US, German Exporter Spar at CIT on Whether US Can Serve Exporter Via Its US Counsel

The Court of International Trade heard oral argument last week on the government's motion for alternative service in a customs penalty case against German paper exporter Koehler Oberkirch. The U.S. claimed that it was proper to serve Koehler via its U.S. counsel, attorneys at Holland and Knight, while the exporter said the government should have sought service through "diplomatic channels" (U.S. v. Koehler Oberkirch GmbH, CIT # 24-00014).

Judge Gary Katzmann probed the case law on the question of alternative service, asking both sides for their "home run" cases and about the relevance of Convergen Energy v. Brooks -- a ruling from the Southern District of New York -- on the issue. In Convergen, the U.S. district court said efforts to conduct service on a foreign company through its U.S. counsel "runs squarely up against the language" of Federal Rule of Civil Procedure 4, which governs service.

John Wood, partner at Holland and Knight, claimed that the government's read of the case, which would have Koehler's appearance in the suit amount to a waiver of service, would make it "impossible for defendants to object to alterative service." He said that Convergen is not an outlier, as claimed by the government, and that there are plenty of other cases supporting the New York court's holding.

Wood said the "cases uniformly state that international comity requires some showing of a need for judicial intervention before alternative service or process will be ordered." The need for international comity in the present case is "heightened," given that a German court explicitly said the government should "pursue diplomatic channels for service," the attorney argued.

The case law allowing service on U.S. counsel typically involves instances wherein the address of the foreign defendant is unknown, the foreign defendant has evaded service or failure to allow alternative service will lead to a lengthy delay in the case, Wood said. "None of those facts are present here," Wood said, since the U.S. "knows where to find Koehler," the company's not evading service and the "few months' delay" in going through diplomatic channels "would not harm the case."

Wood claimed that the U.S. should seek diplomatic channels in an effort to resolve the case through negotiations with German authorities.

The U.S. brought suit in January seeking over $193 million in unpaid antidumping duties for 1,462 entries of lightweight thermal paper entered between 2009 and 2011 (see 2405140034). The Commerce Department found that Koehler Oberkirch transshipped its entries by hiding reportable home market sales, ultimately subjecting the firm to a 75.36% dumping rate. Wood said the government's huge delay in bringing the case should sway the court to require service through diplomatic channels.

DOJ attorney Luke Mathers said that the delay was due to lengthy litigation in the case regarding the underlying AD duties at issue and that the case doesn't just involve U.S. interests. Given that the trade court and the U.S. Court of Appeals for the Federal Circuit sustained the antidumping duties, the courts have an interest in the resolution of the case, which is about "how much money this court has said the United States is entitled to."

Mathers said that since Koehler's hope is that service through diplomatic channels will be a negotiation instead of a formal process of notice, there is "all the more reason to order service through alternative means."

The government's theory of its case is that alternative service is plainly allowed under CIT Rule 4(e), which says that a foreign party can be served "by any internationally agreed means of service." Mathers said there's "no international agreement with Germany or in Germany that would prevent service through a law firm as a conduit" and that due process is satisfied since Holland and Knight has a tie to the defendant.

Mathers said that Holland and Knight entering itself in the case established it as a viable conduit for alternative service since the only question presented by the court's rules is whether there's a "prohibition by international agreements." The DOJ attorney said the only way to avoid establishing itself as such a conduit would be if the court granted the Holland and Knight attorneys approval to say that they were not appointed to receive service.