GUCCI AMERICA, INC., BALENCIAGA AMERICA, INC., BALENCIAGA, S.A., BOTTEGA VENETA INTERNATIONAL S.A.R.L., BOTTEGA VENETA, INC., LUXURY GOODS INTERNATIONAL S.A., YVES SAINT LAURENT AMERICA, INC. v. BANK OF CHINA; WEIXING LI, DBA REDTAGPARTY, DBA MYLUXURYBAGS.COM, DBA XPRESSDESGINERS.COM, DBA XPRESSDESIGNER.NET, DBA DESIGNER HANDBAGS, AKA XIN LI, ET AL.
No. 11-3934-cv; 12-4557-cv
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
September 17, 2014
August Term 2013; Argued: December 6, 2013
AFFIRMED IN PART, REVERSED IN PART, VACATED IN PART, AND REMANDED.
ANDREW RHYS DAVIES (Bradley Stephen Pensyl, Pamela Rogers Chepiga, on the brief,) Allen & Overy LLP, New York, NY, for Appellant.
ROBERT L. WEIGEL (Howard S. Hogan, Anne M. Coyle, Jennifer C. Halter, on the brief), Gibson, Dunn & Crutcher LLP, New York, NY, for Plaintiffs-Appellees.
DEBRA ANN LIVINGSTON, Circuit Judge:
This case arises out of the legal efforts of a number of luxury goods retailers to protect their intellectual property and stop alleged counterfeiters from mаrketing fake merchandise over the Internet and then hiding the profits from the sale of their
Plaintiffs-Appellees Gucci America, Inc. (“Gucci“), Balenciaga America, Inc., Balenciaga, S.A., Bottega Veneta International S.A.R.L., Bottega Veneta, Inc., Luxury Goods International S.A., and Yves Saint Laurent America, Inc. (“plaintiffs“) are manufacturers of well-known luxury handbags, clothing, jewelry, fragrances, and other products. Over the years, millions of consumers have been exposed to plaintiffs’ trademarks through extensive advertising campaigns. As a result of this advertising, plaintiffs’ brands and trademarks are among the most widely-recognized in the United States.
Plaintiffs assert that in or around June 2010, they discovered that certain unauthorized parties, including the defendants in this action, were selling counterfeit versions of plaintiffs’ products on the Internet. Defendants advertised these products as guaranteed authentic. Plaintiffs contend that the defendants not only copied the designs, patterns, and color schemes associated with the plaintiffs’ products, but also “expressly identif[ied] the counterfeit products as ‘Gucci,’
The present appeal by Bank of China (“the Bank” or “BOC“), the nonparty appellant, concerns the plaintiffs’ efforts both to freeze the defendants’ assets so that the profits of defendants’ alleged counterfeiting can be recovered and to obtain the assistance of the Bank in gathering evidence of defendants’ purportedly unlawful conduct. BOC appeals from: (1) an August 23, 2011 order granting plaintiffs’ motion to compel the Bank to comply with a document subpoena and an asset freeze injunction and denying the Bank‘s cross-motion to modify the court‘s orders; (2) a May 18, 2012 order denying the Bank‘s motion to reconsider; and (3) a November 15, 2012 order holding the Bank in civil contempt and imposing monetary penalties.
I. Background
On June 25, 2010, plaintiffs brought an action in the United States District Court for the Southern District of New York against Weixing Li, Lijun Xu, and certain “John Does,” doing business as, inter alia, Redtagparty, Designer Handbags, Myluxurybags.com, Xpressdesigners.com, and Xpressdesigner.net, pursuant to the
Simultaneously with their initial complaint, plaintiffs filed a motion for a temporary restraining order (“TRO“) in the district court. On June 25, 2010, the United States District Court for the Southern District of New York (Sullivan, J.) granted this motion, freezing defendants’ assets and enjoining the defendants from selling counterfeit goods. On July 12, 2010, the district court converted the TRO into a preliminary injunction (“Asset Freeze Injunction“). This Asset Freeze Injunction, issued pursuant to
Defendants and their . . . agents . . . and all persons acting in concert or in participation with any of them, and any banks . . . who receive actual notice of this order . . . without prior approval of the Court [are] restrained and enjoined from transferring, disposing of, or secreting any money . . . or other assets of Defendants . . . .
J.A. 240. The plaintiffs had gathered evidence that, following the issuance of the TRO, certain defendants wired proceeds of their counterfeit sales to accounts at
BOC, the nonparty appellant, is not incorporated or headquartered anywhere in the United States and maintains its principal place of business in China. The Bank, which is owned in major part by the Chinese government, has a significant global presence (maintaining four branсhes in the United States) but only a portion of the Bank‘s worldwide activity takes place in New York. Gucci ECF No. 288 (citing OCC Evaluation Aug. 18, 2008) (“At year-end 2007, [BOC] had 10,145 domestic branches, 689 overseas branches and subsidiaries in 27 countries around the world and 1200 correspondent banks.” Id. at 1). BOC contends that bank officials who work in its two New York branches cannot search the records of the China-based offices, nor can they ascertain whether individuals have accounts at BOC branches outside of the United States.
BOC informed plaintiffs that its New York City branch does not have possession оr control over information located “in any other branch or office of the Bank of China” and that compliance with the subpoena would violate Chinese law. J.A. 773. The Bank produced responsive documents that were in the possession of its New York branch. It refused to produce responsive documents located in any of its branches or offices in China, however, notwithstanding plaintiffs’ evidence
On December 6, 2010, plaintiffs filed a motion to compel compliance with both the Asset Freeze Injunction and the 2010 Subpoena. The Bank filed its opposition and cross-moved to modify the district court‘s orders so as to terminate any provisions requiring the Bank to freeze defendants’ assets held by BOC in China. The motions were fully submitted to the district court as of January 3, 2011.
After the motion to compel compliance with the 2010 Subpoena was submitted, on February 23, 2011, plaintiffs served a second subpoena (“2011 Subpoena“) on BOC. The 2011 Subpoena requests documents concerning accounts “held by Defendants or into which Defendants transferred funds” and specifically identifies six new BOC accounts by account number. The 2011 Subpoena defines “Defendants” much the same way as the 2010 Subpoena.4 J.A. 1162. After serving
On August 23, 2011, the district court denied the Bank‘s cross-motion to modify the Asset Freeze Injunction and ordered the Bank to comply both with the 2010 Subpoena and with the Injunction (“August 23 Order“). BOC timely noticed an appeal.6 In September, BOC produced some documents, all concerning the accounts ending in 1235 and 2443 specifically requested in the 2010 Subpoena.
The Bank then moved, pursuant to
On September 27, 2012, the district court ordered the Bank to show cause why it should not be sanctioned for failing to comply with the August 23 Order, insofar as it compelled compliance with the 2010 Subpoena. Following additional briefing and argument, in a November 15, 2012 order, the district court held BOC in civil contempt for its failure to comply with the Order. The district court ordered the Bank to pay (1) an initial “coercive fine in the amount of $75,000” for its alleged past
After oral argument in connection with this matter, this Court received a letter dated December 19, 2013 signed in the names of Huai Peng Mu, the Director-General of the Legal Affairs Department of the People‘s Bank of China, and Yi Huang, the Director-General of the Supervisory Rules and Regulations Department of the China Banking Regulatory Commission. The views expressed in this letter are not necessary to our decision today and therefore we need not and do not decide whether the letter is properly before this Court.8 Finally, upon invitation from the
* * *
We address the issues in turn. First, as an initial matter, we conclude that the Bank‘s argument that the district court lacked the authority to issue the Asset Freeze Injunction has no merit. The court had personal jurisdiction over the defendants, as well as the equitable authority to issue the prejudgment freeze. However, as to the portion of the August 23 Order compelling the Bank to comply with the Asset Freeze Injunction and the May 18, 2012 order denying the Bank‘s motion to reconsider, we vacate. We conclude that in light of Daimler AG v. Bauman, 134 S. Ct. 746 (2014), decided only this year, the district court erred in finding that BOC is properly subject to general jurisdiction. We remand for the district court to consider: (1) whether it may exercise specific jurisdiction over the Bank to order such compliance; and (2) whether, assuming the necessary jurisdiction is present, such an order is consistent with principles of international comity. We also vаcate that portion of the August 23 Order (and the May 18, 2012 order) compelling compliance with the 2010 Subpoena for the district court to consider whether it has specific
II. Asset Freeze Injunction
BOC first challenges the district court‘s authority to issue the Asset Freeze Injunction restraining and enjoining the defendants “from transferring, disposing of, or secreting any money” or other assets. J.A. 240. The Bank argues that the Asset Freeze Injunction was impermissible because: (1) the district court lacked jurisdiction over the Bank to issue it; and (2) the court lacked the equitable authority pursuant to Grupo Mexicano to do so. As to both arguments, we disagree.
A. Personal Jurisdiction to Enjoin Defendants
We reject BOC‘s argument that personal jurisdiction over the Bank was required for the district court to issue the June 25, 2010 TRO and the subsequent Asset Freeze Injunction restraining the defendants’ assets. BOC does not argue that the defendants are not subject to personal jurisdiction in New York State. And personal jurisdiction over the defendants, not the Bank, is all that was needed for the district court to restrain the defendants’ assets pending trial. United States v. First
This proposition is clear from our decision in NML Capital, Ltd. v. Republic of Argentina, 727 F.3d 230 (2d Cir. 2013), cert. denied, 134 S. Ct. 2819 (2014). There, we noted that because the injunctions in that case “d[id] not directly enjoin payment system participants [such as banks], it [was] irrelevant whether the district court ha[d] personal jurisdiction over them” in issuing such injunctions. Id. at 243. Granted, once a district court issues a preliminary asset freeze order enjoining parties over whom it has jurisdiction, that injunction “automatically forbids others — who are not directly enjoined but who act ‘in active concert or participation’ with an enjoined party — from assisting in [its] violation.” Id. (citing
B. Equitable Authority to Issue Asset Freeze Injunction
We turn next to BOC‘s argument that the district court lacked the equitable authority under Grupo Mexicаno de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999), to issue the prejudgment Asset Freeze Injunction. This argument is without merit. Plaintiffs in trademark infringement actions may recover defendants’ profits.
Pursuant to Grupo Mexicano, then, district courts have no authority to issue a prejudgment asset freeze pursuant to
Such is the case here. Plaintiffs are seeking an accounting of the defendants’ profits, in addition to injunctive relief and monetary damages, under the Lanham Act. J.A. 671 (Gucci‘s complaint requests that defendants “account to Plaintiffs for their profits“). See also
The Supreme Court, in Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240 U.S. 251 (1916), has explained that a trademark “infringer is required in equity to account for and yield up his gains to the true owner,” and “profits are then allowed as an equitable measure of compensation.” Id. at 259 (emphases added); accord Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390, 399 (1940) (“[R]ecovery [of profits] had been allowed in equity [prior to the statutory remedy] both in copyright and patent cases as appropriate equitable relief incident to a decree for an injunction.“). See also Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1967 n.1 (2014) (noting that
Given the weight of this authority, it is not surprising that all three of our sister circuits to have considered the issue have unanimously held that district courts have the authority to issue a prejudgment asset restraint injunction in favor of plaintiffs seeking an accounting against allegedly infringing defendants in Lanham Act cases. See Animale Grp. Inc. v. Sunny‘s Perfume Inc., 256 Fed. App‘x 707 (5th Cir. 2007),
The Bank next argues that the Asset Freeze Injunction exceeded the court‘s equitable authority because it failed to identify the “particular property” derived from the defendants’ allegedly unlawful activities that the plaintiffs seek to recover. We know of no requirement, however, and certainly there is none in the Lanham Act, that would obligate plaintiffs to make this identification prior to obtaining a preliminary injunction. To the contrary: a plaintiff seeking an accounting of profits is “required to prove defendant‘s sales only.”
Finally (and implicitly conceding the weakness of its argument that this case is governed by Grupo Mexicano) the Bank maintains that the plaintiffs’ accounting claim is “illusory.” Under the Lanham Act, however, plaintiffs “may elect” between
III. The August 23 Order and the Asset Freeze Injunction
The district court‘s August 23 Order compels the Bank to comply with the Asset Freeze Injunction and denies its motion to modify that injunction so as to make clear that the Bank is under no obligation to freeze the defendants’ assets held in China. As to the August 23 Order, we conclude that in light of the Supreme Court‘s recent decision in Daimler, 134 S. Ct. at 746, the district court erred in subjecting the Bank to all-purpose general jurisdiction in New York. We conclude that both the August 23 Order, as it relates to the Asset Freeze Injunction, and the related May 28, 2012 order denying the Bank‘s motion to reconsider should be vacated and remanded for two reasons: first, for the district court to consider whether it has specific jurisdiction over the Bank to compel compliance with the Asset Freeze Injunction; and second, assuming such jurisdiction exists, for the district
A. Personal Jurisdiction to Compel Bank‘s Compliance
As we have said, a district court need not preliminarily establish personal jurisdiction over a nonparty bank to restrain a defendant‘s assets. However, a district court can enforce an injunction against a nonparty such as BOC only if it has personal jurisdiction over that nonparty. See Canterbury Belts Ltd. v. Lane Walker Rudkin, Ltd., 869 F.2d 34 (2d Cir. 1989) (concluding that the district court did not have personal jurisdiction to enforce an injunction in a case where plaintiff requested the district court to impose contempt sanctions); see also Heyman v. Kline, 444 F.2d 65 (2d Cir. 1971); 11 C. Wright & A. Miller, Federal Practice and Procеdure § 2960 (2014). Following oral argument in this case, the Supreme Court decided Daimler AG v. Bauman, 134 S. Ct. at 746. BOC asserts, in post-argument letter briefs, that in light of Daimler the district court erred in concluding that the Bank was properly subject to all-purpose general jurisdiction. We agree. We also conclude, however, that this matter should be remanded so that the district court may consider whether it has specific jurisdiction to enforce the Asset Freeze Injunction against the Bank and may exercise such jurisdiction, consistent with due process.
In Daimler, the Supreme Court for the first time addressed the question whether, consistent with due process, “a foreign corporation may be subjected to a court‘s general jurisdiction based on the contacts of its in-state subsidiary.” 134 S. Ct. at 759. Assuming without deciding that such contacts may in some circumstances be imputed to the foreign parent, the Court held that a corporation may nonetheless be subject to general jurisdiction in a state only where its contacts are so “continuous and systematic,” judged against the corporation‘s national and global activities, that it is “essentially at home” in that state. Id. at 761-62. Aside from “an exceptional case,” the Court explained, a corporation is at home (and thus subject to general jurisdiction, consistent with due process) only in a state that is the company‘s formal place of incorporation or its principal place of business. Id. at 761 & n.19. In so holding, the Court expressly cast doubt on previous Supreme Court and New York Court of Appeals cases that permitted general jurisdiction on the basis that a foreign corporation was doing business through a local branch office in
We conclude that applying the Court‘s recent decision in Daimler, the district court may not properly exercise general personal jurisdiction over the Bank. Just like the defendant in Daimler, the nonparty Bank here has branch offices in the forum, but is incorporated and headquartered elsewhere. Further, this is clearly not “an exceptional case” where the Bank‘s contacts are “so continuous and systematic as to render [it] essentially at home in the forum.” Daimler, 134 S. Ct. at 761 & n.19 (alteration in original) (quoting Goodyear, 131 S. Ct. at 2851). BOC has only four branch offices in the United States and only a small portion of its worldwide business is conducted in New York. Gucci ECF No. 288 (citing OCC Evaluation Aug. 18, 2008) (“At year-end 2007, [BOC] had 10,145 domestic branches, 689
Although the Bank appeared in the district court and did not argue there that the court lacked personal jurisdiction, we also conсlude that its objection to the exercise of general jurisdiction has not been waived. While arguments not made in the district court are generally waived, see Datskow v. Teledyne, Inc., Cont‘l Prods. Div., 899 F.2d 1298, 1303 (2d Cir. 1990), “a party cannot be deemed to have waived objections or defenses which were not known to be available at the time they could first have been made,” Hawknet, Ltd. v. Overseas Shipping Agencies, 590 F.3d 87, 92 (2d Cir. 2009) (citation omitted). Accordingly, we have held that a defendant does not waive a personal jurisdiction argument — even if he does not make it in the district court — if the “argument that the court lacked jurisdiction over [the] defendant
Prior to Daimler, controlling precedent in this Circuit made it clear that a foreign bank with a branch in New York was properly subject to general personal jurisdiction here. See, e.g., Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 93-95 (2d Cir. 2000) (discussing New York‘s rule that a business is subject to personal jurisdiction when it is “doing business” in the State and finding general jurisdiction over a large international corporation based on the maintenance of an affiliate investor relations office in New York City); Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 765 F.2d 55, 57-58 (2d Cir. 1985) (discussing the requirements of New York‘s “doing business” test); Dietrich v. Bauer, No. 95-cv-7051, 2000 WL 1171132, at *4 n.4 (S.D.N.Y. Aug. 16, 2000) (holding that “a foreign bank with a branch in New York is ‘doing business’ in New York for purposes of personal jurisdiction“). Under prior controlling precedent of this Circuit, the Bank was subject to general jurisdiction because through the activity of its New York branch, it engaged in a “continuous and systematic course of doing business in New York.” Hoffritz, 762 F.2d at 58.
Even without general personal jurisdiction, the district court may be able to require BOC‘s compliance with the Asset Freeze Injunction by exercising specific jurisdiction.15 To assert specific personal jurisdiction over civil defendants, the Supreme Court requires a two-step analysis. See Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 169 (2d Cir. 2013). First, the court must decide if the defendant has “‘purposefully directed’ his activities at . . . the forum and the litigation . . . ‘arise[s] out of or relate[s] to’ those activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (citation omitted). Second, once the court has established these minimum contacts, it “determine[s] whether the assertion of personal jurisdiction would comport with fair play and substantial justice.” Id. at 476 (quoting Int‘l Shoe, 326 U.S. at 320). See also Asahi Metal Indus. Co. v. Superior Ct. of Cal., Solano Cnty., 480 U.S. 102, 113-14 (1987) (identifying fairness factors that courts should consider). The Supreme Court has not, however, addressed specific
In the context of asset freeze injunctions, other circuits have permitted the exercise of specific jurisdiction over domestic nonparties who, with knowledge of an injunction, intentionally aided in its violation. See, e.g., Waffenschmidt v. MacKay, 763 F.2d 711, 718-19 (5th Cir. 1985) (holding that a domestic nonparty‘s knowing, intentional violation of an injunction is sufficient on its own to create specific personal jurisdiction to enforce the injunction against that party); ClearOne Commc‘ns, Inc., v. Bowers, 651 F.3d 1200, 1215-16 (10th Cir. 2011) (affirming that “a district court may properly exercise personal jurisdiction over a nonparty for purposes of entering contempt orders, when the nonparty, with actual notice of an injunctive order issued by the district court, and in active concert or participation with a party, violates that order“); SEC v. Homa, 514 F.3d 661, 673-75 (7th Cir. 2008) (affirming contempt order against two American nonparties living abroad who knowingly aided and abetted the violation of an order to freeze the defendant‘s assets). Following the framework discussed above, these decisions rely on the theory that intentionally violating an asset freeze injunction is conduct “designed to have purpose and effect in the forum,” and that the authority to force compliance “is necessary to the proper enforcement and supervision of a court‘s injunctive authority and offends no precept of due process.” E.g., Homa, 514 F.3d at 675 (quoting Waffenschmidt, 763 F.2d at 716); ClearOne Commc‘ns, 651 F.3d at 1215. See also Calder v. Jones, 465 U.S. 783, 788-89 (1984). Using that same approach, this Court has permitted a district court to exercise specific jurisdiction over a domestic nonparty who violated a protective order. See Eli Lilly & Co. v. Gottstein, 617 F.3d 186, 195-96 (2d Cir. 2010).18
We have found no case, however, applying such an analysis in the context of a foreign nonparty with only limited contacts in the forum.19 The question whether the exercise of personal jurisdiction is appropriate in this context may depend, in part, on the nature of the foreign nonparty‘s contacts with the forum. BOC‘s presence and activity in the forum may thus be relevant for determining whether specific jurisdiction to force compliance with the Asset Freeze Injunction is appropriate in this case. Compare Homa, 514 F.3d at 675 (noting that nonparties were required to obey the district court‘s order because they were citizens), with Reebok Int‘l Ltd. v. McLaughlin, 49 F.3d 1387, 1392-93 (9th Cir. 1995) (refusing to subject a foreign bank with no American branches to an asset freeze). After all, “[i]t must be remembered that the relatedness test is but a part of a general inquiry . . . to determine whether the exercise of personal jurisdiction . . . does or does not offend
Since the factual record has not been developed and the panel has not had the benefit of oral argument or full briefing on the subject, we express no view on whether the exercise of specific jurisdiction is appropriate in this case. Prior to Daimler, courts in this Circuit often asserted general jurisdiction over nonparty foreign corporations based on the presence of corporate branches, subsidiaries, or affiliates in the Circuit. See, e.g., Wiwa, 226 F.3d at 93-95; Dietrich, 2000 WL 1171132, at *4. In light of that pre-Daimler case law, the district court had no need to consider specific jurisdiction or to develop a record sufficient for that purpose. On remand, the district court must give the issue due consideration.
B. District Court‘s Obligation to Conduct a Comity Analysis
BOC next argues that the district court‘s August 23 Order (compelling the Bank to comply with the Asset Freeze Injunction and denying the Bank‘s motion to modify it) must also be vacated because the district court failed properly to consider legal principles of comity. Although we need not reach this issue, we do so in order to give guidance to the district court in the event that the district court concludes that the exercise of personal jurisdiction over BOC is appropriate. If it so concludes,
Before the district court, the Bank, which is domiciled and рrincipally based in China, identified an apparent conflict between the obligations set forth in the Asset Freeze Injunction and applicable Chinese banking laws. Specifically, the Bank introduced a declaration from a Chinese law expert, Professor Zhipan Wu, asserting that Chinese banking laws prohibit BOC from freezing bank accounts pursuant to a foreign court order, and that doing so could render it civilly and criminally liable. The Bank also submitted the November 3 Regulators’ Letter with its motion for reconsideration, which states that “China‘s commercial banks . . . may not . . . freeze or deduct funds from such accounts pursuant to a U.S. court‘s order.” J.A. 834. According to the Bank‘s expert and the November 3 Regulators’ Letter, China‘s sovereign interest in such laws is to “engender client confidence in the banking system and therefore promote the further development of the banking system.” J.A. 834.
In such circumstances, where the Bank objected to application of the Asset Freeze Injunction to it, specifically citing an apparent conflict with the requirements of Chinese banking law, comity principles required the district court to consider the
We have previously suggested that when a court order will infringe on sovereign interests of a foreign state, district courts may appropriately conduct an analysis using the framework provided by § 403 of the Restatement (Third) of Foreign Relations Law, entitled “Limitations on Jurisdiction to Prescribe.” See United States v. Davis, 767 F.2d 1025, 1036-39 (2d Cir. 1985) (using § 403 factors to hold that district court properly ordered a litigant to terminate litigation in the Cayman Islands); see also Republic of Arg. v. NML Capital, Ltd., 134 S. Ct. 2250, 2258 n.6 (2014) (noting that “other sources of law” — including “comity interests” — might limit
Second, plaintiffs posit that by not requesting that the district court apply § 403 below, the Bank has waived the issue. It is correct that the Bank did not make this argument below. However, given the important role that comity plays in ensuring the “recognition which one nation allows within its territory to the legislative, executive or judiсial acts of another nation, having due regard both to international duty and convenience,” see In re Maxwell Commc‘n Corp., 93 F.3d 1036, 1046 (2d Cir. 1996) (quoting Hilton, 1259 U.S. at 164), we do not deem the issue forfeited.
Finally, plaintiffs review a variety of the comity factors and urge that remand is not necessary because even upon a full analysis employing § 403‘s factors, the
IV. The August 23 Order and the 2010 Subpoena
As already noted, before ordering the Bank to comply with the 2010 Subpoena, the district court performed a comity analysis pursuant to § 442 of the Restatement (Third) of Foreign Relations Law. We discern no abuse of discretion in this analysis and conclude that BOC‘s arguments to the contrary are without merit. Allstate Life Ins. Co. v. Linter Grp. Ltd., 994 F.2d 996, 999 (2d Cir. 1993) (recognizing
But once again, specific personal jurisdiction may permit the district court to order the Bank to comply with particular discovery demands, a question we leave to the district court to address on remand. As already stated, the test for specific jurisdiction over defendants examines whether a cause of action arises out of or relates to the defendant‘s contacts with the forum. See Burger King, 471 U.S. at 472. At least one circuit has translated this test to nonparty discovery requests by focusing on the connection between the nonparty‘s contacts with the forum and the discovery order at issue. See Knowles, 87 F.3d at 418 (finding specific jurisdiction where the “subpoena enforcement action” at issue “ar[ose] out of [the nonparty‘s] contacts” with the forum); see also Ryan W. Scott, Note, Minimum Contacts, No Dog: Evaluating Personal Jurisdiction for Nonparty Discovery, 88 Minn. L. Rev. 968, 1005-06 (2004) (suggesting that thе inquiry in this context should “focus on the relationship
III. Order Holding Bank in Civil Contempt and Imposing Civil Monetary Penalties
Finally, we turn to the district court‘s November 15, 2012 order holding the Bank in civil contempt and imposing civil monetary penalties for the Bank‘s failure to comply with the August 2010 Subpoena. We conclude that the Bank did not
We review a district court‘s finding of contempt for abuse of discretion, Perez v. Danbury Hosp., 347 F.3d 419, 423 (2d Cir. 2003) (citation omitted), but are mindful that a district court‘s contempt power is “narrowly circumscribed,” id. As we have said, “contempt is a powerful weapon.” Chao v. Gotham Registry, Inc., 514 F.3d 280, 291 (2d Cir. 2008). Tо demonstrate it, “a movant must establish that (1) the order the contemnor failed to comply with is clear and unambiguous, (2) the proof of noncompliance is clear and convincing, and (3) the contemnor has not diligently attempted to comply in a reasonable manner.” Perez, 347 F.3d at 423-24 (quoting King v. Allied Vision, Ltd., 65 F.3d 1051, 1058 (2d Cir. 1995)).
The district court‘s November 15, 2012 finding of contempt is based on the Bank‘s violation of the August 23 Order compelling compliance with the 2010 Subpoena. S.P.A. 13 (August 23 Order requiring BOC to “produce all information requested by the [2010] Subpoena within fourteen days of the date of this Order“). Thus, to support a finding of contempt, BOC must have failed to produce information that is clearly and unambiguously sought in the 2010 Subpoena.
The district court found that the Bank was in contempt at least in part for failing to produce documents relating to the seven New Defendants first named in
After receiving an inadequate response to the 2010 Subpoena, on December 6, 2010, plaintiffs filed a motion to compel. It was not until after this motion was
The district court erroneously concluded that BOC was required to produce documents as to the seven New Defendants on the theory that “[t]he August 23 Order . . . made clear that the Second Amended Complaint identified the New Defendants by name and alleged ‘that the New Defendants are recipients of wire transfers from [BOC] accounts registered to Defendants,’ thus making clear that the 2010 Subpoena covered accounts affiliated with even those Defendants identified previously as only ‘John Does.‘” S.P.A. 28. The plain terms of the 2010 Subpoena establish otherwise, however, and certainly the New Defendants are not clearly and unambiguously included in the definition of “Defendants” in the 2010 Subpoena.
The 2010 Subpoena does not define “Defendants” in an open-ended fashion to include all newly-named defendants in the case. Instead, the Subpoena defines “Defendants” as including only “Weixing Li, Lijun Xu a/k/a Jack London, all doing business as Redtagparty, Myluxurybags.com, Xpressdesigner.net, Xpressdesigners.com, Designer Handbags, ABC Companies and John Does, as well as their officers, directors, agents, representatives, and all persons acting on their
The court‘s August 23 Order does not provide any additional clarity. Although plaintiffs argue that the August 23 Order “made clear that all [new and old defendants] were ‘Defendants’ for purposes of the [2010] Subpoena,” that is simply not the case. The district court mentions only that plaintiffs filed a Second Amended Complaint including new defendants in the facts section of the Order. Other than mentioning this amendment in the facts section, the district court does not hint that the 2010 Subpoena or August 23 Order apply to the New Defendants. And that makes sense. Plaintiffs moved to compel compliance with the 2010 Subpoena before they sought account information concerning additional specified accounts they believed to be associated with the New Defendants and before plaintiffs named these New Defendants in the Second Amended Complaint. The motion was fully briefed and submitted to the district court before plaintiffs issued
We also reverse the district court‘s imposition of civil monetary sanctions for the additional reason that the civil contempt sanctions were impermissibly punitive. The district court imposed: (1) an initial “coercive fine in the amount of $75,000” for alleged past noncompliance with the August 23 Order, (2) “an additional coercive fine of $10,000” per day if the Bank did not comply, and (3) attorneys’ fees and costs. J.A. 1292. The $75,000 sanction for past noncompliance, although labeled as “coercive,” was in fact impermissibly punitive.
It is basic law that a civil contempt sanction must only be compensatory or coercive, and may not be punitive. See United States v. United Mine Workers of Am., 330 U.S. 258, 303-04 (1947); Hess v. N.J. Transit Rail Operations, Inc., 846 F.2d 114, 115 (2d Cir. 1988). The $75,000 sanction for past noncompliance provided no compensatory relief. Instead, it was punitive and therefore impermissible. See Mackler Prods., Inc. v. Cohen, 146 F.3d 126, 129 (2d Cir. 1998) (vacating litigation sanctions where “[t]he imposition was retrospective, by reason of past wrongful conduct; it did not seek to coerce future compliance, and no opportunity to purge
CONCLUSION
To summarize, we reject BOC‘s challenge to the district court‘s authority to issue the Asset Freeze Injunction, concluding that personal jurisdiction over the Bank was not necessary to issue the injunction and that Grupo Mexicano is inapplicable. We nevertheless vacate the August 23, 2011 and the May 18, 2012 orders enforcing the Asset Freeze Injunction and the 2010 Subpoena so that on remand the district court may consider whether it may exercise specific personal jurisdiction over the Bank to compel compliance with these orders and, if so, whether proper application of the principles of comity demonstrates that it may exercise such jurisdiction. Finally, we reverse the November 15, 2012 order holding the Bank in civil contempt and imposing civil monetary penalties.24
Notes
In deciding whether to issue an order directing production of information located abroad, and in framing such an order, a court or agency in the United States should take into account the importance to the investigation or litigation of the documеnts or other information requested; the degree of specificity of the request; whether the information originated in the United States; the availability of alternative means of securing the information; and the extent to which noncompliance with the request would undermine important interests of the United States, or compliance with the request would undermine important interests of the state where the information is located.
- the link of the activity to the territory of the regulating state, i.e., the extent to which the activity takes place within the territory, or has substantial, direct, and foreseeable effect upon or in the territory;
- the connections, such as nationality, residence, or economic activity, between the regulating state and the person principally responsible for the activity to be regulated, or between that state and those whom the regulation is designed to protect;
- the character of the activity to be regulated, the importance of regulation to the regulating state, the extent to which other states regulate such activities, and the degree to which the desirability of such regulation is generally accepted;
- the existence of justified expectations that might be protected or hurt by the regulation;
- the importance of the regulation to the international political, legal, or economic system;
- the extent to which the regulation is consistent with the traditions of the international system;
- the extent to which another state may have an interest in regulating the activity; and
- the likelihood of conflict with regulation by another state.
Id. § 403(2). Importantly, even “[w]hen it would not be unreasonable for each of two states to exercise jurisdiction over a person or activity,” if “the prescriptions by the two states are in conflict, each state has an obligation to evaluate its own as well as the other state‘s interest in exercising jurisdiction, in light of all the relevant factors.” Id. § 403(3). “[A] state should defer to the other state if that state‘s interest is clearly greater.” Id.
See, e.g., First Am. Corp., 154 F.3d at 20 (holding that personal service of a subpoena on a general partner established personal jurisdiction over a partnership and allowed a court to compel it to comply with a subpoena); In re Sealed Case, 141 F.3d 337, 341 (D.C. Cir. 1998) (recognizing that in Rule 45 discovery transfer motions “a transferee court . . . would often lack personal jurisdiction over the nonparty” and that “[t]he principle that courts lacking jurisdiction over litigants cannot adjudicate their rights is elementary, and cases have noted the problem this creates for the prospect of transferring nonparty discovery disputes“); In re Application to Enforce Admin. Subpoenas Duces Tecum of the S.E.C. v. Knowles, 87 F.3d 413, 418 (10th Cir. 1996) (requiring that a Bahamian nonparty have minimum contacts with the United States before holding it subject to an administrative agency subpoena); Ariel v. Jones, 693 F.2d 1058, 1061 (11th Cir. 1982) (upholding the quashing of a subpoena “[i]n view of the minimal contacts of the [nonparty] with [the forum]“); Estate of Ungar v. Palestinian Auth., 400 F. Supp. 2d 541, 549 (S.D.N.Y. 2005) (holding that a party must “make out a prima facie case for personal jurisdiction” in order to take “any discovery — even jurisdictional discovery — from a foreign corporation“); Elder-Beerman Stores Corp. v. Federated Dep‘t Stores, Inc., 45 F.R.D. 515, 516 (S.D.N.Y. 1968) (quashing a document subpoena based on complete lack of contacts with the forum); see also Wright & Miller, 9A Federal Practice and Procedure § 2454, at 398-99 (3d ed. 2008) (“A corporation is amenable to service of a subpoena under Rule 45(b) in any forum in which it has sufficient minimum contacts.“); 16 Moore et al., Moore‘s Federal Practice § 108.125, at 108-48 (3d ed. 2008) (“A nonparty witness cannot be compelled to testify at a trial, hearing, or deposition unless the witness is subject to the personal jurisdiction of the court.“); Gary B. Born, International Civil Litigation in United States Courts 865 (3d ed. 1996) (“[A] non-party witness can only be compelled to produce documents if it is subject to the court‘s personal jurisdiction.“).