13‐2535‐cv(L)

Motorola Credit Corp. v. Standard Chartered Bank

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term 2014

(Argued: October 11, 2013 Decided: November 14, 2014)

Docket Nos. 13‐2535‐cv(L), 13‐2639‐cv(con)

      

MOTOROLA CREDIT CORPORATION,

         Plaintiff‐Counter‐Defendant‐ 

         Appellant‐Cross‐Appellee,

NOKIA CORPORATION,

                         Plaintiff‐Counter‐Defendant,

MOTOROLA, INC., KROLL ASSOCIATES, INC., CHRISTOPHER B. GALVIN, KEITH J.

BANE, WALTER KEATING, ED HUGHES, ERNST KRAMER,

              

       Counter‐Defendants,

v.

STANDARD CHARTERED BANK,

         

         Appellee‐Cross‐Appellant,

MURAT HAKAN UZAN, CEM CENGIZ UZAN,

         

         Defendants‐Counter‐Claimants,
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KEMAL UZAN, LIBANANCO HOLDINGS CO. LIMITED, MELAHAT UZAN, AYSEGUL

AKAY, ANTONIO LUNA BETANCOURT, UNIKOM ILETISM HIZMETLERI PAZARLAMA

A.S., STANDART PAZARLAMA A.S., STANDART TELEKOMUNIKASYON BILGISAYAR

HIZMETLERI A.S.,

         

         Defendants.  

      

Before:

CALABRESI, CHIN, and DRONEY, Circuit Judges.

    Appeal from an order of the United States District Court for the

Southern District of New York (Rakoff, J.) holding that the ʺseparate entity ruleʺ 

precludes a court from ordering a garnishee bank operating branches in New

York to restrain assets of judgment debtors held in foreign branches of the bank.  

    REMANDED to the district court to vacate the restraining order on

defendantsʹ assets.

      

HOWARD H. STAHL (George R. Calhoun, on the brief),

Fried, Frank, Harris, Shriver & Jacobson LLP,

Washington D.C., for Motorola Credit Corporation,

and Nokia Corporation.

BRUCE EDWARD CLARK (Patrick B. Berarducci, Sharon L.

Nelles, Bradley P. Smith, on the brief), Sullivan &

Cromwell LLP, New York, New York, for

Standard Chartered Bank.  

Dwight A. Healy, White & Case LLP, for Amici Curiae

Institute of International Bankers, The Clearing
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House, European Banking Federation, and New York

Bankers Association.

      

PER CURIAM:

    This appeal challenges an order entered by the United States District

Court for the Southern District of New York (Rakoff, J.), holding that the

ʺseparate entity ruleʺ precludes a court from ordering a garnishee bank with

branches in New York to restrain assets of judgment debtors held in foreign

branches of the bank.  The district court initially granted a restraining order, then

held that defendantsʹ assets in foreign banks could not be restrained because of

the separate entity rule, and then stayed the release of the restraint on assets

pending appeal.   

The facts are set forth in detail in our opinion filed in this case on

January 14, 2014.  See Tire Engʹg & Distrib. L.L.C. v. Bank of China Ltd., 740 F.3d

108, 112‐13 (2d Cir. 2014).  In that opinion, we certified the following question to

the New York Court of Appeals: ʺwhether the separate entity rule precludes a

judgment creditor from ordering a garnishee bank operating branches in New

York to restrain a debtorʹs assets held in foreign branches of the bank.ʺ1  Id. at

118.

 

1   We certified a second, related question from a companion case, namely, ʺwhether
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In an opinion filed October 23, 2014, the Court of Appeals answered

the certified question.  Motorola Credit Corp. v. Standard Chartered Bank, No. 162

(N.Y. Oct. 23, 2014), available at 2014 WL 5368774.  The Court answered the

question in the affirmative, holding that ʺa judgment creditorʹs service of a

restraining notice on a garnishee bankʹs New York branch is ineffective under the

separate entity rule to freeze assets held in the bankʹs foreign branches.ʺ  Id., slip

op. at 13.  The Court of Appeals thus explicitly adopted the separate entity rule,

concluding that ʺit is a firmly established principle of New York law, with a

history of application both before and after the 1962 adoption of the [New York

Civil Practice Law and Rules].ʺ  Id., slip op. at 8.   

The Court rejected plaintiffsʹ contention that its decision in Koehler v.

Bank of Bermuda Ltd., 12 N.Y.3d 533 (2009), abrogated the rule, observing that ʺwe

did not analyze, much less overrule, the separate entity doctrine in Koehler.ʺ  

Motorola, No. 162, slip op. at 10.  A minority of the Court argued that ʺthe

majorityʹs adoption of the separate entity rule [was] inconsistent with Koehler,ʺ 

id., slip op. at 14 (Abdus‐Salaam, J., dissenting), and that the rule ʺhas no

 

the separate entity rule precludes a judgment creditor from ordering a garnishee bank operating

branches in New York to turn over a debtorʹs assets held in foreign branches of the bank.ʺ  Tire

Engʹg, 740 F.3d at 117.  The parties in the companion case entered into a stipulation to dismiss

the claims on February 18, 2014, which we approved on February 24, 2014.  The New York

Court of Appeals accordingly withdrew that certified question.   Tire Engʹg & Distrib. L.L.C. v.

Bank of China Ltd., 22 N.Y.3d 1152 (2014).  
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application to these modern times,ʺ id., slip op. at 1 (Abdus‐Salaam, J.,

dissenting).  The majority ruled, however, ʺthat abolition of the separate entity

rule would result in serious consequences in the realm of international banking

to the detriment of New Yorkʹs preeminence in global financial affairs.ʺ  Id., slip

op. at 13 (majority opinion).

The ruling of the Court of Appeals resolves the principal claims

before us.  We hold that the district court correctly concluded that the separate

entity rule precludes the restraint of assets held in Standard Chartered Bankʹs

foreign branches.  We thus remand the case to the district court, with instructions

to vacate the restraining order on defendantsʹ assets.

REMANDED.