Nike, Inc. v. Wu
349 F. Supp. 3d 310
S.D. Ill.2018Background
- Plaintiffs (Nike and Converse) obtained a default judgment (over $1 billion equitable relief) against numerous counterfeiters; they assigned the judgment to Next Investments, LLC (Assignee) in 2017.
- Judge McMahon entered a post-judgment contempt/order (10/20/17 Order) that included a global asset restraint enjoining third parties, including financial service providers, from transferring assets of the Judgment Debtors anywhere, including abroad.
- The Assignee served Rule 45 subpoenas on six Chinese banks (ABC, BOCOM, CCB, CMB, ICBC, BOC) seeking documents about accounts and transfers tied to the Judgment Debtors.
- The Banks moved to quash the subpoenas and to modify the 10/20/17 Order (arguing lack of personal jurisdiction and conflict with Chinese law and Motorola’s separate-entity rule); Assignee cross-moved to compel.
- The Magistrate (Judge Freeman) held personal jurisdiction exists under New York law and constitutional due process based on the banks’ New York branches, correspondent and settlement accounts used to process USD wires and credit-card settlements for Judgment Debtors, and marketing of services in New York; performed a comity analysis and ordered production within 45 days.
Issues
| Issue | Assignee's Argument | Banks' Argument | Held |
|---|---|---|---|
| Personal jurisdiction to enforce Rule 45 subpoenas over Chinese banks | Banks purposefully availed themselves of NY by establishing/using NY correspondent and settlement accounts to process USD wires and credit-card settlements for Judgment Debtors; subpoenas relate to that conduct | Banks have minimal NY contacts (single branch), are passive actors; book entries and records are in China; general jurisdiction lacking | Specific jurisdiction exists under N.Y. CPLR §302(a)(1) and due process: banks' repeated use of NY correspondent/settlement accounts and NY presence satisfy statutory and constitutional tests |
| International comity / conflict with Chinese law | Discovery is crucial to locate assets and identify counterfeiters; Hague Convention is unreliable and would delay/limit production | Chinese bank-secrecy and banking laws prohibit disclosure/restraint absent Chinese authority; compliance would violate Chinese law and risk penalties | Comity factors weighed overall in favor of disclosure: importance and specificity of requests, lack of reliable alternative, and U.S. interest in enforcing judgments outweighed comity concerns; ordered production, while acknowledging some factors favor banks |
| Request to modify global asset-restraint in 10/20/17 Order (Motorola/separate-entity rule) | Assignee: not currently seeking to enforce asset freeze against banks; request premature | Banks: Motorola bars ordering a bank’s NY branch to freeze assets held in foreign branches; request ripe because Order authorizes third parties to move to modify | Banks withdrew their request to modify the 10/20/17 Order as unripe; court deemed that portion withdrawn without prejudice |
| Timeliness of motion to quash / joinder | Assignee noted motion untimely but argued court could consider it; BOC sought to join later | Banks filed after subpoena return dates; sought leave to join | Court exercised discretion to hear the motion despite apparent untimeliness and granted BOC leave to join |
Key Cases Cited
- Daimler AG v. Bauman, 571 U.S. 117 (Sup. Ct.) (limits general jurisdiction; "at home" standard)
- Gucci Am., Inc. v. Weixing Li, 768 F.3d 122 (2d Cir.) (rules on international subpoena enforcement and jurisdictional principles)
- Gucci Am., Inc. v. Weixing Li, 135 F. Supp. 3d 87 (S.D.N.Y.) (analysis of specific jurisdiction and comity for foreign bank subpoena enforcement)
- Licci v. Lebanese Canadian Bank, 673 F.3d 50 (2d Cir.) (long-arm/jurisdiction analysis for banks using NY correspondent accounts)
- Licci v. Lebanese Canadian Bank, 20 N.Y.3d 327 (N.Y.) (New York Court of Appeals holding on transaction-of-business via correspondent accounts)
- Motorola Credit Corp. v. Standard Chartered Bank, 24 N.Y.3d 149 (N.Y.) (separate-entity rule regarding restraint of assets held in foreign branches)