Trade Court Says US Can Serve Exporter Through Its US Counsel in Unpaid Duties Suit

The Court of International Trade on Aug. 21 allowed the U.S. to serve German paper exporter Koehler through its U.S. counsel in a suit seeking over $193 million in unpaid antidumping duties and interest from the company. Judge Gary Katzmann said the court's rules allow for such service and that this type of service doesn't disturb international comity or Koehler's due process rights.

Katzmann said defendants can't use the court's protections regarding service "as a defensive moat against a plaintiff's attempts to vindicate its own rights" through the U.S. judicial process. Broadly speaking, the issue of "fairness" is key in international relations, and it requires that "a defendant -- no matter where it is in the world, and no matter its nationality -- has an opportunity to vindicate its rights before the U.S. Court of International Trade," the opinion said.

The government filed the suit to reclaim millions in unpaid AD on lightweight thermal paper after finding that Koehler manipulated home market price data during the 2011-13 period to avoid paying the duties. The exporter unsuccessfully challenged its 75.36% AD rate in court, ultimately petitioning the U.S. Supreme Court, though the rate eventually became final in 2019.

The government claims Koehler owes over $145 million in unpaid duties and more than $48 million in interest. The total doesn't include post-liquidation interest, which the government also is seeking.

The U.S. first tried to serve Koehler through The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents, though a German court said this convention was inapplicable in this case because it's not a civil or commercial matter. The German court suggested service via diplomatic channels.

While the German case was pending, the U.S. tried serving Koehler via its lawyers at Steptoe & Johnson, who were representing the company in a case on a different AD order. Holland & Knight counsel entered notices of appearance in the present case and objected to service through Koehler's U.S. counsel.

Katzmann first found that the trade court's Rule 4(e) allows for this type of service. The rule says that if there's no internationally agreed means of service, a defendant can be served by other means not barred by international agreement or federal law.

The court noted two opposing opinions from the U.S. District Court for the Southern District of New York. Katzmann sided with the district court's ruling in U.S. v. Mrvic, which allowed service on U.S. counsel, because the relevant circumstance is where the defendant, not the intermediary, is located.

The judge said that while the rule refers to serving a party in a foreign country, "service on a foreign defendant through U.S.-located counsel is generally an act that takes place in a foreign country." The company receives the service documents in the foreign country, the court noted. "The location of U.S. counsel is no more the place of service than a last-mile distribution center is the destination of a package."

Katzmann additionally found that the government's service doesn't violate principles of international comity, saying Koehler didn't establish "a German sovereign interest to which comity might conceivably be owed." The company didn't cite any "provision of German law" that would require service on a German party through a letter "rogatory" -- a request from a U.S. judge to a foreign judiciary requiring the performance of an act.

The German court's ruling doesn't establish a German sovereign interest in "Koehler's avoidance of alternative service," the trade court said. The foreign court didn't say diplomatic channels should be the exclusive means of service and instead more narrowly focused on whether The Hague Convention applied.

Invoking international comity "requires a stronger showing of a foreign sovereign interest than what Koehler has made here," the judge said. If respecting Germany's interests "thwarted" the court's rule here, "it would be hard to imagine when the court’s exercise of discretion to order alternative service under Rule 4(e)(3) might ever be proper," the judge found.

Katzmann also rejected Koehler's claim that service through its U.S. counsel would strip it of due process. The Holland & Knight attorneys entered notices of appearance, which requested that all papers be served on them. While the court said this language is "boilerplate," it "leaves no doubt that" the firm "can be relied on to inform its client of the existence of the very action for which the client engaged its services," clearing due process concerns.

While Koehler claimed that service through its U.S. firm would impair future defendants' ability to retain counsel without mooting any objections to service, Katzmann said the outcome of the case "is not so malign as Koehler makes it out to be." Defendants only have a procedural right to proper service, and until service is attempted, defendants don't have a "cognizable interest in engaging U.S. counsel for prospective advice on how to avoid being served at all."

(U.S. v. Koehler Oberkirch GmbH, Slip Op. 24-97, CIT # 24-00014, dated 08/21/24; Judge: Gary Katzmann; Attorneys: Luke Mathers for plaintiff U.S. government; John Wood of Holland & Knight for defendant Koehler)