Opinion ID: 174724
Heading Depth: 2
Heading Rank: 1

Heading: jurisdiction

Text: We agree with the District Court's conclusion that it lacked jurisdiction to uphold the attachment. As we explained in detail in Jaldhi, attachments are a remedy quasi in rem. Id. at 69. In cases where the District Court has no basis for personal jurisdiction over a party, jurisdiction can be established based on the court's power over property within its territory. See Shaffer v. Heitner, 433 U.S. 186, 199, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). In such cases, the District Court must have jurisdiction over the defendant's property in order to be able to affect the defendant's interests. Id. at 199 n. 17, 97 S.Ct. 2569 (A judgment quasi in rem affects the interests of particular persons in designated property.). We conclude that, in the circumstances presented here, the District Court lacked jurisdiction over any of Descatrade's property.
Allied argues that BNP Paribas's presence in New York is sufficient to permit the District Court to exercise jurisdiction over Descatrade's account at BNP Paribas in Paris. We disagree. The District Court did not have jurisdiction over Descatrade's account with BNP Paribas in Paris. Under New York law, [3] the separate entity rule dictates that `each branch of a bank [be] treated as a separate entity for attachment purposes.' Sabre Shipping Corp., 341 F.2d at 53 (quoting Cronan v. Schilling, 100 N.Y.S.2d 474, 476 (Sup.Ct., N.Y.Cnty.1950)); see McCloskey v. Chase Manhattan Bank, 11 N.Y.2d 936, 937, 228 N.Y.S.2d 825, 183 N.E.2d 227 (1962) (assets in a foreign branch cannot be attached in New York). As a result, the debt owed by a branch finds its situs within the territorial jurisdiction of [that] branch. Id. (internal quotation marks omitted). Put differently, the mere fact that a bank may have a branch within New York is insufficient to render accounts outside of New York subject to attachment. John Wiley & Sons, Inc. v. Kirtsaeng, No. 08 Civ. 7834, 2009 WL 3003242, at  (S.D.N.Y. Sept. 15, 2009) (internal quotation marks omitted). The parties do not dispute that Descatrade's only account with BNP Paribas is in Paris. Applying the separate entity rule, because Descatrade's account with BNP Paribas is in Parisand only in Paristhat account cannot be attached in New York. We agree 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. Allied Maritime, 2009 WL 4884160, at .
Alternatively, Allied contends that the suspense account is (1) in New York and (2) attachable there. It is unclear from the record on appeal whether the suspense account was created at BNP Paribas in Paris or at BNP Paribas in New York. The District Court considered both alternatives, and concluded that it was unlikely that the funds were in New York. Allied Maritime, 2009 WL 4884160, at . However, even if we assume that Allied is correct about the location of the suspense accountnamely, that the account is in New Yorkthat account would not be attachable property of Descatrade. As we noted recently in Scanscot Shipping Serv. (Deutschland) GmbH v. Metales Tracomex LTDA , [a]fter an EFT is initiated by an originator's bank, the funds at issue cease to be the property of the originator; the funds do not then become the property of the beneficiary until the EFT is completed by acceptance of a payment order by the beneficiary's bank. 617 F.3d 679, 682 (2d Cir.2010). In the interim, these funds are not property subject to attachment of either the originator or the beneficiary. Id. That [Descatrade] may be in the position of both originator and beneficiary does not change the Rule B analysis. Id. Like the bank account in Scanscot Shipping, BNP Paribas created the suspense account solely as a result of an order of attachment relating to funds now determined to be beyond the reach of the [D]istrict [C]ourt. 2010 WL 3169304, at . Accordingly, the new suspense account neither cures the jurisdictional defect nor provides a basis for reattachment of the same funds. Id.
Allied also argues that BNP Paribas's decision to stop the EFT and segregate funds associated with the transfer in a suspense account entitles Descatrade to a right of repayment under the so-called money-back guarantee provision of N.Y. U.C.C. § 4-A-402(4). [4] Allied argues that this right of repayment is an attachable property interest under Rule B. The District Court properly concluded that, regardless of whether the suspense account was in Paris or New York, the right to repayment under U.C.C. § 4-A-402(4), like the suspense account itself, cannot be attached. Allied Maritime, 2009 WL 4884160, at . The Scanscot Shipping analysis is no less applicable to the recovery right under U.C.C. § 4-A-402(4) derived from a suspense account than it is to the suspense account itself. [5] The jurisdictional defect that renders the suspense account unattachable under Rule B also renders unattachable any recovery right arising out of that suspense account. As one court has aptly observed, [n]o alchemy by the bank [can] transform[] EFTs that cannot be attached into property of the defendant that can be attached. Argus Dev. Inc. v. Steelcore Trading Ltd., No. 09-6009, 2009 WL 4016626, at  (S.D.N.Y. Nov.16, 2009).