TIRE ENGINEERING AND DISTRIBUTION L.L.C., Jordan Fishman, Bearcat Tire A.R.L., Plaintiffs-Appellants, Bcatco A.R.L., Plaintiff, v. BANK OF CHINA LIMITED, Defendant-Appellee.
Nos. 13-1519-cv, 13-2535-cv(L), 13-2639-cv(con)
United States Court of Appeals, Second Circuit
Jan. 14, 2014
740 F.3d 108
CHIN, Circuit Judge
Argued: Oct. 11, 2013.
The government would have us solve this mens rea problem by adopting the legal fiction that a person who is no longer physically in this country, in fact, remains here so as to commit a continuing crime in violation of
In sum, while reversal is an unsatisfactory outcome in this case for a defendant who lived unlawfully in this country for approximately a decade, I join my colleagues in the majority in concluding that Vasquez‘s conviction for being “found in” the United States unlawfully cannot stand because
(1) the crime has an implicit mens rea element requiring proof of voluntary presence in the United States as well as an explicit actus reus element of being found in the United States;
(2) that requisite mens rea can be established either by proof of (a) lack of official restraint at the time defendant is found in the United States, or (b) evidence of defendant‘s voluntary presence in the country at or after his most recent return to the United States, and
(3) as a matter of law, the mens rea element was not proved in this case because
(a) Vasquez was under official restraint when he returned to the United States from Canada,
(b) no record evidence was adduced indicating that, upon being denied entry into Canada, Vasquez‘s intent was to return to the United States, and
(c) Vasquez‘s voluntary return to the United States after deportation almost a decade before he was found in this country could not supply the requisite mens rea because he had physically departed this country and was returned only in restraint.
TIRE ENGINEERING AND DISTRIBUTION L.L.C., Jordan Fishman, Bearcat Tire A.R.L., Plaintiffs-Appellants,
Bcatco A.R.L., Plaintiff,
v.
BANK OF CHINA LIMITED, Defendant-Appellee.
Nokia Corporation, Plaintiff-Counter-Defendant,
Motorola, Inc., Kroll Associates Inc., Christopher B. Galvin, Keith J. Bane, Walter Keating, Ed Hughes, Ernst Kramer, Counter Defendants,
v.
Standard Chartered Bank, Appellee-Cross Appellant,
Murat Hakan Uzan, Cem Cengiz Uzan, Defendants-Counter-Claimants,
Kemal Uzan, Libananco Holdings Co. Limited, Melahat Uzan, Aysegul Akay, Antonio Luna Betancourt, Unikom Iletism Hizmetleri Pazarlama A.S., Standart Pazarlama A.S., Standart Telekomunikayson Bilgisayar Hizmetleri A.S., Defendants.
William Edgar Copley, III (Stephen Adam Weisbrod, on the brief), Weisbrod Matteis & Copley PLLC, Washington, D.C., and Stephen Zoltan Starr, Starr & Starr, PLLC, New York, NY, for Tire Engineering and Distribution, L.L.C., Bcatco A.R.L., Jordan Fishman, and Bearcat Tire A.R.L.
Pamela Chepiga (Andrew Rhys Davies, Molly Spieczny, on the brief), Allen & Overy LLP, New York, NY, for Bank of China Limited.
Howard H. Stahl (George R. Calhoun, on the brief), Fried, Frank, Harris, Shriver & Jacobson LLP, Washington D.C., for Motorola Credit Corporation, and Nokia Corporation.
Bruce Edward Clark (Patrick B. Berarducci, Sharon L. Nelles, Bradley P. Smith, on the brief), Sullivan & Cromwell LLP, New York, NY, for Standard Chartered Bank.
Dwight A. Healy, White & Case LLP, for Amici Curiae Institute of International Bankers, The Clearing House, European Banking Federation, and New York Bankers Association.
Before: CALABRESI, CHIN, and DRONEY, Circuit Judges.
CHIN, Circuit Judge.
These appeals, heard in tandem, challenge two orders entered in the United States District Court for the Southern District of New York (Carter, J., and Rakoff, J.), holding that the separate entity rule precludes a court from ordering a garnishee bank with branches in New York to turn over or restrain assets of judgment debtors held in foreign branches of the bank. In both cases, the plaintiff judgment creditors (“plaintiffs“) contend that the decision of the New York Court of Appeals in Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533, 883 N.Y.S.2d 763, 911 N.E.2d 825 (2009), makes clear that post-judgment relief under Article 52 of the
These appeals present the following unresolved questions of New York law:
First, whether the separate entity rule precludes a judgment creditor from ordering a garnishee bank operating branches in New York to turn over a debtor‘s assets held in foreign branches of the bank; and
Second, whether the separate entity rule precludes a judgment creditor from ordering a garnishee bank operating branches in New York to restrain a debtor‘s assets held in foreign branches of the bank.
Because these unresolved questions implicate significant New York state interests and are determinative of these appeals, we reserve decision and certify these questions to the New York Court of Appeals.
BACKGROUND
A. CPLR Article 52 and the Separate Entity Rule
Nevertheless, New York courts have long applied the separate entity rule to
The original rationale for the rule was that “[e]ach time a warrant of attachment is served upon one branch, every other branch and the main office would have to be notified[,] ... plac[ing] an intolerable burden upon banking and commerce, particularly where the branches are numerous, as is often the case.” Cronan v. Schilling, 100 N.Y.S.2d 474, 476 (Sup.Ct. N.Y.Cnty.1950), aff‘d, 282 A.D. 940, 126 N.Y.S.2d 192 (1st Dep‘t 1953). In Digitrex, Inc. v. Johnson, the Southern District of New York (Knapp, J.) concluded that the separate entity rule was outdated in light of technological advances in the banking industry. 491 F.Supp. 66, 69 (S.D.N.Y.1980) (holding restraining notice served on bank‘s main office sufficient and legally effective, as applied to assets in branch of bank). State and federal courts applying New York law have limited Digitrex‘s reach, however, and apply its exception to the separate entity rule only where “the restraining notice is served on the bank‘s main office; the main office and the branches where the accounts in question are maintained are within the same jurisdiction; and the bank branches are connected to the main office by high-speed computers and are under its centralized control.” In re Nat‘l Union Fire Ins. Co. of Pittsburgh Pa. v. Adv. Emp‘t. Concepts, 269 A.D.2d 101, 703 N.Y.S.2d 3, 4 (1st Dep‘t 2000) (emphasis in original).6 Accordingly, courts have routinely applied
B. Tire Engineering and Distribution, L.L.C. v. Bank of China Ltd.
On October 28, 2010, the District Court for the Eastern District of Virginia entered a judgment in favor of Tire Engineering and Distribution, L.L.C. (“Tire Engineering“) against six foreign companies based in China and Dubai (the “judgment debtors“) for copyright infringement and conversion. The Fourth Circuit affirmed in part, upholding the jury‘s $26 million damages award. See Tire Eng‘g & Distrib., LLC v. Shandong Linglong Rubber Co., 682 F.3d 292 (4th Cir.2012). The judgment debtors have refused to pay the judgment.
Tire Engineering eventually learned that one of the judgment debtors had assets at the Bank of China (“BOC“). BOC is controlled and owned, at least in part, by the People‘s Republic of China. BOC operates two branches in New York City.
On December 18, 2012, Tire Engineering filed this action in the Southern District of New York seeking a turnover order against BOC pursuant to
tice on BOC pursuant to Federal Rule of Civil Procedure 69(a) and
In response, BOC confirmed it had no accounts or property belonging to any of the judgment debtors in its New York branches. BOC filed a motion to dismiss, arguing, among other things, that the separate entity rule precluded the relief Tire Engineering requested. Further, it argued that a preliminary injunction was inappropriate due to the substantial harm that freezing assets belonging to the judgment debtors would cause BOC. In support, BOC submitted declarations of two professors, explaining that Chinese banking laws prohibit Chinese commercial banks from complying with U.S. court orders by freezing customer bank accounts in China and that accordingly BOC could face regulatory sanctions and civil litigation in China if it complied with the turnover order.
On April 12, 2013, the district court granted BOC‘s motion to dismiss, holding that the separate entity rule precluded Tire Engineering‘s request for relief. The district court granted Tire Engineering‘s request for a stay pending appeal, permitting the restraining notice to remain in place until the appeal was decided.
C. Motorola Credit Corp. v. Standard Charter Bank
Between April 1998 and September 2000, members of the Uzan family (the “Uzans“) induced Motorola Credit Corpo-
The Uzans have attempted to avoid paying these judgments. See Motorola Credit Corp. v. Uzan, 561 F.3d 123, 127 (2d Cir. 2009) (finding the Uzans “have persistently endeavored to evade the lawful jurisdiction of the District Court and undermine its careful and determined work“). Indeed, the Uzans remain in contempt of court for failure to comply with the District Court‘s orders and are subject to arrest if they enter the United States. See id. at 128. Motorola has accordingly pursued collection of the judgment through independent investigation and third-party discovery, and the district court has conducted post-judgment proceedings ex parte and under seal. On February 13, 2013, the district court issued a restraining order pursuant to Federal Rules of Civil Procedure 65 and 69 and
Motorola served the restraining order on Standard Chartered Bank (“SCB“). SCB is a foreign banking corporation, incorporated under the laws of and headquartered in the United Kingdom, with branches in many countries, as well as a branch in New York. SCB did not find any Uzan property in its New York branch. After a global search in late April 2013, however, SCB identified relevant assets connected with its branches in the United Arab Emirates (“U.A.E.“). Motorola asked SCB to freeze the assets. As SCB sought to comply with the restraining order, regulatory authorities in Jordan and the U.A.E. intervened. The Central Bank of Jordan sent an auditor to seize documents from SCB‘s branch office in Jordan. The U.A.E. Central Bank debited SCB‘s account with its bank.
On May 14, 2013, SCB filed a motion for relief from the restraining order. SCB argued, among other things, that placing a restraint on the repayment of the inter-bank placements is contrary to the law in the U.A.E. and subjects SCB to legal and regulatory risk. Further, it argued that, in light of the separate entity rule, the restraining order should not have extraterritorial reach. Finally, SCB argued that subjecting its foreign branches to the restraining order violates the Due Process Clause of the Fourteenth Amendment by exposing SCB to double liability.
In a sealed order dated May 30, 2013, the district court found, in relevant part, that the separate entity rule precludes Motorola from restraining assets held by SCB‘s foreign branches. Noting that the law was unsettled as to the viability of the separate entity rule, the district court stayed the release of the restraint on the assets pending appeal. The district court subsequently issued a sealed opinion, explaining its order in more detail.
These appeals followed.
DISCUSSION
A. Applicable Law
1. Standard of Review
We review an appeal from a district court‘s interpretation of questions of state
2. Certification to the New York Court of Appeals
This Court may certify questions “where the New York Court of Appeals has not spoken clearly on an issue and we are unable to predict, based on other decisions by New York courts, how the Court of Appeals would answer a certain question.” Giordano v. Market Am. Inc., 599 F.3d 87, 100 (2d Cir.2010). “The Local Rules of the New York Court of Appeals permit certification of questions by this court when we encounter ‘determinative questions of New York law ... for which no controlling precedent of the Court of Appeals exist.‘” Caronia v. Philip Morris USA, Inc., 715 F.3d 417, 450 (2d Cir.2013) (quoting N.Y. Ct.App. Local R. 500.27(a)).
Certification is appropriate “where an unsettled question of state law raises important issues of public policy, where the question is likely to recur, and where the result may significantly impact a highly regulated industry.” Cruz v. TD Bank, N.A., 711 F.3d 261, 267-68 (2d Cir.2013) (quoting State Farm Mut. Auto. Ins. Co. v. Mallela, 372 F.3d 500, 505 (2d Cir.2004)). In deciding whether to certify a question, we consider: “(1) whether the New York Court of Appeals has addressed the issue and, if not, whether the decisions of other New York courts permit us to predict how the Court of Appeals would resolve it; (2) whether the question is of importance to the state and may require value judgments and public policy choices; and (3) whether the certified question is determinative of a claim before us.” In re Thelen LLP, 736 F.3d 213, 224 (2d Cir.2013) (quoting Barenboim v. Starbucks Corp., 698 F.3d 104, 109 (2d Cir.2012)).
B. Application
We conclude that these appeals turn on unsettled and important questions of New York law. Accordingly, we certify those questions to the New York Court of Appeals.
1. The Absence of Controlling Precedent
The New York Court of Appeals has never addressed whether the separate entity rule applies to post-judgment enforcement proceedings. Indeed, it has not explicitly addressed the separate entity rule in any context. Instead, it has affirmed, without opinion, intermediate courts’ application of the separate entity rule in cases that did not involve post-judgment enforcement proceedings. See McCloskey v. Chase Manhattan Bank, 11 N.Y.2d 936, 228 N.Y.S.2d 825, 183 N.E.2d 227 (1962) (affirming denial of plaintiff‘s request for order of attachment against deposit account at bank branch in Germany by serving warrant of attachment on bank‘s office in New York City); Chrzanowska v. Corn Exch. Bank, 173 A.D. 285, 159 N.Y.S. 385, 387 (1st Dep‘t 1916), aff‘d, 225 N.Y. 728, 122 N.E. 877 (1919) (interpreting provisions of New York Banking Law and finding “different branches were as separate and distinct from one another as from any other bank“). Accordingly, despite its application by lower courts discussed above, the New York Court of Appeals has never unequivocally approved or disapproved of the separate entity rule.
The New York Court of Appeals has instructed that in determining “the expanse of section 5225(b) [the] ‘starting point’ is ‘the language itself, giving effect to the plain meaning thereof.‘” NMI, 21 N.Y.3d at 60 (quoting Majewski v. Broadalbin-Perth Cent. Sch. Dist., 91 N.Y.2d 577, 583, 673 N.Y.S.2d 966, 696 N.E.2d 978 (1998)).
Plaintiffs contend that the decision of the New York Court of Appeals in Koehler settles the issues we face here. In Koehler, the Court addressed the question, certified by this Court, “whether a court sitting in New York may order a bank over which it has personal jurisdiction to deliver stock certificates owned by a judgment debtor (or cash equal to their value) to a judgment creditor, pursuant to CPLR article 52, when [the] stock certificates are located outside New York.” Koehler, 12 N.Y.3d at 536. Answering the question in the affirmative, the Koehler Court explained that “the Legislature intended CPLR article 52 to have extraterritorial reach” and “the key to the reach of the turnover order is personal jurisdiction over a particular defendant.” Id. at 539-40. In short, the Koehler Court concluded that “[a] New York court has the authority to issue a turnover order pertaining to extraterritorial property, if it has personal jurisdiction over a judgment debtor in possession of the property.” Id. at 540 (internal quotation marks and citation omitted). Plaintiffs urge us to find that this holding in Koehler definitively forecloses the application of the separate entity rule to post-judgment enforcement proceedings. While we acknowledge that Koehler may be so read,8 we decline to reach the issue.
The separate entity rule was briefed in Koehler. See Br. of the Clearing House Ass‘n L.L.C. as Amicus Curiae in Support of Respondent, Koehler, 12 N.Y.3d 533 (No. 2009-0082), 2009 WL 1615261 at *18 (“The Court should not answer the certified question in a manner that conflicts with the separate entity rule.“). The deeply divided Koehler Court did not, however, address the issue. In light of the longstanding application of the separate entity rule in New York, as discussed above, we doubt that the Court of Appeals intended to silently overrule the doctrine.9 New York courts considering the rule‘s application to post-judgment enforcement orders after Koehler have so held.10
Although both parties present theories as to why the Court in Koehler did not address the separate entity rule, only the Court of Appeals can tell us definitively the significance--if any--of its decision not to address the question, whether it intended to silently overrule the doctrine, and whether the rule applies to post-judgment
sun Logix Corp. v. Bank of China, No. 105262/10, 31 Misc.3d 1226, 929 N.Y.S.2d 202, 2011 WL 1844061, at *4 (Sup.Ct. N.Y.Cnty. May 12, 2011); Parbulk II AS v. Heritage Maritime, SA, 35 Misc.3d 235, 935 N.Y.S.2d 829, 832 (Sup.Ct.N.Y.Cnty.2011); see also Shaheen Sports, Inc. v. Asia Ins. Co., Ltd., Nos. 98-cv-5951 LAP, 11-CV-920 LAP, 2012 WL 919664, at *4-*5 (S.D.N.Y. Mar. 14, 2012).
Notes
A restraining notice served upon a person other than the judgment debtor or obligor is effective only if, at the time of service, he or she owes a debt to the judgment debtor or obligor ... or if the judgment creditor ... has stated in the notice that a specified debt is owed by the person served to the judgment debtor or obligor.... Such a person is forbidden to make or suffer any sale, assignment or transfer of, or any interference with, any such property, or pay over or otherwise dispose of any such debt, to any person other than the sheriff or the support collection unit ... except upon the direction of the sheriff or pursuant to an order of the court, until the expiration of one year after the notice is served upon him or her, or until the judgment or order is satisfied or vacated, whichever event first occurs.
Upon a special proceeding commenced by the judgment creditor, against a person in possession or custody of money or other personal property in which the judgment debtor has an interest, or against a person who is a transferee of money or other personal property from the judgment debtor, where it is shown that the judgment debtor is entitled to the possession of such property ... the court shall require such person to pay the money ... to the judgment creditor and, if the amount to be so paid is insufficient to satisfy the judgment, to deliver any other personal property, or so much of it as is of sufficient value to satisfy the judgment, to a designated sheriff.
2. The Certified Questions Involve Important Issues of State Law
The questions presented by these appeals involve important issues of New York state law and policy that are likely to recur and may have important effects on a highly regulated industry. Indeed, the separate entity rule is a judicially created doctrine that reflects policy choices over time and courts, the legislature, and the banking industry in New York and abroad may have acquiesced in or relied on its principles. Hence, we find certification here is particularly compelling.
As defendants and amici note, international banks are subject to the competing laws of multiple jurisdictions, and turnover or restraining orders by New York courts may cause conflicts with the regulations, laws, and policies of other sovereign jurisdictions. As SCB‘s experience highlights, in complying with post-judgment orders from United States courts, banks may face regulatory and financial repercussions and due process concerns in foreign jurisdictions.11 Moreover, as amici point out, the original concern that treating all branches of a bank as a single entity would place an “intolerable burden upon banking and commerce,” Cronan, 100 N.Y.S.2d at 476,
framework of personal jurisdiction, when the separate entity rule is understood as akin to a rule governing service of process.“); Samsun, 2011 WL 1844061, at *6 (explaining due process concerns for garnishee-banks exposed to double liability); accord Shaffer v. Heitner, 433 U.S. 186, 212, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977) (“[A]ll assertions of state-court jurisdiction must be evaluated according to the standards [of fair play and substantial justice] set forth in International Shoe and its progeny.“).
On the other hand, as plaintiffs argue, the original basis for the separate entity rule may have weakened or even disappeared over time. Further, as plaintiffs’ experiences show, the applicability of the rule may facilitate efforts of judgment debtors to frustrate and evade the collection of judgments. Indeed, Motorola has been attempting to collect its judgment from the Uzans for nearly a decade. Moreover, the rule may permit banks operating branches in New York to avoid the consequences of choosing to do business in New York and provide a competitive advantage to foreign banks. Indeed, courts in New York have suggested that the risk of double liability is “‘assumed as part of the business of a bank,‘” JPMorgan Chase Bank, N.A. v. Motorola, Inc., 47 A.D.3d 293, 303, 846 N.Y.S.2d 171, 184 (1st Dep‘t 2007) (quoting Petrogradsky Mejdunarodny Kommerchesky Bank v. Nat‘l City Bank of N.Y., 253 N.Y. 23, 40, 170 N.E. 479 (1930)
and noting “the risk [arising from disputes over title to deposit accounts] is a foreseeable one that banks presumably consider“).
Both sides raise important policy concerns, and questions involving such policy concerns, we believe, are more appropriately resolved by the Court of Appeals. See Barenboim, 698 F.3d at 117.
3. The Answers to the Certified Questions May Be Determinative
The response of the Court of Appeals to the certified questions will likely determine the outcome of these appeals. Specifically, if the Court of Appeals holds that the separate entity rule is not applicable to turnover orders pursuant to
CONCLUSION
In sum, we reserve decision and certify the following questions for these tandem cases to the New York Court of Appeals:
First, whether the separate entity rule precludes a judgment creditor from ordering a garnishee bank operating branches in New York to turn over a debtor‘s assets held in foreign branches of the bank; and
We do not bind the Court of Appeals to the particular questions stated. Rather, the Court of Appeals may expand the certified questions to address any other issues that may pertain to the circumstances presented in these appeals.
This panel retains jurisdiction and will consider any issues that remain on appeal once the New York Court of Appeals has either provided us with guidance or declined certification.
It is therefore ORDERED that the Clerk of this Court transmit to the Clerk of the Court of Appeals of the State of New York a Certificate, as set forth below, together with complete sets of briefs and appendices, and the records filed in this Court by the parties.
CERTIFICATE
The foregoing is hereby certified to the Court of Appeals of the State of New York pursuant to Second Circuit Local Rule 27.2 and New York Codes, Rules, and Regulations Title 22, § 500.27(a), as ordered by the United States Court of Appeals for the Second Circuit.
Elias Halim EID; Gwen Packard-Eid, Appellants
v.
John THOMPSON, District Director, Newark District; US Citizenship and Immigration Services.
No. 12-4271.
United States Court of Appeals, Third Circuit.
Argued Sept. 25, 2013.
Opinion filed: Jan. 10, 2014.