notice of the government’s most recent summons.”
The case is In re Pangang Group Company, Ltd., No. 17-72370.
Copyright 2018, Metropolitan News Company