Page 12 - Alternative Dispute Resolution

S12 | MONDAY, MARCH 28, 2016 | Alternative Dispute Resolution
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Asset Attachment
on this question, and district courts within favor of the moving party.12 Failure to establish between the parties during the pendency of

the circuit have recently reached divergent any of these elements will result in the denial the international arbitration proceedings. In
conclusions.7
of preliminary relief.13
granting the preliminary injunction, the Valucine
« Continued from page S2
Assuming that §1782 will support an appli- Matter of Sojitz v. Prithvi Information Solu- court applied the traditional equitable factors
against the Bank of New Zealand in an action cation for an international arbitration proceed- tions14 is one of the leading cases addressing in determining whether preliminary relief would
that would be commenced in New Zealand. ing, one must then show that the requested preliminary attachment of international prop- be appropriate: whether the plaintiff would suf-
Although the court ultimately denied the peti- discovery is “for use” in a foreign proceeding. erty in aid of arbitration under CPLR §7502(c). fer irreparable harm and whether the plaintiff
tioner’s motion on other grounds, it rejected The Second Circuit has deined “for use” to In Sojitz, the petitioner moved for an order of
demonstrated a likelihood of success on the
the respondent’s argument that the court require that (1) there actually is a foreign pro- merits or serious questions going to the merits.
lacked jurisdiction to order discovery under ceeding (or one is in real contemplation); and
Conclusion.
§3102(c) for an action that would be com- (2) the foreign proceeding is adjudicative in An unenforceable arbitral award, secured
menced outside the United States. Relying on nature.8 For example, in Jiangsu S.S. Co. v. Suc- The weight of nationwide at considerable expense, is worse than no
the fact that the Supreme Court is the court of cess Superior,9 the petitioner iled a motion award at all. Accordingly, counsel advising
general jurisdiction, but with little additional under §1782 for pre-action discovery related precedent holds that §1782 clients in pre-arbitration settings should “lip
reasoning, the Murray court determined that to foreign attachment proceedings and pos- does extend to international the script” and attempt to determine at the
“though it is uncontroverted in this proceed- sibly for use in a contemplated arbitration outset whether an award will ultimately be
ing that New York courts do not have juris- enforcement proceeding. The Jiangsu court arbitration; however, the of value. That process may be aided by pre-
diction to adjudicate claims of fraud against denied the application for discovery on the
Second Circuit has not ruled liminary discovery of an adversary’s assets,
the Bank of New Zealand, it does not follow basis that the petitioner had failed to show onthisquestion,anddistrict and if successful, perhaps also by preliminary
that they lack power to order discovery in an that the request would be “for use” in a foreign attachmentofsuchassets.AlthoughNewYork
action to be commenced in New Zealand.”2 proceeding, relying on Second Circuit prec- courts within the circuit have provides for such measures, the jurisprudence
At a minimum, Murray supports an argument edent that “neither pre-judgment attachment is relatively scant. As more clients and counsel
that CPLR §3102(c) is not limited to pre-action nor post-judgment enforcement proceedings recently reached divergent apprehend the potential importance of these
discovery for New York-based actions alone.
are ‘adjudicative’ in nature.”
conclusions.
steps, however, one may expect that, over
Historically, CPLR §3102(c) has been relied Equally problematic for practitioners is the time, the law will become the subject of more
on for pre-action discovery in circumstanc- decision in In re Asia Marine Paciic,10 which
es “where it is absolutely necessary for the rejected the petitioner’s pre-action discov- attachment against several of the respondent’s attention and development.
•
protection of the rights of a party,” includ- ery petition on the basis that §1782 did not assets in connection with the petitioner’s stat- •••••••••••••• ••••••••••••••
ing discovery for the purposes of pre-action encompass foreign arbitrations, and also ed intention to commence an arbitration pro- 1. 2012 N.Y. Misc. LEXIS 5380 (Sup. Ct. 2012). It should
injunction or attachment proceedings.3 Courts on the basis that the request for subpoenas ceeding against the respondent in Singapore. be noted that CPLR §3102(e) provides for discovery for
considering CPLR §3102(c) applications apply targeted records from several banks for the In support of attachment, the petitioner argued an “action pending in another jurisdiction.” However, it
an “extraordinary circumstances” test. The purpose of proposed attachment proceed- that it would take time to form the tribunal, does not appear that this provision has been applied in pre-action circumstances.
decision in Weisz v. Weisz provides a good ings was improperly overbroad. However, and that the respondent might dissipate the 2. Id. at *4.
example of the analysis.4 In Weisz, the peti- Asia Marine can be distinguished on several assets in that time—particularly given that the 3. Matter of Gov’t Empls. Ins. Co. v. Vinci, 2009 N.Y.
tioner sought to discover the respondent’s grounds. First, in denying the application, the respondent had already taken actions to move Misc. LEXIS 6198 (Sup. Ct. 2009) (internal quotation
inancial records for use in a child support court focused on the petitioner’s failure to put funds out of the reach of the petitioner. The marks omitted) (quoting Int’l Components v. Klaiber, 54
A.D. 2d 550, 551 (App. Div. 1976)). It should be noted that with respect to arbitrations, this provision appears to be
arbitration proceeding where the respondent forth any basis for believing the respondent Supreme Court agreed and granted an order of invoked primarily in insurance matters.
was claiming the inability to pay based on may have had accounts at any of the named attachment to permit the petitioner to attach Pre-action discovery under the statute is also appro-
income listed on his prior tax filings. The banks—rather, the court noted, the peti- funds located in New York that belonged to one priate to ascertain who the proper parties to an action
Weisz court granted the petitioner’s applica- tioner’s application could only be described of the respondent’s clients who in turn owed should be, but not where the discovery appears to be
tion for pre-action discovery based primarily as a “ishing expedition.”11 Second, the court payment to the respondent. On appeal, the nothing more than a “ishing expedition” to determine whether a viable cause of action exists. See, e.g., Liberty
on the fact that the tax records relied upon by explained that the petitioner did not demon- Appellate Division afirmed the order of attach- Imps. v. Bourguet, 146 A.D.2d 535, 536 (App. Div. 1989);
the respondent, a self-employed individual, strate that the requested information—pos- ment, noting that the petitioner adequately had Matter of Murray v. Soc’y for Worldwide Interbank Fin.
showed $175,000 in negative income for the sible bank accounts—would be “for use” in the demonstrated that the arbitration award would Commc’n, 2012 N.Y. Misc. LEXIS 5380 at *4.
4. 42 N.Y. Misc.3d 391 (Sup. Ct. 2013).
preceding tax year. The court’s decision to contemplated foreign arbitration proceeding otherwise be rendered ineffectual without the 5. Brandi-Dohrn v. IKB Deutsche Industriebank AG, 673 F.3d 76, 80 (2d Cir. 2012).
permit pre-action discovery based on these (even assuming that §1782 extended to such provisional relief of attachment in light of the 6. See generally Intel v. Advanced Micro Devices, 542
suspicious documents indicates, importantly, a proceeding).
respondent’s actions. The Appellate Division U.S. 241, 264 (2004).
that indicia of fraud can satisfy the “extraordi- Preliminary Attachment of Assets in Aid also rejected the respondent’s argument that 7. Compare In re Asia Mar. Pac. Ltd., 2015 U.S. Dist.
nary circumstances” test for CPLR §3201(c).
of International Arbitration.
the court lacked personal jurisdiction over LEXIS 113307 (S.D.N.Y. 2015) with Jiangsu S.S. Co. v. Suc- cess Superior, 2015 U.S. Dist. LEXIS 18388 (S.D.N.Y. 2015)
A mechanism for pre-action discovery also Once assets or property have been iden- the funds because the respondent lacked the (resolving §1782 application for pre-action discovery in
exists under federal law in 28 U.S.C. §1782, tiied, attachment may be the next step in necessary minimum contacts with New York. connection with potential foreign private arbitrations
which permits a federal court, in its discretion, ensuring enforcement of an arbitral award. The court concluded that the attachment was without suggesting the statute is inapplicable).
to order discovery for use by an “interested New York law establishes a mechanism to constitutionally sound because it was made for 8. Euromepa, S.A. v. R. Esmerian, 154 F.3d 24 (2d Cir.
1998).
9. 2015 U.S. Dist. LEXIS 18388.
person” in a proceeding before a “foreign or obtain pre-action relief for foreign arbitra- purposes of security, and not to gain personal 10. 2015 U.S. Dist. LEXIS 113307.
international tribunal.” The Second Circuit tions in CPLR §7502(c), which provides in jurisdiction over the respondent itself. Sojitz 11. At least one district court in the Second Circuit
applies a three-part test for discovery appli- pertinent part:
is thus signiicant in that it permits a party to has permitted a similar request for subpoenas directed
cations made pursuant to §1782:
[T]he supreme court . may entertain an attach assets in New York to secure payment in at banks that the petitioner believed “most likely” to
(1) the person from whom discovery is application for an order of attachment or anticipation of a foreign arbitration, provided have the documents the petitioner sought. In re Applica- tion of Hornbeam, 2014 U.S. Dist. LEXIS 183856 (S.D.N.Y.
sought resides (or is found) in the district for a preliminary injunction in connection the party can demonstrate its entitlement to Dec. 24, 2014).
of the district court to which the applica- with an arbitration that is pending or that provisional relief under CPLR §7502(c).15
12. See, e.g., Matter of Tapimmune v. Island Capital
Federal case law involving attachment Mgmt., 2013 N.Y. Misc. LEXIS 5464, at *8 (Sup. Ct. 2013).
tion is made, (2) the discovery is for use is to be commenced inside or outside this proceedings related to international arbitra- 13. E.g., id. (denying preliminary relief based on ind-
in a foreign proceeding before a foreign state . but only upon the ground that ing that the petitioner had failed to show a likelihood of success on the merits in arbitration).
tribunal, and (3) the application is made the award to which the applicant may tion proceedings is scant; however, federal 14. 82 A.D.3d 89 (N.Y. App. Div. 2011).
by a foreign or international tribunal or be entitled may be rendered ineffectual courts do grant preliminary injunctive relief 15. This does not mean that attachment always can be
any interested person.5
without such provisional relief.
in those circumstances under Rule 65 of the effected on funds located in New York to secure a foreign
Federal Rules of Civil Procedure. For example, arbitration proceeding. In Matter of International Legal
In addition to these factors, federal courts Key to securing provisional relief under this in AIM International Trading v. Valucine S.p.A.,16 Consulting v. Malabu Oil & Gas, 35 Misc.3d 1203(A) (N.Y. Sup. Ct. 2012), the court rejected a petitioner’s attempt
are guided by the same principles applicable statute is satisfying the same factors that are the plaintiff brought an action that included to attach assets in a United Kingdom bank account, that
to typical civil discovery.6
necessary to obtaining pre-action relief in a claims for breach of contract and fraud, but was not held in the respondent’s name or on its behalf,
As a threshold matter, there is an open civil case. Thus, in addition to showing that shortly thereafter, the defendant instituted a through service on a New York branch of the same bank.
The Malabu Oil court held “the service of an ex parte
question as to whether the language “before a an arbitration award may be rendered inef- separate international arbitration proceed- order of attachment in aid of a pending arbitration on a bank in New York does not encompass branches of the
foreign tribunal” in §1782 encompasses private fectual absent the requested attachment or ing. The Valucine court granted the plaintiff’s bank located in foreign jurisdictions, where the arbitra-
foreign arbitration proceedings. The weight injunction, an application for relief must also application for a TRO, and later a preliminary tion is pending in a foreign jurisdiction and involves a
of nationwide precedent holds that the stat- establish the traditional equitable criteria: (1) injunction, that prevented the foreign defen- dispute between non-U.S. entities having no relationship
ute does extend to international arbitration; irreparable harm, (2) likelihood of success in dant from, among other things, selling products with New York or even the United States.” Id.
AIM Int’l Trading v. Valucine S.p.A
however, the Second Circuit has not ruled
arbitration, and (3) a balance of equities in
under trademarks established by the agreement
16. ., 2002 U.S. Dist. LEXIS 10373 (S.D.N.Y. 2002).