11-3934United States Court of Appeals

FOR THE SECOND CIRCUIT

Docket Nos. 11-3934, 12-4557

GUCCI AMERICA, INCORPORATED, BALENCIAGA AMERICA,INCORPORATED, BALENCIAGA, S.A., BOTTEGA VENETA

INTERNATIONAL S.A.R.L., BOTTEGA VENETA, INCORPORATED,LUXURY GOODS INTERNATIONAL (L.G.I.) S.A.,

YVES SAINT LAURENT AMERICA,Plaintiffs-Appellees,

(caption continued on inside cover)

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

BRIEF FOR THE UNITED STATES OF AMERICA AS AMICUS CURIAE

PREET BHARARA,United States Attorney for the

Southern District of New York,

Attorney for the United States of

America as Amicus Curiae.

CARINA H. SCHOENBERGER,BENJAMIN H. TORRANCE,

Assistant United States Attorneys,

Of Counsel.

86 Chambers Street, 3rd FloorNew York, New York 10007(212) 637-2822

STUART F. DELERY,Assistant Attorney General

DOUGLAS N. LETTER,SCOTT R. MCINTOSH,Attorneys, Appellate Staff

Civil Division,

Department of Justice

12-4557, 12-2317, 12-2330, 12-2349

—v.—

BANK OF CHINA,

Appellant.

Docket Nos. 12-2317, 12-2330, 12-2349

TIFFANY (NJ) LLC, TIFFANY AND COMPANY,

Plaintiffs-Appellees,—v.—

CHINA MERCHANTS BANK, NEW YORK BRANCH, INDUSTRIAL

AND COMMERCIAL BANK OF CHINA, LTD., NEW YORK BRANCH,BANK OF CHINA, NEW YORK BRANCH,

Movants-Appellants.

TABLE OF CONTENTS PAGE

Interest of the United States . . . . . . . . . . . . . . . . . . . 2

Statement of the Case . . . . . . . . . . . . . . . . . . . . . . . . 4

A. The Gucci Court’s Orders . . . . . . . . . . . . . . . 5

B. The Tiffany Court’s Order . . . . . . . . . . . . . . 7

C. Proceedings on Appeal . . . . . . . . . . . . . . . . . 7

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

POINT I—The District Courts’ Denial of the Banks’ Motions to Modify the Asset Freeze Injunctions Should Be Vacated and Remanded for a Full Comity Analysis . . . . . . . 10

A. The District Courts Had the Power to Issue Prejudgment Asset Freeze Injunctions Against the Alleged Counterfeiters . . . . . . . . . . . . . . . . . . . . . . . 10

B. The District Courts Erred in Their Analyses of the Banks’ Motions to Modify the Asset Freeze Injunctions as to the Banks . . . . . . . . . . . . . . . . . . . . . . 16

POINT II—The Gucci Court Did Not Abuse Its Discretion in Ordering Compliance with Gucci’s Subpoena . . . . . . . . . . . . . . . . . . . . . . . . 22

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

ii PAGE

TABLE OF AUTHORITIES

Cases:

Animale Group Inc. v. Sunny’s Perfume Inc., 256 Fed. App’x 707 (5th Cir. 2007) . . . . . . . . . . . 14

CSC Holdings, Inc. v. Redisi, 309 F.3d 988 (7th Cir. 2002) . . . . . . . . . . . . . . . . 13

Curtis v. Loether, 415 U.S. 189 (1974) . . . . . . . . . . . . . . . . . . . . . . . . 12

Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962) . . . . . . . . . . . . . . . . . . . . . . . . 12

De Beers Consol. Mines v. United States, 325 U.S. 212 (1945) . . . . . . . . . . . . . . . . . . . . . . . . 10

Design Strategy, Inc. v. Davis, 469 F.3d 284 (2d Cir. 2006) . . . . . . . . . . . . . . . . . 11

Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998) . . . . . . . . . . . . . . . . . . . . . . . . 12

In re Grand Jury Proceedings, 40 F.3d 959 (9th Cir. 1994) . . . . . . . . . . . . . . . . . 18

Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) . . . . . . . . . . . . . . . . . . . . . . . . 13

Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999) . . . . . . . . . . . . . . . . . 10, 13, 14

Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240 U.S. 251 (1916) . . . . . . . . . . . . . . . . . . . . . . . . 11

iii PAGE

Hilton v. Guyot, 159 U.S. 113 (1895) . . . . . . . . . . . . . . . . . . . . . . . . 17

Johnson v. Couturier, 572 F.3d 1067 (9th Cir. 2009) . . . . . . . . . . . . . . . 13

Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 313 F.3d 70 (2d Cir. 2002) . . . . . . . . . . . . . . . . . . 25

Levi Strauss & Co. v. Sunrise Int’l Trading Inc., 51 F.3d 982 (11th Cir. 1995) . . . . . . . . . . . . . . . . 14

Minpeco, S.A. v. Conticommodity Servs., Inc., 116 F.R.D. 517 (S.D.N.Y. 1987) . . . . . . . . . . . . . . 23

NML Capital, Ltd. v. Republic of Argentina, 727 F.3d 230 (2d Cir. 2013) . . . . . . . . . . . . . . . . . 15

Petrella v. Metro-Goldwyn-Mayer, Inc., __ S. Ct. __, No. 12-1315 (U.S. May 19, 2014) . . . 11

Reebok Int’l, Ltd. v. Marnatech Enters., Inc., 970 F.2d 552 (9th Cir. 1992) . . . . . . . . . . . . . . . . 14

Root v. Lake Shore & M.S. Ry. Co,, 105 U.S. 189 (1881) . . . . . . . . . . . . . . . . . . . . . . . . 13

SEC v. Cavanagh, 445 F.3d 105 (2d Cir. 2006) . . . . . . . . . . . . . . . . . 14

SEC v. Commonwealth Chemical Sec., Inc., 574 F.2d 90 (2d Cir. 1978) . . . . . . . . . . . . . . . . . . 11

SEC v. Contorinis, 743 F.3d 296 (2d Cir. 2014) . . . . . . . . . . . . . . . . . 11

iv PAGE

Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390 (1940) . . . . . . . . . . . . . . . . . . . . . . . . 11

Société Internationale pour Participations Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197 (1958) . . . . . . . . . . . . . . . . . . . . . . . . 23

Société Nationale Industrielle Aérospatiale v. U.S. District Court for the Southern District of Iowa, 482 U.S. 522 (1987) . . . . . . . . . . . . . . 17, 22–24, 28

Trade Dev. Bank v. Continental Ins. Co., 469 F.2d 35 (2d Cir. 1972) . . . . . . . . . . . . . . . . . . 23

United States v. Davis, 767 F.2d 1025 (2d Cir. 1985) . . . . . . . . . . . . . . . . 18

United States v. First Nat’l City Bank, 379 U.S. 378 (1965) . . . . . . . . . . . . . . . . . 14, 15, 21

United States v. Louisiana, 339 U.S. 699 (1950) . . . . . . . . . . . . . . . . . . . . . . . . 11

Wultz v. Bank of China Ltd., 910 F. Supp. 2d 548 (S.D.N.Y. 2012) . . . . . . . . . . 23

Statutes:

15 U.S.C. § 1117(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

28 U.S.C. § 517 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Rules:

Federal Rule of Civil Procedure 60(b) . . . . . . . . . . . . . 5

Federal Rule of Civil Procedure 65(d)(2)(C) . . . . . . . 15

United States Court of Appeals FOR THE SECOND CIRCUIT

Docket Nos. 11-3934, 12-4557

GUCCI AMERICA, INCORPORATED, BALENCIAGA AMERICA, INCORPORATED, BALENCIAGA, S.A., BOTTEGA VENETA INTERNATIONAL S.A.R.L., BOTTEGA VENETA,

INCORPORATED, LUXURY GOODS INTERNATIONAL (L.G.I.) S.A., YVES SAINT LAURENT AMERICA,

Plaintiffs-Appellees, —v.—

BANK OF CHINA, Appellant.

Docket Nos. 12-2317, 12-2330, 12-2349

TIFFANY (NJ) LLC, TIFFANY AND COMPANY, Plaintiffs-Appellees,

—v.—

CHINA MERCHANTS BANK, NEW YORK BRANCH, INDUSTRIAL AND COMMERCIAL BANK OF CHINA, LTD.,

NEW YORK BRANCH, BANK OF CHINA, NEW YORK BRANCH,

Movants-Appellants.

2

BRIEF FOR THE UNITED STATES OF AMERICA AS

AMICUS CURIAE

Interest of the United States

By invitation of this Court and pursuant to 28 U.S.C. § 517 and Rule 29(a) of the Federal Rules of Appellate Procedure, the United States respectfully submits this brief as amicus curiae.

These appeals arise out of efforts by luxury goods manufacturers to enforce asset freeze injunctions is-sued against alleged counterfeiters with bank ac-counts in China, and to obtain third-party discovery from a Chinese bank. The district courts in Gucci America, Inc. v. Weixing Li (Richard J. Sullivan, J.) and Tiffany (NJ) LLC v. Forbse (Naomi Reice Buch-wald, J.), denied the motions of the Bank of China (“BOC”), China Merchants Bank (“CMB”), and Indus-trial and Commercial Bank of China (“ICBC”) (collec-tively, the “Banks”) to modify the injunctions requir-ing them to freeze assets in defendants’ Chinese bank accounts. In Gucci, the district court also ordered BOC to comply with a document subpoena related to defendants’ bank accounts and held the bank in con-tempt for its failure to do so.

The United States has several interests in the is-sues raised in these appeals. Those interests include providing tools for the effective enforcement of the Lanham Act and maintaining a litigation system that

3 provides for timely and reasonable discovery. The United States also has strong interests in ensuring that courts perform thorough international-comity analyses in appropriate cases, and in particular that courts carefully weigh sovereign interests when con-sidering whether to enforce orders in private litiga-tion with extraterritorial effect.

As amicus curiae, the United States supports va-catur and remand of the district court orders denying the Banks’ motions to modify the asset freeze injunc-tions, because the courts erred in failing to conduct a comity analysis to evaluate the sovereign interests affected by the Banks’ compliance with the injunc-tions. However, the United States does not believe the Gucci court, having conducted a comity analysis, abused its discretion in directing BOC to comply with plaintiffs’ document subpoena.

This Court has invited the United States, as part of any amicus submission, to address the letter re-ceived by this Court from the Director-General of the Legal Affairs Department of the People’s Bank of China and the Director-General of the Supervisory Rules and Regulations Department of the China Banking Regulatory Commission (the “Regulators’ Letter”). When the extraterritorial application of do-mestic laws and judicial remedies may implicate the sovereign interests of foreign countries, submissions from interested governments that address comity is-sues should be given serious consideration. In the event that the Court remands for further considera-tion of the Banks’ request for modification of the as-set freeze injunctions, the district courts should give

4 due weight to the representations in the Regulators’ Letter regarding the requirements of Chinese bank-ing law and the sovereign interests underlying those laws. However, as discussed below, the Regulators’ Letter does not present information necessitating re-versal of the order requiring compliance with the document subpoena in Gucci.

Statement of the Case

Plaintiffs, Gucci America, Inc., et al. (“Gucci”) and Tiffany (NJ) LLC, et al. (“Tiffany”), brought trade-mark infringement actions against accused counter-feiters of their branded luxury goods. (Gucci SPA 1; Tiffany SPA 2).1 Before obtaining judgment, plaintiffs in both cases obtained preliminary injunctions freez-ing defendants’ assets during the course of litigation, and enjoining defendants from further acts of trade-mark infringement. Plaintiffs served the injunctions on the New York branches of BOC (in both cases) and CMB and ICBC (in Tiffany). Gucci also served BOC with a subpoena requiring it to produce documents related to defendants’ assets. (Gucci SPA 1).

————— 1 Citations to the Gucci Special Appendix and

the Tiffany Special Appendix are in the form “Gucci SPA __” and “Tiffany SPA __,” respectively. Citations to the Appendices are in the form “Gucci A __” and “Tiffany A __,” respectively. Citations to the Brief for Plaintiffs-Appellees in Tiffany are in the form of “Tif-fany Br. __.”

5 A. The Gucci Court’s Orders

On August 23, 2011, the district court in Gucci granted Gucci’s motion to compel BOC to comply with the injunction and subpoena and denied BOC’s mo-tion to modify the orders. (Gucci SPA 1). With respect to the asset freeze, the district court concluded that because it had personal jurisdiction over the defend-ants, it had the authority to freeze their property wherever they hold it. (Gucci SPA 5). Although BOC presented expert declarations intended to show that compliance with the orders would violate Chinese banking laws and subject BOC to liability in China, the district court’s opinion did not engage those is-sues with respect to the asset freeze. (Gucci SPA 4–5, SPA 10–12). With respect to the document subpoena, the court used a seven-factor test based on Second Circuit precedent and the Restatement (Third) of Foreign Relations Law of the United States § 442 to conclude that BOC was required to produce docu-ments located in China. (Gucci SPA 5–13).

BOC moved the district court for reconsideration under Federal Rule of Civil Procedure 60(b), which the court denied on May 18, 2012. (Gucci SPA 15). BOC’s motion was based principally on a letter dated November 3, 2011 (the “November 3 Letter”) from the People’s Bank of China and the China Banking Regu-latory Commission, both Chinese regulatory agencies, informing the court that under Chinese law “commer-cial banks . . . may not disclose outside China their clients’ account information or freeze or deduct funds from such accounts pursuant to a U.S. court’s order.” (Gucci A 834). The November 3 Letter also described

6 China’s interest in enforcing its banking secrecy laws, urged the court to employ the Hague Convention on the Taking of Evidence Abroad in Civil or Commer-cial Matters (the “Hague Convention”) to avoid a con-flict between Chinese and U.S. laws, stated that the district court’s order could have an adverse effect on ongoing diplomatic dialogues between China and the United States, and informed the court that the regu-lators had “issued a severe warning” to BOC for pro-ducing documents pursuant to the Gucci court’s order and were “conducting further investigation to evalu-ate the severity of the infraction and determine the appropriate sanctions.” (Gucci A 834–35; Gucci SPA 16).

On May 18, 2012, the Gucci court concluded that BOC’s Rule 60(b) motion was premature because the August 23, 2011, order was not a final judgment. (Gucci SPA 16–19). The court further denied the mo-tion on the merits based on its determination that the November 3 Letter was not newly discovered evi-dence as asserted by BOC. (Gucci SPA 21). The dis-trict court concluded that the November 3 Letter was cumulative of the expert declarations before the court prior to its original decision, and that the letter would not have changed the outcome. (Gucci SPA 21). The court stated that it had “clearly considered and bal-anced” China’s interests against those of the United States in its previous decision, and denied BOC’s mo-tion. (Gucci SPA 23).

On September 27, 2012, the district court ordered BOC to show cause why it should not be subject to sanctions for failure to comply with the court’s dis-

7 covery order. (Gucci SPA 24). In a November 15, 2012, memorandum and order, the court held BOC in civil contempt for its failure to comply and ordered it to pay $75,000 plus $10,000 for each subsequent day of non-compliance. (Gucci SPA 24). The court did not address whether BOC was in compliance with the as-set freeze injunction, which was already being ap-pealed.

B. The Tiffany Court’s Order

In Tiffany, the Banks similarly moved the district court to modify the prejudgment asset freeze and dis-covery portions of the preliminary injunctions. (Tiffa-ny SPA 1). The court partially granted the Banks’ motions with respect to the discovery dispute, but de-clined to lift the asset freezes and ordered the Banks to comply with them. (Tiffany SPA 2). Of relevance to this appeal, the district court concluded that it had the inherent authority to issue the asset freeze in-junctions. (Tiffany SPA 27). While the Tiffany court acknowledged that principles of comity are properly considered in the context of issuing an asset freeze with extraterritorial effect, it did not conduct a sepa-rate comity analysis and ultimately concluded that because the plaintiffs had no alternative avenue of relief, the freezes would not be modified. (Tiffany SPA 32).

C. Proceedings on Appeal

After this Court held oral argument in both cases on December 6, 2013, it received the Regulators’ Let-ter dated December 19, 2013. (Dkt. 269). The Regula-tors’ Letter came from the same entities that submit-

8 ted the November 3 Letter to the district courts and covers similar subjects. Among other things, the Reg-ulators’ Letter identifies certain provisions of China’s banking laws and states that “any account opened with a Chinese bank with deposited funds cannot be disclosed, frozen or seized because of a dispute be-tween civil litigants . . . except as allowed by Chinese law.” (Regulators’ Letter 2). The Regulators’ Letter also states that United States court orders that cause Chinese banks to violate Chinese law would under-mine diplomatic relations between the two countries and would be contrary to the principles underlying the Strategic & Economic Dialogue between the United States and China (“S&ED”) and the Banks’ commitments with the Board of Governors of the United States Federal Reserve System (the “Federal Reserve”). (Regulators’ Letter 3–4). The letter also urges United States courts to require use of the Hague Convention for requests for evidence located in China. (Regulators’ Letter 5).

On January 9, 2014, this Court ordered the pri-vate litigants to file post-argument letter briefs in re-sponse to the Regulators’ Letter, and concurrently in-vited the United States to file an amicus curiae brief to present its views on the merits of the cases, the Regulators’ Letter, or “any other issues counsel be-lieves are pertinent to the Court’s disposition of this case.” (Dkt. 271).

A R G U M E N T

The district courts erred in reviewing the Banks’ motions to modify plaintiffs’ asset freeze injunctions

9 because the courts failed to properly apply legal prin-ciples of comity. BOC identified an apparent conflict between the injunctions and China’s banking laws, and in determining whether to modify the injunc-tions, the district courts should have evaluated the reasonableness of subjecting Chinese banks to extra-territorial obligations that could require them to vio-late Chinese laws. These cases should be remanded so that the district courts can properly consider the important foreign and U.S. sovereign interests at is-sue.

Regarding the document subpoena in Gucci, the district court, having conducted a comity analysis, did not abuse its discretion in compelling BOC to comply, but should have given closer attention to certain con-siderations when weighing sovereign interests. Spe-cifically, the district court should have viewed Chi-na’s banking secrecy laws as having a broader pur-pose than merely impeding discovery, and should have considered the United States’ interests in the ability of Lanham Act plaintiffs to obtain relevant in-formation about the finances of persons alleged to have engaged in large-scale infringement of their trademarks. Nevertheless, the court recognized the need to evaluate competing sovereign interests, and appropriately applied Supreme Court precedent in concluding that Gucci was not required to seek evi-dence through the Hague Convention in the first in-stance.

10

POINT I

The District Courts’ Denial of the Banks’ Motions to Modify the Asset Freeze Injunctions

Should Be Vacated and Remanded for a Full Comity Analysis

A. The District Courts Had the Power to Issue Prejudgment Asset Freeze Injunctions Against the Alleged Counterfeiters

The district courts did not err in relying on their inherent equitable authority to enter the asset freeze injunctions at issue. (Tiffany SPA 28 (holding that “the asset restraint falls within the Court’s inherent equitable power”); Gucci SPA 5 n.6 (noting that in-junction was entered based on court’s inherent au-thority)).

A district court may issue a preliminary injunc-tion restraining a defendant from dissipating assets pursuant to the court’s inherent equitable powers when the plaintiff is pursuing a claim for final equi-table relief, Grupo Mexicano de Desarrollo, S.A. v. Al-liance Bond Fund, Inc., 527 U.S. 308, 333 (1999), and the injunction is ancillary to that final relief, De Beers Consol. Mines v. United States, 325 U.S. 212, 219–20 (1945).

Plaintiffs in trademark infringement actions may recover defendants’ profits, 15 U.S.C. § 1117(a), and it is settled that such an “accounting” of profits is an equitable remedy. As the Supreme Court stated in Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., a trademark “infringer is required in equity to account

11 for and yield up his gains to the true owner,” and “profits are then allowed as an equitable measure of compensation.” 240 U.S. 251, 259 (1916); accord Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390, 399 (1940) (“recovery [of profits] had been al-lowed in equity [prior to statutory remedy] both in copyright and patent cases as appropriate equitable relief incident to a decree for an injunction”); United States v. Louisiana, 339 U.S. 699, 706 (1950) (noting that a case to recover royalties and other money re-ceived by the state pursuant to leases on land claimed by the government was “an equity action for an injunction and accounting”); see Petrella v. Metro-Goldwyn-Mayer, Inc., __ S. Ct. __, No. 12-1315, slip op. at 2 n.1 (U.S. May 19, 2014) (noting that recovery of profits “ ‘is not easily characterized as legal or equi-table,’ ” but treating profit-recovery remedy under Copyright Act as “equitable”). Indeed, in this Circuit various similar restitutionary remedies have been recognized as equitable in nature. See, e.g., SEC v. Commonwealth Chemical Sec., Inc., 574 F.2d 90, 95–96 (2d Cir. 1978) (Friendly, J.) (characterizing resti-tution and disgorgement as equitable remedies for Seventh Amendment purposes); Design Strategy, Inc. v. Davis, 469 F.3d 284, 299–300 (2d Cir. 2006) (same characterization of restitution); SEC v. Contorinis, 743 F.3d 296, 301 (2d Cir. 2014) (“Disgorgement is an equitable remedy . . . .”).

The longstanding treatment of accounting of prof-its as an equitable remedy was not changed by Dairy Queen, Inc. v. Wood, where the Supreme Court con-cluded that the defendant in a trademark case was entitled to a jury trial under the Seventh Amendment

12 despite the fact that the plaintiffs’ complaint included a request for an accounting. 369 U.S. 469, 476–78 (1962). Unlike in this case, the plaintiffs in Dairy Queen did not ask for an award of the defendant’s profits, but instead sought amounts owed under a contract or damages for trademark infringement. Id. at 476. The Court concluded that such a claim for monetary relief “is a claim wholly legal in its nature however the complaint is construed.” Id. at 477. The Court then held that for Seventh Amendment pur-poses, the legal character of a claim for breach of con-tract and damages cannot be evaded simply by “cast[ing] [the claim] in terms of an ‘accounting,’ ra-ther than in terms of an action for ‘debt’ or ‘damag-es,’ ” because “[t]he constitutional right to trial by ju-ry cannot be made to depend upon the choice of words used in the pleadings.” Id. at 477–78. Dairy Queen did not present a request for an accounting of profits, and the equitable character of such relief, which the Court expressly recognized in cases such as Hamil-ton-Brown Shoe, Sheldon, and Louisiana, is unaffect-ed by the Court’s treatment of the legal forms of monetary relief at issue in Dairy Queen. Indeed, the Supreme Court has subsequently described Dairy Queen as a damages case, not one for an accounting of profits. See, e.g., Feltner v. Columbia Pictures Tele-vision, Inc., 523 U.S. 340, 346 (1998); Curtis v. Loe-ther, 415 U.S. 189, 195, 197 (1974). Moreover, the Dairy Queen Court noted that its decision did not “in-terfere with the District Court’s power to grant tem-porary relief pending a final adjudication on the mer-its.” 369 U.S. at 479 n.20.

13

The accounting plaintiffs here seek under the Lanham Act, in conjunction with injunctive relief, is not the type of “naked” accounting of profits, i.e., one unaccompanied by a request for an injunction or an-other basis for exercising equity jurisdiction, that the Supreme Court in Root v. Lake Shore & M.S. Ry. Co, 105 U.S. 189, 214-16 (1881), held that courts of equity traditionally would not entertain. Nor does it amount to “legal restitution,” as the Supreme Court has ex-pressly acknowledged that “an accounting for profits [is] a form of equitable restitution.” Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 214 n.2 (2002).

While the relief sought by plaintiffs in these cases may arguably be ambiguous, the Grupo Mexicano rule precluding plaintiffs seeking only legal relief from obtaining prejudgment asset restraints, 527 U.S. at 333, does not apply when plaintiffs seek both legal and equitable remedies, see Johnson v. Couturi-er, 572 F.3d 1067, 1083–84 (9th Cir. 2009) (Grupo Mexicano “is limited to cases in which only monetary damages are sought”); CSC Holdings, Inc. v. Redisi, 309 F.3d 988, 996 (7th Cir. 2002) (where plaintiff sought an “accounting and profits remedy” in the al-ternative, suit included an equitable remedy and an “asset freeze is thus proper”).2 Both district courts in-

————— 2 Although not directly pertinent here, it bears

emphasis that Grupo Mexicano’s limitation on pre-judgment asset restraints in legal cases should not be read to apply to government enforcement actions. As the Grupo Mexicano Court said in distinguishing that

14 terpreted the operative complaints to be seeking legal damages and an equitable accounting of the defend-ants’ profits. Accordingly, the plaintiffs should not be barred from seeking prejudgment asset restraint in-junctions against infringing defendants. See, e.g., An-imale Group Inc. v. Sunny’s Perfume Inc., 256 Fed. App’x 707, 709 (5th Cir. 2007) (district court was “au-thorized to preserve the status quo by entering a lim-ited asset freeze” in Lanham Act infringement case); Levi Strauss & Co. v. Sunrise Int’l Trading Inc., 51 F.3d 982, 987 (11th Cir. 1995) (in Lanham Act case “the district court had the authority to freeze those assets which could have been used to satisfy an equi-table award of profits”); Reebok Int’l, Ltd. v. Mar-natech Enters., Inc., 970 F.2d 552, 562 (9th Cir. 1992) (“The district court’s inherent equitable power to freeze defendants’ assets in cases in which an ac-counting is the ultimate relief sought is therefore not limited by the Lanham Act.”).

The district courts therefore were correct to con-clude, as a first step toward issuing injunctions that run against the infringers’ assets held abroad, that ————— case from an enforcement action brought by the gov-ernment, courts of equity will “ ‘go much farther both to give and withhold relief in furtherance of the pub-lic interest than they are accustomed to go when only private interests are involved.’ ” 527 U.S. at 326 (quoting United States v. First Nat’l City Bank, 379 U.S. 378, 383 (1965) (quotation marks omitted)); ac-cord SEC v. Cavanagh, 445 F.3d 105, 118 n.29 (2d Cir. 2006).

15 they had the authority to do so. Cf. United States v. First Nat’l City Bank, 379 U.S. 378, 384 (1965) (in statutory tax-enforcement action brought by govern-ment, “[o]nce personal jurisdiction of a party is ob-tained, the District Court has authority to order it to ‘freeze’ property under its control, whether the prop-erty be within or without the United States”). The in-junctions were issued against the named defendants, and may also bind the Banks under Federal Rule of Civil Procedure 65(d)(2)(C) (providing that injunc-tions may bind persons who have actual notice of in-junctions and act “in active concert or participation” with the enjoined parties or their agents). See NML Capital, Ltd. v. Republic of Argentina, 727 F.3d 230, 239 (2d Cir. 2013) (injunctions directly binding only party will also bind entities in “active concert or par-ticipation” with that party).3

————— 3 Petitions for writs of certiorari are pending in

NML Capital (Nos. 13-990 and 13-991), but this Court’s holding regarding the application of Rule 65(d)(2) is not challenged in those petitions. In NML Capital, the United States as amicus curiae argued that the injunctions at issue were inconsistent with the Foreign Sovereign Immunities Act and the terms of the relevant bonds, but did not take a position with respect to the application of Rule 65(d)(2). The cita-tion above of NML Capital should not be taken as an endorsement of the Court’s application of Rule 65 in the context of that case.

16

For all those reasons, the district courts did not err in relying on their inherent equitable authority to issue asset freeze injunctions.

B. The District Courts Erred in Their Analyses of the Banks’ Motions to Modify the Asset Freeze Injunctions as to the Banks

While district courts have the equitable power to enjoin Lanham Act defendants from disposing of as-sets during the pendency of the litigation, regardless of whether the assets in question are located in the United States or abroad, whether a court should ex-ercise that authority in a particular case is a separate question that implicates additional considerations. After the Banks objected to the application of the as-set freeze injunctions to them and asserted that there was a conflict between the obligations imposed by the injunctions and the requirements of Chinese banking law, the district courts were required to conduct a full comity analysis. Because the district courts did not sufficiently analyze the competing sovereign interests at stake, their orders should be vacated to allow those courts to perform a thorough comity inquiry.

In challenging the injunctions, the Banks identi-fied foreign sovereign interests and asserted that for-eign law conflicted with the district courts’ orders. Namely, the Banks introduced declarations from Chinese law experts to demonstrate that Chinese banking laws prohibited them from freezing bank ac-counts pursuant to a foreign court order and that do-ing so could subject them to civil and criminal liabil-ity. (Gucci SPA 10–12; Tiffany SPA 9–10, 21–23). The

17 Banks also submitted the November 3 Letter from Chinese banking regulators stating that “China’s commercial banks . . . may not . . . freeze or deduct funds from such accounts pursuant to a U.S. court’s order.” (Gucci A 834; Tiffany A 624). The November 3 Letter set forth China’s interests in enforcing bank-ing secrecy laws to “help engender client confidence in the banking system and therefore promote the fur-ther development of the banking system.” (Gucci A 834; Tiffany A 624).

Legal principles of comity required the district courts to fully consider these issues. The doctrine of international comity “refers to the spirit of coopera-tion in which a domestic tribunal approaches the res-olution of cases touching the laws and interests of other sovereign states.” Société Nationale Industrielle Aérospatiale v. U.S. District Court for the Southern District of Iowa, 482 U.S. 522, 544 n.27 (1987). Comi-ty “is neither a matter of absolute obligation . . . nor of mere courtesy and good will,” but is rather “the recognition which one nation allows within its terri-tory to the legislative, executive or judicial acts of an-other nation, having due regard both to international duty and convenience, and to the rights of its own cit-izens, or of other persons who are under the protec-tion of its laws.” Hilton v. Guyot, 159 U.S. 113, 163–64 (1895).

Here, the comity doctrine should have shaped the district courts’ review of the Banks’ motions to modify the asset freeze injunctions. Although case law re-garding the extraterritorial enforcement of asset freeze injunctions as to international third parties is

18 sparse, this Court has suggested that when the extra-territorial operation of a United States court order would infringe on sovereign interests of a foreign state, it is appropriate to conduct an analysis using the framework of Section 403 of the Restatement (Third) of Foreign Relations Law, entitled “Limita-tions on Jurisdiction to Prescribe.” See United States v. Davis, 767 F.2d 1025, 1036–37 (2d Cir. 1985) (us-ing Section 403 factors to hold that district court properly ordered litigant to terminate litigation in the Cayman Islands); see also, e.g., In re Grand Jury Pro-ceedings, 40 F.3d 959, 965–66 (9th Cir. 1994) (con-ducting Section 403 analysis to affirm court order that would potentially violate Austrian law by requir-ing Austrian citizen to execute a directive authorizing disclosure of bank information from foreign banks).4

Section 403 instructs that when a state has juris-diction, it should not exercise it “to prescribe law with respect to a person or activity having connections with another state when the exercise of such jurisdic-tion is unreasonable.” RESTATEMENT § 403(1). It goes on to identify eight non-exclusive relevant factors to be evaluated in determining reasonableness, and —————

4 The jurisdiction to prescribe law is more com-monly associated with legislative rules than court or-ders. But injunctive orders do impose legal obliga-tions. The Court in Davis looked to Section 403 as a relevant source of guidance regarding general comity principles without concluding that it applies by its terms to courts’ remedial and procedural orders. 767 F.2d at 1036–37.

19 notes that where a conflict exists between the rea-sonable exercise of jurisdiction of two states, “each state has an obligation to evaluate its own as well as the other state’s interest in exercising jurisdiction.” Id. § 403(2)–(3). In the context of this suit—where the Banks presented argument and evidence to the dis-trict courts that they should be relieved from the as-set freeze injunctions because complying with the or-ders would cause them to violate China’s banking laws and subject them to potential civil and criminal liability in China—the district courts should have conducted a comity analysis that takes account of the sorts of considerations identified in Section 403.

As described more fully in Point II below, before ordering discovery, the Gucci and Tiffany courts con-ducted relatively comprehensive analyses to weigh relevant interests, including foreign sovereign inter-ests, under Restatement § 442, which offers a test to determine when a court may order production of for-eign documents by a person subject to the court’s ju-risdiction. In contrast, in deciding whether to modify the asset freeze order, the Gucci court engaged in no express comity analysis and the Tiffany court merely relied on its discovery analysis. (Gucci SPA 4–5; Tif-fany SPA 32). The Gucci court’s failure to address comity was error, as was the Tiffany court’s inade-quate approach.

Some overlap exists with respect to the factors laid out in Sections 403 and 442 of the Restatement, but the considerations relating to general extraterri-torial enforcement of law differ from those that apply specifically to discovery. Compare RESTATEMENT

20 § 403 with RESTATEMENT § 442. Of note, Section 403 identifies the following reasonableness factors that arguably are not reflected in Section 442:

(a) the link of the activity to the ter-ritory of the regulating state; . . . (c) the character of the activity to be regulated, the importance of regulation to the regulating state, the extent to which other states regulate such activi-ties, and the degree to which the desira-bility of such regulation is generally ac-cepted; . . . (d) the existence of justified expecta-tions that might be protected or hurt by the regulation; . . . (e) the importance of the regulation to the international political, legal, or economic system; . . . (g) the extent to which another state may have an interest in regulating the activity; and (h) the likelihood of conflict with reg-ulation by another state.

RESTATEMENT § 403(2). These factors capture inter-ests that may otherwise be excluded when conducting a discovery analysis, and indeed reflect the types of considerations that are inherent in determinations that the United States undertakes, through its agen-cies, before pursuing foreign asset restraints in public enforcement actions.

21

In conducting their analyses of the asset re-straints on remand, the district courts should consid-er a number of factors. These include the professed Chinese Government interests in its banking laws, as stated in the Regulators’ Letter and otherwise, with appropriate weight given to the foreign sovereign’s views regarding the purpose, importance, and re-quirements of its laws and regulations. The courts should weigh the United States’ strong interest in en-forcing the Lanham Act and providing robust reme-dies for private litigants. The Banks’ justified expec-tations concerning regulation should be addressed, bearing in mind that they are not defendants in the litigation. As banks headquartered in China, they are subject to general regulation and enforcement by China; they have also chosen, however, to do business in the United States and have thereby subjected themselves to American regulatory and judicial au-thority. The courts should consider the location of the assets to be frozen and, consistent with Grupo Mexi-cano, also consider whether assets restrained abroad will ultimately be subject to attachment by plaintiffs. The courts should also bear in mind that this is a dis-pute between private litigants, rather than an action (such as a government enforcement action) “in fur-therance of the public interest,” where courts’ equity powers would typically be broader. First Nat’l City Bank, 379 U.S. at 383 (quotation marks omitted).

In sum, these cases should be remanded for the district courts to conduct balancing analyses under Restatement Section 403.

22

POINT II

The Gucci Court Did Not Abuse Its Discretion in Ordering Compliance with Gucci’s Subpoena

In contrast, there was no reversible error in the Gucci court’s order compelling BOC to comply with Gucci’s document subpoena and declining to require Gucci to seek evidence via the Hague Convention. The Gucci court conducted a multi-factored comity analysis, and while the parties disagree on the out-come of that analysis, they are in agreement (as is the United States) that the court considered the ap-propriate factors. The United States does wish to point out certain considerations the district court should have analyzed more closely in its comity anal-ysis, but does not believe that the court’s analysis amounted to an abuse of discretion. The government also wishes to clarify any ambiguity regarding revi-sions to a website maintained by the Department of State, and respond to certain representations in the Regulators’ Letter.

The district court did not err in declining to re-quire Gucci to seek evidence from BOC through the Hague Convention in the first instance. The Hague Convention “prescribes certain procedures by which a judicial authority in one contracting state may re-quest evidence located in another contracting state.” Aérospatiale, 482 U.S. at 524. However, the Hague Convention is not the exclusive means for obtaining evidence located abroad, and U.S. courts need not re-quire litigants to resort to the Convention’s proce-dures in the first instance. Id. at 539, 542. District

23 courts may decide whether to apply Hague Conven-tion procedures case by case, looking to “the particu-lar facts, sovereign interests, and likelihood that re-sort to these procedures will prove effective.” Id. at 544. The Supreme Court has advised United States courts to “take care to demonstrate due respect for any special problem confronted by the foreign litigant on account of its nationality or the location of its op-erations, and for any sovereign interest expressed by a foreign state,” but has declined to “articulate specif-ic rules to guide this delicate task of adjudication.” Id. at 546.

In deciding whether to compel extraterritorial dis-covery, district courts within this Circuit employ a seven-factor test that incorporates the five factors identified in Section 442 of the Restatement (Third) of Foreign Relations Law, entitled “Requests for Dis-closure: Law of the United States.” See, e.g., Minpeco, S.A. v. Conticommodity Servs., Inc., 116 F.R.D. 517, 522–23 (S.D.N.Y. 1987) (deriving factors from Re-statement (Second) of Foreign Relations Law § 40 (superseded by Section 442), Trade Dev. Bank v. Con-tinental Ins. Co., 469 F.2d 35, 41 (2d Cir. 1972), and Société Internationale pour Participations Industri-elles et Commerciales, S.A. v. Rogers, 357 U.S. 197, 208–13 (1958)); Wultz v. Bank of China Ltd., 910 F. Supp. 2d 548, 552 (S.D.N.Y. 2012).

Before granting Gucci’s motion to compel BOC to comply with the document subpoena, the Gucci court analyzed all seven factors: (1) the importance to the litigation of the documents requested; (2) the specific-ity of the request; (3) whether the information origi-

24 nated in the United States; (4) the availability of al-ternative means of securing the information; (5) the extent to which noncompliance would undermine im-portant interests of the United States, or compliance would undermine important interests of the state where the information is located; (6) the hardship of compliance; and (7) whether a party has proceeded in bad faith. (Gucci SPA 6–13). In performing its analy-sis, the district court evaluated the record before it, and on the whole, its decision to accord more weight to certain factors than others did not amount to an abuse of discretion.

While the United States has not identified an abuse of discretion necessitating reversal or remand, it believes that the district court did not give ade-quate weight to certain considerations relevant to the fifth factor—the balancing of sovereign interests—which the court concluded weighed in Gucci’s favor. (Gucci SPA 11). Specifically, the court appears to have discounted the importance of China’s banking secrecy laws by incorrectly characterizing them as “blocking statutes.” (Gucci SPA 10). Blocking stat-utes, like the French law at issue in Aérospatiale, ex-ist solely to prohibit the disclosure of evidence in for-eign judicial proceedings outside a treaty or interna-tional agreement. Aérospatiale, 482 U.S. at 526 n.6. China’s banking secrecy laws have a broader purpose: according to the expert declarations submitted by BOC and the November 3 Letter, those laws were en-acted to engender confidence in and promote the de-velopment of China’s banking system, and China has an interest in enforcing them to achieve those goals. The November 3 Letter also undercuts the Gucci

25 court’s conclusion that “China’s bank secrecy laws merely confer an individual privilege on customers rather than reflect a national policy entitled to sub-stantial deference.” (Gucci SPA 10–11). Particularly with respect to the November 3 Letter, the Gucci court should have been more mindful that a “foreign sovereign’s views regarding its own laws merit—although they do not command—some degree of def-erence,” Karaha Bodas Co., L.L.C. v. Perusahaan Per-tambangan Minyak Dan Gas Bumi Negara, 313 F.3d 70, 92 (2d Cir. 2002), and should not have summarily dismissed representations describing the national importance of China’s banking secrecy laws.

Additionally, in balancing national interests un-der the fifth factor, the Gucci court relied mainly on the United States’ general interests in enforcing acts of Congress. (Gucci SPA 11). But it also should have weighed additional relevant considerations. Enforc-ing the Lanham Act is of special importance because the United States has a strong continuing interest in keeping counterfeit goods out of the domestic mar-ketplace: counterfeiting is not simply a violation of a private citizen’s property rights, but also entails a significant risk to public health and safety involving products as diverse as medications, food products, aircraft parts, and key components of national de-fense systems. Apart from its interests in the specific statute at issue, the United States has a strong inter-est in maintaining a litigation system that provides for timely and fair opportunities for parties to obtain evidence that lies outside their control, and in secur-ing the good-faith participation of entities that choose to do business in the United States. These interests

26 should also have been part of the district court’s analysis.

Regarding the sixth factor—hardship of compli-ance—the Gucci court based its conclusion that any hardship to BOC was unduly speculative on a review of expert declarations describing the potential conse-quences of violating China’s banking secrecy laws, cases in which banks were found liable under those laws, and (on BOC’s motion for reconsideration) the November 3 Letter’s statement that the regulators issued a “severe warning” to BOC and were consider-ing further sanctions. (Gucci SPA 12–13, 22). Only after BOC filed and briefed its appeal did a December 4, 2013, decision from a Chinese court show that cer-tain of the infringers in the Gucci case sued BOC for freezing their accounts. (Dkt. 275-2). The Chinese court ordered BOC to resume services to those in-fringers and ordered BOC to pay a court fee of 70 renminbi (approximately eleven U.S. dollars). (Dkt. 275-2). If this information had been properly before the district court, it should have been considered along with the other facts in the record in evaluating the actual extent of any hardship to BOC in comply-ing with an order that could conflict with China’s banking secrecy laws.

Finally, with respect to the fourth factor in its comity analysis—the availability of alternative means of securing information—the Gucci court con-cluded that the Hague Convention was “not a viable alternative method of securing the information Plain-tiffs seek.” (Gucci SPA 7–10). The United States does not make or report compliance determinations with

27 respect to the operation of the Hague Convention in other states. However, the Gucci court was properly “reluctant to discount Plaintiffs’ evidence and the case law cited . . . solely because of an unexplained revision to the State Department’s website.” (Gucci SPA 10). BOC presented evidence to the district court that in 2011, the State Department removed lan-guage from its website stating that Hague Conven-tion requests in the People’s Republic of China “have not been particularly successful in the past.” (Gucci SPA 8). We have been informed by the State Depart-ment that it did not intend to express any opinion by eliminating characterizations of other countries’ prac-tices on its website, and that the revision does not re-flect any conclusion concerning China’s performance under the Hague Convention. The Gucci court appro-priately declined to read meaning into this website revision, and future courts should as well.

The Regulators’ Letter does not contain any in-formation compelling reversal of the Gucci court’s discovery order. As indicated above, official state-ments by foreign governments regarding the effect of extraterritorial applications of United States law on their sovereign interests are to be respectfully re-ceived and evaluated, and official representations about the requirements of foreign laws and the scope of sovereign interests associated with such laws should be given due consideration by courts in the framing and enforcement of judicial orders with ex-traterritorial effect.

In this case, however, the Regulators’ entreaty to United States courts to require use of the Hague

28 Convention as the exclusive means of foreign evi-dence-gathering is contrary to the Supreme Court’s decision in Aérospatiale. 482 U.S. at 539, 542. Moreo-ver, the letter contains certain representations that do not comport with the United States’ understand-ing. For example, the Regulators’ Letter cites the As-surances Commitment by BOC to the Federal Re-serve, and states that the district court’s discovery order “completely undermines the basis on which the Chinese banking regulators agreed to Chinese banks[’] applying for US branch-banking licenses.” (Regulators’ Letter 4–5). This misconstrues those As-surances. The Assurances Commitment is a part of the Federal Reserve’s standard application for a for-eign banking organization to establish a branch or agency in the United States. See International Appli-cations and Prior Notifications Under Subpart B of Regulation K—FR K-2, OMB No. 7100-0284, Attach-ment E, available at http://www.federalreserve.gov/reportforms/forms/FR_K-220140331_f.pdf (p.18). The Assurances Commitment is a promise by a bank to supply whatever information the Federal Reserve re-quests for supervisory purposes, without limitation. Id. It does not contain any reciprocal promises and does not address discovery of information by other federal banking regulators or in private litigation. Id. Accordingly, the terms of the Assurances Commit-ment do not support the Regulators’ argument that BOC has only a “limited” obligation to supply infor-mation, and would not have had any bearing on the Gucci court’s analysis.

The Regulators’ Letter also contains certain char-acterizations regarding the S&ED, which is an ongo-

29 ing policy dialogue established in 2009 by President Obama and then-Chinese President Hu as a high-level bilateral forum to discuss a broad range of is-sues between the two nations. The letter cites, with-out context, a bilateral commitment from the Fifth Round of the S&ED to improve cooperation in certain matters, including in the areas of evidence-taking and seizure or forfeiture judgments. (Regulators’ Let-ter 4). Because the S&ED is an ongoing policy dia-logue between the two countries, the United States declines at this time to comment on the substance of the S&ED commitment. Nevertheless, the United States’ decision not to respond to this aspect of the Regulators’ Letter should not be construed as agree-ment with the Regulators’ characterizations of the S&ED commitment.

30

CONCLUSION

The orders of the district courts denying the Banks’ motions to modify the asset freeze injunctions should be vacated, and this portion of the cases re-manded for further consideration as set forth in this amicus brief. Dated: New York, New York

May 21, 2014

Respectfully submitted,

PREET BHARARA, United States Attorney for the Southern District of New York, Attorney for the United States of

America as Amicus Curiae.

CARINA H. SCHOENBERGER, BENJAMIN H. TORRANCE, Assistant United States Attorneys, Of Counsel.

STUART F. DELERY, Assistant Attorney General DOUGLAS N. LETTER, SCOTT R. MCINTOSH, Attorneys, Appellate Staff Civil Division, Department of Justice

CERTIFICATE OF COMPLIANCE

Pursuant to Rule 32(a)(7)(C) of the Federal Rules of Appellate Procedure, the undersigned counsel hereby certifies that this brief complies with the type-volume limitation of Rule 32(a)(7)(B). As measured by the word processing system used to prepare this brief, there are 6654 words in this brief.

PREET BHARARA, United States Attorney for the Southern District of New York

By: CARINA H. SCHOENBERGER, Assistant United States Attorney