UNITED STATES DISTRICT COURT UNITED …s3.amazonaws.com/cdn.orrick.com/files/Trade-Secret-Blog-Sep25-Si...united states district court western district of wisconsin united states of

UNITED STATES DISTRICT COURTWESTERN DISTRICT OF WISCONSIN

UNITED STATES OF AMERICA

v.

SINOVEL WIND GROUP CO., LTD.,et al.

Case No. 3:13-cr-84-bbc

MEMORANDUM OF SPECIALLY-APPEARING DEFENDANTSINOVEL WIND GROUP CO., LTD.

IN SUPPORT OF MOTION TO QUASH SERVICE

Michael J. Fitzgerald FITZGERALD LAW FIRM526 E. Wisconsin Ave. Milwaukee, WI 53202 (414) 221-9600 [email protected]

Matthew J. Jacobs Elliott J. JohVINSON & ELKINS LLP 525 Market St., Suite 2750 San Francisco, CA 94105 (415) 979-6900 [email protected]

John P. Elwood Amy Lamoureux RiellaJeremy C. MarwellMatthew J. RicciardiVINSON & ELKINS, LLP 2200 Pennsylvania Ave., NW Suite 500 West Washington, DC 20037(202) 639-6518 [email protected]

Specially-Appearing Counsel for Sinovel Wind Group Co., Ltd.

Case: 3:13-cr-00084-bbc Document #: 51 Filed: 08/16/13 Page 1 of 38

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TABLE OF CONTENTS

TABLE OF AUTHORITIES......................................................................................................... iii

INTRODUCTION...........................................................................................................................1

FACTUAL BACKGROUND .........................................................................................................6

I. A Commercial Contract Dispute Led To This Criminal Case.................................6

II. The Government Makes Numerous Ineffective Efforts At Service ........................8

III. The Government Is Seeking To Amend Rule 4 ....................................................10

IV. The Government Has Failed To Take Any Steps To Effect Service Based On The Agreement on Mutual Legal Assistance In Criminal Matters With China......................................................................................................................11

ARGUMENT ................................................................................................................................12

I. The Government Bears The Burden Of Proof.......................................................12

II. Rule 4 Imposes Two Independent Requirements For Service: Delivery And Mailing...........................................................................................................13

A. The plain language of Rule 4 imposes two mandatory requirements for service ..................................................................................................13

B. The rulemaking history confirms that Rule 4 does not authorize extraterritorial service on a foreign organization in the manner the government has undertaken.......................................................................15

C. Compliance with Rule 4’s requirements for service is an essential prerequisite to exercising jurisdiction over Sinovel China........................16

III. The Government Has Not Satisfied Rule 4’s Delivery Requirement....................17

A. The government has not served any “officer,” “managing or general agent” or “other agent appointed or legally authorized to receive service of process” for Sinovel China...........................................18

B. Sinovel USA is not an agent of Sinovel China..........................................19

IV. The Government Has Not Satisfied Rule 4’s Mailing Requirement .....................20

A. Rule 4’s mailing requirement is a mandatory component of service ........21

B. The government has not satisfied the mailing requirement.......................23

V. There Is No Basis To Treat Sinovel USA And Sinovel China As A Single Entity For Purposes Of Service .............................................................................24

VI. The Government Is Fully Aware That It Cannot Effectuate Service In These Circumstances And Has Sought To Change The Law................................27


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VII. The Government Has Not Attempted Service Through Diplomatic Channels ................................................................................................................29

CONCLUSION .............................................................................................................................30


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TABLE OF AUTHORITIES

Cases:

Abney v. United States, 431 U.S. 651 (1977) ..................................................................................................................29

Bates v. United States, 522 U.S. 23 (1997) ....................................................................................................................14

Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333 (1925) ........................................................................................................2, 17, 18

Cardenas v. City of Chi., 646 F.3d 1001 (7th Cir. 2011) ...................................................................................................19

Crosse v. BCBSD, Inc., 836 A.2d 492 (Del. 2003)..........................................................................................................26

Cruz-Packer v. Dist. of Columbia, 539 F. Supp. 2d 181 (D.D.C. 2008)...........................................................................................19

Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408 (2d Cir. 2005) ......................................................................................................14

Danziger v. United States, 161 F.2d 299 (9th Cir. 1947) .....................................................................................................17

Dole Food Co. v. Patrickson, 538 U.S. 468 (2003) ..................................................................................................................25

Ex Parte Republic of Peru, The Ucayali, 318 U.S. 578 (1943) ..................................................................................................................30

F. Hoffman-La Roche Ltd. v. Empagran, S.A., 542 U.S. 155 (2004) ..............................................................................................................5, 14

Familia De Boom v. Arosa Mercantil, S.A., 629 F.2d 1134, 1139 (5th Cir. 1980), overruled on other grounds, 456 U.S. 694 (1982) ........................................................................................................................................12

Fink v. Igoe, 279 F.2d 544 (7th Cir. 1960) .....................................................................................................17

Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33 (2008) ....................................................................................................................21

Fletcher v. Atex, Inc., 68 F.3d 1451 (2d Cir. 1995) ......................................................................................................26

Hertz Corp. v. Friend, 559 U.S. 77 (2010) ....................................................................................................................23

In re Auto. Refinishing Paint Antitrust Litig., 358 F.3d 288 (3d Cir. 2004) ......................................................................................................14


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In re Hijazi, 589 F.3d 401 (7th Cir. 2009) .....................................................................................................30

Karl Rove & Co. v. Thornburgh, 39 F.3d 1273 (5th Cir. 1994) .....................................................................................................20

Leach Co. v. Gen. Sani-Can Mfg. Corp., 393 F.2d 183 (7th Cir. 1968) ...............................................................................................17, 18

Ludwig v. Gen. Binding Corp., 21 F.R.D. 178 (E.D. Wis. 1957)................................................................................................17

McCormack v. City & Cnty. of Honolulu, No. 10-cv-293, 2011 WL 6934710 (D. Haw. Dec. 30, 2011) ...................................................12

Medi-Tec of Egypt Corp. v. Bausch & Lomb Surgical, No. Civ.A. 19760-NC, 2004 WL 415251 (Del. Ch. Mar. 4, 2004)...........................................26

Murphy Bros., Inc. v. Michetti Pipe Stringing, 526 U.S. 344 (1999) ..............................................................................................................2, 16

NetJets Aviation, Inc. v. LHC Commc’ns, LLC, 537 F.3d 168 (2d Cir. 2008) ......................................................................................................26

Omni Capital Int’l, Ltd. v. Rudolf Wolff & Co.,484 U.S. 97 (1987) ....................................................................................................................16

On Command Video Corp. v. Roti, 705 F.3d 267 (7th Cir. 2013) .....................................................................................................26

Powe v. City of Chi., 664 F.2d 639 (7th Cir. 1981) .....................................................................................................18

Ricoh Co., Ltd. v. Asustek Computer, Inc., 481 F. Supp. 2d 954 (W.D. Wis. 2007).....................................................................................17

Se. Tex. Inns, Inc. v. Prime Hospitality Corp.,462 F.3d 666 (6th Cir. 2006) .....................................................................................................26

Taylor v. Mayo, 110 U.S. 330 (1884) ..................................................................................................................20

United Rope Distribs., Inc. v. Seatriumph Marine Corp., 930 F.2d 532 (7th Cir. 1991) .....................................................................................................16

United States v. Alfred L. Wolff GmbH,No. 08-cr-417, 2011 WL 4471383 (N.D. Ill. Sept. 26, 2011) ............................................passim

United States v. Bestfoods, 524 U.S. 51 (1998) ..............................................................................................................17, 18

United States v. Chitron Elecs Co. Ltd., 668 F. Supp. 2d 298 (D. Mass. 2009)............................................................................17, 18, 25

United States v. Johnson Matthey, No. 2:06-cr-169, 2007 WL 2254676 (D. Utah Aug. 2, 2007)............................................passim


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United States v. Kennedy, 133 F.3d 53 (D.C. Cir. 1998).....................................................................................................12

United States v. Kolon Indus., Inc., No. 3:12-cr-137, 2013 WL 682896 (E.D. Va. Feb. 22, 2013) ...........................................passim

United States v. Matthey Plc, No. 06-cr-169, 2007 WL 2254676 (D. Utah Aug. 2, 2007) ........................................................2

United States v. Mollenhauer Labs., Inc., 267 F.2d 260 (7th Cir. 1959) .....................................................................................................19

United States v. Nippon Paper Indus. Co., Ltd., 944 F. Supp. 55 (D. Mass. 1996), rev’d on other grounds, 109 F.3d 1 (1st Cir. 1997)..........................................................................................................................................14

United States v. Nnanna, 281 F. App’x 708 (9th Cir. 2008)..............................................................................................18

United States v. Pangang Grp. Co., Ltd., 879 F. Supp. 2d 1052 (N.D. Cal. 2012)..............................................................................passim

United States v. Pangang Grp. Co., Ltd., No. 11-cr-573 (N.D. Cal. Apr. 8, 2013) (ECF No. 293) ...................................................1, 4, 12

United States v. Porter, No. 03-cr-129, 2008 WL 5377946(E.D.N.Y. Dec. 23, 2008) ...................................................12

United States v. The Public Warehousing Co. K.S.C., No. 1:09-cr-490, 2011 WL 1126333 (N.D. Ga. Mar. 28, 2011) .........................................25, 27

Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694 (1988) ..............................................................................................................2, 18

Wallace v. Wood, 752 A.2d 1175 (Del. Ch. 1999) .................................................................................................26

West v. Cabell, 153 U.S. 78 (1894) ....................................................................................................................18

Statutes:

15 U.S.C. § 22 ...............................................................................................................................14

18 U.S.C. § 3261 ...........................................................................................................................16

28 U.S.C. § 2071 .............................................................................................................................4

28 U.S.C. § 2074 ...........................................................................................................................11

Rules

Fed R. Civ. P. 4(f) (1939) (reprinted in 28 U.S.C. § 723c (Supp. V 1939)) .................................15

Fed. R. Crim. P. 4(b)(1)(A)-(D) ....................................................................................................13

Fed. R. Crim. P. 4(b)(2).................................................................................................................18


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Fed. R. Crim. P. 4(c)(2) .................................................................................................................13

Fed. R. Crim. P. 4(c)(2) (1946) (reprinted in 18 U.S.C. § 687 (1946)).........................................15

Fed. R. Crim. P. 4(c)(3)(C).....................................................................................................passim

Fed. R. Crim. P. 4(f) ......................................................................................................................14

Fed. R. Crim. P. 4(h) .....................................................................................................................13

Fed. R. Crim. P. 49 ........................................................................................................................12

Fed. R. Crim. P. 9(a)......................................................................................................................13

Fed. R. Crim. P. 9(b) .....................................................................................................................13

Fed. R. Crim. P. 9(c)......................................................................................................................13

Fed. R. Crim. P. 9(c)(1) (1946) (reprinted in 18 U.S.C. § 687 (1946)).........................................22

Other Authorities:

5 Wright & Miller, Federal Practice & Procedure § 1353 (1969)...............................................12

Alexander Holtzoff, Origin and Sources of the Federal Rules of Civil Procedure, 30 N.Y.U. L. Rev. 1057 (1955).................................................................................................15

China Turbine Maker Indicted, Wall Street Journal B2 (June 28, 2013).......................................................................................5

Fed. R. Civ. P. 4, Adv. Comm. Notes (1937)..........................................................................15, 21

Fed. R. Crim. P. 4, Adv. Comm. Notes (2002) .......................................................................16, 22

Fed. R. Crim. P. 9, Adv. Comm. Notes (2002) .............................................................................22

Judicial Assistance—Agreement Between the United States of America and China (June 19, 2000),available at http://www.state.gov/documents/organization/126977.pdf............................11, 29

Press Release, AMSC, China’s Sinovel Indicted in the United States for Stealing AMSC Trade Secrets (June 27, 2013), available at http://ir.amsc.com/releasedetail.cfm?ReleaseID=774372.......................................7

Press Release, AMSC, China’s Supreme People’s Court to Hear AMSC’s Case Against Sinovel on May 29 (May 24, 2013), available at http://ir.amsc.com/releasedetail.cfm?ReleaseID=767222...........................................................5

Restatement (Third) of Agency § 1.01 (2006) ..............................................................................20


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MEMORANDUM OF SPECIALLY-APPEARING DEFENDANTSINOVEL WIND GROUP CO., LTD.

IN SUPPORT OF MOTION TO QUASH SERVICE

Pursuant to this Court’s orders granting counsel leave to enter a special appearance,

Sinovel Wind Group Co., Ltd. (“Sinovel China”) submits this memorandum in support of its

Motion to Quash Service (“Motion”).

INTRODUCTION

The government bears the burden of proof where, as here, the defendant raises a

challenge to the sufficiency of service.1 The government has conceded that it has this burden in

other, similar cases that have been litigated throughout the country. See, e.g., United States v.

Pangang Grp. Co., Ltd., 879 F. Supp. 2d 1052, 1056-57 (N.D. Cal. 2012) (citing United States v.

Alfred L. Wolff GmbH, No. 08-cr-417, 2011 WL 4471383, at *4, *8 (N.D. Ill. Sept. 26, 2011)).2

Proper service of process on any organization, including a foreign corporation, requires

that the government satisfy two independent requirements of Federal Rule of Criminal Procedure

4. The government:

(1) must “delive[r] a copy [of the summons] to an officer, to a managing or general agent, or to another agent appointed or legally authorized to receive service of process”; and

(2) “must . . . mail[]” the summons to the company’s “last known address within the district or to its principal place of business elsewhere in the United States.”

1 “When a defendant raises a challenge to the sufficiency of service of process, the government

bears the burden of proving its adequacy.” United States v. Porter, No. 03-cr-129, 2008 WL 5377946, at *10 (E.D.N.Y. Dec. 23, 2008); see also United States v. Alfred L. Wolff GmbH, No. 08-cr-417, 2011 WL 4471383, at *4, *8 (N.D. Ill. Sept. 26, 2011) (construing Criminal Rule 4 and placing burden on government to show adequate service); infra p. 12.

2 Accord Order, United States v. Pangang Grp. Co. Ltd., No. 11-cr-573 (N.D. Cal. Apr. 8, 2013) (ECF No. 293) (attached as Exhibit A) (granting second motion to quash and observing that “[t]he United States agrees that it bears the burden of demonstrating that service was proper.”).


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Fed. R. Crim. P. 4(c)(3)(C). These two requirements for effective service are a mandatory

prerequisite “to any procedural imposition on [a foreign corporate defendant].” Murphy Bros.,

Inc. v. Michetti Pipe Stringing, 526 U.S. 344, 350 (1999).

The government described the entirety of its efforts to effectuate service in a “Notice”

filed with the Court on July 8, 2013. (ECF No. 36) If the feverishness of service efforts were

evidence of their validity, the government would win this argument going away. However, the

frenzy of activity cannot obscure the fact that the government has not met either of Rule 4’s two

independent requirements.

First, the government has not met Rule 4’s mandatory requirement that the summons be

delivered to an “officer,” “managing or general agent,” or other agent “appointed or legally

authorized” by the defendant to receive service of process. Fed. R. Crim. P. 4(c)(3)(C). Here,

the defendant is Sinovel China, a corporation organized under the laws of the People’s Republic

of China (“China”). Sinovel China has never been incorporated in the United States, and does

not have a principal place of business in this country. Most of the government’s efforts

described in the July 8 Notice involve faxing or delivering summonses to the registered agent of

Sinovel Wind Group (USA) Co., Ltd. (“Sinovel USA”), which is a separate legal entity

incorporated in Delaware. There should be no dispute that service on the registered agent of

Sinovel USA is not proper service on a different, foreign legal entity. Absent very unusual

circumstances that are not present here, service on a subsidiary is ineffective as a matter of law to

“render a parent subject to a court’s jurisdiction.” Volkswagenwerk Aktiengesellschaft v.

Schlunk, 486 U.S. 694, 705 n.* (1988) (citing Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S.

333, 336-37 (1925)); United States v. Johnson Matthey Plc, No. 06-cr-169, 2007 WL 2254676,

at *1 (D. Utah Aug. 2, 2007) (quashing effort to serve foreign parent with criminal service


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through U.S. subsidiary because “service upon a subsidiary is not sufficient service on a parent

company”).

In addition to describing transmission of copies of a summons to Sinovel USA and its

registered agent, the government’s July 8 Notice asserts that it delivered a copy of the summons

to Mr. Zhi Zhou. This is a curious assertion for the government to make. Rule 4 requires that

delivery be made “to an officer, to a managing or general agent, or to another agent appointed or

legally authorized to receive service of process.” Fed. R. Crim. P. 4(c)(3)(C). Mr. Zhou was,

and is, none of these things. Not only was Mr. Zhou not an officer, managing, general, or other

agent of Sinovel China, but he was not even an employee of Sinovel China when the government

handed him the summons. Mr. Zhou’s lawyer informed the FBI of this fact, along with the fact

that Mr. Zhou was not authorized to accept service of any document on behalf of Sinovel China,

but the government agent insisted on handing Mr. Zhou the summons anyway. See Decl. of

Yongji Shi ¶¶ 12-14 (“Shi Decl.”) (filed concurrently with this memorandum); Decl. of Amy

Riella ¶¶ 3-5 (“Riella Decl.”) (filed concurrently with this memorandum).

Nor has the government met Rule 4’s second requirement. Specifically, it has not mailed

the summons to Sinovel China’s “last known address within the [Western] [D]istrict [of

Wisconsin] or to its principal place of business elsewhere in the United States.” Fed. R. Crim. P.

4(c)(3)(C). This requirement allows service on a foreign corporation only where the corporation

has had an address in the District or a principal place of business in the United States (or has

consented to service). In contrast to the delivery requirement, the mailing requirement does not

authorize service through an “agent.” See Fed. R. Crim. P. 4(c)(3)(C). Sinovel China has never

had an address in the Western District of Wisconsin, and has no principal place of business in the

United States. Shi Decl. ¶¶ 4-5.


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The government’s faulty efforts at service do not arise in a vacuum. These same issues

have been litigated in courts around the country, in cases where the government has repeatedly

failed to demonstrate service on very similar facts to those presented here. The government’s

record of losses is striking. See, e.g., Alfred L. Wolff, 2011 WL 4471383 (granting motion to

quash criminal service on German and Chinese corporations); Pangang, 879 F. Supp. 2d 1052

(granting motion to quash criminal service on a Chinese corporation); Order, United States v.

Pangang Grp. Co., Ltd., No. 11-cr-573 (N.D. Cal. Apr. 8, 2013) (ECF No. 293) (attached as

Exhibit A) (“Pangang Order”) (granting subsequent motion to quash additional efforts at

service); United States v. Kolon Indus., Inc., No. 3:12-cr-137, 2013 WL 682896 (E.D. Va. Feb.

22, 2013) (granting motion to quash criminal service on Korean corporation); Johnson Matthey,

2007 WL 2254676 (granting motion to quash criminal service on English company).

Indeed, the government itself has decided that it cannot solely rely on Rule 4’s text to

effect service in circumstances such as these. Instead, the Justice Department has asked the

Advisory Committee on Criminal Rules (authorized pursuant to the Rules Enabling Act, 28

U.S.C. § 2071 et seq., to consider and recommend amendments to the Rules), to rewrite Rule 4

because such an amendment is “necessary in order to effectively prosecute foreign

organizations,” according to the Assistant Attorney General for the Criminal Division. See

Letter from Assistant Attorney General Lanny A. Breuer to the Hon. Reena Raggi (Oct. 25,

2012) (“Breuer Letter”) (attached as Exhibit B). Thus far, no changes to the Rule have occurred.

The rules regarding service are not formulistic or technical, but rather go to the very basis

of the government’s power to forcibly drag a foreign corporation before an American court—

particularly in this circumstance where most, if not all, of the alleged conduct occurred outside of

the United States. Here, the very same conduct alleged in the criminal case is the subject of civil


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lawsuits in China. See Press Release, AMSC, China’s Supreme People’s Court to Hear AMSC’s

Case Against Sinovel on May 29 (May 24, 2013), available at

http://ir.amsc.com/releasedetail.cfm?ReleaseID=767222; see also F. Hoffman-La Roche Ltd. v.

Empagran, S.A., 542 U.S. 155, 164-65 (2004) (comity concerns dictate that courts should “avoid

unreasonable interference with the sovereign authority of other nations”). And in the middle of a

business dispute and civil litigation, in the Chinese courts, between AMSC and Sinovel China,

the American company AMSC went to U.S. politicians to seek support.3 See, e.g., Erin

Ailworth, Chinese firm charged with stealing tech from Mass. company, The Boston Globe (June

27, 2013) (quoting statement by AMSC chief executive that he believes their dispute with

Sinovel “is on the agend[a] of President Barack Obama” and noting favorable “attention” from

“Vice President Joe Biden and Secretary of State John Kerry”). The instant criminal

investigation and prosecution followed.

Moreover, despite the flurry of mailings and faxes to the registered agent for Sinovel

USA, there is a glaring gap in the government’s list of efforts to serve Sinovel China.

Specifically, there is a formal international agreement between the United States and China

regarding Mutual Legal Assistance in Criminal Matters. Yet according to the July 8 Notice, the

government has not even attempted to effectuate service through available diplomatic channels.

This avenue should not be unknown to prosecutors here: In several other Rule 4 cases, a court

has ordered the Justice Department to pursue diplomatic means before proceeding with other

3 Before any criminal charges were brought, then-Senator John Kerry, in whose home state

AMSC is headquartered, said that Sinovel’s actions constituted “a mugging in broad daylight.” See China Turbine Maker Indicted, Wall Street Journal B2 (June 28, 2013) (“While the senior senator from Massachusetts last year, Secretary of State John Kerry called the AMSC-Sinovel dispute ‘a mugging in broad daylight . . . .’”).


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methods. At a minimum, the government should be required to pursue the same means of

service here.

For the reasons stated herein, the Court should find that the government has thus far

failed to satisfy its burden.

FACTUAL BACKGROUND

I. A Commercial Contract Dispute Led To This Criminal Case

Sinovel Wind Group Co., Ltd., is a manufacturer and exporter of wind turbines

incorporated under the laws of, and located in, China. (ECF No. 25, ¶ 6). Two Chinese State-

owned entities collectively own approximately 18% of Sinovel’s shares: Dalian Heavy

Industries Crane Group Co. Ltd. (approximately 16%, Sinovel’s largest shareholder), and the

National Council for Social Security Fund (approximately 2%). Shi Decl. ¶ 3. Sinovel

purchases software and equipment from third parties for the wind turbines that it manufactures,

sells, and services. (ECF No. 25, ¶ 6). Among Sinovel’s third-party providers was AMSC

(formerly American Superconductor), a U.S. corporation that develops and sells software and

equipment to regulate the flow of electricity from wind turbines to electrical grids. Sinovel

China has “legitimately purchased software and equipment from AMSC” pursuant to

commercial contracts. (ECF No. 25, ¶ 6). Sinovel paid AMSC hundreds of millions of dollars

under those contracts for certain rights to possess and use software from AMSC. After

differences arose between the parties beginning in March 2011, AMSC filed several civil suits

against Sinovel in Chinese courts, including claims to enforce certain contractual provisions

before the Beijing Arbitration Commission, and claims involving trade secrets and copyright in

the Beijing Higher People’s Court, the Beijing No. 1 Intermediate People’s Court, and the

Hainan No. 1 Intermediate People’s Court. The Chinese courts dismissed some of these claims,

but others are pending.


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Meanwhile, AMSC engaged in a high-profile political campaign to escalate its civil

dispute into a U.S. criminal prosecution by leveraging contacts with the Department of Justice

and conducting outreach to home-state Senators and Executive Branch officials. On June 27,

2013, within hours of the indictment, AMSC issued a press release trumpeting its role in

“work[ing] with law enforcement” and repeating allegations of criminal activity based on the

assertion that certain Sinovel turbines contain AMSC’s intellectual property. See, e.g., Press

Release, AMSC, China’s Sinovel Indicted in the United States for Stealing AMSC Trade Secrets

(June 27, 2013), available at http://ir.amsc.com/releasedetail.cfm?ReleaseID=774372. The press

release included an extensive quotation from Massachusetts Senator Elizabeth Warren and

announced the “strong support” AMSC had received from other high-level U.S. officials,

including former Massachusetts Senator John Kerry, who now serves as Secretary of State.4

An FBI affidavit in support of the criminal complaint shows AMSC’s intimate

involvement in the criminal investigation. See Aff. of Joshua Ben Mayers (June 6, 2013) (ECF

No. 8-1). The affidavit relies on information that AMSC software engineers provided to the

government about AMSC “source code,” information and evidence gathered by consultants and

investigators paid by AMSC to perform investigative work around the globe (including evidence

obtained during a search private investigators conducted of a private residence). The affidavit

also states that an FBI Special Agent “reviewed . . . [key] electronic evidence” “[i]n consultation

with AMSC engineers.” Id. ¶ 25. The affidavit invokes and relies on “extensive analysis”

4 In March 2013, AMSC’s Vice President testified before the United States Sentencing

Commission, providing a one-sided account of the contract dispute and alleging that Sinovel China engaged in criminal activity in terms of theft of trade secrets and economic espionage. See Testimony of John W. Powell, AMSC Vice President and General Counsel, Hearing on the Proposed Amendments to the Federal Sentencing Guidelines Before the United States Sentencing Commission (Mar. 13, 2013), available at http://www.ussc.gov/Legislative_and_Public_Affairs/Public_Hearings_and_Meetings/20130313/Testimony_Powell.pdf. Mr. Powell’s testimony emphasized that Sinovel was “partially stated owned” and encouraged the Commission to increase sentences where a crime was “committed to benefit a foreign government.” Id. at 2, 6.


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“conducted” by “Senior AMSC Software Manager William Vareka,” and Mr. Vareka’s ultimate

“determin[ation]” that software found in certain Massachusetts wind turbines was “generated

from” a particular AMSC source code—i.e., the central allegation in the criminal case (as well as

a central issue in ongoing civil litigation). Id. ¶¶ 7-8, 13-19, 25-26.

On May 31, 2013, the government filed a criminal complaint charging Sinovel China

with theft of trade secrets. (ECF No. 7). On June 6, 2013, the government filed an amended

complaint naming “Sinovel Wind Group Co., Ltd. d/b/a Sinovel Wind Group (USA) Co., Ltd.”

(ECF No. 8). Sinovel Wind Group (USA) Co. Ltd. is a U.S. subsidiary of Sinovel China

independently engaged in business in the United States and incorporated in Delaware. Shi Decl.

¶ 6; see also id. ¶¶ 7-10. On June 27, 2013, a grand jury returned a three-count indictment

naming “Sinovel Wind Group Co., Ltd. d/b/a Sinovel Wind Group (USA) Co., Ltd.” together

with several individuals, and charging theft of trade secrets, conspiracy, and wire fraud. (ECF

No. 25).

On July 8, 2013, the government filed a “Notice” listing numerous actions it had taken in

seeking to “provid[e] service” in this case. (ECF No. 36) The Notice describes a scattershot of

numerous (but largely overlapping) steps the government has taken with regard to several

versions of a criminal summons, first on a criminal complaint and later on an indictment.

Sinovel China takes the government at its word that the July 8 notice accurately describes all the

attempts at service the government had attempted to date and that the government views as

sufficient to satisfy Rule 4.

II. The Government Makes Numerous Ineffective Efforts At Service

The July 8 notice indicates the government attempted several avenues of service.

Primarily, the government transmitted various versions of a summons to the Delaware and Texas

registered agents for, and Houston office address of, Sinovel USA. These efforts involved four


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different versions of the summons: (a) a summons on a complaint, addressed to Sinovel China;

(b) a summons on a complaint, addressed to “[Sinovel China] d/b/a [Sinovel USA]”; (c) a

summons on a complaint, addressed to Sinovel USA; and (d) a summons to answer an

Indictment, addressed to Sinovel USA. In particular:

On May 31 and June 5, 2013, the government transmitted a copy of the May 30 summons (addressed to Sinovel China) to the Texas and Delaware registered agents for Sinovel USA, and to Sinovel USA’s office address in Houston, Texas.

On June 7, the government transmitted a copy of a different summons on a complaint, naming “[Sinovel China] d/b/a [Sinovel USA]” and dated June 6, 2013, to the Delaware and Texas registered agents for Sinovel USA, and to Sinovel USA’s Houston office address.

On June 12, the government sent a copy of yet another summons on a complaint, addressed to Sinovel USA and dated June 11, 2013, to the Delaware and Texas registered agents for Sinovel USA and to Sinovel USA’s Houston office address.

On June 28 and July 1, the government transmitted copies of a summons to answer an Indictment, which summons was dated June 28, 2013, and addressed to Sinovel USA, to the Texas and Delaware registered agents for Sinovel USA, and to Sinovel USA’s office address in Houston.

July 8 Notice 1-2 (ECF No. 36).

In addition, on May 31, 2013, the government handed a copy of a summons and

complaint addressed to Sinovel China and dated May 30, 2013, to Zhi “Lucas” Zhou, a former

employee of Sinovel China who at the time was not employed by, an officer or managing agent

of, or otherwise authorized to accept service on behalf of, any Sinovel entity. July 8 Notice at 1

(ECF No. 36); Shi Decl. ¶¶ 12-14. Although Mr. Zhou had formerly been an employee of

Sinovel China, his employment contract expired and his resignation was effective May 28, 2013.

Shi Decl. ¶ 13. The government handed Mr. Zhou the summons on May 31 at a time when Mr.

Zhou had no role with Sinovel China. Id. ¶¶ 13-14. Moreover, Mr. Zhou’s attorney informed

the FBI Agent trying to hand Mr. Zhou a summons that Mr. Zhou was not authorized to accept

service on behalf of Sinovel China. Riella Decl. ¶ 4.


10

This Court granted counsel for Sinovel China leave to enter a special appearance. (ECF

Nos. 14-17, 19, & 40). Pursuant to this Court’s orders granting that leave, on June 27, 2013,

counsel for Sinovel China specially appeared and indicated its intent to challenge the sufficiency

of service of process.

III. The Government Is Seeking To Amend Rule 4

After a high-profile string of losses rejecting the government’s attempts to serve process

on foreign organizations by means other than Rule 4, in October 2012, the U.S. Department of

Justice (“DOJ”) formally recommended that the Advisory Committee on Criminal Rules amend

Rule 4(c)(3)(C) “to permit the effective service of a summons on a foreign organizational

defendant that has no agent or principal place of business within the United States.” See Breuer

Letter at 1. The proposed amendment, DOJ explained, was “necessary in order to effectively

prosecute foreign organizations,” because with such an amendment, “organizations could now be

served in the United States or ‘at a place not within a judicial district of the United States.’” Id.

at 1, 7-8 (emphasis added).

Significantly, DOJ requested the outright repeal of Rule 4(c)(3)(C)’s mailing

requirement. It explained that “Rule 4 can and has been read to preclude jurisdiction in criminal

cases against criminal organizations . . . merely because [they] do not have, an agent or a postbox

in the United States.” Id. at 5. DOJ’s letter also proposed a dramatic expansion of Rule 4(c)(2)

to include five express means of effecting service “at a place not within a judicial district of the

United States.” Id. at 1, 7-8. Those revisions would allow service on an organization “at a place

not within a judicial district of the United States” by delivering a copy of the summons to an

officer, managing or general agent, or other authorized agent “in a manner authorized under the

laws of the foreign jurisdiction where the officer or agent to be served is located,” or “by other

means reasonably calculated to give notice,” such as “a means that a foreign authority undertakes


11

in response to a letter rogatory or letter of request,” or by “other means upon request of an

attorney for the government, as the court orders.” Id. at 7.

On March 25, 2013, the Advisory Committee recommended the appointment of a

subcommittee to study DOJ’s proposal. To date, neither the subcommittee nor the Advisory

Committee has acted on the DOJ’s proposal, and Rule 4 stands as written. See 28 U.S.C. § 2074

(authorizing Judicial Conference to recommend, and Supreme Court to promulgate, amendments

to Rules following notice to Congress and waiting period).

IV. The Government Has Failed To Take Any Steps To Effect Service Based On The Agreement on Mutual Legal Assistance In Criminal Matters With China

On July 19, 2000, the United States and the People’s Republic of China signed a formal

agreement on Mutual Legal Assistance in Criminal Matters. See Judicial Assistance—

Agreement Between the United States of America and China (June 19, 2000), available at

http://www.state.gov/documents/organization/126977.pdf (attached as Exhibit C) (“MLAA”);

see also U.S. Dep’t of State, Treaties in Force 2011—Bilateral Treaties in Force as of Jan. 1,

2011, available at http://www.state.gov/documents/organization/169274.pdf. The MLAA

memorializes the parties’ shared intent to “improve the effectiveness of cooperation between the

two countries in respect of mutual legal assistance in criminal matters,” and provides generally

that the parties shall assist each other “in investigations, in prosecutions, and in proceedings

related to criminal matters.” MLAA art. 1. Areas of mutual assistance specifically include

“serving documents,” and the MLAA specifies the form and content of requests for assistance.

Id. art. 4. The Agreement states that a party receiving a request “shall do everything in its power

to execute the request.” Id. art. 6, ¶ 1. Although the agreement states that the parties are not

necessarily “obligated” to effect service of a criminal summons (id. art. 8, ¶ 1), no provision

precludes China from doing so. Indeed, the agreement explicitly states that the Agreement “shall


12

not prevent either Party from granting assistance to the other Party through the provisions of

other applicable international agreements, or through the provisions of its national laws.” Id.

art. 21.

ARGUMENT

I. The Government Bears The Burden Of Proof

“When a defendant raises a challenge to the sufficiency of service of process, the

government bears the burden of proving its adequacy.” United States v. Porter, No. 03-cr-129,

2008 WL 5377946, at *10 (E.D.N.Y. Dec. 23, 2008); see Alfred L. Wolff, 2011 WL 4471383, at

*4, *8 (construing Criminal Rule 4 and placing burden on government to show adequate

service); see also United States v. Kennedy, 133 F.3d 53, 55, 59-60 (D.C. Cir. 1998) (holding

that the government had “just barely” met its burden to show adequate service of an information

under Fed. R. Crim. P. 49); Familia De Boom v. Arosa Mercantil, S.A., 629 F.2d 1134, 1139 (5th

Cir. 1980) (“[W]hen service of process is challenged, the party on whose behalf service is made

has the burden of establishing its validity.” (citing 5 Wright & Miller, Federal Practice &

Procedure § 1353 (1969))), overruled on other grounds, 456 U.S. 694, 700 & n.8, 709 (1982);

McCormack v. City & Cnty. of Honolulu, No. 10-cv-293, 2011 WL 6934710, at *3 (D. Haw.

Dec. 30, 2011) (noting same in civil context and citing authorities).

Indeed, this principle is so well-established, the government has recently conceded the

point, “agree[ing] that it bears the burden of demonstrating that service was proper” in a foreign

corporation’s challenge to the adequacy of service under Criminal Rule 4. Pangang, 879 F.

Supp. 2d at 1056-57 (citing Alfred L. Wolff GmbH, 2011 WL 471383, at *4, *8); accord

Pangang Order at 6 (granting subsequent motion to quash and again observing that “[t]he United

States agrees that it bears the burden of demonstrating that service was proper.”).


13

II. Rule 4 Imposes Two Independent Requirements For Service: Delivery And Mailing

A. The plain language of Rule 4 imposes two mandatory requirements for service

Under Federal Rule of Criminal Procedure 9, when the government elects to proceed by

indictment, “[t]he court must issue a warrant—or at the government’s request, a summons—for

each defendant named in an indictment.” Fed. R. Crim. P. 9(a). Rule 9 requires that “the

summons [be] served as provided in Rule 4(c)(1), (2), and (3).” Fed. R. Crim. P. 9(b), (c). Rule

4, in turn, provides that “a summons [may be] served[] within the jurisdiction of the United

States or anywhere else a federal statute authorizes an arrest.” Fed. R. Crim. P. 4(c)(2). Rule 4

further provides that the summons must contain, in addition to the “stated time and place,” (1)

the defendant’s name, (2) the offense charged, and (3) the signature of a judge. Fed. R. Crim. P.

4(b)(1)(A)-(D).

Rule 4 establishes two unambiguous requirements for how “[a] summons is served on an

organization.” Those requirements are:

(1) “delivering a copy to an officer, to a managing or general agent, or to another agent appointed or legally authorized to receive service of process” and

(2) “mail[ing]” the summons to a known address within the district where the government has chosen to prosecute, or the defendant’s “principal place of business” (if any) elsewhere in the United States.

Fed. R. Crim. P. 4(c)(3)(C).

The mandatory nature of Criminal Rule 4 is highlighted by comparison to the text of the

parallel provision in Federal Rule of Civil Procedure 4(h). Although Civil Rule 4(h) contains

similar language addressing service on an organization within the United States, the civil rule has

additional provisions, not found in Criminal Rule 4, expressly providing for service on foreign

organizational defendants outside the United States. See Fed. R. Civ. P. 4(h) (“[A] domestic or

foreign corporation, or a partnership or other unincorporated association that is subject to suit


14

under a common name, must be served: . . . (2) at a place not within any judicial district of the

United States, in any manner prescribed by Rule 4(f) for serving an individual, except personal

delivery under [Rule 4](f)(2)(C)(i).”); see also Fed. R. Civ. P. 4(f) (setting forth methods of

service on individuals abroad, including the Hague Convention and authorizing a “court [to]

orde[r]” any “means [of service] not prohibited by international agreement”).

The textual differences between the criminal and civil versions of Rule 4 demonstrate

that the Rules’ framers “act[ed] intentionally and purposely” (Bates v. United States, 522 U.S.

23, 29-30 (1997)) in adopting more exacting procedures for service in the criminal context. The

differences also indicate that when the framers have intended to provide for service of process on

a foreign organization, they know precisely how to do so.5 The text of Criminal Rule 4 reflects

the sensitive foreign relations concerns that are implicated when the United States Government

initiates criminal proceedings against an entity based in, and incorporated under the laws of, a

foreign sovereign. To the extent Rule 4 imposes more restrictive requirements for service of

criminal process on foreign entities, it reflects the requirement to construe statutes to “avoid

unreasonable interference with the sovereign authority of other nations.” Empagran, 542 U.S. at

164-65.

5 Congress also knows how to authorize service of process abroad when it so intends. Under

Section 12 of the Clayton Act, for instance, “process in [an antitrust action] may be served . . . wherever [a corporation] may be found.” 15 U.S.C. § 22. In civil cases, some courts have read Section 12 to authorize “worldwide[] service of process.” See, e.g., In re Auto. Refinishing Paint Antitrust Litig., 358 F.3d 288, 293 (3d Cir. 2004); cf. Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 423 (2d Cir. 2005). Despite Section 12’s expansive language, however, other courts have expressed doubt that it applies at all in criminal proceedings, underscoring the troubling breadth of the government’s apparent theory of service here under Criminal Rule 4. See United States v. Nippon Paper Indus. Co., Ltd., 944 F. Supp. 55 (D. Mass. 1996), rev’d on other grounds, 109 F.3d 1 (1st Cir. 1997).


15

B. The rulemaking history confirms that Rule 4 does not authorize extraterritorial service on a foreign organization in the manner the government has undertaken

The history of the Civil and Criminal Rules weighs against authorizing service on entities

outside the United States in a manner that lacks support in the text of the rules or another source

of law.

The longstanding tradition in U.S. law prior to promulgation of the Civil Rules was that

service of a civil summons could be effected only in the district where a case was filed. See

Alexander Holtzoff, Origin and Sources of the Federal Rules of Civil Procedure, 30 N.Y.U.

L. Rev. 1057, 1063-64 (1955). The first Civil Rules “enlarge[d] . . . the [then-]present rule as to

where service may be made.” Fed. R. Civ. P. 4, Adv. Comm. Notes (1937). Civil Rule 4(f)

authorized service of process, other than a subpoena, within the territorial limits of the state in

which the district court was situated. That rule allowed service beyond those “territorial limits”

only “when a statute of the United States so provides.” Fed R. Civ. P. 4(f) (1939) (reprinted in

28 U.S.C. § 723c, at p. 856 (Supp. V 1939)) (attached as Exhibit D).

The Advisory Committee first proposed criminal rules in 1943. The first Criminal Rule

governing service of a summons, effective in 1946, imposed “[t]erritorial [l]imits” on service of

a summons, stating that “[t]he warrant may be executed or the summons may be served at any

place within the jurisdiction of the United States.” Fed. R. Crim. P. 4(c)(2) (1946) (reprinted in

18 U.S.C. § 687, at p. 1961 (1946)) (attached as Exhibit E). Criminal Rule 4 remained

unchanged for a half-century, until a “general restyling” in 2002.6 The Committee Notes

explained that revised Criminal Rule 4(c)(2) “states the traditional rule recognizing the territorial

6 In place of the former Rule 4(d), which provided that “[t]he warrant may be executed or the

summons may be served at any place within the jurisdiction of the United States,” the revised Rule 4(c) provided that “A warrant may be executed, or a summons served, within the jurisdiction of the United States or anywhere else a federal statute authorizes an arrest.”


16

limits for executing warrants.” Fed. R. Crim. P. 4, Adv. Comm. Notes (2002). The 2002

amendments specified only one substantive “change” for Criminal Rule 4(c)(2)—the inclusion of

“new language” (i.e., provision for service “anywhere else a federal statute authorizes an arrest”)

intended to accommodate “the recent enactment of the Military Extraterritorial Jurisdiction Act

[‘MEJA’].” Fed. R. Crim. P. 4, Adv. Comm. Notes (2002).7

This history demonstrates that courts should exercise significant caution before

authorizing extraterritorial service of process, given the Rules’ longstanding domestic focus and

the express provision for extraterritorial service when the drafters have so intended.

C. Compliance with Rule 4’s requirements for service is an essential prerequisite to exercising jurisdiction over Sinovel China

Service of process under Rule 4 is no mere technicality. Rule 4 codifies the longstanding

principle, rooted in the Due Process Clause of the Fifth Amendment, that formal service of

process “is fundamental to any procedural imposition on a named defendant,” Murphy Bros., 526

U.S. at 350, and (absent waiver) a prerequisite to the exercise of jurisdiction over a defendant,

Omni Capital Int’l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987). Service requires actions

beyond mere “notice to the defendant,” and without proper service (or waiver) a federal court

may not exercise personal jurisdiction over a defendant. Id.; Johnson Matthey, 2007 WL

2254676, at *2 (even “ample notice” is no substitute for compliance with Criminal Rule

4(c)(3)(C)). “[B]efore a court may exercise personal jurisdiction over a defendant, there must be

. . . a basis for the defendant’s amenability to service of summons.” Omni Capital, 484 U.S. at

104. Service of a summons must, therefore, be authorized by rule or statute. See id. at 105-08;

United Rope Distribs., Inc. v. Seatriumph Marine Corp., 930 F.2d 532, 534 (7th Cir. 1991)

7 Enacted in November 2000, MEJA made certain domestic criminal laws applicable to military

personnel and contractors abroad and explicitly authorized overseas arrests for violations thereof. See 18 U.S.C. § 3261 et seq.; id. § 3262(a) (authorizing arrest). MEJA has no applicability in this case.


17

(“Omni holds that personal jurisdiction may be created only by statute or federal rule with the

force of statute.”).

“Generally speaking, . . . service of process on a wholly owned subsidiary does not

constitute service of process on the parent corporation where separate corporate identities are

maintained.” United States v. Chitron Elecs Co. Ltd., 668 F. Supp. 2d 298, 304-05 (D. Mass.

2009) (citing Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 334-35 (1925)); Johnson

Matthey, 2007 WL 2254676, at *1 (quashing effort to serve foreign parent with criminal service

through U.S. subsidiary because “service upon a subsidiary is not sufficient service on a parent

company”); see United States v. Bestfoods, 524 U.S. 51, 61-62 (1998).8 Where a corporate

defendant has not been properly served with the summons, service must be quashed. See, e.g.,

Fink v. Igoe, 279 F.2d 544, 545-46 (7th Cir. 1960) (issuing writ of mandamus to vacate denial of

motion to quash service, where there was “no basis in th[e] record” to conclude defendant

resided or “ha[d] a regular and established place of business” in the district); see also Danziger v.

United States, 161 F.2d 299, 301 (9th Cir. 1947).

* * *

Applying these principles to the government’s scattershot efforts at service, the

government has not satisfied either of Rule 4’s two independent requirements.

III. The Government Has Not Satisfied Rule 4’s Delivery Requirement

The government failed to satisfy Rule 4’s requirement that it “deliver [the summons] . . .

to an officer, to a managing or general agent, or to another agent authorized to accept service of

process.” Fed. R. Crim. P. 4(c)(3)(C).

8 See also Leach Co. v. Gen. Sani-Can Mfg. Corp., 393 F.2d 183, 186 (7th Cir. 1968); Ricoh Co.,

Ltd. v. Asustek Computer, Inc., 481 F. Supp. 2d 954, 957 (W.D. Wis. 2007); Ludwig v. Gen. Binding Corp., 21 F.R.D. 178 (E.D. Wis. 1957).


18

A. The government has not served any “officer,” “managing or general agent” or “other agent appointed or legally authorized to receive service of process” for Sinovel China

As noted, the government sent copies of the May 30 summons on a complaint (addressed

to “Sinovel China”) and the June 6 summons on a complaint (addressed to “Sinovel China d/b/a

Sinovel USA”) to the corporate registered agent for, and former Houston office address of,

Sinovel USA. But neither Sinovel USA nor its Delaware or Texas registered agents is an

authorized agent for service of process on Sinovel China. Shi Decl. ¶ 11.9

Thus the only question before this Court is whether service on the authorized agent of a

separately-incorporated subsidiary is effective as service on a parent corporation. The answer is

no. The government’s (unexplained) use of the designation “dba” in the caption of the

Indictment and on one summons does not supersede the hornbook principle that, absent unusual

circumstances not present here, service on a subsidiary is not effective as service on the parent

corporation. Chitron, 668 F. Supp. 2d at 304-05 (citing Cannon Mfg., 267 U.S. at 334-35); see

also Bestfoods, 524 U.S. at 61-62; Schlunk, 486 U.S. at 705 n.*; Leach Co., 393 F.2d at 186.

The government also attempted to serve Sinovel China by handing a copy of the May 30

summons to Zhi Zhou. As Mr. Zhou’s attorney informed the government before it handed Mr.

Zhou the document, Mr. Zhou was not an “officer,” “managing or general agent,” or other agent

9 The summonses dated June 11, 2013 (ECF No. 9), and June 28, 2013 (ECF No. 32), are not

even addressed to (and do not name) Sinovel China, and therefore cannot be effective service as to Sinovel China. Rule 4 expressly provides that a summons must “be in the same form as a warrant” and therefore must “contain the defendant’s name.” Fed. R. Crim. P. 4(b)(1), (2). Failure to name or describe the defendant with reasonable certainty invalidates a summons. See, e.g., United States v. Nnanna, 281 F. App’x 708, 710 (9th Cir. 2008) (under Rule 4, “summons must contain . . . the defendant’s name”); Kolon Indus., 2013 WL 682896, at *2. Courts have long reached the same conclusion as to a defective warrant, the form of which is “the same” as a summons. See, e.g., West v. Cabell, 153 U.S. 78, 85, 88 (1894)(holding that defendant’s constitutional rights were violated when defendant named “Vandy West” was arrested on a warrant that named “James West”); Powe v. City of Chi., 664 F.2d 639, 645 (7th Cir. 1981)(“an arrest warrant that incorrectly names the person to be arrested will usually be deemed insufficient to meet the fourth amendment’s particularity requirement”).


19

authorized to accept service of process for Sinovel China, or any other Sinovel entity. Riella

Decl. ¶ 4; Shi Decl. ¶¶ 12-14. To the contrary, Mr. Zhou had previously been employed by

Sinovel China, under a three-year labor contract that expired on May 3, 2013. Shi Decl. ¶ 12.

Mr. Zhou chose not to renew that contract. Id. ¶ 13. Mr. Zhou formally resigned from Sinovel

China and his resignation was effective May 28, 2013. Id. ¶ 13.

Mr. Zhou would never have been an appropriate vehicle for service, but certainly not

after he was no longer affiliated with Sinovel China and his attorney had informed the

government that Mr. Zhou was not authorized to accept service. Johnson Matthey is on point, in

which the court quashed service on a foreign corporation where the individuals the government

served “had no authority to act on behalf of [the defendant corporation]” and “there was no

evidence that [the individual] [was] an agent for the [foreign corporation].” 2011 WL 2254676,

at *1; see also Cardenas v. City of Chi., 646 F.3d 1001, 1005-06 (7th Cir. 2011) (no valid service

where “[p]laintiffs have not shown that the [recipient] was an authorized agent to receive service

of process”); United States v. Mollenhauer Labs., Inc., 267 F.2d 260, 262 (7th Cir. 1959)

(finding no valid “theory” of service where it was “without controversy that [the individual

whom the United States attempted to serve] was not an officer, managing or general agent of [the

organizational] defendant. Neither was she an agent authorized by appointment or by law to

receive service of process on behalf of defendant.”); accord Cruz-Packer v. Dist. of Columbia,

539 F. Supp. 2d 181, 187 (D.D.C. 2008) (same).

B. Sinovel USA is not an agent of Sinovel China

The government might argue that Sinovel USA was otherwise an agent of Sinovel China,

such that service of process on Sinovel USA satisfied the delivery requirement (but not the

mailing requirement, see infra pp. 20-24) for Sinovel China.


20

Generally speaking, “[a]gency is the fiduciary relationship that arises when one person (a

‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the

principal’s behalf and subject to the principal’s control, and the agent manifests assent or

otherwise consents so to act.” See Restatement (Third) of Agency § 1.01 (2006). “Agency is

never to be presumed; it must be shown affirmatively.” Karl Rove & Co. v. Thornburgh, 39 F.3d

1273, 1296 (5th Cir. 1994). “The mark of an agent is the ability, whether actual or apparent, to

contract in the name of the principal and thereby bind him.” Kolon Indus., 2013 WL 682896, at

*13 (citing Taylor v. Mayo, 110 U.S. 330, 334-35 (1884) (“An agent represents and acts for his

principal, who may be either a natural or artificial person. . . . When an agent contracts in the

name of his principal, the principal contracts, and is bound, but the agent is not.”)).

Sinovel USA does not have authority to enter binding agreements on behalf of Sinovel

China. Nor has it ever asserted authority to do so. Shi Decl. ¶ 9. Sinovel USA therefore lacks

the critical “mark of an agent” of Sinovel China, and cannot be deemed a general agent for

purposes of Rule 4. Kolon Indus., 2013 WL 682896, at *16 (holding that the U.S. subsidiary of a

Korean company was not the company’s general agent because “while [the subsidiary] engaged

in the sales of [the parent’s] products to American and Canadian customers, it did so by binding

itself, and not [the foreign parent], to contracts.”). As a result, transmitting copies of a summons

to Sinovel USA is not service on Sinovel China.

IV. The Government Has Not Satisfied Rule 4’s Mailing Requirement

Although failure to satisfy the mailing requirement is dispositive here, the government

has also failed to satisfy Rule 4’s requirement to mail a copy of the summons to a defendant’s

“last known address within the [Western] [D]istrict [of Wisconsin] or to its principal place of

business elsewhere in the United States.” Fed. R. Crim. P. 4(c)(3)(C).


21

A. Rule 4’s mailing requirement is a mandatory component of service

In addition to the government’s obligation to “deliver[] a copy [of the summons] to an

officer, to a managing or general agent, or to another agent appointed or legally authorized to

receive service of process,” Rule 4 provides that “a copy [of the summons] must also be mailed

to the organization’s last known address within the district or to its principal place of business

elsewhere in the United States.” Fed. R. Crim. P. 4(c)(3)(C) (emphasis added). Rule 4’s text

“connotes a mandatory requirement, rather than a hortatory or precatory requirement,” and

constitutes a “mandatory component of effective service.” See Pangang Order at 8-9. In recent

Criminal Rule 4 cases, courts have reached precisely this conclusion, quashing attempts at

service on foreign corporations that lack an address in the relevant district or a principal place of

business in the United States. See, e.g., Pangang, 879 F. Supp. 2d at 1066 (quashing service, and

concluding that mailing requirement cannot be satisfied by mailing to a foreign corporation’s

agent); Johnson Matthey, 2007 WL 2254676, at *1 (quashing service and observing that Rule 4

requires both mailing and delivery); see also Advisory Comm. Note to Fed. R. Crim. P. 4 (2002)

(“[I]n all cases in which a summons is being served on an organization, a copy of the summons

must be mailed to the organization.” (emphasis added)).10

Rule 4’s history further supports treating the mailing requirement as a mandatory

component of service. Prior to 2002, service of a summons was governed by Criminal Rule 9,

10 In contrast to the mandatory language of Criminal Rule 4, “which always requires the

Government to mail a copy of the summons to the organization,” the text of Federal Rule of Civil Procedure 4 “require[s] a party to mail[] a copy of the summons to an organization located within the United States only where service is made upon an ‘agent . . . authorized by statute and the statute so requires.’” Pangang, 879 F. Supp. 2d at 1064 (quoting Fed. R. Civ. P. 4(h)(1)(B)). This interpretation of Criminal Rule 4 is also supported by structure. The mailing requirement appears under the general heading “(c) Execution or Service, and Return” and under the subheading “(3) Manner.” The provision therefore specifies the “[m]anner” of service of a criminal summons. Cf. Fla. Dep’t of Revenue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 47 (2008) (“[S]tatutory titles and section headings are tools available for the resolution of a doubt about the meaning of a statute.” (citation omitted)).


22

which provided that a “summons to a corporation shall be served by”: (1) “delivering a copy to

an officer or to a managing or general agent or to any other agent authorized by appointment or

by law to receive service of process”; and (2) “if the agent is one authorized by statute to receive

service and the statute so requires, by also mailing a copy to the corporation’s last known

address within the district or at its principal place of business elsewhere in the United States.”

Fed. R. Crim. P. 9(c)(1) (1946) (reprinted in 18 U.S.C. § 687, at p. 1966 (1946)) (emphasis

added) (attached as Exhibit F). A mailing was required only if service was attempted through an

agent “authorized by statute to receive service,” and only where the statute itself required a

mailing. See id. But in those circumstances, mailing was mandatory. Id.

In 2002, the Advisory Committee moved a portion of Rule 9 into Rule 4(c)(3)(C), and

made substantive amendments to expand the mailing requirement to all cases involving service

on an organization.11 The Committee deleted the language in former Criminal Rule 9 limiting

the mailing requirement to service on an authorized agent, and inserted the unqualified statement

that “[a] copy [of the summons] must also be mailed to the organization’s last known address

within the district or to its principal place of business elsewhere in the United States.” The

Advisory Committee’s notes explained that under the amended rule, “in all cases in which a

summons is being served on an organization, a copy of the summons must be mailed to the

organization.” Fed. R. Crim. P. 4, Adv. Comm. Notes (2002) (emphasis added).12

11 The 2002 Amendments included “stylistic” changes. Fed. R. Crim. P. 9, Adv. Comm. Notes

(2002). Among other things, “the language in [former] Rule 9(c)(1), concerning service of a summons on an organization, [was] moved to Rule 4[(c)(3)(C)].” Id. The Advisory Committee explained that Criminal Rule 4 was “the more appropriate location for general provisions addressing the mechanics of arrest warrants and summonses.” Fed. R. Crim. P. 4, Adv. Comm. Notes (2002).

12 There is no indication that dividing the mailing requirement and delivery requirement into two separate sentences was intended to have substantive effect.


23

The government must comply with the mailing requirement set forth in Rule 4 by mailing

the summons to Sinovel China’s last known address in the Western District of Wisconsin or its

principal place of business, if any, in the United States. Rule 4’s mailing requirement does not

authorize mailing to an officer or agent. See Pangang, 879 F. Supp. 2d at 1064 (“Unlike the

delivery requirement, the mailing requirement does not state that a summons may be mailed to

an officer, director or a general agent. It requires a summons to be mailed to the organization’s

principal place of business in the United States.”) (emphasis in original).

B. The government has not satisfied the mailing requirement

Sinovel China does not have, and never has had, an address in the Western District of

Wisconsin. Shi Decl. ¶ 4. Nor does it have a principal place of business elsewhere in the United

States; rather, its principal place of business is, and always has been, in China. Id. ¶ 5; see Hertz

Corp. v. Friend, 559 U.S. 77, 80-81, 92-93 (2010) (holding that a corporation’s “principal place

of business” refers to its “nerve center” and headquarters—i.e., “the place where a corporation’s

officers direct, control, and coordinate the corporation’s activities”). The steps enumerated in the

government’s July 8 Notice demonstrate that the government has been unable to satisfy Rule 4’s

mailing requirement. The government apparently has sought to compensate for non-compliance

with the literal requirements of Rule 4 by attempting to send several rounds of Federal Express

packages (containing various versions of a summons) to Sinovel USA’s office address in

Houston and Sinovel USA’s registered agent for service of process in Texas and Delaware. (July

8 Notice, ECF No. 36).

But Rule 4 does not authorize service on a foreign corporation by mailing the summons

to a separate corporate entity—whether or not that separate entity is an agent of the entity to be

served. The government cannot fill the gap simply by repeating ineffective methods of service.

Service must be quashed. See Johnson Matthey, 2007 WL 2254676, at *2 (granting defendant’s


24

motion to quash despite government’s mailing of summons to defendant’s subsidiary in the

United States because defendant had “not been shown to be present in the District of Utah and

does not now have, nor has it ever had, an address in the District, or a place of business within

the United States”). Even where service would be impossible under the Rule, this Court cannot

ignore the Rule’s unambiguous requirements. Id. (so holding, but noting government could

pursue other avenues of service, including under Mutual Legal Assistance Treaty).

V. There Is No Basis To Treat Sinovel USA And Sinovel China As A Single Entity For Purposes Of Service

Given this straightforward application of Rule 4, the only possible way to uphold service

on Sinovel China would be to treat Sinovel USA and Sinovel China as a single entity, under a

“veil-piercing” or “alter ego” theory borrowed from the civil context. The government has made

alter ego arguments in other cases as well and that theory has been rejected. See, e.g., Kolon

Indus., 2013 WL 682896, at *16-19; Pangang, 879 F. Supp. 2d at 1066-69; Alfred L. Wolff, 2011

WL 4471383, at *5-8. It is equally inappropriate here.

First, the express language of Rule 4 does not contemplate an alter ego theory of service,

and it should not be permitted. An alter ego approach to criminal service represents a sharp

departure from the U.S. criminal tradition. Historically, the government has invoked this

rationale so infrequently in criminal cases that only a handful of federal courts have even

addressed it, and the government’s record in such cases is poor. Indeed, four courts have granted

(sometimes more than once) motions to quash service for noncompliance with Rule 4:

In United States v. Alfred L. Wolff GMbH, No. 08-cr-417, 2011 WL 4471383 (N.D. Ill.

Sept. 26, 2011) (St. Eve, J.), the court granted a motion to quash service on several foreign

corporations (including German and Chinese entities), expressing skepticism about the alter ego

theory at all, but holding that the government had not met its heavy burden under Delaware law


25

to prove that a U.S. subsidiary was the alter ego of the foreign defendants. The court found mere

allegations of criminal conspiracy wholly insufficient to support veil-piercing. Id. at *5. In

United States v. Pangang Group Co., Ltd., 879 F. Supp. 2d 1052 (N.D. Cal. 2012), the court

granted a Chinese corporation’s motion to quash service, concluding that a U.S. subsidiary was

not an alter ego and that the government had not satisfied Rule 4’s mailing requirement. Even

evidence of “some disregard for corporate formalities” and shared directors did not meet the

government’s burden, particularly where the government had not shown fraud. Id. at 1067. In

United States v. Kolon Industries, Inc., No. 3:12-cr-137, 2013 WL 682896 (E.D. Va. Feb. 22,

2013), the court held that the government had failed to serve a Korean company, because the

government had not proved that the U.S. subsidiary was a “mere conduit” for the foreign parent.

Finally, in United States v. Johnson Matthey, No. 2:06-cr-169, 2007 WL 2254676 (D. Utah Aug.

2, 2007), the court granted an English company’s motion to quash service, holding that mailing

to a U.S. subsidiary did not constitute mailing to the foreign parent, where the government had

not shown the U.S. subsidiary was a “sham.”13

Piercing the corporate veil is a “rare exception” to the strong presumption favoring

respect for the corporate form. Dole Food Co. v. Patrickson, 538 U.S. 468, 475 (2003). Under

13 The compelling facts present in the two cases—in U.S. history—to uphold challenged criminal

service on a foreign corporation through a U.S. subsidiary are absent here. In United States v. Chitron Electronics Co. Ltd., 668 F. Supp. 2d 298, 305-06 (D. Mass. 2009), the court concluded the subsidiary was a “mere conduit” for the parent, based on evidence that the parent sent daily “tasking lists,” created a telephone network that surreptitiously directed calls placed to the U.S. subsidiary to ring in mainland China, and misled business partners and customers about which entity they were dealing with. And in United States v. The Public Warehousing Co. K.S.C., No. 1:09-cr-490, 2011 WL 1126333 (N.D. Ga. Mar. 28, 2011) (“PWC”)—which adopted a particularly aggressive approach to piercing the corporate veil with little foundation in Eleventh Circuit law—the court relied on a number of factors, including that the foreign parent and U.S. subsidiary represented to customers that their employees would be “working in unison” as “one global team,” and maintained a joint website.


26

Delaware law,14 “‘the principle of piercing the fiction of the corporate veil is to be applied with

great caution and not precipitously, since there is a presumption of corporate regularity,’ and

‘[t]he party wishing to pierce the corporate veil has the burden of presenting facts demonstrating

that it is entitled to this equitable relief.’” Alfred L. Wolff, 2011 WL 4471383, at *6 (quoting Se.

Tex. Inns, Inc. v. Prime Hospitality Corp., 462 F.3d 666, 675 (6th Cir. 2006) (applying Delaware

law)). “[T]he plaintiff must [show] . . . that the corporation, through its alter-ego, has created a

sham entity designed to defraud investors and creditors.” Crosse v. BCBSD, Inc., 836 A.2d 492,

497 (Del. 2003). “[A]n ‘overall element of injustice or unfairness . . . [must also be]

present.’” Fletcher v. Atex, Inc., 68 F.3d 1451, 1457 (2d Cir. 1995) (applying Delaware law).

“For this Court to pierce the corporate veil or hold that [a party] is the alter ego . . . [the

party seeking to pierce the corporate veil] must prove that some ‘fraud or injustice’ would be

perpetrated through misuse of the corporate form.” Medi-Tec of Egypt Corp. v. Bausch & Lomb

Surgical, No. Civ.A. 19760-NC, 2004 WL 415251, at *7 (Del. Ch. Mar. 4, 2004). The party

advocating veil-piercing must show “the corporate form in and of itself operates to serve some

fraud or injustice, distinct from the alleged wrongs [in the underlying cause of action].” Id.

at *4; accord Alfred L. Wolff, 2011 WL 4471383, at *5. Rather, it must be shown that the

subsidiary was created or used for some fraudulent purpose. NetJets Aviation, Inc. v. LHC

Commc’ns, LLC, 537 F.3d 168, 177-178 (2d Cir. 2008) (applying Delaware law); accord

Wallace v. Wood, 752 A.2d 1175, 1184 (Del. Ch. 1999) (“[e]ffectively, the corporation must be a

sham and exist for no other purpose than as a vehicle for fraud”).

14 In the civil context, “veil-piercing claims are governed by the law of the state of the corporation

whose veil is sought to be pierced.” On Command Video Corp. v. Roti, 705 F.3d 267, 272 (7th Cir. 2013). Other federal courts have taken a similar approach in addressing Criminal Rule 4. See, e.g., Alfred L. Wolff, 2011 WL 4471383, at *5 n.5; Pangang, 879 F. Supp. 2d at 1066 n.14. Sinovel USA is incorporated in Delaware. Shi Decl. ¶ 6.


27

Here, there is no allegation that Sinovel USA is a fraudulent entity or a sham corporation

such that alter ego could apply. Notably, the prosecutors obtained the instant Indictment

(knowing full well that service issues would be paramount), yet the Indictment fails to assert that

Sinovel USA was formed or operated for the purpose of perpetuating a fraud. More to the point,

the government could not credibly do so. The indictment refers without explanation or

elaboration to “Sinovel Wind Group Co., Ltd., dba Sinovel Wind Group (USA) Co., Ltd.” (ECF

No. 25 ¶ 6).

Whatever the government means by the term “dba,” the fact remains that Sinovel China

and Sinovel USA are separately incorporated legal entities. Shi Decl. ¶¶ 3, 6. Sinovel USA is

incorporated under Delaware law and registered to transact business in Texas. See Shi Decl. ¶ 6,

exh. 1 (Delaware Certificate of Incorporation and Evidence of Filing) id. exh. 2 (Texas

Certificate of Filing). Sinovel USA shares many of the hallmarks of independence present in

Alfred L. Wolff, Pangang Group, Johnson Matthey, and Kolon Industries—all cases that rejected

an alter-ego theory of service. Sinovel USA established and maintained its own bank accounts,

filed U.S. taxes, hired an employee, and sought business under its own name. Shi Decl. ¶¶ 7-10.

As federal courts have repeatedly held, the fact that a U.S. entity is a wholly-owned subsidiary of

a foreign company is insufficient to establish an alter ego relationship. Johnson Matthey, 2007

WL 634269 at *1; Chitron, 668 F. Supp. 2d at 304-05; PWC, 2011 WL 1126333at *5; Alfred L.

Wolff, 2011 WL 4471383 at *6.

VI. The Government Is Fully Aware That It Cannot Effectuate Service In These Circumstances And Has Sought To Change The Law

Recognizing that it needed to amend Rule 4 to effectuate service, the government is

currently seeking to change the law. In October 2012, the U.S. Department of Justice (“DOJ”)

recommended that the Advisory Committee on Criminal Rules amend Rule 4(c)(3)(C) “to permit


28

the effective service of a summons on a foreign organization that has no agent or principal place

of business within the United States.” See Breuer Letter at 1. The proposed amendment, DOJ

explained, is “necessary in order to effectively prosecute foreign organizations.” Id. (emphasis

added).

The contrast between the text of existing Rule 4 and DOJ’s proposed amendments

demonstrates how upholding service here would require this Court to ignore the Rule’s plain

language. DOJ has requested the outright repeal of Rule 4(c)(3)(C)’s mailing requirement, and a

dramatic expansion of Rule 4(c)(2) to include five explicit means of effecting service “at a place

not within a judicial district of the United States.” Id. at 1, 7-8. Modeling its recommendations

in part on the current text of Civil Rule 4 (which, as discussed above, explicitly provides for

service on an organization outside the United States), DOJ’s revisions would allow service on an

organization “at a place not within a judicial district of the United States” by delivering a copy of

the summons to an officer, managing or general agent, or other authorized agent “in a manner

authorized under the laws of the foreign jurisdiction where the officer or agent to be served is

located,” or “by other means reasonably calculated to give notice,” such as “a means that a

foreign authority undertakes in response to a letter rogatory or letter of request,” or by “other

means upon request of an attorney for the government, as the court orders.” Id. at 7.

On March 25, 2013, the Advisory Committee recommended the appointment of a

subcommittee to study DOJ’s proposal. See Memorandum from Hon. Reena Raggi to Hon.

Jeffrey S. Sutton, Report of the Advisory Committee on Criminal Rules 8 (May 8, 2013) (“Raggi

Memorandum”), (attached as Exhibit G), available at

http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/Reports/CR05-2013.pdf; see also id.

(reporting DOJ position that certain “foreign corporations . . . cannot be served for lack of a last


29

known address or principal place of business in the United States”). Judge Raggi has asked the

subcommittee to report on its progress in October 2013. See Draft Minutes, Advisory

Committee on Criminal Rules 14-15 (Apr. 25, 2013) (attached as Exhibit H), available at

http://www.uscourts.gov/uscourts/RulesAndPolicies/rules/Agenda%20Books/Standing/ST2013-

06.pdf.

The Rule currently stands as written.

VII. The Government Has Not Attempted Service Through Diplomatic Channels

As in other cases where courts declined to excuse noncompliance with Rule 4, “[t]he

government has not demonstrated why it cannot pursue established channels in order to serve the

summonses on [a] foreign corporate defendant[].” Alfred L. Wolff, 2011 WL 4471383, at *4 n.3.

In particular, “[t]he United States maintains an agreement with China on Mutual Legal

Assistance in Criminal Matters.” Id.; see also MLAA. The MLAA between the United States

and China explicitly addresses service of a summons on those accused of crimes. Although the

agreement states that China would not necessarily “be obligated” to effect service of a criminal

summons (MLAA, art. 8, para. 1), it does not preclude China from doing so in an appropriate

case. Indeed, in a recent sworn filing, “the government conceded that this language [in the U.S.-

China MLAA] provides [China] with discretion to effect service.” Pangang, 879 F. Supp. 2d at

1069. And courts have ordered the government to attempt service through this U.S.-China

agreement. Alfred L. Wolff, 2011 WL 4471383, at *4 n.3.

Comity principles require that U.S. courts should decline to interfere with judicial

proceedings in other countries. Here, the U.S. government’s prosecution is essentially an end

run around pending civil litigation over a business dispute in China. Under these circumstances,

the government must be able to satisfy the safeguards Congress has imposed to protect foreign

corporations. See Abney v. United States, 431 U.S. 651, 661-62 (1977); accord Ex Parte


30

Republic of Peru, The Ucayali, 318 U.S. 578 (1943) (issuing a writ of mandamus to prevent a

district court’s exercise of jurisdiction over a case involving a foreign nation’s property). The

Seventh Circuit has specifically declined to improvise novel forms of service when the

government has yet to avail itself of existing channels. In re Hijazi, 589 F.3d 401, 413 (7th Cir.

2009) (granting writ of mandamus in favor of foreign criminal defendant, reasoning that

defendant could be brought within U.S. jurisdiction if foreign nation “change[d] its mind about

cooperating with the United States” due to “diplomatic pressure”). This Court should take the

same approach here.

* * *

On the current record, the government cannot show compliance with either Rule 4’s

delivery or mailing requirements for Sinovel China. The Rule’s plain text, existing case law, and

longstanding history and tradition all indicate that this Court lacks an adequate basis to exercise

jurisdiction over Sinovel China at this time.

CONCLUSION

For the reasons above, Sinovel Wind Group Co., Ltd. respectfully requests that this Court

quash the attempts at service identified in the July 8 Notice.


31

Respectfully submitted,

/s/ Michael J. FitzgeraldMichael J. Fitzgerald FITZGERALD LAW FIRM526 E. Wisconsin Ave. Milwaukee, WI 53202 Tel: (414) 221-9600 Fax: [email protected]

/s/ Matthew J. JacobsMatthew J. Jacobs Elliott J. JohVINSON & ELKINS LLP 525 Market St., Suite 2750 San Francisco, CA 94105 Tel: 415-979-6900Fax: 415-651-8786Email: [email protected]: [email protected]

John P. Elwood Amy Lamoureux RiellaJeremy C. MarwellMatthew J. RicciardiVINSON & ELKINS, LLP 2200 Pennsylvania Ave., NW Suite 500 West Washington, DC 20037Tel: 202-639-6518 Fax: 202-879-8917 Email: [email protected]: [email protected]: [email protected]: [email protected]

Specially-Appearing Counsel for Sinovel Wind Group Co., Ltd.

Dated: August 16, 2013


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