united states district court southern...
Post on 15-Apr-2018
216 Views
Preview:
TRANSCRIPT
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
AMAPROP LIMITED,
Petitioner,
v.
INDIABULLS FINANCIAL
SERVICES LIMITED and ICICI BANK
LIMITED,
Respondents.
:
:
:
:
:
:
:
:
:
:
No. 11 Civ. 2001(PGG)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECLARATION OF BRUCE E. CLARK
I, BRUCE E. CLARK, declare under penalty of perjury as follows:
1. I am member of the bar of this Court and a member of the law firm of
Sullivan & Cromwell LLP, counsel to The Clearing House Association L.L.C. and the Institute
of International Bankers, the proposed Amici Curiae in this action.
2. I submit this declaration in support of the Motion of The Clearing House
Association L.L.C. and the Institute of International Bankers for Leave to File a Brief as Amici
Curiae.
3. Attached hereto as Exhibit 1 is a true and correct copy of the proposed
Brief of Amici Curiae The Clearing House Association L.L.C. and the Institute of International
Bankers in Support of Respondent ICICI Bank Limited.
Case 1:11-cv-02001-PGG Document 42 Filed 02/03/12 Page 1 of 2
-2-
Dated: New York, New York
February 3, 2012
/s/ Bruce E. Clark
Bruce E. Clark
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, NY 10004
Tel: (212) 558-4000
Counsel for Amici Curiae
The Clearing House Association L.L.C.
and the Institute of International Bankers
Case 1:11-cv-02001-PGG Document 42 Filed 02/03/12 Page 2 of 2
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
AMAPROP LIMITED,
Petitioner,
v.
INDIABULLS FINANCIAL
SERVICES LIMITED and ICICI BANK
LIMITED,
Respondents.
:
:
:
:
:
:
:
:
:
No. 11 Civ. 2001(PGG)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
BRIEF OF AMICI CURIAE THE CLEARING HOUSE ASSOCIATION
L.L.C. AND THE INSTITUTE OF INTERNATIONAL BANKERS
IN SUPPORT OF RESPONDENT ICICI BANK LIMITED
Bruce E. Clark
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, New York 10004
Tel: (212) 558-4000
Fax: (212) 558-3588
clarkb@sullcrom.com
Counsel for Amici Curiae
The Clearing House Association L.L.C.
and the Institute of International Bankers
Of Counsel:
H. Rodgin Cohen
David A. Castleman
Robert A. Gomez
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 1 of 22
-i-
TABLE OF CONTENTS
Page
INTRODUCTION ...........................................................................................................................1
STATEMENT OF INTEREST OF AMICI CURIAE ......................................................................1
PRELIMINARY STATEMENT .....................................................................................................4
ARGUMENT ...................................................................................................................................5
I. KOEHLER DID NOT ABROGATE THE SEPARATE ENTITY RULE...........................5
II. NEW YORK COURTS SHOULD CONTINUE TO APPLY THE SEPARATE
ENTITY RULE TO ENSURE DUE PROCESS AND PERMIT
INTERNATIONAL BANKS TO DO BUSINESS IN NEW YORK ..................................9
A. The Bank Is Potentially Exposed to the Risk of Double Liability Because
ICICI May Not Be Able to Discharge Its Liability to Indiabulls After Turning
Over Deposits to Amaprop ..........................................................................................10
1. Double Liability Exists When a Bank Is Required to Turn Over the Bank‘s
Assets to the Judgment Creditor But Is Not Allowed to Reduce Its
Corresponding Liability to the Judgment Debtor ...............................................10
2. Amaprop Fails To Show that ICICI‘s Liability to Indiabulls Would Be
Discharged, and Therefore Fails to Show that Indiabulls Has an Interest in the
Property Amaprop Seeks to Have Turned Over .................................................12
B. Extraterritorial Restraints, Transfers and Turnovers Would Disrupt Banking in
New York .....................................................................................................................14
C. New York Courts Would be Flooded with Actions Having Little or No
Connection to New York .............................................................................................17
CONCLUSION ..............................................................................................................................18
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 2 of 22
-ii-
TABLE OF AUTHORITIES
Page(s) CASES
Allied Maritime, Inc. v. Descatrade SA,
620 F.3d 70 (2d Cir. 2010).....................................................................................................5, 7
Allstate Ins. Co. v. Serio,
261 F.3d 143 (2d Cir. 2001).............................................................................................8, 9, 12
Anderson Nat’l Bank v. Luckett,
321 U.S. 233 (1944) .................................................................................................................12
Citizens Bank of Maryland v. Strumpf,
516 U.S. 16 (1995) ...................................................................................................................10
City of New York v. Venkataram,
No. 06 Civ. 6578(NRB), 2011 WL 2899092 (S.D.N.Y. July 13, 2011)..................................14
Cronan v. Schilling,
100 N.Y.S.2d 474 (Sup. Ct. N.Y. Cnty. 1950), aff’d, 282 A.D. 940 (1st Dep‘t 1953) ..........5, 6
Eitzen Bulk A/S v. Bank of India,
No. 09 Civ. 10118(AKH), 2011 WL 4639823 (S.D.N.Y. Oct. 5, 2011) ...................................8
Global Technology, Inc. v. Royal Bank of Canada,
34 Misc. 3d 1209(A), 2012 WL 89823 (N.Y. Sup. Ct. Jan. 11, 2012) ..............................6, 7, 8
In re Delaney,
256 N.Y. 315 (1931) ................................................................................................................10
John Wiley & Sons, Inc. v. Kirtsaeng,
No. 08 Civ. 7834(GEL), 2009 WL 3003242 (S.D.N.Y. Sept. 15, 2009) ..................................8
JW Oilfield Equip., LLC v. Commerzbank AG,
764 F. Supp. 2d 587 (S.D.N.Y. 2011)........................................................................................8
Koehler v. Bank of Bermuda Ltd.,
12 N.Y.3d 533 (2009) ...................................................................................................... passim
Levin v. Bank of New York,
No. 09 CV 5900 RPP, 2011 WL 812032 (S.D.N.Y. Mar. 4, 2011)...........................................8
Lok Prakashan Ltd. v. India Abroad Publ’ns, Inc.,
No. 00 Civ. 5852(LAP), 2002 WL 1585820 (S.D.N.Y. July 16, 2002) ....................................5
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 3 of 22
-iii-
Parbulk II AS v. Heritage Maritime, SA,
935 N.Y.S.2d 829 (N.Y. Sup. Ct. 2011) ....................................................................................7
People v. Mechanics & Traders’ Sav. Inst.,
92 N.Y. 7 (1883) ......................................................................................................................10
Samsun Logix Corp. v. Bank of China,
929 N.Y.S.2d 202 (N.Y. Sup. Ct. 2011) ................................................................................5, 7
Sanford v. Bennett,
783 N.Y.S.2d 423 (N.Y. App. Div. 2004) .........................................................................13, 14
Sec. Sav. Bank v. California,
263 U.S. 282 (1923) .................................................................................................................12
Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd.,
585 F.3d 58 (2d Cir. 2009), cert. denied, 130 S. Ct. 1896 (2010) .....................................17, 18
Steph-Leigh Assocs., LLC v. Dweck,
914 N.Y.S.2d 679 (N.Y. App. Div. 2011) ...............................................................................13
W. Union Tel. Co. v. Pennsylvania,
368 U.S. 71 (1961) .............................................................................................................11, 12
Winter Storm Shipping, Ltd. v. TPI,
310 F.3d 263 (2d Cir. 2002).................................................................................................9, 17
STATUTES
CPLR § 5209......................................................................................................................10, 13, 14
CPLR § 6204......................................................................................................................10, 13, 14
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 4 of 22
-1-
INTRODUCTION
The Clearing House Association L.L.C. (―The Clearing House‖) and the
Institute of International Bankers (―IIB‖), each an association of major commercial
banks, submits this brief as amici curiae in support of Respondent ICICI Bank Limited
(―ICICI‖). For the reasons provided below, the Court should deny Petitioner Amaprop
Limited‘s (―Amaprop‖) request for an order compelling ICICI to restrain, transfer and
turn over non-U.S. assets to Amaprop. The prospect that an Indian bank may be forced
to turn over millions of dollars of its own assets because it has a branch in New York
would deal a devastating blow to the business of banking in this State.
STATEMENT OF INTEREST OF AMICI CURIAE
The Clearing House was established in 1853. It is the United States‘
oldest banking association and payments company. It is owned by the world‘s largest
commercial banks, which collectively employ 1.4 million people in the United States and
hold more than half of all U.S. deposits.1 The Clearing House is a nonpartisan advocacy
organization representing, through regulatory comment letters, amicus briefs and white
papers, the interests of its member banks on a variety of systemically important banking
issues. Its affiliate, The Clearing House Payments Company L.L.C., provides payment,
clearing, and settlement services to its member banks and other financial institutions,
1 The members of The Clearing House are Banco Santander, S.A.; Bank of
America, N.A.; The Bank of New York Mellon; The Bank of Tokyo-Mitsubishi
UFJ Ltd.; Branch Banking and Trust Company; Capital One, N.A.; Citibank,
N.A.; Comerica Bank; Deutsche Bank Trust Company Americas; HSBC Bank
USA, N.A.; JPMorgan Chase Bank, N.A.; PNC Bank, N.A.; Regions Bank; The
Royal Bank of Scotland N.V.; UBS AG; U.S. Bank N.A.; and Wells Fargo Bank,
N.A.
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 5 of 22
-2-
clearing almost $2 trillion daily and representing nearly half the automated clearing-
house, funds-transfer and check-image payments made in the United States. See The
Clearing House‘s web page at www.theclearinghouse.org.
IIB is the only national association devoted exclusively to representing
and protecting the interests of the international banking community in the United States.
Its membership is comprised of internationally headquartered banking and financial
institutions from over 35 countries around the world doing business in the United States.
IIB‘s mission is to help resolve the many special legislative, regulatory, tax and
compliance issues confronting internationally headquartered institutions that engage in
banking, securities and other financial activities in the United States. Through its
advocacy efforts, the IIB seeks results that are consistent with the U.S. policy of national
treatment and that appropriately limit the extraterritorial application of U.S. laws to the
global operations of its member institutions. ICICI is a member of the IIB.
The Clearing House and IIB regularly appear as amici curiae in cases that
raise significant legal issues related to banking. The Clearing House and IIB have a
substantial interest in this action because of the negative precedent it could set for their
member banks, and for all international banks with offices in New York. Specifically,
The Clearing House and IIB maintain, as they have in similar cases, that New York‘s
well-established separate entity rule was not abrogated by Koehler v. Bank of Bermuda
Ltd., 12 N.Y.3d 533 (2009).
An extraterritorial order compelling ICICI to transfer non-U.S. funds to
ICICI‘s New York branch and then requiring ICICI to turn those assets over to Amaprop
would significantly and adversely affect international banks doing business in New York
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 6 of 22
-3-
and their affiliates outside the jurisdiction, because it would render them answerable in
New York for any bank account or property entrusted to them anywhere in the world by
their customers. Orders such as the one Amaprop seeks here would not only subject any
international bank doing business in New York to the administrative burden and cost of
searching for assets held anywhere in the world in response to a broad extraterritorial
order of restraint, but also to being ordered to deliver funds or other property held outside
New York into New York. Banks would thereby be put in the perilous position, as is the
case here, of violating the laws of other countries—e.g., those regarding privacy,
attachment, priority and a bank‘s duties to its customers—governing its non-New York
operations and establishing its legal duties to its customers who hold interests in property
held by non-New York branches. Most significantly, without any proof that India would
recognize the transfer and turnover of India-held assets as reducing ICICI‘s obligation to
Indiabulls Financial Services Limited (―Indiabulls‖) in the absence of an order from an
Indian court, there is considerable risk that the only victim here would be ICICI.
Banks and other financial institutions maintain not only deposit accounts,
but also hold property for their clients in a variety of capacities—e.g., as secured parties
on loans, as bailees, as trustees and as broker-dealers, just to name a few. In addition,
client accounts or property held by banks could be subject to security agreements, liens
and other property interests of third parties. An order such as the one Amaprop seeks
here would place all of these relationships in jeopardy. Such an order would also create
serious problems for major international banks solely because of their New York
presence and threaten New York‘s position as the world‘s preeminent financial center.
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 7 of 22
-4-
PRELIMINARY STATEMENT
Amaprop, a Cayman Islands company, seeks to enforce a post-judgment
arbitration award against Indiabulls, an Indian company, with assets from Indiabulls‘
Indian bank, ICICI, which operates a New York branch office. The Court confirmed the
arbitration award on September 12, 2011. On the date of the judgment, the award
equaled approximately $48.9 million.
On October 4, 2011, Amaprop sought to enforce the arbitration award by
serving a restraining notice and an information subpoena against ICICI. ICICI responded
to the subpoena, but did not restrain Indiabulls‘ assets in India because doing so would
cause it to violate the laws of India. Without an order from an Indian court with proper
jurisdiction requiring it to restrain and surrender India-held assets, ICICI maintains that it
is unable to restrain or surrender such assets. To date, Amaprop has offered no proof that
ICICI or its New York branch office has ever held any Indiabulls assets in New York.
On December 22, 2011, the Court granted Amaprop‘s application for an
order to show cause as to why an order should not be issued declaring the restraining
notice ―valid and enforceable with respect to all funds and property held in India or
elsewhere belonging to or held for‖ Indiabulls‘ benefit, ―compelling ICICI to transfer all
funds held for Indiabulls to ICICI‘s New York branch‖ office, ―ordering ICICI to turn
over to Amaprop any and all of Indiabulls‘s assets up to the Judgment Amount,‖ and
holding ICICI in contempt of the restraining notice because ICICI allegedly violated the
restraining notice by allowing Indiabulls to withdraw funds from accounts in India (not in
New York) after ICICI was served with the restraining notice.
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 8 of 22
-5-
The Clearing House and IIB respectfully submit this brief in support of
ICICI‘s position that: (1) the separate entity rule continues to apply after Koehler and
bars Amaprop‘s application for post-judgment relief; and (2) the separate entity rule is
the right policy and required as a matter of due process, particularly where the record
does not support the conclusion that Indiabulls‘ property, as opposed to ICICI‘s property,
is even at issue.
ARGUMENT
I. KOEHLER DID NOT ABROGATE THE SEPARATE ENTITY RULE
Koehler did not mention—much less abrogate—New York‘s long
standing separate entity rule. Koehler v. Bank of Bermuda Ltd., 12 N.Y.3d 533 (2009);
see also Cronan v. Schilling, 100 N.Y.S.2d 474, 476 (Sup. Ct. N.Y. Cnty. 1950) (―The
law seems well established that a warrant of attachment served upon a branch bank does
not reach assets held for, or accounts maintained by, the defendant in other branches or in
the home office.‖), aff’d, 282 A.D. 940 (1st Dep‘t 1953). As explained by a New York
State court that explicitly preserved the separate entity rule after Koehler, ―each branch of
a bank is a separate entity, unconcerned with accounts that depositors maintain in other
branches or at the home office.‖ Samsun Logix Corp. v. Bank of China, 929 N.Y.S.2d
202 (N.Y. Sup. Ct. 2011); see also Allied Maritime, Inc. v. Descatrade SA, 620 F.3d 70,
74 (2d Cir. 2010); Lok Prakashan Ltd. v. India Abroad Publ’ns, Inc., No. 00 Civ.
5852(LAP), 2002 WL 1585820, at *1 (S.D.N.Y. July 16, 2002).
The original rationale for the separate entity rule was that a depositor‘s
account records were located only at one branch, and requiring any other branch to
handle an attachment order relating to that account would place ―an intolerable burden
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 9 of 22
-6-
upon banking and commerce.‖ Cronan, 100 N.Y.S.2d at 476. That rationale is still valid
today, but the rule takes on even greater significance in the context of attempted
attachment of overseas assets, as opposed to domestic assets.
Although the continued vitality of the separate entity rule has come under
attack after Koehler, each New York State court to address this issue has explicitly held
that Koehler did not abrogate the separate entity rule. Each court has relied on the same
basic principle that lower courts should not assume that the Court of Appeals overruled a
well-established doctrine of New York State law without so much as mentioning the
doctrine.
In January 2012, Justice Stallman rejected a judgment creditor‘s argument
that Koehler abrogated the separate entity rule. Global Technology, Inc. v. Royal Bank of
Canada, 34 Misc. 3d 1209(A), 2012 WL 89823 (N.Y. Sup. Ct. Jan. 11, 2012). In a
lengthy exposition detailing both the development of the separate entity rule and the
Koehler litigation, the court held that
[w]ithout a clear statement from the Appellate Divisions or the Court of
Appeals, th[e] Court . . . declines to abrogate the separate entity rule so as
to hold that service of a restraining notice upon any bank branch in the
State of New York encompasses all of a bank‘s branches, including those
located outside the State of New York.
Id. at *13. Justice Stallman explained how the ―separate entity rule can be harmonized
with the modern due process framework of personal jurisdiction‖ and the Koehler
decision:
[T]he separate entity rule requires that service of a postjudgment
restraining notice upon a bank must be made upon the bank branch where
the account is maintained. Viewed as a rule for service of postjudgment
enforcement process, service of a restraining notice upon one bank branch
(other than the main branch) would be improper, if the restraining notice
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 10 of 22
-7-
sought to restrain an account that the served bank branch did not maintain,
even if a basis for in personam jurisdiction over the bank was not in
dispute.
Id. Here, similarly, Amaprop‘s restraining notice was not served on the branch of ICICI
that maintains Indiabulls‘ account(s), and is thus improper even if the Court does have in
personam jurisdiction over ICICI.
Similarly, in Parbulk II AS v. Heritage Maritime, SA, Justice Sherwood
explained that Koehler did not ―address[] the ‗separate entity‘ rule.‖ 935 N.Y.S.2d 829
(N.Y. Sup. Ct. 2011). The question certified by the Second Circuit, the court explained,
―did not involve the separate entity rule and the New York Court of Appeals did not
address it.‖ Id. n.1. ―Until the appellate courts in New York hold otherwise,‖ the court
added, ―this court is constrained to decline the invitation to ignore established precedent
applying the separate entity rule.‖ Id. In Samsun Logix Corp. v. Bank of China, Justice
Solomon explained that ―the Court of Appeals in Koehler did not even mention the
separate entity rule, thereby strongly indicating that it had not intended to overrule that
doctrine.‖ 929 N.Y.S.2d 202 (citation omitted).
Further, the Second Circuit has continued to apply the separate entity rule
after Koehler was decided. In Allied Maritime, although the Second Circuit did not
directly analyze whether Koehler altered the separate entity rule, the court applied the
rule ―because Descatrade‘s account with BNP Paribas is in Paris—and only in Paris.‖
620 F.3d at 74. Accordingly, the Second Circuit held, ―that account cannot be attached in
New York.‖ Id. The Second Circuit also expressly ―agree[d] with the District Court that
‗if Allied seeks to attach Descatrade‘s bank accounts, it may do so only at the branch
where the account exists.‘‖ Id. (citation omitted). Other decisions in the Southern
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 11 of 22
-8-
District have continued to apply the separate entity rule after Koehler. See Levin v. Bank
of New York, No. 09 CV 5900 RPP, 2011 WL 812032, at *12 (S.D.N.Y. Mar. 4, 2011)
(―Following‖ the separate entity ―doctrine, service of a writ of attachment on the Bank of
New York‘s Maryland branch is not sufficient to attach assets residing in accounts in
New York State.‖); see also John Wiley & Sons, Inc. v. Kirtsaeng, No. 08 Civ.
7834(GEL)(DCP), 2009 WL 3003242, at *4 (S.D.N.Y. Sept. 15, 2009).
Amaprop is correct that two Southern District cases have found that
Koehler abrogated the separate entity rule. See Eitzen Bulk A/S v. Bank of India, No. 09
Civ. 10118(AKH), 2011 WL 4639823 (S.D.N.Y. Oct. 5, 2011); JW Oilfield Equip., LLC
v. Commerzbank AG, 764 F. Supp. 2d 587 (S.D.N.Y. 2011). Eitzen Bulk, however,
merely involved an information subpoena, and thus there was no need for the court to
determine whether the separate entity rule after Koehler would limit transfer of overseas
assets. See 2011 WL 4639823, at *1. In JW Oilfield, Commerzbank conceded that
―Koehler . . . preempts application of the separate entity rule.‖ See 764 F. Supp. 2d at
595. Here, by contrast, ICICI argues that Koehler did not abrogate the separate entity
rule. Both Eitzen Bulk and JW Oilfield predate Justice Stallman‘s well-reasoned
explanation harmonizing Koehler and the separate entity rule. Global Technology, 34
Misc. 3d 1209(A), 2012 WL 89823. On this issue of New York State law, The Clearing
House and IIB respectfully submit that the Court should follow the precedent set by New
York State courts and hold that the separate entity rule was not abrogated by Koehler.
See, e.g., Allstate Ins. Co. v. Serio, 261 F.3d 143, 150 (2d Cir. 2001) (―Where a decision
is to be made on the basis of state law, . . . the Supreme Court has long shown a strong
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 12 of 22
-9-
preference that the controlling interpretation of the relevant statute be given by state,
rather than federal, courts.‖) (citations omitted).
II. NEW YORK COURTS SHOULD CONTINUE TO APPLY THE
SEPARATE ENTITY RULE TO ENSURE DUE PROCESS AND PERMIT
INTERNATIONAL BANKS TO DO BUSINESS IN NEW YORK
In addition to the recent New York decisions set forth above holding that
the separate entity rule was not abrogated by Koehler, there are compelling policy
reasons that support continuing to apply the separate entity rule in post-judgment
attachment proceedings under Article 52 of the CPLR. First, abandoning the separate
entity rule when a judgment creditor seeks to garnish a foreign bank account subjects the
bank to a significant risk of double liability because the foreign jurisdiction may not
recognize an order discharging the bank‘s liability to the judgment debtor. The risk of
double liability is amplified here by virtue of the fact that nothing in the record
demonstrates that Indiabulls ultimately would have an interest in the assets sought to be
turned over by ICICI, as opposed to ICICI itself having the only interest. Second,
subjecting banks with offices in New York to worldwide collection efforts, rather than
requiring judgment creditors to attach accounts at their situs, would seriously disrupt
banking operations in New York. Indeed, nothing prevents Amaprop, a Cayman Islands
company, from going to India to attach Indiabulls‘ ICICI accounts at their source. Third,
similar to the situation following the Winter Storm decision, allowing New York to
become the worldwide center for post-judgment attachment proceedings would expose
New York courts to a wave of collection proceedings that have nothing to do with New
York or even the United States. See Winter Storm Shipping, Ltd. v. TPI, 310 F.3d 263
(2d Cir. 2002).
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 13 of 22
-10-
A. The Bank Is Potentially Exposed to the Risk of Double Liability
Because ICICI May Not Be Able to Discharge Its Liability to
Indiabulls After Turning Over Deposits to Amaprop
1. Double Liability Exists When a Bank Is Required to Turn Over the
Bank‘s Assets to the Judgment Creditor But Is Not Allowed to
Reduce Its Corresponding Liability to the Judgment Debtor
New York State law guarantees that a bank ―is discharged from [its]
obligation to the [depositor] to the extent of the payment or delivery‖ made pursuant to
an execution order, CPLR § 5209, or an order of attachment, CPLR § 6204. A deposit
creates a bank‘s contractual liability to the depositor; the money deposited is the property
of the bank. See In re Delaney, 256 N.Y. 315, 319 (1931) (―[T]he relation between a
bank and its depositors is that of debtor and creditor. The money deposited with the bank
belongs to the bank and is not the property of the depositor. The property of the
depositor is the indebtedness of the bank to it.‖) (citation omitted); see also Citizens Bank
of Maryland v. Strumpf, 516 U.S. 16, 21 (1995); People v. Mechanics & Traders’ Sav.
Inst., 92 N.Y. 7, 9 (1883). Thus, when the bank account of a depositor is attached by a
judgment creditor, two steps must happen: (1) the bank must turn over the funds, which
belong to the bank, to the judgment creditor; and (2) the bank‘s liability to the depositor
must be reduced by the same amount. When both these steps happen, the bank will be in
the same position as if the judgment debtor had withdrawn the amount to be turned over
and paid the judgment creditor itself. Both these steps are necessary, however, so that it
is the judgment debtor, and not the bank, that is actually paying the judgment creditor.
The CPLR provides for both steps to occur. See CPLR §§ 5209, 6204.
But the CPLR does not necessarily have extraterritorial application.
Therefore, in cases such as this, the bank is subject to the risk that the first step will be
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 14 of 22
-11-
completed without the second step. This would mean that the judgment creditor will
collect from the judgment debtor‘s bank, rather than the judgment debtor, but the bank‘s
corresponding liability to the judgment debtor will not be discharged. If the attachment
order were served on the branch where the account is held, that court could order both a
turnover and provide the corresponding discharge of liability. Here, however, the
accounts at issue are in India, and therefore beyond the reach of this Court. Accordingly,
if the Court orders the bank to turn over the funds, there is no assurance that a court in
India would clear the bank of its liability to its customer. Indeed, Amaprop does not even
suggest that India would do so.2 If such an order is not recognized by an Indian court,
ICICI would be required both to pay the judgment creditor and still be subject to liability
to the judgment debtor for the same amount. The possibility of such divergence exposes
ICICI to the unconstitutional risk of double liability. See W. Union Tel. Co. v.
Pennsylvania, 368 U.S. 71, 75 (1961).3 This constitutional risk can be avoided if the
2 As Dr. B.P. Saraf, Robi Isaac, Vikram Trivedi and Mamta Tiwari explain,
pursuant to Section 44A of India‘s Civil Procedure Code of 1908, only decrees
passed by courts in ―Reciprocating Territories‖ may be enforced in India as if
they had been passed by an Indian court. Saraf Decl. ¶ 10; Isaac Opp‘n Decl. ¶ 9;
Trivedi Op. at pp. 4–5; Tiwari Decl. ¶ 5; Trivedi Supp. Op. at pp. 3–5. India does
not recognize the United States as a ―Reciprocating Territory.‖ Saraf Decl. ¶ 11;
Isaac Opp‘n Decl. ¶ 10; Trivedi Op. at p. 5; Tiwari Decl. ¶ 5; Trivedi Supp. Op. at
p. 5. Accordingly, based on the current record, there is no basis for finding that
India would apply or recognize an order from this Court discharging ICICI of its
obligation to Indiabulls, in India, if ICICI were required to restrain, transfer and
turn over India-held assets to Amaprop.
3 In Western Union, the Supreme Court explained that even where a court has in
rem jurisdiction over property, exposure to multiple liability runs afoul of due
process if ―the holder of such property . . . is compelled to relinquish it without
assurance that he will not be held liable again in another jurisdiction or in a suit
brought by a claimant who is not bound by the first judgment.‖ 368 U.S. at 75
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 15 of 22
-12-
separate entity rule continues to apply. See, e.g., Allstate Ins. Co. v. Serio, 261 F.3d 143,
149-50 (2d Cir. 2001) (―It is axiomatic that the federal courts should, where possible,
avoid reaching constitutional questions.‖) (citations omitted).
2. Amaprop Fails To Show that ICICI‘s Liability to Indiabulls Would
Be Discharged, and Therefore Fails to Show that Indiabulls Has an
Interest in the Property Amaprop Seeks to Have Turned Over
The risk of double liability is heightened here because, even though
Amaprop won an arbitration award against Indiabulls, not ICICI, nothing in the record
demonstrates that Indiabulls has an interest in the asset that Amaprop proposes be turned
over to it by ICICI. This is because the discharge of the bank‘s liability to the judgment
debtor is necessary to establish that the funds being turned over are property in which the
judgment debtor has any interest. Without that discharge, the bank is simply turning over
its own property.
In its papers to the Court, Amaprop repeatedly touts the fact that under
Indian law, as under New York State law, once a deposit is made, the funds become the
property of the bank. See Amaprop Reply Br. at 8 n.8 (Dkt. 35); see also Amaprop Ltr.
to the Court, dated Jan. 13, 2012, at ¶ 6; Merchant Decl. ¶ 7.C.(iii) & Annex. 3. Neerav
Merchant, Amaprop‘s Indian counsel, represents that ―Indian law considers the
relationship between a bank and its customer is that of a debtor and creditor. This has
long been so, as held in the landmark English decision of Foley v. Hill (1848) 9 Eng.
Rep. 1002 (House of Lords); 2 HLC 28, which is followed in India.‖ Merchant Decl.
¶¶ 2, 7.C.(iii) & Annex. 3 (citing Shanti Prasad Jain v. Dir. of Enforcement, AIR 1962
(citing Anderson Nat’l Bank v. Luckett, 321 U.S. 233, 242-43 (1944); Sec. Sav.
Bank v. California, 263 U.S. 282, 286-90 (1923)).
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 16 of 22
-13-
SC 1764, at 324 (―Now the law is well settled that when moneys are deposited in a Bank,
the relationship that is constituted between the banker and the customer is one of debtor
and creditor and not trustee and beneficiary. The banker is entitled to use the monies
without being called upon to account for such use[], his only liability being to return the
amount in accordance with the terms agreed between him and the customer.‖)). The
terms of the depositor‘s contract with the bank undoubtedly were agreed to in India and
are governed by Indian law.
Amaprop‘s argument totally misses the crucial legal issue. As explained
above, New York State law also provides that a bank ―is discharged from [its] obligation
to the [depositor] to the extent of the payment or delivery‖ made pursuant to an execution
order, CPLR § 5209, or an order of attachment, CPLR § 6204. Because a deposit is the
property of the bank, a deposit cannot be subject to an execution, attachment or turnover
order unless it is determined that the judgment debtor has an interest in the deposit. The
CPLR provides that the judgment debtor, not the bank, has the requisite interest by
relieving the bank of the obligation to pay the depositor. See CPLR §§ 5209, 6204. The
CPLR, however, does not necessarily apply in India.
Here, Amaprop bears the burden to demonstrate that the judgment debtor
has an interest in the asset sought to be turned over. See Steph-Leigh Assocs., LLC v.
Dweck, 914 N.Y.S.2d 679 (N.Y. App. Div. 2011) (plaintiff has ―burden of ‗show[ing]
that the judgment debtor‘‖ is ―‗in possession or custody of money or other personal
property in which‘‖ it has an interest) (citation omitted); Sanford v. Bennett, 783
N.Y.S.2d 423, 424 (N.Y. App. Div. 2004) (―Petitioner, as a judgment creditor, had the
burden to show that Bennett, the judgment debtor, is entitled to possession of the money
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 17 of 22
-14-
received by respondents or that her rights to the money are superior to those of
respondents.‖) (citations omitted). Amaprop has not carried its burden. It has failed to
provide the Court with any proof—indeed, not even so much as to suggest—that India
has any laws that provide the same protection as CPLR §§ 5209 and 6204 or that India
would apply or recognize such an order by this Court. Without the slightest evidence
that, under Indian law, ICICI would be discharged from its obligation to Indiabulls if the
Court ordered ICICI to restrain, transfer and turn over India-held assets to Amaprop,
there is no basis for finding that ICICI would be relieved of its obligation to Indiabulls if
the Court were to grant Amaprop the relief it seeks.4 On the current record, the only
property interest the Court could find implicated by the relief Amaprop seeks is ICICI‘s.
Thus, Amaprop has failed to establish that the relief it seeks is appropriate satisfaction of
its asserted claims against Indiabulls. The fact that Amaprop has not even attempted to
do so speaks volumes.
B. Extraterritorial Restraints, Transfers and Turnovers Would Disrupt
Banking in New York
From a practical standpoint, the type of extraterritorial restraint, transfer
and turnover Amaprop seeks clearly would disrupt the banking system in New York.
4 In a footnote in its January 13, 2012 letter to the Court, Amaprop draws attention
to the fact that in City of New York v. Venkataram, the State Bank of India
(―SBI‖) honored a restraining order issued in connection with a judgment by a
Southern District court and turned over restrained funds to a judgment creditor.
No. 06 Civ. 6578(NRB), 2011 WL 2899092, at *5 (S.D.N.Y. July 13, 2011). But
Amaprop omits a crucial detail: ―‗the Indian court authorized SBI to release funds
to be applied to his credit against the outstanding judgment in favor of the City of
New York.‘‖ Id. n.7 (emphasis added) (citation omitted); see also id. at *3 (―the
City informed us that the Indian tribunal . . . authorized SBI to release the funds
in one of Venkataram‘s accounts, and that SBI in fact transferred those funds . . .
to the City‖) (emphasis added).
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 18 of 22
-15-
Orders requiring international banks to restrain, transfer and turn over assets held outside
New York merely as a result of the bank‘s presence in New York would increase costs
and risks both to banks and their customers.
When presented with extraterritorial orders to restrain, transfer and turn
over assets, like those Amaprop seeks here, banks would be forced to devote significant
resources to the task of compliance merely as a price of having operations in New York.
Global banks in New York would be faced with the prospect of searching their entire
international organization to determine whether property belonging to a defendant could
be found at any of their branches anywhere in the world. Such a search itself would
potentially violate foreign laws. After doing that, they would need to restrain any assets
they found. Even in an era of computer technology and electronic records, these are very
burdensome tasks. Moreover, after restraining any non-U.S. assets, global banks would
have to expend additional time and effort transferring and turning the assets over in New
York. All these operations would impose substantial additional costs and risks on global
banks merely because they have operations in New York.
In addition, international banks with New York offices would be forced to
become frequent participants in cross-border legal disputes, as this case amply
demonstrates. Not only would they be required to deal with court orders issued in New
York, they would also be forced into legal disputes in other jurisdictions where
defendants may have property. These disputes could involve the debtors‘ efforts to
restrain the banks from transferring deposits, and the banks‘ efforts to be compensated for
any loss they otherwise would suffer. In such cases, resources of both the foreign branch
and the New York branch of the international bank would be drawn into a complex cross-
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 19 of 22
-16-
border dispute regarding, inter alia, the relationship between the branches and the
conflicting laws of the two jurisdictions.
Making matters worse, customers will become reluctant to deposit or
otherwise have property in the possession of banks that have New York branches because
of the additional risk to which they would be exposed. As a result, foreign banks will
lose business based on their decision to maintain a New York presence. International
customers may prefer to bank at U.S. institutions without a New York presence out of
fear that a bank‘s New York presence may threaten their foreign property. Foreign banks
that could avoid having a presence in New York would do so to minimize risk, expense
and loss of customers.
In the end, extraterritorial restraints and turnover orders would increase
pressure on non-U.S. banks not to operate in New York. Such pressure would come
internally—due to the increased risk and cost of doing business under such a legal
regime—and externally from foreign customers who do not want their assets exposed in
New York. This would not only harm New York‘s economy, it would also affect
customers of banking services who benefit from the choice and competition fostered by
the wide array of financial institutions presently in New York. New York courts surely
do not wish to send the message to financial institutions that their presence in New York
uniquely exposes them to double liability and to becoming embroiled in third-party,
cross-border disputes to which neither they nor New York have any connection.
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 20 of 22
-17-
C. New York Courts Would be Flooded with Actions Having Little or No
Connection to New York
The fact that so many international banks have a New York presence,
coupled with the expansive issuance of extraterritorial asset restraints and turnover
orders, would invite, indeed strongly encourage, plaintiffs to come to New York to
restrain assets located anywhere in the world and, ultimately, collect judgments. New
York courts would be overwhelmed with proceedings that arise from controversies
having nothing to do with New York and where the core of the dispute—the assets—are
held in another country.
A recent example demonstrates the reality of this concern. In Winter
Storm Shipping, Ltd. v. TPI, a Second Circuit panel authorized New York federal courts
to order attachments in maritime cases to reach electronic fund transfers on the basis that
such transfers momentarily passed through an ―intermediary bank‖ in New York. 310
F.3d 263 (2d Cir. 2002). Due in part to the dramatic rise of cases based on Winter Storm
and filed in the Southern District, with virtually no ties to New York, the Second Circuit
overruled Winter Storm in Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585
F.3d 58 (2d Cir. 2009), cert. denied, 130 S. Ct. 1896 (2010).
Before being overruled, Winter Storm wreaked havoc on New York
federal courts and threatened the efficiency of New York‘s banking industry. Indeed, in
Jaldhi, the Second Circuit lamented the fact that Winter Storm caused an explosion in
maritime attachment cases in New York federal courts—at one time ―constitut[ing] 33%
of all lawsuits filed in the Southern District.‖ 585 F.3d at 62. The flood of maritime
attachment cases following Winter Storm undermined the efficiency of New York‘s
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 21 of 22
-18-
international funds transfer business by burdening it with uncertain and unpredictable
litigation. ―[L]eft uncorrected,‖ the Second Circuit explained, ―[u]ndermining the
efficiency . . . of fund transfers in New York could . . . damage New York‘s standing as
an international financial center.‖ Id. (citations omitted). A ruling in favor of Amaprop
would have the same effect here.
CONCLUSION
For the reasons provided above, The Clearing House Association L.L.C.
and the Institute of International Bankers respectfully urge the Court to deny and dismiss
Amaprop‘s request for an order compelling ICICI to restrain, transfer and turn over non-
U.S. assets to Amaprop.
Dated: New York, New York
February 3, 2012
/s/ Bruce E. Clark
Bruce E. Clark
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, New York 10004
Tel: (212) 558-4000
Fax: (212) 558-3588
clarkb@sullcrom.com
Counsel for Amici Curiae
The Clearing House Association L.L.C.
and the Institute of International Bankers
Of Counsel:
H. Rodgin Cohen
David A. Castleman
Robert A. Gomez
Case 1:11-cv-02001-PGG Document 42-1 Filed 02/03/12 Page 22 of 22
top related