Securities and Exchange Commission v. Brown

• Decision Date: 02 November 1964
• Citation: 235 F. Supp. 57
• Parties: SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Lester D. BROWN, d/b/a L. D. Brown Co., Defendant. Application of COGGESHALL & HICKS.
• Court: U.S. District Court — Southern District of New York

235 F. Supp. 57

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Lester D. BROWN, d/b/a L. D. Brown Co., Defendant Application of COGGESHALL & HICKS.

United States District Court S. D. New York.

November 2, 1964.

Sydney D. Bierman, New York City, for receiver, John C. Lankenau.

Grandefeld & Goodman, New York City, for Coggeshall & Hicks.

TYLER, District Judge.

This is an application to vacate a former order of this court entered at the request of the court-appointed receiver of the assets of defendant Lester D. Brown and staying all actions and proceedings against said defendant. Coggeshall & Hicks, the applicant, had commenced an action in the state court against defendant Brown prior to the aforesaid stay order of this court and seeks to perfect its lien on certain assets under a warrant of attachment in the state case.

A chronology of events here and in the state court will serve to bring the present dispute into focus.

On May 5, 1964, the applicant obtained a warrant of attachment from a justice of the Supreme Court of the State of New York, New York County.

The next day the Sheriff of the City of New York, New York County Division, levied upon property of Brown in the possession of the Grace National Bank in New York City.

On May 11, 1964 an action, in connection with which the prior attachment had been made, was commenced in the Supreme Court of the State of New York, New York County, by the applicant against Brown by personal service of a summons and complaint upon Brown.

On May 20, 1964, the Grace National Bank served a statement upon the Sheriff listing the property of Brown in its custody and possession as of the date of the levy.

On May 28, 1964, the Securities and Exchange Commission commenced an action against Brown in this court.

On June 3, 1964, this court appointed John C. Lankenau, Esq. as receiver and conservator of Brown's assets.

On June 23, 1964, the receiver sought and obtained from this court an order enjoining further proceedings in existing actions against Brown and the initiation of new suits against that defendant. It is this order, of course, which applicant here seeks to modify.

Federal court interference in state court proceedings has long been a fertile source of litigation. In general, the federal courts have wisely attempted to avoid, where possible, needless friction with the proceedings of their state court brethren. Oklahoma Packing Co. v. Oklahoma Gas & Electric Co., 309 U.S. 4, 60 S.Ct. 215, 84 L.Ed. 447, 537 (1939); Toucey v. New York Life Ins. Co., 314 U.S. 118, 62 S.Ct. 139, 86 L.Ed. 100, 137 A.L.R. 967 (1941); 28 U.S.C. § 2283. This policy is designed, of course, to achieve accommodation of occasional apparent conflicts between competing judicial systems which are sovereign in their own spheres.

Frequently, where conflicts of jurisdiction between state and federal judicial systems have emerged, special consideration has been given to the in personam or in rem quality of relief sought. And although it has been held that conflicting in personam actions may proceed in different forums, if one action is in rem or quasi in rem in character and the other in personam, then a clear conflict is said to be presented. Penn General Casualty Co. v. Com. of Penn. ex rel. Schnader, 294 U.S. 189, 55 S.Ct. 386, 79 L.Ed. 850 (1935); Ferguson v. Tabah, 288 F.2d 665 (2d Cir. 1961). In the latter situation, the rule has developed that the court which first acquires jurisdiction over the res shall proceed without any interference from other courts. Kline v. Burke Construction Co., 260 U.S. 226, 43 S.Ct. 79, 67 L.Ed. 226, 24 A.L.R. 1077 (1922).

In my view, the applicant has...