Court of Appeals Concludes That Specific Personal Jurisdiction Over Non-Party Bank of China May Exist Based on Operation of Local Branches and Other Activities

The World in U.S. Courts: Fall 2014 - Personal Jurisdiction | September.17.2014

Gucci America v. Bank of China, U.S. Court of Appeals for the Second Circuit, September 17, 2014

Plaintiffs are luxury goods manufacturers that sued a number of entities under the Lanham Act for trademark infringement in connection with their alleged counterfeiting activities.  In the litigation, the plaintiffs sought to obtain jurisdiction over the nonparty Bank of China so that they could obtain documents and information from the bank that would assist them in the case.  The trial court required the bank to comply with the requests.  Also at issue was an asset freeze ordered by the trial court directing the defendants not to move certain funds from the bank.  On appeal, the U.S. Court of Appeals in New York concluded that no basis for the exercise of general personal jurisdiction over the bank existed, but it returned the case to the trial court to determine whether specific personal jurisdiction could be obtained, on the terms described below.

The Bank of China argued that none of the orders could be applied to it because it was not subject to the court's personal jurisdiction.  As to the asset freeze, the Court observed that the target of the orders was the defendant companies, not the bank, and so jurisdiction over the bank was not immediately relevant.  While injunctions from federal courts run against named parties as well as others who are "in active concert or participation" with them, the Court of Appeals noted that questions as to personal jurisdiction could be addressed if and when any enforcement of the order against the bank was attempted.  As to that question, the Court observed that specific personal jurisdiction could ordinarily be obtained over a nonparty by the nonparty's intentional disregard or undermining of a court order of which it had notice.  In the context of a non-U.S. nonparty, however, the Court noted that, in connection with the traditional inquiry as to whether the exercise of personal jurisdiction would comport with "fair play and substantial justice," a court should consider the nature of the bank's branches and activities in New York.

As to the Bank of China's obligation to respond to discovery, the Court of Appeals first concluded that general personal jurisdiction could not be obtained.  Applying the U.S. Supreme Court's 2014 decision in Daimler AG v. Bauman, the Court noted that the bank was neither incorporated nor based in New York, and that the bank's four local branch offices, compared with the bank's global operations, were not so significant as to leave the bank essentially "at home" in New York and thus subject to general personal jurisdiction.

That left the question whether the trial court could assert specific personal jurisdiction over the Bank, based on claims that arose directly out of contacts with the forum.  Noting that a different rule applied to parties than to nonparties, like the Bank of China, the Court stated that the question whether an exercise of specific personal jurisdiction would be constitutional would require an assessment of the connection between the bank's contacts with New York and the order at issue, and whether exercising jurisdiction for the purposes of the order was consistent with traditional notions of fundamental fairness.  The Court also noted without deciding that the bank may have consented to personal jurisdiction in connection with its applications to open branch offices in New York.

Finally, the Court of Appeals directed that the trial court consider "comity" with other nations in connection with the assertion of specific personal jurisdiction over the Bank of China, noting specifically the bank's arguments that adherence to the asset freeze might expose it to criminal sanctions under Chinese law.

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