Chinese banks don’t owe $150m over Nike, Converse dispute
The US Court of Appeals for the Second Circuit says that six Chinese banks should not be subject to a $150 million penalty for allegedly enabling Nike and Converse counterfeiters to move money out of the US.
The opinion handed down on August 30 affirms a New York district court’s ruling that the motion alleging the violation was filed too late and that a banking law could reasonably bar the court from imposing sanctions on the foreign banks, including the Bank of China.
The judgment also claimed that there is a “fair ground of doubt” whether the bank’s activities could be constituted as “active concert or participation” in the violations of asset restraints.
Next Investments, Nike’s successor in the lawsuit, also failed to prove the existence of documents that it alleged the Chinese banks had failed to produce in discovery, the second circuit ruled.
Nike and its subsidiary Converse first filed the trademark infringement suit in 2013, targeting “hundreds” of individuals involved in Chinese counterfeiting networks.
The US District Court for the Southern District of New York issued enjoined the banks from transferring, withdrawing or disposing of money from the alleged counterfeiter’s accounts in November of 2013.
Six years later in 2019, Next Investments moved to hold the six banks in contempt for failing to implement the restraints imposed by the New York court and ordered the banks to produce documents proving transactions in violation of the orders. The district court denied the motion, leading Next to appeal.
Until the contempt motion was introduced, Nike or Next never sought to enforce asset restraints against the banks.
‘Separate entity’ rule
Next failed to demonstrate to both the district and appellate courts that the asset restrains imposed in 2013 “unambiguously” forbade the banks from transferring money from the defendant’s accounts.
Both courts cited New York’s “separate entity” rule, which requires courts to treat bank’s foreign branches as separate entities from their New York branches “for the purpose of enforcement of post-judgment asset restraints”.
Next also failed to prove that the banks “aided and abetted” the defendants unlawful activity outside of providing “routine banking activities”.
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