Potential Rulings on the “Alter Ego” Theory for Service on Foreign Corporations

20 April 2015

Two cases before the Seventh and Ninth Circuit Court of Appeals could clarify whether the “Alter Ego” theory allows the U.S. government to serve legal process upon foreign corporations by only serving a domestic U.S. subsidiary. 

Currently, the Federal Rules of Criminal Procedure, specifically Rules 4 and 9, are ambiguous as to this question. Among other requirements, these rules mandate that the U.S. government to deliver a summons “to an officer, to a managing or general agent, or to another agent appointed or legally authorized to receive service of process” and require the government to mail a copy of the summons to the corporation’s “last known address within the district or to its principal place of business elsewhere in the United States.”

In the few district court cases that have addressed this question, the government has used the alter ego theory to argue that these requirements are met by serving a domestic subsidiary. District courts, however, have generally interpreted the rules strictly and ruled against the government on this question

Two ongoing circuit court cases could provide clarity on the validity of the alter ego theory. On April 1, the Seventh Circuit heard oral arguments in the United States v. Sinovel Wind Group Co. Ltd. Sinovel raises the issue of attempted service of criminal process upon a foreign company’s U.S.-based affiliate. The Ninth Circuit will soon hear oral arguments in United States v. Public Warehousing Co. KSC. Public Warehousing similarly involves whether service of a domestic affiliate of a foreign company is permissible under the Criminal Rules through an alter ego theory.

Relatedly, in October 2012 the DOJ’s Criminal Division formally proposed amending the Federal Rules of Criminal Procedure “to permit the effective service of a summons on a foreign organization that has no agent or principal place of business within the United States.” Any such modification, however, even if approved would not take effect until at least December 2016. Sinovel and Public Warehousing could provide guidance on this question well before that.