New Limitations on Asset Restraints and Discovery Orders on Foreign Banks in NY

In Daimler AG v. Bauman, 134 S. Ct. 746 (2014), the US Supreme Court in January 2014 held that a corporation is not subject to personal jurisdiction merely because it “engages in a substantial, continuous, and systematic course of business” in a forum. A corporation is subject to general jurisdiction only where it is considered “at home” and absent exceptional circumstances, a company is only “at home” where it is incorporated or has its principal place of business.

Based on the decision in Daimler, the Second Circuit recently held in two cases, Tiffany (NJ) LLC v. China Merchants Bank, 2014 U.S. App. LEXIS 17827 (2d Cir. 2014) and Gucci America, Inc. v. Bank of China, 2014 U.S. App. LEXIS 17827 (2d Cir. 2014), that the district court’s authority to compel nonparty banks to restrain assets or produce extraterritorial discovery would depend on whether the court had specific personal jurisdiction over the bank. Hence, there must be personal jurisdiction over the nonparty bank that has branch offices in New York, but is incorporated or headquartered elsewhere. The maintenance of a branch bank does not by itself give rise to general jurisdiction over that bank and allow for a freeze of a foreign bank account. It is more likely that parties will have to resort to the Hague Convention or similar treaties and foreign restraint and discovery laws and legal authorities to seek discovery and prejudgment restraint of accounts maintained abroad.

However, these decisions dot not stop all exercise of jurisdiction over a foreign bank with a branch in New York. Instead, there must be a showing of specific jurisdiction. What that entails will be case specific.