United States v. Sinovel Wind Group Co., Ltd

In the

United States Court of Appeals

For the Seventh Circuit

____________________

Nos. 14-3013, 14-3105

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

SINOVEL WIND GROUP CO., LTD.,

Defendant-Appellant.

____________________

IN RE SINOVEL WIND GROUP CO., LTD.,

Petitioner.

____________________

Appeal from and Petition for Writ of Mandamus to the United States

District Court for the Western District of Wisconsin

No. 13-cr-84-bbc — Barbara B. Crabb, Judge.

____________________

ARGUED APRIL 1, 2015 — DECIDED JULY 23, 2015

____________________

2 Nos. 14-3013, 14-3105

Before WOOD, Chief Judge, FLAUM, Circuit Judge, and

KENNELLY, District Judge. *

WOOD, Chief Judge. In June 2013, the United States deliv-

ered a criminal summons to the office of Sinovel Wind

Group (USA) Company in Texas. It did so in order to serve

process on Sinovel Wind Group Company, a Chinese corpo-

ration and the owner of 100% of the shares of Sinovel Wind

Group (USA). (To avoid confusion, we refer to the subsidiary

Sinovel USA and the parent as Sinovel.) The summons re-

vealed that Sinovel had been indicted in the Western District

of Wisconsin for crimes including criminal copyright in-

fringement and trade secret theft. Sinovel contested jurisdic-

tion and moved to quash service of the summons. Conclud-

ing that Sinovel USA was the alter ego of Sinovel and that

service on Sinovel USA was proper, the district court denied

Sinovel’s motion. Sinovel appealed (No. 14-3013), and short-

ly thereafter filed a petition for a writ of mandamus in this

court (No. 14-3105), asking us to direct the district court to

vacate its order refusing to quash service of process. We con-

clude that we have no jurisdiction to hear Sinovel’s appeal.

We also conclude that this case does not meet the high

standards for issuance of a writ of mandamus. Sinovel will

be free to raise all relevant arguments on appeal from final

judgment, should it be convicted and wish to pursue the

matter.

I

A grand jury in the Western District of Wisconsin indict-

ed Sinovel and three individuals in June 2013 on charges of

* Hon. Matthew F. Kennelly of the Northern District of Illinois, sit-

ting by designation.

Nos. 14-3013, 14-3105 3

conspiracy to commit trade secret theft, wire fraud, trade se-

cret theft, and criminal copyright infringement. See 18 U.S.C.

§§ 371, 1343, 1832(a)(2), 2319; 17 U.S.C. § 506(a)(1)(A). The

charges arose from Sinovel’s alleged scheme to steal (among

other things) computer source code from a company called

AMSC, formerly known as American Superconductor; the

pilfered code was allegedly going to be used to assist in op-

erating Sinovel’s wind turbines. FBI reports indicate that the

government served a summons on Sinovel USA’s registered

agent in Dover, Delaware, in June 2013; it also mailed a

summons to Sinovel USA’s office in Houston via FedEx and

served Sinovel USA’s registered agent in Austin. (Sinovel

USA was incorporated in Delaware and registered to trans-

act business in Texas.)

In August 2013, Sinovel specially appeared in the district

court to file a motion pursuant to Federal Rule of Criminal

Procedure 12 to quash service of the summonses, complaint,

and indictment. The record indicates that the individual de-

fendants do not reside in the United States and are not ex-

pected to appear; they have not been served and play no

part in either proceeding before us. We thus have nothing

further to say about them.

Sinovel argued that the government had not complied

with Rules 4 and 9, because service of process on Sinovel

USA and its registered agents was not equivalent to service

on Sinovel itself. The magistrate judge to whom the case was

assigned was unpersuaded; he concluded that Sinovel USA

was the alter ego of Sinovel under Delaware law and thus

that service upon Sinovel USA sufficed for service upon Si-

novel. Sinovel filed objections to the magistrate judge’s order

denying the motion to quash service, along with a motion

4 Nos. 14-3013, 14-3105

for reconsideration. The district court rejected the objections

and denied the motion. It decided three critical points: first,

the facts alleged demonstrated that Sinovel USA was not in-

dependent of Sinovel; second, Delaware law governed the

question whether Sinovel USA was Sinovel’s alter ego for

service of process purposes; and third, under Delaware law,

alter ego status had been proven.

Sinovel filed a notice of appeal from this interlocutory

ruling in September 2014. It also filed a petition for a writ of

mandamus directly with this court. We instructed the parties

to address the question of appellate jurisdiction in their con-

solidated briefs, along with the merits. The two proceedings

have been consolidated for decision.

II

We have jurisdiction over appeals from all final decisions

of the district courts. 28 U.S.C. § 1291. Criminal defendants,

like others, must ordinarily wait for a final judgment before

they may bring an appeal. The “core application” of section

1291 “is to rulings that terminate an action.” Gelboim v. Bank

of Am. Corp., 135 S. Ct. 897, 902 (2015). There is, however, a

“small class” of decisions that “finally determine claims of

right separable from, and collateral to, rights asserted in the

action, too important to be denied review and too independ-

ent of the cause itself to require that appellate consideration

be deferred until the whole case is adjudicated.” Cohen v.

Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949). The Su-

preme Court has imposed three requirements for a collateral

order to be appealable: the decision must be conclusive; it

must resolve important questions separate from the merits;

and it must be effectively unreviewable on appeal from the

eventual final judgment in the underlying action. Mohawk

Nos. 14-3013, 14-3105 5

Indus., Inc. v. Carpenter, 558 U.S. 100, 106 (2009). The Court

has stressed that the orders qualifying for appeal under this

doctrine comprise a “small category,” Swint v. Chambers Cty.

Comm’n, 514 U.S. 35, 42 (1995), and that the collateral order

doctrine “must never be allowed to swallow the general rule

that a party is entitled to a single appeal, to be deferred until

final judgment has been entered.” Mohawk, 558 U.S. at 106

(quotations omitted).

Sinovel argues that its appeal ticks all the boxes that Co-

hen and other cases require for appellate jurisdiction. Recog-

nizing the Court’s recent warning in Mohawk against expand-

ing the set of appealable collateral orders, it urges nonethe-

less that its case fits the bill. We are unconvinced. The “small

class” of non-final orders that may be appealed is to be po-

liced carefully. Cohen, 337 U.S. at 546. Sinovel’s position

would lead to the opposite result: there would be no princi-

pled way to avoid the conclusion that every denial of a mo-

tion to quash service of process is appealable. Such an out-

come would be inconsistent with the Court’s guidance. See

Will v. Hallock, 546 U.S. 345, 350 (2006) (“[W]e have meant

what we have said; although the Court has been asked many

times to expand the ‘small class’ of collaterally appealable

orders, we have instead kept it narrow and selective in its

membership.”). Sinovel realizes the challenge before it, and

so it has tried to craft a narrower rule into which its case

would fit. Here is its proposal: denials of motions to quash

service in cases in which the moving party is “a foreign, par-

tially state-owned corporation … [and] prosecutors have

plainly failed to comply with the unambiguous require-

ments of [Criminal Rule 4]” are appealable. That is a mouth-

ful, but even if we were to find this anything but jury-rigged,

there can be no denying that this would create a new catego-

6 Nos. 14-3013, 14-3105

ry of appealable collateral orders—precisely what the Su-

preme Court has strongly discouraged.

Sinovel otherwise rests its position mainly on what it

contends is the practical unreviewability of the district

court’s denial of its motion to quash after a judgment on the

merits. That overstates the case considerably. It is true that

the district court’s ruling has eliminated the option of avoid-

ing the proceeding altogether, but Sinovel never had such a

right. (This is not like double jeopardy, or the immunity doc-

trines whose purpose is to avert an unauthorized proceed-

ing.) This is, in effect, a branch of personal-jurisdiction law.

People routinely raise personal-jurisdiction objections at the

district-court level, their argument is rejected, and they ar-

gue on appeal that the district court erred. If the appellate

court agrees with them, the judgment is set aside. That is just

what would happen if Sinovel is convicted after a trial and if

it decides to take an appeal. If the court of appeals concludes

that the district court should have granted the motion to

quash, it will set aside the judgment.

Even if all this is true, Sinovel argues, there is an excep-

tion for cases in which the importance of the particular value

at stake is sufficiently great that an immediate appeal must

be allowed to protect that value. See Mohawk, 558 U.S. at 107

(“[T]he decisive consideration is whether delaying review

until the entry of final judgment ‘would imperil a substantial

public interest’ or ‘some particular value of a high order.’”)

(quoting Hallock, 546 U.S. at 352–53). This is such a case, Si-

novel continues, because the litigation imperils the foreign

relations of the United States and will harm comity between

the United States and China. It emphasizes that the govern-

ment of China has a minority (18%) stake in Sinovel; if Si-

Nos. 14-3013, 14-3105 7

novel must endure proceedings in a U.S. court, the Chinese

government’s dignity will be adversely affected.

A big problem with this argument is the fact that the For-

eign Sovereign Immunities Act (FSIA) in the United States

does not recognize any special rights for foreign-government

ownership of less than a majority of the shares (or their

equivalent). See 28 U.S.C. § 1603(b)(2); Dole Food Co. v. Pat-

rickson, 538 U.S. 468, 480 (2003) (“[A] foreign state must itself

own a majority of the shares of a corporation if the corpora-

tion is to be deemed an instrumentality of the state under the

provisions of the FSIA.”). The FSIA codifies the line Con-

gress has drawn to trigger protections for foreign sovereign

interests. China’s stake in Sinovel is not over that line. Sinov-

el (which did not cite the FSIA in either its opening or reply

brief) has offered no reason for us in essence to confer sover-

eign immunity on entities that fall outside the scope of the

statute.

We raised this problem at oral argument, where Sinovel

conceded that the rules applying to foreign sovereigns are

not (at least technically) applicable to it. It argued instead

that China’s stake in Sinovel warrants at least “a thumb on

the scale” in favor of appellate jurisdiction over the district

court’s denial of the motion to quash. But Sinovel has point-

ed to no rule to that effect. It cites Samantar v. Yousuf, 560 U.S.

305 (2010), in support of its argument that the FSIA’s lan-

guage does not necessarily exclude entities it does not men-

tion from its protections. Samantar, however, dealt with the

question whether a foreign official could invoke the protec-

tions of the FSIA and thereby obtain immunity from suit.

No, the Court replied: the term “foreign state” is defined in

the statute, and officials are not mentioned. Id. at 315–16. It

8 Nos. 14-3013, 14-3105

reached that result despite the fact that it recognized some

residual federal common law of foreign sovereign immunity.

Id. at 324. If Samantar helps anyone, it helps the government

in this case, not Sinovel. We see no reason why a foreign

corporation in which a foreign government has a minority

stake is entitled to a “thumb on the scale” for jurisdictional

purposes.

There are other reasons to take issue with Sinovel’s posi-

tion that requiring it to stand trial will harm U.S. foreign re-

lations and that it is up to the courts to save the day. Among

them is the fact that the decision to prosecute a foreign cor-

poration represents the assessment of the Executive Branch,

through the Department of Justice, that the proceeding fur-

thers U.S. interests. It is not up to the courts to monitor the

extent of Justice’s consultations with the Department of

State, the Office of the U.S. Trade Representative, the Com-

merce Department, or any other interested entity, although

we are aware that such consultations often take place. See,

e.g., Lori B. Morgan & Helaine S. Rosenbaum, U.S. Depart-

ment of Justice Antitrust Enforcement Policy, 34 HARV. INT’L L.J.

192, 197 (1993) (“[T]he DOJ analyzes enforcement situations

to avoid prosecutions which conflict with the laws of foreign

governments, performs a balancing test of competing na-

tional interests, and considers possible effects on the United

States’ foreign relations.” (citations omitted)); see also DEP’T

OF JUSTICE AND FED. TRADE COMM’N, ANTITRUST

ENFORCEMENT GUIDELINES FOR INTERNATIONAL OPERATIONS

§ 3.2 (1995), available at http://www.justice.gov/atr/antitrust-

enforcement-guidelines-international-operations (“In cases

where the United States decides to prosecute an antitrust ac-

tion, such a decision represents a determination by the Exec-

Nos. 14-3013, 14-3105 9

utive Branch that the importance of antitrust enforcement

outweighs any relevant foreign policy concerns.”).

Sinovel has not provided us the kind of compelling rea-

son we would need to override the government’s assessment

here. It argues, for example, that the government neglected

to employ the procedures spelled out in a judicial assistance

agreement between the United States and China to serve

process in this case. That fact, if it is so, does not tell us that

the Department failed to consider the effect of this prosecu-

tion on the government’s relations with China, let alone that

it will affect or has affected those relations. Furthermore, Si-

novel does not explain what difference it would have made

if the government had tried to follow the agreement in order

to serve process on Sinovel in China. The agreement says

that if the United States asks China to serve a document,

China “shall use its best efforts” to do so—but that China

“shall not be obligated to effect service of a document which

requires a person to appear as the accused.” Judicial Assis-

tance Agreement, China-U.S., at 8, June 19, 2000, T.I.A.S. No.

13,102. Sinovel offers no reason for us to assume that failure

to initiate this optional method of service has disrupted in-

ternational relations, nor why an earlier opportunity to pre-

sent its arguments to a U.S. court would repair such a rup-

ture.

Sinovel’s other arguments fare no better. It contends that

criminal proceedings against it in Wisconsin could interfere

“with ongoing civil litigation in Chinese courts” over the

same dispute. Sinovel supports its argument with citations

to a press release and an article from WindPower Monthly

about lawsuits that AMSC has filed against Sinovel in China.

Since oral argument, it has also filed several supplemental

10 Nos. 14-3013, 14-3105

letters informing us of the progress of the Chinese litigation.

Yet Sinovel does not detail how those lawsuits could be af-

fected by the eventual outcome of the criminal case here,

even in its latest submission detailing the “complete victory”

Sinovel had recently achieved against AMSC in the Chinese

courts. These lawsuits, we are told, have been pending since

2011; Sinovel was indicted in 2013, and yet we have no evi-

dence thus far about any effect that the Chinese litigation has

had on this case or on relations between the United States

and China. It is also worth noting that Sinovel will have an

opportunity to present those cases to the district court and

argue for whatever recognition and enforcement may be due

to them.

Sinovel also says that courts must guard against the ex-

traterritorial expansion of federal service of process, but it

appeals again to comity for this point. We note that the topic

of extraterritorial service is addressed in Federal Rule of

Criminal Procedure 4(c)(2), which says that “[a] warrant

may be executed, or a summons served, within the jurisdic-

tion of the United States or anywhere else a federal statute au-

thorizes an arrest” (emphasis added). In other words, it is

Congress that makes the judgments about service of process

outside the country; the courts’ responsibility is to ensure

that the operative rules are followed.

Sinovel has made other arguments supporting its effort

to obtain review under the collateral order doctrine, but in

the end they do not carry the day. It is not enough to show,

as we may assume Sinovel did, that the district court conclu-

sively decided the issue of service of process, and that this

question is separate from the merits. It must also show effec-

tive unreviewability after final judgment, and it has not. We

Nos. 14-3013, 14-3105 11

therefore dismiss appeal no. 14-2013 for want of appellate

jurisdiction.

III

Sinovel also argues that we have jurisdiction over its peti-

tion for a writ of mandamus. That is correct: jurisdiction ex-

ists under the All Writs Act, 28 U.S.C. § 1651(a). But that peti-

tion fares no better than Sinovel’s appeal, for slightly differ-

ent but related reasons.

We may issue a writ of mandamus “only in extraordinary

circumstances … to confine an inferior court to a lawful ex-

ercise of its prescribed jurisdiction or to compel it to exercise

its authority when it is its duty to do so.” In re Hijazi,

589 F.3d 401, 407 (7th Cir. 2009) (quoting Allied Chem. Corp. v.

Daiflon, Inc., 449 U.S. 33, 35 (1980)). In assessing the question

whether a writ should issue, we consider whether the party

asking for the writ has no other adequate remedy to attain

her desired relief; whether that party has demonstrated that

her right to the writ is “clear and indisputable”; and whether

this kind of intervention is appropriate under the circum-

stances. Cheney v. U.S. Dist. Court, 542 U.S. 367, 380–81 (2004)

(quotations omitted).

Before we turn to the merits, we note that the govern-

ment contends that Sinovel has waived its mandamus argu-

ment. It complains that Sinovel merely incorporated its ear-

lier mandamus brief from the companion case into its brief

on appeal. The government is correct that Sinovel’s presenta-

tion is, to put it charitably, spare. It used just three sentences

of a 53-page brief to address mandamus. But that overlooks

the fact that there is considerable overlap between the points

Sinovel made in an effort to justify an interlocutory appeal

12 Nos. 14-3013, 14-3105

and the points it must make to earn mandamus relief. We

decline to rest our decision on waiver and turn to the merits.

Our reasons for rejecting a collateral-order appeal have

their counterpart for this part of the case. Sinovel argues in

its mandamus petition that the district court’s order declin-

ing to quash service of process was clearly erroneous, and

then it leaps to the conclusion that it has no other recourse

but mandamus. Waiting for a final judgment is not an op-

tion, it insists, because this case is “unique.” Yet Sinovel’s ar-

guments explaining why mandamus “is the only adequate

remedy” merely repeat its belief that action now by this

court (and by this Sinovel can mean only action in its favor,

which is obviously not guaranteed) would avert damage to

U.S.-China relations. That argument fares no better to sup-

port mandamus than it did to support an immediate appeal.

The mandamus cases Sinovel cites that have anything to

do with foreign defendants in the U.S. courts are distin-

guishable. Rather than prove Sinovel’s point, they show that

we are willing to issue writs of mandamus only in the most

unusual circumstances. E.g., Abelesz v. OTP Bank, 692 F.3d

638, 651 (7th Cir. 2012) (case was extraordinary because Hol-

ocaust survivors’ claims against Hungarian banks for expro-

priation of property had “appreciable foreign policy conse-

quences” with “astronomical” potential damages of $75 bil-

lion, and issue of personal jurisdiction was “crystal” clear);

Hijazi, 589 F.3d at 407–12 (in an archetypal standoff, foreign

defendant never appeared in United States to answer charg-

es, his country of residence refused to extradite him, and dis-

trict court refused to rule on his motions to dismiss). No

such compelling reason for immediate action exists here; to

the contrary, we are confident that, should it come to this,

Nos. 14-3013, 14-3105 13

Sinovel will have an adequate remedy in an appeal after fi-

nal judgment.

One other matter requires our attention. Sinovel asks us

to certify to the Delaware Supreme Court the question

whether a showing of fraud is required under Delaware law

for piercing of the corporate veil. Because we do not have

jurisdiction over Sinovel’s appeal and we have found that the

standards for mandamus are not met, we must decline this

request.

IV

The district court’s denial of Sinovel’s motion to quash

service of process is not an appealable order under the col-

lateral order doctrine. We thus DISMISS Sinovel’s appeal, No.

14-3013, for want of appellate jurisdiction. In No. 14-3105, we

conclude that the requirements for issuance of a writ of

mandamus have not been met, and so we DENY Sinovel’s pe-

tition.