WASHINGTON, Oct. 2 -- The Supreme Court refused Monday to review a case in which it was asked to decide whether a U.S. judge has the power to enforce injunctions outside the United States. Reebok International Ltd., one of the world's premier sports shoe manufacturers, had asked for the review in a case involving a Luxembourg bank. A panel of the 9th U.S. Circuit Court of Appeals ruled earlier that a federal injunction's mandate ends at the U.S. borders. But Reebok argued in briefs filed with the Supreme Court that the appeals court decision conflicted with rulings from another federal appeals court and with Supreme Court precedent. Reebok's U.S. subsidiary, Reebok International Ltd., is organized under Massachusetts law. The parent company, with the same name, is organized under United Kingdom laws, and has its principal place of business in Oxbridge, Middlesex, England. Reebok shoes are manufactured at different sites around the globe, however. The shoemaker first brought suit against Byron McLaughlin and the Heatherdale Corp., among others, in U.S. District Court in San Diego. The suit alleged that the defendants were importing and selling counterfeit Reebok footwear in the United States and around the globe. A U.S. District Court judge issued a temporary restraining order in November 1989, instructing the defendants not to transfer or dispose of funds received through the allegedly counterfeit activity. A copy of the TRO was served that month on the Banque Internationale a Luxembourg S.A., or BIL, where McLaughlin had accounts.
In early December 1989, according to court records, McLaughlin's wife Brigitte 'appeared at BIL's office in Luxembourg and presented the proper documentation to take control of all the funds in the Heatherdale (time deposit) account...approximately $2.4 million,' according to court records. Although the bank normally would have honored the request, it told Mrs. McLaughlin it would hold the funds until they matured Jan. 8, 1990. The bank, however, was actually caught between the rock of the U.S. judge's injunction and the hard place of Luxembourg law. 'At that time, BIL was prohibited by Luxembourg banking secrecy laws from informing Reebok of Ms. McLaughlin's efforts to remove the funds,' U.S. court records say. Brigitte McLaughlin, using a local lawyer, challenged BIL's retention of the funds. The bank negotiated a compromise in which the funds would be transferred to a new account, but would remain with the bank pending further legal developments. BIL created the 'Bawnmore Corp.' and transferred most of the Heatherdale money to that new firm's account. Meanwhile, Reebok was trying to get the U.S. temporary restraining order recognized by the Luxembourg courts. It was still trying when, under threat of suit in Luxembourg from the McLaughlins, BIL released the $2.4 million plus interest to Byron McLaughlin. An irate Reebok went back to U.S. District Court in San Diego and filed a motion for contempt against the Luxembourg bank for releasing the funds despite the U.S. temporary restraining order. A U.S. judge dismissed the motion on the grounds that BIL's actions were compelled by Luxembourg law and because the bank did not intend to aid and abet any crime. Reebok tried again in July 1992, presenting new evidence, and a U.S. judge this time held BIL in contempt, and levied damages exceeding $2.6 million. Lawyers for the bank, aghast at the turn of events, appealed that contempt citation to the 9th Circuit panel. The panel ruled for the bank, ending the TRO's power at the U.S. border, and set the law on the issue for the states contained within the 9th U.S. Circuit -- California, Washington, Oregon, Arizona, Idaho, Montana, Nevada, Alaska and Hawaii, and the territories of Guam and the Northern Marianna Islands. The Supreme Court's refusal to review the case Monday means the decision stands and applies in those states and territories. The 9th Circuit ruling conflicts with a precedent set in the 5th U.S. Circuit in 1985, Reebok argued in its rejected petition to the Supreme Court. The 5th U.S. Circuit includes Texas, Louisiana and Mississippi. (No. 95-85, Reebok International Ltd. vs. Banque International a Luxembourg S.A.)
