Reebok Intern. Ltd. v. McLaughlin

• Decision Date: 06 March 1995
• Docket Number: No. 93-55961,93-55961
• Citation: 49 F.3d 1387
• Parties: REEBOK INTERNATIONAL LIMITED (a Massachusetts corporation) and Reebok International Limited (a limited company of the United Kingdom), Plaintiffs-Appellees, v. Byron McLAUGHLIN a/k/a Beck Marketing Agency a/k/a Beck Buying Group, et al., Defendants, and Banque Internationale A Luxembourg S.A., Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1387

49 F.3d 1387

63 USLW 2565

REEBOK INTERNATIONAL LIMITED (a Massachusetts corporation) and Reebok International Limited (a limited company of the United Kingdom) Plaintiffs-Appellees, v. Byron McLAUGHLIN a/k/a Beck Marketing Agency a/k/a Beck Buying Group, et al., Defendants and Banque Internationale A Luxembourg S.A., Appellant.

No. 93-55961.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 8, 1995.

Decided March 6, 1995.

Lawrence M. Harnett, Marks & Murase, New York City, and Matthew E. Digby, Marks, Murase & White, Los Angeles, CA, for appellant.

Harley I. Lewin, Lewin & Laytin, New York City, and Bennett A. Bigman, Stein & Kahan, Santa Monica, CA, for plaintiffs-appellees.

Appeal from the United States District Court for the Southern District of California.

Before: TROTT, FERNANDEZ and T.G. NELSON, Circuit Judges.

FERNANDEZ, Circuit Judge:

Banque Internationale a Luxembourg S.A. ("BIL") appeals the district court's orders summarily holding it in contempt ¹ and assessing sanctions against it in the amount of $2,680,417.30. BIL argues that the district court had neither subject matter nor personal jurisdiction over it. Because we agree that the district court lacked personal jurisdiction over BIL, we reverse.

BACKGROUND FACTS

Reebok International Limited brought suit against Byron McLaughlin for violations of the Lanham Act in allegedly counterfeiting Reebok footwear. Mr. McLaughlin controlled various corporations, including the Heatherdale Corporation. As a result of the lawsuit, Reebok obtained a temporary restraining order in the district court which enjoined "the defendants and their officers, servants, employees and agents and any persons On December 6, 1989, Mr. McLaughlin's wife Brigitte--at his request--appeared at BIL's office in Luxembourg and presented the proper documentation to take control of all of the funds in the Heatherdale account, which amounted to approximately $2,400,000. Those funds were in a time deposit that did not mature until January 8, 1990. Although BIL would normally have honored the request for early release, it instead told Ms. McLaughlin that it would retain the funds until they became due. At that time, BIL was prohibited by Luxembourg banking secrecy laws from informing Reebok of Ms. McLaughlin's efforts to remove the funds. It was also compelled by Luxembourg law to release funds upon proper requests from depositors. Ms. McLaughlin, through Luxembourg counsel, challenged BIL's retention of the funds. BIL's in-house counsel, Jean-Jacques Rommes, advised BIL that Ms. McLaughlin had a right to withdraw the funds because the TRO had not been properly registered as a valid judgment (exequatur) or as an order for attachment (saisie-arret) under Luxembourg law.

                in active concert or participation with them" from "transferring, disposing of, or secreting any money, stocks, or other assets of these defendants without prior approval of the court."   It also enjoined banks from transferring funds of the defendants which were in the banks' hands.  On November 29, 1989, a copy of the TRO was served on BIL in Luxembourg.  BIL is a banking corporation with its principal place of business in Luxembourg.  It has no physical presence in California nor does it transact any banking business in the United States.  BIL sent some letters to Mr. McLaughlin at his address in California acknowledging the receipt of funds.  Mr. McLaughlin also made several telephone calls to BIL during December 1989
                

BIL then negotiated a compromise with Ms. McLaughlin in which the funds would be transferred to a new account, but would still remain within the bank pending further legal developments--for example, the proper registration of the TRO in Luxembourg. BIL created the Bawnmore corporation and account and transferred the majority of the Heatherdale monies into that account, which was also ultimately controlled by Mr. McLaughlin. Later, BIL released approximately $117,000 from the Bawnmore account as interest and as part of the negotiated agreement with Mr. McLaughlin that the principal amount of the Heatherdale funds would remain at BIL.

Meanwhile, Reebok was attempting to have the TRO recognized by the Luxembourg courts. It failed in its attempt to obtain a saisie-arret, and then pursued other remedies available under articles 806 and 807 of the Luxembourg Code of Civil Procedure, which were also denied. At no time did the TRO ever become an enforceable judgment or an attachment under Luxembourg law.

In February of 1990, Mr. McLaughlin informed BIL that he would sue in Luxembourg for the right to remove his funds. This lawsuit was known as the "Heatherdale Lawsuit." BIL made an oral opposition. The result of the suit was the "Heatherdale Order," which instructed BIL to release the funds because the TRO was not legally valid in Luxembourg. Shortly thereafter, BIL released approximately $2,500,000 to Mr. McLaughlin.

Reebok then brought a contempt motion against BIL on January 22, 1992. It contended that BIL should be held in contempt for releasing the funds with knowledge of the restraining order. On May 28, 1992, the district court dismissed Reebok's motion on grounds that BIL's actions were compelled by Luxembourg law, namely the Heatherdale Order, and BIL did not have the requisite intent for aider and abettor liability under Federal Rule of Civil Procedure 65(d).

On July 22, 1992, Reebok brought a motion for reconsideration of the dismissal based on new evidence. On April 27, 1993, the district court granted Reebok's motion for reconsideration and held BIL in contempt. Reebok I, 827 F.Supp. at 628-29. Thereafter the district court fixed compensatory sanctions in the amount of $2,680,417.30, which presumably were payable to Reebok, although the order did not explicitly say so. This appeal ensued.

JURISDICTION AND STANDARDS OF REVIEW

We have jurisdiction pursuant to 28 U.S.C. Sec. 1291.

The existence of subject matter jurisdiction is a question of law reviewed de novo. See Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987, 990 (9th Cir.1994).

A district court's determination that personal jurisdiction can properly be exercised is a question of law reviewable de novo when the underlying facts are not disputed. See Bourassa v. Desrochers, 938 F.2d 1056, 1057 (9th Cir.1991). The district court's factual findings on all jurisdictional issues must be accepted unless clearly erroneous. See Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989), cert. denied, 496 U.S. 937, 110 S.Ct. 3217, 110 L.Ed.2d 664 (1990).

A district court's civil contempt order is reviewed for an abuse of discretion. See In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir.1993). A district court's decision to impose sanctions or punishment for contempt is also reviewed for abuse of discretion. See Securities and Exch. Comm'n v. International Swiss Invs. Corp., 895 F.2d 1272, 1277 (9th Cir.1990).

DISCUSSION

When all is said and done, the resolution of this case turns on jurisdictional issues. BIL asserts that the district court had neither subject matter nor personal jurisdiction over it. We disagree with the former assertion but find merit in the latter one.

A. Subject matter jurisdiction

BIL argues that the district court should not have exercised subject matter jurisdiction over its actions in Luxembourg under the "jurisdictional rule of reason" articulated in Timberlane Lumber Co. v. Bank of Am., 549 F.2d 597, 613 (9th Cir.1976). However, in that case we were not deciding the nature of a district court's subject matter jurisdiction over its own orders. Rather, we determined whether United States antitrust laws may be applied to actions occurring in other nations, and in so doing listed several factors to be considered. ² The Timberlane factors are generally used to analyze whether a particular United States law may bind parties acting in other nations. For example, this court has held that the Lanham Act may properly be applied to foreign defendants' activities outside the United States. See Reebok Int'l, Ltd. v. Marnatech Enters., 970 F.2d 552, 554-57 (9th Cir.1992).

Those authorities do not lend support to BIL's claim that the district court had no subject matter jurisdiction in this case. District courts do, and must, have the authority to punish contemptuous violations of their orders. 18 U.S.C. Sec. 401. See also International Union, United Mine Workers v. Bagwell, --- U.S. ----, ----, 114 S.Ct. 2552, 2559, 129 L.Ed.2d 642 (1994) (noting that "[c]ourts independently must be vested with 'power to impose ... submission to their lawful mandates ...' " and thus have "an inherent contempt authority") (citation omitted); cf. Republic of the Phil. v. Westinghouse Elec. Corp., 43 F.3d 65, 72-80 (3d Cir.1994) (where foreign government was a party, district court could impose sanctions upon it, but comity precluded injunctive relief). Thus, the district court did have subject matter jurisdiction to determine if its TRO had been violated.

B. Personal jurisdiction

BIL next argues that it could not be held in contempt because the district court did not have personal jurisdiction over (1) The nonresident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

it. For a defendant to be subject to general in personam jurisdiction, it must have such continuous and systematic contacts with the forum that the exercise of jurisdiction does not offend traditional notions of fair play and substantial justice. See Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1485 (9th Cir.1993). If a defendant's contacts with the forum are not continuous and systematic, the forum may...