Drexel Burnham Lambert Group, Inc. v. Galadari
| Decision Date | 08 April 1991 |
| Docket Number | No. 84 Civ. 2602 (CBM),90 Civ. 2140 (CBM).,84 Civ. 2602 (CBM) |
| Citation | 127 BR 87 |
| Parties | The DREXEL BURNHAM LAMBERT GROUP, INC., Plaintiff, v. A.W. GALADARI and A.W. Galadari Commodities, Defendants. REFCO, INC., Plaintiff, v. Abdul Wahab Bin Ebrahim GALADARI and A.W. Galadari Commodities, Defendants, The Committee of Receivers for Abdul Wahab Bin Ebrahim Galadari and A.W. Galadari Commodities, Additional Defendant. |
| Court | U.S. District Court — Southern District of New York |
Bickel & Brewer by Carlton Asher, Jr., New York City, for Committee of Receivers.
Richards & O'Neil by Edward Powers and Natalie Gomez, New York City, Thomas Hill, West Palm Beach, Fla., for Drexel Lambert.
Graubard Millen Horowitz Pomeranz & Shapiro by Therese M. Doherty and Marianne Bretton-Granatoor, New York City, for Refco.
SUPPLEMENTAL OPINION RE: VACATING STAY
SUPPLEMENTAL FINDINGS OF FACT AND CONCLUSIONS OF LAW
This is a motion by plaintiff Refco, Inc. ("Refco") to vacate the stay of this action imposed by this Court's Order dated January 4, 1991, in favor of a foreign liquidation proceeding in Dubai, United Arab Emirates. Refco argues that the receivership proceedings in Dubai are fundamentally unfair and have deprived Refco of due process, and that, therefore, the Dubai proceedings are not entitled to international comity.
On March 18 and 19, 1991, this Court conducted a hearing on Refco's motion to lift the stay. Refco presented the testimony of Phillip Bennett ("Bennett"), Chief Financial Officer of Refco R.Tr. 3-41, and Jack Weinberg ("Weinberg"), partner in charge of the Galadari matters at the Graubard Mollen Horowitz Pomeranz & Shapiro firm (the "Graubard firm") R.Tr. 123. Bennett testified with respect to his dealings with the Committee of Receivers (the "Committee") and with Carlton R. Asher, Jr., Esq. ("Asher"), who has been representing the Committee in Refco's action against Galadari and the Committee. Weinberg testified to his dealings with Asher.
The Committee failed to present any witnesses to rebut Refco's showing that the Dubai proceedings have been fundamentally unfair and have denied Refco due process.2 Specifically, the Committee failed to present the testimony of any of its members to explain the reasons, if any, for the Committee's unconscionable delay in adjudicating Refco's claim.
Refco has demonstrated that is has been denied due process in the Dubai proceedings because the Committee, under the control of Asher, (a) inordinately delayed its decision on Refco's claim, (b) misrepresented to Refco the status of the Committee's determination of Refco's claim, (c) dictated the results of what purported to be a key unbiased report by an expert to the Committee, (d) barred Refco from fully participating in the proceedings before the Committee, (e) abdicated to Asher and Richards Butler the Committee's function as fact finder and judge, (f) acted both as trustee and judge, and (g) concocted new issues in 1990, and at the hearing before this Court on March 19, 1990, as further obstacles to Refco's claim, and falsely labelled those issues as matters that had been and remain "open."
The testimony offered by Refco was substantially unrebutted. There was no witness who testified for the Committee regarding its conduct in the purported adjudication of Refco's claim.
Refco is an Illinois corporation with its principal place of business in Chicago, Illinois. Refco is registered as a Futures Commission Merchant pursuant to the Commodity Exchange Act, 7 U.S.C. § 1 et seq. Complaint, ¶ 1.
The Committee was appointed on or about April 17, 1984, pursuant to an ad hoc decree issued by the government of Dubai, to manage the affairs of defendant Abdul Wahab Bin Ebrahim Galadari ("Galadari") and certain Galadari companies, including defendant A.W. Galadari Commodities ("Commodities") Drexel Ex. S.
The Committee at all times has been, and it still is, represented in this action by Asher, formerly a member of the law firm of Gaston & Snow and presently a member of the law firm of Bickel & Brewer R.Tr. 125, 237.
The Committee at all times has been, and it still is, represented in the Dubai proceedings by Asher R.Tr. 125 and, since mid-1989, by the London, England law firm of Richards Butler Drexel Ex. A-2 (192), (196).
On or about February 7, 1983, defendants Galadari and Commodities opened five trading accounts with Refco (the "Accounts") and commenced trading in the Accounts. Complaint, ¶ 4; Ex. R32.
In or about May 1983, the debit balance in the Accounts was $6,109,664.20. On or about July 6, 1983, Galadari executed a letter agreement (the "1983 Agreement"), on behalf of himself and Commodities, acknowledging the debt owed to Refco. Ex. R27(A); R.Tr. 6-7.
Pursuant to the 1983 Agreement, Galadari paid Refco $500,000 on each of three occasions during the period of September to November 1983 Ex. R27; R.Tr. 5-6. Thereafter, Galadari made no further payments Id.. The remaining debt for which Galadari and Commodities are liable to Refco is $4,609,664.20 Complaint, ¶ 7; Ex. R27(A).
On August 10, 1984, Refco commenced an action against Galadari and Commodities in the State Supreme Court, New York County (the "United States Action") predicated upon Galadari's failure to satisfy the 1983 Agreement. Refco obtained an order to show cause containing a temporary restraining order (the "Restraining Order;" Removal Ex. B).3 The Restraining Order provided that:
defendants and any person in possession of property in which defendants have an interest or owing debts to the defendants and as prospective garnishees herein, and their employees, agents, assigns and all persons acting in concert with them, are restrained from making or suffering any sale, assignment or transfer of, or any interference with, or paying over or otherwise disposing of, or taking any steps to sell, assign, transfer, interfere with, pay over or otherwise dispose of from any proceeds or property or debt of the defendants to the extent of $4,609,664.20
The Restraining Order directed defendants Galadari and Commodities to show cause why an order should not be entered, inter alia, granting Refco an order of attachment and directing the sheriff to levy upon the property in which either defendant had an interest and upon debts owing to either defendant for the purposes of satisfying any judgment that may be obtained by Refco in the amount of $4,609,664.20 Id. at 2.
By stipulation dated October 9, 1984, the Committee, which had not been a party to the action, appeared in the action by New York counsel (Asher) and agreed to extend the Restraining Order. Thereafter, the Committee actively opposed Refco's motion for an order of attachment.
By memorandum decision dated March 27, 1985, and entered on April 3, 1985 Removal Ex. D, the state court, inter alia, (a) continued the Restraining Order as it related to a New York condominium which Galadari maintained at 641 Fifth Avenue, New York, New York (the "Apartment"), but denied Refco's motion for an order of attachment, and (b) added the Committee as an additional defendant. The Committee never sought to modify or dissolve the Restraining Order. The Restraining Order remains in full force and effect R.Tr. 124. See 28 U.S.C. § 1450.
By stipulations between the attorneys for the Committee (Asher) and Refco, the Committee's time to answer or otherwise move with respect to the summons and complaint in United States Action was, at the Committee's request, continously adjourned R.Tr. 128-30.
Refco consented to the Committee's requests for adjournments in the United States Action based on representations by Asher that the Committee was actively reviewing Refco's claim in the Dubai proceedings R.Tr. 39-40, 135, 212.
By letter dated May 24, 1984, the Committee informed Refco that it had "been appointed to manage the affairs of the Galadari companies and the Galadari assets" and was "empowered to proceed with the orderly realization of funds and then to distribute the proceeds of realizations . . ." Ex. R1; R.Tr. 8-9. The letter informed Refco also "that creditors are forthwith required to send in their names and addresses and particulars of their debt or claim" to the Committee before July 31, 1984 Id..
On July 16, 1984, Refco timely submitted to the Committee its formal proof of claim Ex. R27; R.Tr. 5, 10.
By telex dated August 18, 1984, the Committee acknowledged receipt of Refco's formal claim and represented that Refco's claim was under review Ex. R28.
The Committee did not consider Refco's claim until February 1987, some two and one-half years after the claim was submitted. By telex dated February 4, 1987, the Committee notified Refco that a meeting would be held two weeks later, on February 21, 1987, in Dubai, to consider Refco's claim Ex. R3; R.Tr. 12.
In light of the very short notice the Committee gave Refco, Refco requested a short adjournment of the meeting to enable it fully and properly to prepare the necessary documentation and to arrange for legal representation at the meeting Ex. R4; R.Tr. 13, 126. However, the Committee refused to grant even a short adjournment Ex. R30; R.Tr. 14. As a result, Refco was unable to prepare a full presentation of its claim and was not represented by counsel at the meeting in Dubai R.Tr. 14, 18, 57.
Notwithstanding the Committee's refusal to adjourn the meeting, and in pursuit of advancing the receivership process and the prompt consideration of its claim, Refco proceeded to provide to the Committee information and documentation in support of Refco's claim.
On February 21 and 22, 1987, Bennett, as Chief Financial Officer of Refco, met with the Committee in Dubai ...
To continue reading
Request your trial
-
Mele v. First Colony Life Ins. Co.
... ... , Washington, D.C., for Healthmasters of Md., Inc ... Jack L. Diamond, M.D., ... ...