The case of the day is Nike, Inc. v. Wu (S.D.N.Y. 2018). Nike and Converse, the shoe companies, brought trademark infringement cases against hundreds of online retailers. These actions resulted in a default judgment for $1.8 billion, which perhaps will not turn out to be worth the paper it was printed on. The companies assigned their judgment to Next Investments, LLC. Next Investments caused subpoenas to be issued to Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, China Merchants Bank, and Industrial and Commercial Bank of China, seeking information on the judgment debtors’ assets. It’s not clear from the decision how the subpoenas were served, but presumably they were served on the New York branch offices of the Chinese banks, and in any case the banks raised no challenge to the service. The banks’ main claims were that the court lacked personal jurisdiction and that in light of Chinese bank secrecy laws, Next Investments should have been required to make first resort to the Hague Evidence Convention. The magistrate judge denied the banks’ motion to quash, and the banks sought review of the order.
I’m not going to discuss it here, but the court’s discussion of the correct standard of review is interesting. The court treated the magistrate judge’s decision as a decision on a non-dispositive motion rather than a dispositive motion, which means review was more deferential. To be sure, the subpoenas here were post-judgment subpoenas taking place in the context of a civil action, and so the decision plainly appears to be non-dispositive. On the other hand, the only dispute between the banks and Next Investment is the subpoena, and in that sense the decision was dispositive of the dispute. And if we compare the case with, say, a § 1782 case, where the entire proceeding is about the subpoena, it seems that there is more complexity to this issue than maybe meets the eye at first.
Anyway, on the merits: the jurisdictional argument revolved around whether the use of correspondent accounts and settlement accounts with New York banks was sufficient to support the exercise of jurisdiction. The judge rejected the banks’ arguments on both scores. With regard to correspondent accounts, it wrote:
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.
And the court, over the banks’ strong objection, held that the magistrate judge had not erred by treating settlement accounts just like correspondent accounts for purposes of the analysis.
Turning from New York law to the constitutional question, the court noted that there was some line-drawing to be done to determine whether the exercise of jurisdiction is reasonable. It cited a case for the proposition that “the routing of a single transaction through a New York correspondent account held by a Maine-based bank was not enough to confer personal jurisdiction,” but it observed:
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 “unintended and unapproved.”
Note an apparent distinction between this case and the Ruiz case, which I wrote about last month. There, the court held , in a § 1782 case, that it lacked personal jurisdiction over a foreign bank with an office in New York, but there was no apparent connection between the facts of the case and the bank’s New York activities that could support a finding of specific jurisdiction, and the court held that the presence of a branch office cannot support a finding of general jurisdiction. The rule in Ruiz is subject to challenge—does it make sense to apply the ordinary personal jurisdiction analysis in a § 1782 ancillary proceeding? But in this case, it seems the banks’ correspondent and settlement accounts in New York were used to handle transactions involving the judgment debtors.
On the issue of first resort to the Convention, the court correctly held that there was no per se rule requiring first resort. It held that the magistrate judge had correctly applied the balancing test from Linde v. Arab Bank:
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  “the importance to the investigation or litigation of the documents 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.” Restatement § 442(1)(c). Cases from our Circuit counsel that, when deciding whether to impose sanctions, a district court should also examine the  hardship of the party facing conflicting legal obligations and  whether that party has demonstrated good faith in addressing its discovery obligations.
The most interesting factor in the analysis was whether a request under the Convention was a suibtable alternative method for obtaining the evidence. Experience teaches that Hague Evidence Convention requests to the Chinese central authority can face significant delay and what the judge called “less than fulsome discovery.” The banks submitted a letter from the Chinese Ministry of Justice that states 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.” But the judge pointed out that while the English translation of the letter appeared to be addressed to the Office of International Judicial Assistance at the Department of Justice with a copy to the judge, the Chinese version was addressed to one of the Chinese banks, “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.” Without commissioning a translation of my own I can’t evaluate this, of course, but the court concluded that the letter was
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.
One lesson for foreign central authorities is that it takes some doing to overcome a history of reluctance to respond to Evidence Convention requests in a reasonable way. Increased cooperativeness by foreign central authorities is, I think, likely to lead to increased deference by US courts, and the converse is true, too, as this case shows.
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