13-1519-cv, 13-2535-cv(L), 13-2639-cv(con)
`Tire Eng'g & Distrib, L.L.C., et al. v. Bank of China Ltd., Motorola Credit Corp. v. Standard Chartered Bank
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`UNITED STATES COURT OF APPEALS
`FOR THE SECOND CIRCUIT
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`August Term 2013
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`Decided: January 14, 2014)
`(Argued: October 11, 2013
`Docket Nos. 13-1519-cv, 13-2535-cv(L), 13-2639-cv(con)
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`Plaintiffs-Appellants,
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`TIRE ENGINEERING AND DISTRIBUTION L.L.C., JORDAN FISHMAN, BEARCAT TIRE
`A.R.L.,
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`BCATCO A.R.L.,
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` Plaintiff,
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`v.
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`BANK OF CHINA LIMITED,
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`Defendant-Appellee.
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`MOTOROLA CREDIT CORPORATION,
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`Plaintiff-Counter-Defendant-
`Appellant-Cross Appellee,
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`NOKIA CORPORATION,
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` Plaintiff-Counter-Defendant,
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`MOTOROLA, INC., KROLL ASSOCIATES INC., CHRISTOPHER B. GALVIN, KEITH J. BANE,
`WALTER KEATING, ED HUGHES, ERNST KRAMER,
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` Counter Defendants,
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`v.
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`STANDARD CHARTERED BANK,
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`Appellee-Cross Appellant,
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`MURAT HAKAN UZAN, CEM CENGIZ UZAN,
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`Defendants-Counter-Claimants,
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`KEMAL UZAN, LIBANANCO HOLDINGS CO. LIMITED, MELAHAT UZAN, AYSEGUL
`AKAY, ANTONIO LUNA BETANCOURT, UNIKOM ILETISM HIZMETLERI PAZARLAMA
`A.S., STANDART PAZARLAMA A.S., STANDART TELEKOMUNIKAYSON BILGISAYAR
`HIZMETLERI A.S.,
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`Defendants.
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`ON APPEAL FROM THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF NEW YORK
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`Before:
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`CALABRESI, CHIN, and DRONEY, Circuit Judges.
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`Appeals heard in tandem from orders of the United States District
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`Court for the Southern District of New York (Carter, J., and Rakoff, J.) holding
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`that the "separate entity rule" precludes a court from ordering a garnishee bank
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`operating branches in New York to turn over or restrain assets of judgment
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`debtors held in foreign branches of the bank.
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`DECISION RESERVED AND QUESTIONS CERTIFIED.
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`WILLIAM EDGAR COPLEY, III (Stephen Adam Weisbrod,
`on the brief), Weisbrod Matteis & Copley PLLC,
`Washington, D.C., and Stephen Zoltan Starr, Starr
`& Starr, PLLC, New York, New York, for Tire
`Engineering and Distribution, L.L.C., Bcatco A.R.L.,
`Jordan Fishman, and Bearcat Tire A.R.L.
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`PAMELA CHEPIGA (Andrew Rhys Davies, Molly
`Spieczny, on the brief), Allen & Overy LLP, New
`York, New York, for Bank of China Limited.
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`HOWARD H. STAHL (George R. Calhoun, on the brief),
`Fried, Frank, Harris, Shriver & Jacobson LLP,
`Washington D.C., for Motorola Credit Corporation,
`and Nokia Corporation.
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`BRUCE EDWARD CLARK (Patrick B. Berarducci, Sharon L.
`Nelles, Bradley P. Smith, on the brief), Sullivan &
`Cromwell LLP, New York, New York, for
`Standard Chartered Bank.
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`Dwight A. Healy, White & Case LLP, for Amici Curiae
`Institute of International Bankers, The Clearing
`House, European Banking Federation, and New York
`Bankers Association.
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`CHIN, Circuit Judge
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`These appeals, heard in tandem, challenge two orders entered in the
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`United States District Court for the Southern District of New York (Carter, J., and
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`Rakoff, J.), holding that the separate entity rule precludes a court from ordering a
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`garnishee bank with branches in New York to turn over or restrain assets of
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`judgment debtors held in foreign branches of the bank. In both cases, the
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`plaintiff judgment creditors ("plaintiffs") contend that the decision of the New
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`York Court of Appeals in Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533 (2009),
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`makes clear that post-judgment relief under Article 52 of the New York Civil
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`Practice Law and Rules ("CPLR") is dependent only on personal jurisdiction over
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`the garnishee banks, and therefore its remedies are available to reach property of
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`judgment debtors held in foreign branches of those banks. The defendant
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`garnishee banks ("defendants") argue that Koehler did not silently overrule New
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`York's longstanding separate entity rule as applied to banks with branches in
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`New York and other countries.
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`These appeals present the following unresolved questions of New
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`York law:
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`First, whether the separate entity rule precludes a judgment creditor
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`from ordering a garnishee bank operating branches in New York to turn over a
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`debtor's assets held in foreign branches of the bank; and
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`Second, whether the separate entity rule precludes a judgment
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`creditor from ordering a garnishee bank operating branches in New York to
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`restrain a debtor's assets held in foreign branches of the bank.
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`Because these unresolved questions implicate significant New York
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`state interests and are determinative of these appeals, we reserve decision and
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`certify these questions to the New York Court of Appeals.
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`BACKGROUND
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`A. CPLR Article 52 and the Separate Entity Rule
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`CPLR article 52 governs the enforcement and collection of money
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`judgments in New York. See N.Y. C.P.L.R. 5201 et seq. (McKinney 2013). Sections
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`5222 and 5225(b) apply to third parties that possess assets in which a judgment
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`debtor has an interest. Section 5222 authorizes the issuance of a restraining
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`notice to prohibit a third party from disposing of a debt owed to the judgment
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`debtor for one year after service of the restraining notice or until the judgment is
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`satisfied or vacated, whichever comes first.1 Section 5225(b) allows a judgment
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`1
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`C.P.L.R. § 5222 provides, in relevant part:
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`creditor to commence a proceeding to order a third party to turn over the
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`judgment debtors' assets.2 As the New York Court of Appeals explained in
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`Koehler, "article 52 postjudgment enforcement involves a proceeding against a
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`person -- its purpose is to demand that a person convert property to money for
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`payment to a creditor." 12 N.Y.3d at 538. Accordingly, "personal jurisdiction is
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`A restraining notice served upon a person other than the judgment debtor
`or obligor is effective only if, at the time of service, he or she owes a debt
`to the judgment debtor or obligor . . . or if the judgment creditor . . . has
`stated in the notice that a specified debt is owed by the person served to
`the judgment debtor or obligor . . . . Such a person is forbidden to make or
`suffer any sale, assignment or transfer of, or any interference with, any
`such property, or pay over or otherwise dispose of any such debt, to any
`person other than the sheriff or the support collection unit . . . except upon
`the direction of the sheriff or pursuant to an order of the court, until the
`expiration of one year after the notice is served upon him or her, or until
`the judgment or order is satisfied or vacated, whichever event first occurs.
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`N.Y. C.P.L.R. § 5222(b) (McKinney 2013).
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`2
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`C.P.L.R. § 5225(b) provides, in relevant part:
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`Upon a special proceeding commenced by the judgment creditor, against
`a person in possession or custody of money or other personal property in
`which the judgment debtor has an interest, or against a person who is a
`transferee of money or other personal property from the judgment debtor,
`where it is shown that the judgment debtor is entitled to the possession of
`such property . . . the court shall require such person to pay the money . . .
`to the judgment creditor and, if the amount to be so paid is insufficient to
`satisfy the judgment, to deliver any other personal property, or so much of
`it as is of sufficient value to satisfy the judgment, to a designated sheriff.
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`N.Y. C.P.L.R. § 5225(b) (McKinney 2013).
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`the linchpin of authority under section 5225(b)." Commw. of the N. Mariana Islands
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`v. Canadian Imperial Bank of Commerce, 21 N.Y.3d 55, 64 (2013) ("NMI").
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`Nevertheless, New York courts have long applied the separate entity
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`rule to garnishee banks operating branches both in New York and elsewhere.
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`The rule provides that even if a bank is subject to personal jurisdiction due to the
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`presence of a New York branch, the other branches of the bank will be treated as
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`separate entities for certain purposes, such as attachments, restraints, and
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`turnover orders.3 Indeed, as the rule has been historically applied, even branches
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`of a bank located in the same city are separate entities for purposes of
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`attachment.4 Although the rule has no apparent mooring in the text of the CPLR,
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`See, e.g., In re Nat'l Union Fire Ins. Co. of Pittsburgh Pa. v. Advanced Emp't.
`3
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`Concepts, 703 N.Y.S.2d 3, 4 (1st Dep't 2000) (applying the "long-standing general rule in
`New York that each bank is a separate entity and that in order to reach a particular
`bank account, the branch of the bank where the account is maintained must be served");
`Cronan v. Schilling, 100 N.Y.S.2d 474, 476 (Sup. Ct. N.Y. Cnty. 1950), aff'd, 126 N.Y.S.2d
`192 (1st Dep't 1953) ("The law seems well established that . . . . for purposes of
`attachment, among others, each branch of a bank is a separate entity, in no way
`concerned with accounts maintained by depositors in other branches or at the home
`office."); see also Det Bergenske Dampskibsselskab v. Sabre Shipping Corp., 341 F.2d 50, 52-53
`(2d Cir. 1965) ("A review of the New York cases indicates a consistent line of authority
`holding that accounts in a foreign branch bank are not subject to attachment or
`execution by the process of a New York court served in New York on a main office,
`branch, or agency of the bank.").
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`See Sabre Shipping Corp., 341 F.2d at 53-54 (noting "both the theory and the
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`4
`policy of the rule . . . apply with almost equal force to attachment of bank accounts at
`other branch offices within New York City" (citing Chrzanowska v. Corn Exch. Bank, 159
`N.Y.S. 385 (1916)).
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`the principle that branches of banks are regarded as separate entities for some
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`purposes is reflected in New York's Uniform Commercial Code.5
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`The original rationale for the rule was that "[e]ach time a warrant of
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`attachment is served upon one branch, every other branch and the main office
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`would have to be notified[,] . . . plac[ing] an intolerable burden upon banking
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`and commerce, particularly where the branches are numerous, as is often the
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`case." Cronan v. Schilling, 100 N.Y.S. 2d 474, 476 (Sup. Ct. N.Y. Cnty. 1950), aff'd,
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`126 N.Y.S.2d 192 (1st Dep't 1953). In Digitrex, Inc. v. Johnson, the Southern
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`District of New York (Knapp, J.) concluded that the separate entity rule was
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`outdated in light of technological advances in the banking industry. 491 F. Supp.
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`66, 69 (S.D.N.Y. 1980) (holding restraining notice served on bank's main office
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`sufficient and legally effective, as applied to assets in branch of bank). State and
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`federal courts applying New York law have limited Digitrex's reach, however,
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`and apply its exception to the separate entity rule only where "the restraining
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`notice is served on the bank's main office; the main office and the branches where
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`the accounts in question are maintained are within the same jurisdiction; and the
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`bank branches are connected to the main office by high-speed computers and are
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`See, e.g., N.Y. U.C.C. § 4-A-105(1)(b) (McKinney 2013) ("A branch or
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`separate office of a bank is a separate bank for purposes of this article.").
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`under its centralized control." In re Nat'l Union Fire Ins. Co. of Pittsburgh Pa. v.
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`Adv. Emp't. Concepts, 703 N.Y.S. 2d 3, 4 (1st Dep't 2000) (emphasis in original).6
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`Accordingly, courts have routinely applied the separate entity rule to
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`post-judgment proceedings involving branches of banks in different sovereign
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`nations.7
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`B.
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`Tire Engineering and Distribution, L.L.C. v. Bank of China Ltd.
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`On October 28, 2010, the District Court for the Eastern District of
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`Virginia entered a judgment in favor of Tire Engineering and Distribution, L.L.C.
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`("Tire Engineering") against six foreign companies based in China and Dubai (the
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`"judgment debtors") for copyright infringement and conversion. The Fourth
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`Circuit affirmed in part, upholding the jury's $26 million damages award. See
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`Tire Eng'g & Distrib., LLC v. Shandong Linglong Rubber Co., 682 F.3d 292 (4th Cir.
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`2012). The judgment debtors have refused to pay the judgment.
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`See also Limonium Mar., S.A. v. Mizushima Marinera, S.A., 961 F. Supp. 600,
`6
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`607-08 (S.D.N.Y. 1997) ("A rule providing that service of a restraining notice on one
`bank branch (e.g., New York) suffices to reach assets in another bank branch in a city in
`a different country (e.g., London) would cause substantial interference with routine
`banking business, and no case has been cited . . . where such a restraint was held to be
`effective.); Therm-X-Chem. & Oil Corp. v. Extebank, 444 N.Y.S.2d 26 (2d Dep't 1981)
`(applying rule to bank without centralized system).
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`See, e.g., Fidelity Partners, Inc. v. Philippine Export & Foreign Loan Guarantee
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`Corp., 921 F. Supp. 1113, 1120 (S.D.N.Y. 1996) (applying separate entity rule to branches
`in different countries because New York branch has "neither control nor managerial
`direction over . . . [the extraterritorial] main office").
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`Tire Engineering eventually learned that one of the judgment
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`debtors had assets at the Bank of China ("BOC"). BOC is controlled and owned,
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`at least in part, by the People's Republic of China. BOC operates two branches in
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`New York City.
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`On December 18, 2012, Tire Engineering filed this action in the
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`Southern District of New York seeking a turnover order against BOC pursuant to
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`CPLR § 5225(b), alleging that BOC possesses assets of at least one of the
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`judgment debtors. Tire Engineering asked that BOC be ordered to turn over "all
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`money or other personal property in its possession in which one or more of the
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`[j]udgment [d]ebtors have an interest, regardless of whether [BOC] possesses
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`that money or other personal property in New York, China, the United Arab
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`Emirates, or elsewhere." First Amend. Compl. ¶ 40. Tire Engineering also
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`served a restraining notice on BOC pursuant to Federal Rule of Civil Procedure
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`69(a) and CPLR § 5222, prohibiting it from selling, assigning, or transferring any
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`property of the judgment debtors in its possession. The district court (Carter, J.)
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`entered an order directing BOC to show cause as to why a preliminary injunction
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`should not be granted.
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`In response, BOC confirmed it had no accounts or property
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`belonging to any of the judgment debtors in its New York branches. BOC filed a
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`motion to dismiss, arguing, among other things, that the separate entity rule
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`precluded the relief Tire Engineering requested. Further, it argued that a
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`preliminary injunction was inappropriate due to the substantial harm that
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`freezing assets belonging to the judgment debtors would cause BOC. In support,
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`BOC submitted declarations of two professors, explaining that Chinese banking
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`laws prohibit Chinese commercial banks from complying with U.S. court orders
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`by freezing customer bank accounts in China and that accordingly BOC could
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`face regulatory sanctions and civil litigation in China if it complied with the
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`turnover order.
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`On April 12, 2013, the district court granted BOC's motion to
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`dismiss, holding that the separate entity rule precluded Tire Engineering's
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`request for relief. The district court granted Tire Engineering's request for a stay
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`pending appeal, permitting the restraining notice to remain in place until the
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`appeal was decided.
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`C. Motorola Credit Corp. v. Standard Charter Bank
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`Between April 1998 and September 2000, members of the Uzan
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`family (the "Uzans") induced Motorola Credit Corporation ("Motorola") to loan
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`more than $2 billion to a Turkish company they controlled. See Motorola Credit
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`Corp. v. Uzan, 274 F. Supp. 2d 481, 490 (S.D.N.Y. 2003). The Uzans diverted much
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`of these funds. Id. On July 31, 2003, the district court (Rakoff, J.) entered a
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`judgment against the Uzans in favor of Motorola for compensatory damages in
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`the amount of $2,132,896,905.66. Id. at 580. In addition, on June 20, 2006, the
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`district court awarded Motorola $1 billion in punitive damages. See Motorola
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`Credit Corp. v. Uzan, 413 F. Supp. 2d 346, 353 (S.D.N.Y. 2006).
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`The Uzans have attempted to avoid paying these judgments. See
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`Motorola Credit Corp. v. Uzan, 561 F.3d 123, 127 (2d Cir. 2009) (finding the Uzans
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`"have persistently endeavored to evade the lawful jurisdiction of the District
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`Court and undermine its careful and determined work"). Indeed, the Uzans
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`remain in contempt of court for failure to comply with the District Court's orders
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`and are subject to arrest if they enter the United States. See id. at 128. Motorola
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`has accordingly pursued collection of the judgment through independent
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`investigation and third-party discovery, and the district court has conducted
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`post-judgment proceedings ex parte and under seal. On February 13, 2013, the
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`district court issued a restraining order pursuant to Federal Rules of Civil
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`Procedure 65 and 69 and CPLR § 5222, enjoining the Uzans, their agents, and
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`anyone with notice of the order from selling, assigning, or transferring their
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`property (the "restraining order"). The restraining order prohibited any parties
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`served with it from disclosing the restraining order or its contents to the Uzans.
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`Motorola served the restraining order on Standard Chartered Bank
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`("SCB"). SCB is a foreign banking corporation, incorporated under the laws of
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`and headquartered in the United Kingdom, with branches in many countries, as
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`well as a branch in New York. SCB did not find any Uzan property in its New
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`York branch. After a global search in late April 2013, however, SCB identified
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`relevant assets connected with its branches in the United Arab Emirates
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`("U.A.E."). Motorola asked SCB to freeze the assets. As SCB sought to comply
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`with the restraining order, regulatory authorities in Jordan and the U.A.E.
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`intervened. The Central Bank of Jordan sent an auditor to seize documents from
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`SCB's branch office in Jordan. The U.A.E. Central Bank debited SCB's account
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`with its bank.
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`On May 14, 2013, SCB filed a motion for relief from the restraining
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`order. SCB argued, among other things, that placing a restraint on the
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`repayment of the interbank placements is contrary to the law in the U.A.E. and
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`subjects SCB to legal and regulatory risk. Further, it argued that, in light of the
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`separate entity rule, the restraining order should not have extraterritorial reach.
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`Finally, SCB argued that subjecting its foreign branches to the restraining order
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`violates the Due Process Clause of the Fourteenth Amendment by exposing SCB
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`to double liability.
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`In a sealed order dated May 30, 2013, the district court found, in
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`relevant part, that the separate entity rule precludes Motorola from restraining
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`assets held by SCB's foreign branches. Noting that the law was unsettled as to
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`the viability of the separate entity rule, the district court stayed the release of the
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`restraint on the assets pending appeal. The district court subsequently issued a
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`sealed opinion, explaining its order in more detail.
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`These appeals followed.
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`DISCUSSION
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`A.
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`Applicable Law
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`1.
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`Standard of Review
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`We review an appeal from a district court's interpretation of
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`questions of state and federal law de novo. Am. Intern. Group, Inc. v. Bank of Am.
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`Corp., 712 F.3d 775, 778 (2d Cir. 2013).
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`2.
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`Certification to the New York Court of Appeals
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`This Court may certify questions "where the New York Court of
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`Appeals has not spoken clearly on an issue and we are unable to predict, based
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`on other decisions by New York courts, how the Court of Appeals would answer
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`a certain question." Giordano v. Market Am. Inc., 599 F.3d 87, 100 (2d Cir. 2010).
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`"The Local Rules of the New York Court of Appeals permit certification of
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`questions by this court when we encounter 'determinative questions of New
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`York law . . . for which no controlling precedent of the Court of Appeals exist.'"
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`Caronia v. Philip Morris USA, Inc., 715 F.3d 417, 450 (2d Cir. 2013) (quoting N.Y.
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`Ct. App. Local R. 500.27(a)).
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`Certification is appropriate "'where an unsettled question of state
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`law raises important issues of public policy, where the question is likely to recur,
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`and where the result may significantly impact a highly regulated industry.'"
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`Cruz v. TD Bank, N.A., 711 F.3d 261, 267-68 (2d Cir. 2013) (quoting State Farm
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`Mut. Auto. Ins. Co. v. Mallela, 372 F.3d 500, 505 (2d Cir. 2004)). In deciding
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`whether to certify a question, we consider: "(1) whether the New York Court of
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`Appeals has addressed the issue and, if not, whether the decisions of other New
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`York courts permit us to predict how the Court of Appeals would resolve it; (2)
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`whether the question is of importance to the state and may require value
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`judgments and public policy choices; and (3) whether the certified question is
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`determinative of a claim before us." In re Thelen LLP, 736 F.3d 213, 224 (2d Cir.
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`2013) (quoting Barenboim v. Starbucks Corp., 698 F.3d 104, 109 (2d Cir. 2012)).
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`B. Application
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`We conclude that these appeals turn on unsettled and important
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`questions of New York law. Accordingly, we certify those questions to the New
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`York Court of Appeals.
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`1.
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`The Absence of Controlling Precedent
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`The New York Court of Appeals has never addressed whether the
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`separate entity rule applies to post-judgment enforcement proceedings. Indeed,
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`it has not explicitly addressed the separate entity rule in any context. Instead, it
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`has affirmed, without opinion, intermediate courts' application of the separate
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`entity rule in cases that did not involve post-judgment enforcement proceedings.
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`See McCloskey v. Chase Manhattan Bank, 11 N.Y.2d 936 (1962) (affirming denial of
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`plaintiff's request for order of attachment against deposit account at bank branch
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`in Germany by serving warrant of attachment on bank's office in New York
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`City); Chrzanowska v. Corn Exch. Bank, 159 N.Y.S. 385, 387 (1st Dep't 1916), aff'd,
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`225 N.Y. 728 (1919) (interpreting provisions of New York Banking Law and
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`finding "different branches were as separate and distinct from one another as
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`from any other bank"). Accordingly, despite its application by lower courts
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`discussed above, the New York Court of Appeals has never unequivocally
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`approved or disapproved of the separate entity rule.
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`The New York Court of Appeals has instructed that in determining
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`
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`"the expanse of section 5225(b) [the] 'starting point' is 'the language itself, giving
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`effect to the plain meaning thereof.'" NMI, 21 N.Y.3d at 60 (quoting Majewski v.
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`Broadalbin-Perth Cent. Sch. Dist., 91 N.Y.2d 577, 583 (1998)). As plaintiffs point
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`out, the plain language of Sections 5222 and 5225(b) supports the authority of
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`New York courts to order garnishee banks subject to personal jurisdiction in
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`New York to turn over or restrain judgment debtors' assets. Article 52 makes no
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`specific references to foreign banks operating New York branches, and the
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`separate entity rule is not the product of a textual analysis of the CPLR. Instead,
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`it is a judicially created doctrine reflecting policy considerations over time, as
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`discussed below. Accordingly, while we are mindful that the New York Court of
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`Appeals has determined that "the failure of the legislature to include a term in
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`[article 52] is a significant indication that its exclusion was intended," NMI, 21
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`N.Y.3d at 60, we find this principle inapposite for a wholly judicially created
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`doctrine not tethered to the CPLR's text.
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`Plaintiffs contend that the decision of the New York Court of
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`Appeals decision in Koehler settles the issues we face here. In Koehler, the Court
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`addressed the question, certified by this Court, "whether a court sitting in New
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`York may order a bank over which it has personal jurisdiction to deliver stock
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`certificates owned by a judgment debtor (or cash equal to their value) to a
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`
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`judgment creditor, pursuant to CPLR article 52, when [the] stock certificates are
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`located outside New York." Koehler, 12 N.Y.3d at 536. Answering the question in
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`the affirmative, the Koehler Court explained that "the Legislature intended CPLR
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`article 52 to have extraterritorial reach" and "the key to the reach of the turnover
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`order is personal jurisdiction over a particular defendant." Id. at 539-40. In short,
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`the Koehler Court concluded that "[a] New York court has the authority to issue a
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`turnover order pertaining to extraterritorial property, if it has personal
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`jurisdiction over a judgment debtor in possession of the property." Id. at 540
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`(internal quotation marks and citation omitted). Plaintiffs urge us to find that
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`this holding in Koehler definitively forecloses the application of the separate
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`entity rule to post-judgment enforcement proceedings. While we acknowledge
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`that Koehler may be so read,8 we decline to reach the issue.
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`The separate entity rule was briefed in Koehler. See Br. of the
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`Clearing House Ass'n L.L.C. as Amicus Curiae in Support of Respondent, Koehler,
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`12 N.Y.3d 533 (No. 2009-0082), 2009 WL 1615261 at *18 ("The Court should not
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`answer the certified question in a manner that conflicts with the separate entity
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`See, e.g., JW Oilfield Equip., LLC v. Commerzbank, AG, 764 F. Supp. 2d 587,
`8
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`595 (S.D.N.Y. 2011).
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`rule."). The deeply divided Koehler Court did not, however, address the issue. In
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`
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`light of the longstanding application of the separate entity rule in New York, as
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`discussed above, we doubt that the Court of Appeals intended to silently
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`overrule the doctrine.9 New York courts considering the rule's application to
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`post-judgment enforcement orders after Koehler have so held.10
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`Moreover, on the facts before it, the Court in Koehler did not need to
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`address the separate entity rule. The defendant in Koehler was a foreign bank
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`that had consented to personal jurisdiction in New York through the service of
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`its wholly owned New York subsidiary. Koehler, 12 N.Y3d at 536. Further, the
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`judgment creditor in Koehler sought the turnover of physical stock certificates in
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`the bank's possession. Id. As the separate entity rule precludes courts from
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`ordering branches of foreign banks to turn over or restrain assets in a judgment
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` Indeed, prior to Koehler, the First Department recognized that an
`9
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`extension of exceptions to the separate entity rule "would require . . . a pronouncement
`from the Court of Appeals or an act of the Legislature." In re Nat'l Ins. Co. of Pittsburgh,
`Pa., 703 N.Y.S.2d at 3; accord Sabre Shipping Corp., 341 F.2d 53 (refusing to abandon the
`separate entity rule because "[w]e 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
`their point of view").
`
`
`
`See, e.g., Global Tech., Inc. v. Royal Bank of Canada, No. 150141/2011, 2012
`10
`WL 89823, at *13 (Sup. Ct. N.Y. Cnty. Jan. 11, 2012); Samsun Logix Corp. v. Bank of China,
`No. 105262/10, 2011 WL 1844061, at *4 (Sup. Ct. N.Y. Cnty. May 12, 2011); Parbulk II AS
`v. Heritage Maritime, SA, 935 N.Y.S.2d 829, 832 (Sup. Ct. N.Y. Cnty. 2011); see also Shaheen
`Sports, Inc. v. Asia Ins. Co., Ltd., Nos. 98-cv-5951 LAP, 11-CV-920 LAP, 2012 WL 919664,
`at *4-*5 (S.D.N.Y. Mar. 14, 2012).
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`-19-
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`debtor's account, nothing required the Koehler Court to consider the rule's
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`application to a foreign bank operating a subsidiary in New York that was
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`
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`ordered to turn over stock certificates it physically possessed. Here, in contrast,
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`plaintiffs' claims turn on the crux of the separate entity rule -- whether
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`defendants are subject to post-judgment enforcement orders where they operate
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`a branch in New York and hold assets of judgment debtors in accounts in foreign
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`branches.
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`
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`Although both parties present theories as to why the Court in
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`Koehler did not address the separate entity rule, only the Court of Appeals can
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`tell us definitively the significance -- if any -- of its decision not to address the
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`question, whether it intended to silently overrule the doctrine, and whether the
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`rule applies to post-judgment enforcement orders. Accordingly, we conclude
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`that there is no "controlling precedent" in New York that governs this case.
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`2.
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`The Certified Questions Involve Important Issues of State Law
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`
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`The questions presented by these appeals involve important issues
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`of New York state law and policy that are likely to recur and may have
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`important effects on a highly regulated industry. Indeed, the separate entity rule
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`is a judicially created doctrine that reflects policy choices over time and courts,
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`the legislature, and the banking industry in New York and abroad may have
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`acquiesced in or relied on its principles. Hence, we find certification here is
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`particularly compelling.
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`As defendants and amici note, international banks are subject to the
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`competing laws of multiple jurisdictions, and turnover or restraining orders by
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`New York courts may cause conflicts with the regulations, laws, and policies of
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`other sovereign jurisdictions. As SCB's experience highlights, in complying with
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`post-judgment orders from United States courts, banks may face regulatory and
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`financial repercussions and due process concerns in foreign jurisdictions.11
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`Moreover, as amici point out, the original concern that treating all branches of a
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`bank as a single entity would place an "intolerable burden upon banking and
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`commerce," Cronan, 100 N.Y.S.2d at 476, may still be relevant for world-wide
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`post-judgment orders. State courts continue to acknowledge that banks face
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`practical constraints and considerable costs in determining whether a judgment
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` See, e.g., Global Tech., Inc., 2012 WL 89823, at *13 ("The separate entity rule
`11
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`can be harmonized with the modern due process framework of personal jurisdiction,
`when the separate entity rule is understood as akin to a rule governing service of
`process."); Samsun, 2011 WL 1844061, at *6 (explaining due process concerns for
`garnishee-banks exposed to double liability); accord Shaffer v. Heitner, 433 U.S. 186, 212
`(1977) ("[A]ll assertions of state-court jurisdiction must be evaluated according to the
`standards [of fair play and substantial justice] set forth in International Shoe and its
`progeny.").
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`debtor's property is located in any branch in the world.12 Finally, amici contend
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`
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`that the applicability, or not, of the separate entity rule to post-judgment
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`enforcement orders may have unintended consequences for New York's banking
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`industry and New York courts. A decision that branches of a bank anywhere in
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`the world are subject to post-judgment enforcement orders if that bank maintains
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`a New York branch could potentially affect decisions of international banks to
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`maintain New York branches.13
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`On the other hand, as plaintiffs argue, the original basis for the
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`separate entity rule may have weakened or even disappeared over time. Further,
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`as plaintiffs' experiences show, the applicability of the rule may facilitate efforts
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`of judgment debtors to frustrate and evade the collection of judgments. Indeed,
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`Motorola has been attempting to collect its judgment from the Uzans for nearly a
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`decade. Moreover, the rule may permit banks operating branches in New York
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`See, e.g., Samsun, 2011 WL 1844061, at *4 ("[T]he banks submitted
`12
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`numerous affidavits to the effect that the computer systems in the New York branches
`of the Banks do not provide access