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In re Pangang Group Co. Ltd.

United States Court of Appeals, Ninth Circuit

August 22, 2018

In re Pangang Group Company, Ltd.; Pangang Group Steel Vanadium & Titanium Company, Ltd.; Pangang Group Titanium Industry Company, Ltd.; Pangang Group International Economic & Trading Company,
v.
United States District Court for the Northern District of California, Oakland, Respondent, Pangang Group Company, Ltd.; Pangang Group Steel Vanadium & Titanium Company, Ltd.; Pangang Group Titanium Industry Company, Ltd.; Pangang Group International Economic & Trading Company, Petitioners, United States of America, Real Party in Interest.

          Argued and Submitted June 13, 2018

          Petition For Writ Of Mandamus No. 4:11-cr-00573-JSW

          Before: Michael R. Murphy, [*] Richard A. Paez, and Sandra S. Ikuta, Circuit Judges.

         SUMMARY[**]

         Mandamus / Fed. R. Crim. P. 4(c)(3)(D)

         The panel denied a petition for a writ of mandamus, brought by companies owned and controlled by the Chinese government, asking this court to vacate the district court's order denying their motion to quash service of criminal summonses the government had delivered to attorneys for the companies.

         The companies argued that the delivery of the summonses did not effect service on them under Fed. R. Crim. P. 4(c)(3)(D). The panel held that where such delivery provides actual notice to a foreign organization, it satisfies Rule 4. The panel concluded that because the evidence established that the companies had actual notice of the summonses, the district court did not err, let alone clearly err, in denying their motion to quash service. The panel therefore denied the petition for a writ of mandamus.

          OPINION

          IKUTA, CIRCUIT JUDGE

         After the government delivered criminal summonses to attorneys for the Pangang Group Company, Ltd. and its subsidiaries Pangang Group Titanium Industry Company, Pangang Group Steel Vanadium & Titanium Company, Ltd., and Pangang Group International Economic & Trading Company (collectively, the "Pangang Companies"), the attorneys made a special appearance on behalf of their clients to quash service of the summonses. The district court denied their motion. The Pangang Companies petition for a writ of mandamus directing the district court to vacate its order, arguing that the delivery of the summonses did not effect service on the Pangang Companies under Rule 4(c)(3)(D) of the Federal Rules of Criminal Procedure (which we refer to as the Criminal Rules). We conclude that where such delivery provides actual notice to a foreign organization, it satisfies Criminal Rule 4. Because the evidence established that the Pangang Companies had actual notice of the summonses, the district court did not err, let alone clearly err, in denying the Pangang Companies' motion to quash. Therefore, we deny the petition.

         I

         This petition requires us to review the intertwined history of the 2016 amendments to Criminal Rule 4 and the government's repeated attempts at service on the Pangang Companies.

         A

         On February 7, 2012, the government indicted the Pangang Companies on charges of conspiracy to commit economic espionage, in violation of 18 U.S.C. § 1831(a)(5), and attempted economic espionage, in violation of 18 U.S.C. § 1831(a)(3) and (4). The Pangang Companies are enterprises owned and controlled by the Chinese government. According to the indictment, the Pangang Companies conspired with individuals to illegally obtain trade secrets from E.I. du Pont de Nemours & Company related to chloride-route titanium dioxide production technology.[1]

         A federal magistrate judge issued summonses to each of the Pangang Companies. The government served the summonses at the New Jersey office of a U.S. subsidiary of one of the Pangang Companies, Pan America, Inc., and mailed copies to the same location. At the time, the government attempted service pursuant to the 2011 version of Criminal Rule 4, which provides the process for issuing and executing an arrest warrant or summons to a defendant if a criminal complaint establishes probable cause to believe that an offense has been committed and that the defendant committed it. Fed. R. Crim. P. 4(a). A summons "require[s] the defendant to appear before a magistrate judge at a stated time and place." Fed. R. Crim. P. 4(b)(2). The 2011 version of Criminal Rule 4 provided that a summons is served on an organization "by 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." Fed. R. Crim. P. 4(c)(3)(C) (2011). A copy 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." Id.[2]

         On March 29, 2012, the Pangang Companies made a special appearance in district court through two attorneys from Quinn Emanuel Urquhart & Sullivan, LLP (the "Quinn Emanuel attorneys"), and filed a motion to quash service of the summonses on the grounds that service on Pan America was defective under Criminal Rule 4. On July 23, 2012, the district court granted the motion, reasoning that service had not complied with the delivery requirement of Criminal Rule 4 for three of the Pangang Companies, and had not satisfied the mailing requirement as to all four Pangang Companies, see Fed. R. Crim. P. 4(c)(3)(C) (2011).

         Between August 2012 and November 2012, the government attempted to serve the Pangang Companies by mailing and delivering the summonses to various individuals and addresses within the United States that were associated with the Pangang Companies. In addition, the Department of Justice (DOJ) formally requested that an agency of the Chinese government serve the Pangang Companies. The Chinese government refused.

         On February 7, 2013, the Pangang Companies made a second special appearance in district court through the Quinn Emanuel attorneys, and filed another motion to quash. The district court granted the motion, holding that none of the agents and addresses bore the requisite connection to the Pangang Companies required under Criminal Rule 4(c)(3)(C). The government asked the district court to reconsider its rulings, arguing that the service of the summonses had substantially complied with Criminal Rule 4. The court denied the government's motion.

         B

         While the government was struggling to serve the Pangang Companies, the DOJ asked the Advisory Committee on the Criminal Rules to make changes to Criminal Rule 4. For those unfamiliar with the rulemaking process, we provide a brief overview. The Rules Enabling Act of 1934, 28 U.S.C. §§ 2071-2077, authorized the Supreme Court to promulgate rules of procedure which have the force and effect of law. The work of formulating and revising such rules has been delegated to the Judicial Conference of the United States (the principal policy-making body of the U.S. Courts). Id. § 2073. The Judicial Conference formed a Committee on Rules of Practice and Procedure (referred to as the Standing Committee) and five advisory rules committees, the Advisory Committees on Appellate, Bankruptcy, Civil, Criminal, and Evidence Rules. See id. § 2073(a)(2), (b). By statute, the meetings of each Advisory Committee are generally open to the public, and minutes of each meeting are maintained by the committee and made available to the public. Id. § 2073(c)(1).

         The rulemaking process proceeds as follows. After evaluating proposals for new rules or amendments to existing rules, an Advisory Committee may recommend a proposed change to the Standing Committee. See id. § 2073(b). If the Standing Committee approves the proposal, the Advisory Committee notifies the public regarding the proposed rule or amendment and solicits public comment. See Procedures for the Judicial Conference's Committee on Rules of Practice and Procedure and Its Advisory Rules Committees, § 440.20.40 (2011).[3] After evaluating and responding to such comments, the Advisory Committee may recommend a final rule or amendment to the Standing Committee. See id. § 440.20.50. The Standing Committee then makes an independent recommendation to the Judicial Conference, see id. §§ 440.30.10(d), 440.30.20(d), which in turn recommends the proposed changes to the Supreme Court. If the Supreme Court approves the proposal, it will promulgate the revised rules to take effect on December 1 of the same year unless Congress enacts legislation to the contrary. See 28 U.S.C. § 2074.

         The DOJ asked the Advisory Committee to amend Criminal Rule 4 to allow service on an organization outside of the United States either by serving the organization under the laws of the foreign jurisdiction or through a non-exhaustive list of other means of service. Letter from Lanny A. Breuer, Assistant Attorney General, Dep't of Justice, to Judge Reena Raggi, Chair of Advisory Comm. on Criminal Rules (Oct. 25, 2012).[4] The Advisory Committee developed a revised version of the proposal. Advisory Comm. on Criminal Rules, May 2014 Report to Standing Committee, at 2, 6 (May 5, 2014), [hereinafter Initial Advisory Committee Report].[5] In its report to the Standing Committee, the Advisory Committee proposed three amendments to Criminal Rule 4. Id. at 2. First, it proposed adding the following sentence to the end of Criminal Rule 4(a): "If an organizational defendant fails to appear in response to a summons, a judge may take any action authorized by law." Id. at 3. Second, it proposed eliminating the requirement that a summons be separately mailed to an organizational defendant within the United States, except in cases where service is "made on a statutorily appointed agent when the statute itself requires a mailing as well as personal service." Id. Finally, it proposed adding a new subdivision (D) to Criminal Rule 4(c)(3), which would authorize serving a summons on an organization not within a judicial district of the United States by (1) delivery on an appropriate individual in compliance with the foreign jurisdiction's law; or (2) "any other means that gives notice," including by a method stipulated by the parties, undertaken by a foreign authority in response to a formal request, or "permitted by applicable international agreement." Id. at 4-5.

         The Standing Committee approved the Advisory Committee's recommendation to publish the proposed amendments for public comment. Comm. on Rules of Practice and Procedure, September 2014 Report to the Judicial Conference, at 18-19 (Sept. 1, 2014)[6]; see also Comm. on Rules of Practice and Procedure, Preliminary Draft of Proposed Amendments to the Federal Rules of Criminal Procedure, at 333-34 (Aug. 14, 2014).[7]

         The Advisory Committee received six public comments on its proposal, including a comment letter from the Quinn Emanuel attorneys who had previously represented the Pangang Companies in their special appearances in 2012 and 2013. Advisory Comm. on Criminal Rules, March 2015 Agenda Book, at 71 (Mar. 16-17, 2015).[8] As explained in more detail below, the Quinn Emanuel attorneys contended that allowing service on an organization to be effected "by any other means that gives notice" would result in a range of evils. Robert P. Feldman & John M. Potter, Comment Letter on Proposed Amendment to Federal Rule of Criminal Procedure 4, at 1 (Feb. 13, 2015) [hereinafter Quinn Emanuel Comment Letter].[9] Among other things, it would allow the government to serve a summons by informal means such as "simply by sending a letter or an email," which would "render superfluous the limitations imposed in the other subsections." Id. at 2. It would also "insulate service from judicial review" by effectively eliminating special appearances. Id. at 1-2. In response to the Quinn Emanuel letter, the DOJ submitted a comment letter arguing that the evils identified by Quinn Emanuel were features, not flaws, of the proposed amendment; indeed, the point of the amendment was to ensure that "[i]f the defendant corporation has notice of a summons, it ought to be considered served." Letter from Jonathan Wroblewski, Dir., Office of Policy and Legislation, Dep't of Justice, to Judge David M. Lawson, Chair of Subcomm. on Rule 4, at 2 (Feb. 20, 2015).[10] While an organizational defendant could still make special appearances to contest other threshold issues, the DOJ stated, "[w]hen a party makes a special appearance, any facts that a court learns as a result of that appearance, including that a party has received actual notice of the prosecution, may be considered by the court." Id. at 74-75. According to the DOJ, "feigning ignorance of a criminal summons of which the foreign organization does have notice (either by declining to appear, or by appearing and denying knowledge) is not a legitimate interest the criminal rules should protect." Id. at 75.

         After considering the comments, the Advisory Committee approved the amendments to Criminal Rule 4 as published. In its report to the Standing Committee, the Advisory Committee discussed at some length "the open-ended provision in (c)(3)(D)(ii) that allows service 'by any other means that gives notice, '" and explained that this language "provides flexibility for cases in which the Department of Justice concludes that service cannot be made (or made without undue difficulty) by the enumerated means." Advisory Comm. on Criminal Rules, May 2015 Report to Standing Committee, at 3 (May 6, 2015) [hereinafter Final Advisory Committee Report].[11] Therefore, the Advisory Committee chose not to require the government "to show other options were not feasible or had been exhausted before resorting to certain options for service." Id. at 7. The Advisory Committee report also directly addressed and rejected Quinn Emanuel's comments. Id. at 5-7. The Advisory Committee recommended that the Standing Committee adopt the amendments to Criminal Rule 4 as published. Id. at 5.

         The Standing Committee did so, and transmitted them to the Judicial Conference. Comm. on Rules of Practice and Procedure, September 2015 Report to the Judicial Conference, at 2, 23-25 (Sept. 1, 2015).[12] After approval by the Judicial Conference, the Supreme Court promulgated the amendments to Criminal Rule 4 and transmitted them to Congress on April 28, 2016. The transmittal instructed that the amendments "shall take effect on December 1, 2016, and shall govern in all proceedings in criminal cases thereafter commenced and, insofar as just and practicable, all proceedings then pending."[13] Congress did not stop the rule from going forward.

         C

         The amendments to Criminal Rule 4 took effect December 1, 2016. The new subdivision, Criminal Rule 4(c)(3)(D), provides in full:

(D) A summons is served on an organization not within a judicial district of the United States:
(i) by delivering a copy, in a manner authorized by the foreign jurisdiction's law, to an officer, to a managing or general agent, or to an agent appointed or legally ...

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