Defendant is a U.S. citizen living overseas who is obligated to file an FBAR (Report of Foreign Bank and Financial Accounts). The IRS started an FBAR examination of the Defendant, and ultimately assessed about $4 million in penalties in October 2019 against the Defendant. They sent a letter to Defendant at his last known address in Belgrade, Serbia, and to one of Defendant’s authorized representatives, whereby the IRS demanded payment. When no payment was received, the U.S. government filed a Complaint on October 28, 2021 to collect the assessed penalties. After considerable time trying to serve Defendant through the Hague Service Convention in Serbia, the Serbian Central Authority notified the government that the Defendant was no longer in Serbia, but was instead in the Republic of Srpska, a constituent republic of Bosnia-Herzegovina. The government has not been able to locate an address for Defendant in B-H. The government requested authorization to serve Defendant pursuant to FRCP 4(f)(3), by serving his U.S. counsel who represented him in the underlying FBAR examination, or, in the alternative, to serve him via his tax preparer, listed on his 2021 tax returns, filed in February 2022.
Service via FRCP 4(f)(3) is at the discretion of the court, and in exercising the court’s discretion, the court considers whether the Plaintiff has reasonably attempted service and whether circumstances are such that the court’s intervention is necessary.
The court must examine whether the requested service (through a third party) is prohibited by some international agreement. If is not prohibited, then the court must determine if the service would comport with constitutional due process. Since the alternative service requested here is through a U.S. lawyer, the court needs to explore whether the government can show adequate communication between the individual (Defendant) and the attorney. Courts have generally held that service on a Defendant located abroad via U.S.-based counsel is permitted under the text of FRCP 4(f)(3), but some courts have found that service through U.S. counsel is not permissible because the text of FRCP 4(f)(3) provides for alternative service “at a place not within any judicial district of the United States.” This court is going to follow the majority approach “because ‘the relevant circumstance is where the defendant is, and not the location of the intermediary.'”
All four lawyers who were representing Defendant in the tax matter indicated they are not authorized to accept service on behalf of Defendant, but that is not determinative as to whether the court may permit alternative service on counsel. The court need only determine if the service on U.S. counsel is “reasonably calculated, under all of the circumstances” to notify Defendant. One of the 4 lawyers had said he had not had recent communication with Defendant, was unsuccessful in attempts to reach Defendant, had no current information for him, and no longer represents him. Therefore, serving this lawyer is not reasonably calculated to provide notice to Defendant. The other three attorneys, all working at the same firm, made no such representations to the government, and had participated extensively in the FBAR investigation. As officers of the court, they would be likely to give Defendant the information served on them. Because the government had made numerous other attempts to serve Defendant, and were diligent in trying to locate Defendant’s new address, the government can effectuate alternative service on the law firm noted above.