Court Orders Nonparty Bank to Produce Documents Said to be Located Abroad in Trademark Counterfeiting Case

After more than five years of litigating access to documents requested in a subpoena directed to a nonparty foreign bank, the district court in Gucci Am. Inc. v. Weixing Li has ordered the bank to produce the documents, despite objections from the bank that production would violate Chinese law. The decision written by Judge Sullivan of the Southern District of New York, is an important decision for brand owners seeking to obtain financial documentation related to the sale of allegedly counterfeit goods.

As detailed in a prior post, the case was brought in 2010 by a brand owner and its affiliates against defendants accused of trademark counterfeiting. After a court-ordered preliminary injunction (i) prohibited banks with notice of the order from transferring any money from defendants’ bank accounts and (ii) required subpoenaed third parties to produce responsive documents within ten days, the plaintiffs served a subpoena on a U.S. branch of the Bank of China (BOC) seeking defendants’ account information. The brand owner plaintiffs had obtained evidence that certain defendants had wired sales proceeds to accounts at the Chinese headquarters of BOC. BOC filed objections to the subpoena, arguing that production of the documents would violate Chinese law. The district court ordered the bank to comply with the subpoena. The bank appealed to the Second Circuit.

The Second Circuit vacated the decision compelling compliance with the subpoena, reasoning that in light of the Supreme Court’s Daimler AG v. Bauman decision, the court lacked general personal jurisdiction over the bank. Personal jurisdiction over a nonparty is needed to require it to comply with a subpoena. However, the Second Circuit remanded to the district court to evaluate whether specific personal jurisdiction existed, and if so, whether comity concerns (i.e., respect for a foreign country’s laws), should sway the court not to exercise jurisdiction.

In a decision dated September 29, the district court compelled the bank to comply with the first subpoena and a second subpoena served in 2011. First, the court found that specific personal jurisdiction existed over the foreign bank. For example, the bank was properly served at its New York branch and New York’s long arm statute, C.P.L.R. § 302(a)(1) provided a statutory basis to exercise jurisdiction. Asserting jurisdiction was also constitutionally proper given, among other things, the bank’s use of a correspondent bank account in the name of its Head Office in New York, to effectuate wire transfers for the foreign bank’s U.S. clients to China, including defendants in the action.

Second, the court ruled that comity concerns would not prevent the court from ordering compliance. Judge Sullivan considered a 2013 decision from the Second Intermediate People’s Court of Beijing and a 2014 decision from the Higher People’s Court of Beijing (upholding the 2013 decision after a de novo review). In the Beijing litigation, certain U.S. defendants from the S.D.N.Y. case sued BOC in China, arguing that the bank unlawfully froze their accounts and sought an order lifting the freeze. Those courts ruled that BOC lacked a contractual or legal basis to freeze the accounts, and that services should be resumed. The S.D.N.Y. court determined, however, that these decisions did not alter the result of the comity analysis conducted by the court (as to documents) in 2011. The Court noted that the Beijing judgments did not support the notion that China’s bank secrecy laws were either “rigidly enforced” or “trump[ed] the United States’ interest in enforcing the Lanham Act.” Moreover, nothing in these judgments suggested that disclosure of the subpoenaed information would expose the bank and its employees to serious criminal or civil liability in China.