Mones v. Commercial Bank of Kuwait, S.A.K.

Decision Date31 July 2007
Docket NumberNo. 18 Misc. 0302(SAS).,18 Misc. 0302(SAS).
Citation502 F.Supp.2d 363
PartiesBruce E. MONES, Petitioner, v. COMMERCIAL BANK OF KUWAIT, S.A.K., Respondent.
CourtU.S. District Court — Southern District of New York

Charles H. Camp, Esq., Law Offices of Charles H. Camp, Washington, D.C., for Petitioner.

George F. Hritz, Esq., Jeffrey D. Ratner, Esq., Hogan & Hartson, L.L.P., New York City, for Respondent.

OPINION AND ORDER

SCHEINDLIN, District Judge.

I. INTRODUCTION

On December 4, 2003, Bruce E. Mones filed a Notice of Petition of Issuance of Order for Payment or Delivery of Property of Judgment Debtors in the Possession of Commercial Bank of Kuwait, S.A.K. ("Petition for Turnover Order"). The purpose of the Petition is to enforce a judgment rendered by the United States District Court for the District of Columbia on June 18, 2003, against the Limited Partner Judgment Debtors ("debtors").1 Initially, this Court granted the Petition for Turnover Order, but subsequently vacated that judgment on the ground that the funds sought by Mones were held in Kuwait and this Court lacked authority to direct the Commercial Bank of Kuwait ("CBK") to transfer the assets of the judgment debtors from Kuwait into New York.2 Mones appealed the judgment to the Second Circuit Court of Appeals, which declined to hear the merits of the appeal pending this Court's determination of whether it has personal jurisdiction over CBK.3 For the following reasons, this Court does not have jurisdiction over CBK.

II. BACKGROUND4

CBK is headquartered in Kuwait. For many years, it maintained a New York branch which conducted regular banking operations. In 2003, however, CBK's Board of Directors ordered the New York branch to close. Following the Board's directive, the New York branch began to liquidate its, assets on June 30, 2003, and had completed transferring all outstanding credit balances pursuant to customer instructions by mid-July.5 CBK's own funds were retained at the National Bank of Kuwait in New York through the completion of the liquidation proceedings and the final closing of the CBK branch which occurred on March 31, 2004. CBK maintained that account through July 5, 2005.6

In furtherance of the liquidation process, CBK took a number of steps to comply with pertinent regulations. It notified the Office of the Comptroller of the Currency (the "OCC") in Washington, D.C., and published various notices in local newspapers of the liquidation proceedings pursuant to section 3102 of Title 12 of the United States Code.7

On November 30, 2003, CBK rented a temporary administrative office in New York complete with a telephone and fax line ("liquidation office").8 The initial lease on that space continued through February 28, 2004, which CBK renewed at the end of February for an additional month.9 Despite renting the liquidation office, CBK did not vacate its original banking office at 1120 Avenue of the Americas until February 28, 2004.10 CBK thus maintained two offices in New York from December 1, 2003 through February 28, 2004.

To handle the liquidation and closure, CBK maintained two full time employees: Elham Mahfouz, the General Manager of the New York branch, and Aralsothy Shanmugam, the Financial Controller for the New York branch.11 In November 2003, Mahfouz returned to Kuwait to resume her full-time duties at CBK's headquarters, leaving Shanmugam as the sole employee handling the liquidation and closure of the bank's New York branch. On January 16, 2004, over a month after Mones filed this action, the OCC formally recognized CBK's liquidation.12 Shanmugam continued to work on other aspects of the bank's closure through March 2004.13 Mones served process on CBK in Kuwait via DHL Express on December 11, 2003.

Kuwait signed the Hague Convention on the, Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters ("Convention") in 2002 as a non-member state of the Hague Conference on Private International Law (the "Conference").14 The Convention provides means for international service for dispute resolution through various channels, including service by mail under Article 10.15 Article 10 states in relevant part: "Provided the State of destination does not object, the present Convention shall not interfere with & a) the freedom to send judicial documents, by postal channels, directly to persons abroad ...." CBK claims that Kuwait did in fact object to service by mail of judicial documents when it joined the Convention. As evidence of Kuwait's objections, CBK cites to Kuwaiti Law No. 7 of 2002, which approved the accession to the Convention on the Service Abroad of Documents in Civil and Commercial Matters.16 This law does in fact state Kuwait's objection to service by mail. However, it appears that these objections were never received by the Ministry of Foreign Affairs of the Netherlands (the "Ministry"), the agency which served as the secretary to the Convention at the time Kuwait joined the Convention. Indeed, it was not until Kuwait filed, or perhaps re-filed, its objection to service by mail with the Ministry on June 29, 2005, that the Ministry formally recognized this objection.17

Kuwait, however, notified the Ministry of its objection to service by mail prior to June 29, 2005. In mid-2003, the Convention updated its service of process manual by forwarding a questionnaire to every signatory country, asking each country to provide the Ministry with updated information, declarations, and objections.18 Kuwait's response, which was due on September 15, 2003, clearly indicated the country's objection to service of process by mail.19 However, the Convention did not publish a summary of the responses to the questionnaires until February, 2004, more than one month after Mones had served process on CBK.20

III. LEGAL STANDARDS
A. Service of Process

The acceptable methods of service of a summons and complaint in federal court are set forth in Rule 4 of the Federal Rules of Civil Procedure. Rule 4(h) provides for service upon corporations and associations, stating that service "shall be effected ... (2) in a place not within any judicial district of the United States in any manner prescribed for individuals by subsection (f)." Under Rule 4(f), service may be effected outside the United States "by any internationally agreed means reasonably calculated to give notice, such as those means authorized by the Hague Convention[.]"

"The [Hague] Convention provides simple and certain means by which to serve process on a foreign national."21 The Second Circuit has recognized that "[t]he Hague Convention provides for several alternate methods of service: (1) service through the Central Authority of member states; (2) service through consular channels; (3) service by mail if the receiving state does not object; and (4) service pursuant to the internal laws of the state."22

B. Personal Jurisdiction

To determine personal jurisdiction, a court engages in a two-part analysis. First, it must determine whether there is jurisdiction over the defendant under the relevant forum state's laws.23 Second, it must determine whether an exercise of jurisdiction under these laws is consistent with federal due process requirements.24 "The burden of proving jurisdiction is on the party asserting it."25

New York subjects a foreign corporation to general personal jurisdiction if it is "doing business" in the state.26 Under this test, "a foreign corporation is amenable to suit in New York if it is `engaged in such a continuous and systematic course' of `doing business' here as to warrant a finding of its `presence' in this jurisdiction."27 "[T]he term `doing business' is used in reference to foreign corporations to relate to `the ordinary business which the corporation was organized to do' .... It is not the occasional contact or simple collateral activity which is included."28 "The doing business standard is a stringent one because a corporation which is amenable to the [c]ourt's general jurisdiction `may be sued in New York on causes of action wholly unrelated to acts done in New York.'"29

"For the purposes of the jurisdictional analysis under New York State law the [c]ourt focuses specifically on the [d]efendants' amenability to suit at the time the lawsuit was filed, not when the claim arose (and not subsequent changes in their status)."30 To determine whether a foreign corporation is doing business in New York, courts focus on traditional criteria including: (1) whether the foreign corporation has an office in the state; (2) whether it has any bank accounts or other property in the state; (3) whether it has a phone listing in the state; (4) whether it does any public relations work in the state; and (5) whether it has employees who permanently work in the state.31 No single criterion is determinative.32 The general jurisdiction inquiry thus looks to the totality of the defendant's contacts and "permits a court to exercise its power in a case where the subject matter of the suit is unrelated to those contacts."33

If a defendant is found to be "doing business" in the State, the court must then consider whether the exercise of jurisdiction will offend the Due Process clause under the Fourteenth Amendment, which permits a state to exercise personal jurisdiction over a non-resident defendant with whom it has minimum contacts so long as the exercise of jurisdiction "does not offend traditional notions of fair play and substantial justice."34 To establish the necessary minimum contacts, the plaintiff must show that the defendant "purposefully availed" itself of the privilege of doing business in the State and thus could foresee being haled into court.35

IV. DISCUSSION
A. Service of Process

CBK claims that service of process was insufficient under Article 10(a) of the Convention because Kuwait had properly objected to service by mail pursuant to Article 21,36 Article 21 of the Hague Convention states in relevant part: "Each ...

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