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Tiffany (Nj) LLC and v. Qi andrew

July 25, 2011

TIFFANY (NJ) LLC AND
TIFFANY AND COMPANY, PLAINTIFFS,
v.
QI ANDREW, GU GONG, SLIVER DENG AND KENT DENG, ALL D/B/A TIFFANYSTORES.ORG, FASHION STYLE AND STORESORG; ABC COMPANIES; AND JOHN DOES, DEFENDANTS.



The opinion of the court was delivered by: Pitman, United States Magistrate Judge:

OPINION AND ORDER

I. Introduction

Plaintiffs move for an Order compelling non-parties Bank of China ("BOC"), Industrial and Commercial Bank of China ("ICBC") and China Merchants Bank ("CMB") (collectively the "Banks") to produce documents pursuant to a subpoena duces tecum that was served upon them in January 2011. The Banks oppose plaintiffs' motion.

For the reasons set forth below, plaintiffs' motion to compel is denied without prejudice to renewal.

II. Facts

Plaintiffs Tiffany (NJ) LLC and Tiffany and Company are the well-known, high-end manufacturers of jewelry and other products which hold "various federally registered and common law trademarks used to identify the high quality goods merchandised or manufactured by Tiffany" (Complaint, dated Dec. 20, 2010 (Docket Item 1), ¶ 1). Plaintiffs allege that defendants sold counterfeit Tiffany products through several websites hosted in the United States. Plaintiffs claim that defendants accepted payment in U.S. dollars and used PayPal, Inc. ("PayPal") to process customers' credit card transactions, then transferred the profits to accounts held by the Banks (Memorandum of Law in Support of Plaintiffs' Motion to Compel, dated May 3, 2011 (Docket Item 21), ("Pl.'s Mem. in Supp.") at 1). PayPal was the sole method of payment for these goods (Pl's Mem. in Supp. at 4; Declaration of Robert Weigel, dated May 3, 2011 (Docket Item 22), ("Weigel Decl.") ¶¶ 4, 8, 11--13). Defendants have not responded to the complaint, nor have they responded to the Court's order requiring them to produce documents related to their counterfeiting operation (Pl.'s Mem. in Supp. at 3).

The Honorable William H. Pauley, III, United States District Judge, entered a Preliminary Injunction on January 3, 2011 (Preliminary Injunction, dated January 3, 2011 (Docket Item 7), (the "PI Order")). The PI Order directed that Plaintiffs' motion for continued expedited discovery from financial institutions is granted, and that any banks . . . or other companies or agencies that engage in the transfer of real or personal property, who receive actual notice of this order by personal service or otherwise, shall provide to Plaintiffs all records in their possession, custody, or control, concerning the assets and financial transactions of Defendants or any other entities acting in concert or participation with Defendants, including but not limited to records concerning the following: . . . any and all Bank of China accounts in the name of or associated with Defendants . . . any and all Industrial and Commercial Bank of China accounts in the name of or associated with Defendants (PI Order at 8). The PI Order further directed that these institutions could "apply to this Court for relief from the terms of this paragraph within seven (7) days of service of this order" (PI Order at 9).

On January 5, 2011, plaintiffs served the New York branches of BOC and ICBC ("BOCNY" and "ICBCNY" respectively) with copies of the PI Order, and on January 7, 2011, plaintiffs served these branches with subpoenas pursuant to Federal Rule of Civil Procedure 45 (Declaration of Lanier Saperstein, dated May 17, 2011 (Docket Item 27), ("Saperstein Decl.") ¶¶ 5-6) seeking the following documents: (1) communications concerning defendants or defendants' accounts; (2) documents containing contact information associated with defendants' accounts; (3) documents relating to any and all credit card transactions processed in connection with purchases from defendants or defendants' websites; (4) documents concerning any open or closed checking, savings, or money market accounts, and certificates of deposit held in the name of any of the defendants, including bank statements; (5) documents concerning any open or closed loans or mortgages relating to any of the defendants; (6) wire transfer documents and files relating to any of the defendants, including documents reflecting the source of funds for wires into defendants' accounts and (7) documents relating to Currency Transaction Reports and Suspicious Activity Reports concerning any of the defendants (see Pl.'s Mem. in Supp. at 4-5; Subpoenas, attached to Weigel Decl. as Exs. 7, 9, 11).

On January 7, 2011, BOCNY informed plaintiffs that it had searched its computer system, but did not find any accounts held in the names of defendants. BOCNY requested additional information to distinguish common Chinese names, as well as the full account number of the abbreviated account number set forth in the PI Order. It agreed to search for that account, as well as any responsive wire transfer documents for which BOCNY acted as an intermediary. BOCNY also asserted that it "ha[d] no access to or control over any customer accounts or any customer account information located outside the United States" (Letter of Lanier Saperstein to Anne Coyle, dated Jan. 7, 2011 and attached to Saperstein Decl. as Ex. D).

On January 21, 2011, BOCNY informed plaintiffs that after a search, it had not located any responsive wire transfers, though it claimed it needed additional identifying information to identify responsive wire transfers for "Ma Li" because it was too common a name. BOCNY also offered to assist plaintiffs in preparing and submitting a discovery request to Chinese authorities pursuant to the Hague Convention, a proposal to which plaintiffs did not agree (Letter of Lanier Saperstein to Jennifer Halter, dated Jan. 21, 2011 and attached to Saperstein Decl. as Ex. E).

On January 24, 2011, BOCNY served objections and responses to the subpoena, and stated that it did not have "possession, custody or control" of documents at any branch or office outside of the United States. It also objected to producing any information to the extent such production would violate domestic or foreign law (BOCNY's Objections and Responses to Plaintiffs' Rule 45 Subpoena, dated Jan. 24, 2011 and attached to Saperstein Decl. as Ex. F). On February 24, 2011, BOCNY confirmed that it had no accounts matching the numbers provided by plaintiffs, nor did it have any wire transfer documents to or from those accounts during the relevant time period (Letter of Lanier Saperstein to Jennifer Halter, dated Feb. 24, 2011 and attached to Saperstein Decl. as Ex. G).

Similarly, on January 7, 2011, ICBCNY informed plaintiffs that it held no accounts relating to any of the defendants (Letter of Ying Wang to Anne Coyle, dated Jan. 7, 2011 and attached to Saperstein Decl. as Ex. H). ICBCNY later informed plaintiffs that it had no accounts matching the numbers provided by plaintiff, but proposed to assist plaintiffs in preparing a request pursuant to the Hague Convention (Letter of Lanier Saperstein to Jennifer Halter, dated Feb. 24, 2011 and attached to Saperstein Decl. as Ex. G).

On January 24, 2011, ICBCNY served its formal objections and responses to the subpoena and stated that it did not have "possession, custody or control" of documents at any branch or office outside of the United States, and objected to producing any information to the extent such production would violate domestic or foreign law (ICBCNY Objections and Responses, dated Jan. 24, 2011 and attached to Saperstein Decl. as Ex. I).

On January 26, 2011, plaintiffs served a copy of the PI Order and a Rule 45 Subpoena on CMB's New York branch ("CMBNY") seeking the same documents as those requested from BOC and ICBC (PI Order and Subpoena, dated Jan. 26, 2011 and attached to Weigel Dec. as Ex. 11). In a letter dated January 28, 2011, CMBNY's counsel informed plaintiffs that it "ha[d] no accounts or assets for the defendants listed in the PI [Order] and identified in your letter" and noted that CMBNY would serve "objections and responses to the Subpoena within the time called for in the Subpoena" (Letter of Dwight Healy to Jennifer Halter, dated Jan. 28, 2011 and attached to Declaration of Dwight Healy, dated May 17, 2011 (Docket Item 24), ("Healy Decl.") as Ex. A). CMBNY then objected to the production of any documents not in the custody and control of CMBNY, noting that it did not have control over documents located in any other office of CMB. CMBNY also objected to producing documents that "would violate any applicable domestic or foreign law, including the banking, commercial and criminal laws of the People's Republic of China" (CMB's Objections and Responses, dated Jan. 24, 2011 and attached to Weigel Decl. as Ex. 14).

Plaintiffs now move to compel the Banks to provide all documents called for by the subpoenas and the PI Order (Docket Item 20). The Banks oppose this motion arguing: (1) the Banks do not have custody or control of documents located in China and (2) plaintiffs' motion should be denied in accordance with notions of comity.

III. Analysis

A. Scope of Subpoena

Served Pursuant to Rule 45*fn1

1. Applicable Law

Rule 45 of the Federal Rules of Civil Procedure states that a subpoena may command a non-party to produce documents that are in its "possession, custody, or control." Fed.R.Civ.P. 45; see also Linde v. Arab Bank, PLC, 262 F.R.D. 136, 141 (E.D.N.Y. 2009).

"Control is defined not only as possession, but as the legal right to obtain the documents requested upon demand." Searock v. Stripling, 736 F.2d 650, 653 (11th Cir. 1984). "Control" may also be found where an entity has "access to" and the "ability to obtain the documents." Bank of New York v. Meridien BIAO Bank Tanzania Ltd., 171 F.R.D. 135, 144 (S.D.N.Y. 1997); see also, e.g., In re Ski Train Fire of November 11, 2000 Kaprun Austria, 2006 WL 1328259, *5 (S.D.N.Y. 2006) (same); Addamax Corp. v. Open Software Found., Inc., 148 F.R.D. 462, 467 (D.Mass. 1993) (same). The party seeking to compel a subsidiary to produce the documents of its foreign parent has the burden of showing that the documents are within the local subsidiary's con- trol. See, e.g., State of New York v. Nat'l R.R. Passenger Corp., 233 F.R.D. 259 (N.D.N.Y. 2006). "Access" and "ability to obtain documents" have been found where "documents ordinarily flow freely between" parent and subsidiary. Hunter Douglas, Inc. v. Comfortex Corp., No. CIV. A. M8-85, 1999 WL 14007, at *3 (S.D.N.-Y. Jan. 11, 1999).

Linde v. Arab Bank, PLC, supra, 262 F.R.D. at 141 (footnote omitted). See also Shcherbakovskiy v. Da Capo Al Fine, Ltd., 490 F.3d 130, 138 (2d Cir. 2007) (documents are within a party's possession, custody or control when it has the practical ability to obtain them); Vacco v. Harrah's Operating Co. Inc., No. 1:07-CV-0663 (TJM/DEP), 2008 WL 4793719 at *9 (N.D.N.Y. Oct. 29, 2008) ("The touchstone of control, which has been variously defined by the courts, is the ability, whether through the exercise of a legal right or authority or through other means, to obtain the requested documents."); see George Hantscho Co. v. Miehle-GossDexter, Inc., 33 F.R.D. 332, 334-35 (S.D.N.Y. 1963) (Palmieri, D.J.).

Regardless of the witness' legal relationship to a document, for the purposes of a Rule 45 subpoena, a document is within a witness's "possession, custody, or control" if the witness has the practical ability to obtain the document. Babaev v. Grossman, No. CV03-5076 (DLI)(WDW), 2008 WL 4185703 at *3 (E.D.N.Y. Sept. 8, 2008) ("Documents are under a party's control when it has the right, authority or practical ability to obtain them from a non-party."); In re NTL, Inc. Sec. Litig., 244 F.R.D. 179, 195 (S.D.N.Y. 2007) (Peck, M.J.) ("Under Rule 34, control does not require that the party have legal ownership or actual physical possession of the documents at issue; rather, documents are considered to be under a party's control when that party has the right, authority, or practical ability to obtain the documents from a non-party to the action.") (internal quotation marks and citations omitted), aff'd sub nom., Gordon Partners v. Blumenthal, 02 Civ. 7377 (LAK), 2007 WL 1518632 (S.D.N.Y. May 17, 2007) (Lewis, D.J.); see In re Zyprexa Prods. Liab. Litig., 254 F.R.D. 50, 58 (E.D.N.Y. 2008), aff'd, 04-MD-1596, 2008 WL 4682311 (E.D.N.Y. Oct. 21, 2008); Bank of New York v. Meridien BIAO Bank Tanzania, Ltd., 171 F.R.D. 135, 146-47 (S.D.N.Y. 1997) (Francis, M.J.); George Hantscho Co. v. Miehle-Goss-Dexter, Inc., supra, 33 F.R.D. at 334-35.*fn2 If the party subpoenaed has the practical ability to obtain the documents, the actual physical location of the documents -- even if overseas -- is immaterial. Matter of Marc Rich & Co., A.G., 707 F.2d 663, 667 (2d Cir. 1983); In re Flag Telecom Holdings, Ltd. Sec. Litig., 236 F.R.D. 177, 180 (S.D.N.Y. 2006) (Conner, D.J.); Cooper Indus., Inc. v. British Aerospace, Inc., 102 F.R.D. 918, 920 (S.D.N.Y. 1984) (Edelstein, D.J.). However, "[l]egal and practical inability to obtain the requested documents from the non-party, including by reason of foreign law, may place the documents beyond the control of the party who has been served with the Rule 34 request." Cohen v. Horowitz, 07 Civ. 5834 (PKC), 2008 WL 2332338 at *2 (S.D.N.Y. June 4, 2008) (Castel, D.J.), citing Shcherbakovskiy v. Da Capo Al Fine, Ltd., supra, 490 F.3d at 138.

The burden of demonstrating that the party from whom discovery is sought has the practical ability to obtain the documents at issue lies with the party seeking discovery. Golden Trade S.r.L. v. Lee Apparel Co., 143 F.R.D. 514, 525 n.7 (S.D.N.-Y. 1992) (Dolinger, M.J.) ("In the face of a denial by a party that it has possession, custody or control of documents, the discovering party must make an adequate showing to overcome this assertion."); accord Honda Lease Trust v. Middlesex Mut. Assur. Co., No. 3:05CV1426 (RNC), 2008 WL 3285242 at *2 (D. Conn. Aug. 7, 2008); SEC v. Credit Bancorp, Ltd., supra, 194 F.R.D. at 472; In re Lozano, 392 B.R. 48, 54 (Bnkr.S.D.N.Y. 2008) (Glenn, B.J.).

"[A] corporation is presumed to have custody and control of its own records ordinarily required in the course of business, and the burden of proving otherwise is on the corporation" (Pl.'s Mem. in Supp. at 7, citing Hunter Douglas, Inc. v. Comfortex Corp., CIV. A. M8-85 (WHP), 1999 WL 14007 at *3 n.6 (S.D.N.Y. Jan. 11, 1999) (Pauley, D.J.); Cooper Indus. Inc. v. British Aerospace, Inc., supra, 102 F.R.D. at 920 n.2; In re Equitable Plan Co., 185 F. Supp. 57, 60-61 (S.D.N.Y. 1960) (Herlands, D.J.) (requiring foreign banks to respond to document subpoenas served on New York branches)). In this case, plaintiffs' subpoenas were directed to the corporate entities of BOC, ICBC and CMB --- entities which actually have branch offices (not subsidiaries or affiliates) in New York.

2. Location of the Documents

The New York branch offices all claim that the documents at issue are located in their China branches, and they assert that the New York and China branches do not share computer systems that can access the information sought and do not otherwise exchange the type of information requested (Declaration of Richard Pagnotta, dated May 17, 2011 (Docket Item 26), ("Pagnotta Decl.") ¶¶ 2-3; Declaration of John Beauchemin, dated May 17, 2011 (Docket Item 28), ("Beauchemin Decl.") ¶¶ 3-6; Declaration of Xintao Luo, dated May 17, 2011 (Docket Item 30), ("Luo Decl.") ¶¶ 3-6). Therefore, the Banks claim that the documents are not in the New York branches' custody and control and cannot be produced. They also claim that their personnel "do not have the authority to direct personnel at the head offices or at Chinese branches to disclose customer account information" and lack the "ability" or "legal right" to obtain the information plaintiffs request (Memorandum of Law in Opposition to Plaintiffs' Motion to Compel the Production of Documents from Non-parties Bank of China and Industrial and Commercial Bank of China, Ltd., dated May 17, 2011 (Docket Item 31), ("BOC/ICBC Mem. in Supp.") at 12-13, citing Linde v. Arab Bank, PLC, supra, 262 F.R.D. at 141 and Zenith Electronics v. Vizio, Misc. No. M8-85, 2009 WL 3094889, at *2 (S.D.N.Y. Sept. 25, 2009) (Pauley, D.J.)). The Banks further note that although their foreign customers can access their accounts electronically in the United States, the United States branches of the Banks cannot themselves access this information (see Pagnotta Decl. ¶ 4; Beauchemin Decl. ¶ 4).

Plaintiffs claim that because "[n]one of the Banks' New York branches are separately incorporated from the branches that operate overseas, including the branches in China," the Banks should be deemed to have custody and control over the documents at issue (Pl.'s Mem. in Supp. at 5).

3. The Banks have Custody and Control of the Documents

As noted by plaintiffs, "a corporation is presumed to have custody and control of its own records ordinarily required in the course of business, and the burden of proving otherwise is on the corporation" (Pl.'s Mem. in Supp. at 7, citing Hunter Douglas, Inc. v. Comfortex Corp., supra, 1999 WL 14007 at *3 n.6). "Clear proof of lack of possession and control is necessary to rebut the presumption." First Nat'l v. IRS, 271 F.2d 616, 618 (2d Cir. 1959). In this case, plaintiffs' subpoenas are directed to the corporate entities of BOC, ICBC and CMB. Though they were served on their branch offices in New York, the subpoenas are directed to these corporate entities in their entirety. The Banks do not dispute that their New York and China branches are part of the same corporate entity. The necessary inquiry, therefore, is whether the Banks have overcome the presumption that they control the documents within their China branches.

This case is analogous to Ssangyong Corp. v. Vida Shoes Int'l, Inc., 03 Civ. 5014 (KMW)(DFE), 2004 WL 1125659 (S.D.N.Y. May 20, 2004) (Eaton, M.J.), in which the New York branch of a bank headquartered in Hong Kong claimed it did not have custody and control over the documents in the foreign branch. The Court held that where the foreign bank and its New York branch were not "separate entities," and account holders were aware that documents could be sent outside the foreign branch, the New York branch had custody and control of the documents regardless of their location abroad. Ssangyong Corp. v. Vida Shoes Int'l, Inc., supra, 2004 WL 1125659 at *4-5. Although the Banks are correct that an analysis of the "reality of whether the entity from which discovery is sought has actual control over the records" has been used to determine the reach of a subpoena or document request (Memorandum of Law of Third Party China Merchants Bank in Opposition to the Plaintiffs' Motion to Compel, dated May 17, 2011 (Docket Item 23), ("CMB Mem. in Supp.") at 7), this analysis is usually warranted only "[w]here there are two entities." Ssangyong Corp. v. Vida Shoes Int'l, Inc., supra, 2004 WL 1125659 at *4 (emphasis added).

The Banks cite several cases in which motions to compel discovery were denied because one branch of an entity was found to lack control over the documents of another (CMB Mem. in Supp. at 7, 10; BOC/ICBC Mem. in Supp. at 13 n.3, citing New York ex rel. Boardman v. Nat'l R.R. Passenger Corp., 233 F.R.D. 259, 268 (N.D.N.Y. 2006); Zenith Electronics v. Vizio, supra, 2009 WL 3094889 at *2; Linde v. Arab Bank, PLC, supra, 262 F.R.D. at 142-45). However, these cases are not instructive because they give no insight into the fact-specific question of whether the Banks in this case, the New York branches of which are not legally separate entities, have overcome the presumption that they have control over their own documents.

The Banks also discuss several cases in which a corporate branch was either found to have control over documents in another branch, or did not argue otherwise (CMB Mem. in Supp. at 8-10; BOC/ICBC Mem. in Supp. at 13 n.13, citing First Nat'l v. IRS, supra, 271 F.2d at 618; United States v. First Nat'l City Bank, 396 F.2d 897, 898 n.2*fn3 (2d Cir. 1968); Ings v. Ferguson, 282 F.2d 149, 151-52 (2d Cir. 1960); In re Equitable Plan Co., supra, 185 F. Supp. at 59)). Again, these cases are not helpful because they do nothing to answer the factual question of whether the Banks have custody and control of the documents requested in this case.

The Banks attempt to overcome the presumption that they have custody and control over the documents by asserting that their New York and China branches have separate computer systems, and that their New York personnel cannot compel the China headquarters to produce account information. These facts are of no moment, however, because the subpoena is directed to the Banks as a whole, not solely the New York branches. The Banks do not argue that BOC, ICBC and CMB lack control ...


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