Protections in International Competition
7-5a The International Marketplace and Monetary Issues: The Disclosure Role of Banks
· Protections for banks and international customers: taxes and shelters
§ Taxation issues lead to companies holding funds off-shore – asset parking
· Protections for bank customers: information
§ Hague Convention and requirements on disclosure of information on bank accounts
See PowerPoint Slide 7-23.
CASE BRIEF 7.2
Tiffany and Company v. Andrew
2012 WL 5451259 (S.D.N.Y.)
FACTS: Tiffany (plaintiffs) allege that Andrew and others (defendants) sold counterfeit Tiffany products through several websites hosted in the United States. Andrew accepted payment in U.S. dollars, used PayPal, Inc. to process customers’ credit card transactions, then transferred the sales proceeds to accounts held by the Bank of China (“BOC”), Industrial and Commercial Bank of China (“ICBC”), and China Merchants Bank (“CMB”) (“Banks”).
Andrew defaulted on the suit, and Tiffany sought discovery from the Banks by serving subpoenas seeking the identities of the holders of the accounts into which the proceeds of the counterfeit sales were transferred and the subsequent disposition of those proceeds. The Banks involved all maintained branch offices in the Southern District of New York, and the subpoenas were served on those branch offices.
The Banks responded to the subpoenas by explaining that the information sought was all maintained in China and that the New York branches of the Banks lacked the ability to access the requested information. China’s internal laws prohibited the disclosure of the information except under certain conditions. The Banks proposed that the plaintiffs pursue the requested discovery pursuant to the Hague Convention.
The court concluded that Tiffany should pursue discovery through the Hague Convention. Tiffany submitted its Hague Convention application to China’s Central Authority in November 2010, and on August 7, 2011, the Ministry of Justice of the People’s Republic of China (“MOJ”) responded by producing some of the documents requested. For each of the Banks, the MOJ produced account opening documents (including the government identification card of the account holder), written confirmation of certain transfers into the accounts and a list of transfers out of the accounts. With respect to CMB, the records indicate that all funds in the account were withdrawn through cash transactions at either an ATM or through a teller. BOC and CMB each produced documents concerning a single account; ICBC produced documents for three accounts.
In its cover letter, the MOJ noted that it was not producing all documents requested. Specifically, the letter stated, “Concerning your request for taking of evidence for the Tiffany case, the Chinese competent authority holds that some evidence required lacks direct and close connections with the litigation. As the Chinese government has declared at its accession to the Hague Evidence Convention that for the request issued for the purpose of the pre-trial discovery of documents only the request for obtaining discovery of the documents clearly enumerated in the Letters of Request and of direct and close connection with the subject matter of the litigation will be executed, the Chinese competent authority has partly executed the requests which it deems conform to the provisions of the Convention.”
On the grounds that the MOJ’s production is deficient, Tiffany moved to enforce the subpoenas previously served on the New York branches of the Banks. The deficiencies Tiffany claims are (1) whether any of the defendants have any additional accounts at the Banks; (2) detailed wire transfer records concerning the deposits into and withdrawals from the CMB and ICBC accounts.
ISSUE: Could the court issue subpoenas in order to obtain more information about the bank accounts to help Tiffany identify the perpetrators of the counterfeit goods?
DECISION: No, the court will not issue the subpoenas. The Banks, through the MOJ, have unquestionably produced relevant, responsive documents. Second, the scope of the Banks’ production has not been so narrow that resort to the Convention can fairly be described as futile. The account holders’ identities and addresses have been identified as well as transaction histories. Plaintiffs’ argument that additional documents concerning transfers into and out of the accounts will lead to a fuller understanding of the trademark counterfeiting operation is extremely speculative. Finally, the fact that the MOJ China takes a narrower view concerning the appropriate scope of pretrial discovery does not render the Hague Convention process futile. The high cost of discovery in federal litigation is well known, and the fact that another sovereign chooses to take a more restrictive view of the appropriate scope of pretrial discovery is not unreasonable. In addition, as noted above, China is not unique in reserving its right to limit production in response to a Hague Convention request to documents that it considers to bear a direct and close connection with the litigation; many other countries have made the same reservation.
7-5b Antitrust Laws in the International Marketplace (See PowerPoint Slide 7-24)
· All firms doing business here are subject to antitrust jurisdiction
· All U.S. firms are also subject to EU antitrust laws, which have tended to be more stringent than U.S. antitrust laws currently
· Export Trading Company Act
§ Allows joint ventures among competitors
§ For business in other countries
§ Use summary of laws in Exhibit 7.1
7-5c Protections for Intellectual Property – see Chapter 15 (See PowerPoint Slide 7-25)
7-5d Criminal Law Protections (See PowerPoint Slide 7-26)
· All those present in a country are subject to that country’s criminal law
· Subject to all regulations as well