Tiffany (NJ) LLC v. Forbse, No. 11-4976, 2012 U.S. Dist. LEXIS 72148 (S.D.N.Y. May 23, 2012)

Plaintiffs, Tiffany (NJ) LLC and Tiffany and Company (collectively, “Tiffany”), filed suit against Defendants under the Lanham Act and New York statutory and common law, alleging trademark infringement through the sale of counterfeit products on various websites.  The court entered a preliminary injunction order that expedited discovery from third-party financial institutions, including the New York branches of China Merchants Bank (“CMB”), Bank of China (“BOC”), and Industrial and Commercial Bank of China (“ICBC”) (collectively, the “Banks”), and required the Banks to restrain Defendants’ assets.

The Banks filed a motion to modify the preliminary injunction and Tiffany cross-moved to compel compliance by the Banks.  In support of their motion, the Banks contended that, because Chinese bank-secrecy laws prohibit the production of bank records in China, Tiffany should have sought such records through the Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters (the “Hague Convention”).  The Banks also contended that there was no source of authority for the court to apply an asset restraint to funds outside the United States. 

After oral argument on the motions, Tiffany learned that BOC was acting as an “acquiring bank” for one of Defendants’ websites.  An acquiring bank helps to process online purchases and is responsible for performing due diligence on the merchant.

The court looked at seven factors to determine the issue of comity with regard to the discovery request: (1) the importance of the documents to the litigation; (2) the specificity of the request; (3) where the information originated; (4) the alternative means of securing the information; (5) the competing national interests; (6) the hardship of compliance; and (7) the good faith of the party resisting discovery.  Based on the totality of the factors, the court ordered BOC to comply with the discovery provision of the injunction because BOC was an acquiring bank for an infringing website.  On the other hand, because Tiffany had the possibility of reasonable alternative means of discovery, the court held that Tiffany was required to direct its discovery requests for ICBC and CMB through the Hague Convention.

Regarding the asset restraint issue, “a federal district court maintains the inherent authority to issue a prejudgment asset restraint only if the plaintiff states a cause of action for final equitable relief and the prejudgment asset restraint preserves the availability of that final relief.”  The court held that an accounting of profits under the Lanham Act constituted discretionary equitable relief and the assets to be frozen included funds that Tiffany may be entitled to in connection with this relief.  Furthermore, because the court had personal jurisdiction over Defendants and the Banks, the court’s authority to restrain Defendants’ assets extends to wherever those assets are located.

In conclusion, BOC was compelled to comply with the discovery requests, while Tiffany was required to seek discovery from ICBC and CMB through the Hague Convention.  Additionally, all three banks were required to comply with the court-ordered asset restraint.