By Meg Utterback, King & Wood Mallesons and Tara J. Plochocki, Lewis Baach PLLC

utterback_mIn 2010 and 2011, the New York branch of the Bank of China (“BOC”)was served with two subpoenas relating to a lawsuit for trademark infringement brought by luxury goods companies Gucci, Balenciaga, Yves Saint Laurent, Bottega Veneta and others. They sought all documents – including those located in China – relating to BOC accounts belonging to the defendant counterfeiters.  BOC protested that compliance with these requests would cause it to violate PRC law protecting bank customers from unauthorized disclosure of their account information. Last month, BOC’s five-year battle to maintain its customers’ privacy and remain in compliance with Chinese law came to an end.  In that time, BOC filed two appeals, was found in contempt of court twice, and filed its own lawsuit in China.  In November 2015, the District Court for the Southern District of New York raised the cost of noncompliance.  It issued an order imposing a coercive fine of $50,000 U.S. dollars per day until BOC complied with the subpoenas.  By January 20, 2016, the fine had reached $1 million, and BOC capitulated. It produced over 7,000 pages from its Chinese offices.  Despite contesting BOC’s claims of privilege over certain documents, Gucci notified the court on April 8, 2016 that it had resolved its dispute with BOC.

The Gucci case offers some insight as to what to expect from U.S. courts going forward.  It appears probable that U.S. courts will continue to demand the production of information protected from disclosure outside the U.S., and will assert jurisdiction when lawsuits or subpoenas relate to an entity’s deliberate use of a U.S. correspondent bank account.

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