MOTOROLA CREDIT CORPORATION v. KEMAL UZAN

• Decision Date: 26 October 2003
• Docket Number: 02 Civ. 666 (JSR)
• Citation: 288 F. Supp. 2d 558
• Parties: MOTOROLA CREDIT CORPORATION and NOKIA CORPORATION, Plaintiffs, v. KEMAL UZAN, et al., Defendants.
• Court: Texas Court of Appeals

288 F. Supp. 2d 558 MOTOROLA CREDIT CORPORATION and NOKIA CORPORATION, Plaintiffs,

v.

KEMAL UZAN, et al., Defendants 02 Civ. 666(JSR)UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORKOctober 26, 2003, Decided October 28, 2003, Filed

For Motorola Credit Corporation, PLAINTIFF: Steven K Davidson, John F O’Connor, Howard H Stahl, Gordon M Clay, Steptoe & Johnson, LLP, Washington, DC USA.Paul J Fishman, Mishell B Kneeland, Friedman, Kaplan, Seiler & Adelman, LLP, New York, NY USA.

For Nokia Corporation, PLAINTIFF: Michael N Donofrio, Jason Brown, Neal N Beaton, Holland & Knight, LLP, New York, NY USA.

For Kemel Uzan, Cem Cengiz Uzan, Murat Hakan Uzan, Melahat Uzan, Aysegul Akay, DEFENDANTS: Kenneth M Bialo, Emmet, Marvin and Martin, LLP, New York, NY USA.

For Kemel Uzan, Cem Cengiz Uzan, Murat Hakan Uzan, Melahat Uzan, Aysegul Akay, Antonio Luna Betancourt, Unikom Iletism Hizmetleri Pazarlama AS, Standart Pazarlama AS, Standart Telekomunik asyon Bilgisayar Hizmetleri AS, DEFENDANTS: Robert F Serio, Mark B Holton, Thomas C Sheehan, Gibson, Dunn & Crutcher, LLP, New York, NY USA.

For Keith J Bane, COUNTER-DEFENDANT: Brian Vincent Otero, Hunton & Williams, New York, NY USA.

JUDGES: JED S. RAKOFF, U.S.D.J.

JED S. RAKOFF

[*560] MEMORANDUM

JED S. RAKOFF, U.S.D.J.

By Order dated October 19, 2003, the Court denied without prejudice the motion of plaintiffMotorola Credit Corporation(“Motorola”) seeking to require JP Morgan Chase, ABN AMRO Bank, N.V., UBS AG, Credit Suisse, Credit Lyonnais, and certain subsidiaries of HSBC HoldingsPLC n1 to transfer into this Court’s registry the funds held in accounts outside this District belonging to the individual defendants and the companies they control.This Memorandum briefly states the reasons for that ruling.

The relief Motorola seeks is in aid of enforcing its $ 4.2 billion money judgment against the individual defendants.The application is therefore subject to Rule 69(a), Fed. R. Civ. P., which states:

Process to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise.The procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held, existing at the time the remedy is sought, except that any statute of the United States governs to the extent that it is applicable.In aid of the judgment or execution, the judgment creditor or a successor in interest when that interest appears of record, may obtain discovery from any person, including the judgment debtor, in the manner provided in these rules or in the manner provided by the practice of the state in which the district court is held.

The immediate difficulty in applying this Rule to Motorola’s motion arises from the fact that, even though Motorola has served process on the principal New York (and United States) office of each of the respondent banks, the affected accounts are believed to be held in the banks’ foreign branches.This implicates the doctrine of New York law known as the “separate entity rule,” which in its pristine form provides that “each branch of a bank is treated as a separate entity... in no way concerned with accounts maintained by depositors in other branches or at a home office.”Lok Prakashan LTD v. India Abroad Publications, Inc., 2003 U.S. Dist. LEXIS 4793, 2002 WL 1585820, at *1(S.D.N.Y.2002)(citations omitted);Cronan v. Schilling, 100 N.Y.S.2d 474, 476(Sup. Ct. N.Y. Cty., 1950).Under this doctrine, the “mere fact that a bank may have a branch within New York is insufficient to render accounts outside of New York subject to attachment.”National Union Fire Insurance Company of Pittsburgh, PA. v. Advanced Employment Concepts, Inc., 269 A.D.2d 101, 703 N.Y.S.2d 3(1st Dept.2000).

The putative purpose of this doctrine is to avoid undue interference with ordinary banking transactions.As stated in Cronan, 100 N.Y.S.2d at 474: “Unless each branch of a bank is treated as a separate entity for attachment purposes, no branch could safely pay a check drawn by its depositor without checking with all other branches and the main office to make sure that no warrant of attachment [*561] had been served upon any of them.” n2 But in Digitrex, Inc. v. Johnson, 491 F. Supp. 66(S.D.N.Y.1980), Judge Knapp of this Court opined that modern bank computerization had rendered this fear obsolete, thus casting doubt on the continued viability of the separate entity doctrine.Id. at 68-70.In the wake of Digitrex, the courts of New York began to re-examine the separate entity rule and loosen its strictures.See, e.g., Therm-X-Chemical & Oil Corp. v. Extebank, 84 A.D.2d 787, 444 N.Y.S.2d 26(2d Dep’t1981);Carrick Realty Corp. v. Flores, 157 Misc. 2d 868, 598 N.Y.S.2d 903, 907(Civ. Ct. N.Y. Cty.1993).It now appears clear, for example, that a restraining notice served on a bank’s main New York office may in appropriate circumstances restrain accounts in all branches of that bank located in the issuing court’s geographic jurisdiction.SeeLimonium Maritime, S.A. v. Mizushima Marinera, S.A., 961 F. Supp. 600, 607(S.D.N.Y.1997)(citing cases);Fidelity Partners, Inc. v. Philippine Export and Foreign Loan Guarantee Corp., 921 F. Supp. 1113, 1119-20(S.D.N.Y.1996).

Nonetheless, counsel for Motorola have not cited a single case in which a New York court has so extended the separate entity rule as to permit restraint of accounts held in a bank’s foreign branches pursuant to a restraining order served on the bank’s office in New York, even when that office is the bank’s principal United States, or worldwide, headquarters.Nor is this surprising, since 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.While, on the other hand, it may appear somewhat anomalous that banks that trumpet their account-holders’ ability to access their funds instantaneously anywhere in the world can still rely on the vestiges of the separate entity rule to shield such accounts from attachment by judgment creditors, it is not for this Court to limit the separate entity doctrine beyond...