Sealed Case (PUBLIC REDACTED OPINION) ( 2019 )

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njI $tat Iourt nf ppca1
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued July 12, 2019 Decided July 30, 2019
Reissued August 6, 2019
No. 19-5068
IN RE: SEALED CASE
Consolidated with 19-5 100, 19-5 102, 19-5 103
Appeals from the United States District Court
for the District of Columbia
(No. 1:18-mc-00175)
(No. 1:18-mc-00176)
(No. 1:18-mc-00177)
Before: TATEL, MILLETT, and PILLARD, Circuit Judges.
Opinion for the Court filed by Circuit Judge TATEL.
TATEL, Circuit Judge:* The three appellant banks,
headquartered in China, hold records that the United States
government thinks may clarify how North Korea finances its
nuclear weapons program. The government therefore procured
subpoenas for those records, obtaining two from a grand jury
(for the two banks with U.S. branches) and one from the
*
NOTE: Portions of this opinion contain sealed
information, which has been redacted.
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Attorney General under the Patriot Act (for the bank that has
no U.S. branch). The banks resisted on multiple fronts,
claiming that the district court lacked personal jurisdiction, that
the Patriot Act subpoena exceeded the government’s statutory
authority, and that compelling production would run afoul of
comity principles because turning over the records—even in
response to a U.S. court order—would trigger penalties under
Chinese law. In a thorough and thoughtful pair of opinions, the
district court overruled those objections and, when the first
opinion failed to elicit the records, held the banks in civil
contempt. For the reasons set forth below, we affirm.
I.
For decades, the Democratic People’s Republic of Korea
(better known as North Korea) has aspired to a battle-ready
nuclear weapons program. Seeking to defuse the threat, the
U.S. government has imposed stiff financial sanctions on the
North Korean regime and its instrumentalities, exercising
authority located in the International Emergency Economic
Powers Act. See 50 U.S.C. §S 170 1—02 (granting the President
the power to “prohibit” various “transactions” after declaring a
“national emergency” posed by “any unusual and extraordinary
threat. to the national security, foreign policy, or economy
. .
of the United States”). Relevant to this case, those sanctions are
intended to cut off North Korea’s access to American markets
and currency. See Executive Order No. 13,382, § 1, 70 Fed.
Reg. 38,567, 38,567 (June 28, 2005) (authorizing various
cabinet officers to “block[J” entities that further nuclear
proliferation by preventing any “property or interests in
property” from being “transferred, paid, exported, withdrawn,
or otherwise dealt in”). According to government investigators,
however, North Korea manages to evade the sanctions by using
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Chinese front companies that cloak the true ownership of the
funds involved.
The facts uncovered by this investigation so far are a case
in point. The U.S. government has collected substantial
evidence that a now-defunct Chinese company called
(“the Company”)
acted as a front for , a North Korea-
owned entity (“the NKE”), by facilitating transactions that
violated the sanctions orders. In fact, to date the government’s
“investigation [has] not yield[ed] any evidence that” the
Company “was ever used as a legitimate business.”
Declaration of (“FBI
Declaration”) ¶ 10, Joint Appendix (“J.A.”) 864.
Unsurprisingly, then, in addition to the NKE itself, the
government has sanctioned the Company and two of its alleged
founders. Actions Taken Pursuant to Executive Order 13382,
(designating the
NKE); Notice of [Office of Foreign Asset Control (OFAC)]
Sanctions Actions,
(designating the Company); Notice of OFAC Sanctions
Actions, •
(designating alleged co-founder
—
); Notice of OFAC
Sanctions Actions,
(designating alleged co-founder ).
According to the government, the scheme operated like
this: Hobbled by the worthlessness of North Korea’s currency,
the NKE would use the Company to make or receive payments
in U.S. dollars. These transactions helped North Korea access
resources that would otherwise have been beyond its reach. For
example, the Company’s assistance allegedly enabled North
Korea to export hundreds of millions of dollars of coal and
other minerals, generating revenue in U.S. currency that North
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Korea could then use to requisition other commodities vital to
its weapons program.
In these transactions, the Company routinely took
advantage of U.S. correspondent bank accounts—that is,
accounts held by banks outside the United States at banks
located inside the United States. See 31 U.S.C.
§ 53 18A(e)(1)(B) (defining “correspondent account” to mean
“an account established to receive deposits from, make
payments on behalf of a foreign financial institution, or handle
other financial transactions related to such institution”). Such
accounts allow foreign “banks to conduct business and provide
services for their customers in” the United States even if “the
banks have no physical presence” here. Minority Staff of the
Senate Permanent Subcommittee on Investigations,
Correspondent Banking: A Gateway for Money Laundering,
S. Hrg. 107-84, 107th Cong., app. 287 (2001). This, in turn,
enables a foreign bank’s customers to “receive many or all of
the services offered by [a] U.S. bank” without forming a direct-
client relationship with an American institution. Id.Correspondent banking arrangements are fairly ubiquitous:
“[d]ue to U.S. prominence in international trade and the high
demand for U.S. dollars due to their overall stability, most
foreign banks that wish to provide international services to
their customers have accounts in the United States capable of
transacting business in U.S. dollars.” Id. In short, then,
correspondent bank accounts allow foreign banks to offer their
clients services—including obtaining and transacting in U.S.
currency—without opening a U.S. branch.
These accounts are how the appellant banks (collectively,
the “Banks”) enter the story. All three are China-based—
indeed, the Chinese government owns a substantial minority of
each—and hold correspondent accounts in the United States.
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Banks One and Two also operate branches in the United States,
but according to the government the Company relied on the
three Banks’ U.S. correspondent accounts to execute its
scheme.
To better grasp the full scope of the Company’s
operations, the government seeks certain records from the
Banks. The United States and China have a bilateral agreement
for obtaining just these kinds of records. Known as the Mutual
Legal Assistance Agreement (MLAA), it obligates the two
countries to assist each other “in proceedings related to
criminal matters,” including by “providing . . records or
.
articles of evidence” and “executing requests for inquiry,” and
specifies the “[f]orm and [c]ontents” of any requests.
Agreement Between the Government of the United States of
America and the Government of the People’s Republic of
China on Mutual Legal Assistance in Criminal Matters, arts. 1,
4, June 19, 2000, T.I.A.S. No. 13,102. Absent an MLAA
request, Chinese law prohibits banks from disclosing records
to international investigators.
In this case, however, the United States chose not to go
through the MLAA. Stymied by what it perceives as sluggish
and typically fruitless cooperation from Chinese authorities in
the past, the government unilaterally issued subpoenas to all
three Banks in December 2017. The two banks with branches
in the United States
(“Bank One” and “Bank Two,”
respectively)—received grand jury subpoenas. See Federal
Rule of Criminal Procedure 1 7(e)(1). The third
(“Bank Three”)—has no branch in
the United States and received a subpoena from the Attorney
General pursuant to the Patriot Act, which gives the Attorney
General and the Treasury Secretary special investigatory tools
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when it comes to U.S. correspondent bank accounts. See 31
U.S.C. § 53 18(k)(3)(A)(i). The subpoenas seek all records
dated 2012 to 2017 concerning all correspondent banking
transactions associated with certain accounts linked to the
Company, defining records to include signature cards, ledger
cards, account statements, and documentation of deposits,
withdrawals, and transfers. Through this investigation, the
government hopes to learn whether the Company or any other
entities have committed various federal crimes, including
engaging in unlicensed financial transactions (violating 50
U.S.C. § 1705), money laundering (violating 18 U.S.C.
§ 1956), or failing to exercise due diligence in correspondent
banking as required by the Bank Secrecy Act (violating 31
U.S.C. § 531$ and 5322). The government does not currently
suspect the subpoenaed Banks of any wrongdoing.
In correspondence with the U.S. government, the Banks
and the Chinese government protested that complying with the
subpoenas would violate multiple Chinese laws, including the
law designating the MLAA process as the exclusive
mechanism for disclosures. They claimed that failure to use the
MLAA channel would expose the Banks to administrative and
criminal penalties. In response, the U.S. government took the
position that such a request would be futile, given China’s slow
and spotty history of providing records requested through that
process.
There matters stood for about a year. Despite traveling
twice to China for what proved to be unproductive negotiations
with the Chinese government, there were no major
breakthroughs: the United States refused to submit an MLAA
request, and the Banks continued to withhold the records. At
last, in November 2018, things kicked back into gear when the
government moved the district court to compel enforcement.
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Still resisting, the Banks disputed the district court’s personal
jurisdiction and contended that enforcing the subpoenas would
violate deeply ingrained principles of international comity.
Bank Three also protested that the scope of its subpoena
exceeded the Attorney General’s Patriot Act authority.
The district court granted the government’s motion to
compel. In re Grand Jury Investigation ofPossible Violations
of 18 USC. §‘ 1956 and 50 US.C. 1705, Nos. 1:18-mc-175,
-176, -177, slip op. at 3 (D.D.C. Mar. 18, 2019) (“March op.”).
The court found that Banks One and Two had consented to
personal jurisdiction when they signed an agreement with the
federal Reserve permitting them to open branches in the
United States. Id. at 11—13. As for Bank Three, which has no
branch in the United States, the court determined that (along
with Banks One and Two) it had sufficient contact with the
United States as a whole and the subpoenas sufficiently related
to that contact so as to support the court’s personal jurisdiction.
Id. at 13—27; see also International Shoe Co. v. State of
Washington, Office of Unemployment Compensation and
Placement, 326 U.S. 310, 316 (1945) (personal jurisdiction
requires “minimum contacts” with the forum such that
jurisdiction is consistent with “traditional notions of fair play
and substantial justice” (internal quotation marks omitted)).
The district court also perceived no problems with the scope of
the Patriot Act subpoena. March Op. 27—31. Finally, although
the government conceded that compliance with the subpoenas
would entail violating at least some Chinese laws, the district
court concluded that comity principles did not require the
subpoenas to be quashed. Id. at 32—5 8. The court found that,
based on past practice, China’s preferred MLAA procedure
would likely be futile and determined that the U.S.
government’s strong national security interests outweighed
China’s stake in enforcing the identified laws. Id. at 42—51. The
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court was unmoved by a series of letters from the Chinese
Ministry of Justice promising to “promptly review and
process” any MLAA request in this case. Id. at 45 (quoting
Letter from Du Yaling, Director General of International
Cooperation Department of the Ministry of Justice, to Chief
Judge Beryl A. Howell (Feb. 26, 2019), J.A. 966).
About a month later, after the Banks made clear they
would not comply with the compulsion order, the district court
held them in contempt. In re Grand Jury Investigation of
Possible Violations of 18 U.S.C. § 1956 and 50 US.C. § 1705,
Nos. 1:18-mc-175, -176, -177, slip op. at 1—3 (D.D.C. Apr. 10,
2018) (“April Op.”). It imposed a $50,000 per day fine against
each bank but stayed that penalty contingent on the parties
seeking an expedited appeal. Id. at 14—15. They obliged, and
we agreed to accelerate our consideration of the case. Per
Curiam Order, In re: Sealed Case, No. 19-5068 (D.C. Cir. Apr.
25, 2019). We now turn to the Banks’ arguments, beginning
with personal jurisdiction before examining the merits.
II.
The Constitution forbids federal courts from exercising
personal jurisdiction absent sufficient “minimum contacts” to
satisfy “traditional notions of fair play and substantial
justice.” International Shoe, 326 U.S. at 316 (quoting Milliken
v. Meyer, 311 U.S. 457, 463 (1940)). That protection extends
to private foreign entities—such as the Banks—just as to
American citizens. See Livnat v. Palestinian Authority, 851
F.3d 45,48 (D.C. Cir. 2017) (delineating the “general rule” that
restrictions on personal jurisdiction “protect{J all litigants in
our courts”). Unlike subject-matter jurisdiction, however,
personal jurisdiction “can. be waived,” meaning a party
. .
may “consent” to a court’s personal jurisdiction. Insurance
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Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456
U.s. 694, 703 (1982). Because neither the government nor the
Banks suggests that these principles operate differently in
grand jury investigations than in ordinary civil litigation, we
shall treat these two contexts as identical for purposes of this
case. But see Boydv. Meachum, 77 f.3d 60,66 (2d Cir. 1996)
(“While the federal constitutional requirements of personal
jurisdiction in a civil setting are reasonably well-defined,
this is not so in a criminal case.”).
All three Banks contest personal jurisdiction. “Reviewing
the district court’s assertion of personal jurisdiction de novo,”
United States ex rel. Miller v. Bill Harbert International
Construction, Inc., 608 F.3d 871, 886 (D.C. Cir. 2010), we
conclude that the Banks’ challenges are meritless. Banks One
and Two consented to jurisdiction when they opened branches
in the United States. And although Bank Three has no U.S.
branch and executed no such agreement, its choice to maintain
correspondent accounts in the United States establishes an
adequate connection to the forum and the enforcement action
to sustain jurisdiction.
A.
Congress requires any “foreign bank” to acquire “prior
approval of the” Federal Reserve before it “may establish a
branch or an agency” in the United States. 12 U.S.C.
§ 3 105(d)(1). The Federal Reserve, in turn, has authority to
“impose such conditions on its approval” of a foreign bank’s
application “as it deems necessary,” Id. § 3 105(d)(5), to,
among other things, assure itself that the bank will be “in
compliance with applicable United States law” and mitigate
any “risk to the stability of the United States financial system,”
id. § 350 1(d)(3)(D)—(E). See also 12 C.F.R. § 21 1.24(c)(2)(vii)
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(Federal Reserve scrutinizes “[wjhether the foreign bank...
has established adequate controls and procedures. to ensure . .
continuing compliance with U.S. law, including controls
directed to detection of money laundering”).
When Banks One and Two applied to open their U.S.
branches, both executed agreements with the Federal Reserve
to assure compliance with relevant provisions of American
law. As part of that deal, they “consent[edj to the jurisdiction
of the federal courts of the United States for purposes of
. . .
any and all. proceedings initiated by. the United
. . . .
States. in any matter arising under U.S. Banking Law.”
. .
Letter from Vice Chairman & President,
,
to Board of Governors of the
Federal Reserve System 1 l.A. 1659 (“Bank
,
One Consent”); Assurances Commitment and Consent to
Jurisdiction Commitment
1, J.A. 1663 (“Bank Two Consent”). The agreements
define “U.S. Banking Law” expansively to include “all federal
criminal laws of which violation(s) arise(s): under .the . . . . .
Bank Secrecy Act.” Bank One Consent 3 n.2, l.A. 1661; Bank
Two Consent 1 n.2, l.A. 1663.
The plain language of those agreements covers this case.
This investigation is unquestionably a “proceeding[] initiated
by. the United States” and, as the government explains, “the
. .
grand jury is investigating whether those financial institutions
that provided services in the United States”—for example, the
American institutions hosting the foreign Banks’
correspondent accounts—”exercised due diligence.”
Appellee’s Br. 18 (citing 31 U.S.C. § 5318, 5318A, 5322).
The Bank Secrecy Act makes willful dereliction of that
obligation a federal criminal violation. 31 U.S.C. § 5322. In
short, then, the government has assembled the necessary
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ingredients for jurisdiction: a criminal investigation initiated by
the United States (the grand jury investigation) arising under
U.S. Banking Law (the Bank Secrecy Act).
The banks’ contrary arguments amount to nothing more
than an unsuccessful effort to move the goalposts. They insist
that there must be a reasonable showing that someone actually
violated the Bank Secrecy Act. Bank Two Br. 8. Not so. All
our precedent requires is a “reasonable probability that. the. .
facts necessary for the exercise of jurisdiction” exist. In re
Sealed Case, $32 F.2d 1268, 1274 (D.C. Cir. 1987) (quoting In
re Marc Rich & Co., 707 F.2d 663, 670 (2d Cir. 1983)). Here,
nothing in the consent agreements requires the government to
establish liability; they require only that the proceedings
“aris[e] under U.S. Banking Law.” Bank One Consent 1,
J.A. 1659 (emphasis added); Bank Two Consent 1, J.A. 1663
(emphasis added). Whether a proceeding “arises under” a
particular law is a question about its subject matter at the outset,
not a question about its outcome. To look at the same phrase in
a more typical context, when we ask whether a lawsuit “aris[es]
under” federal law for purposes of subject-matter jurisdiction,
U.S. Const. art. III, § 2, we look to whether the plaintiffs
“assert a claim” based on “federal law,” not whether they will
ultimately prevail, National farmers Union Insurance Cos. v.
Crow Tribe of Indians, 471 U.S. 845, 850 (1985) (emphasis
added); see also American Well Works Co. v. Layne & Bowler
Co., 241 U.S. 257, 260 (1916) (“A suit arises under the law that
creates the cause of action.”). Given this “legal lineage,” Hall
v. Hall, 13$ S. Ct. 1118, 1125 (201$),agrand jury investigation
plainly “arises under” a particular statute when it probes
whether that statute has been violated.
Read properly, the consent agreements demand only that
“U.S. Banking Law” form the basis of the investigation. The
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government has cleared that threshold here. Even if, as the
banks suggest, this investigation’s potential to yield successful
prosecutions is uncertain, the banks have offered no basis for
doubting that “U.S. Banking Law” constitutes this
investigation’s subject matter.
The banks also suggest that there is a problem with
personal jurisdiction because the subpoenaed records are
located outside the United States. But that fact has no bearing
on personal jurisdiction given that the banks’ consent
agreements supply the basis for jurisdiction. The argument is
better conceived as a challenge to the scope of the subpoenas—
an understanding not evident from the banks’ briefs. Even were
we to entertain the argument, however, it would go nowhere.
Federal courts have long required the production of documents
held abroad. See, e.g., In re Marc Rich, 707 F.2d at 667 (A
witness may not “resist the production of documents on the
ground that the documents are located abroad.”); United States
v. first National City Bank, 396 F.2d 897, 900—01 (2d Cir.
196$) (“[A] federal court has the power to require the
production of documents located in foreign countries if the
court has in personam jurisdiction of the person in possession
or control of the material.”). That practice makes sense: grand
juries often investigate violations of criminal laws that
obviously cover extraterritorial conduct. “It would be strange,
indeed, if the United States could punish a foreign corporation
for violating its criminal laws . . but a federal grand jury
. ,
could not investigate to ascertain the probability that a crime
had taken place.” In re Marc Rich, 707 F.2d at 666.
B.
Bank Three, by contrast, has neither opened a U.S. branch
nor consented to personal jurisdiction. We therefore must
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determine whether it “has purposefully directed” its relevant
“activities” at “the forum.” Burger King Corp v. Rudzewicz,
471 U.S. 462, 472 (1985) (internal quotation marks omitted).
That, of course, requires us to correctly identify “the
forum,” a task ordinarily linked to where Congress has
authorized service of process. See BNSF Railway Co. v.
Tyrrell, 137 S. Ct. 1549, 1555—56 (2017) (“Congress’ typical
mode of providing for the exercise of personal jurisdiction has
been to authorize service of process” because “a basis for
service of a summons on the defendant is prerequisite to the
exercise of personal jurisdiction”). In many situations,
Congress limits the territorial reach of federal district courts to
that of the state in which they sit. See Wright & Miller,
4 Federal Practice & Procedure § 1068.1 (4th ed.); see, e.g.,
Federal Rule of Civil Procedure 4(k)(1)(A). For example,
unless a federal statute otherwise provides, by virtue of Rule
4(k)(1)(A) the jurisdictional reach of a federal court in a civil
action is keyed to that of a court of general jurisdiction in the
state in which it sits. So in reviewing the constitutionality of
their assertions of jurisdiction, federal courts oflen perform
state-specific contacts analyses. Although the constitutional
restraint in those situations necessarily flows from the Fifth
Amendment, the scope of the minimum-contacts inquiry is the
same as it would be under the Fourteenth Amendment for a
claim in state court: confined to contacts with the forum state.
According to Bank Three, a state-specific contacts
analysis is appropriate for the Patriot Act subpoenas at issue
here. And, the Bank argues, since its agent was served in New
York and the Bank lacks any meaningful contact with the
District of Columbia, the district court here lacked jurisdiction.
For its part, the government maintains that the Patriot Act
authorizes nationwide service of process. Under those
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circumstances, the Fifth Amendment requires only “minimum
contacts with the United States” as a whole—rather than with
the forum state. SEC v. Bilzerian, 378 F.3d 1100, 1106 n.8
(D.C. Cir. 2004); accord Livnat, 851 F.3d at 55 (“Under the
Fifth Amendment, which defines the reach of federal courts,
contacts with the United States as a whole are relevant.”).
Therefore, the government argues, the district court properly
considered Bank Three’s contacts with the United States as a
whole, including its maintenance and use of correspondent
accounts in New York.
We begin by observing that the usual process of looking to
where federal law authorizes service of process as a proxy for
whether Congress sought to trigger a federal court’s nationwide
territorial reach is, perhaps, not a perfect fit for this provision
of the Patriot Act. Because the statute confers authority to issue
a subpoena directly on the Attorney General and the Treasury
Secretary, rather than on a federal district court, Congress may
have given little consideration to the territorial reach of a
district court considering a motion to compel enforcement of
such a subpoena. But given that Bank Three assumes that
authorizing nationwide service in this context would trigger a
nationwide contacts analysis, we shall too. See Sickle v. Torres
Advanced Enterprise Solutions, LLC, 884 F.3d 338, 344 (D.C.
Cir. 2018) (accepting a party’s decision “not to brief or argue
the question of personal jurisdiction” because that “defense .
can be waived or forfeited”).
Here, that service-of-process provision, codified in 31
U.S.C. § 5318(k), authorizes the kind of subpoena served on
Bank Three to “be served on the foreign bank in the United
States if the foreign bank has a representative in the United
States.” 31 U.S.C. § 5318(k)(3)(A)(ii). We know of no other
service-of-process provision in the U.S. Code phrased exactly
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this way. Still, we are not entirely without guideposts as we
evaluate this question.
We know, for instance, that Congress has many different
ways of authorizing nationwide service of process. Sometimes
it makes its intention abundantly clear by authorizing service
“anywhere in the United States.” See, e.g., 7 U.S.C. § 499g(b)
(service for enforcing in federal district courts certain orders of
the Secretary of Agriculture); 2$ U.S.C. § 232 1(c) (same for
enforcing orders of the Surface Transportation Board); 33
U.S.C. § 921(c) (service for review proceedings in the courts
of appeals of decisions of the Benefits Review Board for
longshore and harbor workers). On other occasions, Congress
employs some riff on the phrase “wherever the defendant may
be found,” language generally understood to refer to
nationwide service. See, e.g., 7 U.S.C. § 25(c) (service in
private lawsuits under the Commodity Exchange Act); see also
Omni Capital International, Ltd. v. Rudolf Wolff & Co., 484
U.S. 97, 105—06 (1987) (recognizing that such language
“explicitly authorize[sJ nationwide service of process”);
Appellee’s Br. 25 n.20 (collecting additional examples). We
also know that Congress can very clearly limit service to a
particular judicial district when it wants to. See, e.g., 45 U.S.C.
§ 3 62(b) (authorizing process issued by most courts in Railroad
Retirement Board proceedings to be served “in the judicial
district of the district court issuing such. process”).
. .
At first glance, the language in section 5318(k) looks more
like the provisions that authorize nationwide service. So long
as a foreign bank has designated a representative, the statute
allows for service “in the United States,” without specifying
any state or judicial district. True, the provision lacks the
unmistakable clarity of the statutes that expressly authorize
service “anywhere” in the country; nonetheless, the text
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contains no limitation other than the territorial boundaries of
the entire United States. Bank Three, however, seizes on the
requirement to designate a representative to argue that, in fact,
Congress only meant to authorize service in the judicial district
where that representative is located.
Bank Three’s position makes some intuitive sense. After
all, as a matter of physics, the designated representative will
have a single location. On further reflection, however, this
logic fails to resolve things in the Bank’s favor. After all, both
Bank Three and the government agree that language
authorizing service “wherever a defendant may be found”
authorizes nationwide service, see Bank Three Br. 51,
Appellee’s Br. 25 n.20, even though in many instances that
defendant, too, will only be located in one place at a time.
Even more instructive, in other service-of-process regimes
involving designated representatives, when Congress wants to
specify a particular location or district for service, it says so
directly. For example, in certain trademark actions, Congress
has instructed foreign mark holders to designate a U.S. agent
and authorized service of process “by leaving with that person
or mailing to that person a copy [of the process] at the address
specfied in the last designation so filed.” 15 U.S.C. § 1141k(f)
(emphasis added). Congress has even provided a backup
option, explaining that “[i]f the person so designated cannot be
found at the last designated address” then “process may be
served on the Director” of the United States Patent and
Trademark Office. Id.; see also 7 U.S.C. § 2569 (containing a
similar backup provision for when a designee “cannot be found
at the address given”). The provision at issue in this case is
noticeably devoid of any similar language, leading to the
inference that Congress sought to impose no similar
geographical limitation here.
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Reading section 5318(k) to authorize nationwide service
also aligns with the Patriot Act’s structure and purpose. Cf
United States International Trade Commission v. ASAT, Inc.,
411 f.3d 245, 251 (D.C. Cir. 2005) (examining, when
considering whether a statute authorizes nationwide service,
whether “Congress would have desired nationwide service of
process to effectuate the underlying statute’s purpose”). Rather
than requiring the Attorney General or Treasury Secretary to
go to court to obtain a subpoena, Congress authorized those
officers to issue process themselves. Unlike federal district
courts, which customarily serve a particular geographical area,
Cabinet officers serve the entire country. Structurally speaking,
then, Congress’s choice to give two such officers the subpoena
power evokes an intent to rely on their nationwide reach. As
for purpose, having found that correspondent accounts were a
source of special concern for money laundering, Congress
sought “to provide a clear national mandate for subjecting to
special scrutiny those. . financial institutions operating
.
outside of the United States. that pose particular, identifiable
. .
opportunities for criminal abuse.” USA PATRIOT Act of 2001,
Pub. L. No. 107-56, § 302(a)(6), (b)(4), 115 Stat. 272, 296—97.
It would be odd if, in establishing this “clear national mandate,”
Congress had geographically subdivided the government’s
investigative powers.
Apparently recognizing that its preferred interpretation of
section 5318(k) may not represent “the most natural reading of
the provision,” Bank Three Br. 4$, Bank Three falls back on
the presumption against extraterritoriality, which teaches that
without a “clearly expressed congressional intent to the
contrary, federal laws will be construed to have only domestic
application.” RJR Nabisco, Inc. v. European Community, 136
S. Ct. 2090, 2100 (2016). According to the Bank, reading the
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Patriot Act to authorize nationwide service “would vastly
expand the extraterritorial scope of federal regulatory power.”
Bank Three Br. 49. But that does not follow. This service-of-
process provision has no impact on the substantive
extraterritorial reach of federal law; it merely helps sort out
which federal court has authority to enforce the subpoena. After
all, even under Bank Three’s preferred interpretation, at least
one federal court could assert jurisdiction over Bank Three (the
one in the district where the Bank’s agent resides). The
presumption against extraterritoriality therefore offers no basis
to upset the most straightforward reading of the text: that once
a foreign bank has designated a representative in the United
States, service may be accomplished throughout “the United
States.”
Having defined the forum as the entire United States, we
would usually go on to assess whether the Bank’s contacts with
that forum are sufficient. In this case, however, Bank Three
placed all its eggs in the forum-identification basket; it claims
only that it lacks the necessary contacts with the District of
Columbia, offering no argument that its contacts with the
United States as a whole are insufficient. See Bank Three
Br. 46—47 (“The only way the government can prevail is by
showing that the relevant forum is the United States as a
whole.”). We therefore have no occasion to question the district
court’s conclusion that Bank Three’s maintenance of
correspondent accounts in the United States supplies the
necessary nexus. March op. 2 1—24. With no further
jurisdictional hurdles in our path, we proceed to the merits.
III.
Bank Three, the only bank to receive a Patriot Act
subpoena, argues that its subpoena exceeds the Attorney
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General’s statutory authority. Although “[w]e generally review
district court decisions enforcing document subpoenas only for
arbitrariness or abuse of discretion,” we afford no deference to
a decision that applies “the wrong legal standard.” In re Sealed
Case, 146 F.3d 881, $83 (D.C. Cir. 199$). We therefore review
“de novo” the district court’s “legal conclusions,” including its
statutory interpretation, even as we review “its factual findings
for clear error.” United States v. Ahn, 231 F.3d 26, 38 (D.C.
Cir. 2000).
Congress enacted section 531 8(k)(3) “to increase the
strength of United States measures to prevent, detect, and
prosecute international money laundering and the financing of
terrorism.” Pub. L. No. 107-56, § 302(b)(1), 115 Stat. at 297.
In particular, Congress found that correspondent accounts held
by foreign banks were “one of the banking mechanisms
susceptible in some circumstances to manipulation by foreign
banks to permit the laundering of funds.” § 302(a)(6), 115 Stat.
at 296. Thus, it authorized both the Attorney General and the
Treasury Secretary to issue a “subpoena to any foreign bank
that maintains a correspondent account in the United States and
request records related to such correspondent account,
including records maintained outside of the United States
relating to the deposit of funds into the foreign bank.” 31
U.S.C. § 5318(k)(3)(A)(i).
Bank Three claims the subpoena it received strays outside
the statutory lines because it is “not expressly confine[d]” to
documents related to the Bank’s correspondent accounts in the
United States. Bank Three Br. 23. To be sure, the subpoena is
comprehensive: it seeks “[a]1l documents relating to [the
Company’s] correspondent banking transactions”—including,
it would seem, documents related to transactions using
correspondent accounts in countries other than the United
20
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States. Bank Three Subpoena, J.A. 771; see also id. (requesting
“signature cards,” “account ledger cards,” “periodic account
statements,” and “records. of all items deposited,
. .
withdrawn, or transferred”). And we know Bank Three does,
in fact, have correspondent accounts outside the United States.
If we knew nothing else about the Company, Bank Three’s
argument might therefore have some force: where, as here, a
bank maintains correspondent accounts in multiple countries,
it is by no means a given that all of an account holder’s
correspondent banking transactions “relate to” the bank’s US.
correspondent accounts, as the statute requires.
With respect to this particular case, however, the
government has a compelling response. It argues, as it did
before the district court, that evidence already collected during
the investigation shows that the Company’s “exclusive raison
d’etre” was to serve as “a progenitor of U.S. dollars for” the
NKE. Appellee’s Br. 62; see also Id. at 64 (describing the
Company as “a front company created for the sole purpose of
executing U.S.-dollar transactions”); March 5, 2019 Hearing
Tr. 95:17—25, l.A. 1650—5 1 (“[The Company] existed only for
one reason. [T]he [NKE] has to set up entities like this,
. .
because [it] want[s] access to the U.S. financial system.”). In
the government’s view, such a showing means that all of the
Company’s records are “related to” the Bank’s U.S.
correspondent accounts because those accounts were part of the
Company’s means of obtaining U.S. dollars.
The parties’ dispute turns on the meaning of the term
“related to” as used in section 531 8(k)(3). Arguing for a narrow
interpretation, Bank Three reads the statute to authorize
collecting only those records of transactions that themselves
passed through Bank Three’s U.S. correspondent accounts. For
its part, the government advocates a more expansive reading—
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one that would cover all records that have a “connection with”
the Company’s use of Bank Three’s U.S. correspondent
accounts, even if some individual transactions made no use of
a U.S. correspondent account. Appellee’s Br. 60 (internal
quotation marks omitted).
To assess how broadly the phrase “related to” sweeps, we
look to the “traditional tools of statutory interpretation—text,
structure, purpose, and legislative history.” Tax Analysts v. IRS,
350 F.3d 100, 103 (D.C. Cir. 2003) (internal quotation marks
omitted). The “first step in interpreting a statute is to determine
whether the language at issue has a plain and unambiguous
meaning”; “[o]ur inquiry must cease if the statutory language
is unambiguous and the statutory scheme is coherent and
consistent.” Robinson v. Shell Oil Co., 519 U.S. 337, 340
(1997) (internal quotation marks omitted).
“[W]hen asked to interpret statutory language including the
phrase ‘relating to,’ . .th[e] [Supreme] Court has typically
.
read the relevant text expansively.” Lamar, Archer & Cofrmn,
LLP v. Appling, 13$ S. Ct. 1752, 1760 (201$). We see no
reason to deviate from that approach here. The ordinary
meaning of that phrase encompasses the broad relationships
described by the government. See, e.g., Merriam-Webster’s
Collegiate Dictionary 987 (10th ed. 1997) (defining “relate” as
“to have [a] relationship or connection”); Black’s Law
Dictionary 1288 (6th ed. 1990) (defining “relate” as “[tb stand
in some relation; to have bearing or concern; to pertain; refer;
to bring into association with or connection with”); see also BF
America Production Co. v. Burton, 549 U.S. 84, 91(2006)
(“Unless otherwise defined, statutory terms are generally
interpreted in accordance with their ordinary meaning.”).
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The government’s interpretation finds further support in the
one example that Congress offered of a record “related to” a
U.S. correspondent account: “records maintained outside of the
United States relating to the deposit of funds into the foreign
bank.” 31 U.S.C. § 5318(k)(3)(A)(i). The final phrase is
important. Merely depositing funds “into the foreign bank”
would not necessarily entail passing those funds through the
foreign bank’s U.S. correspondent account; rather, it may be a
preparatory step for using the correspondent account. For
instance, an aspiring money launderer might deposit illicitly-
obtained foreign currency into the foreign bank before using
the U.S. correspondent account to facilitate a payment in U.S.
dollars, helping the guilty party conceal the origin of the funds.
By specifying that its view of records “related to” a U.S.
correspondent account includes such a predicate transaction,
Congress embraced an expansive view of the term in line with
the government’s. And, of course, that view accords with
Congress’s stated purpose in enacting the provision: “to
increase the strength of United States measures to prevent,
detect, and prosecute international money laundering and the
financing of terrorism.” Pub. L. No. 107-56, § 302(b)(1), 115
Stat. at 297.
Resisting this expansive text, Bank Three offers two
reasons to prefer a more circumscribed understanding of the
statute. First, it again looks to the presumption against
extraterritoriality. But here, the statute contains no ambiguity
requiring us to resort to that presumption. See Validus
Reinsurance, Ltd. v. United States, 786 F.3d 1039, 1046 (D.C.
Cir. 2015) (explaining that “ambiguity is resolved by
[applyingj the presumption against extraterritoriality”
(emphasis added)). To be sure, the statutory text is capacious,
but as the Supreme Court has observed, “[b]road. language
. .
is not necessarily ambiguous when congressional objectives
23
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require broad terms.” Diamond v. Chakrabarty, 447 U.S. 303,
315 (1980).
Second, Bank Three points to the Justice Department’s
attempt to persuade Congress to amend the statute to allow the
government to obtain not just “records relating to” a foreign
bank’s U.S. correspondent account, but also “any records”
pertaining to “any related account at the foreign bank,
including records maintained outside of the United States, that
are the subject of any investigation of a criminal violation of
United States law.” Department of Justice, Title III, Anti-
Corruption Legislative Proposals, 114th Cong., at 4 (May 5,
2016), https://www.justice.gov/opa/file/849986/download
(emphases added). The Bank would have us infer from
Congress’s failure to adopt the amendment that section
53 18(k)(3) as currently written can never reach “[a]l1
documents” relating to “all” of a company’s “correspondent
banking transactions,” as this subpoena does. Bank Three
Subpoena, J.A. 771. But the Supreme Court has long cautioned
against reading too much into congressional inaction given that
“[l]ogically, several equally tenable inferences could be drawn
from the failure of the Congress to adopt an amendment.
including the inference that the existing legislation already
incorporated the offered change.” United States v. Wise, 370
U.S. 405, 411 (1962). In any event, the unenacted amendment
Bank Three cites does not expand the definition of what records
count as “related to” a U.S. correspondent account; rather, it
would allow the government to reach other accounts,
regardless of their relationship to a U.S. correspondent account.
Such a proposal tells us little about what Congress currently
considers to be “related to” a correspondent account.
We therefore conclude that records “related to” a U.S.
correspondent account include records of transactions that do
24
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not themselves pass through a correspondent account when
those transactions are in service of an enterprise entirely
dedicated to obtaining access to U.S. currency and markets
using a U.S. correspondent account. All that remains is to
determine whether the government has adequately shown that
the Company was such an enterprise.
The district court found that the government had made the
necessary showing. Specifically, it found that “[n]o part” of the
Company could “be separated from the ploy to put money
through the United States financial market.” March Op. 29. On
the record before us, that finding was not clearly erroneous. See
Boca Investerings Partnership v. United States, 314 F.3d 625,
629—30 (D.C. Cir. 2003), as amended (Mar. 26, 2003) (a
conclusion is clearly erroneous when “the reviewing court on
the entire evidence is left with the definite and firm conviction
that a mistake has been committed”) (internal quotation marks
omitted). The investigation has turned up considerable
evidence supporting the court’s conclusion. The Company
engaged in an enormous volume of U.S. dollar transactions:
“[B]etween October 2012 and November 2015 alone, [the
Company] made over $100 million U.S.-dollar payments.” FBI
Declaration ¶ 13, J.A. 866. And the Company “was a
counterparty to over 680 U.S.-dollar international transfers
(which transited through the United States financial system via
correspondent U.S. banks).” Id., J.A. 867. The government has
uncovered no “evidence that” any of these transactions were
part of “a legitimate business”; rather, all were part of the
NKE’s scheme to launder money. Id. ¶ 10, J.A. 864—65.
Nor does any record evidence suggest that the NKE used
the Company to launder money through currencies other than
U.S. dollars. Indeed, the NKE had a special need for dollars
because “commodity companies, such as those operating in
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China, Thailand, and Singapore, frequently prefer to take
payments in U.S. dollars because of the dollar’s global demand
and stability.” Id. ¶ 26, l.A. 871; see also Correspondent
Banking: A Gateway for Money Laundering, S. Hrg. 107-84
app. 287 n.12 (“U.S. dollars are one of a handful of major
currencies accepted throughout the world. They are also
viewed as a stable currency, less likely to lose value over time
and, thus, a preferred vehicle for savings, trade and
investment.”). Further, the government explains, and Bank
Three nowhere contests, that before 2017—and consequently
during the vast majority of the period covered by this
subpoena—the NKE “could legally conduct transactions in
other currencies” besides the U.S. dollar (such as the euro),
Appellee’ s Br. 61, signaling that the NKE would have had no
need of a front company to conduct transactions in those
currencies.
Taken together, these facts support the district court’s
finding that “[nb part” of the Company—and thus, none of its
banking records—”can be separated from the ploy” to launder
money through U.S. financial markets, March op. 29, because
the Company’s sole purpose was to give the NKE access to
U.S. dollars through U.S. correspondent accounts. We
therefore conclude that on the facts of this case, the records
requested by the Patriot Act subpoena all “relate to” Bank
Three’s U.S correspondent account. To be clear, nothing in this
opinion authorizes, as the Bank fears, the government “for any
reason, [to] obtain essentially any document or record from any
foreign bank with a U.S. correspondent account,” Bank Three
Br. 22, regardless of whether those records are “related to” that
U.S. correspondent account. The government’s power to
subpoena the records in this case derives from the evidence that
this particular company operated exclusively as a U.S. dollar
clearinghouse for the NKE. Under such circumstances, all
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records pertaining to the Company’s Bank Three account and
its correspondent banking transactions, no matter where they
occurred, are “related to” the Bank’s U.S. correspondent
accounts.
Iv.
“Comity refers to the spirit of cooperation in which a
domestic tribunal approaches the resolution of cases touching
the laws and interests of other sovereign states.” Société
Nationale Industrielle Aérospatiale v. U.S. District Court for
the Southern District of Iowa (“Société Nationale”), 482 U.S.
522, 543 n.27 (1987). Invoking this “spirit of cooperation,” Id.,all three Banks argue that “ordering a foreign-sovereign-owned
bank to violate foreign law on foreign soil violates basic
‘comity’ principles” and, as such, demands reversal, Bank One
Br. 11; see also Bank Two Br. 25 (making this argument);
Bank Three Br. 32—33 (same). We begin by providing some
additional background before explaining why the Banks’
argument fails.
A.
A comity analysis typically starts by determining whether
a “true conflict” exists between the implicated legal systems.
Hartford Fire Insurance Co. v. Calfornia, 509 U.S. 764, 798
(1993) (internal quotation marks omitted). Absent a clash of
foreign and domestic law, American courts may press forward
free from worry that their rulings will threaten the
“international legal ties that advance the rule of law within and
among nations.” Laker Airways Ltd. v. Sabena, Belgian World
Airlines, 731 F.2d 909, 937 (D.C. Cir. 1984), as amended
(Mar. 6 and 9, 1984). As the district court recognized, however,
in this case that determination “is the easy part,” given that
“[tJhe [U.S.] government concedes that complying with the
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respective subpoenas exposes each bank to legal penalties in
China.” March op. 32.
After this initial inquiry, the question is whether “the
factual circumstances” of the case at hand counsel against
applying American law. Laker Airways, 731 f.2d at 937. A
collection of factors helps us to delineate the “inherently
uncertain” borders set by the principles of comity in the context
of subpoena enforcement. Id. Factors include “the importance
to the litigation of the documents . requested,” “the degree
. .
of specificity of the request,” “whether the information
originated in the United States,” “the extent to which
noncompliance with the request would undermine important
interests of the United States, or compliance with the request
would undermine important interests of the state where the
information is located,” and whether “alternative means of
securing the information” exist. Société Nationale, 482 U.S. at544 n.28 (alteration omitted) (quoting Restatement of foreign
Relations Law of the United States (Revised) § 437(1)(c)).
Courts also look to whether compliance would impose hardship
on the party targeted by the subpoena and whether that party
has acted in good faith. See In re Sealed Case (“Sealed
CaseT’), 825 F.2d 494, 498—99 (D.C. Cir. 1987)
(distinguishing cases based on “good faith” considerations);
Linde v. Arab Bank, PLC, 706 f.3d 92, 110 (2d Cir. 2013)
(“[A] district court should also examine the hardship of the
party facing conflicting legal obligations... .“).
The district court diligently applied this “constellation of
factors” to the facts at issue here. March Op. 33. In so doing, it
observed that two factors indisputably weigh against enforcing
the subpoenas: the documents originated outside the United
States, see id. at 42, and the Banks have acted in good faith
throughout this litigation, see id. at 57 (“[T]he government
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agrees that none of the banks has acted in bad faith.”).
According to the district court, another pair of factors just as
clearly weighs in favor of enforcement: the documents contain
unique information vital to the investigation—indeed, “the
government avows the subpoenaed documents are the
foundation of the United States’ investigation,” Id. at 39
(alteration and internal quotation marks omitted), and the
subpoenas target an appropriately specific collection of
records—that is, “the subpoenas are tailored to specific
financial records, for a defined date range, at banks [the
Company] is known to have used to launder funds,” id. at 41.
Parsing the more complex remaining factors, the district
court emphasized the government’s goal of learning how North
Korea has thwarted American sanctions in pursuing weapons
of mass destruction. “[NJon-enforcement” of the subpoenas,
the district court stressed, “would undermine a critical national
interest.” Id. at 4$. Although acknowledging that China has a
“legitimate” “interest in the development of a sound banking
system,” the district court concluded that the United States’
national security interest easily outweighs China’s interest in
safeguarding its banking secrecy laws. Id. at 50; see also Id.
(observing that because “even Chinese authorities recognize
that bank secrecy can co-exist with limited disclosure to
government agencies,” “China’s interest would not be
undermined by enforcement of the subpoenas”).
The district court recognized that the U.S. government had
declined to take advantage of an alternative channel through
which the United States might obtain the documents at issue:
the Mutual Legal Assistance Agreement, which creates a
process to exchange “documents” and “records” relevant to
criminal investigations. MLAA art. l(2)(c); see March Op. 42—
47 (discussing the MLAA). But based on the U.S.
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government’s declarations that China has failed to
satisfactorily engage in the MLAA process in many other cases
over the past decade, the district court accepted the Executive
Branch’s representation that requiring the government to first
exhaust the MLAA process would just “[aJllow[J China to gum
up [the] United States’ investigations” and, therefore, that
“[tJhe Department of Justice no longer needs to take overtures
of China’s willingness to assist the United $tates[] with
investigations into North Korea seriously.” March op. 47.
finally, with respect to the hardship facing the Banks, the
district court acknowledged that compliance with the
subpoenas would violate Chinese law. Though the government
doubts the Banks’ claim that any criminal laws would be
broken, it concedes that compliance would at least violate those
laws prohibiting Chinese companies from handing over records
that have not been approved for release through the MLAA
process. See Law of the People’s Republic of China on
International Criminal Judicial Assistance (promulgated by the
Standing Committee of the Thirteenth National People’s
Congress, Oct. 26, 201$, effective Oct. 26, 201$), ch. I, art. 4,
J.A. 355 (forbidding any “institution [or] organization
within the territory of [China]” from “provid[ing] evidentiary
materials and assistance prescribed by this Law to foreign
countries”); Id. ch. II, § 2, art. 13, J.A. 35$ (requiring a “foreign
country” to request “criminal judicial assistance” “in
accordance with the provisions of the criminal judicial
assistance treaty”). The district court also recognized that the
Ministry of Justice has advised that these violations would have
consequences in the form of administrative penalties against
the Banks and civil or criminal penalties against individual
officers. See March Op. 51—53. The district court, however,
found the hardships accompanying compliance both
speculative and minimal. See id. at 53—57. It based this
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conclusion in part on historical Chinese enforcement trends:
penalties are rare and relatively modest when they do occur.
The court found, for example, no instances of “a state-owned
Chinese enterprise . fac{ing] severe repercussions for
. .
responding to the order of a foreign court,” Id. at 53, and that
bank officers had apparently faced penalties only for stealing
and selling “client information for profit,” id. at 55. The district
court also relied on the logical supposition that the Chinese
government is unlikely to severely sanction banks that it
largely owns, id., and concluded that the Ministry’s warnings
failed to “suggest[] the administrative penalties will amount to
more than nominal fines” or provide any “concrete indication
criminal penalties are likely,” Id. at 56—57.
Affording the most weight to the United States’
unassailable interest in successfully investigating and, with any
luck, frustrating North Korea’s arms programs, see id. at 58
(calling “the interests of the relevant countries” the “most
important factor”), the district court concluded that “[ojn
balance, international comity is not a reason to refrain from
compelling compliance with the subpoenas,” Id. On appeal, the
Banks argue that the district court applied the incorrect legal
standard, that enforcing the subpoenas runs afoul of our case
law, that “[c]omity dictates that the Chinese government at
least be given an opportunity to comply with an MLAA request
before forcing a Chinese bank to violate Chinese law on
Chinese soil,” Bank Two Br. 19, and, finally, that the district
court incorrectly balanced the relevant factors.
B.
Before considering these arguments, we must first
ascertain the appropriate standard of review. Although we
“ordinarily review{] a district court’s grant of a motion to
31
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compel.. for abuse of discretion,” Recording Industry Ass ‘n
.
of America, Inc. v. Verizon Internet Services, Inc., 351 F.3d
1229, 1233 (D.C. Cir. 2003), we have yet to expressly
determine the standard of review applied to a comity analysis
in this context, cf Sealed Case I, $25 f.2d at 497—99 (not
identifying the standard of review); de Csepel v. Republic of
Hungary, 714 F.3d 591, 606 (D.C. Cir. 2013) (“This court has
never expressly addressed the standard by which we review a
district court’s decision to grant comity to a foreign
judgment.”). The Supreme Court, however, has observed that
“[t]he exact line between reasonableness and
unreasonableness” when weighing comity principles “must be
drawn by the trial court, based on its knowledge of the case,”
Sociétë Nationale, 482 U.S. at 546, and we generally review
for abuse of discretion when the district court finds itself
responsible for making such a fact-bound reasonableness call,
see, e.g., Ideal Electronic Security Co. v. International Fidelity
Insurance Co., 129 F.3d 143, 150 (D.C. Cir. 1997) (“[TJhe
reasonableness of an attorney’s fees award is within the sound
discretion of the trial court and is reviewed only for abuse of
discretion.”); United States v. Law, $06 F.3d 1103, 1105 (D.C.
Cir. 2015) (“We. consider the substantive reasonableness of
. .
the sentence imposed under an abuse-of-discretion standard.”
(internal quotation marks omitted)). This approach comports
with our sister circuits, which review similar questions for
abuse of discretion. See, e.g., Allstate Life Insurance Co. v.
Linter Group Ltd., 994 F.2d 996, 999 (2d Cir. 1993) (“[S]ince
the extension or denial of comity is within the court’s
discretion, we will reverse the court’s decision only when we
find an abuse of discretion.”); Reinsurance Co. ofAmerica v.
Administratia Asigurarilor de Stat, 902 F.2d 1275, 1283 (7th
Cir. 1990) (“The denial of [the company’s] motion to compel
responses was . . not an abuse of discretion.”). The Banks
.
offer no argument for departing from that approach here. See
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Bank Two Br. 5 (suggesting “an abuse of discretion standard”);
Oral Arg. Rec. 13:33—13:40 (Bank One counsel agreeing that
if “the district court did apply the correct legal standard, then
it’s an abuse of discretion standard”). Accordingly, we shall
review the district court’s comity analysis for abuse of
discretion.
Employing that standard, we ask whether the district court
“based its ruling on an error of law, a clearly erroneous
assessment of the evidence, or an improper weighing of the
factors limiting its discretion.” fraenkel v. Islamic Republic of
Iran, $92 F.3d 348, 356 (D.C. Cir. 201$) (citation and internal
quotation marks omitted). We of course review any embedded
“legal conclusions de novo.” Guedes v. Bureau of Alcohol,
Tobacco, firearms & Explosives, 920 F.3d 1, 10 (D.C. Cir.
2019).
Bank One first argues that “the District Court used the
wrong legal standard to review the Government’s request to
enforce the Subpoenas”—that is, the court should not have
adopted “the multifactorial approach of . Restatement
. .
(Third) of Foreign Relations.” Bank One Reply Br. 1. This
argument gets the Banks nowhere. In Sociëtë Nationale, the
Supreme Court explained that the Restatement’s “factors are
relevant to any comity analysis.” 482 U.S. 522, 544 n.2$; see
Overby v. National Ass ‘n of Letter Carriers, 595 F.3d 1290,
1295 (D.C. Cir. 2010) (“[C]arefully considered language of the
Supreme Court, even if technically dictum, generally must be
treated as authoritative.” (internal quotation marks omitted)).
The Bank points out that our decision in Sealed Case I, issued
a few months after Société Nationale, never expressly
references the Restatement’s factors. In that case we reversed
an order holding a bank owned by (unidentified) Country X in
contempt for failure to comply with a subpoena that would
33
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have required the bank to produce documents in contravention
of the banking privacy laws of Country Y, where the branch at
issue was located. Sealed Case I, 825 F.2d at 497—98. But
Sealed Case I neither refutes Société Nationale’ s ratification of
the Restatement factors nor offers a different test to apply—
nor, of course, could it. See We the People foundation, Inc. v.
United States, 485 F.3d 140, 144 (D.C. Cir. 2007) (circuit
courts must follow Supreme Court precedent). As the district
court recognized, Sealed Case I “comports with the Supreme
Court’s treatment of international comity as a principle that
depends on ‘prior scrutiny in each case of the particular facts,
sovereign interests, and likelihood that resort to [alternative]
procedures will prove effective.” March Op. 34 (alteration in
original) (quoting Société Nationale, 482 U.S. at 544).
This brings us to the Banks’ related assertion that “[t]he
present case is controlled by” Sealed Case I. Bank One Br. 14.
But that case by its own terms constricts its holding to its facts:
“If any of the facts we rest on here were different,” we
cautioned, “our holding could well be different.” Sealed Case I,
825 F.2d at 499. We therefore agree with the district court that
this case merits its own factual inquiry; Sealed Case I does not,
as a legal matter, control the outcome here.
The Banks’ more powerful argument is that, due to the
factual parallels between Sealed Case I and this case, “it was
an abuse of discretion to enforce the Subpoena[sJ.” Bank Two
Br. 25. The Sealed Case I court identified several facts central
to its decision not to enforce the contempt order at issue, and
they might sound familiar, first, and “[m]ost important,” the
“sanctions represent[ed] an attempt by an American court to
compel a foreign person to violate the laws of a different
foreign sovereign on that sovereign’s own territory.” 825 F.2d
at 498; see also Id. (observing that the bank had no way to
34
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“comply with the contempt order without violating the laws of
Country Y on Country Y’s soil”). We also recognized that the
bank “had acted in good faith,” was “a third party . not...
. .
accused of any wrongdoing,” and constituted “not merely a
private foreign entity,” but also “an entity owned by the
government of Country X.” Id. finally, because the bank’s
manager would “be available and able to testify as to many of
the facts that the grand jury may [have] wish[edj to ascertain,”
the government was not “left empty-handed” by the decision
not to enforce the subpoena. Id. at 499. But see Ed.
(acknowledging “that the grand jury’s investigation may
nonetheless be hampered, perhaps significantly” by the
decision not to enforce).
As the Banks point out, each of those facts maps neatly
onto this case, in which the government asks us to compel
Chinese banks owned in significant part by the Chinese
government to violate Chinese law on Chinese territory. The
Banks have acted in good faith, they are currently third parties
to the criminal investigation, and the MLAA, at least on its
face, provides an alternative path that would allow the
government to obtain the records at issue.
What’s more, to the extent there are differences, there is
some reason to believe that this case is an even better candidate
for comity than Sealed Case I. For one thing, where the
subpoena recipient in Sealed Case I was being asked to violate
the laws of a “different foreign sovereign,” Id. at 498, here the
government demands that the Banks violate their home
country’s laws. Although the Country X-based bank in Sealed
Case I might have closed its branch in Country Y to avoid
sanctions, the Banks here have no such workaround. As the
district court recognized, “[a] Country X bank can shutter the
Country Y portion of its business; a Chinese bank cannot leave
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China.” March Op. 36 n.13; see also Id. (“[C]ompelling a bank
to violate its own nation’s law is more prejudicial to
international comity.” (internal quotation marks omitted)).
Moreover, the Chinese government in this case “has warned
the Bank[s] that [they] will be sanctioned if [they] ignore[J” its
“express instructions not to produce these documents outside
the MLAA process,” and “[t]here is no indication that the
foreign government in Sealed Case I did anything similar.”
Bank Three Br. 39.
The district court ignored none of these considerations.
Quite to the contrary, it grappled with each and instead found
persuasive two other “critical” differences between the cases.
March Op. 34.
The district court first pointed out that Sealed Case I
concerned a “domestic law enforcement matter,” which
“hardly compares to the national security interests and
associated potential harm caused by non-compliance with a
subpoena related to an investigation into funding a state-
sponsor of terrorism’s nuclear weapons program.” Id. at 35.
This is an important distinction. The government justifiably
believes that the subpoenas will unearth information
concerning North Korea’s use of third-party front companies
to evade economic sanctions, and nothing in Sealed Case I
suggests any “sovereign interest[],” Société Nationale, 482
U.S. at 544, remotely comparable to impeding North Korea’s
stockpiling of nuclear weapons.
We acknowledge, as the Banks point out, that the
government here has failed to proceed as though North Korea
were about to push the nuclear launch button. Indeed, the
government took nearly a year to enforce the subpoenas in
court and never sought to expedite this case until the district
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court instructed it to do so. It did not, however, sit on its hands
during that time, as the Banks repeatedly assert, but “engaged
in intra- and inter-agency deliberations” and “twice sent a
delegation to China” during that period. March op. 40. More
to the point, we are reluctant to second-guess the Executive
Branch’s assessments of national security interests and how to
best serve them. See frugone v. Central Intelligence Agency,
169 f.3d 772, 775 (D.C. Cir. 1999) (cautioning “that courts
have little expertise in either international diplomacy or
counterintelligence operations”). We of course agree with
Bank One that “the judiciary has an independent obligation to
evaluate” the diplomatic ripple effects of its decisions. Bank
One Br. 25; see also Sealed Case I, 225 f.2d at 499 (“[WJe see
good reason for courts not to act on their own, even at the
urging ofthe executive branch, when their actions ‘may hinder
rather than further this country’s pursuit of goals both for itself
and for the community of nations as a whole in the international
sphere.” (emphasis added) (quoting Banco Nacional de Cuba
v. Sabbatino, 376 U.S. 398, 423 (1964))). But we are confident
that the district court respected that obligation and that it acted
within its discretion by recognizing that the heightened national
interest here, as articulated by the Executive Branch,
distinguishes this case from Sealed Case I.
The Banks next observe that “if the Government receives
the documents via the MLAA, its national security interests
will be fully vindicated.” Bank Two Br. 26. The district court,
however, concluded that the futility of the MLAA process sets
this case apart from Sealed Case I, in which testimony from the
bank’s manager appeared to offer a sure-fire way of securing
at least some of the desired information. “[un this
investigation,” by contrast, the district court observed, “the
government insists that without compelling compliance, the
requested information is out of reach.” March Op. 35.
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forcefully disagreeing with this conclusion, the Banks insist
that the MLAA process provides a channel specifically
designed to allow the U.S. government to obtain exactly the
types of records it seeks. Allowing it to eschew that process
without so much as making an initial MLAA request, they
argue, neglects comity’ s “spirit of cooperation.” $ociété
Nationale, 482 U.S. at 543 n.27. For its part, the government
argues in support of the district court that “the historical record
demonstrates . an MLAA request of China for such bank
. .
records is not a viable alternative.” Appellee’s Br. 37 (internal
quotation marks omitted).
Recall that the MLAA establishes a procedure for the U.S.
and Chinese governments to obtain documents from each other
in criminal investigations. Specifically, the process provides
that “insofar as national law permits,” if, say, the United States
makes a request, China’s “Central Authority” must search for
and then send the requested records. MLAA
arts. 2(1), 14(1), (3). Nothing in the MLAA, however,
designates it as the exclusive means of obtaining evidence in a
criminal investigation.
In this case, China’s Central Authority, the Ministry of
Justice, Id. art. 2(2), expressed a “willingness to cooperate with
a DOJ MLAA request” as early as March 2018, Letter from
Hank B. Walther & Samidh Guha to Zia Faruqui & An
Redboard 3 (Mar. 23, 2018), J.A. 830. Bank Three
communicated China’s overture to the U.S. Department of
Justice, observing that the MLAA process “would allow DOJ
to obtain the documents it seeks, while avoiding the time, cost,
and risk of litigating the Patriot Act subpoena.” Id. As we now
know, the United States declined that invitation—even as it
filed at least ten other MLAA requests in 2017 and 2012—and
instead sought to enforce the subpoenas in court.
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The Ministry then directly communicated with the district
court multiple times, assuring that court that the Ministry
“would timely review and handle the requests for assistance
sought by the DOJ in accordance with the [MLAA] and
applicable domestic laws.” Letter from Du Yaling, Director
General of International Cooperation Department of the
Ministry of Justice to Chief Judge Beryl A. Howell 4 (Jan. 6,
2019), J.A. 76. If the government submits a “request in line
with the [MLAAJ,” the Ministry pledged, “China will provide
the assistance to the United States accordingly.” Id. Confident
that the MLAA “mechanism works effectively,” the Ministry
reminded the district court that China has “provided effective
assistance to the US in many cases” and that “[tJhe avenue of
the {MLAA] is the only legal means to obtain criminal
evidence in China by foreign judicial agencies under Chinese
laws.” Letter from Du Yaling, Director General of International
Cooperation Department of the Ministry of Justice to Chief
Judge Beryl A. Howell 2—4 (Feb. 26, 2019), J.A. 965—67. The
district judge observed that this marked “the first time” she had
seen “correspondence directly from a foreign government
related to an ongoing matter.” March 5, 2019 Hearing Tr. 18:2—
4, J.A. 1573. The government points to no other case where the
Ministry has made such a representation and reneged on it and
admits that in some cases, “China has produced bank records
to the general satisfaction of the U.S. prosecutors and agents.”
Declaration of Associate Director of the Office of International
Affairs Jeffrey M. Olson (“OIA Declaration”) ¶ 14(e),
J.A. 951.
The district court considered all these facts but ultimately
concluded that pursuing the MLAA process would result in an
inadequate production of documents. According to the
Associate Director of the Office of International Affairs—
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which serves as the United States’ Central Authority under the
MLAA—the United States has submitted fifty MLAA requests
for bank records over the past decade and has received no
responsive records to thirty-five; the government found most
of China’s responses in the remaining fifteen cases inadequate
or untimely. And of the ten requests submitted within the last
two years, the United States has received at most one response.
Cf OIA Declaration ¶ 13(b), J.A. 950 (describing that, for
example, China failed to produce documents in one of those
cases even though the United States informed the Ministry that
the request was time-sensitive due to an upcoming trial).
Moreover, the district court recognized that the
government is especially pessimistic about the chances of
success in this case given that the investigation involves a
perfect storm of disagreements between the United States and
China: “Chinese authorities have a demonstrated failure in
supporting foreign and U.S. sanctions and U.S. law
enforcement actions involving North Korea,” and “the Chinese
government has specifically objected to the imposition of
sanctions on [the Company] and other Chinese front
companies.” FBI Declaration ¶ 80, J.A. $88. Drawing the
district court’s attention to a case “nearly identical” to this one,
Id. at 37, J.A. 884, an FBI special agent submitted a declaration
pointing out that although in that case, China had “nominally
agreed to work jointly with the U.S. authorities” on MLAA
requests for bank records involving North Korea, id. ¶ 72,
J.A. $85, nothing ever came of that initial agreement; offering
various excuses, China never handed over any records. “Based
on these facts,” the agent “concluded that the MLAA process
is not an effective way to obtain bank records from Chinese
authorities with respect to investigations involving North
Korea.” Id. ¶ 75, J.A. 886; see Id. (“[OJne reason that Chinese
authorities do not want to assist with North Korean
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investigations is that producing such records could reflect
badly on the Chinese government and the Chinese financial
industry.”).
Given this record, we see no abuse of discretion in the
district court’s decision to enforce the subpoenas despite the
fact that the United States chose not to pursue the MLAA
process. The Supreme Court has made clear that evidence-
sharing arrangements set up by international agreements,
although often valuable, can also prove “unduly time
consuming and expensive, as well as less certain” than court-
enforced subpoenas “to produce needed evidence.” $ociété
Nationale, 482 U.S. at 542. As such, whether comity “requires
resort” to an agreement’s procedures calls for an inquiry into
the “likelihood that resort to those procedures will prove
effective.” Id. at 544. The district court addressed just that
question: it reviewed declarations from U.S. and Chinese
officials, identified facts that undermined the Chinese
government’s assurances about the MLAA system, and
concluded that the U.S. government had no obligation to
submit a voluntary MLAA request because it would likely
prove ineffective.
We need not tarry over the Banks’ remaining arguments
that the district court abused its considerable discretion in
balancing the comity factors. Cf Morley v. Central Intelligence
Agency, 894 F.3d 389, 391 (D.C. Cir. 2018) (recognizing that
when “factors point in different directions,” “it will be the rare
case when we can reverse a district court’s balancing ofthe.
factors”). Specifically, Bank Three reiterates its claim that “the
Patriot Act subpoena is facially overbroad,” Bank Three Reply
Br. 20, and, as such, the “degree of specificity of the request,”
Sociétë Nationale, 482 U.S. at 544 n.28 (internal quotation
marks omitted), also weighs in favor of the Bank. But we agree
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with the district court that given that the Company “solely
existed as a front company,” “all [the Company’s] records
relate to the conduct under investigation,” March Op. 41
(internal quotation marks omitted). With respect to the
hardship factor, Bank One takes issue with the district court’s
conclusion that the Banks would likely face minimal penalties
for complying with the subpoenas. In a civil law country such
as China, the Bank contends, “[t]he District Court cannot know
how the Chinese government will exercise its prosecutorial
discretion.” Bank One Br. 2$. But the district court never
presumed to declare itself a soothsayer; it assessed a cluster of
datapoints presented and substantiated by the Executive
Branch and ultimately determined that the risk of harsh
punishment was slim. In any event, it recognized that “this
factor tips ever so slightly toward the banks.” March Op. 57.
The district court exercised its ‘judgment” in drawing these
conclusions and was “guided by sound legal principles.”
United States v. Taylor, 487 U.S. 326, 336 (198$) (internal
quotation marks omitted). Our analysis ends there.
We proceed with extreme caution when enforcing
subpoenas that would require recipients to violate a foreign
sovereign’s domestic laws. As we said in Sealed Case I, “[w]e
have little doubt. that our government and our people would
. .
be affronted if a foreign court tried to compel someone to
violate our laws within our borders,” 825 F.2d at 498—99, all
the more so if our government assured that court that it was
ready and willing to engage in a mutually agreed-upon bilateral
process to provide the precise information requested. But we
take heart that at every stage of this process decisionmakers
have recognized that whether to enforce a subpoena “in cases
like this one raises grave difficulties for courts.” Id. at 498. The
government decided to pursue the records at issue through the
courts rather than the MLAA process only after twice sending
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delegates to China and engaging in extensive “internal
discussions with subject matter experts within the FBI, as
. . .
well as consultations involving senior FBI management and
Department of Justice and Department of Treasury officials.”
FBI Declaration ¶ 80, J.A. $88. That decision was then put to
“the wise discretion of our judicial colleague[] on the District
Court,” fraenkel, 892 F.3d at 362, and that court consented to
the government’s course of action only after undertaking a
thorough, considered analysis that frankly acknowledged the
Banks’ comity concerns. Whether to enforce the subpoenas
was a hard call, the district court made that call, and we have
no reason to reverse its fact-bound conclusion.
V.
Finally, Banks One and Three challenge the district court’s
April 2019 contempt order, arguing that it was unjustified
given the government’s concession that the Banks acted in
good faith to obtain the Chinese government’s permission to
produce the records covered by the subpoenas. “[W]e
review. the contempt finding. for abuse of discretion.” In
. . . .
re Fannie Mae Securities Litigation, 552 F.3d 814, 818 (D.C.
Cir. 2009).
A civil contempt citation is appropriate “only if the putative
contemnor has violated an order that is clear and unambiguous,
and the violation must be proved by clear and convincing
evidence.” Broderickv. Donaldson, 437 F.3d 1226, 1234 (D.C.
Cir. 2006) (internal quotation marks omitted). Banks One and
Three nowhere dispute that by refusing to produce the
documents covered by the subpoenas, they have violated a
clear and unambiguous order. Instead, they rest their challenge
to the contempt order on the Restatement (Third) of Foreign
Relations Law, which suggests that a court “should not
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ordinarily impose sanctions of contempt, dismissal, or default
on a party that has failed to comply with [an] order for
production” that would violate another state’s laws or
regulations, “except in cases of deliberate concealment or
removal of information or of failure to make a good faith
effort” “to secure permission from the foreign authorities to
make the information available.” Restatement (Third) of
Foreign Relations Law § 442(2)(a)—(b) (1927) (emphasis
added).
The banks insist that the district court should not have held
them in contempt because they acted in good faith (albeit
unsuccessfully) to secure the Chinese government’s
permission to produce the records at issue. This is a rather thin
reed to begin with, rendered more slender still by the fact that
the more recent Restatement (fourth) of foreign Relations Law
significantly diminishes the importance of a putative
contemnor’s “good faith”: the Restatement (Fourth) simply
states that courts “have discretion to excuse violations of law,
or moderate the sanctions imposed for such violations, on the
ground that the violations are compelled by another state’s
law” if “the person in question appears likely to suffer severe
sanctions for failing to comply with foreign law” and “has
acted in good faith to avoid the conflict.” Restatement (Fourth)
of foreign Relations Law § 442 (2018) (emphasis added)). In
any event, this court has long held that “[t]he intent of the
recalcitrant party is irrelevant in a civil contempt proceeding
because, unlike a criminal contempt proceeding, a civil
contempt action is a remedial sanction used to obtain
compliance with a court order or to compensate for damage
sustained as a result of noncompliance.” Food Lion, Inc. v.
United Food & Commercial Workers International Union,
AFL-CIO-CLC, 103 F.3d 1007, 1016 (D.C. Cir. 1997) (internal
quotation marks omitted).
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Confronted with clear non-compliance in the face of a
perfectly pellucid order, the district court reasonably found that
“the banks have not demonstrated good faith in a way relevant
to contempt” and that, because “the requested records are
essential to an investigation into a matter of national
security[,].. continued contumacy threatens tremendous
.
harm.” April op. 9 (internal quotation marks omitted). Under
these circumstances, the banks have given us no basis for
concluding that the district court abused its discretion.
VI.
For the foregoing reasons, we affirm the district court’s
contempt orders against all three Banks.
So ordered