20

- 602

- cv Next Investments, LLC v. Bank of China

1 

# United States Court of Appeals 2 

# for the Second Circuit 3 4 August Term, 20 20 5 6 ( Argued : May 10 , 20 2 1 Decided: Aug 30, 202 1 ) 7 8 Docket No

. 20

- 602

- cv 9

_____________________________________ 10 11 NEXT INVESTMENTS, LLC , 12 Interested Party

– A ppellant , 13

v. 14 15 BANK OF CHINA, AGRICULTURAL BANK OF CHINA, 16 BANK OF COMMUNICATIONS, CHINA CONSTRUCTION BANK, 17 CHINA MERCHANTS BANK, INDUSTRIAL AND COMMERCIAL 18 BANK OF CHINA LIMITED , 19 Appellee s. * 20

_____________________________________ 21 Before: 22 23 N EWMAN , P ARK , AND M ENASHI , Circuit Judge s

. 24 25 In 2013, Nike, Inc., and its subsidiary, Converse, Inc. (together, “Nike”) , 26 brought a trademark

- infringement suit under the Lanham Act against hundreds 27 of participants in Chinese counterfeit ing networks (“ D efendants”) . The United 28 States District Court for the Southern District of New York (Scheindlin, J. , and 29 McMahon, then

- C.J. ) entered five prejudgment orders, a default judgment, and 30 one postjudgment order against D efendants, who never appeared in court. Each 31 of those orders enjoined D efendants “and all persons acting in concert or in 32

* The Clerk of Court is respectfully directed to amend the caption of this matter accordingly.2 participation with any of them .

. . from transferring, withdrawing or disposing of 1 any money or other assets into or out of [ D efenda nts’ accounts] regardless of 2 whether such money or assets are held in the U.S. or abroad.” In 2019, Nike’s 3
successor

- in

- interest, Appellant Next Investments, LLC (“Next”) , moved to hold 4 Appell ee s

— six nonparty Chinese banks (the “Banks”)

— in contempt for fa ilure to 5 implement the asset restraints and for failure to produce certain documents sought 6 in discovery. The district court denied the motion, and Next appealed. 7 We hold that the district court did not abuse its discretion in denying Next’s 8 motion for contempt sanctions against the Banks because (1) until the contempt 9 motion, Nike and Next never sought to enforce the asset restraints against the 10 Banks ; ( 2 ) there is a fair ground of doubt as to whether, in light of New York’s 11 separate entity rule and pri nciples of international comity, the orders could reach 12 assets held at foreign bank branches; ( 3 ) there is a fair ground of doubt as to 13 whether the B anks’ activities amounted to “active concert or participation” in 14 D efendants’ violation of the asset restraints that could be enjoined under Federal 15 Rule of Civil Procedure 65(d); and ( 4 ) Next failed to provide clear and convincing 16 proof of a discovery violation. We thus AFFIRM

. 17 18 R OBERT L. W EIGEL (Howard S. Hogan, 19 Matthe w S. Rozen , Lauren M. L. Nagin on 20 the brief ) , Gibson , Dunn & Crutcher LLP, 21 New York, NY & Washington, DC , for 22 Interested Party

– Appellant

. 23 24 S ANFORD I. W EISBURST , Quinn Emanuel 25 Urquhart & Sullivan, LLP, New York, NY 26 ( David G. Hille , Jacqueline I. Chung, White 27 & Case LLP, New York, NY; Carey R. 28 Ramos, Cory D. Struble, Quinn Emanuel 29 Urquhart & Sullivan, LLP, New York, NY, 30 on the brief ) for Appell ees Bank of China, Bank 31 of Communications, China Construction Bank, 32 China Merchants Bank, and Industrial and 33 Commercial Bank of China Limited

. 34 353 A DAM S. H OFFINGER , Greenberg Traurig, 1 LLP , Washington, DC ( Gary Stein, Robert E. 2 Griffin, Thomas L. Mott, Hannah M. 3 Thibideau, Schulte Roth & Zabel LLP, New 4 York, NY , on the brief ) for A ppell ee 5 Agricultural Bank of China

. 6 7 Matthew J. Oppenheim, Oppenheim + 8 Zebrak, LLP, Washington, DC, for Amicus 9 Curiae Association of American Publishers, Inc. 10 in support of Appellant

. 11 12 Lauren Beth Emerson, Robert M. Isa c kson, 13 Cameron Rueber, Peter S. Sloane, Leason 14 Ellis LLP, White Plains, NY , for Amic i Curiae 15 Center for Anti

- Counterfeiting and Product 16 Prot ection and American Apparel & Footwear 17 Associatio n in support of Appellant

. 18 19 Joshua A. Goldberg, Patterson Belknap 20 Webb & Tyler LLP, New York, NY, for 21 Amicus Curiae Banking Law Committee of the 22 New York City Bar Association in support of 23 Appellees

. 24 25 Roberto J. Gonzalez, Brad S. Karp, H. 26 Christopher Boehning, Jessica S. Carey, 27 Ethan C. Stern, Xinshu Sui, Paul, Weiss, 28 Rifkind, Wharton & Garrison LLP, 29 Wash ington, DC & New York , NY, for Amici 30 Curiae Institute of International Bankers and 31 European Banking Federation in support of 32 Appel lees

. 33 34 354 Park , Circuit Judge : 1
In 2013, Nike, Inc., and its subsidiary, Converse, Inc. (together, “Nike”) , 2
brought a trademark

- infringement suit under the Lanham Act , 15 U.S.C. § 1051 et 3

seq

. , against hundreds of participants in Chinese counterfeit ing networks 4
(“ D efendants”) . The Unite d States District Court for the Southern District of New 5
York (Scheindlin, J. , and McMahon, then

- C.J. ) entered five prejudgment orders, a 6
default judgment, and one postjudgment order against D efendants, who never 7
appeared in court. Each of those orders en joined D efendants “and all persons 8
acting in concert or in participation with any of them .

. . from transferring, 9
withdrawing or disposing of any money or other assets into or out of [ D efendants’ 10
accounts] regardless of whether such money or assets are he ld in the U.S. or 11

abroad.” App’x at 229 , 648 ; see id. at 281, 318, 377

– 78, 501, 526

– 27. In 2019, Nike’s 12

successor

- in

- interest, Next Investments, LLC (“Next”) , moved to hold Appell ee s

— 13
six nonparty Chinese banks ( the “Banks”)

— in contempt for failure to imp lement 14
the asset restraints and for failure to produce certain documents sought in 15
discovery. The district court denied the motion, and Next appealed. 16
We hold that the district court did not abuse its discretion in denying Next’s 17

motion for contempt san ctions against the Banks because (1) until the contempt 185 motion, Nike and Next never sought to enforce the asset restraints against the 1

Banks ; ( 2 ) there is a fair ground of doubt as to whether, in light of New York’s 2
separate entity rule and principles of international comity, the orders could reach 3
assets held at foreign bank branches; ( 3 ) there is a fair ground of doubt as to 4

whether the B anks’ activities amounted to “active concert or participation” in 5

D efendants’ violation of the asset res traints that could be enjoined under Federal 6
Rule of Civil Procedure 65(d); and ( 4 ) Next failed to provide clear and convincing 7
proof of a discovery violation

. For these reasons, we affirm

. 8

I. BACKGROUND 9

A. The Asset Restraints 10

In November 2013, Nike, In c. and its subsidiary Converse, Inc. sued the 11
proprietors 1 of websites advertising and selling products bearing Nike or 12
Converse marks, like Nike’s “Swoosh,” its Jordan b rand “Jumpman,” or the 13
Converse Chuck Taylor “All Star” label. Nike alleged trademar k infringement, 14
trademark counterfeiting, and false designation of origin, all in violation of the 15

1 Nike’s original complaint identified about three

- dozen D efendants. O ver the course of the district court proceedings, Nike identified hundreds of additional alleged members of th e 26 counterfeiting networks alleged in the original complaint and successfully added them to the action, first as D efendants named in an amended complaint and eventually as D efendants subject to the judgment below. At the time of this appeal, the judgment applied to 636 D efendants.6 Lanham Act, 15 U.S.C. §§ 1114(1), 1116(d), 1117(b)

– (c), 1125(a) , along with several 1

related federal and state causes of action. Nike sought an injunction restraining 2

D efendants from further use of the trademarks, an accounting of D efendants’ 3
profits (plus treble recovery) or treble compensatory damages for counterfeiting , 4
statutory damages related to cyberpiracy, and punitive damages. 5

Nike i mmediately sought and received a temporary restraining order. After 6

Defendants failed to appear, the district court granted a preliminary injunction 7

and three orders amending the preliminary injunctio n

. All five prejudgment 8

orders contained the following restriction regarding D efendants’ assets: 9

IT IS FURTHER ORDERED that , in accordance with Rule 65 of the 10 Federal Rules of Civil Procedure, 15 U.S.C. § 1116(a), and this Court ’ s 11 inherent equitable power to issue provisional remedies ancillary to its 12 authority to provide final equitable relief, Defendants, their officers, 13 directors, agents, representatives, successors or assigns, and all 14 persons acting in concert or in participat ion with any of them, 15 including any third parties receiving actual notice of this Order by personal 16 service or otherwise, are restrained and enjoined from transferring, 17 withdrawing or disposing of any money or other assets of 18 Defendants, or otherwise payin g or transferring any money or other 19 assets into or out of any accounts held by , associated with, or utilized 20 by Defendants, regardless of whether such money or assets are held in the 21 U.S. or abroad

. 22 App’x at 281 (emphasis added); see id. at 318, 377

– 78, 501; see also id. at 229 (TRO)

. 2 23

2 The TRO did not contain the residual clause prohibiting “otherwise paying or transferring money or other assets into or out of” D efendants’ acco unts. App’x at 229.7 B

. The Banks Attempt To Challenge the Asset Restraints 1
In June 2015, Nike moved for default judgment. Nike’s proposed judgment 2

would have preserve d the asset restraints from the prejudgment orders and 3

extend ed them to any later

- discovered assets belonging to D efendants. About one 4

month later , the Banks

— s ix nonparty banks headquartered in China 3

— filed a joint 5
letter opposing Nike’s motion for default judgment “insofar as the proposed 6
judgment contains a federal asset

- freezing injunction that would purport to 7
require the Banks to restrain customer accounts located outside the United States.” 8
App’x at 1096. Nike had notified the Banks of the prejudgment orders by 9
personally serving the orders and related material at the Banks’ New York branch 10

offices or by approved email service . The Banks’ letter argued that the court could 11

not enforce the asset restraints against the Banks in light of international comity 12

concerns and New York’s separate entity rule and because the court lacked 13
personal jurisdiction over the Banks

. 14

Nike responded that the Banks’ objections were irrelevant and premature 15

because t he proposed judgment “is not an order against the Banks .” Id. at 1102. 16

3 T he Bank of China (“BOC”), Agricultural Bank of China (“ABC”), Bank of Communications (“BOCOM”), Industrial and Commercial Bank of China (“ICBC”), China Construction Bank (“CCB”), and China Merchants Bank (“CMB”)

.8 “If the Court later needs to compel th e Banks to take (or refrain from) any specific 1
actions to prevent the counterfeiters from violating the default judgment, the 2
Court can then evaluate whether personal jurisdiction exists over the Banks and 3
whether any comity issues exist for the Court to c onsider.” Id. The district court 4
agreed with Nike and denied the Banks’ letter motion, reasoning that the Banks’ 5
objections were not “ripe” because “the Proposed Default Judgment is directed 6
entirely at defendants and seeks no enforcement against the non

- party Banks.” 7

Nike, Inc. v. Wu , No. 13

- cv
- 8012, 2015 WL 9450795, at *1 (S.D.N.Y. Aug. 20, 2015) 8
(“ Nike I ”)

. T he district court acknowledged the possibility

— however remote

— 9
“that defendants will comply with the Court’s Order and make plaintiffs whole

— 10

in w hich case the Banks would never be required to take any action with respect 11

to the asset freeze.” Id. 12
The district court entered default judgment against Defendants on August 13

20, 2015 and granted Nike an accounting of profits

. W ithout any documents from 14

D efendants to assist in calculating their profits , the court used statutory proxies , 159 yielding a judgment of over $1 billion

. 4 T he judgment also kept the prejudgment 1
asset restraints in place, ordering that 2

in accordance with Rul e 65 of the Federal Rules of Civil Procedure, 15 3 U.S.C. § 11l6(a), Article 52 of New York State ’ s Civil Practice Law and 4 Rules, and this Court ’ s inherent equitable power to issue remedies 5 ancillary to its authority to provide final relief, all Defendants ’ Assets 6 that have been previously identified as frozen or that were otherwise 7 required to be restrained in compliance with this Court ’ s Orders, 8 continue to be restrained regardless of whether the Defendants ’ 9 Assets are located in the United States or abroad

. 10 App’x at 526

– 27. The default judgment went on to apply the same restraints to 11
“any other of Defendants’ Assets that Plaintiffs identify in the future and/or that 12
have not yet been frozen

. . . regardless of whether the Defendants’ Assets are 13

located in the United States or abroad.” Id. at 527. 14
On January 31, 2017, nearly a year

- and

- a

- half later , Nike assigned its interest 15
in the judgment to Next Investments, LL C , an investment vehicle owned by the 16
litigation

- finance firm Tenor Capital. Next (represented by Nike’s counsel) sought 17

an order to show cause why (1) Defendants should not be held in contempt of 18

court and (2) additional bank accounts and websites associated with the 19

counterfeiter networks should not b e subject to the judgment. The district court 20

4 The Lanham Act a uthorizes damages of not more than $2,000,000 for each willful use of a counterfeit mark, 15 U.S.C. § 1117(c)(2), and not more than $100,000 for each infringing domain
name, id. § 1117(d).10 (reassigned to then

- Chief Judge Colleen McMahon after Judge Scheindlin retired ) 1

entered the order. D efendants again failed to appear, so the court held the m in 2
contempt for failing to comply

— or even to make r easonable effort s to comply

— 3

with the default judgment. That contempt order , which the parties call the “Final 4

Order,” incorporated the additional bank accounts , and as before, it prohibited 5
“all persons acting in concer t or in participation with” Defendan ts from moving 6

asset s in the accounts “regardless of whether such money or assets are held in the 7
U.S. or abroad.” App’x at 648. But this time the court explicitly ordered, “by 8
automatic operation of Fed. R. Civ. P. 65(d)(2), that all third parties who a ct in 9
concert or participation with [ D efendants] .

. . and who receive actual notice of this 10

order .

. . shall be bound by the terms of this order,” including the asset restraints

. 11
App’x at 653. T he Final Order also gave Next the right to seek expedited 12
discovery , from any financial institution servicing D efendants , of “all documents 13

and records

. . . whether located in the U.S. or abroad, relating to any financial 14
accounts” associated with any D efendant. Id. at 649

– 50. 15

Next served the Banks with the Final Order and subpoenas for expedited 16
discovery . The cover letter to each B ank explained that the B ank was bound by 17

the asset restraints , which applied both w ithin the United States and abroad. 1811 All of the B ank s complied with the subpoenas on b ehalf of their sole New 1

York branch es and stated that none of D efendants’ accounts was held in New 2

York

. But t he Banks argued that, for the same reasons they objected to the default 3
judgment, neither the subpoenas nor the asset restraints could reach acco unts held 4

at Bank branches outside of New York. T he Banks moved to quash the subpoenas 5
insofar as they sought discovery beyond the New York branches and to modify 6

the Final Order to limit the asset restraints to New York accounts

. Next cross

7
moved to compel production and opposed modification. 8
The district court granted Next’s cross

- motion to compel production , with 9
certain modifications to accommodate China’s banking laws

. See Nike, Inc. v. Wu , 10
349 F. Supp. 3d 310, 318 (S.D.N.Y. 2018) (“ Nike II ”) (Freeman, M.J. ) , aff’d , Nike, Inc. 11

v. Wu , 349 F. Supp. 3d 346 (S.D.N.Y. 2018) (“ Nike III ”) (McMahon, then

- C.J. ) ; Memo 12

Endorsement of Bank Letter at 1, Nike, Inc. v. Wu , No. 13

- cv
- 8012 (S.D.N.Y. Dec. 13
12, 2018), ECF No. 181 (permitting del ivery of documents through China’s 14
Ministry of Justice)

. Although the court lacked general personal jurisdiction over 15

the Banks , it found that it had specific personal jurisdiction sufficient to compel 16
production abroad based on the Banks’ maintenance of correspondent and 17

settlement accounts in New York, some of which had been used to facilitate 1812 transfer s for D efendants. See Nike II , 349 F. Supp. 3d at 32 2

– 27, 331

– 32 ; Nike III , 349 1
F. Supp. 3d at 354

– 60

. T he court concluded that the totality of the comity factors 2
weighed in favor of compelling compliance with Next’s discovery requests. See 3

Nike II , 349 F. Supp. 3d at 334

– 41; Nike III , 349 F. Supp. 3d at 363

– 68

. 4

T he court did not decide , however, whether the asset restraint s could apply 5

outside the United States

. In response to the Banks ’ motion to limit the asset 6

restraints in the Final Order to New York accounts , Next averred that the “Final 7
Order, same as the Judgment, is directed entirely at Judgment Debtors and seeks 8

n o enforcement against the Banks

. ” App’x at 1280. Next clarified that it did “not 9
currently seek [] an order compelling the Banks to turn over their proceeds.” Id. 10

T he Banks thus withdrew their motion for modification and asked that the 11

withdrawal be without prejudice to allow ing the Banks to renew the request if 12

Next were to seek to enforce the restraints. The magistrate judge agreed and no 13
party objected

. See Nike II , 349 F. Su pp. 3d at 345

– 46. 14

T he Banks collectively produced over 7, 00 0 documents, totaling over 20,000 15

pages , in the three months after the district court affirmed the magistrate judge’s 16
ruling

. 1713 B

. The Contempt Motion A gainst the Banks 1
In response to a motion by the Banks to shift certain discovery costs (a 2

motion denied below and not challenged on appeal), Next moved to hold the 3
Banks in contempt on July 19, 2019

. 4

First, Next asserted that the Banks had never instituted an asset freez e on 5

any D efendants ’ accounts and were thus in contempt of the asset

- restraint 6
provisions of the prejudgment orders , the default judgment, and the Final Order. 7
Based on documents produced by the Banks, Next counted at least 36,000 8

transactions in violation of the asset restraints , including withdrawals and 9
deposits as early as November 15, 2013, the day after entry of the TRO

. These 10
allegedly violative transactions continued up through the Bank’s production of 11

documents in late 2018. 12

Second, Next accused the Banks of producing just a small fraction of their 13

relevant documents and thus failing to display reasonable diligence in complying 14

with the d iscovery order. 15
Next sought several sanctions. It first asked for $150 million as 16
“compensatory contem pt damages” resulting from the thousands of prohibited 17
transactions. App’x at 1689. Next calculated that D efendants transferred over 1814 $32 million out of their accounts after the Banks had been made aware of the asset 1

restraints. Next also argued that the Banks ’ conduct made them participants in 2
the counterfeiting networks and thus jointly and severally liable for at least $118 3
million in statutory damages. Next also sought a turnover order of the roughly 4

$40,000 left in D efendants’ accounts. And as sanctions for the alleged discovery 5

violations, Next sought an adverse inference that the missing documents would 6

have shown additional violative transaction s, increasing the sanctions above the 7
$150 million already specified. 8
This contempt motion , fil ed on July 19, 2019, marked the first time Nike or 9
Next had sought to enforce the asset restraints against the Banks, squarely raising 10

the question whether the restraints applied extraterritorially. T he district court 11
concluded that they did not. Instead , the district court found that the asset 12

restraints had “never bound” the Bank s

. Nike, Inc. v. Wu , No. 13

- cv
- 8012, 2020 WL 13
257475, at *2 (S.D.N.Y. Jan. 17, 2020) (“ Nike IV ”)

. 14

The district court offered two main reasons why the asset restraints never 15

boun d the Banks. First , it concluded that New York’s separate entity rule required 16

the court to treat the Banks’ foreign branches as entities separate from their New 17
York branches for the purpose of “enforcement of postjudgment asset restraints 1815 and turnover orders

. ” Id. at *21. Second, the court found that Next failed to offer 1
“proof showing that the Banks aided and abetted the Judgment Debtors ’ unlawful 2
activity

. ” Id. at *20. It thus rejected Next’s charge that the Banks ha d been in 3
“active concert or participation” with Defendants by providing “routine banking 4

activities.” Id. at *19. The court held that “‘active concert or participation’ is 5
something more than account management in the ordinary course

. ” Id. 6

T he district court also gave other reasons for concluding that the Banks were 7
not bound by the asset restraints

. Noting that an order must be “clear and 8
unambiguous” to be the basis for contempt, the court concluded that the various 9

orders failed to “identify each acc ount subject to the asset restraints” or to identify 10
the Banks as third parties subject to the restraints

. Id. at * 17

– 1 8

. Similarly, the 11
“geographic scope” of the orders was ambiguous , id. at * 17, and the court found 12
the postjudgment asset restraints to be ultra vires , see id. at *23

– 24 (citing Grupo 13

Mexicano de Desarrollo S.A. v. All. Bond Fund , Inc. , 527 U.S. 308 (1999) )

. Finally, the 14

court stated that “the Contempt Motion clashes with fundamental notions of due 15
process.” Id. at * 24. The court characterized the contempt motion as an 16
“underhanded” or “gotcha” tactic in light of Nike ’s and Next’s earlier, repeated 17
assertions that they were not seeking enforcement against the Banks. Id. at *25. 1816 The court thus concluded that awardin g $150 million in contempt sanctions would 1
unfairly “reward efforts by both Plaintiffs and Assignee to delay resolution of this 2
issue and bolster their contempt arguments.” Id. 3

The district court also denied Next’s motion for contempt sanctions for 4

violat ion of the discovery orders . It found that Next failed to show that the Banks ’ 5
effort to comply with the discovery orders fell below the standard of reasonable 6
diligence. To the contrary , the court noted that “the Banks searched numerous 7

branches and databases for the information demanded in the subpoenas, even 8
though some of the Debtor information was incomplete and unsearchable.” Id. at 9

*26. Although the court disagreed with the Banks’ decision to withhold currency 10
transaction and credit reports to avoid violating Chinese law, “those limited 11
instances of noncompliance are slender reeds on which to rest the finding of 12

contempt that [Next] demands .” Id. at *27. The district court thus refused Next’s 13
request for an adverse inference. 14
This timely app eal followed. We have subject

- matter jurisdiction under 15 15
U.S.C. § 1121(a) and 28 U.S.C. §§ 1331, 1338(a)

– (b), and appellate jurisdiction 16

under 28 U.S.C. § 1291. See Latino Officers Ass’n City of N.Y., Inc. v. City of New York , 17
558 F.3d 159, 163 (2d Cir . 2009) (“[W]here, as in this case, civil contempt 1817 proceedings are instituted after the conclusion of the principal action rather than 1
during the pendency of the action, the order disposing of the contempt 2
proceedings is appealable as a final decision of a district court under 28 U.S.C. 3
§ 1291.” (internal quotation marks omitted) )

. 4

II. STANDARD OF REVIEW 5
“A court of the United States shall have power to punish by fine or 6
imprisonment, or both, at its discretion, such contempt of its authority, and none 7

oth er, as .

. . [d]isobedience or resistan ce to its lawful writ, process, order, rule, 8
decree, or command.” 18 U.S.C. § 401 , 401 (3). “To demonstrate [contempt], ‘a 9
movant must establish that (1) the order the contemnor failed to comply with is 10

clear and unambiguous, (2) the proof of noncompliance is clear and convincing, 11
and (3) the contemnor has not diligently attempted to comply in a reasonable 12

manner.’” Gucci Am., Inc. v. Weixing Li , 768 F.3d 122, 142 (2d Cir. 2014) (quoting 13
Perez v. Danbury Hosp. , 34 7 F.3d 419, 423

– 24 (2d Cir. 2003)). 14

“I t is peculiarly within the province of the district court to determine the 15
meaning of its own order,” Truskoski v. ESPN, Inc. , 60 F.3d 74, 77 (2d Cir. 1995) 16
(cleaned up), so the district court is best positioned to det ermine whether the 17
“potent weapon” of contempt is the best means of enforc ing that order , Int’l 1818 Longshoremen’s Ass’n Loc. 1291 v. Phil a

. Marine Trade Ass’n , 389 U.S. 64, 76 (1967)

. 1

W e review the “ultimate ruling on the contempt motion .

. . for abuse of 2

d iscretion

. ” Latino Officers Ass ’ n , 558 F.3d at 164

. 5 We accept the district court’s 3
factual findings “unless they are shown to be clearly erroneous.” Id. “W e accord 4

substantial deference to a district court’s construction of its own orders,” while 5
acknowledging that “the construction cannot be based on an error of law.” United 6

States v. Canova , 412 F.3d 331, 346 (2d Cir. 2005). P urely legal questions are 7

considered de novo

. See S. New England Tel. Co. v. Glob

. NAPs Inc. , 624 F.3d 123, 145 8
(2d Cir . 2010). 9

III. DISCUSSIO N 10

A. The District Court ’s Denial of Contempt Sanctions Was Not an Abuse of 11 Discretion in Light of Plaintiffs’ Failure to Move to Compel the Banks to 12 Comply with the Asset Restraints 13

The district court faulted Next for delaying resol ution of key issues 14
regarding the scope and application of the asset restraints

. See Nike IV , 2020 WL 15

5 Given the seriousness of the contempt remedy and the careful limitations on its use, we apply a “rigorous” or “more exacting” abuse of discretion review to district court orders holding a party in contempt. Chevron Corp. v. Donziger , 990 F.3d 191, 202 , 2 12 (2d Cir. 2021) ( citations omitted) ; see also EEOC v. Loc

. 638 , 81 F.3d 1162, 1171 (2d Cir. 1996). But such scrutiny is not appropriate here because the district court did not hold a party in contempt

.19 257475, at *25. We agree

— the district court ’s denial of the contempt motion on 1
this basis was an appropriate exercise of its discretion

. 2

First, N ike and Next (together, “Plaintiffs”) failed to seek enforcement of the 3
asset restraints against the Banks for almost six years. Next ’s July 2019 contempt 4

motion alleged that the Banks had violated the orders as far back as November 15, 5
2013, the day afte r the district court issued the temporary restraining order. 6
According to Next , during the period between the TRO and the contempt motion , 7

the Banks facilitated tens of thousands of transactions in violation of the orders , 8

which caused $150 million in dam ages to Next

. This delay of nearly six years is 9
difficult to explain. Nike was sufficiently suspicious of ongoing violations that it 10

serve d all six nonparty Banks with the TRO within twelve days of its issuance , and 11

Nike and Next continued to serve the B anks with notice of each successive order

. 12
But instead of acting on their suspicions and taking a ny step s to compel the Banks’ 13
compliance, Plaintiffs allowed six years to pass while at least $150 million in 14
alleged damages accumulated

. 15

Second, Nike and Ne xt explicitly disclaimed that they were seeking 16
enforcement of the asset restraints against the Banks for four years, which 17
prevented the court from addressing the Banks’ objections to the orders. Not only 1820 did P laintiffs fail to take any action despite kn owing of or suspecting th at 1
transactions were ongoing ; they specifically averred that they were not enforcing 2
the orders against the Banks. The Banks tried twice to present legal arguments 3
challenging the scope of the asset restraints , once in July 2015 and again in 4
February 2018

. See App’x at 1096

– 99, 1160

– 89 (objecting to the default judgment 5
and the Final Order). But P laintiffs expressly disclaimed enforcement against the 6
Banks, and thus forestalled any case or controversy about the scope of the orders. 7

See Nike I , 2015 WL 9450795, at *1 ; Nike II , 349 F. Supp. 3d at 345 ( concluding that 8

the Banks’ legal challenges to the orders were not ripe). The damages sought in 9

Plaintiffs’ contempt motion accumulated for four years from their first disclaim er 10
of any attempt to enforce the orders against the Banks

. 11

Under these circumstances, i t was well within the district court’s discretion 12

to consider Plaintiffs’ dilatory conduct in denying Next’s contempt motion

. 13

P laintiffs ’ delay made a contempt motion an improper vehicle for addressing the 14
Banks’ substantial legal defenses to the orders for the first time

. See Chao v. Gotham 15
Registry, Inc. , 514 F.3d 280 , 292 (2d Cir. 2008) (“[I] t seems unreasonable that 16
Gotham be required, on pain of contempt, to arriv e at a correct answer to such a 17
difficult question of first impression .” ); see also Radio Corp. of Am. v. Cable Radio 1821 Tube Corp. , 66 F.2d 778, 782

– 83 (2d Cir. 1933) (noting potential unfairness to 1
defendant where contempt proceedings used to resolve “ substantial dispute ” )

. 2

As noted above, u ntil the contempt motion, P laintiffs’ disavowals had 3
prevented the district court from resolving questions about the applicabil ity of its 4

orders to the Banks. F or almost six years

— including four years directly 5

attributable to P laintiffs’ disclaimer in 2015

— the Banks were unable to obtain a 6
ruling on their arguments that the asset

- restraint orders did not reach them 7

because they c ould not apply extraterritorially, did not encompass ordinary 8
banking activities, or failed to identify the frozen accounts with adequate 9
specificity. I n light of these unresolved questions of law , the district court properly 10

declined to hold the Banks in contempt . “[W]here infringement .

. . is not clear on 11

the face of the matter,” i t is simply not “reasonable” to put the Banks “at the peril 12
of correctly gauging [their] right[s] under the [orders] or being liable in contempt.” 13
Radio Corp. of Am. , 66 F. 2 d at 782

– 83; see also Gotham Registry , 514 F.3d at 292. 14
Moreover, Plaintiffs’ conduct precluded them from carrying their burden to 15

“establish that

. . . the order the contemnor failed to comply with is clear and 16
unambiguous.” Gucci Am. , 768 F.3d at 142

. Plaintiffs made it impossible to satisfy 17

that burden by disclaiming enforcement of the restraints. Next could have moved 1822 to compel the Banks to comply with the orders on behalf of their foreign branches

. 1

See Nike IV , 2020 WL 257475, at *25 (“If Ass ignee wishes to enforce the asset 2
restraints against the Banks, it should brief the comity factors and give the Banks 3
an opportunity to respond in connection with a motion to compel compliance.”); 4
see also, e.g. , Gucci Am. , 768 F.3d at 127

– 28 (noting that the district court granted a 5
motion to compel compliance with the asset restraints before granting the 6
contempt motion); Tiffany (NJ) LLC v. China Merchs

. Bank , 589 F. App’x 550, 553

– 54 7
(2d Cir. 2014) (vacating order compelling compliance with asset freeze s). Under 8
the circumstances, Next should have proceeded with a motion to compel 9
compliance by the Banks before seeking contempt sanctions. 10

We also note that the district court has “broad discretion in fashioning 11
coercive remedies,” including declining to award sanctions. King v. Allied Vision, 12

Ltd. , 65 F.3d 1051, 10 62 (2d Cir. 1995)

. C ontempt sanctions must be “reasonable in 13

relation to the facts,” a determination we leave “to the informed discretion of the 14

district court.” N.Y. State Nat’l Org. for Wom en v. Terry , 886 F.2d 1339, 1353 (2d Cir. 15
1989). Here , the district court refused to reward Next’s “‘gotcha’ tactics” and other 16
efforts “to delay resolution” of key legal issues. Nike IV , 2020 WL 257475 , at *25. 17

The district court emphasized the gamesma nship at the foundation of Next’s 1823 motion: T he $150 million in contempt sanctions reflects injuries that P laintiffs 1

allowed to accumulate while resting on their rights for six years and disclaiming 2

enforcement for four

. These dilatory tactics undermine Next’s claim to such a 3
large amount in damages

. See 11A Charles Alan Wright & Arthur R. Miller, Federal 4

Practice and Procedure § 2946 (3d ed. 2021) (“[A] plaintiff is advised to assert all 5
rights under Rule 65 promptly. A ny unnecessary delay in doing so may be viewed 6
as inconsistent with a claim that plaintiff is suffering great injury

. . . .”). 7

In sum, the district court did not abuse its discretion by denying Nike and 8

Next’s motion for $150 million in contempt sanctions in light of P laintiffs’ years

9
long delay in seeking enforcement of the orders

. 10

B

. There Is a “Fair Ground of Doubt” as to Whether the Restraints Could 11 Bind the Banks 12 The district court also properly denied Next’s contempt motion because 13

Next failed to car ry its burden to demonstrate that the asset restraints clearly and 14
unambiguously forbade the Banks’ conduct. A s in any contempt motion, Next 15

must establish that the orders are “clear and unambiguous” to hold the Banks in 16
contempt. Next also must show tha t the orders were sufficiently clear to the Banks 17

at the time of the alleged conduct that it would not be “unreasonable” to require 1824 compliance in the first instance “on pain of contempt

. ” Gotham Registry , 514 F.3d 1

at 292. 2

“A clear and unambiguous order is one that leaves no uncertainty in the 3

minds of those to whom it is addressed, who must be able to ascertain from the 4
four corners of the order precisely what acts are forbidden.” King , 65 F.3d at 1058 5
(cleaned up) . Thus, a contempt o rder “is inappropriate if ‘there is a fair ground of 6
doubt as to the wrongfulness of the [alleged contemnor ’s ] conduct. ’ ” Latino 7
Officers Ass’n , 558 F.3d at 164 (quoting Cal. Artificial Stone Paving Co. v. Molitor, 113 8
U.S. 609, 618 (1885)). Ambiguities in the order’s language and persisting questions 9
about legal limits on the court’s power can each defeat a contempt motion. See, 10

e.g. , King , 65 F.3d at 1059 (linguistic ambiguity); G otham Registry , 514 F.3d at 2 9 2 11
(legal ambiguity). 6 12

We hold that the dis trict court appropriately exercised its discretion to deny 13

Next’s contempt motion because there are “fair ground [ s ] of doubt” as to whether 14
those restraints apply extraterritorially in light of principles of international 15

6 By contrast, the First Circuit has held that onl y linguistic ambiguit y is a defense to contempt. See Goya Food, Inc. v. Wallack Mgmt. Co. , 290 F.3d 63, 76 (1st Cir. 2002) (“Thus, the ‘clear and unambiguous’ standard applies to the language of the relevant court order, not to its effectiveness.” (emphasis in original) )

.25 comity and New York’s separate ent ity rule and as to whether the Banks were “in 1
active concert or participation” with D efendants within the meaning of Rule 65(d). 2

1. International Comity 3

T o avoid a conflict with Chinese law, principles of international comity 4
might limit t he asset restraints’ geographic scope to domestic accounts

. Comity 5
“is the recognition which one nation allows within its territory to the legislative, 6
executive or judicial acts of another nation.” Hilton v. Guyot , 159 U.S. 113, 164 7
(1895). “Although c ourts in this country have long recognized the principles of 8
international comity and have advocated them in order to promote cooperation 9
and reciprocity with foreign lands, comity remains a rule of ‘practice, convenience, 10
and expediency’ rather than of la w.” Pravin Banker Assocs., Ltd. v. Banco Popular 11

Del Peru , 109 F.3d 850, 854 (2d Cir. 1997) (quoting Somportex Ltd. v. Phil a . Chewing 12
Gum Corp. , 453 F.2d 435, 440 (3d Cir. 1971) )

. It follows that “when a court order 13
will infringe on sovereign interests o f a foreign state,” we eschew any categorical 14

rule and instead draw on the eight

- factor framework found in Section 403 of the 15
Restatement (Third) of Foreign Relations Law. Gucci Am. , 768 F.3d at 139 (citing 16

United States v. Davis , 767 F.2d 1025, 1036

– 39 ( 2d Cir. 1985)). 1726 Here , the Banks assert that China’s banking laws prohibit them from 1
freezing customer accounts

. A Chinese bank may freeze assets only at the request 2
of a “competent organ”

— a term that includes Chinese courts but excludes foreign 3

courts. A pp’x at 10,345

– 46 (citing Provisions on the Administration of Financial 4
Institutions’ Assistance to Inquiries, Freezing or Deduction of Accounts 5
(promulgated by People’s Bank of China, Jan. 15, 2002, effective Feb. 1, 2002), 6
CLI.10.56742(EN) (Lawinfochina) ). Next disputes this reading of Chinese law and 7
dismisses the possibility that the Banks, as “quasi

- governmental entities,” would 8
actually be sanctioned for freezing D efendants’ accounts. R eply Br. at 32. 9

There is a “ fair ground of doubt ” about how the comity factors would apply 10

in this case. Section 403 calls for China and the United States to “evaluate both [ of ] 11
its interests” and to yield to the state with the “clearly greater interest.” 12
Restatement (Third) of Foreign Relations § 403 cmt. e (Am. Law Inst. 1987). “It 13
need hardly be stated that the United States itself has a powerful interest in 14
enforcing the acts of Congress, especially those, such as the Lanham Act, that are 15
designed to protect intellectual property rights and prevent c onsu mer confusion.” 16

Gucci Am. v. Li , No. 10

- cv
- 4974, 2011 WL 6156936, at *11 (S.D.N.Y. Aug. 23, 2011) 17
(Sullivan, J. ) , vacated on other grounds 768 F.3d 122 (2d Cir. 2014)

. On the other 1827 hand, factors like “the connections .

. . between the regulating state and the person 1
principally responsible for the activity to be regulated, or between that state and 2
those whom the regulation is designed to protect , ” Restatement (Third) of Foreign 3
Relations § 403 (2) (b), suggest that enforcing the asset restraints would be 4
improper, because the Banks, the accounts, and the affected customers are located 5

in China. 6

T he district court never engaged in this kind of analysis with respect to the 7

asset restraints

. 7 “A comity analysis drawing upon § 403 is .

. . appropriate before 8
ordering a nonparty foreign bank to freeze assets abroad in apparent 9
contravention of foreign law to which it is subject.” Gucci Am. , 768 F.3d at 139 10
(emphasis added). Where, as here, the comity concerns are colorable and the 11

district court had not decided the issue , the B anks had a reasonable basis to doubt 12

whether the asset restraints applied to their foreign branches . The district court 13
thus did not abuse its discretion in denying Next’ s contempt motion based on the 14

Banks’ failure to implement such restraints in China. 15

7 The district court engaged in a comity analysis only with respect to the discovery requests, which implicate a set of factors distinct from section 403.28 2. Separate Entity Rule 1
New York’s separate entity rule, which in this context is itself a rule of 2
comity , also provide s “ fair ground [ s ] of doubt ” about whether the asset restraints 3
appl y to the Bank s ’ Chin ese branches

. “The separate entity rule .

. . provides that 4
even when a bank garnishee with a New York branch is subject to personal 5
jurisdiction, its other branches are to be treated as separate entities for certain 6
purposes, particularly with respect to [New York Civil Practice Law and Rule s ] 7

article 62 prejudgment attachments and article 52 postjudgment restraining 8

notices and turnover orders.” See Motorola Credit Corp. v. Standard Chartered B ank , 9
21 N.E.3d 223, 226 (N.Y. 2014), answering question certified by Tire Eng’g & Distrib. 10
L.L.C v. Bank of Chin a Ltd. , 740 F.3d 108 (2d Cir. 2014)

. 11
Although the separate entity rule is a principle of state law, the Federal 12
Rules of Civil Procedure incorp orate state law under certain circumstances. As 13

relevant here, Rule 69 provides that “[t]he procedure on [writs of] execution

— and 14
in proceedings supplementary to and in aid of judgment or execution

— must 15
accord with the procedure of the state where the cou rt is located.” Fed. R. Civ. P. 16
69(a)(1). A ny conflicting “federal statute governs to the extent it applies.” Fed. R. 17
Civ. P. 69(a)(1). 1829 In the district court’s view , the postjudgment asset restraints were subject to 1
the separate entity rule , which preve nted their extraterritorial application. See Nike 2

IV , 2020 WL 257475, at *21

– 22 (citing Motorola , 21 N.E.3d at 230)

. We need not 3

decide whether the separate entity rule bars enforcement of the postjudgment 4

asset restraints. It is enough that Next fails to identify a legal principle that clearly 5
subjects the Chinese branches to the asset restraints, whether by blocking 6
application of the separate entity rule or by reaching the Chinese branches 7
notwithstanding the separate enti ty rule. 8

Next makes two dubious arguments. First, it claims that the separate entity 9
rule cannot apply where it is in conflict with Federal Rule of Civil 10

Procedure 65(d)’s provisions binding nonparties who have actual notice

. We 11
reject this argument . Ru le 69 describe s its operation with more specificity than 12
does Rule 65(d) . In such circumstances, “the particular enactment must be 13
operative, and the general enactment must be taken to affect only such cases 14
within its general language as are not within t he provisions of the particular 15

enactment.” RadLAX Gateway Hotel, LLC v. Amalgamated Bank , 566 U.S. 639, 646 16
(2012) (quoting United States v. Chase , 135 U.S. 255, 260 (1890)). 1730 Second, Next asserts that the separate entity rule applies only if personal 1
jur isdiction is based entirely on the presence of a New York branch . And here , 2
Next argues that personal jurisdiction is based on the foreign accounts’ use of New 3
York correspondent and settlement accounts , so the separate entity rule must not 4
apply

. Again, we disagree

. To start , Next points to no New York authority 5
holding that the separate entity rule depends on the nature of the jurisdictional 6

hook. Cf. Global Tech., Inc. v. Royal Bank of Can. , No. 150151/2011, 2012 WL 89823 , 7

at *1 3 (N.Y. Sup. Ct. 2012) (explaining that the separate entity rule should be 8
“understood as akin to a rule governing service of process” independent of 9
jurisdiction ). More over, the district court did not decide whether it had specific 10
personal jurisdiction o ver the Banks as to their compliance with the asset 11

restraints, let alone over their Chinese branches. T he district court’s personal 12
jurisdiction finding was expressly limited to the discovery orders. See Nike II , 349 13
F. Supp. 3d at 322 , 332 & n.12

. Nex t thus failed to meet its burden to show that the 14
restraints applied to the foreign bank branches. 15

3. “Active Concert or Participation” Under Rule 65(d) 16

The district court also determined that the Banks were not in “ active concert 17

or participation ” with Defendants and thus the asset restraints did not clearly and 1831 unambiguously apply to the nonparty Banks under Rule 65(d)(2)

. See Nike IV , 2020 1

WL 257475, at *19

– 20. We agree with this conclusion

. 2
“Rule 65(d) is designed to codify the c ommon

- law doctrine that defendants 3
may not nullify a decree by carrying out prohibited acts through aiders and 4
abettors, although they were not parties to the original proceeding.” Doctor’s 5

Assoc s. , Inc. v. Reinert & Duree, P.C. , 191 F.3d 297, 302

– 03 (2d Cir. 1999) ( internal 6
quotation marks omitted ) ; see also Alemit e Mfg. Corp. v. Staff , 42 F.2d 832, 833 (2d 7
Cir. 1930) ( L. Hand, J. ) (stating that, in order to hold a nonparty in contempt of a 8
court order, the nonparty “must either abet the defendant, or mus t be legally 9
identified with him”). T he relevant inquiry under Rule 65(d) is whether th e 10

nonparty Banks aided or abetted the Defendants’ violations of the court’s orders. 11

See NML Cap. , Ltd. v. Republic of Argentina , 727 F.3d 230, 243 (2d Cir. 2013) (stating 12

that Rule 65(d) forbids nonparties “‘in active concert or participation’ with an 13
enjoined party

. . . from assisting in a violation of the injunction ” (emphasis added)). 14

We have never catalogued the activities that constitute aidin g and abetting 15

a defendant’s violation of an asset

- restraint order. Although Defendants may have 16

violated the orders by withdrawing or transferring funds, there is a “fair ground 17

of doubt” as to whether the facilitation of such transactions by providing r outine 1832 financial services could expose the Banks to liability under Rule 65(d). 8 The 1

district court reasonably concluded that Rule 65(d) requires “clear and convincing 2
proof” tha t “‘an enjoined party is substantially intertwined with a non

- party,’” 3

and t hat such proof was lacking here. Nike IV , 2020 WL 257475, at *19 (quoting 4
John Wiley & Sons, Inc. v. Book Dog Books, LLC , 327 F. Supp. 3d 606, 638 (S.D.N.Y. 5
2018)). The ultimate answer to this question might also depend on the common

6
law understanding of aiding and abetting, which would ask whether a nonparty’s 7

assistance is sufficiently “substantial” to be proscribed by the Rule. See 8
Restatement (First) of Torts § 876(b) (Am. Law Inst. 1939)

. B ut such an 9
understanding is at best uncertain and our siste r circuits have not adopted it. See, 10

e.g. , Inst. of Cetacean Rsch. v. Sea Shepherd Conservation Soc’y , 774 F.3d 935, 949

– 51 11
(9th Cir. 2014); Goya Foods, Inc. v. Wallack Mgmt. Co. , 290 F.3d 63, 75 (1st Cir. 2002) ; 12
Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc. , 154 F.3d 1345, 1353 (Fed. 13
Cir. 1998)

. 14

8 We thus need not address the question whether the Banks ’ provision of “ routine ” banking services can constitute aid ing and abet ting violations of asset

- restraint orders. To the extent the district court held otherwise, we reach no conclusion on that portion of its ruling

.33 As with the question of extraterritorial application, the “fair ground of 1
doubt” as to whether the Banks were in “active concert or participation” with 2

D efendants is enough to defeat Next’s cont empt motion. 3

C. The Alleged Discovery Violations 4
Finally, we affirm the district court’s denial of Next’s motion for discovery 5

sanctions. The standard for holding a party in contempt of discovery orders is the 6

same as the standard for holding a party in contempt of asset restraints. See S. New 7
England Tel. Co. , 624 F.3d at 144

– 45. Next “ must establish that (1) the order the 8

c ontemnor failed to comply with is clear and unambiguous, (2) the proof of 9
noncompliance is clear and convincing, and (3) the co ntemnor has not diligently 10
attempted to comply in a reasonable manner.” King , 65 F.3d at 1058. Unlike the 11

asset restraints, where the focus has been on the clarity of the orders, t he district 12
court found that Next’s proof of noncompliance with the discovery orders was not 13
“clear and convincing” because the Banks made “diligent and energetic efforts to 14
comply in a reasonable manner.” Nike IV , 2020 WL 257475, at *25 (quoting Gotham 15

R egistry , 514 F.3d at 293). These are factual findings , which Next must show were 16
clearly erroneous in order to prevail

. See Latino Officers Ass’n , 558 F.3d at 164

. 1734 O n appeal , Next focuses on just two of the Banks: BOCOM and ABC. See 1
Appellant’s Br. at 56

– 57. Next alleges that BOCOM and ABC each withheld 2
requested documents showing transactions associated with several merchant 3
accounts used in the counterfeiting scheme. But Next offer s no clear and 4
convincing proof that such documents existed and were in each bank’s possession

. 5
For example, BOCOM’s compliance officer’s statement that BOCOM “identified 6
transaction information pertaining to” several merchants before blacklisting those 7

merchants , App’x at 1492, in no way prove s that BOCOM created records of 8

individual transactions and maintained such records. Likewise, Next’s assertion 9
that Mastercard’s intricate rules for intermediary merchants required ABC and 10
BOCOM to keep such records does not prove that the records exist or ever existed. 11

We thus af firm the district court’ s denial of Next’s motion for discovery sanctions. 12

IV. CONCLUSION 13

For the reasons set forth above , the district court’s judgment is AFFIRMED. 14