Opposition Brief — Reebok Internationale Ltd. v. Banque Internationale A. Luxembourg S. A.

No. 95-85 (>)

In The

Supreme Court of the

Ai

October Term, 1995

REEBOK INTERNATIONAL LTD. and

REEBOK INTERNATIONAL LIMITED,

Petitioners,

v.

BANQUE INTERNATIONALE

A LUXEMBOURG S.A.,

Respondent.

On Petition For A Writ OF CERTIORARI TO THE UNITED STATES

Court of APPEALS FOR THE NINTH CIRCUIT

RESPONDENT’S BRIEF IN OPPOSITION

LAWRENCE M. HARNETT

Counsel of Record

DIANE C. HERTZ

MARKS & MURASE L.L.P.

399 Park Avenue

New York, New York 10022

(212) 318-7700

Counsel for Respondent

Banque Internationale

a Luxembourg S.A.

a (800) 3 APPEAL + (800) 5 APPEAL + (800) BRIEF 21 04 , :

QUESTION PRESENTED

Whether the Court of Appeals correctly held that the

District Court exceeded its powers when it held a foreign bank,

not a party to the United States court proceeding and not

otherwise subject to personal jurisdiction in the forum, in

contempt for aiding and abetting a violation of an injunction

by engaging in conduct solely in its own country which was

required by the laws of that country.

ii

LIST OF INTERESTED PARTIES

Respondent, Banque Internationale a Luxembourg S.A.

(“BIL”), is a Luxembourg banking corporation, with its

principal place of business in Luxembourg. The parent

companies and subsidiaries (except wholly owned

subsidiaries) of BIL are listed below:

1. Parent Company

Crédit Communal de Belgique, Bruxelles

2. Subsidiaries

Abecor, Bruxelles

Aerochange Sarl, Luxembourg

Aurea Finance Company, Luxembourg

AresS.A., Luxembourg

Banque Bruxelles Lambert, Bruxelles

Belfox, Bruxelles

Bil-Vie S.A., Luxembourg

Bourse de Luxembourg, Luxembourg

Cedel Bank, Luxembourg

Cegedel, Luxembourg

Centralede Communications Luxembourg, Luxembourg

Cetrel, Luxembourg

Euro Pacific Advisors, Hong Kong

Euro-Trav-Ecu, Bruxelles

Europay Luxembourg, Luxembourg

Exor, Luxembourg

Immo Croissance Conseil, Luxembourg

Intercalux S.A., Luxembourg

Luxair Executive S.A., Luxembourg

Luxair, Luxembourg

Luxconsult S.A., Luxembourg

Paneurolife S.A., Luxembourg

Port Fluvial Mertert, Luxembourg

iii

Serie S.A., Luxembourg

Shipping Transport Insurance Management (STIM),

Luxembourg

Soporgest, Luxembourg

Société Immobiliére du Parc des Expositions de

Luxembourg, Luxembourg

Société Internationale des Foires de Luxembourg,

Luxembourg

Société Royal Rome, Luxembourg

Swift, Bruxelles

Visalux S.A., Luxembourg

Luxempart, Luxembourg

iv

TABLE OF CONTENTS

Page

QUST eee METRE? ced occcccceeseccesesess i

LIST OF INTERESTED PARTIES .............008. ii

SARs APT ITEE vib senieccceepeavenecnss iv

TAR IE AR BRREEE ob sv accccevacengaeedaws vi

re ab 6 Wks ico uecinceverssesneanes 2

STATEMENT OF JURISDICTION ................ 2

CONSTITUTIONAL AND STATUTORY PROVISIONS

kg | SC ay ape enn anes oer 3

STATEMENT OF THE CASE ...........cccecceces 4

A. . FBUIEE CIE 6 in on bk ce ccccccevveess 4

B. The Proceedings Below ......ccccccsscecece 9

ARGUMENT - REASONS FOR DENYING THE WRIT

PP ree Te EV EE Pe ee UNE ONE Pee eer 11

I. NONE OF THE THREE’ REASONS

ADVANCED BY THE _ PETITIONER

SUPPORTS REVIEW OF THE DECISION

MAP: Wi ceadnvehescessesesineesuseews 12

A. The Ninth Circuit’s Decision Does Not

Conflict With Decisions of the Fifth Circuit

a RRO EPS Sharir eee ae 12

ala

Vv

Contents

Page

B. The Court of Appeals’ Decision Does Not

Create Confusion and Uncertainty ....... 16

C. The Petitioner’s “Parade of Horrors”

Argument Is Without Merit.............. 19

II. THERE ARE ADDITIONAL REASONS FOR

DENYING THE WRIT ..................... 20

IE Fidei is ee 21

vi

Contents

Page

TABLE OF AUTHORITIES

Cases:

Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482 (9th

Cals BOEED 6 va vcnvatedssbiens buneueesaueees 14

International Shoe Co. v. Washington, 326 U.S. 310

CI wk cov uvianidkceesckdauscenebheas ences 10

Leman v. Krentler-Arnold Hinge Last Co., 284 U.S. 448

CPR: bvcdcbaue 6644 bebe as otekeeencaienneress 14

Steele v. Bulova Watch Co., 344 U.S. 280(1952) ..... 14,15

United States v. First National City Bank, 379 U.S. 378

CIOGS) ob ncccceakeusssdaeeei cacke hi eesra 14,15

United States v. Ross, 302 F.2d 831 (2d Cir. 1962) .... 20

Waffenschmidt v. Mackay, 763 F.2d 711 (Sth Cir. 1985),

cert. denied, 474 U.S. 1056(1986) ......... 10, 12, 13, 14

Statutes and Rules:

SOU Bac BEGEED hccd basacives subieduaneaaeees 3

PAUSED EGE) ivedsscixdesnsGeaaiigngaeas 3

26 UBL BAFEE 6 ckccnsncsasscdctccunssecigeeans 3

ZB UVB.C.'§ USSR) cc cccvocviccccscsctennevananss 3

vii

Contents

Page

ge i ge L,I ae ee 3-4,9,21

St hee ee hag BREE Le EY EEE EAE ema 19

Constitutional Provisions:

ite ke i en ae eres 3

Other Authorities:

Lorang, Luxembourg, in INTERNATIONAL EXECUTION

AGAINST JUDGMENT Destors (D. Campbell ed. 1993) .. 17

Restatement (Third) of the Foreign Relations Law of

the United States § 441(1)(a) OER Big ias a'g os as 20

Restatement (Third) of the Foreign Relations Law of

the United States § 441 commente SE hic ie pan ss 20

1

No. 95-85

In The

Supreme Court of the United States

_N

October Term, 1995

REEBOK INTERNATIONAL LTD. and

REEBOK INTERNATIONAL LIMITED,

Petitioners,

Vv.

BANQUE INTERNATIONALE A

LUXEMBOURG S.A.,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES

Court OF APPEALS FOR THE NINTH CIRCUIT

RESPONDENT’S BRIEF IN OPPOSITION

TO THE HONORABLE SUPREME COURT:

The Respondent, Banque Internationale a Luxembourg

S.A. (“BIL” or the “Banque”), respectfully requests that this

Court deny the Petition for a Writ of Certiorari submitted by

Petitioners Reebok International Ltd. and Reebok

International Limited (collectively “Petitioner” or

“Reebok”). As discussed in the Argument section below, the

decision of the United States Court of Appeals for the Ninth

2

Circuit from which review is sought presents no conflict with

decisions of any other United States Court of Appeals or of

this Court. Moreover, the Ninth Circuit’s holding that it

would be fundamentally unfair to subject BIL to personal

jurisdiction in the California forum was the result of a careful

analysis limited to the unique facts presented in this case.

Accordingly, the Petition raises no issues worthy of this

Court’s review.

OPINIONS BELOW

The opinion of the Ninth Circuit unanimously reversing

the contempt finding against BIL by the United States District

Court for the Southern District of California is reported at 49

F.3d 1387 (9th Cir. 1995) and is reproduced in Petitioner’s

Appendix (“App.”) at 42a-62a. The Order of the Ninth

Circuit unanimously denying Reebok’s petition for rehearing

and its suggestion for rehearing en banc is not reported, but is

reproduced in Petitioner’s Appendix at 63a.

The opinion of the District Court dismissing Reebok’s

contempt motion against BIL is not reported, but is

reproduced in Petitioner’s Appendix at la-17a. The opinion

of the District Court granting Reebok’s motion for contempt

against BIL upon reconsideration is reported at 827 F. Supp.

622 (S.D. Cal. 1993) and is reproduced in Petitioner’s

Appendix at 18a-33a. The opinion of the District Court fixing

sanctions against BIL in the total amount of $2,680,417.30 is

not reported, but is reproduced in Petitioner’s Appendix at

34a-4la.

STATEMENT OF JURISDICTION

The opinion and judgment of the Ninth Circuit

dismissing the contempt claim against BIL were entered on

3

March 6, 1995. App. at 42a. The order denying Reebok’s

Petition for Rehearing and rejecting the suggestion for

rehearing en banc was entered on April 19, 1995. App. at

63a. Reebok invokes the jurisdiction of this Court pursuant

to 28 U.S.C. § 1254(1).

The jurisdiction of the Ninth Circuit was invoked

pursuant to 28 U.S.C. § 1291 as an appeal of right from the

final order of the District Court imposing contempt sanctions

against BIL. The jurisdiction of the District Court was based

upon 28 U.S.C. §§ 1331 and 1338(a).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

This case involves, inter alia, the question of whether the

District Court’s exercise of personal jurisdiction over BIL

met the requirements of the due process clause of the

Fourteenth Amendment to the United States Constitution,

which provides in relevant part:

No State shall make or enforce any law

which shall abridge the privileges or

immunities of citizens of the United States:

nor shall any State deprive any person of

life, liberty, or property, without due

process of law....

This case also involves the permissible reach of a District

Court’s injunctive powers pursuant to Fed. R. Civ. P. 65(d),

which provides as follows:

Every order granting an injunction and

every restraining order shall set forth the

4

reasons for its issuance; shall be specific in

terms; shall describe in reasonable detail,

and not by reference to the complaint or

other document, the act or acts sought to be

restrained; and is binding only upon the

parties to the action, their officers, agents,

servants, employees, and attorneys, and

upon those persons in active concert or

participation with them who receive actual

notice of the order by personal service or

otherwise.

STATEMENT OF THE CASE

A. Factual Background

On or about November 29, 1989 BIL, a Luxembourg bank

having no presence in the State of California and doing no

banking business anywhere in the United States, received a

copy of a temporary restraining order issued by the United

States District Court for the Southern District of California

(the “Restraining Order”) enjoining defendant Byron

McLaughlin -(“McLaughlin”) and several companies

controlled by him from transferring or disposing of certain

assets, including bank deposits.’ App. at 47a. At the time that

BIL received a copy of the Restraining Order, one of

McLaughlin’s companies, Heatherdale Corporation

(“Heatherdale”), had approximately $2.4 million on deposit

with BILin Luxembourg. App. at 48a.

' The Petitioner incorrectly states that BIL “provided banking

services to McLaughlin in California.” Petition at 4 n.3. In fact, the

record is clear that BIL did not do business in California. It merely

accepted funds from McLaughlin in Luxembourg and sent a few letters to

McLaughlin at his address in California acknowledging receipt of those

funds. App. at 47a, 53a.

5

On December 6, 1989 McLaughlin’s wife, Brigitte

McLaughlin, appeared at BIL’s office in Luxembourg at

McLaughlin’s request and presented all documents required

by Luxembourg law to take control of the funds in the

Heatherdale account. While those funds were in a time

deposit that did not mature until January 8, 1990, BIL would

normally have honored the McLaughlins’ demand for early

release. App. at 47a-48a.

But BIL did not regard this as the normal situation. Even

though it knew the Restraining Order had no force in

Luxembourg because it had not been recognized by a

Luxembourg court, BIL wanted to protect the interests

implicated by the Order. However, Luxembourg law

provided significant constraints on what BIL could do. App.

at 48a; Ex.R. at 27-29.2

BIL was prohibited under Luxembourg banking secrecy

laws from informing Reebok, the United States District Court

or any other person of the McLaughlins’ demand to withdraw

the funds. It also could not simply ignore the demand

because of the strict obligations a bank has to honor proper

customer demands under Luxembourg law. Accordingly, in

an effort to keep the funds at the Banque, BIL did the one

thing it was technically entitled to do: it told Ms. McLaughlin

that it would retain the funds until the time deposit matured.

App. at 48a; Ex.R. at 25-29.

Ms. McLaughlin, through Luxembourg counsel,

promptly challenged BIL’s right to withhold the funds, stating

that if BIL were basing its decision on the Restraining Order,

it was knowingly acting contrary to Luxembourg law. The

? “Ex.R.” refers to the Excerpts of Record filed by BIL in the Court

of Appeals on November 6, 1993.

6

head of BIL’s Legal Department, Mr. Jean-Jacques Rommes,

advised BIL that the McLaughlins’ counsel was correct.

While Luxembourg has well-recognized procedures under

which a foreign court order can be formally recognized as a

Luxembourg court order (the exequatur procedure), or

provide the basis for a Luxembourg order of attachment (the

saisie-arret procedure), such a decree had not been obtained

with respect to the Restraining Order. As a result, that Order

had no legal force and effect under Luxembourg law. App. at

48a-49a.

Thus, BIL could have paid out the funds immediately.

But, in an effort to protect all interests, BIL used the limited

leverage of the time deposit to negotiate a compromise

whereby BIL agreed to move funds out of the Heatherdale

account in return for the McLaughlins’ agreement to keep the

principal portion of the funds in another McLaughlin-

controlled account at BIL pending further legal

developments. Pursuant to this compromise, BIL complied

with the McLaughlins’ demands to transfer the funds into Ms.

McLaughlin’s account, to form the Bawnmore corporation,

and then to transfer the funds into the Bawnmore account. At

all times, therefore, the principal balance of the funds

remained at BIL in accounts controlled by McLaughlin, and

only $117,000, consisting primarily of accrued interest, was

released. App. at 48a.

By this compromise, BIL ensured that if Reebok took the

steps required to give the Restraining Order legal force and

effect under Luxembourg law, the funds would still be at the

Banque and available to Reebok. As Ms. McLaughlin

acknowledged, BIL also advised the McLaughlins that it

would not protect or “cover” for them if a Luxembourg court

issued an order regarding the funds. Ex.R. at 134.

7

While BIL thus retained the McLaughlin funds, Reebok

never took the proper steps to obtain a court order in

Luxembourg to freeze or obtain them. App. at 48a.

Significantly, Reebok never pursued the exequatur procedure

under which the Restraining Order could have been given

formal legal recognition as a Luxembourg court order. App.

at 48a; Ex.R. at 104-05.

Moreover, when Reebok sought a unilateral order of

attachment through the saisie-arret procedure, it inexplicably

failed to make the necessary evidentiary showing to permit

such relief, prompting its own Luxembourg counsel to

complain that Reebok’s showing was “too general at this

stage.” Ex.R. at 94, 152-53. While Reebok could have filed

an expedited appeal from the denial of its application, and

introduced new evidence on that appeal, Reebok did not do

so. Ex.R. at 153-54,

Instead, Reebok brought another proceeding seeking a

provisional injunction against BIL. Because this was not the

appropriate way to obtain formal recognition of the

Restraining Order, or to attach funds based upon that Order,

the Luxembourg court dismissed Reebok’s application as

defective on January 22, 1990. Ex.R. at 35-39; App. at 48a.

At that point, all legal efforts by Reebok in Luxembourg came

to an end. As a result, the Restraining Order never had any

legal force and effect in Luxembourg, a fact that even

Reebok’s own Luxembourg law expert acknowledged. App.

at 55a-S6a.

Then, after BIL failed to comply with McLaughlin’s

repeated demands for the funds, on or about March 2, 1990,

Heatherdale sued BIL in the Luxembourg District Court,

seeking an order compelling BIL to honor all transfer and

withdrawal demands. Heatherdale argued that since the

Restraining Order had not been recognized by a Luxembourg

court, BIL had no legal basis to refuse its customer’s

demands. BIL argued in opposition that it was in a difficult

position because it was aware of the Restraining Order, but

was also aware that such Order was not enforceable in

Luxembourg.’ App. at 49a; Ex.R. at31.

On April 24, 1990 the Luxembourg court issued an order

in favor of Heatherdale (the “Heatherdale Order”), holding

that the Restraining Order had no force in Luxembourg and

that BIL was absolutely required to honor its customer’s

demands. The Heatherdale Order provides in relevant part:

B.I.L. has been served a temporary

restraining order issued by a California

court on November 27, 1989 prohibiting all

banks and generally any other financial

institutions from releasing the funds held

by HEATHERDALE CORPORATION.

Since the measures taken abroad against

HEATHERDALE CORPORATION have

only a territorial effect and since the

opposition served on B.I.L. was not done in

the form of a proper attachment, supported

by a title enforceable in Luxembourg or the

permission of a Luxembourg judge, they

cannot be considered valid or

effective. ...

> While BIL could make limited disclosures to the Heatherdale court

necessary to defend itself, the Luxembourg bank secrecy laws were not

waived, and contrary to Reebok’s suggestion (Petition at 6) BIL was still

prohibited from disclosing anything about the Heatherdale action to

Reebok or the District Court. Ex.R. at 147, 156-57.

9

Therefore, B.I.L.’s blockage of the

account must be considered improper. . . .

App. at 58a-59a.

Shortly after the Heatherdale Order issued, BIL honored

McLaughlin’s demands and released approximately $2.5

million. App. at 49a.

B. The Proceedings Below

On January 22, 1992 Reebok brought a contempt motion

against BIL in the District Court, arguing that when BIL

released the funds with knowledge of the Restraining Order, it

became an aider and abettor of -McLaughlin’s contempt

pursuant to Fed. R. Civ. P. 65(d) and, as a consequence, was

automatically subject to personal jurisdiction in the

California forum. On May 28, 1992 the District Court,

without reaching the jurisdictional issue, dismissed the

contempt motion because (1) BIL was compelled by

Luxembourg law — specifically the Heatherdale Order — to

release the funds, and (2) BIL did not commit the requisite

voluntary act or have the requisite intent for aider and abettor

liability under Rule 65(d). App. at 9a-14a, 49a.

On July 2, 1992 Reebok moved for reconsideration, and

was thereafter permitted to take discovery from BIL. On April

27, 1993 the District Court granted Reebok’s motion for

reconsideration and summarily held BIL in contempt. App.

at 18a-33a, 49a. By Order dated June 14, 1993 the District

Court assessed sanctions against BIL in the amount of

$2,680,417.30. App. at 34a-41a, 49a.

The District Court’s contempt finding on reconsideration

was based upon the erroneous conclusion that BIL had failed

10

to inform the Heatherdale court in Luxembourg of the

existence of the Restraining Order and that court, therefore,

directed BIL to release the funds without knowledge of the

Restraining Order. App. at 3la, 38a, 58a-59a. In reliance

upon this fundamental misapprehension of fact, the District

Court concluded that the compulsory effect of the

Heatherdale Order should now be disregarded and, once

disregarded, BIL should be deemed to have assisted

McLaughlin in the violation of the Restraining Order. Id.

The District Court also held that BIL was subject to

personal jurisdiction in California despite an express finding

that BIL did not do business in California or anywhere in the

United States. Relying upon Waffenschmidt v. MacKay, 763

F.2d 711 (Sth Cir. 1985), cert. denied, 474 U.S. 1056 (1986),

the court found jurisdiction on the theory that BIL’s supposed

act of assisting McLaughlin in the violation of the Restraining

Order constituted a “super-contact” with the California forum

so that there were sufficient minimum contacts to satisfy the

requirement of International Shoe Co. v. Washington, 326

U.S.310(1945). App. at 21a-22a, 53a-54a.

On March 6, 1995 the Court of Appeals unanimously

reversed the District Court and dismissed the contempt charge

against BIL. The Court of Appeals held that it would be

fundamentally unfair and constitute a deprivation of due

process to subject BIL to personal jurisdiction in California

for having engaged in conduct in Luxembourg that was

required by Luxembourg law. App. at 55a-56a, 59a-62a.

As an integral part of its fairness analysis, the Court of

Appeals also concluded that the District Court’s central

factual finding — that the Heatherdale court did not know

about the District Court’s Restraining Order — was clearly

erroneous, stating “[t]he Heatherdale Order was issued with

11

full knowledge of both the TRO and its ineffectiveness under

Luxembourg law.” App. at 59a. As a consequence, the Court

of Appeals determined that the Heatherdale court’s finding

that the Restraining Order had no legal force in Luxembourg

“excused BIL from having to comply with it.” Jd.

ARGUMENT - REASONS FOR DENYING THE WRIT

The only “Question Presented” by Reebok in its Petition

is

Whether a federal district court’s

inherent powers to enforce its injunctions

reaches extraterritorially to prevent non-

parties from committing acts outside the

United States which aid and abet a party in

violating the injunction.

Petition ati.

This, however, was not the question decided by the Court

of Appeals in the present case. The question decided by the

Court of Appeals was whether BIL, a nonparty Luxembourg

bank not otherwise subject to jurisdiction in California, could

be held in contempt for engaging in conduct in Luxembourg

that was required by Luxembourg law. After careful analysis

of the factual record, the Court of Appeals answered this

question in the negative.

By challenging the Court of Appeals’ decision in its

Petition, Reebok is asking this Court to proclaim a new rule of

law that United States court injunctions are binding upon

every person in the world who has notice of them, irrespective

of whether that person has any contacts with the United States

forum and irrespective of whether that person has conflicting

12

obligations imposed by its own domestic law. There is no

good reason for this Court to accept the Petitioner’s invitation

to create such an expansive rule and every good reason not to

do so.

LL.

NONE OF THE THREE REASONS ADVANCED BY

THE PETITIONER SUPPORTS REVIEW OF THE

DECISION BELOW.

A. The Ninth Circuit’s Decision Does Not Conflict With

Decisions of the Fifth Circuit or This Court.

The Petitioner argues that the Ninth Circuit’s decision

conflicts with the decision of the Fifth Circuit in

Waffenschmidt v. MacKay, 763 F.2d 711 (Sth Cir. 1985), cert.

denied, 474 U.S. 1056 (1986) and with certain decisions of

this Court. The Petitioner could not be more mistaken.

In Waffenschmidt, the Fifth Circuit affirmed an order

holding that certain nonparty Texas residents were subject to

personal jurisdiction in a contempt proceeding in Mississippi

because they aided and abetted the Mississippi defendant’s

violation of an injunction by accepting assets from the

defendant which they knew were subject to the injunction.

The Fifth Circuit concluded that jurisdiction over the

nonparties was proper because of the inherent authority of a

court to enforce its injunctions and because a knowing

violation of an injunction would make litigation in the forum

that issued it reasonably foreseeable. Jd. at 716-18, 721-23.

The court grounded its decision on the fact that the “mandate

of an injunction issued by a federal district court runs

nationwide”, Jd. at 716, and, therefore, the “nationwide scope

of an injunction carries with it the concomitant power of the

court to reach out to nonparties who knowingly violate its

orders.” Jd. at 717.

13

The Ninth Circuit readily concluded that the

Waffenschmidt rationale had no application to the facts of this

case:

{I]t is not surprising that [the

Waffenschmidt court] determined that a

national court which could issue

nationwide orders could also reach out and

enforce those orders on a nationwide basis

by taking personal jurisdiction over

violators. Of course, in Waffenschmidt the

individuals held in contempt had accepted

assets from the enjoined party after they

knew that he was enjoined from

transferring those assets. Id. at 723.

A finding of personal jurisdiction over

the violators in that instance may be sound,

even necessary. But the strength of the

analysis begins to crumble when a district

court seeks to reach out across the Atlantic

in an attempt to impose conflicting duties

on another country’s nationals within its

own borders.

App. at 54a-55a.

Unlike the nonparties in Waffenschmidt: (i) BIL was a

foreign national, acting on foreign soil; (ii) BIL was acting in

a jurisdiction (Luxembourg) where the Restraining Order had

no legal force and effect; (iii) BIL was compelled by the law

of Luxembourg to engage in conduct that was prohibited by

the terms of the Restraining Order; (iv) BIL was prevented

under Luxembourg bank secrecy laws from seeking

clarification from the District Court as to the intended reach

14

of the Restraining Order; and (v) BIL did not assist in

removing the restrained funds from the forum since the funds

had been deposited with BIL in Luxembourg long before the

Restraining Order issued. App. at 47a-49a, 55a.

The Court of Appeals correctly held that any effort to

export the Waffenschmidt test to the international arena on the

particular facts of this case would violate fundamental

principles of due process. App. at 55a, 59-61a, citing Core-

Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482 (9th Cir.

1993). In short, the Ninth Circuit’s decision is not even

remotely in conflict with the Fifth Circuit’s decision in

Waffenschmidt.‘

The Ninth Circuit’s decision also is not in conflict with

any decisions of this Court. The decisions in Steele v. Bulova

Watch Co., 344 U.S. 280 (1952) and United States v. First

National City Bank, 379 U.S. 378 (1965), upon which the

Petitioner relies (Petition at 11), merely stand for the

proposition that a district court has the authority to enjoin

conduct and freeze assets of a party outside the United States

so long as personal jurisdiction has already been obtained

over that party. See Steele, 344 U.S. at 281, 289; First

National City Bank, 379 U.S. at 384.

Of course, BIL was not a party to the District Court

proceeding and, as the Ninth Circuit found, the District Court

* Petitioner suggests that the Waffenschmidt court’s citation to

Leman v. Krentler-Arnold Hinge Last Co., 284 U.S. 448, 452 (1932)

confirms that the Waffenschmidt test for jurisdiction over nonparties was

not intended to be limited to the United States. Petition at 10-11.

Incredibly, Petitioner fails to inform the Court that the respondent in

Leman was a U.S. resident party, not a foreign nonparty, and that only three

sentences above the portion of the Leman decision quoted by Petitioner,

the Court stated that “[t]he decree was binding upon the respondent, not

simply within the District of Massachusetts, but throughout the United

States.” Id. at 451.

15

did not — indeed, could not — have jurisdiction over BIL at

the time that it issued the Restraining Order. App. at 53a-56a.

Moreover, in both Steele and First National City Bank,

this Court expressly found that the enforcement of the district

court’s injunctions against extraterritorial conduct of the

parties in those cases would not present any conflict with

foreign law. See Steele, 344 U.S. at 289; First National City

Bank, 379 U.S. at 384. By contrast, the Ninth Circuit

expressly found that the prohibitions in the Restraining Order

presented a direct conflict with the obligations imposed upon

BIL under Luxembourg law. App. at 55a-56a, 61a. In short,

the decisions of this Court relied upon by Reebok present no

conflict whatsoever with the Ninth Circuit’s decision.

Finally, Petitioner argues that the Court of Appeals

created a “per se rule that a court’s injunctive powers as to

non-party aiders and abettors terminate at the borders of the

United States” and that this rule “does not foster international

comity.” Petition at 11. This argument turns the principle of

comity on its head; it also completely mischaracterizes the

Court of Appeals’ decision.

Even if the Court of Appeals had created the per se rule

that Petitioner contends, such rule would still be far more

consistent with comity principles than the rule advocated by

Petitioner, which would allow United States courts simply to

disregard the compulsory effect of foreign law on foreign

nationals acting on foreign soil. Notably, the Court of

Appeals expressly found that the District Court’s order

holding BIL in contempt for obeying the law of Luxembourg

— the order that Reebok seeks to have reinstated — created a

“conflict with the sovereignty of Luxembourg [that] could

hardly be more sharp.” App. at 61a.

16

In any event, contrary to Reebok’s contention, the Court

of Appeals did not create such a per se rule. In its opinion, the

Ninth Circuit carefully evaluated the specific factual record

before it which established that BIL did not do business in the

State of California and did not otherwise have any minimum

contacts with that State. The record also established that the

Restraining Order had no legal force and effect in

Luxembourg and that BIL was compelled by Luxembourg

law, including the Heatherdale Order, to release the funds to

McLaughlin. Far from creating any per se rule, the Ninth

Circuit followed established precedent and held only that BIL

could not be subject to personal jurisdiction in California

based upon these specific facts. App. at 59a-61a.

B. The Court of Appeals’ Decision Does Not Create

Confusion and Uncertainty.

Unable to demonstrate that the Ninth Circuit’s decision

conflicts with any decisions of this Court or other Courts of

Appeal, the Petitioner next argues that the Ninth Circuit

confused the law by applying principles relating to the

recognition of final judgments to provisional injunctions.

Petition at 13-15. Thus, Reebok states that (1) the Ninth

Circuit held that if an injunction is to have any effect beyond

the United States as to a nonparty, it must be “registered” —

that is, given formal legal recognition — in the country of the

nonparty, and (2) an injunction is not “registerable” under

Luxembourg law because it is not a final judgment. /d.

Reebok’s first statement mischaracterizes the Ninth

Circuit’s decision. Its second statement mischaracterizes

Luxembourg law.

The Ninth Circuit did not hold that an injunction must

always be “registered” in a foreign country to have effect over

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a nonparty there. As stated above, the Ninth Circuit merely

held that it would be unfair to hold BIL subject to personal

jurisdiction in California on the specific and unique facts of

this case.

Moreover, the record below established that in this case

the Restraining Order could have been given full legal effect

in Luxembourg through the saisie-arret procedure. That

procedure provided Reebok with an available and perfectly

Suitable mechanism to obtain a Luxembourg court order of

attachment based upon the Restraining Order, thereby

ensuring the continued restraint of the funds at BIL. Reebok

never properly pursued this remedy. Ex.R. at 151-54.

The record below also established that the Restraining

Order could have been given formal legal recognition as a

Luxembourg court order through the exequatur procedure

even though it was not a final judgment. Indeed, Mr. Jacques

Loesch, BIL’s Luxembourg law expert, testified that if

Reebok had sought exequatur for the Restraining Order, it

would have had a very good prospect of being granted. Ex.R.

at 72, 146-47, 154. Inexplicably, Reebok never even pursued

this remedy.°

* Petitioner claims that Lorang, Luxembourg at 3-25, in

INTERNATIONAL EXECUTION AGAINST JUDGMENT DEBTORS (D. Campbell ed.

1993) (the “Lorang Article”) and Reebok’s reconsideration motion in the

District Court (C.R. 199) both stand for the propositions that exequatur

requires a full civil trial on the merits and that only final judgments can

receive the exequatur of a Luxembourg court. Petition at 5 n.5, 15 n.19.

Petitioner is simply wrong. Neither of these citations, nor anything else in

the record, stands for such propositions. In fact, the Lorang Article

confirms that a Luxembourg court (i) may not evaluate the merits of

foreign orders submitted to it for exequatur, and (ii) may give formal legal

recognition to foreign provisional orders. Lorang Article at 3-7, 12, 16.

18

Thus, the Petitioner’s criticism of the Ninth Circuit’s

decision has nothing to do with any perceived lack of

available remedies in Luxembourg to give legal force to the

Restraining Order. Rather, having failed properly to pursue

those remedies, the Petitioner criticizes the Ninth Circuit for

refusing to create a broad new rule of law holding that United

States injunctions are binding upon nonparties wherever

located in the world, irrespective of the absence of any

contacts with the United States forum and irrespective of the

existence of conflicting mandates under foreign law.

As the Ninth Circuit aptly stated, the power of a United

States court simply does not extend that far:

In fine, we do not agree that when a

national of a foreign country follows the

law of that country in that country it can be

dragged halfway around the world to

answer contempt charges arising out of a

foreign court’s ineffective order.

... [T]here are limits to the district

court’s reach, and those limits became

palpable when the court sought to extend

its arm into the territory of another nation

and to impose discordant duties upon the

subjects of that nation whose actions were

solely within its own borders.

App. at 59a-62a.

19

C. The Petitioner’s “Parade of Horrors” Argument Is

Without Merit.

The Petitioner also argues that in order to prevent a

proliferation of money laundering by counterfeiters using

foreign banks, this Court must now jettison well-settled

principles of due process and comity and decree that United

States injunctions bind the world. See Petition at 16-

18. This argument requires little discussion.

The Petitioner has not shown — nor could it — that

adherence to the due process and comity principles upon

which the Court of Appeals’ decision is founded will have a

disastrous impact on criminal enforcement of United States

counterfeiting laws. In fact, it is notable that Petitioner has

never cited a single other case in which a party defendant such

as McLaughlin has violated a United States injunction by

withdrawing restrained funds from a foreign bank.

This is not surprising since other countries, like

Luxembourg, typically have available procedures to give

legal effect to a United States court order and to ensure the

continued restraint of illegally laundered funds. Having

failed properly to pursue the remedies available to it in

Luxembourg, Petitioner's “parade of horrors” argument

rings hollow.

In sum, the Petitioner has presented no reasons, much

less the requisite “special and important reasons”, Sup. Ct. R.

10.1, for this Court to review the decision of the Court of

Appeals.

20

Il.

THERE ARE ADDITIONAL REASONS FOR

DENYING THE WRIT.

In addition to the Court of Appeals’ dismissal on personal

jurisdiction grounds, that Court’s opinion provides several

alternative bases which support dismissal of the contempt

charge against BIL. For these reasons as well, review by this

Court is unnecessary and unwarranted.

First, as the Court of Appeals made clear, the Restraining

Order should never have been construed to require BIL to do

anything in Luxembourg because that Order was never given

legal force and effect in that country. App. at 55a, 59a-60a.

Thus, as a matter of United States law, the Restraining Order

could properly have been treated as a legal nullity by BIL,

insufficient to require BIL to take, or refrain from taking, any

action. Id. Accord Restatement (Third) of the Foreign

Relations Law of the United States § 441 comment e (1987).

Second, even assuming the Restraining Order could be

deemed to have had some legal force in Luxembourg, then the

District Court should never have construed it to require BIL to

perform acts in Luxembourg that would violate Luxembourg

law. As the Ninth Circuit stated, “[ijt is a general principle

that one state cannot require a person ‘to do an act in another

state that is prohibited by the law of that state or by the law of

the state of which he is a national,’ nor can the person be

required to refrain from an act that is required,” citing

Restatement (Third) of the Foreign Relations Law of the

United States § 441(1)(a) (1987). App. at 55a. Accord

United States v. Ross, 302 F.2d 831, 834 (2d Cir. 1962). The

Ninth Circuit correctly concluded that when the District

Court held BIL in contempt for complying with Luxembourg

law, it exceeded its power. App. at 59a.

21

Finally, the Ninth Circuit also correctly concluded that it

would “defy logic” to hold BIL in contempt of the Restraining

Order for complying with the Heatherdale Order. App. at

56a-57a. An essential element of Reebok’s contempt claim

against BIL under Fed. R. Civ. P. 65(d) was proof that BIL

acted voluntarily when it transferred the funds. App. at 12a-

14a. Because the compulsory effect of Luxembourg law

removed any voluntariness with respect to BIL’s transfers,

Reebok could never satisfy the requisite elements of its

contempt claim against BIL.

Accordingly, even if this Court were to disagree with the

jurisdictional holding of the Ninth Circuit that Petitioner

challenges, review of this case would still be unwarranted

since the Ninth Circuit’s opinion presents numerous

alternative bases supporting dismissal of the contempt claim

against BIL.

CONCLUSION

For all of the foregoing reasons, respondent Banque

Internationale a Luxembourg S.A. respectfully requests that

the Petition for Writ of Certiorari be denied.

Respectfully submitted,

LAWRENCE M. HARNETT

Counsel of Record

DIANE C. HERTZ

MARKS & MURASE L.L.P.

399 Park Avenue

New York, New York 10022

(212) 318-7700

Counsel for Respondent

Banque Internationale

a Luxembourg S.A.