U.S. v. Nippon Paper Industries Co., Ltd.

• Decision Date: 03 September 1996
• Docket Number: CR. No. 95-10388-JLT.
• Citation: 944 F.Supp. 55
• Parties: UNITED STATES of America, v. NIPPON PAPER INDUSTRIES CO., LTD.; Jujo Paper Co., Inc.; and Hirinori Ichida; Defendants.
• Court: U.S. District Court — District of Massachusetts

944 F.Supp. 55

UNITED STATES of America, v. NIPPON PAPER INDUSTRIES CO., LTD.; Jujo Paper Co., Inc.; and Hirinori Ichida; Defendants.

CR. No. 95-10388-JLT.

United States District Court, D. Massachusetts.

September 3, 1996.

COPYRIGHT MATERIAL OMITTED

Charles E. Koob, James Kreissman, Jonathan Rosenberg, David E. Vann, Jr., Simpson, Thacher & Bartlett, New York City, Terry Philip Segal, Segal & Feinberg, Boston, MA, for Appleton Papers, Inc.

William H. Kettlewell, Boston, MA, for Jujo Paper Co., Ltd.

Richard G. Parker, O'Melveny & Myers, Washington, DC, William H. Kettlewell, Boston, MA, for Nippon Paper Industries Co., Ltd.

Michael B. Himmel, Christopher S. Porrino, Robert J. Kipness, Greenbaum, Rowe, Smith, Ravin & Davis, Woodbridge, NJ, Terry Philip Segal, Segal & Feinberg, Boston, MA, for Jerry A. Wallace.

MEMORANDUM

TAURO, Chief Judge.

The United States brings this criminal action against Nippon Paper Industries Co., Inc. ("Nippon"), alleging that its predecessor Jujo Paper Co., Inc. ("Jujo"), conspired in 1990 to fix prices of jumbo roll thermal facsimile paper ("fax paper") sold in the United States, in violation of section 1 of the Sherman Act, 15 U.S.C.A. § 1 (West Supp.1996). Presently before the court are Nippon's motions to dismiss on three alternative grounds: (1) lack of personal jurisdiction over Nippon, (2) failure of the indictment to state an offense under section 1 of the Sherman Act, and (3) failure of the indictment to adequately plead successor liability.

I. BACKGROUND¹

Nippon is a Japanese corporation with its principal place of business in Tokyo, Japan. Nippon was formed in 1993 as a result of a merger between Jujo and Sanyo Kokusaku Co., Ltd., both Japanese corporations with their principal places of business in Japan.

In 1990, Jujo manufactured fax paper at mills located in Japan. Jujo did not engage in direct export sales but, rather, sold its fax paper in Japan to Japanese trading houses. With regard to fax paper manufactured by Jujo that ultimately reached customers in the United States, Jujo's sales were limited to two Japanese trading companies, Japan Pulp & Paper Co., Ltd. ("JPP") and Mitsui & Co., Ltd. ("Mitsui"). JPP and Mitsui exported the fax paper to their respective subsidiaries in the United States and those subsidiaries engaged in direct sales to customers in the United States.

The government maintains that the conspiracy originated at meetings held in Japan in early 1990, during which Jujo and other Japanese manufacturers of fax paper "agreed to increase prices for fax paper to be imported in North America." Indictment ¶ 7(b). Although the indictment does not specify which alleged co-conspirators attended these meetings, the government conceded at argument on this motion that none of the Japanese trade houses nor their American subsidiaries participated in these meetings.

To effectuate this conspiracy, Jujo and the other manufacturers "raised their prices for fax paper" charged to the Japanese trading houses. The government further contends that Mitsui and JPP, and their American subsidiaries, became co-conspirators by agreeing to sell fax paper in North America at the newly raised price.

II. DISCUSSION

A. Personal Jurisdiction

Congress, by way of the Federal Rules of Criminal Procedure, has provided for nationwide service of process of criminal summons. Fed.R.Crim.P. 4(d)(2). Service of process on a corporation may be effected within the territorial limits of the United States by:

delivering a copy [of the summons] to an officer or to a managing or general agent or to any other agent authorized by appointment or by law to receive service of process and, if the agent is one authorized by statute to receive service and the statute so requires, by also mailing a copy to the corporation's last known address within the district or at is principal place of business elsewhere in the United States.

Fed.R.Crim.P. 9(c)(1).

On January 4, 1996, service by certified mail of a criminal summons was made upon Seiichi Masuko, the general manager of the larger of the two Nippon offices in Seattle. In January 1996, service of a copy of the criminal summons was made on Richard Parker, a partner of O'Melveny & Myers, who had been active in the law firms representation of Nippon throughout the grand jury investigation leading to the present indictment. Subsequently, in-hand service of the criminal summons on Seiichi Masuko was executed by a United States Marshal at Nippon's Seattle office.²

The government contends that the court has jurisdiction over Nippon merely because a summons was served on Seiichi Masuko within the territorial boundaries of the United States pursuant to Rule 4. Alternatively, the government maintains that, because Nippon has sufficient contacts with the United States, service pursuant to Rule 4 gives this court jurisdiction over Nippon.

1. Review of jurisdictional principles

"Personal jurisdiction implicates the power of a court over a defendant." Foster-Miller, Inc. v. Babcock & Wilcox Canada, 46 F.3d 138, 143 (1st Cir.1995). Historically, the presence of a defendant within the boundaries of the sovereign served as a prerequisite to its courts exercising jurisdiction over him. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). Once presence existed, the manner in which such presence was procured did not alter the power of the court over that person. See, e.g., Frisbie v. Collins, 342 U.S. 519, 522, 72 S.Ct. 509, 511, 96 L.Ed. 541 (1952) (jurisdiction existed over criminal defendant brought within border of sovereign by forcible abduction); Chandler v. United States, 171 F.2d 921, 933 (1st Cir.1948) (court may not refuse jurisdiction where fugitive is brought before it regardless of the means used to bring him within its territorial jurisdiction), cert. denied, 336 U.S. 918, 69 S.Ct. 640, 93 L.Ed. 1081 (1949).

With the advent of personal service of process, the scope of a sovereign's power expanded to include, under certain conditions, persons not present in its territory. International Shoe, 326 U.S. at 316, 66 S.Ct. at 158. Exercise of jurisdiction over persons not found within the sovereign's borders was held to be consistent with due process if the defendant has "certain minimum contacts with it such that maintenance of the suit does not offend traditional notions of fair play and substantial justice." Id. The modern doctrine of personal jurisdiction, thus, involves two distinct and independent bases for exercise of a sovereign's power: (1) physical presence of the person within the territorial boundaries of the sovereign, and (2) sufficient contacts with the sovereign to justify reaching him extraterritorially.

With respect to the latter basis for jurisdiction, the First Circuit has developed the doctrines of general and specific jurisdiction. United Elec., Radio and Mach. Workers of America v. 163 Pleasant Street Corp., 960 F.2d 1080, 1088 (1st Cir.1992). A court has general jurisdiction over a person "when the litigation is not directly based on the defendant's forum-based contacts, but the defendant has nevertheless engaged in continuous and systemic activity, unrelated to the suit, in the forum state." Id. If general jurisdiction is lacking, a court determines whether it possesses specific jurisdiction by examining (1) the relatedness of the defendant's forum-state activities and the claim underlying the litigation, (2) the deliberateness of the defendant's contacts with the forum-state, and (3) the reasonableness of the exercise of jurisdiction in light of various Gestalt factors. Pritzker v. Yari, 42 F.3d 53, 60-61 (1st Cir.1994), cert. denied, ___ U.S. ___, 115 S.Ct. 1959, 131 L.Ed.2d 851 (1995).

Turning to adjudication of federal claims in federal courts, two factors must be examined: (1) the territorial limits on service of process defined by Congress, and (2) the constitutional constraints on Congress' definition of those limits. See, e.g., S.E.C. v. Unifund SAL, 910 F.2d 1028, 1033 (2nd Cir. 1990). Courts have recognized that Congress may provide for nationwide service of process. Lisak v. Mercantile Bancorp, Inc., 834 F.2d 668, 671 (7th Cir.1987), cert. denied, 485 U.S. 1007, 108 S.Ct. 1472, 99 L.Ed.2d 700 (1988). In providing for nationwide service, Congress defines the territorial jurisdiction of the federal courts as encompassing the entire nation. Id. at 671-72. As such, the Due Process Clause of the Fifth Amendment does not require that a defendant have sufficient contacts with the state in which the district court sits for there to be jurisdiction. Johnson Creative Arts, Inc. v. Wool Masters, Inc., 743 F.2d 947, 950 n. 3 (1st Cir.1984); Debreceni v. Bru-Jell Leasing Corp., 710 F.Supp. 15, 20-1 (D.Mass.1989).

With these principles in mind, the court turns to the issues raised by the parties: (1) whether Congress can authorize federal courts to exercise jurisdiction over an alien corporation, without regard to the contacts of that corporation to the United States, (2) whether service under Rule 4 authorizes a federal district court to exercise personal jurisdiction over an alien corporation, regardless of the substantiality of the contacts of that corporation with the state in which the district court sits, and (3) whether Nippon has sufficient contacts with the United States to warrant exercise of jurisdiction over it.

2. Jurisdiction by virtue of service in the United States

The government contends that service under Rules 4 and 9, standing alone, is sufficient to create jurisdiction over Nippon. In advancing this position, the government argues by analogy from cases concerning the presence of individual criminal defendants. The Supreme Court explained in Frisbie:

The Court has never departed from the rule announced in Ker v. Illinois, 119 U.S. 436 [7 S.Ct. 225, 30 L.Ed. 421] [1886] that the power of a court to try a person for crime is not impaired by the fact that he...