Jw Oilfield Equip. Llc v. Commerzbank Ag

• Decision Date: 14 January 2011
• Docket Number: No. 18 MS 0302(PKC).,18 MS 0302(PKC).
• Parties: JW OILFIELD EQUIPMENT, LLC, Petitioner,v.COMMERZBANK AG, Respondent.
• Court: U.S. District Court — Southern District of New York

764 F.Supp.2d 587

JW OILFIELD EQUIPMENT, LLC, Petitioner,

v.COMMERZBANK AG, Respondent.

No. 18 MS 0302(PKC).

United States District Court, S.D. New York.

Jan. 14, 2011.

Oksana G. Wright, Fox Rothschild LLP, New York, NY, for Petitioner.George E. Mastoris, Dewey & LeBoeuf LLP, New York, NY, for Respondent.

MEMORANDUM AND ORDER

P. KEVIN CASTEL, District Judge:

Petitioner JW Oilfield Equipment, LLC (“Oilfield”) obtained a judgment in the United States District Court for the Western District of Oklahoma against J.J.S. Oilfield Supply, GmbH (“Judgment Debtor” or “JJS”). Oilfield registered the judgment in this district and now seeks to enforce it through an application for a turnover order. Specifically, Oilfield moves this Court for a “turnover” order pursuant to Rule 69(a), Fed.R.Civ.P., and N.Y. CPLR § 5225(b), ordering Commerzbank AG (“Commerzbank”) to remit certain funds held in a checking account of JJS. Commerzbank objects, arguing that granting the turnover order would deprive JJS of rights protected by the Due Process Clause of the United States Constitution. Alternatively, Commerzbank argues that this Court should refrain from exercising jurisdiction based on the principles of international comity, and that the Court should dismiss the petition on forum non conveniens grounds.

BACKGROUNDI. Oklahoma Proceedings

On March 20, 2009, JJS filed a complaint against Oilfield in the United States District Court for the Western District of Oklahoma (the “Oklahoma Court”). JJS Oilfield Supply GmbH v. JW Oilfield Equipment, LLC, 09 Civ. 00301 (W.D. Okla. 2009). Oilfield defended the suit, and at the close of a two-day jury trial was granted judgment as a matter of law pursuant to Rule 50, Fed.R.Civ.P., on June 23, 2010. Oilfield subsequently moved for attorney's fees against JJS, and on August 9, 2010 was granted a judgment for $166,169.53 in attorney's fees. No appeal has been filed from that judgment.

JJS did not satisfy the judgment, and on September 9, 2010, Oilfield moved for a Judgment Debtor Exam under 12 O.S. § 842, made applicable by Rule 69(a), Fed.R.Civ.P. The motion was granted by United States Magistrate Judge Doyle W. Argo, ordering J.J. Steinbeck, principal and corporate representative for JJS, to appear on October 26, 2010 and produce documents regarding corporate assets. This order also forbade JJS from transferring or otherwise disposing of any money or property until further order of the court. Neither JJS nor Steinbeck appeared as directed.

On November 29, 2010, the Honorable Tim Leonard, U.S.D.J., ordered J.J. Steinbeck to show cause in writing by December 27, 2010, why he should not be held in civil contempt for failing to appear and produce documents. Judge Leonard also granted the application of counsel for JJS to withdraw, but ordered that JJS secure and file an entry of appearance by other counsel within thirty days.

On January 10, 2010, the court found Steinbeck to be in civil contempt due to his continued violation of the September 13, 2010 order and because of his failure to respond to the order to show cause. The court imposed a daily civil fine in the amount of $100.00 per day for each day he continues to violate the September 13, 2010 order, and awarded attorney's fees and costs to the plaintiff, Oilfield.

II. New York Proceedings

On October 22, 2010, Oilfield filed this application against Commerzbank in the Southern District of New York, seeking a turnover order pursuant to Rule 69(a), Fed.R.Civ.P. and N.Y. CPLR §§ 5225(b). Oilfield seeks to enforce the judgment of the Western District of Oklahoma, which was registered in this district pursuant to 28 U.S.C. § 1963. It requests a turnover order against Commerzbank, where JJS holds a bank account. On November 4, 2010, the Honorable Miriam Goldman Cedarbaum, U.S.D.J., ordered that Commerzbank restrain and freeze any accounts maintained for the benefit of or in the name of JJS, including without limitation any such accounts in Germany. Oral argument was held before me on December 28, 2010, as the district judge then presiding in Part I. Commerzbank opposed the petition.

III. German Proceedings

Pursuant to the September 9, 2010 order of the Oklahoma Court, Commerzbank froze assets in accounts in the name of JJS up to the amount of the judgment. On November 1, 2010, JJS filed a Petition for the Issue of an Injunction against Commerzbank in the Frankfurt Regional Court, Commercial Division (the “German Court”), seeking to require Commerzbank to pay over the money frozen in its account. Commerzbank filed a Response on November 5, and the German Court, by order dated November 8, 2010, denied JJS's petition for a temporary injunction.

DISCUSSIONI. Procedure

Rule 69(a)(1), Fed.R.Civ.P., provides that a money judgment is enforced by a writ of execution, and the “procedure on execution—and in proceedings supplementary to and in aid of judgment or execution—must accord with the procedure of the state where the court is located” if no federal statute applies.

Section 5225(b) of the N.Y. CPLR provides the process by which a judgment creditor may compel “a person in possession or custody of money or other personal property in which the judgment debtor has an interest ... to pay the money, or so much of it as is sufficient to satisfy the judgment, to the judgment creditor....” N.Y. CPLR 5225(b). Section 5225(b) requires the judgment debtor to proceed by way of special proceeding. Id. A special proceeding is a creature of New York law with no federal analogue. “A special proceeding is a civil judicial proceeding in which a right can be established or an obligation enforced in summary fashion. Like an action, it ends in a judgment, but the procedure is similar to that on a motion. Speed, economy and efficiency are the hallmarks of this procedure.” Alexander, Comment C401:1 (McKinney's N.Y. CPLR, 2010) (internal citations omitted).

Because Oilfield could not commence a “special proceeding” in this Court, Rule 2, Fed.R.Civ.P., it proceeded by filing an action against Commerzbank with a petition for issuance of a writ of execution and turnover order. No party has objected to this procedure. Rule 69(a) “does no more than establish a system of procedure for federal district courts.” Kashi v. Gratsos, 712 F.Supp. 23, 25 (S.D.N.Y.1989) (Duffy, J.). “Neither this rule nor state law create or withdraw the district court's jurisdiction to enforce its judgment.” Id.¹

II. Extraterritorial Application of N.Y. CPLR § 5225(b)

Commerzbank contends that it should not be required to turn over any funds it holds in the name of JJS, because the funds at issue are on deposit in a German bank at a branch in Germany. The issue of extraterritorial application of N.Y. CPLR § 5225(b) was the subject of a recent opinion of the New York Court of Appeals, responding to a question certified to it by the Second Circuit. Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533, 883 N.Y.S.2d 763, 911 N.E.2d 825 (2009), answering question certified by Koehler v. Bank of Bermuda Ltd., 544 F.3d 78 (2d Cir.2008). The New York Court of Appeals concluded that “a New York court with personal jurisdiction over a defendant may order [that defendant] to turn over out-of-state property regardless of whether the defendant is a judgment debtor or a garnishee.” Id. at 541, 883 N.Y.S.2d 763, 911 N.E.2d 825.

In Koehler, a Pennsylvania citizen obtained a judgment in an action in the United States District Court for the District of Maryland against a Bermuda resident. The plaintiff, Koehler, registered the judgment in the Southern District of New York, then sought to enforce it in that court through a turnover petition directed to the Bank of Bermuda Limited (“BBL”). BBL held stock certificates owned by the judgment debtor. BBL argued that a New York court could not lawfully order a party, other than the judgment debtor himself, to deliver assets into New York, even if the court had personal jurisdiction over the party. The New York Court of Appeals disagreed. The Court distinguished postjudgment enforcement from a prejudgment attachment, which is based on a court's jurisdiction over the property being attached. It concluded that postjudgment enforcement (such as a proceeding under N.Y. CPLR article 52) requires only jurisdiction over persons. “In short, article 52 postjudgment enforcement involves a proceeding against a person—its purpose is to demand that a person convert property to money for payment to a creditor—whereas article 62 attachment operates solely on property, keeping it out of a debtor's hands for a time.” Id. at 538, 883 N.Y.S.2d 763, 911 N.E.2d 825.

The New York Court of Appeals reasoned that when a judgment debtor is subject to a New York court's personal jurisdiction, “that court has jurisdiction to order the judgment debtor to bring property into the state, because the court's authority is based on its personal jurisdiction over the judgment debtor.” Id. at 540, 883 N.Y.S.2d 763, 911 N.E.2d 825. The authority of the court to order a garnishee to bring property into the state is likewise based on personal jurisdiction over that garnishee. BBL argued that where there is no personal jurisdiction over the judgment debtor, the court must have in rem jurisdiction over the property, even if the garnishee is within the court's personal jurisdiction. The Court of Appeals disagreed, finding that personal jurisdiction over the judgment debtor and in rem jurisdiction over the property are not necessary where the court's order is acting on the person of the garnishee.

In this case, Commerzbank does not dispute that this Court has personal jurisdiction over it. Under N.Y. CPLR § 301, 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' here [in NY] as to warrant a finding of its ‘presence’ in this jurisdiction.” Simonson v. Int'l Bank, 14 N.Y.2d 281, 285, 251...