Motorola Credit Corp. v. Uzan
978 F. Supp. 2d 205
S.D.N.Y.2013Background
- Motorola obtained multi-billion dollar judgments against the Uzan family for diversion of loans to Telsim and sought worldwide restraint on Uzan assets and their proxies (including Jordan Dubai Islamic Bank, "JDIB").
- The Court issued an Injunction and Restraining Order (Feb 13, 2013) targeting Uzan property and identified JDIB as an Uzan proxy; Motorola served the order on Standard Chartered’s New York branch.
- Standard Chartered froze funds after locating four placements (total ~21 million JOD) allegedly placed by JDIB at Standard Chartered’s UAE branch, but refused to remit payments when due; UAE authorities later debited Standard Chartered’s account.
- Motorola contends the frozen assets are proceeds of palladium trades (or, alternatively, debts owed JDIB) and thus restrainable as Uzan property; Standard Chartered contends the assets are interbank placements at its UAE branch and challenges service/authority under New York’s separate-entity rule.
- The Court found the assets belong to JDIB (an Uzan proxy) and therefore are subject to restraint, but held the New York separate-entity rule prevents restraining assets held at a foreign branch served only via the New York branch; nevertheless the Court entered a temporary injunction keeping the freeze in place pending Motorola’s appeal conditioned on a $1 million bond.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the frozen UAE-account assets property of JDIB/Uzan proxies or of Standard Chartered? | Motorola: contracts show palladium trades/proceeds or debts owed to JDIB; assets are Uzan property. | Standard Chartered: assets are interbank placements owed by the bank to JDIB; not commodities held for JDIB. | Court: Contract terms bind Standard Chartered; assets are JDIB property (either palladium proceeds or debts owed) and restrainable. |
| Does New York’s separate-entity rule permit restraining assets held at a foreign branch served only via the bank’s NY branch? | Motorola: Koehler suggests separate-entity rule no longer controls post-judgment enforcement; personal jurisdiction over NY bank suffices. | Standard Chartered: Separate-entity rule requires service on the specific foreign branch holding the assets. | Court: Separate-entity rule remains valid; service on NY branch insufficient to attach assets at UAE branch. |
| Should the Court equitably modify the restraint to avoid double liability under foreign law? | Motorola: not directly argued here; seeks enforcement. | Standard Chartered: maintenance of freeze risks double liability under UAE law and regulatory sanctions; equitable modification warranted. | Court: Banks assume double-liability risk in cross-border business; double-liability risk does not justify modifying the restraining order. |
| May the Court maintain a temporary injunction (freeze) on JDIB funds pending appeal? | Motorola: release would cause irreparable harm because assets would likely be dissipated; serious questions exist on merits. | Standard Chartered: continued freeze causes hardship and regulatory exposure in UAE. | Court: Motorola showed irreparable harm and serious questions on the merits; preliminary injunction to keep freeze pending appeal granted conditioned on $1M bond. |
Key Cases Cited
- Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (noting bank deposits are promises to pay)
- Koehler v. Bank of Bermuda, Ltd., 12 N.Y.3d 533 (post-judgment turnover where garnishee/branch submitted to jurisdiction)
- Petrogradsky Mejdunarodny Kommerchesky Bank v. Nat’l City Bank of N.Y., 253 N.Y. 23 (banks assume risk of double liability doing foreign business)
- JPMorgan Chase Bank, N.A. v. Motorola, Inc., 47 A.D.3d 293 (discussing double-liability risk and bank responsibilities in cross-border attachments)
- Citigroup Global Markets, Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30 (preliminary injunction standard in Second Circuit)