I. Factual Background and Procedural History
Plaintiffs NIKE, Inc. and Converse Inc. ("Plaintiffs") brought an action for trademark infringement against several hundred online retailers, the majority of them located in China. On August 20, 2015, this Court entered a default judgment in favor of Plaintiffs (the "Judgment"). (Dkt. No. 49.) Plaintiffs subsequently assigned their interest in the Judgment to Next Investments, LLC (the "Assignee"), (Dkt. No. 50), who moved to enforce the Judgment by, in part, issuing subpoenas to six nonparty Chinese banks
On September 11, 2018, Magistrate Judge Debra Freeman entered a memorandum opinion and order denying the Banks' motion to quash the Subpoenas and granting Assignee's cross-motion to compel the production of documents pursuant to the Subpoenas. Nike, Inc. v. Wu , No. 13-cv-8012,
On October 10, 2018, the Banks filed two sets of objections to the Magistrate Judge's order, one from ABC and another from the other five banks. (Dkt. No. 156 ("Banks Obj.") and Dkt. No. 163 ("ABC Obj.") (collectively, the "Objections").) ABC wrote "separately to highlight factual issues that pertained specifically to ABC as opposed to the [o]ther banks," including allegedly de minimis contacts with the forum state. (ABC Obj. at 3 n.2.) However, ABC joined the objection of the other five banks "in its entirety." (Id. at 2 n.1.)
The Assignee filed a combined opposition to the Objections. (Dkt. No. 169 ("Next Opp.").)
Ruling on the Banks' Objections, this Court now finds that the Magistrate Judge's order was neither clearly erroneous nor contrary to law and AFFIRMS the order. This Court also hereby lifts the discovery stay entered on October 15, 2018 (Dkt. No. 168), and ORDERS that the Banks have twenty-eight (28) calendar days from the date of this order to comply with the Subpoenas. The deadline for compliance is hereby set as Monday, December 17, 2018.
Finally, this Court will simultaneously enter an order referring any subsequent discovery disputes to the Magistrate Judge.
II. Legal Standard
Upon objection to a magistrate judge's order on a non-dispositive matter, the district court may modify or set aside any portion of the order which it finds to be clearly erroneous or contrary to law. Fed. R. Civ. P. 72(a) ;
The Banks urge this Court to review the Magistrate Judge's order de novo because the "effect of the ruling is dispositive on the Banks." (Banks Obj. at 4; see also ABC Obj. at 8-9.) In response, the Assignee argues that the motion is non-dispositive as to the underlying cause of action and should therefore be reviewed under Rule 72(a)'s "clearly erroneous or contrary to law" standard. (Next Opp. at 9.)
The list of dispositive motions at
The cases cited by the Banks are distinguishable, as the very causes of actions in those cases sought relief in the form of the production of the subpoenaed information. For example, in NLRB v. Frazier , the
This Court therefore reviews the Magistrate Judge's order under the "clearly erroneous or contrary to law" standard under Rule 72(a). An order is "clearly erroneous" when the entire evidence leaves the district court "with the definite and firm conviction that a mistake has been committed." FDIC v. Providence Coll. ,
Finally, courts in this circuit generally follow the rule that a district court reviewing an appeal of a non-dispositive motion from a magistrate judge may not look beyond the factual record presented to the magistrate judge. See, e.g. , Thai Lao Lignite (Thai.) Co. v. Laos ,
III. Discussion
The Banks object to two aspects of the Magistrate Judge's order. All six Banks argue first that the Magistrate Judge failed to give proper consideration to key facts that would support quashing the subpoenas in favor of proceeding with discovery under the Hague Evidence Convention, as a matter of comity. ABC writes separately to argue that the Subpoenas in this case are akin to so-called Bank of Nova Scotia subpoenas, the use of which is disfavored by the U.S. Department of Justice in the international criminal context
The Banks also argue that the Magistrate Judge wrongly concluded that New York law provided for the exercise of personal jurisdiction over the Banks based on their maintenance and use of correspondent and settlement accounts at New York banks. Separately, ABC objects to the finding of personal jurisdiction on the basis that its contacts with New York were insufficient. Since the Magistrate Judge's findings on these issues are neither clearly erroneous nor contrary to law, this objection is also denied.
A. Personal Jurisdiction
"A district court must have personal jurisdiction over a nonparty to compel it to comply with a Rule 45 subpoena." Gucci Am., Inc. v. Li ,
As is relevant to this case, New York's long-arm statute provides for personal jurisdiction over a person not domiciled in the state "[a]s to a cause of action arising from ... transact[ing] any business within this state."
The Due Process Clause requires that the nonparty have "certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Goodyear Dunlop Tires Operations, S.A. v. Brown ,
The Banks' briefs are addressed to discrete findings and conclusions within the Magistrate Judge's order, each of which is considered below.
1. Correspondent Accounts
The Banks argue that it was contrary to law for the Magistrate Judge to find that their establishment and maintenance of correspondent accounts at New York banks could give rise to specific jurisdiction under
In the Banks' view, a non-domiciliary bank cannot be subject to specific personal jurisdiction in New York unless it directs the particular transactions at issue through the New York banks at which it maintains its correspondent accounts. (Id. ) The Banks acknowledge that this finding would require the Court to disagree with the outcome in Gucci III , in which Judge Sullivan found that the district court had specific personal jurisdiction over a nonparty bank for purposes of a Rule 45 subрoena under circumstances very similar to the instant case. (Id. at 17.) In the Banks' view, the exercise of personal jurisdiction in Gucci III was inappropriate because there was "no indication" that the bank in that case "engaged in affirmative conduct to initiate wire payments or that it knowingly assisted in any illegal scheme through the use of its correspondent accounts." (Id. )
This Court agrees with the Assignee that the Magistrate Judge's reliance on the Banks' use of correspondent accounts to find specific personal jurisdiction was neither clearly erroneous nor contrary to law. In spite of the Banks' arguments, New York's long-arm statute clearly does not require, as a condition precedent to personal jurisdiction, that foreign banks direct the payment of funds into their correspondent accounts.
In her order, the Magistrate Judge found that "[i]n determining whether the use of a correspondent account by a foreign bank is sufficiently purposeful to constitute a transaction of business within the state,.... the relevant distinction is between 'unintended and unapproved use of a correspondent bank account, where the non-domiciliary bank is a passive and unilateral recipient' and 'repeated, deliberate use that is approved by the foreign bank on behalf and for the benefit of a customer.' " Nike ,
Indeed, as the New York Court of Appeals has recognized:
In the banking context, the requisite inquiry under CPLR 302(a)(1)'s first prong may be complicated by the nature of inter-bank activity, especially given the widespread use of correspondent accounts nominally in New York to facilitate the flow of money worldwide, often for transactions that otherwise have no other connection to New York, or indeed the United States. As a result, determining in an individual case whether a foreign bank's maintenance and use of a correspondent account is purposeful or coincidental may often prove ... difficult[.] Nonetheless, complaints alleging a foreign bank's repeated use of a correspondent account in New York on behalf of a client-in effect, a "course of dealing"-show purposeful availment of New York's dependable and transparent banking system, the dollar аs a stable and fungible currency, and the predictable jurisdictional and commercial law of New York and the United States.2
The Rushaid court applied the law from Licci III to hold that a New York court had personal jurisdiction over a Swiss bank based on its use of a correspondent account in New York because the Swiss bank: (1) had marketed business relations with New York on its website; (2) had credited the funds held in the New York correspondent account to its client in Switzerland; and (3) had engaged in twelve of these transactions on behalf of the same client, eventually totaling millions of dollars.
Gucci III , which was decided before Rashaid , is also persuasive. In Gucci III , Judge Sullivan correctly understood the Court of Appeals' holding in Licci III as not limiting the exercise of personal jurisdiction to cases in which the banks made illegal payments "knowingly" or "in complicity" with counterfeiters that utilized their banking services.
New York law is clear: a bank need not "direct" that a customer use its correspondent account in order to be subject to personal jurisdiction in New York, as long as the establishment and maintenance of the account evinces a purposeful availment of New York as a place for conducting business. Accordingly, the Magistrate Judge found that "four Banks ... ha[d] demonstrably used their New York-based correspondent accounts to facilitate U.S. dollar wire transfers abroad for Judgment Debtors," and that these Banks had collectively done so on hundreds of occasions to the tune of millions of dollars. Nike ,
2. Settlement Accounts
The Banks next argue that the Magistrate Judge erred by considering BOC and BOCOM's acquiring bank activities as a basis for specific jurisdiction. (Banks Obj. at 18.) The Banks argue that: (i) the acquiring bank services offered by BOC and BOCOM were limited to merchants in China; (ii) the establishment and maintenance of settlement accounts in New York does not constitute "purposeful availment" for purposes of personal jurisdiction; and (iii) reliance on Gucci America, Inc. v. Frontline Processing Corp. ,
ABC joins these arguments and argues that, in addition: (1) prior to entry of the Judgment, its transactions through settlement accounts in New York on behalf of the Judgment Debtors were de minimis; and, (2) subsequent to the Judgment, the transactions that took place through settlement accounts were neither relevant to the Subpoenas nor conducted on behalf of a Judgment Debtor. (ABC Obj. at 7.)
Briefly, an acquiring bank contracts with a merchant to process purchases by its customers that take place through a payment card network (e.g. , Visa or MasterCard). Nike ,
Contrary to the Banks' assertions, the Magistrate Judge did not base her finding of personal jurisdiction on the Banks' "acquiring bank activities," which undisputedly take place entirely within China. Instead, based on the Banks' own descriptions, the Magistrate Judge reasoned that "New York-based settlement accounts function analogously to the way in which correspondent accounts function for the purpose of wire transfers." Nike ,
Indeed, this Court agrees with the Assignee that applying New York's decisional law on correspondent accounts to the settlement accounts at issue in this case was a "reasonable extension of the law." (See Next Opp. at 20.) The Banks protest that, "[i]mportantly, no authority in this district, or in any other jurisdiction, holds that an acquiring bank may be subject to personal jurisdiction solely due to the presence of a settlement account in that forum[,] and the Magistrate Judge's unprecedented conclusion on this matter is contrary to law and should be set aside." (Banks Obj. at 20.) This is a bit of a red herring. Although the Banks would have me believe otherwise, "correspondent accounts" and "settlement
As a result, it was not contrary to law for the Magistrate Judge to reason from first principles and find that the exercise of personal jurisdiction was appropriate. When evaluating personal jurisdiction based on correspondent accounts, the New York Court of Appeals has said that the key question is whether a bank's establishment and maintenance of correspondent accounts constitutes purposeful availment of the privilege of conducting business in New York. Here, the Banks themselves admitted that they "maintain [settlement] accounts in New York to facilitate more efficient settlement processes with other banks, whose settlement accounts are also in New York." (Banks Obj. at 20.) This indicates purposeful availment.
The Court of Appeals has also said that the quantity and quality of transactions through bank accounts сan support a finding of personal jurisdiction. Here, the Magistrate Judge relied on evidence introduced by the Assignee that three of the Banks-ABC, BOCOM, and BOC-had "repeatedly and deliberately used their New York-based settlement accounts to process international credit card transactions on behalf of their customers, including some of the Judgment Debtors in this action." Nike ,
In addition, if "more efficient settlement processes with other banks, whose settlement accounts are also in New York," (Banks Obj. at 20) (emphasis added), refers to issuing banks based in New York, the Chinese Banks' establishment of settlement accounts in New York would almost certainly facilitate "the purchase of counterfeit products" in either New York," Nike ,
It was also not error for the Magistrate Judge to rely on Frontline for the proposition that directing business into the state supports the "transacting business" portion of New York's long-arm statute. The Banks attempt to distinguish that case by pointing out that, here, the Plaintiffs did not plead a tort or trademark infringement claim against the Banks. (Banks Obj. at 20-21.) However, the fact that the bank in Frontline "direct[ed] business into the state" was not relevant to that court's long-arm statutory jurisdiction analysis, which was based on tortious acts that took place in the state. Frontline ,
As to ABC's separate concerns: the Magistrate Judge did not err in finding specific personal jurisdiction over ABC based on the fact that it "repeatedly and deliberately" used a Visa settlement account at JPMorgan Chase Bank to process 458 transactions for one of the Judgment Debtors-"ALI*WWW.ALVABABY.COM"-between January and June of 2016. Nike ,
ABC also argues that (1) "www.alvababy.com," a website, is not a Judgment Debtor and, (2) in the alternative, even if the merchant name on the 2013 transactions, "WWW.ALVABABY.COM BEIJING," is a Judgment Debtor, this merchant is not necessarily the same as the merchant listed on the 2016 transactions, "ALI*WWW.ALVABABY.COM." (ABC Obj. at 12-13.) Because the 2016 transactions provide the strongest jurisdictional hook, and because it is not clear that the 2016 transactions relate to a Judgment Debtor, ABC argues that there is no personal jurisdiction. (Id. )
But, the Assignee is correct that "www.alvababy.com" refers, not to an infringing website, but instead to the name of one of the Judgment Debtors, "WWW.ALVABABY.COM BEIJING," which has a registered website "www.nfljerseywebsite.com," through which infringing activities occurred. In the Court's final order, dated October 20, 2017, "Judgment Debtors" are defined as "all Defendants set forth in the Exhibits to the [August 20, 2015] Judgment." (Dkt. No. 62 at 1.) Exhibit 1 to the Judgment lists "WWW.ALVABABY.COM BEIJING" as the name of the Judgment Debtor operating at the domain www.nfljerseywebsite.com. (Dkt. No. 37 Ex. 1 (row 1273).)
Second, the Magistrate Judge did not clearly err in relying on a sample cross-check and the sworn declaration of one of the Assignee's lawyers, Alexandra Grossbaum, to find that an adequate connection had been shown between the Judgment Debtors and the Banks.
3. Advertising
The Magistrate Judge found, as part of both the statutory and constitutional personal jurisdiction analysis, that "all of the Banks have made statements promoting their settlement services, and their service (provided through correspondent accounts) of providing U.S. dollar wire transfers to and from China for customers like the Judgment Debtors in this action." Nike ,
As a preliminary matter, the Banks concede that BOC-New York branch "produced certain U.S. dollar wire transfer records associated with the Judgment Debtors." (Id. at 22 n.26.) Therefore, I do not consider BOC for purposes of this analysis, because its branch was involved in the present dispute.
It is true that the Banks maintain branches in New York and that, apart from BOC, the Assignee has shown no connection between the present dispute and these branches. It is also true that some of the sources cited by the Magistrate Judge focus on branch banking services rather than, for example, the ability to wire money from the U.S. to China through correspondent banking or the global reach of its acquiring bank services. For example, ABC's webpage discusses the dollar clearing business of its New York branch, and even says that this business will "reduce dependence on correspondent path to enhance the creation of business value." (Decl. of Robert L. Weigel, dated March 16, 2018, Dkt. No. 84 ("Weigel Decl.") Ex. 18.) It does not mention anything about supporting cross-border payment card transactions, the only jurisdictional link to the Judgment Debtors. (Id. ) Similarly, the spare BOCOM webpage advertises USD clearing services as part of the "Specialty Services" offered by its New York branch but does not say anything about payment cards. (Weigel Decl. Ex. 46.) Certain Banks' pages do relate to their in-state, suit-specific activities. For example, the CMB webpage states that the bank "[m]aintain[s] long-term and close cooperative relationship with domestic institutions." (Weigel Decl. Ex. 70.) CCB's page, too, says that "[c]ontinuously increasing correspondent banks enables a good book transfer rate." (Weigel Decl. Ex. 93.) ICBC's states that "[t]he correspondent banking relationships maintained with the peers in 21 countries/regions lays a solid customer base for the Branch to achieve continual growth in USD clearing services." (Weigel Decl. Ex. 116.)
Because the webpages of CMB, CCB, and ICBC advertise the broader network of relationships with New York institutions that support the Banks' dollar clearing business-i.e. , the correspondent banking services that are the subject of the Subpoenas-it
Howevеr, for ABC and BOCOM, it was error to find that advertising their branch banking (and, to a very limited extent, dollar-clearing) activity was connected to the information requested in the Subpoenas. Personal jurisdiction was not asserted over ABC and BOCOM on the basis of its correspondent accounts; instead, it was based on its settlement accounts. (See ABC Obj. at 18.) The exhibits cited by the Magistrate Judge do not mention the reach of either Bank's acquiring banking services or the ability to reach payment card customers in the U.S.
Nonetheless, I find that this error was ultimately harmless, as these exhibits were only a small portion of the Magistrate Judge's personal jurisdiction analysis, the bulk of which was grounded in the Banks' establishment and repeated use of correspondent and/or settlement accounts in New York. See Nike ,
4. Real Estate Holdings
The Banks make a similar argument that the Banks' real estate holdings have "no relationship to the underlying dispute" because the real estate holdings "primarily relate to the Banks' New York branch operations." (Banks Obj. at 22.) Branch banking is not always connectеd to correspondent banking. A head office may elect to use its branch for correspondent banking, but it may also elect to use third-party banks. Ultimately, it is a business decision. Likewise, the Court is not aware of-and the parties have not briefed-the connection between branch banking and interbank settlement of payment card transactions, even where the issuing bank and branch bank are in the same country. Therefore, it was error to consider the Banks' branch banking activities as a basis for personal jurisdiction (with the exception of BOC).
Again, however, this error of elision was harmless. The Magistrate Judge did not ground her personal jurisdiction analysis in the Banks' real estate holdings; "[r]ather, it is the Banks' repeated use of New York-based correspondent and/or settlement accounts that satisfies the requirement that there be an 'articulable nexus' between the nonparties' contacts with the forum and the discovery order at issue." Nike ,
5. "Fair Play and Substantial Justice"
Finally, the Banks argue that the Magistrate Judge clearly erred in determining that the exercise of personal jurisdiction for purposes of the subpoenas would comport with "fair play and substantial justice." (See Banks Obj. at 22.) This is sometimes called the "reasonableness" prong.
Courts evaluate five factors to determine if this prong of the Due Process analysis is satisfied: "(1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiffs interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies." Chloe v. Queen Bee of Beverly Hills, LLC ,
Principally, the Banks take issue with the fifth factor, arguing that the Magistrate Judge failed to consider that her decision would be "disastrous for the New
The Magistrate Judge did not clearly err, however, in failing to give this slippery slope argument much weight. First, the Banks' argument is purely speculative. The New York Court of Appeals announced the rule in Licci III in 2012. The Banks have failed to demonstrate how this rule has been "disastrous" for the banking industry in the intervening six years, except that they have submitted, along with their objections, a complete version of The Bank Directory: Worldwide Correspondents (2018). (See Decl. of Jacqueline L. Chung, dated Oct. 10, 2018, Dkt. No. 164 ¶ 6.) This impressive-looking volume, which clocks in in at just over 1500 pages, the Banks maintain, is "necessary [in order] for the Court to have a complete understanding of the number of non-U.S. banks maintaining correspondent accounts in New York in order to assess the reasоnableness of exercising personal jurisdiction over non-U.S. banks that maintain such accounts in New York." (Id. ¶ 5.) As the saying goes, "if the law and the facts are against you, pound the table"-here, apparently, by dropping a 5-lb. book on it,
The Banks also inflate the policy implications of the Magistrate Judge's order by misconstruing its reasoning. According to the Banks, "[u]nder the standards for specific jurisdiction adopted by the Magistrate Judge, a plaintiff would simply be required to a wire payment [sic ] connected with a particular defendant or judgment debtor was routed through one of the[ ] 9122" correspondent accounts that foreign banks maintain in New York. (Banks Obj. at 24 n.28.) As discussed in preceding sections, this is an incorrect statement of the rule. In fact, the parade of horribles imagined by the Banks is precisely the fact pattern from Amigo Foods Corp. v. Marine Midland Bank-N.Y. ,
In the instant case, by contrast, the Magistrate Judge made detailed findings that the Banks' use of correspondent accounts to support hundreds of transactions for millions of dollars in the aggregate was "repeated [and] deliberate" rather than
The Banks also argue that it was clear error to evaluate the burden to the Banks in the portion of the opinion that discusses comity, rather than as part of the personal jurisdiction analysis. (Banks Obj. at 24.) According to the Banks, their burden consists of being "forc[ed] to violate the laws of their home country." (Id. )
However, the Due Process burden analysis relates to the burden of "submitting to jurisdiction in New York." Gucci III ,
Leibovitch v. Islamic Republic of Iran , cited by the Banks, does not stand for the proposition that violation of bank secrecy laws is properly considered as part of the "burden" framework; instead, the Leibovitch court appeared to weigh this as part of the "interests of other sovereigns" factor.
The Banks' other argument also fail. (Banks Obj. at 25.) The Magistrate Judge was self-evidently not required to consider China's bank secrecy laws in analyzing the Assignee's "interest in obtaining convenient and effective relief." This factor has nothing to do with defendants'-or, in this case, nonparty Banks'-interests. In fact, repeated stonewalling by a party may contribute to the court's finding that the exercise of personal jurisdiction is the only way for the plaintiff to obtain any effective relief for a clear violation of its rights. See, e.g. , Mario Valente Collezioni, Ltd. v. Confezioni Semeraro Paolo, S.R.L. ,
Finally, cоntrary to what the Banks state in their papers, the Magistrate Judge did in fact "explain why the forum's interests in combating counterfeiting and enforcing the Lanham Act justify the expenditure of judicial resources." (Banks Obj. at 25) In fact, she balanced this factor against the burden claimed by the Banks. If the Banks failed to brief this issue adequately below, focusing only on the breadth of the Subpoenas and the violation of bank secrecy laws, and neglecting to include facts such as the location of key documents, actors, and assets, they cannot now claim that Judge Freeman committed clear error. The Magistrate Judge properly found that "the Banks ha[d] failed to meet their burden to demonstrate that exercising jurisdiction over them would be unreasonable." Nike ,
For the aforementioned reasons, the Magistrate Judge's determination that the Banks were subject to personal jurisdiction in the Southern District of New York was neither clearly erroneous nor contrary to law.
B. Comity and the Hague Convention
The Banks do not dispute that "even where personal jurisdiction over a foreign non-domiciliary is established, a court should not uphold an international subpoena in possible contravention of foreign law, without first performing a comity analysis pursuant to Section 442 of the Restatement (Third) of Foreign Relations Law."
At the outset, this Court notes that the U.S. Supreme Court has "decline[d] to hold as a blanket matter that comity requires resort to Hague Evidence Convention procedures without prior scrutiny in each case of the particular facts, sovereign interests, and likelihood that resort to those procedures will prove effective." Société Nationale Industrielle Aérospatiale v. U.S. Dist. Court for Southern Dist. of Iowa ,
This Court also notes that China's bank secrecy laws are not a "get out of jail free" card. See Linde v. Arab Bank, PLC ,
When exercising its discretion to enter a discovery order that may violate foreign law, a district court follows the balancing test set out in Linde:
Section 442 [of the Restatement (Third) of Foreign Relations Law of the United States] provides that, in determining whether to issue a production order for information located abroad, courts should consider [1] "the importance to the investigation or litigation of the documents or other information requested; [2] the degree of specificity of the request; [3] whether the information originated in the United States; [4] the availability of alternative means of securing the information; and [5] 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." Restatement § 442(1)(c). Cases from our Circuit counsel that, when deciding whether to impose sanctions, a district court should also examine the [6] hardship of the party facing conflicting legal obligations and [7] whether that party has demonstrated good faith in addressing its discovery obligations.
The Banks take issue with the Magistrate Judge's findings of fact with respect to the second, fourth, fifth, and sixth factors. These are addressed in turn.
1. Second Factor: Degree of Specificity of the Request
The Magistrate Judge did not clearly err in finding that the Subpoenas
The Banks also claim that the Magistrate Judge erred by failing to consider certain hardships associated with the breadth of the requests. (Banks Obj. at 11-12.) They argue that the Assignee had tied only "a handful" of the Judgment Debtors to the Banks; that it is "impossible for the Banks to identify the correct account holder" because many of the Judgment Debtor names are "extremely common Chinese names or partial names;" and that the requests for customer account information based on e-mail addresses and websites are "so broad that the Banks would not even know where to begin." (Id. ) At the same time, however, representatives of the Banks have submitted declarations to this Court describing the internal control measures they have taken with respect to the Judgment Debtors identified in Attachment B to the subpoenas. (See, e.g. , Dkt. No. 157 ¶ 5; Dkt. No. 158 ¶ 5; Dkt. No. 159 ¶ 5; Dkt. No. 160 ¶ 5; Dkt. No. 161 ¶ 5-6.) These internal control measures include designating certain Judgment Debtor accounts for heightеned risk, putting them on the Banks' internal "watch lists," adding them to the Banks' real-time monitoring lists, etc . This rather undermines the Banks' contention that the breadth of the request should weigh against a finding of comity.
The Magistrate Judge did not clearly err in determining that the Subpoenas were sufficiently specific and that this weighed in favor of granting the Assignee's motion to compel.
2. Fourth Factor: Alternative Means of Securing the Information
Similarly, the Magistrate Judge did not err in disagreeing with the Banks that "given ... the Hague Convention provides an alternative to U.S. discovery that avoids the conflicts with Chinese law that would arise if the Banks were forced to comply with the Subpoenas, there is no reason not to utilize it." (Banks Obj. at 8,) Indeed, there are several. The Magistrate Judge made specific findings of fact that, "Based on historical precedent regarding the timeline and adequacy of productions made pursuant to Hague Convention requests to China, the Assignee has the better argument." Nike ,
Contrary to the Bank's Objections, moreover, the Magistrate Judge did not "ignore[ ] that the level of assistance offered by the Banks here is without precedent." (Banks Obj. at 6.) Instead, she simply found that argument unpersuasive.
The Banks also wrongly imply that the Magistrate Judge gave "no weight" to the Banks' evidence that China's Ministry of Justice ("MOJ") had evinced a greater willingness to comply with discovery orders. This evidence was, and remains, thin. For example, the Banks stress thаt China's Ministry of Justice "has written to this Court to confirm that it will 'execute a [Hague Convention request] according to the ... Convention and Chinese law" and will "take [a Hague Convention request] seriously and offer necessary legal assistance." (Banks Obj. at 7 (quoting Decl. of Jacqueline L. Chung, dated Apr. 27, 2018, Dkt. No. 111 at Ex. 11 ("MOJ Ltr.").) For the Banks, this demonstrates that "the relevant Chinese authorities ... continue to display a consistent willingness to cooperate with Assignee on a Hague Convention request." (Banks Obj. at 7.)
This Court is not convinced that this letter demonstrates that the Magistrate Judge clearly erred in her comity analysis. First, the Chinese version is addressed to "," i.e., ABC, not to the Court, and it simply confirms that the Chinese office will write a letter to the Office of International Judicial Assistance, U.S. Department of Justice, copying Chief Judge Colleen McMahon, to express their aforementioned legal position. (MOJ Ltr. at 1-2 (" Colleen McMahon, ").) This is hardly evidence of a sea change in the MOJ's willingness to cooperate with a Hague Convention request. Nor is it evidence of the MOJ's interest in supporting the expeditious production of relevant materials in this particular case. Indeed, it appears to be a form letter. The Magistrate Judge did not "ignore" this evidence, and she did not clearly err in affording it little weight.
The Banks also point to their own (unprecedented) willingness to cooperate in these discovery requests. (Banks Obj. at 6-7.) However, as the Assignee has accurately stated, "it is the MOJ, not the Banks, that executes Hague Convention requests, and 'historical precedent' indicates that any requests submitted to the MOJ will be only 'partly executed.' " (Next Opp. at 29.)
Finally, the Banks argue that the Magistrate Judge "ignore[d] the fact that the speed with which China processes Hague Convention requests has increased " in recent years. (Banks Obj. at 7 (emphasis added).) However, in support of this, the Banks cite to the Declaration of Guo Li, (dated Feb. 14, 2018, Dkt. No. 73), which the Magistrate Judge did, in fact, review as part of her findings. Nike ,
The Magistrate Judge did not clearly err in determining that resort to the Hague Convention was unlikely to produce the requested materials within a reasonable timeframe and that this fact weighed in favor of the Assignee.
3. Fifth Factor: National Interests
The Magistrate Judge's analysis of competing national interests was also not clearly erroneous. The Banks make much hay of the MOJ Letter: "The very fact that the Ministry of Justice made a submission demonstrates the importance afforded its banking laws by the Chinese government." (Banks Obj. at 10.) Again, however, the Magistrate Judge was not required to give that form letter substantial weight, particularly where she found that it did not discuss the nature or importance of the law it purported to enforce, Nike ,
For the first time on review, ABC raises an additional argument that, in the criminal context, the U.S. Department of Justice "has placed special, important curbs on the ability of prosecutors to issue" subpoenas that would cause the subject to violate its country's laws. (ABC Obj. at 22.) Therefore, ABC argues, "[t]here is no legitimate reason why Next, a private litigant, should be permitted to issue such Subpoenas and circumvent the Hague Convention process when, if the U.S. Department of Justice sought to obtain the same foreign banking records, it almost certainly would not issue subpoenas and would instead elect to proceed through the [mutual legal assistance treaty] process out of respect for foreign law." (Id. at 23.)
The Assignee has pointed out that district courts "generally do not entertain new legal arguments not presented to the magistrate judge." (Next Opp, at 11 (quoting Anderson ,
The Magistrate Judge did not err in finding that this factor weighed in favor of the Assignee.
4. Sixth Factor: Hardship to the Banks
The Magistrate Judge concluded that "to date, the evidence remains strong for the conclusion ... that meaningful sanctions by the Chinese government against Chinese banks are highly doubtful." Nike ,
According to the Banks, "a New York court should not encroach upon another nation's sovereignty by requiring citizens to take actions within their home country that would contravene that country's laws." (Id. (citing CE Int'l Res. Holdings, LLC v. S.A. Minerals Ltd. P'ship , No. 12-cv-8087,
Second, the Banks argue that "the law in this district ... holds that nonparties are not required to demonstrate proof of actual sanctions," (Banks Obj. at 9 (citing CE Int'l Res. ,
Therefore, the Magistrate Judge's finding that this factor did not weigh in favor of the Banks was neither clearly erroneous nor contrary to law.
IV. Conclusion
For the reasons stated above, the order of the Magistrate Judge denying the Banks' motion to quash the Subpoenas and granting the Assignee's cross-motion to compel is AFFIRMED.
This Court also hereby lifts the discovery stay entered on October 15, 2018 (Dkt. No. 168), and ORDERS that the Banks have twenty-eight (28) calendar days from today, i.e. , by Monday, December 17, 2018, to comply with the Subpoenas.
Finally, this Court will simultaneously entеr an order referring any subsequent
Notes
Agricultural Bank of China ("ABC"), Bank of China ("BOC"), Bank of Communications ("BOCOM"), China Construction Bank ("CCB"), China Merchants Bank ("CMB"), and Industrial and Commercial Bank of China ("ICBC") (collectively, the "Banks").
(Accord. Decl. of Robert Almanas, dated Apr. 27, 2018 ("Almanas Decl."), Dkt. No. 112 ¶ 34 ("Many large global financial banks ... still use correspondent banking services provided by U.S. financial institutions in New York to access financial services offered by correspondent banks and the economies of scale achieved by correspondent banks clearing and settling of USD transactions.").)
Because the Court concludes that these transactions are sufficient, this opinion does not address whether the Magistrate Judge erred in considering the two 2013 transactions, initiated by Plaintiffs, as part of the personal jurisdiction analysis. (See ABC Obj. at 16-17.)
The Court has never heard of Raconteur but was surprised to find counsel for the Batiks listed as a partner on its website. About Us , Raconteur, https://www.raconteur.net/about-us (last accessed Nov. 2, 2018) (scroll down to "Brands Who Work With Us"). The author of the Raconteur article also features it on her personal webpage as an editorial -not an article. http://sharontniruchelvam.com/filter/Editorial/How-China-became-a-leader-in-intellectual-property-The-Times (last accessed Nov. 2, 2018).