Case of the Day: SEC v. MCC International

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Letters Blogatory wishes its readers a happy Patriots’ Day!

The case of the day is SEC v. MCC International Corp. (S.D. Fla. 2023). The SEC had obtained a preliminary injunction against Luiz Carlos Capuci, Jr. and others in a cryptocurrency fraud case. Capuci opposed the preliminary injunction on the grounds that while he had had notice, he had not been served with process before the PI hearing in a way that comported with the Service Convention. This is a perennial issue, and I thought I’d return to it.

It’s clear that a court can enter a temporary restraining order without service of process, because what distinguishes a TRO from a preliminary injunction is the lack of notice. If you don’t need to give notice to the defendant before a TRO, then of course you don’t need to serve process. But of course you have to give notice of the TRO after the court issues it, since due process doesn’t allow a court to punish for contempt of a TRO if the defendant had no notice of it. You do have to give notice of a motion for a preliminary injunction, though, before the injunction issues. The question, whether its post-issuance notice of a TRO or pre-issuance notice of a motion for a PI, is: do you have to serve the notice in the same way you would serve a summons? More specifically, if the defendant is in a Service Convention state, as Capuci seems to have been, must the means of giving notice comply with the Convention?

The first question to ask is: is the notice that you have to provide a “judicial document?” Probably yes. If you are providing notice of a TRO that has already issued, that means giving a copy of the TRO to the defendant, and the TRO itself is certainly a judicial document. If you are providing notice of a hearing on a motion for a preliminary injunction, I suppose it’s a little less clear. You probably are going to provide a copy of the notice you received from the court. Perhaps it would be enough to tell the other side the date and the time. Anyway, let’s just assume that you have to deliver a judicial document to the defendant one way or another. So the Convention is in play, because under Article 1, the Convention applies whenever there is occasion to transmit a judicial document abroad for service.

The next question is: are you sending the document abroad for service? The US answer to this question is that “for service,” as used in the Convention, means formal service of process and not just service of documents in the course of a lawsuit. The Volkswagen case says:

The Convention does not specify the circumstances in which there is “occasion to transmit” a complaint “for service abroad.” But at least the term “service of process” has a well established technical meaning. Service of process refers to a formal delivery of documents that is legally sufficient to charge the defendant with notice of a pending action. …

The negotiating history supports our view that Article I refers to service of process in the technical sense. The committee that prepared the preliminary draft deliberately used a form of the term “notification” (formal notice), instead of the more neutral term “remise” (delivery), when it drafted Article 1. 3 Actes et Documents at 78-79. Then, in the course of the debates, the negotiators made the language even more exact. The preliminary draft of Article 1 said that the present Convention shall apply in all cases in which there are grounds to transmit or to give formal notice of a judicial or extrajudicial document in a civil or commercial matter to a person staying abroad. To be more precise, the delegates decided to add a form of the juridical term “signification” (service), which has a narrower meaning than “notification” in some countries, such as France, and the identical meaning in others, such as the United States. The delegates also criticized the language of the preliminary draft because it suggested that the Convention could apply to transmissions abroad that do not culminate in service. The final text of Article 1 eliminates this possibility and applies only to documents transmitted for service abroad. The final report (Rapport Explicatif) confirms that the Convention does not use more general terms, such as delivery or transmission, to define its scope because it applies only when there is both transmission of a document from the requesting state to the receiving state and service upon the person for whom it is intended.  

That may be enough to make the point, although I personally am not convinced by this aspect of Volkswagen, because in FRCP 5 we also use the term “service” to describe the sending of documents in a lawsuit after the summons has been served. So let’s ask another question that can resolve the matter: is a notice of a hearing, or a TRO or a preliminary injunction, “process” in the strict sense? If it isn’t, then Volkswagen suggests that the Convention does not apply, whatever you think about its explanation of the term “service.”

I think the answer is no. You could approach this by delving into the legal history of the idea of “process” and asking what constituted the process in the Chancery. I think an easier way is to look at other rules of civil procedure and see what light they shed. If you compare FRCP 4 and FRCP 4.1, you will see that Rule 4 and its methods of service apply only to summonses. Other process (except for subpoenas, which are governed by FRCP 45) must be served, under Rule 4.1, by the marshal or else by a special process server appointed by the court. Does anyone think that a preliminary injunction, or a notice of a hearing for an injunction, must be served by the marshal? No, I don’t think so. Indeed, the advisory committee note to Rule 4.1 (which isn’t the law, but still …) says: “Service of process is not required to notify a party of a decree or injunction …”

So the answer to the question whether you can have a valid preliminary injunction if the notice is not served in a way that the Convention authorizes or permits, at least in the United States, should be yes.

Today, by the way is Patriots’ Day in Massachusetts, or as it is better known, Marathon Day! I wish all the runners good luck. And I’m reminded especially of Patriots’ Day ten years ago, the day of the Boston Marathon bombing. It was a sad, scary, and sobering day, and I want to remember the victims of the bombing, Krystle Campbell, Martin Richards, Lingzi Lu, and Sean Collier, and others who were injured, along with the doctors, nurses, and other medical workers and public safety workers who did so much that day. A few days after the bombing, the Red Sox were playing the Kansas City Royals at Fenway Park, and one of my favorite players, David “Big Papi” Ortiz, a Hall of Fame slugger who had just been called back up from the minors, gave one of the great American speeches, which really lifted the spirits of everyone in the city. Here it is. (You can skip the Dropkick Murphys remix following the very short speech–I used this version because it was the only “unbleeped” one I could find, and frankly the “bleep” spoils the speech).

Big Papi’s Speech After the Marathon Bombing

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