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Despite Malaysian Blocking Statute, Court Compels Third Party’s Production of Foreign Banking Information Pursuant to Subpoena

Posted in CASE SUMMARIES

Gucci Amer., Inc. v. Curveal Fashion, 2010 WL 808639 (S.D.N.Y. Mar. 8, 2010)

Plaintiff sought to compel the production of documents and information regarding defendants’ Malaysian bank accounts pursuant to a subpoena served on United Overseas Bank’s New York Agency (“UOB NY”).  UOB NY was not a party to the underlying action, nor was its parent company. Despite substantial evidence that production of the requested information was prohibited by Malaysian law and that violation of the law could subject a person to civil and criminal penalties, the court concluded that compliance with the subpoena was warranted and ordered UOB NY to produce the information within two weeks.

In this trademark infringement case, plaintiffs served a subpoena on UOB NY seeking information regarding defendants’ Malaysian bank accounts.  UOB NY refused arguing that Malaysian banking secrecy laws prohibited such production.  During the pendency of this discovery dispute, plaintiffs were awarded default judgment in the amount of $13.7 million.  The order awarding default directed all defendants’ asset holders, including UOB, to liquidate defendants’ assets to fulfill the judgment, among other things.  Plaintiffs continued to seek production of the requested documents as the bank records were necessary to enforce the order.

Following the order awarding default and a telephone conference with the court, UOB NY submitted a legal opinion, drafted by a Malaysian attorney, indicating that compliance with the subpoena was not permitted by Malaysian law.  In response, plaintiffs argued that as a foreign company doing business in New York, UOB should not be permitted to “hide behind foreign law to flout a valid court order.”

Taking up the issue, the court applied the test set out in the Restatement (Third) of Foreign Relations Law of the United States, as applied by the Supreme Court and other courts nationwide:

In accordance with the Restatement, the Court must consider the following five factors:  (1) the importance of the documents or information requested to the litigation; (2) the degree of specificity of the request; (3) whether the information originated in the United States; (4) the availability of alternative means of retrieving the information; and (5) the extent to which noncompliance with the request would undermine important interests of the United States, or compliance with the request would undermine the important interests of the state where the information is located. In addition, courts in the Second Circuit may also consider "the hardship of compliance on the party or witness from whom discovery is sought [and] the good faith of the party resisting discovery."  (Citations omitted.) 

The court quickly determined that factors one and two weighed in favor of the plaintiffs and that the third weighed in favor of UOB NY.

Turning to the fourth factor, the court determined that the only alternative means available to plaintiffs to receive the requested information was to initiate action in Malaysia to secure a judgment which would provide an exception to the prohibition on disclosure.  Citing the expense and logistical concerns attendant with any such action, the court concluded that the information was not “easily obtained” and that the fourth factor favored plaintiffs.  The court indicated that this conclusion provided a “counterbalance” to the previous factor which the court had concluded favored UOB NY.

The fifth factor was identified as being “of the greatest importance in determining whether to defer to the foreign jurisdiction.”  Further, the court noted that while Malaysian interest must be considered, “American courts are not required to adhere blindly to the directives of [foreign blocking statutes].”  Following analysis of the relevant Malaysian law, the court concluded that “the United States interest in fully and fairly adjudicating matters before its courts…outweighs Malaysia’s interest in protecting the confidentiality of its banking customers’ records.”  Thus, the fifth factor weighed in favor of plaintiffs.

Finally, the court considered UOB NY’s hardship in complying with the subpoena, including the potential for criminal penalties for violating the Malaysian law, and noted that the potential for criminal, rather than civil penalties, typically weighs in favor of the objecting party.  Nonetheless, in the present case, the court found that UOB NY had provided no information to assist in the determination of the likelihood of prosecution for disclosure and thus deemed the concern “mere speculation.”  Thus, the sixth factor weighed in favor of plaintiffs.

Following a brief discussion of UOB NY’s good faith in objecting to the subpoena, the court concluded that compliance with the subpoena was “warranted in this case:”

In sum, the documents are vital to the litigation, the requests are direct and specific, the documents are not easily obtained through alternative means, the interest of the United States outweighs that of Malaysia under the circumstances, and the likelihood that UOB N.Y. would face civil or criminal penalties is speculative.  Although UOB N.Y. has acted in good faith, and the documents are located abroad, this is insufficient to overcome those factors weighing in favor of disclosure.

UOB NY was ordered to produce the documents within two weeks.