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 @ 11:52am

    Re: Re: Re: Re:

    You misunderstand the jurisprudence. The issue here is only service of process. Those cases look at personal jurisdiction, which is a related issue though it's not the exact same issue. Nonetheless, those cases don't apply here for the personal jurisdiction issue.

    The issue in Goodyear was whether the estates of two children who died in a bus crash in France could sue subsidiaries of Goodyear who were located in Luxembourg, Turkey, and France in the courts located in North Carolina. That is not the situation here. The Court held that North Carolina did not have specific jurisdiction to adjudicate the matter because the tire was manufactured and sold abroad and the accident took place abroad. The Court also found that the contacts with North Carolina were not systematic and continuous enough to establish general jurisdiction over the foreign corporate defendants.

    The situation here is a foreign corporation (Megaupload Ltd.) transacting business directly in Virginia. The contacts with Virginia are direct. The jurisdiction sought is specific, not general, since the liabilities arise directly from the contacts. The Goodyear case simply does not apply here.

    The J. McIntyre case is also distinguishable and inapplicable here. In J. McIntyre, a worker who seriously injured his hand brought a product liability suit against the foreign manufacturer of the machine involved in the accident. The Court held that the foreign corporation did not purposefully direct its conduct at New Jersey so as to allow jurisdiction there. There were insufficient contacts between the foreign corporation and New Jersey so as to permit jurisdiction there.

    The situation with Megaupload Ltd. is different since Megaupload Ltd. did purposefully direct its conduct to Virginia when it entered into multi-year, multi-thousand-dollar-a-day contract in Virginia. This isn't the case of some third party using Megaupload's products in Virginia despite Megaupload Ltd. doing nothing to connect itself to Virginia. Megaupload Ltd. decided to lease key components of its business in Virginia. Totally different fact pattern.

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