Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—SDNY: FTC Authorized to Serve Documents on Indian Defendants Through Email and Facebook, (Mar 8, 2013)

By Tobias J. Gillett, J.D., LLM.

In an action against two India-based companies and three individuals for allegedly operating a scheme to deceive American consumers into paying to fix non-existent computer problems, the federal district court in New York has authorized the FTC to serve the defendants with documents through email and Facebook messages (FTC v. PCCare247 Inc., March 7, 2013, Engelmayer, P.).

On September 24, 2012 the FTC brought suit against PCCare247 Solutions Pvt. Ltd., Connexxions IT Services Private Limited, and three associated individuals, all located in India, alleging that they had engaged in a scheme to deceive American consumers into paying to resolve non-existent problems with their computers. The court issued a temporary restraining ordering freezing the defendants’ assets and suspending their business operations.

The FTC, in compliance with Federal Rule of Civil Procedure 4(f)(1) and the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (“Hague Service Convention”), submitted the summons, complaint, and related documents to the Indian Central Authority (ICA) for service on the defendants. The FTC also sent the documents to the defendants by e-mail to the defendants’ known e-mail addresses, by Federal Express, and by personal service through a process server.

Although all defendants received the summons and complaint through the process servers, and most through FedEx, the ICA did not serve the defendants formally and did not respond to FTC inquiries regarding the service. Having received actual notice of the action, the defendants retained counsel, and those attorneys represented the defendants at a preliminary injunction hearing. The court issued the injunction, carrying over most terms from the temporary restraining order, but exempting funds from the asset freeze to pay the attorneys. Nonetheless, the attorneys were not paid, and the court granted their motion to withdraw.

The defendants failed to comply with the injunction, but one defendant remained in email contact with the FTC and the court. In the present motion, the FTC sought permission from the court to serve the defendants through e-mail and Facebook messages.

International Agreement. The court first concluded that the FTC’s proposed methods of service complied with the Hague Service Convention. Under that agreement, each signatory state must designate an authority that would receive requests for service from other signatories. Article 10 permits service through certain alternative means, provided the destination state does not object. India did object to the Article 10 methods, but limited its objection to those specific means. The court observed that where a recipient nation has limited its objection to the means in Article 10, a court may order service through alternative means not listed in Article 10. The court noted that “[n]umerous courts” had found e-mail does not violate international agreement when the objection is limited to Article 10 means, and Facebook service “is clearly outside the scope of Article 10.” Therefore, international agreement did not prohibit service by e-mail and Facebook.

Due Process. To comport with due process, service must “be reasonably calculated, under all circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” The court observed that email complied with this standard “where a plaintiff demonstrates that the email is likely to reach the defendant.” Here, the FTC had identified email addresses for each defendant, and the defendants operated an internet business that relied on frequent use of email. Moreover, the email addresses for two defendants were employed in the alleged scheme, and one of the defendants had used his email address to email the court four times. Therefore, service through email would comport with due process.

With respect to service by Facebook, the court observed that “if the FTC were proposing to serve defendants only by means of Facebook, as opposed to using Facebook as a supplemental means of service, a substantial question would arise whether that service comports with due process.” Facebook profiles can be created using false or incomplete information, and the profile or its associated email address may not be maintained by the party to be served.

However, the profiles at issue here did not suffer from those defects, in the court’s view. The individual defendants had registered their Facebook accounts with email addresses known to belong to them, and two of the defendants listed positions with the defendant companies as their professional activities. Those two individual defendants were “friends” with the third individual defendant. Therefore, the FTC had “demonstrated a likelihood that service by Facebook message would reach defendants.”

Although service by Facebook was “a relatively novel concept,” it would be used only as a means to supplement service by email, and the court declared that courts should be open to new technological means of service, “rather than dismissing them out of hand as novel.” Moreover, the defendants had themselves “zealously embraced” the new technology, and already had actual knowledge of the lawsuit. Service by e-mail and Facebook together would be “highly likely to reach defendants.”

Furthermore, the FTC had already made “good faith” attempts to effect service on the defendants by other means, in the court’s view. The ICA had provided no indication that it had served the defendants, despite five months in which to do it, nor had it responded to FTC inquiries. The withdrawal of the defendants’ counsel left the FTC with no other means of effecting service, and the defendants already had actual notice of the proceedings. Under these circumstances, it was “not tolerable to wait five months (or more) for every motion in this case to be served by the [ICA].” Therefore, the authorization of alternate means of service was warranted.

The case is No. 12 Civ. 7189 (PAE).

Attorneys: Benjamin Robert Davidson for Federal Trade Commission. Jonathan Andrew Harris (Harris, Cutler & Houghteling LLP) for NavinPasari. Stacey Neal (Procopio Cory Hargreaves & Savitch LLP) for Sanjay Agarwalla.

Companies: PCCare247 Solutions Pvt. Ltd.; Connexxions IT Services Private Limited

Cases: ConsumerProtection NewYorkNews