Strachman v. the Palestinian Auth.

• Decision Date: 30 March 2010
• Citation: 2010 N.Y. Slip Op. 02673,73 A.D.3d 124,901 N.Y.S.2d 582
• Parties: David STRACHMAN, as Administrator of the Estate of Yaron Ungar, et al., Plaintiffs–Respondents,v.The PALESTINIAN AUTHORITY, etc., et al., Defendants,The Palestinian Pension Fund for the State Administrative Employees of the Gaza Strip, Defendant–Appellant.
• Court: New York Supreme Court — Appellate Division

73 A.D.3d 124

901 N.Y.S.2d 582

2010 N.Y. Slip Op. 02673

David STRACHMAN, as Administrator of the Estate of Yaron Ungar, et al., Plaintiffs–Respondents,

v.The PALESTINIAN AUTHORITY, etc., et al., Defendants,The Palestinian Pension Fund for the State Administrative Employees of the Gaza Strip, Defendant–Appellant.

Supreme Court, Appellate Division, First Department, New York.

March 30, 2010.

Morrison & Foerster LLP, New York (Charles L. Kerr, Mark David McPherson and Adam Jackson Heintz of counsel), for appellant.Jaroslawicz & Jaros, LLC, New York (Robert J. Tolchin of counsel), for respondents.PETER TOM, J.P., ANGELA M. MAZZARELLI, EUGENE NARDELLI, JAMES M. CATTERSON, KARLA MOSKOWITZ, JJ.CATTERSON, J.

The sole issue in this appeal is whether the plaintiffs, judgment creditors of the Palestinian Authority (hereinafter referred to as “ PA”) and the Palestine Liberation Organization (hereinafter referred to as “ PLO”), have a right to a jury trial in a declaratory judgment action. The action seeks to establish the PA's ownership of more than $100 million in securities and debt instruments frozen by Swiss American Securities Inc., (hereinafter referred to as “SASI”) in New York. Thus, as set forth below, this Court's task is to find an 1894 analog for a claim of money-laundering designed to interfere with the execution of a judgment.

The plaintiffs are the survivors and the administrator of the estate of United States citizen Yaron Ungar who was murdered with his pregnant wife in a terrorist machine-gun attack in June 1996 in Israel. The plaintiffs alleged that the attack was carried out by members of Hamas acting under the command of the PA and the PLO. In July 2004, the plaintiffs obtained a default judgment against the PA and PLO in an amount of $116,409,123. See Estate of Ungar v. Palestinian Auth., 325 F.Supp.2d 15 (D.R.I. 2004), aff'd, 402 F.3d 274 (1st Cir. 2005), cert. denied, 546 U.S. 1034, 126 S.Ct. 715, 163 L.Ed.2d 575 (2005).

In 2005, the federal judgment was domesticated in New York. The federal court issued a restraining order and injunction, and the plaintiffs served information subpoenas and restraining notices pursuant to CPLR 5222 on a number of entities believed to be holding assets of the PA and the PLO. The notices stated that the federal injunction applied to all assets of the PA and the PLO “however titled.” In response to the notice, SASI froze more than $100 million in accounts titled variously as the Palestinian Pension Fund for the State Administrative Employees and the Palestinian Pension Fund for the State Administrative Employees of the Gaza Strip.

On or about December 7, 2005, defendant, the Insurance and Pension Fund (hereinafter referred to as “IPF”) appeared for the first time and asserted that the names on the account are aliases of the IPF not the PA; and that IPF is an independent entity. IPF moved to vacate the restraining order. The plaintiffs did not respond but instead filed for a turnover proceeding against SASI, and filed a sheriff's levy co-extensive with the proceeding. The plaintiffs further filed this declaratory judgment action seeking a declaration that the assets held by SASI belong to the PA not IPF, and alleging that the PA and the IPF engaged in a fraudulent scheme to prevent the Ungars from enforcing their judgment against the assets frozen by SASI.

In or around March 2006, the court deemed the motion to vacate the restraining notice moot in view of the fact that the plaintiffs had withdrawn it. IPF moved to dismiss the turnover proceeding and the court granted the motion.

Discovery in this declaratory judgment action was completed in February 2007, and the plaintiffs filed a corrected note of issue demanding a trial by jury on all issues. Four months later, on May 30, 2007, defendant Palestinian Pension Fund for the State Administrative Employees of the Gaza Strip (hereinafter referred to as “the Gaza Fund”), moved to strike the plaintiffs' demand for a jury trial.¹ By decision and order entered May 7, 2008, the court denied the defendant's motion to strike the jury demand.

For the reasons set forth below, we affirm. CPLR 4101 provides for a jury trial in “an action in which a party demands and sets forth facts which would permit a judgment for a sum of money only” or in “any other action in which a party is entitled by the constitution or by express provision of law to a trial by jury.”

The declaratory judgment action was unknown at the time of the adoption of the 1894 Constitution which “fr[o]ze” the right to a jury trial to those types of cases in which it was recognized at common law or by statute as of the adoption of the Constitution. See Independent Church of Realization of Word of God v. Board of Assessors of Nassau County, 72 A.D.2d 554, 554, 420 N.Y.S.2d 765, 765 (2nd Dept. 1979).

However, the right to trial by jury is not limited to those instances in which it was used as of 1894 but extends to cases that are analogous to those which were traditionally tried by jury. Id., citing Wynehamer v. People, 13 N.Y. 378, 426 (1856) and Colon v. Lisk, 153 N.Y. 188, 193, 47 N.E. 302, 304 (1897). Hence, as the motion court correctly noted, it is necessary to examine which of the traditional common-law actions would most likely have been used to present the instant claim had the declaratory judgment action not been created. See Siegel, New York Practice, § 439; see also James v. Powell, 25 A.D.2d 1, 266 N.Y.S.2d 245 (1st Dept. 1966), rev'd on other grounds, 19 N.Y.2d 249, 279 N.Y.S.2d 10, 225 N.E.2d 741 (1967).

It then follows that if the traditional action that most likely would have been used is an action at law, then the plaintiff will be entitled to a jury trial. See Matter of DES Mkt. Share Litig., 79 N.Y.2d 299, 304–305, 582 N.Y.S.2d 377, 380, 591 N.E.2d 226, 229 (1992); if the traditional action that would have been presented is equitable, there is no right to a jury trial. Independent Church of the Realization of the Word of God, Inc., 72 A.D.2d at 555, 420 N.Y.S.2d at 765–766.

While the parties agree on the applicable standard, on appeal they disagree, as they did before the motion court, as to which traditional action would have been used instead of the instant declaratory judgment action. The defendants argue that this is essentially a “quiet title” claim and thus the action lies in equity because disputes concerning ownership of property including personal property such as securities were treated as equitable claims.

The plaintiffs assert that the gravamen of their complaint is that the Gaza Fund is a fictitious name used by the judgment debtor PA to shield PA assets. More significantly, they allege that the IPF's claim that it owns the assets is false and an attempt to mislead the court and to unlawfully prevent the plaintiffs from enforcing their judgment against the PA. Thus, the plaintiffs argue that the motion court held correctly that the action is substantively analogous to an action at law for tortious interference with the enforcement of a judgment. We agree.

The plaintiffs further assert correctly that a cause of action for unlawful interference with enforcement of a judgment has long been recognized in New York, and that it was always an action triable by a jury. See Yates v. Joyce, 11 Johns. 136 (1814) (party liable for damages after its fraudulent misconduct where plaintiff acquired a legal lien on a property and injury to property was done with a full knowledge of the plaintiff's rights); see also Quinby v. Strauss, 90 N.Y. 664 (1882). In Quinby, an action for damages was held maintainable against a judgment debtor and his attorney for conspiring to keep defendant's property out of the reach of his creditors by securing fictitious debts under which the property was sold to his attorney.

There is no question, therefore, that the cause of action existed at the time that the Constitution was enacted in 1894. Nor is there any doubt that the action was an action at law and thus, triable by a jury. See Quinby, 90 N.Y. at 664–665.

In James v. Powell, this Court further explained:

“At common law, whoever by improper means interfered with the execution of a judgment was liable for the damage he caused to the judgment creditor ( Mott v. Danforth, 6 Watts 304 (Pa.); Collins v. Cronin, 117 Pa. 35, 11 A. 869). The right of action [for unlawful interference with execution on a judgment] has been recognized and discussed at length by the United States Supreme Court in Findlay v. McAllister, 113 U.S. 104, 5 S.Ct. 401, 28 L.Ed. 930 and is undoubtedly part of the common law of this state ( Quinby v. Strauss, 90 N.Y. 664)” ( James, 25 A.D.2d at 2, 266 N.Y.S.2d at 247).

This Court then discussed the measure of damages for such an action:

“In any event, this is neither a suit on the judgment nor for the same relief, and not even specifically to collect it. It is for damages resulting from a tort. The amount of the judgment is not the measure of the damages; it is rather the loss or expense caused by the interference ( Penrod v. Mitchell, 8 Serg. & R. 522 (Pa)). Conceivably, this could embrace the judgment itself ( see Quinby v. Strauss, supra), in which event satisfaction of the judgment so obtained would also operate to satisfy the original judgment.” 25 A.D.2d at 4, 266 N.Y.S.2d at 248.

See also Arrow Communication Labs. v. Pico Prods., 219 A.D.2d 859, 632 N.Y.S.2d 903 (4th Dept. 1995) (the trial court properly denied defendant's motion to strike plaintiff's jury demand; although plaintiff sought equitable relief in the form of a declaratory judgment and an accounting, underlying controversy sought monetary damages); Hebranko v. Bioline Labs., 149 A.D.2d 567, 540 N.Y.S.2d 264 (2nd Dept. 1989) (plaintiff's allegation of facts upon which damages alone will afford full relief entitled him to jury trial notwithstanding inclusion of a request for equitable relief).

We reject the dissent's contention that any reliance on Quinby is...