This case has received significant press, so I won’t cover it here in the same format I usually do. Instead, I will excerpt some of the other coverage, the case and then add my own thoughts.

From Politico:

A divided federal appeals court has rejected a bid by accused video pirate Kim Dotcom to recover millions of dollars in assets ordered seized by a U.S. court at the request of American prosecutors.

A panel of the Richmond-based 4th Circuit U.S. Court of Appeals ruled, 2-1, Friday that Dotcom—the swashbuckling founder of the once-highly-popular file-sharing website Megaupload—could not recover his assets because he remains a fugitive from criminal charges of racketeering, conspiracy to commit copyright infringement and conspiracy to commit money laundering in a scheme that allegedly caused $500 million in damages to the motion picture industry.

From Washington Post:

Dotcom, who founded the file-sharing website Megaupload, has since 2012 been fighting extradition from New Zealand to the United States on piracy charges. Prosecutors say that Megaupload produced at least $175 million in illegal assets from fees and ads for its owners and executives from its creation in 2005 to its demise in 2012. What’s left, they say, is the $75 million being kept in Hong Kong and New Zealand.

…in 2014 the U.S. moved to seize Dotcom’s assets, along with those of his associates, in both countries.

They won a default judgment in Virginia federal court last year. But Dotcom and his co-defendants argued that they were unconstitutionally deprived of the right to defend themselves in that civil forfeiture case.

A three-judge panel of the Fourth Circuit Court of Appeals was unpersuaded, ruling that by refusing to face trial in the U.S. on criminal charges, Dotcom and the rest of the Megaupload team gave up their right to contest any civil proceedings.

While most of the press coverage focused on the sexier piracy aspect of the case, most of the Court’s opinion is about the unsexy topic of jurisdiction. Though, to the Court’s credit, even that has a flare of the high seas:

The claimants’ first argument fails because it confuses principles of admiralty law for principles of constitutional law. Both Titanic I and Titanic II describe jurisdictional principles governing admiralty courts and the law of the sea. The two crucial distinctions between these cases and the one before us are (1) that the Titanic cases based jurisdiction on the common law of admiralty whereas this case relies on § 1355, and (2) the Titanic cases involved a salvage and so no court could assert jurisdiction through exclusive control of the res, but here the res resides in two sovereign nations that are cooperating with federal authorities from this country regarding the assets in question.

The claimants fail to acknowledge the most glaring problem with their reliance on Titanic I and Titanic II: the cases speak explicitly in terms of the jurisdictional limits of admiralty courts pursuant to “the common law of the seas.”

I suspect if you are a first year law student in Civil Procedure this semester, your professor may reference this case. It is rife with references to Penoyer v. Neff and includes a discussion of minimum contacts in the context of the internet and due process:

As in other cases we have decided in which websites and web transactions have been the asserted basis for jurisdiction, we will analyze the minimum contacts question by applying the factors commonly used for determining specific personal jurisdiction: “(1) the extent to which the defendant has purposefully availed itself of the privilege of conducting activities in the state; (2) whether the plaintiffs’ claims arise out of those activities directed at the state; and (3) whether the exercise of personal jurisdiction would be constitutionally ‘reasonable.’” Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 397 (4th Cir. 2003).

As already mentioned, both the forfeiture complaint and the criminal indictment allege that 525 servers located within the Eastern District of Virginia were used in furtherance of the Mega Conspiracy. All Assets Listed in Attachment A, 89 F. Supp. 3d at 823. The government further alleges, and the claimants do not dispute, that these servers were “operated and closely controlled” by the claimants “at a cost of tens of millions of dollars over a period of years.” Gov’t Br. 18. We find that such contacts are sufficient to show the claimants “purposefully availed [themselves] of the privilege of conducting activities in the state.” See Carefirst, 334 F.3d at 397.

The claimants argue, however, that “this Court has repeatedly dismissed ‘as “de minimis” the level of contact created by the connection between an out-of-state defendant and a web server located within a forum.’” Appellants’ Br. 17-18 (quoting Carefirst, 334 F.3d at 402). Besides not being a binding rule of general applicability, the particular facts of this case warrant a different outcome than otherwise might be true. The quote they rely on is an unfortunate paraphrasing in our Carefirst opinion of a discussion contained in a footnote of another case, Christian Science Board of Directors of First Church of Christ, Scientist v. Nolan, 259 F.3d 209 (4th Cir. 2001).

… More to the point, this case does not involve a single server that happened to reside in the forum state. It involves hundreds of servers, closely controlled by the claimants, representing an investment of tens of millions of dollars.

The dissent brings up what (I think) is an interesting point. If all the money is outside the U.S., how can the U.S. court order forfeiture of the money?

The defendant in this action–the res–is outside of the United States and beyond the control of the district court. Absent control, no order of the district court can be binding on the res because the fate of the res is ultimately not in the hands of the district court. Instead, the res in this case is subject to the control of the courts of New Zealand and Hong Kong. The district court’s forfeiture order therefore merely advises the courts of a foreign sovereign that (in the district court’s view under the laws of the United States) the United States should have title to the res. Those courts, of course, with control of the res and with the authority vested in them by their own sovereigns, remain free to revise, overturn, or refuse recognition to the judgment of the district court. The decision of the district court regarding title in the res is thus subject to a “more authoritative agency” outside of the Article III hierarchy. Without control of the res, the district court’s decision cannot bind the res and thus constitutes an advisory opinion prohibited by Article III.

Going forward, given the dissenting voice here and the amount of money involved, I think we will see an en banc opinion of the entire Fourth Circuit. I don’t anticipate this being petitioned to the Supreme Court if Dotcom and friends prevail in an en banc opinion. I think DOJ and the federal government will see that the fa-reaching jurisdictional implications brought up by the dissent in this opinion, even if legally justified, could impact relationships with other nations (put differently: just because the Fourth Circuit rejected the Charming Betty argument doesn’t mean that the administration can’t act as Charming Betty anyway). If the government prevails again, I think the MegaUpload crew will appeal. A SCOTUS opinion in this case would be very interesting.