Page 10 - Complex Litigation

S10 | MONDAY, JUNE 2, 2014 | Complex Litigation
| NYLJ.COM

‘Daimler’
Supreme Court decided Daimler AG v. Bau- an overseas bank operates through a New property located overseas is its power over

man, a case that turned on the requirements York branch.
the company that controls those assets.
for a corporation to be subject to general per- As noted above, the Court of Appeals And if, under Daimler, the company is not
« Continued from page S4
sonal jurisdiction.8 Justice Sonia Sotomayor emphasized that personal jurisdiction is the “at home” in New York, then the court lacks
their employees or agents.” While undoubt- wrote that the decision “adopt[ed] a new rule basis for post-judgment execution proceed- that power. As the Supreme Court wrote in
edly helpful to banks subject to expansive of constitutional law” that abandoned “the ings—indeed, that is the whole reason that another recent case, narrowing the standard
cross-border discovery requests, the ruling ‘continuous and systematic’ contacts inquiry it found that it did not need jurisdiction over for speciic jurisdiction, “[h]owever minimal
that denial of the request was a provident that has been taught to generations of irst- the relevant property. Because Daimler limits the burden of defending in a foreign tribunal,
exercise of discretion sets little in the way of year law students.”
the ability of a judgment creditor to establish a defendant may not be called upon to do
a bright line rule. More concretely, the First The plaintiffs in Daimler were 22 Argentin- personal jurisdiction over non-U.S. compa- so unless he has had the ‘minimal contacts’

Department found that “principles of inter- ean citizens who brought suit against the Ger- nies, it could significantly ameliorate the with that State that are a prerequisite to its
national comity” required denying plaintiffs’ man company in the U.S. District Court for the effects of the Koehler rule for banks that are exercise of power over him.”9
motion to compel, in light of the availability of Northern District of California. Plaintiffs made not chartered or headquartered in New York.
Courts have only just begun to sort out
the Hague Evidence Convention as an alterna- claims for crimes against humanity allegedly Of course, Daimler deals only with general, the implications of the decision in Daimler,
tive means of obtaining the same documents, committed in Argentina by a Daimler subsid- not speciic, jurisdiction. But speciic jurisdic- but there is no doubt that its effects will be
the risk of conlict with other nations’ privacy iary. Plaintiffs’ argument focused on Daimler tion requires that the plaintiff show that the wide-reaching. Tightening the jurisdictional
laws, and the fact that the underlying dispute being subject to general personal jurisdic- claims “arise out of” the defendant’s (here, reach of U.S. courts may provide a way of
originated overseas. Even more recently, in In tion in California because a U.S. subsidiary, the garnishee bank’s) activity in the forum avoiding conlicts with foreign law without
re Uni-Rty Corporation
, the same court found Mercedes-Benz USA, had suficient contacts state. The issue has not yet been litigated, reliance on fact-dependent or discretionary
that the separate-entity rule did not apply to in California to support general jurisdiction.
but it seems hard to argue that an action to doctrines like international comity or forum
the case before it, while keeping mum about The Supreme Court rejected this argu- garnish assets held overseas arises out of the non conveniens, doctrines that presuppose
whether the rule still existed.
ment. General jurisdiction cannot be cast bank’s activity in New York. One might try the U.S. court’s power to decide the case. For
One reason for that reluctance may be the upon a party merely because its contacts to point to New York activity that led to the banks that are chartered or headquartered
pendency of yet another certiied question, with a forum are continuous and pervasive, assets ending up in the other jurisdiction— in New York, those doctrines, as well as the
this time in Tire Engineering and Motorola a view that had long been the standard in an underlying business transaction in New separate-entity rule, retain their importance.
Credit. In each of those cases, the Second many states. Instead, the court held that a York, for example. But a claim seeking only But for foreign banks, even those with New
Circuit asked the Court of Appeals directly corporation is only subject to general per- turnover of the asset does not depend on any York branches, the combination of CNMI and

“whether the separate entity rule precludes sonal jurisdiction in the forum state when of those facts: the plaintiff would seek, and Daimler may have addressed many of the
a judgment creditor from ordering a garnish- “afiliations with the State are so continuous under Koehler might be entitled to, turnover concerns raised by Koehler. Daimler sharply
ee bank operating branches in New York to and systematic as to render them essentially regardless of any New York activity. Accord- limits the scope of U.S. jurisdiction over banks
restrain” or turn over “a debtor’s assets held at home in the forum state,” and that “only ingly, the better answer is that such claims with a toehold in New York, but it does not set
in foreign branches of the bank.” (Koehler, a limited set of afiliations” reach that level. do not arise out of New York conduct. That limits on what courts may do to banks that are
recall, had avoided that question, because the The paradigm afiliations are incorporation logic holds especially where the bank is asked subject to their jurisdiction. Thus, Daimler (at
foreign entity had agreed that it was subject to and headquarters, and the “exceptional case” to hand over a debt that is governed by the least, its holding) would not prevent a court
the court’s jurisdiction.) Both of these cases that the court cited to illustrate a possible law of another jurisdiction—linking the debt’s from ordering a New York-chartered or -head-
involved petitions for post-judgment execu- exception involved a company’s wartime governing law to the “activity” out of which quartered bank to move assets into New York.

tions against foreign banks with New York relocation of its headquarters to the forum the claim “arises” is a straightforward way But CNMI does. In some respects, therefore,
branches. In both cases, the creditor sought in which it was sued.
to ensure that courts do not order turnover it is the combination of Daimler—limiting the
property held by a subsidiary or other branch of debts that they cannot discharge.
number of banks that are subject to New York
located outside of New York. The decision on Efect on Cross-Border Garnishment
Creative litigants may attempt to avoid this jurisdiction—and CNMI—limiting what courts
those questions, which could come later this result by arguing that Daimler should be lim- may do if jurisdiction is found—that provides
year, should resolve whether the separate- While Daimler is a watershed for juris- ited to the exercise of personal jurisdiction real protection against over-expansive attach-
entity rule takes precedence over the typical diction generally, it could have special rel- to decide a claim against the defendant (the ment and turnover orders.
personal jurisdiction analysis, and eliminate evance to multi-national banks concerned situation in Daimler). Daimler acknowledges
•••
any lingering doubts about whether the rule about Koehler turnover orders. In particular, that jurisdiction turns on “the relationship ••••••••••••••••••••••••••
exists at all.
it could alleviate some of the threat that a among the defendant, the forum, and the 1. Tire Eng’g & Distrib. v. Bank of China and Motorola
bank will be required to pay over a non-U.S. litigation,” and it could be argued that the Credit v. Std. Chartered, 740 F.3d 108, 110 (2d Cir. 2014).
2. See In re Uni-Rty v. N.Y. Guangdong Fin., 2014 NY
‘Daimler’
debt to a U.S. creditor, without an automatic interest of a garnishee is less than that of a Slip Op. 03030 (May 1, 2014).
corresponding discharge of the debt to the true defendant. These arguments, however, 3. 491 F. Supp. 66, 68 (S.D.N.Y. 1980).
While New York courts have been trying bank’s customer. CNMI rejected turnover in do not address the central rationale for due 4. In re Nat’l Union Fire Ins. Co. of Pittsburgh Pa. v. Adv.
to sort out the implications of treating the that situation only because the relevant New process limits on jurisdiction. As Koehler Emp’t. Concepts, 269 A.D.2d 101 (1st Dep’t 2000).
court’s garnishment authority as coterminous York and non-New York banks were separately acknowledged, the only arguable basis for a 5. 21 N.Y.3d 55 (2013).
6. 38 Misc. 3d 916, 924 (Sup. Ct. N.Y. Cnty. 2012).
with its jurisdiction over parties, the U.S.
incorporated, leaving open the risk where
New York court to order the disposition of
7. 115 A.D.3d 495 (1st Dep’t 2014).
8. 134 S. Ct. 746 (2014).

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