Motorola Credit Corp. v. Standard Chartered Bank
771 F.3d 160
2d Cir.2014Background
- Plaintiffs obtained a district-court restraining order on defendants’ assets after serving a restraining notice on a garnishee bank’s New York branch.
- Defendants argued the bank’s foreign-branch assets could not be restrained under New York’s “separate entity rule.”
- The district court initially granted the restraint, later held the separate entity rule barred restraining assets in foreign branches, and stayed release pending appeal.
- This Court certified to the New York Court of Appeals the question whether the separate entity rule precludes freezing assets held in a bank’s foreign branches when served via its New York branch.
- The New York Court of Appeals held that service on a New York branch is ineffective to freeze assets in foreign branches and reaffirmed the separate entity rule.
- On that basis this Court affirmed the district court’s conclusion and remanded with instructions to vacate the restraining order on assets held in foreign branches.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a restraining notice served on a bank’s NY branch can freeze assets held in the bank’s foreign branches | Service on the NY branch suffices to restrain foreign-branch assets (Koehler interpreted to allow broader reach) | The separate entity rule treats each branch/foreign branch as a separate legal entity; NY service cannot reach foreign-branch assets | The separate entity rule precludes restraining assets held in foreign branches when only the NY branch is served; NY Court of Appeals adopted the rule and this Court affirmed |
Key Cases Cited
- Tire Eng’g & Distrib. L.L.C. v. Bank of China Ltd., 740 F.3d 108 (2d Cir. 2014) (certified question and earlier proceedings concerning reach of restraining notices to foreign branches)
- Motorola Credit Corp. v. Standard Chartered Bank, 24 N.Y.3d 149 (N.Y. 2014) (New York Court of Appeals adopting the separate entity rule; service on NY branch cannot freeze foreign-branch assets)
- Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533 (N.Y. 2009) (addressed garnishment/restraining procedures but did not overrule or abolish the separate entity doctrine)