Post on 16-Apr-2018
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
---x SHAHEEN SPORTS INC and TAJMAHAL SPORTS COMPANY
USDCSDNY DOCUMENT ELECTRONICALLY FILED DOC II L
DAlE FILED ~ 1 lt1112shy
Plaintiffs 98-cv-5951 (LAP)
-against
ASIA INSURANCE COMPANY LTD
Defendant --------------- -----X
TAHIR HAMID
Petitioner 11 cv- 920 (LAP)
-v- Memorandum and Order
HABIB BANK LIMITED and NATIONAL BANK OF PAKISTAN
Respondents --- - --- ------x
LORETTA A PRESKA Chief United States District Judge
There are two motions sub judice in these related cases
The first is the motion of Plaintiffs Shaheen Sports Inc
(Shaheen) and Tajmahal Sports Company (Tajmahal) to
substitute Tahir Hamid (Hamid or Petitioner) as Plaintiff in
98 cv-5951 The second is Petitioner Hamids petition ll-cvshy
920 seeking the turnover of certain assets from Habib Bank
Limited (HBLIT) in which the 98-cv-5951 judgment debtor Asia
Insurance Company Ltd (Asia Insurance) has an interest
For the reasons below Plaintiffs motion for substitution in
1
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 1 of 24
98-cv-5951 is GRANTED and Petitioner Hamids motion for
turnover in 11-cv-920 is DENIED
I Background
The Court presumes the parties familiarity with the
relevant s in these related actions Nevertheless a brief
summary is helpful here
Shaheen and Tajmahal filed the underlying litigation
against Asia Insurance in August 1998 Tajmahal alleged that
As Insurance had failed to pay Tajmahals claim on certain
marine insurance policies and Shaheen claimed it was the third
party beneficiary of those insurance policies See HBL
Memorandum of Law in Response to Order to Show Cause 11-cv-920
(HBL Mem) at 4) On March 262003 the erk of the Court
entered judgment in favor of Shaheen and Tajmahal in the amount
of $36942391 against Asia Insurance Id Three months
after Shaheen and Tajmahal obtained this judgment Shaheen
dissolved ceasing to exist on June 25 2003 Id at 5)
Tajmahal remains a going concern in Pakistan (Id )
On February 28 2009 Hamid commenced the action in 11-cvshy
920 serving the New York branches of HBL and National Bank
Pakistan with a Petition Summons Subpoena and Restraining
Notice to Garnishee Id Hamids petition alleges that (1)
he is the successor in interest to both Tajmahal and Shaheen
(2) the judgment in 98 cv-5951 remains unpaid by Asia Insurance
2
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 2 of 24
and (3) upon information and belief II assets of Asia Insurance
are within the possession of a Pakistani branch offices of HBL
and National Bank of Pakistan (rd) Hamid alleges that the
total amount of the judgment owed including post judgment
interest is now $41189127 Id at 4) After attempts to
locate the assets of Asia Insurance in the United States and
Europe Hamid had determined that HBL and National Bank of
Pakistan branches in Pakistan possessed certain of its assets
See Hamid Memorandum of Law in Support of Turnover (Hamid
Mem) at 2) Hamid served the New York branch offices of both
respondents which are not independently incorporated New York
corporations but offices controlled and governed directly by
the main office of each Respondent in Pakistan (Id at 2-3)
On May 20 2011 Judge Denise Cote of this Court entered an
Order prohibiting HBL and the Bank of Pakistan from making or
suffering any assignment or transfer of or any
interference with any property up to the sum of $41189127 in
which [the banks] have an interest andor which is in
possession control andor custody of the defendants belonging
to Asia Insurance Company Ltd of Pakistan 1I [dkt no 26]
Asia Insurance has subsequently filed a lawsuit against HBL in
Pakistan seeking a declaration that HBL be permanently and
temporarily restrained from alienating the assets of Asia
Insurance held in its Pakistani branch (HBL Mem at 7) To
3
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 3 of 24
date there has been no ruling on Asia Insurances request in
the Pakistani court (Id )
II Plaintiffs Motion to Substitute in 98-cv-5951
Original Plaintiffs Shaheen and Tajmahal have filed a
motion to substitute Hamid as Plaintiff the underlying
action [dkt no 38] To date the motion remains unopposed
by Asia Insurance
Moreover Plainti have submitted substantial affidavits
and other documents supporting Hamids claim to be the
successor-in-interest to the money judgment in 98-cv 5951 For
example Hamid himself submitted an affidavit [dkt no 39] in
which he explains that he at all times was Shaheens sole
shareholder and caused it to be dissolved by proclamation in
June 2003 (See Affidavit of Tahir Hamid (Hamid Aff) 7
10 12) Plaintiffs attorney Frederick A Lovejoy so
represents to this Court that prior to Shaheens dissolution he
examined an executed assignment of rights to the judgment in
this case between Shaheen and Hamid which he advised was
adequate to transfer the rights in the judgment between the two
See Affidavit of Frederick A Lovejoy (Lovejoy AfflI) 10
[dkt no 41] i Supplemental Affidavit of Frederick A Lovejoy
(Supp Lovejoy AfL) 4-8 and Ex I [dkt no 43])
It is also clear that Tajmahal has been treated throughout
this litigation as a nominal plainti When ruling on Asia
4
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 4 of 24
Insurances motion to dismiss this action on the basis of forum
conveniens Judge Robert L Carter noted that (a]lthough
plaintiff Tajmahal is a Pakistani corporation Shaheen appears
to be the real party in interest See Shaheen Inc v ----------~-----~---------
Asia Ins Co Ltd 89 F Supp 2d 500 505 (SDNY 2000)
(citing Alaska Russia Salvrnon Caviar Co Inc v MV Marit
Maersk 2000 WL 145124 at 3 4 (SDNY Feb 2 2000raquo
Tajmahal has also separately represented to this Court that any
judgment rendered in this matter is the property of Shaheen and
that it instructed Asia Insurance at all times to issue
certificates of insurance for the subject goods in Shaheens
name (See Affidavit of Kahlid Mahmood Gundra (Gundra Aff)
9-12 [dkt no 10] i Lovejoy Aff 8-9)
Upon consideration of Plaintiffs submissions on their
motion and Asia Insurances lure to oppose it the Court
concludes that Plaintiffs motion to substitute Hamid as
Plaintiff in 98-cv-5951 is GRANTED in the interests of justice
and the convenience of Hamid as the remaining judgment
creditor in this case
III Petitioner Hamids Motion for Turnover in ll-cv-920
Petitioner Hamid brings this turnover action under the New
York CPLR sectsect 5225(b) and 5227 Under Fed R Civ P 69(a) a
federal district court has the authority to enforce a judgment
by attaching property in accordance with the law the state in
5
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 5 of 24
v Bank of Bermudawhich the district court sits See
Ltd Koehler I 544 F3d 78 85 (2d Cir 2008) New York
Civil Practice Law and Rules (CPLR) sect 5225 authorizes a court
to order the delivery of property that belongs to a judgment
debtor but is not in his possession See CPLR 5225(b)
Moreover under CPLR sect 301 it is the general rule that New York
courts may exercise general jurisdiction over a foreign
corporation where that corporation is engaged in such a
continuous and systematic course of doing business [in New
York] as to warrant a finding of its presence in this
jurisdiction Simonson v Intl Bank 14 NY2d 281 285
(1964) There lS no serious spute that the Court has general
jurisdiction over Respondents in this case
A Personal Jurisdiction and the Separate Entity Rule
The New York Court of Appeals recently made clear that at
least as a general matter a New York court with personal
j sdiction over a defendant may order him to turn over out-of
state property regardless of whether the defendant is a judgment
debtor or a garnishee Koehler v Bank of Bermuda Ltd
Koehler III 577 F3d 497 499 (2d 2009) (quoting Koehler
v Bank of Bermuda Koehler II 12 NY3d 533 541 (2009)
(certified question answered in the affirmative)) i see
=H~o~t~e~1~7~1~M~e~z~z~L~e=n~d~e=r~L=L=C~v~~~~ 14 NY3d 303 312 (2010)
6
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 6 of 24
([A] court with personal jurisdiction over a nondomiciliary
present in New York has jurisdiction over that individuals
tangible or intangible property even if the situs of the
property is outside New YorkI) After the Koehler cases it is
certainly established law in New York that where a court has
jurisdiction over a potential garnishee holding an asset in
which a judgment debtor has an interest the court can generally
direct turnover of that asset in the post judgment context even
if it is located outside New York
It has also long been considered settled law in New York
however that where that garnishee is a bank the court must
obtain jurisdiction over the specific bank branch holding the
asset before it may order any turnover notwithstanding its
general jurisdiction over the banking entity by virtue of its
New York branch This has become known as the separate entity
rule See Motorola Credit Corp v Uzan 288 F Supp 2d 558
560 (SDNY 2003) i Lok Prakashan Ltd v Indi
Inc No 00 Civ 5852 2002 WL 1585820 at 2 (SDNY July
16 2002) (New York law follows the separate entity rule for
purposes of attachment and execution ) i Partners
Inc v Phillipine Exp and Foreign Loan Gaur Corp 921 F
Supp 1113 1119 (SDNY 1996) (This rule of law known as
the separate entity rule provides that each branch of a bank
is a separate entity [and is] in no way concerned with accounts
7
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 7 of 24
maintained by depositors in other branches or at a home officell
(quoting Cronan v Schilling 100 NYS2d 474 476 (Sup Ct
1950) affd 126 NYS2d 192 (1st Dept 1953))) The original
rationale for this rule was avoiding the intolerable burden
that would otherwise be placed on banking and commerce See Det
Bergenske Dampskibsselskab v Sabre Shipping Corp 341 F2d 50
53 (2d Cir 1965) (quoting Cronan 100 NYS2d at 476raquo i see
also Joseph H Sommer Where is a Bank Account 57 Md L Rev
1 78 79 (1998) (describing why the separate entity rule is
unique to international banks) For the same reasons the rule
has so been codified in the Article of the New York Commercial
Code governing funds transfers and creditor processes See
NY UCC sectsect 4-A-105(1) (b)i 4-A-502(4) (A branch or
separate office of a bank is a separate bank for purposes of
this Article) (emphasis added) Applying the separate entity
rule in this case Hamid would be unable to secure a turnover of
assets held by HBL in Pakistan simply by serving its New York
branch 1
1 New York courts have created one specific exception to the separate entity rule-one that is not implicated in this case The exception applies only where (1) the restraining notice is served on the banks main office (2) the banks main office and braches are within the same jurisdiction and (3) the bank branches are connected to the main office by high-speed computers and are under the centralized control of the main office 1I John Wiley amp Sons Inc v Kirtsaeng No 08 Civ 7834 2009 WL 3003242 at 4 (SDNY Sept 15 2009) (internal (continued on next page)
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Case 111-cv-00920-LAP Document 48 Filed 031412 Page 8 of 24
B The S~parate Entity Rule after Koehler II
Hamid invites this Court to discard the separate entity
rule in this case largely as a result of the New York court of
Appeals holding in Koehler II which Hamid regards as
eliminating the separate entity rule sub silentio For the
reasons below this Court decl s this invitation First this
Court is not convinced that the New York Court of Appeals
squarely overturned the separate entity rule when it responded
to a question certified to it by the Court of Appeals for the
Second Circuit in 2008 Second the balance of subsequent
federal and state decisions after Koehler II does not support
the Petitioners position Finally the only post Koehler II
case in this district otherwise helpful to Petitioner JW
Oilfield Equipment LLC v Commerzbank AG 764 F Supp 2d 587
(SDNY 2011) is readily distinguishable both on its facts
and its reasoning For these reasons Hamids petition must be
denied
1 The Koehler Litigation
Koehler concerned the turnover of stock certificates
belonging to a judgment debtor that were physically held by the
Bank of Bermuda Ltd (BBL) in Bermuda See Koehler I 544
F3d at 80 In that case Koehler (the judgment creditor)
(continued from previous page) quotation marks omitted) i see also Digitrex Inc v Johnson 491 F Supp 66 67 69 (SDNY 1980)
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Case 111-cv-00920-LAP Document 48 Filed 031412 Page 9 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
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Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
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Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
98-cv-5951 is GRANTED and Petitioner Hamids motion for
turnover in 11-cv-920 is DENIED
I Background
The Court presumes the parties familiarity with the
relevant s in these related actions Nevertheless a brief
summary is helpful here
Shaheen and Tajmahal filed the underlying litigation
against Asia Insurance in August 1998 Tajmahal alleged that
As Insurance had failed to pay Tajmahals claim on certain
marine insurance policies and Shaheen claimed it was the third
party beneficiary of those insurance policies See HBL
Memorandum of Law in Response to Order to Show Cause 11-cv-920
(HBL Mem) at 4) On March 262003 the erk of the Court
entered judgment in favor of Shaheen and Tajmahal in the amount
of $36942391 against Asia Insurance Id Three months
after Shaheen and Tajmahal obtained this judgment Shaheen
dissolved ceasing to exist on June 25 2003 Id at 5)
Tajmahal remains a going concern in Pakistan (Id )
On February 28 2009 Hamid commenced the action in 11-cvshy
920 serving the New York branches of HBL and National Bank
Pakistan with a Petition Summons Subpoena and Restraining
Notice to Garnishee Id Hamids petition alleges that (1)
he is the successor in interest to both Tajmahal and Shaheen
(2) the judgment in 98 cv-5951 remains unpaid by Asia Insurance
2
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 2 of 24
and (3) upon information and belief II assets of Asia Insurance
are within the possession of a Pakistani branch offices of HBL
and National Bank of Pakistan (rd) Hamid alleges that the
total amount of the judgment owed including post judgment
interest is now $41189127 Id at 4) After attempts to
locate the assets of Asia Insurance in the United States and
Europe Hamid had determined that HBL and National Bank of
Pakistan branches in Pakistan possessed certain of its assets
See Hamid Memorandum of Law in Support of Turnover (Hamid
Mem) at 2) Hamid served the New York branch offices of both
respondents which are not independently incorporated New York
corporations but offices controlled and governed directly by
the main office of each Respondent in Pakistan (Id at 2-3)
On May 20 2011 Judge Denise Cote of this Court entered an
Order prohibiting HBL and the Bank of Pakistan from making or
suffering any assignment or transfer of or any
interference with any property up to the sum of $41189127 in
which [the banks] have an interest andor which is in
possession control andor custody of the defendants belonging
to Asia Insurance Company Ltd of Pakistan 1I [dkt no 26]
Asia Insurance has subsequently filed a lawsuit against HBL in
Pakistan seeking a declaration that HBL be permanently and
temporarily restrained from alienating the assets of Asia
Insurance held in its Pakistani branch (HBL Mem at 7) To
3
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 3 of 24
date there has been no ruling on Asia Insurances request in
the Pakistani court (Id )
II Plaintiffs Motion to Substitute in 98-cv-5951
Original Plaintiffs Shaheen and Tajmahal have filed a
motion to substitute Hamid as Plaintiff the underlying
action [dkt no 38] To date the motion remains unopposed
by Asia Insurance
Moreover Plainti have submitted substantial affidavits
and other documents supporting Hamids claim to be the
successor-in-interest to the money judgment in 98-cv 5951 For
example Hamid himself submitted an affidavit [dkt no 39] in
which he explains that he at all times was Shaheens sole
shareholder and caused it to be dissolved by proclamation in
June 2003 (See Affidavit of Tahir Hamid (Hamid Aff) 7
10 12) Plaintiffs attorney Frederick A Lovejoy so
represents to this Court that prior to Shaheens dissolution he
examined an executed assignment of rights to the judgment in
this case between Shaheen and Hamid which he advised was
adequate to transfer the rights in the judgment between the two
See Affidavit of Frederick A Lovejoy (Lovejoy AfflI) 10
[dkt no 41] i Supplemental Affidavit of Frederick A Lovejoy
(Supp Lovejoy AfL) 4-8 and Ex I [dkt no 43])
It is also clear that Tajmahal has been treated throughout
this litigation as a nominal plainti When ruling on Asia
4
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 4 of 24
Insurances motion to dismiss this action on the basis of forum
conveniens Judge Robert L Carter noted that (a]lthough
plaintiff Tajmahal is a Pakistani corporation Shaheen appears
to be the real party in interest See Shaheen Inc v ----------~-----~---------
Asia Ins Co Ltd 89 F Supp 2d 500 505 (SDNY 2000)
(citing Alaska Russia Salvrnon Caviar Co Inc v MV Marit
Maersk 2000 WL 145124 at 3 4 (SDNY Feb 2 2000raquo
Tajmahal has also separately represented to this Court that any
judgment rendered in this matter is the property of Shaheen and
that it instructed Asia Insurance at all times to issue
certificates of insurance for the subject goods in Shaheens
name (See Affidavit of Kahlid Mahmood Gundra (Gundra Aff)
9-12 [dkt no 10] i Lovejoy Aff 8-9)
Upon consideration of Plaintiffs submissions on their
motion and Asia Insurances lure to oppose it the Court
concludes that Plaintiffs motion to substitute Hamid as
Plaintiff in 98-cv-5951 is GRANTED in the interests of justice
and the convenience of Hamid as the remaining judgment
creditor in this case
III Petitioner Hamids Motion for Turnover in ll-cv-920
Petitioner Hamid brings this turnover action under the New
York CPLR sectsect 5225(b) and 5227 Under Fed R Civ P 69(a) a
federal district court has the authority to enforce a judgment
by attaching property in accordance with the law the state in
5
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 5 of 24
v Bank of Bermudawhich the district court sits See
Ltd Koehler I 544 F3d 78 85 (2d Cir 2008) New York
Civil Practice Law and Rules (CPLR) sect 5225 authorizes a court
to order the delivery of property that belongs to a judgment
debtor but is not in his possession See CPLR 5225(b)
Moreover under CPLR sect 301 it is the general rule that New York
courts may exercise general jurisdiction over a foreign
corporation where that corporation is engaged in such a
continuous and systematic course of doing business [in New
York] as to warrant a finding of its presence in this
jurisdiction Simonson v Intl Bank 14 NY2d 281 285
(1964) There lS no serious spute that the Court has general
jurisdiction over Respondents in this case
A Personal Jurisdiction and the Separate Entity Rule
The New York Court of Appeals recently made clear that at
least as a general matter a New York court with personal
j sdiction over a defendant may order him to turn over out-of
state property regardless of whether the defendant is a judgment
debtor or a garnishee Koehler v Bank of Bermuda Ltd
Koehler III 577 F3d 497 499 (2d 2009) (quoting Koehler
v Bank of Bermuda Koehler II 12 NY3d 533 541 (2009)
(certified question answered in the affirmative)) i see
=H~o~t~e~1~7~1~M~e~z~z~L~e=n~d~e=r~L=L=C~v~~~~ 14 NY3d 303 312 (2010)
6
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 6 of 24
([A] court with personal jurisdiction over a nondomiciliary
present in New York has jurisdiction over that individuals
tangible or intangible property even if the situs of the
property is outside New YorkI) After the Koehler cases it is
certainly established law in New York that where a court has
jurisdiction over a potential garnishee holding an asset in
which a judgment debtor has an interest the court can generally
direct turnover of that asset in the post judgment context even
if it is located outside New York
It has also long been considered settled law in New York
however that where that garnishee is a bank the court must
obtain jurisdiction over the specific bank branch holding the
asset before it may order any turnover notwithstanding its
general jurisdiction over the banking entity by virtue of its
New York branch This has become known as the separate entity
rule See Motorola Credit Corp v Uzan 288 F Supp 2d 558
560 (SDNY 2003) i Lok Prakashan Ltd v Indi
Inc No 00 Civ 5852 2002 WL 1585820 at 2 (SDNY July
16 2002) (New York law follows the separate entity rule for
purposes of attachment and execution ) i Partners
Inc v Phillipine Exp and Foreign Loan Gaur Corp 921 F
Supp 1113 1119 (SDNY 1996) (This rule of law known as
the separate entity rule provides that each branch of a bank
is a separate entity [and is] in no way concerned with accounts
7
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 7 of 24
maintained by depositors in other branches or at a home officell
(quoting Cronan v Schilling 100 NYS2d 474 476 (Sup Ct
1950) affd 126 NYS2d 192 (1st Dept 1953))) The original
rationale for this rule was avoiding the intolerable burden
that would otherwise be placed on banking and commerce See Det
Bergenske Dampskibsselskab v Sabre Shipping Corp 341 F2d 50
53 (2d Cir 1965) (quoting Cronan 100 NYS2d at 476raquo i see
also Joseph H Sommer Where is a Bank Account 57 Md L Rev
1 78 79 (1998) (describing why the separate entity rule is
unique to international banks) For the same reasons the rule
has so been codified in the Article of the New York Commercial
Code governing funds transfers and creditor processes See
NY UCC sectsect 4-A-105(1) (b)i 4-A-502(4) (A branch or
separate office of a bank is a separate bank for purposes of
this Article) (emphasis added) Applying the separate entity
rule in this case Hamid would be unable to secure a turnover of
assets held by HBL in Pakistan simply by serving its New York
branch 1
1 New York courts have created one specific exception to the separate entity rule-one that is not implicated in this case The exception applies only where (1) the restraining notice is served on the banks main office (2) the banks main office and braches are within the same jurisdiction and (3) the bank branches are connected to the main office by high-speed computers and are under the centralized control of the main office 1I John Wiley amp Sons Inc v Kirtsaeng No 08 Civ 7834 2009 WL 3003242 at 4 (SDNY Sept 15 2009) (internal (continued on next page)
8
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 8 of 24
B The S~parate Entity Rule after Koehler II
Hamid invites this Court to discard the separate entity
rule in this case largely as a result of the New York court of
Appeals holding in Koehler II which Hamid regards as
eliminating the separate entity rule sub silentio For the
reasons below this Court decl s this invitation First this
Court is not convinced that the New York Court of Appeals
squarely overturned the separate entity rule when it responded
to a question certified to it by the Court of Appeals for the
Second Circuit in 2008 Second the balance of subsequent
federal and state decisions after Koehler II does not support
the Petitioners position Finally the only post Koehler II
case in this district otherwise helpful to Petitioner JW
Oilfield Equipment LLC v Commerzbank AG 764 F Supp 2d 587
(SDNY 2011) is readily distinguishable both on its facts
and its reasoning For these reasons Hamids petition must be
denied
1 The Koehler Litigation
Koehler concerned the turnover of stock certificates
belonging to a judgment debtor that were physically held by the
Bank of Bermuda Ltd (BBL) in Bermuda See Koehler I 544
F3d at 80 In that case Koehler (the judgment creditor)
(continued from previous page) quotation marks omitted) i see also Digitrex Inc v Johnson 491 F Supp 66 67 69 (SDNY 1980)
9
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 9 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
and (3) upon information and belief II assets of Asia Insurance
are within the possession of a Pakistani branch offices of HBL
and National Bank of Pakistan (rd) Hamid alleges that the
total amount of the judgment owed including post judgment
interest is now $41189127 Id at 4) After attempts to
locate the assets of Asia Insurance in the United States and
Europe Hamid had determined that HBL and National Bank of
Pakistan branches in Pakistan possessed certain of its assets
See Hamid Memorandum of Law in Support of Turnover (Hamid
Mem) at 2) Hamid served the New York branch offices of both
respondents which are not independently incorporated New York
corporations but offices controlled and governed directly by
the main office of each Respondent in Pakistan (Id at 2-3)
On May 20 2011 Judge Denise Cote of this Court entered an
Order prohibiting HBL and the Bank of Pakistan from making or
suffering any assignment or transfer of or any
interference with any property up to the sum of $41189127 in
which [the banks] have an interest andor which is in
possession control andor custody of the defendants belonging
to Asia Insurance Company Ltd of Pakistan 1I [dkt no 26]
Asia Insurance has subsequently filed a lawsuit against HBL in
Pakistan seeking a declaration that HBL be permanently and
temporarily restrained from alienating the assets of Asia
Insurance held in its Pakistani branch (HBL Mem at 7) To
3
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 3 of 24
date there has been no ruling on Asia Insurances request in
the Pakistani court (Id )
II Plaintiffs Motion to Substitute in 98-cv-5951
Original Plaintiffs Shaheen and Tajmahal have filed a
motion to substitute Hamid as Plaintiff the underlying
action [dkt no 38] To date the motion remains unopposed
by Asia Insurance
Moreover Plainti have submitted substantial affidavits
and other documents supporting Hamids claim to be the
successor-in-interest to the money judgment in 98-cv 5951 For
example Hamid himself submitted an affidavit [dkt no 39] in
which he explains that he at all times was Shaheens sole
shareholder and caused it to be dissolved by proclamation in
June 2003 (See Affidavit of Tahir Hamid (Hamid Aff) 7
10 12) Plaintiffs attorney Frederick A Lovejoy so
represents to this Court that prior to Shaheens dissolution he
examined an executed assignment of rights to the judgment in
this case between Shaheen and Hamid which he advised was
adequate to transfer the rights in the judgment between the two
See Affidavit of Frederick A Lovejoy (Lovejoy AfflI) 10
[dkt no 41] i Supplemental Affidavit of Frederick A Lovejoy
(Supp Lovejoy AfL) 4-8 and Ex I [dkt no 43])
It is also clear that Tajmahal has been treated throughout
this litigation as a nominal plainti When ruling on Asia
4
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 4 of 24
Insurances motion to dismiss this action on the basis of forum
conveniens Judge Robert L Carter noted that (a]lthough
plaintiff Tajmahal is a Pakistani corporation Shaheen appears
to be the real party in interest See Shaheen Inc v ----------~-----~---------
Asia Ins Co Ltd 89 F Supp 2d 500 505 (SDNY 2000)
(citing Alaska Russia Salvrnon Caviar Co Inc v MV Marit
Maersk 2000 WL 145124 at 3 4 (SDNY Feb 2 2000raquo
Tajmahal has also separately represented to this Court that any
judgment rendered in this matter is the property of Shaheen and
that it instructed Asia Insurance at all times to issue
certificates of insurance for the subject goods in Shaheens
name (See Affidavit of Kahlid Mahmood Gundra (Gundra Aff)
9-12 [dkt no 10] i Lovejoy Aff 8-9)
Upon consideration of Plaintiffs submissions on their
motion and Asia Insurances lure to oppose it the Court
concludes that Plaintiffs motion to substitute Hamid as
Plaintiff in 98-cv-5951 is GRANTED in the interests of justice
and the convenience of Hamid as the remaining judgment
creditor in this case
III Petitioner Hamids Motion for Turnover in ll-cv-920
Petitioner Hamid brings this turnover action under the New
York CPLR sectsect 5225(b) and 5227 Under Fed R Civ P 69(a) a
federal district court has the authority to enforce a judgment
by attaching property in accordance with the law the state in
5
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 5 of 24
v Bank of Bermudawhich the district court sits See
Ltd Koehler I 544 F3d 78 85 (2d Cir 2008) New York
Civil Practice Law and Rules (CPLR) sect 5225 authorizes a court
to order the delivery of property that belongs to a judgment
debtor but is not in his possession See CPLR 5225(b)
Moreover under CPLR sect 301 it is the general rule that New York
courts may exercise general jurisdiction over a foreign
corporation where that corporation is engaged in such a
continuous and systematic course of doing business [in New
York] as to warrant a finding of its presence in this
jurisdiction Simonson v Intl Bank 14 NY2d 281 285
(1964) There lS no serious spute that the Court has general
jurisdiction over Respondents in this case
A Personal Jurisdiction and the Separate Entity Rule
The New York Court of Appeals recently made clear that at
least as a general matter a New York court with personal
j sdiction over a defendant may order him to turn over out-of
state property regardless of whether the defendant is a judgment
debtor or a garnishee Koehler v Bank of Bermuda Ltd
Koehler III 577 F3d 497 499 (2d 2009) (quoting Koehler
v Bank of Bermuda Koehler II 12 NY3d 533 541 (2009)
(certified question answered in the affirmative)) i see
=H~o~t~e~1~7~1~M~e~z~z~L~e=n~d~e=r~L=L=C~v~~~~ 14 NY3d 303 312 (2010)
6
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 6 of 24
([A] court with personal jurisdiction over a nondomiciliary
present in New York has jurisdiction over that individuals
tangible or intangible property even if the situs of the
property is outside New YorkI) After the Koehler cases it is
certainly established law in New York that where a court has
jurisdiction over a potential garnishee holding an asset in
which a judgment debtor has an interest the court can generally
direct turnover of that asset in the post judgment context even
if it is located outside New York
It has also long been considered settled law in New York
however that where that garnishee is a bank the court must
obtain jurisdiction over the specific bank branch holding the
asset before it may order any turnover notwithstanding its
general jurisdiction over the banking entity by virtue of its
New York branch This has become known as the separate entity
rule See Motorola Credit Corp v Uzan 288 F Supp 2d 558
560 (SDNY 2003) i Lok Prakashan Ltd v Indi
Inc No 00 Civ 5852 2002 WL 1585820 at 2 (SDNY July
16 2002) (New York law follows the separate entity rule for
purposes of attachment and execution ) i Partners
Inc v Phillipine Exp and Foreign Loan Gaur Corp 921 F
Supp 1113 1119 (SDNY 1996) (This rule of law known as
the separate entity rule provides that each branch of a bank
is a separate entity [and is] in no way concerned with accounts
7
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 7 of 24
maintained by depositors in other branches or at a home officell
(quoting Cronan v Schilling 100 NYS2d 474 476 (Sup Ct
1950) affd 126 NYS2d 192 (1st Dept 1953))) The original
rationale for this rule was avoiding the intolerable burden
that would otherwise be placed on banking and commerce See Det
Bergenske Dampskibsselskab v Sabre Shipping Corp 341 F2d 50
53 (2d Cir 1965) (quoting Cronan 100 NYS2d at 476raquo i see
also Joseph H Sommer Where is a Bank Account 57 Md L Rev
1 78 79 (1998) (describing why the separate entity rule is
unique to international banks) For the same reasons the rule
has so been codified in the Article of the New York Commercial
Code governing funds transfers and creditor processes See
NY UCC sectsect 4-A-105(1) (b)i 4-A-502(4) (A branch or
separate office of a bank is a separate bank for purposes of
this Article) (emphasis added) Applying the separate entity
rule in this case Hamid would be unable to secure a turnover of
assets held by HBL in Pakistan simply by serving its New York
branch 1
1 New York courts have created one specific exception to the separate entity rule-one that is not implicated in this case The exception applies only where (1) the restraining notice is served on the banks main office (2) the banks main office and braches are within the same jurisdiction and (3) the bank branches are connected to the main office by high-speed computers and are under the centralized control of the main office 1I John Wiley amp Sons Inc v Kirtsaeng No 08 Civ 7834 2009 WL 3003242 at 4 (SDNY Sept 15 2009) (internal (continued on next page)
8
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 8 of 24
B The S~parate Entity Rule after Koehler II
Hamid invites this Court to discard the separate entity
rule in this case largely as a result of the New York court of
Appeals holding in Koehler II which Hamid regards as
eliminating the separate entity rule sub silentio For the
reasons below this Court decl s this invitation First this
Court is not convinced that the New York Court of Appeals
squarely overturned the separate entity rule when it responded
to a question certified to it by the Court of Appeals for the
Second Circuit in 2008 Second the balance of subsequent
federal and state decisions after Koehler II does not support
the Petitioners position Finally the only post Koehler II
case in this district otherwise helpful to Petitioner JW
Oilfield Equipment LLC v Commerzbank AG 764 F Supp 2d 587
(SDNY 2011) is readily distinguishable both on its facts
and its reasoning For these reasons Hamids petition must be
denied
1 The Koehler Litigation
Koehler concerned the turnover of stock certificates
belonging to a judgment debtor that were physically held by the
Bank of Bermuda Ltd (BBL) in Bermuda See Koehler I 544
F3d at 80 In that case Koehler (the judgment creditor)
(continued from previous page) quotation marks omitted) i see also Digitrex Inc v Johnson 491 F Supp 66 67 69 (SDNY 1980)
9
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 9 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
date there has been no ruling on Asia Insurances request in
the Pakistani court (Id )
II Plaintiffs Motion to Substitute in 98-cv-5951
Original Plaintiffs Shaheen and Tajmahal have filed a
motion to substitute Hamid as Plaintiff the underlying
action [dkt no 38] To date the motion remains unopposed
by Asia Insurance
Moreover Plainti have submitted substantial affidavits
and other documents supporting Hamids claim to be the
successor-in-interest to the money judgment in 98-cv 5951 For
example Hamid himself submitted an affidavit [dkt no 39] in
which he explains that he at all times was Shaheens sole
shareholder and caused it to be dissolved by proclamation in
June 2003 (See Affidavit of Tahir Hamid (Hamid Aff) 7
10 12) Plaintiffs attorney Frederick A Lovejoy so
represents to this Court that prior to Shaheens dissolution he
examined an executed assignment of rights to the judgment in
this case between Shaheen and Hamid which he advised was
adequate to transfer the rights in the judgment between the two
See Affidavit of Frederick A Lovejoy (Lovejoy AfflI) 10
[dkt no 41] i Supplemental Affidavit of Frederick A Lovejoy
(Supp Lovejoy AfL) 4-8 and Ex I [dkt no 43])
It is also clear that Tajmahal has been treated throughout
this litigation as a nominal plainti When ruling on Asia
4
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 4 of 24
Insurances motion to dismiss this action on the basis of forum
conveniens Judge Robert L Carter noted that (a]lthough
plaintiff Tajmahal is a Pakistani corporation Shaheen appears
to be the real party in interest See Shaheen Inc v ----------~-----~---------
Asia Ins Co Ltd 89 F Supp 2d 500 505 (SDNY 2000)
(citing Alaska Russia Salvrnon Caviar Co Inc v MV Marit
Maersk 2000 WL 145124 at 3 4 (SDNY Feb 2 2000raquo
Tajmahal has also separately represented to this Court that any
judgment rendered in this matter is the property of Shaheen and
that it instructed Asia Insurance at all times to issue
certificates of insurance for the subject goods in Shaheens
name (See Affidavit of Kahlid Mahmood Gundra (Gundra Aff)
9-12 [dkt no 10] i Lovejoy Aff 8-9)
Upon consideration of Plaintiffs submissions on their
motion and Asia Insurances lure to oppose it the Court
concludes that Plaintiffs motion to substitute Hamid as
Plaintiff in 98-cv-5951 is GRANTED in the interests of justice
and the convenience of Hamid as the remaining judgment
creditor in this case
III Petitioner Hamids Motion for Turnover in ll-cv-920
Petitioner Hamid brings this turnover action under the New
York CPLR sectsect 5225(b) and 5227 Under Fed R Civ P 69(a) a
federal district court has the authority to enforce a judgment
by attaching property in accordance with the law the state in
5
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 5 of 24
v Bank of Bermudawhich the district court sits See
Ltd Koehler I 544 F3d 78 85 (2d Cir 2008) New York
Civil Practice Law and Rules (CPLR) sect 5225 authorizes a court
to order the delivery of property that belongs to a judgment
debtor but is not in his possession See CPLR 5225(b)
Moreover under CPLR sect 301 it is the general rule that New York
courts may exercise general jurisdiction over a foreign
corporation where that corporation is engaged in such a
continuous and systematic course of doing business [in New
York] as to warrant a finding of its presence in this
jurisdiction Simonson v Intl Bank 14 NY2d 281 285
(1964) There lS no serious spute that the Court has general
jurisdiction over Respondents in this case
A Personal Jurisdiction and the Separate Entity Rule
The New York Court of Appeals recently made clear that at
least as a general matter a New York court with personal
j sdiction over a defendant may order him to turn over out-of
state property regardless of whether the defendant is a judgment
debtor or a garnishee Koehler v Bank of Bermuda Ltd
Koehler III 577 F3d 497 499 (2d 2009) (quoting Koehler
v Bank of Bermuda Koehler II 12 NY3d 533 541 (2009)
(certified question answered in the affirmative)) i see
=H~o~t~e~1~7~1~M~e~z~z~L~e=n~d~e=r~L=L=C~v~~~~ 14 NY3d 303 312 (2010)
6
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 6 of 24
([A] court with personal jurisdiction over a nondomiciliary
present in New York has jurisdiction over that individuals
tangible or intangible property even if the situs of the
property is outside New YorkI) After the Koehler cases it is
certainly established law in New York that where a court has
jurisdiction over a potential garnishee holding an asset in
which a judgment debtor has an interest the court can generally
direct turnover of that asset in the post judgment context even
if it is located outside New York
It has also long been considered settled law in New York
however that where that garnishee is a bank the court must
obtain jurisdiction over the specific bank branch holding the
asset before it may order any turnover notwithstanding its
general jurisdiction over the banking entity by virtue of its
New York branch This has become known as the separate entity
rule See Motorola Credit Corp v Uzan 288 F Supp 2d 558
560 (SDNY 2003) i Lok Prakashan Ltd v Indi
Inc No 00 Civ 5852 2002 WL 1585820 at 2 (SDNY July
16 2002) (New York law follows the separate entity rule for
purposes of attachment and execution ) i Partners
Inc v Phillipine Exp and Foreign Loan Gaur Corp 921 F
Supp 1113 1119 (SDNY 1996) (This rule of law known as
the separate entity rule provides that each branch of a bank
is a separate entity [and is] in no way concerned with accounts
7
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 7 of 24
maintained by depositors in other branches or at a home officell
(quoting Cronan v Schilling 100 NYS2d 474 476 (Sup Ct
1950) affd 126 NYS2d 192 (1st Dept 1953))) The original
rationale for this rule was avoiding the intolerable burden
that would otherwise be placed on banking and commerce See Det
Bergenske Dampskibsselskab v Sabre Shipping Corp 341 F2d 50
53 (2d Cir 1965) (quoting Cronan 100 NYS2d at 476raquo i see
also Joseph H Sommer Where is a Bank Account 57 Md L Rev
1 78 79 (1998) (describing why the separate entity rule is
unique to international banks) For the same reasons the rule
has so been codified in the Article of the New York Commercial
Code governing funds transfers and creditor processes See
NY UCC sectsect 4-A-105(1) (b)i 4-A-502(4) (A branch or
separate office of a bank is a separate bank for purposes of
this Article) (emphasis added) Applying the separate entity
rule in this case Hamid would be unable to secure a turnover of
assets held by HBL in Pakistan simply by serving its New York
branch 1
1 New York courts have created one specific exception to the separate entity rule-one that is not implicated in this case The exception applies only where (1) the restraining notice is served on the banks main office (2) the banks main office and braches are within the same jurisdiction and (3) the bank branches are connected to the main office by high-speed computers and are under the centralized control of the main office 1I John Wiley amp Sons Inc v Kirtsaeng No 08 Civ 7834 2009 WL 3003242 at 4 (SDNY Sept 15 2009) (internal (continued on next page)
8
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 8 of 24
B The S~parate Entity Rule after Koehler II
Hamid invites this Court to discard the separate entity
rule in this case largely as a result of the New York court of
Appeals holding in Koehler II which Hamid regards as
eliminating the separate entity rule sub silentio For the
reasons below this Court decl s this invitation First this
Court is not convinced that the New York Court of Appeals
squarely overturned the separate entity rule when it responded
to a question certified to it by the Court of Appeals for the
Second Circuit in 2008 Second the balance of subsequent
federal and state decisions after Koehler II does not support
the Petitioners position Finally the only post Koehler II
case in this district otherwise helpful to Petitioner JW
Oilfield Equipment LLC v Commerzbank AG 764 F Supp 2d 587
(SDNY 2011) is readily distinguishable both on its facts
and its reasoning For these reasons Hamids petition must be
denied
1 The Koehler Litigation
Koehler concerned the turnover of stock certificates
belonging to a judgment debtor that were physically held by the
Bank of Bermuda Ltd (BBL) in Bermuda See Koehler I 544
F3d at 80 In that case Koehler (the judgment creditor)
(continued from previous page) quotation marks omitted) i see also Digitrex Inc v Johnson 491 F Supp 66 67 69 (SDNY 1980)
9
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 9 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
Insurances motion to dismiss this action on the basis of forum
conveniens Judge Robert L Carter noted that (a]lthough
plaintiff Tajmahal is a Pakistani corporation Shaheen appears
to be the real party in interest See Shaheen Inc v ----------~-----~---------
Asia Ins Co Ltd 89 F Supp 2d 500 505 (SDNY 2000)
(citing Alaska Russia Salvrnon Caviar Co Inc v MV Marit
Maersk 2000 WL 145124 at 3 4 (SDNY Feb 2 2000raquo
Tajmahal has also separately represented to this Court that any
judgment rendered in this matter is the property of Shaheen and
that it instructed Asia Insurance at all times to issue
certificates of insurance for the subject goods in Shaheens
name (See Affidavit of Kahlid Mahmood Gundra (Gundra Aff)
9-12 [dkt no 10] i Lovejoy Aff 8-9)
Upon consideration of Plaintiffs submissions on their
motion and Asia Insurances lure to oppose it the Court
concludes that Plaintiffs motion to substitute Hamid as
Plaintiff in 98-cv-5951 is GRANTED in the interests of justice
and the convenience of Hamid as the remaining judgment
creditor in this case
III Petitioner Hamids Motion for Turnover in ll-cv-920
Petitioner Hamid brings this turnover action under the New
York CPLR sectsect 5225(b) and 5227 Under Fed R Civ P 69(a) a
federal district court has the authority to enforce a judgment
by attaching property in accordance with the law the state in
5
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 5 of 24
v Bank of Bermudawhich the district court sits See
Ltd Koehler I 544 F3d 78 85 (2d Cir 2008) New York
Civil Practice Law and Rules (CPLR) sect 5225 authorizes a court
to order the delivery of property that belongs to a judgment
debtor but is not in his possession See CPLR 5225(b)
Moreover under CPLR sect 301 it is the general rule that New York
courts may exercise general jurisdiction over a foreign
corporation where that corporation is engaged in such a
continuous and systematic course of doing business [in New
York] as to warrant a finding of its presence in this
jurisdiction Simonson v Intl Bank 14 NY2d 281 285
(1964) There lS no serious spute that the Court has general
jurisdiction over Respondents in this case
A Personal Jurisdiction and the Separate Entity Rule
The New York Court of Appeals recently made clear that at
least as a general matter a New York court with personal
j sdiction over a defendant may order him to turn over out-of
state property regardless of whether the defendant is a judgment
debtor or a garnishee Koehler v Bank of Bermuda Ltd
Koehler III 577 F3d 497 499 (2d 2009) (quoting Koehler
v Bank of Bermuda Koehler II 12 NY3d 533 541 (2009)
(certified question answered in the affirmative)) i see
=H~o~t~e~1~7~1~M~e~z~z~L~e=n~d~e=r~L=L=C~v~~~~ 14 NY3d 303 312 (2010)
6
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 6 of 24
([A] court with personal jurisdiction over a nondomiciliary
present in New York has jurisdiction over that individuals
tangible or intangible property even if the situs of the
property is outside New YorkI) After the Koehler cases it is
certainly established law in New York that where a court has
jurisdiction over a potential garnishee holding an asset in
which a judgment debtor has an interest the court can generally
direct turnover of that asset in the post judgment context even
if it is located outside New York
It has also long been considered settled law in New York
however that where that garnishee is a bank the court must
obtain jurisdiction over the specific bank branch holding the
asset before it may order any turnover notwithstanding its
general jurisdiction over the banking entity by virtue of its
New York branch This has become known as the separate entity
rule See Motorola Credit Corp v Uzan 288 F Supp 2d 558
560 (SDNY 2003) i Lok Prakashan Ltd v Indi
Inc No 00 Civ 5852 2002 WL 1585820 at 2 (SDNY July
16 2002) (New York law follows the separate entity rule for
purposes of attachment and execution ) i Partners
Inc v Phillipine Exp and Foreign Loan Gaur Corp 921 F
Supp 1113 1119 (SDNY 1996) (This rule of law known as
the separate entity rule provides that each branch of a bank
is a separate entity [and is] in no way concerned with accounts
7
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 7 of 24
maintained by depositors in other branches or at a home officell
(quoting Cronan v Schilling 100 NYS2d 474 476 (Sup Ct
1950) affd 126 NYS2d 192 (1st Dept 1953))) The original
rationale for this rule was avoiding the intolerable burden
that would otherwise be placed on banking and commerce See Det
Bergenske Dampskibsselskab v Sabre Shipping Corp 341 F2d 50
53 (2d Cir 1965) (quoting Cronan 100 NYS2d at 476raquo i see
also Joseph H Sommer Where is a Bank Account 57 Md L Rev
1 78 79 (1998) (describing why the separate entity rule is
unique to international banks) For the same reasons the rule
has so been codified in the Article of the New York Commercial
Code governing funds transfers and creditor processes See
NY UCC sectsect 4-A-105(1) (b)i 4-A-502(4) (A branch or
separate office of a bank is a separate bank for purposes of
this Article) (emphasis added) Applying the separate entity
rule in this case Hamid would be unable to secure a turnover of
assets held by HBL in Pakistan simply by serving its New York
branch 1
1 New York courts have created one specific exception to the separate entity rule-one that is not implicated in this case The exception applies only where (1) the restraining notice is served on the banks main office (2) the banks main office and braches are within the same jurisdiction and (3) the bank branches are connected to the main office by high-speed computers and are under the centralized control of the main office 1I John Wiley amp Sons Inc v Kirtsaeng No 08 Civ 7834 2009 WL 3003242 at 4 (SDNY Sept 15 2009) (internal (continued on next page)
8
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 8 of 24
B The S~parate Entity Rule after Koehler II
Hamid invites this Court to discard the separate entity
rule in this case largely as a result of the New York court of
Appeals holding in Koehler II which Hamid regards as
eliminating the separate entity rule sub silentio For the
reasons below this Court decl s this invitation First this
Court is not convinced that the New York Court of Appeals
squarely overturned the separate entity rule when it responded
to a question certified to it by the Court of Appeals for the
Second Circuit in 2008 Second the balance of subsequent
federal and state decisions after Koehler II does not support
the Petitioners position Finally the only post Koehler II
case in this district otherwise helpful to Petitioner JW
Oilfield Equipment LLC v Commerzbank AG 764 F Supp 2d 587
(SDNY 2011) is readily distinguishable both on its facts
and its reasoning For these reasons Hamids petition must be
denied
1 The Koehler Litigation
Koehler concerned the turnover of stock certificates
belonging to a judgment debtor that were physically held by the
Bank of Bermuda Ltd (BBL) in Bermuda See Koehler I 544
F3d at 80 In that case Koehler (the judgment creditor)
(continued from previous page) quotation marks omitted) i see also Digitrex Inc v Johnson 491 F Supp 66 67 69 (SDNY 1980)
9
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 9 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
v Bank of Bermudawhich the district court sits See
Ltd Koehler I 544 F3d 78 85 (2d Cir 2008) New York
Civil Practice Law and Rules (CPLR) sect 5225 authorizes a court
to order the delivery of property that belongs to a judgment
debtor but is not in his possession See CPLR 5225(b)
Moreover under CPLR sect 301 it is the general rule that New York
courts may exercise general jurisdiction over a foreign
corporation where that corporation is engaged in such a
continuous and systematic course of doing business [in New
York] as to warrant a finding of its presence in this
jurisdiction Simonson v Intl Bank 14 NY2d 281 285
(1964) There lS no serious spute that the Court has general
jurisdiction over Respondents in this case
A Personal Jurisdiction and the Separate Entity Rule
The New York Court of Appeals recently made clear that at
least as a general matter a New York court with personal
j sdiction over a defendant may order him to turn over out-of
state property regardless of whether the defendant is a judgment
debtor or a garnishee Koehler v Bank of Bermuda Ltd
Koehler III 577 F3d 497 499 (2d 2009) (quoting Koehler
v Bank of Bermuda Koehler II 12 NY3d 533 541 (2009)
(certified question answered in the affirmative)) i see
=H~o~t~e~1~7~1~M~e~z~z~L~e=n~d~e=r~L=L=C~v~~~~ 14 NY3d 303 312 (2010)
6
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 6 of 24
([A] court with personal jurisdiction over a nondomiciliary
present in New York has jurisdiction over that individuals
tangible or intangible property even if the situs of the
property is outside New YorkI) After the Koehler cases it is
certainly established law in New York that where a court has
jurisdiction over a potential garnishee holding an asset in
which a judgment debtor has an interest the court can generally
direct turnover of that asset in the post judgment context even
if it is located outside New York
It has also long been considered settled law in New York
however that where that garnishee is a bank the court must
obtain jurisdiction over the specific bank branch holding the
asset before it may order any turnover notwithstanding its
general jurisdiction over the banking entity by virtue of its
New York branch This has become known as the separate entity
rule See Motorola Credit Corp v Uzan 288 F Supp 2d 558
560 (SDNY 2003) i Lok Prakashan Ltd v Indi
Inc No 00 Civ 5852 2002 WL 1585820 at 2 (SDNY July
16 2002) (New York law follows the separate entity rule for
purposes of attachment and execution ) i Partners
Inc v Phillipine Exp and Foreign Loan Gaur Corp 921 F
Supp 1113 1119 (SDNY 1996) (This rule of law known as
the separate entity rule provides that each branch of a bank
is a separate entity [and is] in no way concerned with accounts
7
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 7 of 24
maintained by depositors in other branches or at a home officell
(quoting Cronan v Schilling 100 NYS2d 474 476 (Sup Ct
1950) affd 126 NYS2d 192 (1st Dept 1953))) The original
rationale for this rule was avoiding the intolerable burden
that would otherwise be placed on banking and commerce See Det
Bergenske Dampskibsselskab v Sabre Shipping Corp 341 F2d 50
53 (2d Cir 1965) (quoting Cronan 100 NYS2d at 476raquo i see
also Joseph H Sommer Where is a Bank Account 57 Md L Rev
1 78 79 (1998) (describing why the separate entity rule is
unique to international banks) For the same reasons the rule
has so been codified in the Article of the New York Commercial
Code governing funds transfers and creditor processes See
NY UCC sectsect 4-A-105(1) (b)i 4-A-502(4) (A branch or
separate office of a bank is a separate bank for purposes of
this Article) (emphasis added) Applying the separate entity
rule in this case Hamid would be unable to secure a turnover of
assets held by HBL in Pakistan simply by serving its New York
branch 1
1 New York courts have created one specific exception to the separate entity rule-one that is not implicated in this case The exception applies only where (1) the restraining notice is served on the banks main office (2) the banks main office and braches are within the same jurisdiction and (3) the bank branches are connected to the main office by high-speed computers and are under the centralized control of the main office 1I John Wiley amp Sons Inc v Kirtsaeng No 08 Civ 7834 2009 WL 3003242 at 4 (SDNY Sept 15 2009) (internal (continued on next page)
8
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 8 of 24
B The S~parate Entity Rule after Koehler II
Hamid invites this Court to discard the separate entity
rule in this case largely as a result of the New York court of
Appeals holding in Koehler II which Hamid regards as
eliminating the separate entity rule sub silentio For the
reasons below this Court decl s this invitation First this
Court is not convinced that the New York Court of Appeals
squarely overturned the separate entity rule when it responded
to a question certified to it by the Court of Appeals for the
Second Circuit in 2008 Second the balance of subsequent
federal and state decisions after Koehler II does not support
the Petitioners position Finally the only post Koehler II
case in this district otherwise helpful to Petitioner JW
Oilfield Equipment LLC v Commerzbank AG 764 F Supp 2d 587
(SDNY 2011) is readily distinguishable both on its facts
and its reasoning For these reasons Hamids petition must be
denied
1 The Koehler Litigation
Koehler concerned the turnover of stock certificates
belonging to a judgment debtor that were physically held by the
Bank of Bermuda Ltd (BBL) in Bermuda See Koehler I 544
F3d at 80 In that case Koehler (the judgment creditor)
(continued from previous page) quotation marks omitted) i see also Digitrex Inc v Johnson 491 F Supp 66 67 69 (SDNY 1980)
9
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 9 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
([A] court with personal jurisdiction over a nondomiciliary
present in New York has jurisdiction over that individuals
tangible or intangible property even if the situs of the
property is outside New YorkI) After the Koehler cases it is
certainly established law in New York that where a court has
jurisdiction over a potential garnishee holding an asset in
which a judgment debtor has an interest the court can generally
direct turnover of that asset in the post judgment context even
if it is located outside New York
It has also long been considered settled law in New York
however that where that garnishee is a bank the court must
obtain jurisdiction over the specific bank branch holding the
asset before it may order any turnover notwithstanding its
general jurisdiction over the banking entity by virtue of its
New York branch This has become known as the separate entity
rule See Motorola Credit Corp v Uzan 288 F Supp 2d 558
560 (SDNY 2003) i Lok Prakashan Ltd v Indi
Inc No 00 Civ 5852 2002 WL 1585820 at 2 (SDNY July
16 2002) (New York law follows the separate entity rule for
purposes of attachment and execution ) i Partners
Inc v Phillipine Exp and Foreign Loan Gaur Corp 921 F
Supp 1113 1119 (SDNY 1996) (This rule of law known as
the separate entity rule provides that each branch of a bank
is a separate entity [and is] in no way concerned with accounts
7
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 7 of 24
maintained by depositors in other branches or at a home officell
(quoting Cronan v Schilling 100 NYS2d 474 476 (Sup Ct
1950) affd 126 NYS2d 192 (1st Dept 1953))) The original
rationale for this rule was avoiding the intolerable burden
that would otherwise be placed on banking and commerce See Det
Bergenske Dampskibsselskab v Sabre Shipping Corp 341 F2d 50
53 (2d Cir 1965) (quoting Cronan 100 NYS2d at 476raquo i see
also Joseph H Sommer Where is a Bank Account 57 Md L Rev
1 78 79 (1998) (describing why the separate entity rule is
unique to international banks) For the same reasons the rule
has so been codified in the Article of the New York Commercial
Code governing funds transfers and creditor processes See
NY UCC sectsect 4-A-105(1) (b)i 4-A-502(4) (A branch or
separate office of a bank is a separate bank for purposes of
this Article) (emphasis added) Applying the separate entity
rule in this case Hamid would be unable to secure a turnover of
assets held by HBL in Pakistan simply by serving its New York
branch 1
1 New York courts have created one specific exception to the separate entity rule-one that is not implicated in this case The exception applies only where (1) the restraining notice is served on the banks main office (2) the banks main office and braches are within the same jurisdiction and (3) the bank branches are connected to the main office by high-speed computers and are under the centralized control of the main office 1I John Wiley amp Sons Inc v Kirtsaeng No 08 Civ 7834 2009 WL 3003242 at 4 (SDNY Sept 15 2009) (internal (continued on next page)
8
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 8 of 24
B The S~parate Entity Rule after Koehler II
Hamid invites this Court to discard the separate entity
rule in this case largely as a result of the New York court of
Appeals holding in Koehler II which Hamid regards as
eliminating the separate entity rule sub silentio For the
reasons below this Court decl s this invitation First this
Court is not convinced that the New York Court of Appeals
squarely overturned the separate entity rule when it responded
to a question certified to it by the Court of Appeals for the
Second Circuit in 2008 Second the balance of subsequent
federal and state decisions after Koehler II does not support
the Petitioners position Finally the only post Koehler II
case in this district otherwise helpful to Petitioner JW
Oilfield Equipment LLC v Commerzbank AG 764 F Supp 2d 587
(SDNY 2011) is readily distinguishable both on its facts
and its reasoning For these reasons Hamids petition must be
denied
1 The Koehler Litigation
Koehler concerned the turnover of stock certificates
belonging to a judgment debtor that were physically held by the
Bank of Bermuda Ltd (BBL) in Bermuda See Koehler I 544
F3d at 80 In that case Koehler (the judgment creditor)
(continued from previous page) quotation marks omitted) i see also Digitrex Inc v Johnson 491 F Supp 66 67 69 (SDNY 1980)
9
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 9 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
maintained by depositors in other branches or at a home officell
(quoting Cronan v Schilling 100 NYS2d 474 476 (Sup Ct
1950) affd 126 NYS2d 192 (1st Dept 1953))) The original
rationale for this rule was avoiding the intolerable burden
that would otherwise be placed on banking and commerce See Det
Bergenske Dampskibsselskab v Sabre Shipping Corp 341 F2d 50
53 (2d Cir 1965) (quoting Cronan 100 NYS2d at 476raquo i see
also Joseph H Sommer Where is a Bank Account 57 Md L Rev
1 78 79 (1998) (describing why the separate entity rule is
unique to international banks) For the same reasons the rule
has so been codified in the Article of the New York Commercial
Code governing funds transfers and creditor processes See
NY UCC sectsect 4-A-105(1) (b)i 4-A-502(4) (A branch or
separate office of a bank is a separate bank for purposes of
this Article) (emphasis added) Applying the separate entity
rule in this case Hamid would be unable to secure a turnover of
assets held by HBL in Pakistan simply by serving its New York
branch 1
1 New York courts have created one specific exception to the separate entity rule-one that is not implicated in this case The exception applies only where (1) the restraining notice is served on the banks main office (2) the banks main office and braches are within the same jurisdiction and (3) the bank branches are connected to the main office by high-speed computers and are under the centralized control of the main office 1I John Wiley amp Sons Inc v Kirtsaeng No 08 Civ 7834 2009 WL 3003242 at 4 (SDNY Sept 15 2009) (internal (continued on next page)
8
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 8 of 24
B The S~parate Entity Rule after Koehler II
Hamid invites this Court to discard the separate entity
rule in this case largely as a result of the New York court of
Appeals holding in Koehler II which Hamid regards as
eliminating the separate entity rule sub silentio For the
reasons below this Court decl s this invitation First this
Court is not convinced that the New York Court of Appeals
squarely overturned the separate entity rule when it responded
to a question certified to it by the Court of Appeals for the
Second Circuit in 2008 Second the balance of subsequent
federal and state decisions after Koehler II does not support
the Petitioners position Finally the only post Koehler II
case in this district otherwise helpful to Petitioner JW
Oilfield Equipment LLC v Commerzbank AG 764 F Supp 2d 587
(SDNY 2011) is readily distinguishable both on its facts
and its reasoning For these reasons Hamids petition must be
denied
1 The Koehler Litigation
Koehler concerned the turnover of stock certificates
belonging to a judgment debtor that were physically held by the
Bank of Bermuda Ltd (BBL) in Bermuda See Koehler I 544
F3d at 80 In that case Koehler (the judgment creditor)
(continued from previous page) quotation marks omitted) i see also Digitrex Inc v Johnson 491 F Supp 66 67 69 (SDNY 1980)
9
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 9 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
B The S~parate Entity Rule after Koehler II
Hamid invites this Court to discard the separate entity
rule in this case largely as a result of the New York court of
Appeals holding in Koehler II which Hamid regards as
eliminating the separate entity rule sub silentio For the
reasons below this Court decl s this invitation First this
Court is not convinced that the New York Court of Appeals
squarely overturned the separate entity rule when it responded
to a question certified to it by the Court of Appeals for the
Second Circuit in 2008 Second the balance of subsequent
federal and state decisions after Koehler II does not support
the Petitioners position Finally the only post Koehler II
case in this district otherwise helpful to Petitioner JW
Oilfield Equipment LLC v Commerzbank AG 764 F Supp 2d 587
(SDNY 2011) is readily distinguishable both on its facts
and its reasoning For these reasons Hamids petition must be
denied
1 The Koehler Litigation
Koehler concerned the turnover of stock certificates
belonging to a judgment debtor that were physically held by the
Bank of Bermuda Ltd (BBL) in Bermuda See Koehler I 544
F3d at 80 In that case Koehler (the judgment creditor)
(continued from previous page) quotation marks omitted) i see also Digitrex Inc v Johnson 491 F Supp 66 67 69 (SDNY 1980)
9
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 9 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
served a writ of execution and restraining notice on a
subsidiary of BBL in New York Id As the district court noted
in denying Koehler1s request for turnover of the stock
certificates BBLs Bermuda branch itself had ultimately
consented to the personal jurisdiction of the district court and
therefore the separate entity rule [had] no role to play in
this case [because] [h]ere the foreign branch itself was
properly served Koehler v Bank of Bermuda Ltd 2005 WL
551115 1 at 12 (SDNY Mar 9 1 2005) Ultimately however
the district court held that it lacked the authority to attach a
res located beyond the court1s jurisdiction See id The Court
of Appeals for the Second Circuit found however that the
ability of the district court to attach assets abroad in
satisfaction of a domestic judgment was an open question under
New York law and therefore certified the question of its in rem
jurisdiction to the New York Court of Appeals See Koehler I
544 F3d at 82 Specifically the Court of Appeals for the
Second Circuit asked the New York Court of Appeals whether a
court sitting in New York may order a bank over which it has
personal jurisdiction to del stock certificates owned by a
judgment debtor (or cash equal to their value) to a judgment
creditor pursuant to NY CPLR Article 52 when those stock
certificates are located outside New York Id at 88
10
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 10 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
In a deeply divided 4-3 decision the New York Court of
Appeals answered in the affirmative Koehler II 12 NY3d at
541 The court ruled that Ua court sitting in New York that has
personal jurisdiction over a garnishee bank can order the bank
to produce stock certificates located outside New York Id
The court explained that CPLR Article 52 contains no express
territorial limitation barring the entry of a turnover order
that requires a garnishee to transfer money or property into New
York from another state or country Id at 539 It further
explained that the key to the reach of the turnover order is
personal jurisdiction over a particular defendant Id at 540
Having been answered in the firmative the Court of Appeals
for the Second Circuit then ruled that [b]ecause BBL consented
to the personal jurisdiction of the Southern District of New
York as of the commencement of the proceedings in 1993 [the
district court] had the authority to issue the 1993 turnover
order against BBL Koehler III 577 F3d at 499
Importantly the New York Court of Appeals did not mention
the separate entity rule as part of its analysis and appeared to
confine its inquiry to the stock certificates at issue in
Koehler See generally Koehler II 12 NY3d 533 Nor did the
Court of Appeals for the Second Circuit consider the separate
entity rule before issuing its final mandate in the Koehler
case See generally Koehler III 577 F3d 497 Petitioner
11
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 11 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
nevertheless argues that the question over its continued
viability in the post-judgment context has been squarely and
unambiguously answered (Hamid Mem at 3-4) This court
cannot agree
The New York Court of Appeals noted that CPLR Article 52
contains no express territorial limitation barring the entry of
a turnover order that requires a garnishee to transfer money or
property into New York from another state or country and that
the key to the reach of the turnover order is personal
jurisdiction over a particular defendant Koehler II 12
NY3d at 539-40 The separate entity rule however was a
court-made rule that did not involve any interpretation of
either CPLR Article 52 or 62 (post and pre-judgment attachment
respectively) See eg Cronan 100 NYS2d at 476 Clinton
Trust Co v Compania Azucarera Cent Ramona SA 14 NYS2d
743 746 (Sup Ct 1939) affd 15 NYS2d 721 (1st Dept
1939) Moreover the public policy considerations underlying
the separate entity rule as enacted by the New York
legislature continue to be reflected through its version of the
Uniform Commercial Code See eg NY UCC sectsect 4-Ashy
105(1) (b) i 4-A-502(4) supra As noted above those policy
considerations contemplate among other issues the intolerable
burden that would otherwise be placed on banking and commerce
if mere service of a writ to a New York branch could subject
12
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 12 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
foreign bank branches to competing claims See Sabre --~----~
Shipping Corp 341 F2d at 53 (quoting Cronan 100 NYS2d at
476) For that reason the separate entity rule is best
understood as a qualifier on the courts attachment power under
New York law in the specific context of extraterritorial
banking even where personal jurisdiction over a defendant is
otherwise obtained vis-a-vis a New York branch
Petitioner argues that the Koehler case has entirely
eliminated the separate entity rule sub silentio at least in
the case of post-judgment execution (See Hamid Mem at 3-4)
In light of the significant policy principles underlying the
separate entity rule and its lengthy history in New York courts
however it is not unreasonable to expect that if the New York
Court of Appeals had chosen to eliminate it it would have said
so At the very least its role in the Koehler case was raised
by the Brief of the Clearing House Association LLC as Amicus
Curiae in Support of Respondent Koehler v Bank of Bermuda
Ltd 12 NY3d 533 (Mar 17 2009) 2009 WL 1615261 at 18
and so this Court does not presume that the Court of Appeals did
not consider it The New York Appellate Division First
Department has previously said that any future exception to the
separate entity rule would require a pronouncement from the
Court of Appeals or an act of the Legislature Natl Union
13
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 13 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
Fire Ins Co v Adv Empt Concepts Inc 703 NYS2d 3 4
(1st Dept 2000)
Indeed both of the New York state courts to consider the
separate entity rule and post-judgment executions post Koehler
have recently held that the New York Court of Appeals decision
in Koehler could not reasonably be read to overturn it without
stating so in express terms In Samsun Logix Corp v Bank of
China No 10526210 2011 WL 1844061 (Sup Ct May 12 2011)
the court held that the Court of Appeals in Koehler did not
even mention the separate entity rule thereby strongly
indicating that it had not intended to overrule that doctrine 1I
Id at 3 Similarly in Parbulk II AS v Heritage Maritime
935 NYS2d 829 (Sup Ct 2011) the court held that
Koehler did not address the separate entity rule and therefore
[u]ntil the appellate courts in New York hold otherwise this
court is constrained to decline the invitation to ignore
established precedent applying the separate entity rule 1t Id
at 832 n1 This Court is similarly constrained
2 Post Koehler Cases
The Samsun and Parbulk II cases are instructive in that
they are the only New York state post-judgment execution cases
to analyze the viability of the separate entity rule postshy
Koehler and both courts found the rule had survived They are
not however the only New York courts to do so In Levin v
14
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 14 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
Bank of New York No 09 Civ 5900 2011 WL 812032 (SDNY
Mar 4 2011) Judge Robert Patterson of this Court found that
under New York law the separate entity rule applied to bar a
post-judgment writ of execution against a bank branch in
Maryland where the assets sought were in a New York branch of
the same bank See id at 12 The Koehler case played no role
in that decision See generally id
Additionally both the Court of Appeals for the Second
Circuit and the Southern District of New York have continued to
apply the separate entity rule in pre-judgment attachment cases
following Koehler strongly undercutting Petitioners argument
that it had been completely jettisoned sub silentio Koehler
II The Court of Appeals recently reiterated that the
separate entity rule dictates that each branch of a bank [be]
treated as a separate entity for attachment purposes Allied
Maritime Inc v Descatrade SA 620 F3d 70 74 (2d Cir 2010)
(quoting Sabre Shipping Corp 341 F2d at 53) Judge Donald
Pogue writing for this Court also recently observed that
under New York commercial law notice received by one branch
of a bank does not [even] constitute constructive notice to any
other branch of the same bank John Wiley amp Sons Inc 2009
WL 3003242 at 4 (quoting Gutekunst v Contl Ins Co 486
F2d 194 196 (2d Cir 1973)) Tellingly in light of the very
recent decision at that point in Koehler II Judge Pogue went on
15
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 15 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
to observe that although indeed the separate entity rule may be
outdated the court must follow the rule absent direction from
the New York legislature New York state courts or the Second
Circuit Id at 4 n9 see also Motorola Credit Corp 288 F
Supp 2d at 561 ([I]t is not for this Court to limit the
separate entity doctrine beyond the limits already set by the
courts of New York) This Court agrees
In fact only one case decided post-Koehler in the federal
and state courts has squarely concluded that Koehler preempts
any application of the separate entity doctrine 2 In JW Oilfield
Equipment LLC v Commerzbank AG 764 F Supp 2d 587 (SDNY
2011) Judge Kevin Castel found that respondent Commerzbank AG
conceded in its post-judgment execution briefing that Koehler
effectively preempts application of the separate entity rule
here See id at 595 Judge Castel reasoned that so long as a
New York court had general personal jurisdiction over
Commerzbank AG under NY CPLR sect 301 Koehler made clear that
this Court may issue a turnover order under NY CPLR sect 5225(b)
directing Commerzbank to turn over funds up to the amount of the
2 Petitioner also reI on Judge Hellersteins recent Order in Eitzen Bulk S v State Bank of India No 09 Civ 10118 2011 WL 4639823 SDNY Aug 5 2010 This Order has been vacated by the Court of Appeals however and will play no part in todays opinion See Eitzen Bulk Als v State Bank of India No 10 3352 cv (2d Cir May 122011) ([T]he district courts order directing Appellant to engage in turnover litigation with respect to a maritime contract dispute is VACATED )
16
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 16 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
judgment regardless of whether those accounts are held in
Germany or New York See id at 593 In reaching this
conclusion Judge Castel predicted that Koehler indicates that
New York courts will not apply the separate entity rule in postshy
judgment execution proceedings Id at 595 However as now
evidenced by the subsequent state court holdings in Samsun and
Parbulk II supra both decided well after Commerzbank this
appears not to be the case See eg Samsun 2011 WL 1844061
at 3 Parbulk II 935 NYS2d at 832 nl (This court
disagrees [with Commerzbank] The question certified to the New
York Court of Appeals by the United States Court of Appeals for
the Second Circuit did not involve the separate entity rule and
the New York Court of Appeals did not address it ) In any
event for reasons further described below this Court is
convinced that whatever its merits Commerzbank is not a case
on all fours with the petition currently before the Court
On balance the Court finds that the weight of subsequent
federal and state decisions after Koehler II cuts decidedly
against Petitioners position on the separate entity rule The
Court is particularly mindful that New York state courts have
uniformly rejected Petitioners reading of Koehler while
explicitly disagreeing with the only federal holding in this
district to embrace it
17
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 17 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
3 Commerzbank and Due Process
A final word may be helpful on the s that distinguish
this case from the turnover proceeding in Commerzbank
particularly in light of the policy underlying the separate
entity rule in New York The most obvious difference is Judge
Castels observation that Commerzbank appeared to concede that
the separate entity rule would not apply after Koehler II See
Commerzbank 764 F Supp 2d at 595 Far from conceding that
point here HBL argues strenuously that the separate entity rule
is alive and well (See generally HBL Mem)
More important however I is Judge Castels conclusion thatI
Commerzbank had put forth no evidence that it could rightfully
refuse to pay over the assets it holds [elsewhere] to a location
in New York II See Commerzbank 764 F Supp 2d at 596 By
contrast HBL makes the colorable claim here that it could
refuse (or be required to refuse) to make such a trans of
funds under Pakistani law ~~__~~ HBL Mem at 22 23i
Declaration of Muhammad Akram (Akram Decl II) ~ 5 I [dkt no 38]
(describing why Section 5 of the Pakistani Foreign Exchange
Regulation Act of 1947 operates to prohibit Asia Insurance from
directing and HBL from executing such a transfer of funds out of
Pakistan) i HBL Sur-Reply Memorandum of Law in Response to Order
to Show Cause (HBL Reply MemlI) at 7-8) Similarly Judge
ICastel noted in Commerzbank that it was signif that a
18
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 18 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
German court had declined to issue a preliminary injunction
ordering Commerzbank to pay over the judgment debtors assets
then frozen in its German branchs accounts by order of this
Court Commerzbank 764 F Supp 2d at 597 Thus he reasoned
the German court had not uespoused the view that the interests
of Germany in applying its own banking laws outweighs the United
States interest in enforcing its own judgmentslt and therefore
Commerzbank uwill not likely be caught in the crosshairs of
German law1t Id Unfortunately the same cannot be said for
HBL in this case HBL has submitted evidence that such a
transfer of assets would violate Pakistani law and is currently
defending Asia Insurances pending suit for injunctive relief in
Pakistans courts See HBL Mem at 7) Unlike Commerzbank
there has been no favorable resolution of the Pakistani
litigation to date rd
These s are significant as they implicate both the
underlying rationale for the separate entity rule New York as
well as concerns for HBLs due process See United States v
First Natl City Bank 321 F2d 14 (2d Cir 1963) revd on
other grounds 379 US 378 (1965) (UThe nature of garnishment
proceedings is such that the garnishor obtains no greater right
against the garnishee than the garnishees creditor had It)
Commerzbank 764 F Supp 2d at 596 (UThe question is
whether [the judgment debtor] if it were New York could
19
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 19 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
direct the [foreign garnishee] to pay over the money it holds on
deposit in [judgment debtors] name to an account in New
York) HBL raises a colorable claim in this case that granting
Hamids ition for turnover of these assets would
impermissibly vest him with greater rights than are enjoyed by
judgment debtor Asia Insurance under the laws of Pakistan
Moreover HBL argues that were it required to turn over
Asia Insurance assets in New York this would not discharge its
obligations to Asia Insurance in Pakistan because Pakistans
courts do not recognize judgments in US courts See HBL Mem
at 23 and n6) HBLs concern for potential inconsistent
judgments and double liability is therefore very real See
~ JP Chase Bank NA v Motorola Inc 846 NYS2d
171 178 87 (1st Dept 2007) (reversing a garnishment ordered
below because the sk of double liability in a foreign court
was too great) i Oppenheimer v Dresdner Bank AG 377 NYS2d
625 632-33 (2d Dept 1975) affd 41 NY2d 949 (1977) (giving
effect to a German courts order of attachment as though it had
been ordered by a New York court in order to avoid the
unconscionable result of double liability) i see also Harris v
Balk 198 US 215 226 (1905) (It ought to be and it is the
object of courts to prevent the payment of any debt twice
over) Indeed the New York Appellate Division Second
Department has gone so far as to state that the admonishment of
20
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 20 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
the Supreme Court of the United States in Harris to prevent
double liability is incorporated into CPLR Articles 52 and 62
See Oppenheimer 377 NYS2d at 632 affd 41 NY2d 949 It
is clear that these judicial priorities are implicated to a far
greater extent here than they were in Commerzbank
It will come as no surprise that the separate entity rule
from its inception was designed to target the concerns of banks
susceptible to such multiple claims first across branches and
more recently across borders __~____~ Motorola Credit Corp
288 F Supp 2d at 560-61 (The putative purpose of this
doctrine is to avoid undue interference with ordinary banking
transactions [and] the original rationale of avoiding
undue disruption of routine banking practices may still carry
weight when the requested transfers involve banks subject to
foreign laws and practices) Even if Koehler II can be read
as some have to suggest that the New York Court of Appeals due
process considerations in the post-judgment context have become
ly relaxed see eg Damien H Weinste New York
The Next Mecca for Judgment Creditors An Analysis of Koehler
v Bank Bermuda Ltd 78 Fordham L Rev 3161 3194-95
(2010) I Court of Appeals for the Second Circuit
elsewhere specifically instructed that a federal court may not
alter an established rule of New York law when there has been no
indication by the New York lawmakers that they have changed
21
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 21 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
their point of view 1I See Sabre Shipping Corp 341 F2d at 53
Even if it is no longer the case after Koehler II that New York
courts have not given any hint of eliminating the separate
entity rule see Motorola Credit Corp 288 F Supp 2d at 561
it remains more than reasonable in light of the policy concerns
described above to expect that the court do so in clear terms if
it is so inclined Moreover this expectation is accord with
the post-Koehler New York state court decisions in Samsun and
Parbulk II
For these reasons Hamids ition must be denied
4 28 USC sect 1292 (b) Appealability
This Court is acutely aware of the lack of clarity
permeating this area of the law following the New York Court of
Appeals decision Koehler II The Court is also aware of the
relative frequency of these CPLR Article 52 turnover proceedings
in both the federal and state courts of New York and therefore
of the relatively high risk of varied and inconsistent views on
this subject going forward With respect to the case at bar
the Court is also concerned about the balance of equities in
denying Hamids petition and thereby ending the temporary
restraint placed on HBL and National Bank of Pakistan by Judge
Cote in her May 20 2011 Order [dkt no 26] only to have the
Court of Appeals for the Second Circuit (or ultimately the New
22
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 22 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
York Court of Appeals) later displace the substance of this
opinion on appeal
For these reasons the Court finds pursuant to 28 USC sect
1292(b) that this Order uinvolves a controlling question of law
as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation
See 28 USC sect 1292(b) i see also Klinghoffer v Achille Lauro
921 F2d 21 23-24 (2d Cir 1990) (noting that a controlling
question of law exists where the reversal of an order would
terminate an action or it involves issues that affect a wide
range of pending cases) Accordingly Petitioner is permitted
to make an application to the Court of Appeals for such an
appeal within 10 days of this Order see 28 USC sect 1292(b)
and Judge Cotes May 20 2011 Order shall be extended for the
same 10-day period at which point Petitioner must seek any
further temporary injunctive relief directly from the Court of
Appeals pursuant to any appeal
CONCLUSION
For the foregoing reasons Plaintiffs motion for
substitution in 98-cv-5951 [dkt no 38] is GRANTED Petitioner
Hamids motion for a turnover writ of execution pursuant to CPLR
sectsect 5225(b) 5227 and Fed R Civ P 69(a) in 11-cv-920 [dkt
no 8] is DENIED Interlocutory appeal from this Order pursuant
23
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 23 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24
to 28 USC sect 1292(b) is GRANTED The May 20 2011 Order of
the Court granting temporary injunctive relief to Hamid in 11shy
cv-920 [dkt no 26] is extended for a period of 10 days from
the date of this Order All other remaining requests for relief
and pending motions in both actions are DENIED as moot
SO ORDERED
Dated New York New York6
March h 2012
LORETTA A PRESKA Chief United States District Judge
24
Case 111-cv-00920-LAP Document 48 Filed 031412 Page 24 of 24