After getting trounced in its trade secrets battle with DuPont Co., Kolon Industries Inc. is having better luck stonewalling a follow-on criminal indictment. But it may only be a matter of time before a judge lets the U.S. Department of Justice go forward with the case.
U.S. District Judge Robert Payne in Richmond, Va., ruled Friday that the DOJ didn’t properly serve Kolon with a summons in the criminal case. The order effectively freezes the DOJ’s case, which alleges that Kolon stole trade secrets relating to DuPont’s popular Kevlar fiber material.
Payne denied a motion dismiss by Kolon, however, writing that Kolon’s argument that the company can’t be served at all in the case would lead to the "absurd result" of the U.S. not being able to bring charges against certain foreign defendants. Payne also indicated that the DOJ will likely be able to fix the problems with its summons, so the case may yet go forward.
Kolon, a South Korean company, makes a product that competes with Kevlar. DuPont sued Kolon in 2009, alleging it lured away a DuPont salesperson and pumped him for trade secrets relating to Kevlar. A federal jury in Richmond returned a $919 million verdict for DuPont in September 2011. Payne oversaw that trial, and sided with DuPont’s lawyers at McGuireWoods and Crowell & Moring on several key pre-trial issues. Paul Hastings represented Kolon.
The DOJ unsealed a follow-on criminal complaint against Kolon in October 2012. By Judge Payne’s count, the DOJ tried eight different approaches to serving Kolon. Federal agents tried to serve Kolon in Korea pursuant to the Mutual Legal Assistance Treaty (MLAT). And they mailed a summons to Kolon USA, a related U.S. company based in New Jersey.
Kolon’s lead lawyer, Paul Hastings’s Jeff Randall, made a special appearance for the purpose of trying to quash the summons. Randall argued that all of the U.S.’s attempts at service were inadequate, and he also moved to dismiss the case entirely on the grounds that the U.S. can’t possibly comply with Rule 4(c)(3)(C) of the Federal Rules of Criminal Procedure, which requires that a "copy [of the summons] be mailed to the organization’s last known address within the district or to its principal place of business elsewhere in the United States." Kolon has neither a last known address in Virginia nor a principal place of business in the U.S. (Kolon USA is an entirely separate entity).
Payne rejected Randall’s creative argument in Friday’s decision. Siding with the DOJ, he concluded that the relevant provision of Rule 4(c)(3)(C)–known as the "mailing requirement"–isn’t a strict requirement. "To find that a foreign corporation effectively could immunize itself from a prosecution…by maintaining its principal place of business outside the country would reach an absurd result and one which the Court cannot conclude was intended by Congress when it approved Rule 4(c)(3)(C)," he ruled.
Payne did agree with Paul Hastings that all of the U.S.’s attempts at service have been inadequate so far. He found, however, that "the United States will likely be able to serve Kolon under the MLAT." The initial summons the DOJ filed pursuant to the treaty "was only inaccurate because it was not served in a timely manner," he ruled.
In a press release from Paul Hastings, Randall said he’s "pleased that the Court agreed that the Government did not satisfy its foundational obligation to properly serve its summons on Kolon."