Gucci Am., Inc. v. Bank of China, Nos. 11–3934–cv

• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
• Writing for the Court: DEBRA ANN LIVINGSTON, Circuit Judge
• Citation: 112 U.S.P.Q.2d 1445,768 F.3d 122
• Decision Date: 17 September 2014
• Docket Number: Nos. 11–3934–cv,12–4557–cv.
• Parties: 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., Plaintiffs–Appellees, v. Bank of China, Appellant, WEIXING LI, DBA Redtagparty, DBA Myluxurybags.com, DBA Xpressdesginers.com, DBA Xpressdesigner.Net, DBA Designer Handbags, AKA Xin Li, et al., Defendants.

768 F.3d 122
112 U.S.P.Q.2d 1445

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., Plaintiffs–Appellees
v.
Bank of China, Appellant
WEIXING LI, DBA Redtagparty, DBA Myluxurybags.com, DBA Xpressdesginers.com, DBA Xpressdesigner.Net, DBA Designer Handbags, AKA Xin Li, et al., Defendants.

Nos. 11–3934–cv
12–4557–cv.

United States Court of Appeals, Second Circuit.

Argued: Dec. 6, 2013.
Decided: Sept. 17, 2014.

768 F.3d 124

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.

Before: LIVINGSTON, LYNCH, and LOHIER, Circuit Judges.

Opinion

768 F.3d 125

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 marketing fake merchandise over the Internet and then hiding the profits from the sale of their counterfeit products. This case was argued in tandem with a related case, Tiffany LLC v. China Merchants Bank, et al., Nos. 12–2317; 12–2330. We decide the Tiffany appeal in a summary order issued simultaneously with this opinion.

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,’ ‘Balenciaga,’ ‘Bottega Veneta’ and ‘YSL’ products.” J.A. 630. Defendants displayed authentic pictures of the plaintiffs' goods on websites, but purchasers received counterfeit versions that were not produced by the plaintiffs.¹ Plaintiffs allege that defendants have manufactured and sold these counterfeit products without the permission, authorization, or approval of the plaintiffs. All told, defendants have allegedly violated at least 20 of plaintiffs' trademarks and have sold millions of dollars worth of counterfeit products to American consumers.

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.

For the reasons set forth herein, we first conclude that BOC's claim that the district court was without authority to issue orders restraining the defendants' assets pending adjudication, either because it lacks jurisdiction over the Bank or, alternatively, pursuant to the Supreme Court's decision in Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 119 S.Ct. 1961, 144 L.Ed.2d 319 (1999), is without merit. We vacate the

768 F.3d 126

August 23, 2011 and the May 18, 2012 orders, however, so that, on remand, the district court may consider whether it may exercise specific personal jurisdiction over the Bank to compel compliance with its orders² and (if so) whether it should exercise such jurisdiction, properly applying principles of comity. We reverse the November 15, 2012 order holding the Bank in civil contempt and imposing civil 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 Lanham Act, 15 U.S.C. § 1051, et seq., and related state law causes of action. Plaintiffs filed a First Amended Complaint on October 4, 2010 to include Ting Xu and Kuelala.com as additional defendants. Plaintiffs subsequently entered into a settlement agreement with defendant Lijun Xu. No other defendants have appeared in this action.

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 Rule 64 of the Federal Rules of Civil Procedure, provides that:

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. Therefore, the Asset Freeze Injunction expressly states that it applies to (but is not limited to) “any and all Bank of China accounts associated with or utilized by Weixing Li, Lijun Xu, Redtagparty, Myluxurybags.com and/or any of the other Defendants.” J.A. 241. Plaintiffs served the Bank with the Asset Freeze Injunction at its New York City branch on July 13, 2010.

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 branches 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,

768 F.3d 127

nor can they ascertain whether individuals have accounts at BOC branches outside of the United States.

Having served the Bank with the Asset Freeze Injunction, plaintiffs proceeded, on July 16, 2010, by serving BOC, at its New York City branch, with a subpoena requesting all documents concerning the “Defendants” and the “Defendants' accounts” (the “2010 Subpoena”). J.A. 1152. The 2010 Subpoena defines “Accounts” to include a variety of types of accounts “at Bank of China held by Defendants; including, but not limited to, any account or deposit in the name of Lijun Xu a/k/a Jack London” with an account number ending in 1235 or 2443. J.A. 1150. The 2010 Subpoena defines “Defendants” as “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 behalf.” J.A. 1150.

BOC informed plaintiffs that its New York City branch does not have possession or 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 suggesting that the proceeds of defendants' unlawful activity had been transferred there.³

On December 6, 2010,...