*1 [21 NE3d 594] 996 NYS2d al., et Appellant-Respondent, Motorola Credit Corporation, Plaintiff-Counter-Defendant, al., et Counter-Defendants, al., et Respondent-Appellant, Standard Chartered Defendants-Counter-Claimants, al., et Defendants. Argued September 16, 2014; decided October *2 COUNSEL
POINTS OF (Howard Fried, Frank, Harris, LLP H. Shriver & Jacobson pro bar, vice, admitted hac Stahl, of the District of Columbia Howe, bar, of Columbia admitted Jr., Jerald S. of the District pro George Calhoun, V, of the District of Columbia vice, hac R. counsel), Douglas pro vice, Baruch of
bar, admitted hac W. language appellant-respondent. plain of I. Under the CPLR for (Tire (b), proper. Eng’g restraint & 5222 was Ltd., 108; Com L.L.C. v Bank China 740 F3d Distrib. of Imperial v Bank monwealth the N. Mariana Is. Canadian of of Ltd., 12 55; 21 v Bank Bermuda Commerce, NY3d Koehler of Goebel, 73; NY Matter Tucker v 533; Matter 295 NY3d of of Community Educ., 274; No. 82 Board Bright School Dist. NY2d of Wright, 157; Matter Amorosi v South Homes v 8 NY2d of Dist., 367; 9 NY3d Pultz v Econo Colonie Ind. Cent. School 53.) People Finnegan, makis, 542; v 85 NY2d II. There 10 NY3d “separate support postjudgment application no for (Tire Eng’g v Bank & Distrib. L.L.C. China rule.” of McCloskey Bank, 11 Ltd., 108; 740 F3d v Chase Manhattan Supp India, 234; 827 F 2d 936; Eitzen Bulk v Bank A/S Supp Equip., Commerzbank, F AG, LLC v 2d JW Oilfield Slip Op Co., Media, LLC, 587; Edman & LLC v Z & M 2012 NY Royal Tech., Can., Misc 3d 32918[U]; Inc. v Bank Global Slip Op Digitrex, v 1209[A], 50023[U]; Johnson, Inc. NY 66.) Supp F491 (Bruce City Clark, E. H. LLP,
Sullivan & Cromwell
New York
Bradley
Rodgin Cohen,
Nelles,
P. Smith and Patrick
Sharon L.
counsel),
respondent-appellant.
B. Berarducci of
I. As a
protection against
liability,
double
rule is
(Koehler
deeply
banking
rooted in New York
v
law.
Bank of
Ltd.,
Bermuda
Commerzbank, AG, F Parbulk 764 Corp. Logix tage v Bank Mar., 235; 35 Misc Samsun SA, 3d Op Slip 50861[U]; Eitzen 1226[A], 3d 2011 NY China, 31 Misc Supp Flanagan v 234; F 2d Mount India, Bank Bulk vA/S Arbegast Hosp., Educ. 24 School, Board S. 427; v Eden Gen. New Berlin NY2d Bryant Finnish 161; v Natl. Cent. 65 NY2d 426.) recognize sepa- jurisdictions Other Airline, 15 NY2d V. garnishee principle that banks should rate (K2 legal obligations. subjected Inv. not inconsistent Group, Co., 578; & Liab. Ins. LLC v American Guar. 848; Trust Co. v Marcos, 95 F3d Clinton Com Hilao v Estate of pania 148; S.A., Misc Bluebird Azucarera Cent. Ramona Corp. Undergarment Marisco, v Gomez, 742; 139 Misc Ltd. Supp Woodlands, 1244; F 2d Ltd. v Govt., Samoa American 13.) Supp Co., F LTD., Ins. VI. Westwood procedures judgment-enforcement prevents New York’s against process conflicting protections with federal due from (Western Telegraph Pennsylvania, liability. Union Co. double King Burger Corp. v Balk, 215; Harris v 198 US 71; 368 US Lugar Co., 457 US v Edmondson Oil US Rudzewicz, 462; Overstock.com, Yasuma, 984; 922; Naoko Ohno Yuko F3d 586.) Dept. Fin., Taxation & 20 NY3d Inc. v New YorkState City Healy, (Dwight LLP, A. Ernest & Case York White counsel), Lyons Patrikis, M. T. C. and Marika Owen Pell others, amici curiae. I. Institute of International Bankers significant policy support sep considerations that There are apply policy rule and those considerations arate *4 (Ayyash equal in the restraints. v force context of Trust 916, 495; Misc 3d 115 AD3d Clinton Co. v Koleilat, 38 Compania S.A., Cent. Ramona 172 Misc 258 Azucarera Empagran App A., Ltd S. 780; F. Roche v 542 Div Hoffmann-La Co., 35; 469 F2d 155; US Trade Dev. Bank v Continental Ins. [Union Jury Subpoenas Tecum Matter Two Grand Duces of Schilling, Switzerland], 222; 2d v 282 Bank 158 Misc v Cronan of Heritage App Mar., SA, II 35 Misc 3d 940; Div Parbulk AS v Waite, 433; Umb 235; Matter 99 NY Disconto Gesellschaft of 624.) Co., F2d 570; Shaheen, Ltd. v 544 208 US Clarkson reit, II. [2014]) —, v US S Ct 746 Daimler AG Bauman 134 importance appropriateness highlights the of the incorporated headquartered entity particularly rule, for banks (Barrow Kane, 100; in Susquehanna v 170 US Tauza v York. S. S. Co. Cutlery, Co., 259; 220 NY Inc. v
Coal Hoffritz for
153
Amajac,
Corp.
F2d
Ltd.,
55;
763
Landoil
v
Resources
Alexander
Eng’g
Servs.,
&
28;
Alexander
77 NY2d
Tire
& Distrib. L.L.C. v
Ltd.,
108;
Bank China
740 F3d
Licci ex
v
rel. Licci Lebanese
of
Gager
Bank, SAL,
Can.
50;
673 F3d
v White,
475;
53 NY2d
In
Corp.
Compagnie
surance
Ireland v
des
Guinee,
Bauxites de
456
694;
US
LLC v
Doubet
Trustees
Columbia Univ. in City
433;
99 AD3d
Intl.
of N.Y.,
Indosuez
Fin. v National Reserve
238.)
Corporation’s
Bank, 98
III.
NY2d
Motorola Credit
efforts
recognition
long-standing
separate entity
to diminish the
(Matter
misplaced.
rule are
National Union Fire Ins. Co.
Pittsburgh,
Empl. Concepts,
vPa. Advanced
Jones New York M. Lee A. counsel), Ogulluk and Sevan of Jordan, Central Bank respects amicus curiae. I. The the sover (Hilton eignty Guyot, and their nations citizens. 159 US 113.) unduly II. The rule does not burden the (CIBC process of international enforcement. Mellon 215.) Corp., Trust Co. v Hotel Mora *5 City {James Kerr, Davis LLP, Polk & Wardwell New York L. counsel), Wagner Margaret Tahyar Karen E. E. of for Com- 154 City Banking the Bar of the Law the Association of
mittee on of entity reflects I. The York, amicus curiae. of New gives proper to all 52 that effect of CPLR article a construction (Padula Corp., provisions. Props. 519; 84 NY2d v Lilarn of its Eng’g 533; & Ltd., 12 Tire v Bermuda NY3d Koehler Bank of Ltd., 108; Reins. Bank China 740 F3d Global Distrib. L.L.C. v of Equitas Corp.-U.S. Ewen v 722; v 18 NY3d Ltd., Branch Thompson-Starrett 245; the N. Co., 208 NY Commonwealth of Imperial 21 NY3d Commerce, Bank Mariana Is. v Canadian of Hospital Matter Serv., 295; 30 NY2d 55; Abood v Ambulance of Shanley, Kaplan Peyser, v 62 147; v 273 Matter Beach of 806.) Corp., II. 32 v H. R. H. Constr. AD2d 241; Cook NY2d subjecting garnish must be construed to avoid CPLR article 52 (Harris liability. v an risk of double ees to unconstitutional Falor, LLC v 14 NY3d Balk, 215; 198 Hotel Mezz Lender US 71 Telegraph App 303; Silva, 95; 124 Div Union Drake v De Western City Pennsylvania, 71; States v First Nat. v 368 US United Co. McGrath, 330; Bank, 378; Service Co. v 342 US 379 US Cities Oreamuno, 494; His 24 Solicitor Diamond v Majesty’s NY2d for of Affairs Treasury Russian Co., 282; v Trust 304 NY Bankers 149.) § Banking 204-a Stoddard, 240 NY III. Law Reins. Co. v (a) (3) (1) statutory support provide (Trinh Fargo Citibank, N.A., 1164; 850 F2d Asia rule. v Wells Citibank, N.A., 723; F2d Brill v Chase Manhattan Ltd. v Bank, Trujillo-M Misc 852; Scotia, v Bank Nova AD2d Bank, 847; A.,N. 2d AD2d Pineiro v Chase Manhattan Istim, Bank, Inc. v 794; AD2d Matter Chemical 342.) Foreign Country Money-Judgments Rec IV The Uniform wholly ognition Act contained in CPLR article 53 is inconsistent (Greschler judgments. v with the extraterritorial enforcement of Sung Corp., Co., Hwan Ltd. v Rite Aid Greschler, 368; 51 NY2d 78.) comity sepa Principles are well-served 7 NY3d V (Matter Ratsutsky, 696; v Gotlib 83 NY2d rate rule. Republic 460; 61 NY2d Perez Chase Manhattan City Argentina & York, 252; 25 NY2d Ehrlich-Bober Newof University Houston, 574; 49 NY2d F. Co. v Hoffmann-La Corp.- Empagran A., 155; 542 US Global Reins. Roche Ltd v S. Paquete Equitas Habana, Ltd., 722; 18 NY3d U.S. Branch v Angeles, County Japan Line, Ltd. v Los 441 US 677; 175 US 501; v Bin Matter Holmes 434; Mahfouz, NY3d Ehrenfeld 300.) Winter, 22 NY3d City Meagher Arps, Skadden, Slate, LLP, & York Flom (Scott Raymond Timothy Nelson and D. G. Amanda Musoff
155 counsel), Kalantirsky Washington, of and Ira D. Hammerman, Washington, D.C., Industry Carroll, and Kevin D.C., for Securities Association, and Financial Markets amicus curiae. I. certainty, In the of interests business rule, a (J. long-standing preserved. of law this should state, Grindlays [Uganda], Zeevi v & Sons Bank 220; 37 NY2d IRB- Resseguros, Inepar Invs., S.A., Brasil v 310; S.A. 20 Mat NY3d Banking Corp., Eckart, 493; ter 39 NY2d Matter Southeast of of Schilling, App 178; 93 940; NY2d Cronan v 282 Div Chrza App Bank, nowska v Corn Exch. 173 728; Div 225 NY Corp. & Extebank, 787; Therm-X-Chem. Oil v 84 AD2d Bluebird Undergarment Corp. Gomez, 742; v 139 Misc Clinton Trust Co. 148.) Compania v Azucarera S.A., Cent. Ramona 172 Misc II. public policy support continuing Sound reasons bank to treat purposes branches as entities for of article CPLR 52. (Mashreqbank PSC v Ahmed Hamad Al Gosaibi & Co., Bros. 23 Shipping Corp. 129; NY3d India v Ltd. Jaldhi Overseas Pte of Ltd., 58; F3d 585 Cala Rosa Mar. Co. Ltd. v Sucres Et Deneres Group, Supp Ayyash F 426; 2d Koleilat, 613 v Misc 3d 916, 38 495; 115 AD3d Commonwealth the N. Mariana v Cana Is. of Imperial dian Commerce, Bank 21 55; NY3d United States v of Philadelphia Logix Corp. Bank, Nat. 374 321; US Samsun v Slip Op China, Bank JPMorgan 31 Misc 1226[A], 3d 2011 NY 50861[U]; of Motorola, Chase N.A. v Inc., AD3d 293; 47 71.) Telegraph Pennsylvania, Western Union Co. v 368 US III. [2009]) Koehler v Bank Bermuda Ltd. 533 did NY3d not of (Global abrogate Royal Tech., rule. Inc. v Slip Op Can., Bank 1209[A], 34 Misc 50023[U]; 3d 2012 NY of Pittsburgh, Matter National Union Fire Ins. Co. Pa. v of of Empl. Concepts, 101; Co., Advanced 269 AD2d Edmant & LLC v Slip Op Ayyash Media, Z & M LLC, 2012 NY 32918[U]; v Ko Logix Corp. leilat, Misc 38 3d 115 AD3d 495; Samsun v Slip Op China, Bank 31 1226[A], Misc 3d 2011 NY 50861[U]; Heritage Mar., Parbulk II AS v SA, 235; 35 Misc 3d Dewar v Bangkok Ltd., Branch, Bank Pub. 1231[A], Co. N.Y. 37 Misc 3d Slip Op Legal 52254[U]; 2012 NY Matter International Consulting Ltd., Ltd. v Oil 1203[A], Malabu & Gas 35 Misc 3d 50546[U].) Slip Op comity, 2012 NY IV Considerations of limita extraterritoriality Supreme precedent tions on and recent Court (Glob- Corporation’s interpretation. all disfavor Motorola Credit Corp.-U.S. Equitas al Ltd., 722; Reins. Branch v 18 NY3d Mor- rison v National Bank Ltd., 247; Australia 561 US Banco Am- City v Artoc Trust, 65; brosiano Bank & Pontiac NY2d Sys. & AG, Policemen’s Firemen’s Retirement UBS 752 F3d Holding Holding A.S., F3d Cukurova 173; B.V. v Sonera Pittsburgh, Pa. v Fire Co. 221; Union Ins. Matter National Empl. Concepts, Tech., Inc. v 101; AD2d Global Advanced Op Slip Royal 1209[A], 3d 2012 NY Can., 34 Misc Bank of 50023[U].) legislature to be intended for branches V The (Arbegast S. v Board Educ. entities. treated as Hammelburger v School, Four 161; 65 NY2d New Berlin Cent. Thruway Easley Corp., New YorkState 580; some Inn Long Co., Is. R.R. Auth., 374; 1 NY2d Transit Commn. [Aetna Co.], 60; Ins. Matter Delmar Box Co. NY 345; *7 Engle 237; New York State Assn. Talarico, 33 NY2d Matter v Dept., Banking v New York State Underwriters Life Broadway Peyser, Dyer Kaplan 147; 353; v Matter NY 430.) Bank, 252 Cent. NY OF THE COURT OPINION J. Graffeo, Appeals for the case,
In the United States Court of Second this entity” “separate prevents a Circuit asks us whether ordering garnishee operating judgment from a bank creditor judgment in to restrain a debtor’s assets branches New York foreign of the bank. We conclude that does. held in branches
I April September 2000, 1998 and members of Between several (the Uzans) family plaintiff induced Motorola Credit the Uzan (Motorola) Corporation to a Turkish to loan over billion $2 they purportedly company controlled, to telecommunications major operations. expansion company’s a of the finance a Motorola, Unbeknownst the Uzans diverted substantial they portion and other of these funds themselves entities discovering In the Uzans had controlled. after “perpetrated huge “their scheme a fraud” concealed through lies, threats, an almost endless series of chica nery,” Court for Southern District United States District York entered Motorola’s favor (Motorola compensatory damages of about billion Credit $2.1 2003]). Corp. [SD Supp Uzan, F 2d Three NY years later, the an District Court awarded Motorola additional (see Corp. punitive damages Uzan, billion in Motorola Credit $1 Supp [SD F413 2d gone great lengths satisfying to avoid
The Uzans have contempt judgments comply and remain for failure to with subjecting they orders, District Court’s them to if arrest enter the United States. As a result of obstacles, enforcement pursued judgments through Motorola has party discovery collection third- postjudg-
and the District Court has conducted proceedings parte February ment ex and under In seal. pursuant the District Court entered an order to Federal Rules restraining of Civil Procedure rules 65 and 69 and CPLR 5222 anyone selling, the Uzans and with notice of the order from as- signing transferring property. or their restraining
Motorola served the order on the New York branch (SCB), foreign of defendant Standard Chartered Bank incorporated headquartered Kingdom. in the United SCB, which no had connection to Motorola’s loan to the Uzans underlying litigation, any property did not locate Uzan at its global New York branch. Two later, months search its roughly branches revealed Uzan-related assets valued at $30 (U.A.E.). million in its branches the United Arab Emirates SCB froze those assets accordance with the order, regulatory quickly but authorities in the U.A.E. and Jordan intervened. Central Bank of Jordan a bank sent examiner to seize branch, documents SCB’s Jordan while the U.A.E. unilaterally Bank Central debited about million SCB’s from $30 *8 account the bank. May sought restraining
In SCB relief from order, the claiming in the District Court that the mil- restraint the $30 subjected lion in assets violated U.A.E. and li- law to double ability. separate that, SCB also contended under New York’s entity restraining rule, service the order on SCB’s York New only branch was effective as to assets in located accounts at foreign that branch and could not freeze funds in situated opposition, separate In branches. Motorola asserted that the entity longer light rule was no in valid law of Koehler v Bank (12 [2009]), judg- Ltd. Bermuda NY3d 533 held a where we that ment creditor could seek the turnover of stock certificates lo- country long personal ju- cated outside the so as the court had garnishee. risdiction over the In a order, sealed the District agreed separate entity Court with SCB and concluded the that precluded restraining foreign rule from Motorola assets SCB’s stayed Nevertheless, branches. the District Court release pending appeal. the restraint the outcome of Motorola’s recognizing explicitly Circuit, The that Second we have never separate entity finding addressed doctrine and that its vi- ability unclear in the of Koehler, was wake certified the follow- ing question to us: entity separate precludes
“[W]hether a ordering garnishee judgment bank from creditor operating in York to restrain a branches New foreign the bank” branches of assets held debtor’s (740 [2d Cir F3d [2014]).1 accepted certification We
II argues judgment creditor, that the service Motorola, as restraining York branch of notice on New a CPLR 5222 foreign garnishee to freeze the funds of is sufficient regard- any bank, branch account with the debtor questions the assets are located. Motorola whether less where entity separate rule, which is not mentioned CPLR article that, if it of New York and asserts even was ever law necessarily any event, In Mo- was, we abolished it in Koehler. separate doctrine as torola asks us disavow the unnecessary. outmoded responds garnishee bank,
As the SCB that banking foreign deeply rooted in New York law that deciding reasonably years relied on it over when banks have open York. and conduct business New whether to branches Supported did curiae, several amici SCB asserts Koehler urges rule and the rule not discard the banking. Unlike remains in the context of international vital dissenting colleagues, we that SCB has the better our conclude argument. employed by rule, as it has been lower applying law,
New York courts and federal courts
York
provides
garnishee
York
that even when a bank
with New
jurisdiction,
subject
personal
are
its other branches
branch is
purposes, particu-
as
for certain
to be treated
larly
entities
respect
prejudgment
article 62
attachments
to CPLR
and article 52
notices
turnover
*9
(see
Pittsburgh,
Fire
Co.
orders Matter National Union
Ins.
Concepts,
Dept
[1st
Empl.
2000];
Pa. v
159 2010]). restraining In words, other notice turnover order on a served New York branch will be for effective assets held in impact accounts at that branch but will have no on assets in other branches.2 traditionally
Courts and commentators have ascribed three basic rationales for the First, doctrine. courts applying emphasized importance the rule have of interna comity “any banking operation tional foreign country and the fact that in a necessarily subject foreign sovereign’s
is to the (Global regulations” Royal Tech., own and laws Inc. v Bank of Slip Op [Sup Can., 34 3d 1209[A], Misc 2012 NY 50023[U], *3 County 2012] [internal quotation Ct, NY marks citation omitted]). necessary protect Second, it was viewed as to banks being “subject competing possibil from ... claims” and the (Shaheen ity liability Sports, Co., double Inc. v Asia Ins. Ltd., [SD 919664, *5, 2012 2012 WL US Dist LEXIS *14 36720, NY, (LAP), (LAP)]), 14, 2012, Mar. Nos. 98-CV-5951 11-CV-920 strenuously concern voiced the amici in this third, case. And justified the rule has been based on the “intolerable burden” placed that would otherwise be on banks to monitor ascertain the status of bank accounts in numerous other (Cronan Schilling, [Sup branches 474, Ct, 100 NYS2d NY County op App [1st Dept 1950], without Div 940 1953]; aff'd Geoffrey generally Rejection Separate Entity Sant, see The Separate Entity Rule Rule, Validates the L 65 SMU Rev [2012]). component
The existence of rule as a New York’s common law can be traced back to a 1916 decision (see App [1st Chrzanowska v Corn Exch. Div Dept 1916], question presented affd without op decision, the different branches [1919] [“With respect separate any were as from as distinct one another from bank”]). applied It other was first in the context a few decades later in v Bustos, Walsh the court concluded where that a on order served a New York branch of the applying 2. Most cases rule involved bank branches in countries, foreign applied but some have bar a restraint even (see e.g. Bergenske where the unserved branch is located New York Det Dampskibsselskab Corp., Shipping [2d Sabre 341 F2d 53-54 Cir case, In this we have no to address occasion whether the any application has to domestic branches New York or elsewhere in question prevents the United before States. narrow us whether the rule foreign accounts, the restraint of assets held in branch and we limit our anal- ysis inquiry. to that *10 160 the judgment to the deposits did not “extend garnishee (46 bank” NYS2d foreign of this in the Mexican branch
debtor
1943]).
1960s,
sepa
the 1950s and
By
Ct
240,
City
[NY
and federal courts as
by
described
state
rate
rule was
476)
(Cronan, 100
and supported
NYS2d at
established”
“well
(Det
Bergenske Dampskib
authority”
line
by “a consistent
1965]).
50, 53
Cir
Corp.,
Sabre Shipping
[2d
341 F2d
sselskab v
century in
twenty-first
into the
continues
And its endurance
(see
B.M.,
v Bank Hapoalim
Gliklad
context
Parbulk
Ct,
County 2014];
NY
[Sup
32117[U]
NY Slip Op
Mar.,
SA,
Ct,
Heritage
v
Misc 3d
238-239
NY
II AS
[Sup
Partners,
&
Export
Inc.
Philippine
2011];
Fidelity
County
1113, 1119-1120
[SD
921 F Supp
Foreign
Corp.,
Loan Guar.
the separate
not
on
expounded
we have
Although
it
a
established
firmly
is
rule,3 contrary
suggestion,
to Motorola’s
both
law,
York
a
history
application
of New
principle
of the CPLR.
adoption
before and after the 1962
in
abrogated
years ago
the rule five
argues
Motorola
that we
(12
Bermuda Ltd.
[2009]),
a case
Koehler v Bank of
CPLR
turnover or-
secured a
judgment
in
a
creditor
which
a
bank in Bermuda to deliver stock cer-
directing
garnishee
der
debtor. The bank consented
to the
belonging
judgment
tificates
subsidiary
of a
in
based on the
jurisdiction
presence
to personal
certified to us
the Second Circuit
by
York.4 The question
in
order a bank
may
a court
New York
sitting
was “whether
involving
separate entity-
affirmed,
opinion, in two cases
3. We
without
(see
[1962];
Bank,
Notably any our absent from in Koehler decision was discus separate entity sion tbe rule. We discern two reasons for our subject. foreign silence on matter, the As an initial the bank did not raise issue we the so had no occasion examine the doc separate entity by applied Second, trine. the rule, as has been courts, the would not have aided the in bank Koehler because that case involved neither bank branches nor in assets held analyze, In short, accounts. we did not much less over separate entity rule, the in Nor, doctrine Koehler. the as dissent holding believes, is the rule in irreconcilable our Koehler scope generally of CPLR article 52 is tied to the exercise personal jurisdiction garnishee. long-standing over a As a entity separate doctrine, common-law rule functions as limiting principle banking, in the context of international particularly involving attempts in situations to restrain assets garnishee foreign reject in a held bank’s branches. We therefore Motorola’s view that Koehler decided the issue before us.
Motorola and the dissent further submit that entity incompatible rule is with CPLR article 52 because noth- ing governing postjudgment restraining in 5222, CPLR notices, expressly embraces the rule. Motorola cites Commonwealth Imperial the N. Mariana Is. Commerce, v Canadian Bank determining expanse stated, where we of CPLR article “starting point language giving 52, that the itself, effect plain meaning [2013] [internal 55, to the thereof’ entity prevents foreign Motorola’s restraint of held SCB’s assets branches. It appear 5. would creditor Koehler also served the Bermuda, only subsidiary, yet bank itself in an- providing not its New York (see inapplicability reason other for the rule in that case Ltd., 551115, *12, Koehler v Bank WL US Bermuda Dist LEXIS (CSH)] NY, [“Assuming [SD *35 Mar. No. M18-302 service to case”]). proper, play rule has no role to in this omitted]). quotation But reliance Motorola’s and citation marks misplaced Imperial because Bank is on Canadian predates the issue decades and the CPLR several statutory but, rather, whether construction is not one of principle. a common-law retain sep-
Finally, cast aside Motorola’s invitation to we decline part discussed, the doctrine has been rule. arate As century. nearly a Courts have of New York for common law the repeatedly prevent of as- restraint it to used solely foreign on the ser- branch accounts based situated sets Undoubtedly, foreign York branch. vice of bank’s New benefits have the doctrine’s banks considered international deciding open turn York, which in has branches New when played preeminent shaping as the
a role in New York’s “status *12 center of the Nation and the commercial and financial nerve (Ehrlich-Bober University Houston, 49 NY2d & Co. v world” [1980]). 574, 581 adop large underlying led the the reasons that to measure, In today. entity ring separate true The risk of the rule still tion of possibility liability sepa competing in the of double claims and jurisdictions significant concerns, as does the real rate ity remain subject legal foreign branches are to a multitude of that By limiting regimes. regulatory reach of a CPLR 5222 the restraining banking foreign context, the notice in the comity entity promotes international and serves to avoid (see among legal systems generally competing Daimler conflicts AG Bauman, US —, —, 134 Ct S [2014] importance considering [recognizing the “the risks to suggests comity”]). although that And Motorola international banking technological and centralized have advancements have to doctrine, ameliorated the need for the courts continued recognize practical the constraints and costs associated with judgment conducting search for a debtor’s assets worldwide (see Logix Corp. China, 1226[A], v Bank Misc 3d Samsun [Sup County 2011] [stat Slip Op 50861[U], Ct, *4 2011 NY ing numerous affidavits to the effect
that “the Banks submitted computer systems in New York branches provide information at Banks do not access to customer account States”]).6 head office or at branches outside of the United questioned validity sepa- highlights, 6. As the dissent one court (see Johnson, computerized banking Digitrex, light in Inc. v rate Indeed, observed, as the District Court the facts of this case aptly policies implicated by demonstrate that the deeper ability rule run than the of a to communicate seeking comply restraining In across branches. to with the or- regulatory repercussions der, SCB faced and financial abroad. Representatives compelled of the Central Bank of Jordan SCB immediately disclose records directed SCB to unfreeze regula- possesses the assets. The U.A.E. Central which tory oversight in nation, would not allow SCB’s Uzan- payment obligation related to remain result, unsatisfied. As a the U.A.E. Central Bank hank debited SCB’s account with that equivalent approximately for an amount to the frozen funds — placed position million. In essence, $30 SCB was the difficult attempting comply contradictory of multiple with the directives of
sovereign nations. Consequently, in dissent, contrast we believe that aboli- tion rule would result in serious conse- quences banking realm of international to the detriment preeminence global of New York’s financial all affairs. For reasons, these that a we conclude creditor’s service garnishee notice on a bank’s New York branch is ineffective under the rule to freeze assets held foreign in the bank’s branches.
Accordingly, question the certified should be answered affirmative. *13 (dissenting). Today, year 2014, J. in the the Abdus-Salaam,
majority expressly adopts for the first time the proceedings rule for enforcement under CPLR statutory initially article 52. The has no basis and was by nearly century ago formulated the lower courts on a based application has times. rationale that no to these modern In choosing majority engaged rule, this outmoded the has in judicial improper legislation, import avoided clear of our in recent decision Koehler Bank Ltd. Bermuda of 1980]). Supp F subsequently [SD 491 66 But courts limited the so-called “(1) Digitrex exception to cases where on the notice served (2) office; main the bank’s main bank’s office and branches are within the (3) jurisdiction; same and the bank branches are to the main office connected by high-speed computers and are under the centralized of the main of- control (Limonium Mar., Marinera, 600, S.A., Supp F fice” S.A. v Mizushima 607 1997]; Pittsburgh, [SD NY see also Matter National Union Fire Ins. Co. 2000]). Empl. Concepts, Dept Pa. Advanced 102 [1st AD2d [2009]) policy compelling public given short shrift to and reject such a rule. reasons to judg permitted majority particular case, has, this plaintiff over billion who owe debtors, $2 individuals
ment consequential damages, damages punitive who and billion $1 subject States District from United are to arrest orders English and The District of New York for the Southern Court High Justice, have been convicted of multibil and who Court Turkey, proceed enforcement to evade lion bank frauds dollar ings Circuit, the Second As described in New York. was “[r]elying personal wealth, have time the Uzans on their vast lawyers legal deployed again to the their to raise roadblocks They persis judgment against have them. enforcement of jurisdiction tently of the District endeavored to evade lawful (Mo its careful and determined work” Court and undermine [2d Corp. Uzan, 561 F3d Cir torola Credit majority persuading this Standard Chartered adopt rule, has aided its Court to the obsolete by erecting fugitive a monumental roadblock to customers judgment. plaintiffs staggering enforcement doing today’s holding permits terms, banks busi- In broader in branches to shield customer accounts held ness in New York country, by judgment creditors to thwarts efforts outside this judgments, egregious the most and allows even collect mockery flagrant judgment of our courts’ to make debtors being duly judgments. age In an banks are held where entered their actions vis-a-vis their accountable than ever for more public today’s holding is a deviation from current customers,1 step policy regarding responsibilities and a in the banks wrong direction. (b) 107-56, III, (1), e.g. § L tit 1. PATRIOT Act of Pub See USA Secrecy to, (4), (11), (amending among things, 115 US Bank Act other Stat detect, strength prevent, pros- measures to “increase the United States financing terrorism,” money laundering ecute international and the scrutiny “provide subjecting special a clear national mandate for those operating foreign jurisdictions, financial institutions outside of United States, types pose of accounts that and classes of international transactions abuse,”
particular, opportunities and “to ensure that identifiable for criminal industry subject ap- appropriate all of the financial services are to elements money propriate requirements report potential laundering to transactions to authorities, disputes not examination proper jurisdictional do hinder that requirements”); reporting compliance of financial institutions with relevant procedures). (requiring risk-based customer verification 31 CFR 1020.220 I Expressly Impliedly Incorporates
CPLR Article Neither Nor Separate Entity Rule (b) begin analysis my generally I of CPLR 5222 with the ac- cepted premise “starting point” language that the is “the itself, (Commonwealth giving plain meaning effect to the thereof’ of Imperial the N. Mariana Is. v Canadian Bank Commerce, 21 quotation [2013] [internal NY3d 55, 60 marks and citation omit- ted]). provides, pertinent part, respect The statute in with to parties postjudgment restraining third served with a notice: property judgment
“All in which the debtor or obligor is known or believed to have an then interest coming possession in and thereafter into the or custody person, including any specified of such a person, including notice, and all debts of such a any specified in notice, then due and thereafter coming obligor, due to the or debtor shall subject to the notice.” Nothing exempts parties statute banks, third that are complying or banks, branches of from no- companion tice. As the Second Circuit noted in the case Tire Eng’g & Distrib. L.L.C. Bank 108, China Ltd. F3d 2014]), [2d product Cir rule “is not the of a analysis “judicially textual of the CPLR” but is instead a cre- ated doctrine” is “not tethered to the CPLR’s text.” consistently clung principle plain
This Court has to the statutory 206, construction [1951] (see [although e.g. Matter the statute was enacted due Di Brizzi [Proskauer], emergency, legislature general to a war because utilized expressly implication, terms, not, and did either limit its operation may a time war, so]; we not do Matter Tucker Community Educ., v Board School Dist. No. 82 NY2d unequivocally [1993] [“where . . . the statute describes general particular apply terms situation which it is to nothing contrary legislative indicates a intent, courts impose statutory language”]). should not on limitations the clear temptation legislate, We have also resisted mindful supposed guise “[c]ourts legislate are not under the interpretation, long closely and in the run better it is to adhere principle Legislature to this it to leave to correct evils if any (Bright Wright, exist” [1960]; Homes 8 NY2d see
also Matter Amorosi 9 NY3d [2007] v South Colonie Ind. Cent. School [“the courts are not free legislate *15 Dist., Legislature unsought consequences any result, is the best if and them”]). any majority The avoids evaluate and resolve suited to analysis reasoning rule is that the statute, the predates the CPLR several law, of common which a creation predating point is, to rule the CPLR But the about the decades. separate entity my good for us to conclude that the mind, reason rejected, not The fact remains that embraced. should statutory support in framework CPLR the rule finds no statutory imports exception an to the enforce- article solely exception prerogative is ment scheme. Such an legislature, not this Court.
II Separate Entity Rule is and Runs Counter to Obsolete Policy Public began early part century ap- the last Lower courts theory ply separate entity a rule on the that one bank branch way had no to ascertain the status of a debtor’s account at an- major- subsequent courts suit. The other branch. Some ity followed adopt today in the believes that this Court should 162) (majority op name at for the benefit of the of stare decisis obligations. prefer banks this extensive limitation on their who Initially, adoption I note that of the rule some lower federal not mean that York courts some courts does fundamentally, I rule is entitled to stare decisis effect. More majority’s good agree rationale cannot stare decisis imprimatur place our on an anachronistic rule that reason to greatly scope diminishes the and reach of enforce- proceedings. ment enunciating
Notably, first some cases (173 upon App rule2 v Corn Exch. Bank Div relied Chrzanowska [1919]). op That [1916], 1916 First without NY affd Department of a are decision held different branches bank “separate any and distinct from another as from other one Legislature “[t]he intend, think, did not we ei bank” because require having to cash ther to authorize or branches Compania 2. Clinton Co. v Azucarera Cent. These cases include Trust (172 Ct, County 1939], [Sup op 258 Ramona Misc 148 without S.A. aff'd 1939]) (139 Dept Undergarment Corp. App [1st Div Bluebird Gomez City [NY Misc 742 Ct depositor any checks and make loans to a branch at which he may produce call, see fit to do so would endless confu- 291). App sion” Div at This observation is an indication of just technology, much, how with the advent of modern the world general, banking particular, industry changed and the has underpinnings since It 1916. also tells that the us ratio- long decayed. nale for the rule have since *16 County applied In trial a court in New York the reason- ing of Chrzanowska when held: sepa
“Unless each of a branch treated is as a entity purposes, rate for attachment no branch safely pay depositor could a check drawn its checking without all with other branches and main office to sure make that no warrant of attach upon any ment had been served them. Each time upon a warrant attachment branch, is served one every other branch and the main office would have place to be notified. This would an intolerable upon banking particularly burden and commerce, numerous, where are branches as is often the (Cronan Schilling, [Sup case” NYS2d County Ct, NY day banking technology, In this of centralized and advanced bank branches can communicate a with each other in matter of longer seconds. Banks are no with faced this “intolerable restraining sepa- burden” when served with notice. That the longer practical recognized rate rule no made sense was years ago by over 30 the United States for District Court Digitrex, York, Southern District of New when it noted in Inc. v (491 1980]) [SD Supp “operations Johnson F that at City all most if not New . York commercial banks . . have largely computerized” become “it concluded that is clear argument that forth in favor rule set 1950 Cro- longer persuasive.” agreed Department nan . . . is no The First (219 Corp. in S & S Mach. Hanover Trust Co. Manufacturers 1996]), Dept [1st applied Digitrex AD2d 249 when it rule postjudgment subpoena: notice and information Digitrex argued persuasively “The court that requiring judgment old York rule, that postjudgment process par- creditor serve his on the ticular branch of the bank where the located, obsolete in era debtor’s assets were was an large when commercial banks centralized com- use (219 puter handle their accounts” databases to 252). AD2d original aptly case, noted in this “the Circuit And as the Second basis may even have weakened or 117). disappeared F3d at over time” long-standing rules common-law nature certain While the being prevent important, Court from that should not this changed acknowledge enough has that the world flexible Judge change it. once As Cardozo the law must observed: duly rule, has been
“I after it think when by experience, be has been found to inconsis- tested tent with justice or with social sense of be less hesitation frank welfare, there should had and full We have to do avowal abandonment. field of law. this sometimes in the constitutional private Perhaps fields of we should do so oftener in utility are of social not so law where considerations greater aggressive There should insistent. position to abandon an untenable when readiness the rule to be discarded *17 may reasonably sup- not posed the of the liti- to have determined conduct gants, particularly origin in when was the and its product which have institutions or conditions of gained significance development with the a new (Cardozo, years” progress The Nature of [1921 [emphasis ed] Process at add- Judicial 150-151 ed]). certainly separate society Our has most evolved since entity formulated, first and the initial reasons for rule was longer majority rule no exist. notes that banks have been years posits relying doctrine for and on the banking industry any change might negatively impact in may place reliance New York. But while banks some technical they rely and rule, on the cannot on blind unwavering legal bygone adherence norms era to birthed government, represents, and bank which that rule for banks expectations practices to have shifted their and customers reality. very Banks in the United conform to a different modern far-reaching subject complex government are and States now regulations regarding relationships their their customers. country. Yet banks to do business this continue brought government York federal Both the New have Secrecy against Act. banks under the Bank enforcement actions particular agreed Standard Chartered Bank to a settlement Department in 2012 with the New York State of Financial Ser- (DFS) penalty vices which a included civil million and $340 report directly the installation monitor to the DFS (see money-laundering to evaluate the bank’s risk controls Press Department Release, Services, Financial Statement from Benjamin Lawsky, Superintendent Services, M. Financial Regarding Aug. Bank, Standard Chartered 14, 2012, available http://www.dfs.ny.gov/about/press/prl208141.htm).
Additionally, “[i]n
Holdings
paid
2012, HSBC
PLC
bil
$1.9
admitting
Secrecy
lion after
violations of the Bank
Act
Regulators
other laws.
also reached
smaller settlement with
Citigroup
Standard Chartered PLC and cited
Inc. and J.P.
Morgan
money-laundering
Chase & Co. for deficient
controls”
(Andrew
Against
Grossman, Banks Face
U.S.
Moves
Laun
2014).
dering,
Recently,
September
J,
Wall St
Jan. 9,
jury in the United States District Court for the Eastern District
civilly
sup
of New York found Arab Bank
liable for the material
port
provi
24of Hamas
attacks,
terror
in violation
civil
(Andrew
sions
Act
Keshner,
Anti-Terrorism
Arab Bank
Support,
Sept.
[discuss
NYLJ,
Found Liable
Terror
04-CV-2799])
ing
verdict in Linde v Arab
and the United
Appeals
States Court of
for the Second Circuit reinstated claims
against
victims of terrorist attacks
the National Westminster
supporting
handling money
Bank for
Hamas
for the Palestine
(Weiss
Development
Relief &
Fund
v National Westminster Bank
[2d
PLC,
Banks have societal they responsible corporate presumably by will be citizens, using technology modern and a reasonable re- share their *18 compliance regulatory sources to shoulder the burden of with a global regime surely every reach. In this environment, longer shrug knows that it no exists in a it can off world where duly judgment a entered for assets in its collective on coffers theory long game the would have to resort to a telephone tag, opposed international as to a brief search its computer subject database, to The restrain funds to collection. require foreign difficulties that banks face will should we comply postjudgment proceedings branches to with to enforce rights judgment likely pale comparison the creditors will comply to banks’ to with the Act the efforts USA PATRIOT and Secrecy Bank Act. imposed my any is far out- on the banks view,
In burden rights judgment weighed their creditors to enforce judgment judgments. a entered in favor this case involves While judgment big holding corporation, all sorts of our will affect of a way example, employees their Take, who wend for creditors. eventually through system a obtain substantial the court and rights against employer judgment for law and human labor their employer only all has removed assets violations, find that the to placed them in a York, in New accounts located from bank foreign reckoning, employees majority’s By these branch. proceedings, enforcement can find no relief problematic to for banks because it is too burdensome restraining foreign bank branch. order in a enforce a
Ill Entity All-Encompassing Separate Rule is Not A Blanket and Necessary Comity to Promote promotes majority rule The reasons that the comity. majority apply separate would But while the reach a creditor seeks to all instances where many foreign there where branch, in a are countries assets held conflicting complying laws, and not face where banks would restraining law be consistent with the where notice would foreign is no need for the Thus, branch is located. there majority comity. sweep promote employed to broad only comity play is a true into when there “International comes foreign jurisdiction” American and that of conflict between law ( Corp. plc by Homan, re Maxwell Communication In might [2d That CPLR article F3d Cir country’s require does some other laws not conflict with judg imposed protect entity rule be accounts of anywhere deposited United ment outside States. debtors majority’s address use fly. comity using potential a cannon to kill a issues is akin just appropriate as effec Less extreme measures are more tive. potential jurisdictions li
As where a bank is faced with for complying notice, CPLR 5240 with a abilities gives modify deny, limit, discretion to condition or a court procedure. adopt any Thus, we need not use of enforcement comity. categorical separate entity A rule in the name of bank’s may liability exposure ad concerns about double other *19 by protected through dressed a court.3 Banks do not need to be application wide-ranging separate entity of this rule.
IV Majority’s Reasoning The Cannot be Reconciled with Koehler Putting necessity aside the obvious obsolescence and lack of separate entity for the rule, our decision in Koehler it makes Legislature clear that we believe “that intended CPLR (12 539). article to have extraterritorial reach” NY3d at Answering question by a certified to us the Second Circuit involving garnishee proceeding pursuant bank and a turnover principle to CPLR held we that “the that a New York may judgment ordering court issue a turnover out-of- applies state equally is assets not limited to debtors, but (id. 541). garnishees” reasoning at Our was based on the words of the statute. express
“CPLR article no contains territorial barring entry limitation requires turnover order that garnishee money property to transfer country. into New York from another state or It easy Legislature would have an been matter for the to have added such a restriction reach of article and there is no basis for us to infer it language presently from the broad in the statute” (id. 539). majority, law, focused on the common is unconcerned wording reasoning with of the statute. But Koehler’s that statutory language question answered the certified with re- spect apply equal to CPLR 5225 should in our with force exam- Although ination of CPLR 5222. the Koehler court did not ad- interpretation rule, dress Koehler’s of CPLR holding article 52 and its that 52 has article extraterritorial today’s adopting reach cannot be reconciled with decision scope majority’s rule. The of the Koehler deci- sion was understood the Koehler dissent: case, In 3. unpersuaded this the District Court was Standard Chartered predictions” subject liability, Bank’s “dire that it would be to double and fur- assuming occur, ther noted that even this would banks assume risk ordinary doing multiple jurisdictions New York as an cost of business Furthermore, F Supp [SD 2d plaintiff argues, as Standard actually subject any Chartered Bank has not li- demonstrated that ability light agreement of the indemnification it has Jordan proxy subject Dubai Islamic an Uzan to the or- District Court’s freeze der. *20 one York branch —either the has New “If subsidiary incorporated, separately or a is not that relationship enough parent’s is close the which with jurisdiction subject parent York to New to —the judgment having registered judgment creditor, requiring an the as- York, can obtain order in New (12 [Smith, at 542 here” to be delivered set dissenting]). J., majority point precisely here has that
This is overlooked. recognition rule is inconsistent
That only in the Koehler dissent’s reflected not with Koehler is Clearing proposed by legislation The House observation, but (both ap- Bankers International and the Institute of Association support pear Bank in of Standard Chartered as amici curiae action) by adding in Koehler “correct” our decision this language to (b) restraining providing that a notice
to CPLR respect property to no effect with on a bank shall have served at or office of the bank outside or accounts held a branch (see Clearing House Association LLC and Letter from state to Governor David Institute of International Bankers addressed http://c.ymcdn.com/sites/ 19, 2010, Paterson, Jan. available iib.site-ym.com/resource/resmgr/imported/20100119Letter by legislation proposed Additionally, _Paterson.pdf). Senator S5734) sought Farley Bill NY Senate in June 2013 provide notice that 5222 to amend CPLR money property outside United States to restrain seeks except served on the no the extent that shall have effect majority’s adoption judgment underscores that debtor. This Koehler, of the is inconsistent through any implementation be done amend- of the rule must legislature, not this Court. ment to CPLR article 52
V
Conclusion integral part money judgments and vital postjudgment is an Enforcement of system, legal extensive evidenced our as 52. A of CPLR article enforcement scheme primarily foreign will serve banks that shields assets protect Uzans, who have debtors, as the defiant such money in amounts of the means to maintain considerable foreign large judgments, accounts, to frustrate collection of doing to immunize banks who benefit from business in New responsibilities statutory York from their under the enforce- provisions. ment question
Therefore, I would answer the certified “No.” Judge Judges Lippman Chief Read, Smith and Rivera Judge Judge concur with dissents Graffeo; Abdus-Salaam opinion Judge an in which Pigott concurs. Following question by certification of a the United States Appeals acceptance Court for the Second Circuit and question by pursuant this Court to section 500.27 of this Court’s hearing argument by Practice, Rules of and after counsel for *21 parties and consideration of the briefs and the record question submitted, certified answered in the affirmative.