DOJ Argues That Even If Case Against Megaupload Is Dismissed, It Still Can Hold Its Assets

from the well-of-course dept

As the fight over whether or not the US can even charge Megaupload under criminal law continues, the US Justice Department continues to make quite extraordinary claims. If you don't recall, the US filed criminal charges against Megaupload and a bunch of its execs. However, as a US judge noted back in April, under US law it might actually be impossible for the case against Megaupload to proceed, because criminal law requires "serving" the defendant, and the law also says you can only serve companies at their US address. Megaupload is not based in the US and has no US address. The DOJ is trying to tapdance around what the law actually says, but (as Megaupload points out) they can't point to a single real legal citation that supports their position. The DOJ is basically arguing that the law should be what they want it to be... because otherwise the DOJ wouldn't like it very much.

Tim Lee continues his always excellent reporting, by providing some details of the latest court hearings on the matter where the judge definitely seems to recognize that Megaupload may be legally correct:
[Judge O'Grady] noted that the "plain language" of the law required sending notice to the company's address in the United States. "You don't have a location in the United States to mail it to," he said. "It's never had an address" in the United States.
Perhaps even more interesting is the claim by the DOJ that even if the Judge rules against them on this issue, they should still be able to freeze Megaupload's assets, because the cases against the individuals will continue.
Not only that, but the government believes it can continue to freeze Megaupload's assets and paralyze its operations even if the judge grants the motion to dismiss. That's because in the government's view, the assets are the proceeds of criminal activity and the prosecution against founder Kim Dotcom will still be pending. The fact that the assets are in the name of Megaupload rather than its founder is of no consequence, the government claimed.
That's a trickier argument to make, though, not a totally crazy one. It's more or less based on the same controversial theory under which the Justice Department seizes and forfeits things like hip hop blogs because someone might possibly get some infringing music from them. But here it's even more complex, because there is supposed to be a separation between the corporation as an entity and the execs who work there as entities. It's part of the reason why "limited liability" corporations exist. There are, of course, ways to get past that, but the government would need to make that case, and they may have a hard time doing so. Either way, it does appear that they're legitimately worried about this rather massive error on their part in bringing the case.

Perhaps, next time, the DOJ won't rush into highly questionable lawsuits just because the MPAA is upset about a website.

Filed Under: assets, copyright, doj, frozen, jurisdiction, service
Companies: megaupload


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  1. identicon
    Anonymous Coward, 29 Jul 2012 @ 10:52am

    Re: Re: Re: Re: Re: Re: Re: Re: Re:

    Now that I think about it, that's not quite right. In general, federal courts exercise personal jurisdiction no broader than that authorized by the long-arm statute of the state the federal court sits in. If process would have been sufficient in a court of general jurisdiction within that state, then process is sufficient is a federal court sitting in that state. The constitutionality of the exercise of personal jurisdiction in the federal court collapses into the analysis for whether the same exercise of jurisdiction in the state courts.

    However, for claims arising under federal law--as the claims against Megaupload Ltd. all do--then the federal courts can even exercise personal jurisdiction over defendants that not even a court of general jurisdiction sitting within the state could do. The personal jurisdiction of a federal court sitting in federal question jurisdiction is only limited by the federal Due Process Clause--and the federal rules.

    The federal rules do require a mailing address in the U.S., so it that sens they do not go as far as the Due Process Clause would allow. But nonetheless, nothing disallows state substantive corporate law from conditioning that a foreign corporation doing business that state constructively names a state officer to be its agent. Fed.R.Crim.P. 4(c)(3)(C) does not say that the last known address has to be actual and not constructive. If Congress wanted to limit the jurisdiction of the federal courts to hear federal criminal matters to only foreign corporations with actual and not constructive addresses in the U.S., Congress knew how to do so. It chose not to place that limitation, and for good reason. Why would Congress want to create a loophole like that?

    Lots of foreign corporations operate in the U.S. without properly registering in the states they operate in. Lots of foreign corporations have constructive mailing addresses for the very purpose of mailing process to. It makes no sense to argue that these constructive mailing addresses that exist for the very purpose of delivering process to foreign corporations doing business in the states are not mailing addresses that can be used to mail process.

    You guys seem all too willing to go to great and fantastical lengths to protect Megaupload Ltd.

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