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, 28 Jul 2012 @ 8:06am

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


    Obviously, Megaupload and the DOJ have presented their arguments in briefs to the District Court, and argued their respective positions before the court yesterday, July 27th.

    Much is made by Megaupload that it does not have a Virginia mailing address. The proper resolution of this matter is anything but clear. While this case arises where the FRCP appear to govern, this does not necessarily mean that resort cannot be had in part to state law. One will have to await the court's decision on the motion to see how this issue is answered.

    Of course, a condition predicate should state law be decided as relevant is the matter of "conducting business in the state". How nice it would be if the contracts between Megaupload and the "server renters" were avaliable for perusal. Their "choice of law" provisions would prove quite interesting since, almost invariably, the service providers' terms and conditions recite provisions in their favor, and not that of the "renters". Granted, contracts are civil matters, but it is not at all unusual for federal courts to look to state law where federal case law is not well developed.

    Long ago I was quoted in an article at Patently-O that "predictions are the musings of fools", a lesson I learned many, many years ago. This quote follows from the very first lesson I learned when I began my practice of law, namely, the one should never get drunk on his own wine. An argument may be outstanding, but that alone does not mean that a court will find it compelling and determinant of the eventual outcome.

    Thus, the most that can be said at this point is the case is now before the court for a decision, and all must now await that decision. My prediction? I hew to my earlier quote and await its promulgation.

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