Opinion ID: 106959
Heading Depth: 2
Heading Rank: 1

Heading: Need for Personal Jurisdiction Over Omar.

Text: We should first consider the question in its starkest form. Assuming that there is no quasi in rem jurisdiction over the property (see Part IV, infra, p. 404) and no reasonable likelihood of obtaining personal jurisdiction over Omar, why should the court not use its naked power, to the extent that it could be brought to bear on others situated as was Citibank, to tie up Omar's property all over the world for the avowed purpose of coercing Omar into paying its taxes? Use of judicial equity powers to coerce a party over whom the court has no jurisdiction or likelihood of obtaining jurisdiction is unheard of. The statute authorizing courts to render such decrees as may be necessary or appropriate for the enforcement of the internal revenue laws clearly intends that courts use only their traditional equity powers to that end. [4] It should not be interpreted as an authorization to employ radically new and extremely far-reaching forms of coercive action in a more free-wheeling approach to international than to domestic cases. [5] Neither the Government nor the Court argues for such an extraordinary judicial use of power. Suffice it to say that if the contrary position were taken, serious constitutional problems would arise. 2. Improbability of Obtaining Personal Jurisdiction Over Omar as of the Time the Injunction Was Issued. It is basic to traditional notions of equity that to justify the issuance of a protective temporary injunction there must exist a substantial probability that jurisdiction, judgment, and enforcement will be obtained with respect to the person sought to be affected. [6] The Court does not and could not contest this proposition, and virtually concedes that at the time the injunction was issued, the Government had insufficient probability of obtaining personal jurisdiction over Omar to justify the issuance of the freeze order. Section 302 (a) of the New York Civil Practice Law and Rules, upon which the Court alone relies, did not become effective until 10 months later. [7] No other theory is offered by the Court which could justify the freeze order as of the time at which it was issued. [8] 3. Evaluating the Injunction as of now. The only course left open to the Court on its theory of the case is to judge the injunction as of now. Indeed the New York Court of Appeals ruled in Simonson v. International Bank, 14 N. Y. 2d 281, 200 N. E. 2d 427, that § 302 (a) does not retroactively validate actions in pending cases taken before its enactment, and may be applied to further proceedings in pending cases only if it is equitable to do so. [9] Thus even on the glib assumption that New York courts would interpret § 302 (a) to give personal jurisdiction over one who merely traded long distance for his own account on the New York exchanges, [10] the Court must nonetheless show, as a matter of both state and federal law, that there is equity in continuing the existence of the freeze order. There are two inescapable reasons why such a showing is impossible. (a) The so-called temporary freeze order has now been in effect for over two years. During this time no form of jurisdiction over Omar has been obtained. It may be argued that it is this appellate review which has been the cause of delay. But Omar is not party to this review. The contesting parties are the Government and Citibank. Nothing pertaining to these proceedings precluded or excused the Government from obtaining personal jurisdiction over Omar and proceeding with the case if it was otherwise able to do so. As far as Omar is concerned, its property has been taken from its control by a court having jurisdiction neither over the corporation nor over the property (see Part IV, infra, p. 404), prior to any judgment of liability being entered against it, and during a time when the Uruguayan peso has fallen over 60%. [11] The Government had its chance to reach Omar's property before it was removed from the country. Indeed, it was warned ( supra, p. 386), and made no legal move until several months later. It made no effort to obtain personal jurisdiction over Omar within a reasonable time after the temporary injunction was issued; or after § 302 (a) was enacted; or after the date at which it supposedly altered the theory on which it chose to argue its case. The Court expresses the opinion that this latter event, obviously irrelevant to the equities of Omar and Citibank, somehow explains and excuses the Government's failure to have acquired personal jurisdiction over Omar. This is surely untenable. The petition for rehearing was filed on July 10, 1963, following the initial Court of Appeals' opinion and prior to the opinion of the court en banc. Over 18 months have elapsed since that time. Were this in itself not conclusive, the Government stated unequivocally and as its very first ground for rehearing: The United States, which in this action seeks inter alia a judgment in personam against Omar, is taking necessary steps to effectuate personal jurisdiction over Omar. In the face of this statement there is no way that the Court can excuse or avoid the fact that the Government, by reason of either neglect or inability, has failed to acquire jurisdiction over Omar in the ample time which has been available to it. Yet the Court inexplicably finds equity in continuing the freeze order. [12] Omar, as a foreign corporation which allegedly withdrew its assets to avoid taxation by this country, naturally does not present a sympathetic aspect to this Court, but that is no justification for perpetuating a temporary order which, without any jurisdictional basis, has tied up Omar's property for over two years. [13] Alleged tax dodgers, as much as those charged with crime, are entitled to due process treatment. And the hand of equity should be stayed long before it reaches constitutional limits. (b) Whether the situation is examined as of the time the order originally issued or as of now, the Government has to show that the funds to be frozen may be subject to ultimate execution. If the property cannot be subjected to government levy, there is obviously no equity in freezing it. That is the situation presented here. The quasi in rem statute does not permit the court to attach the property directly (see Part IV, infra, p. 404), and no view is expressed by the Court as to how or whether this difficulty could be avoided. The Government argues that this obstacle can be skirted in the following fashion. Personal jurisdiction under § 302 can be obtained over Omar by mailing a letter to Uruguay pursuant to New York's substituted service statute. [14] Judgment can then be obtained together with an order to Omar to transfer the funds in the Montevideo account to the Government. When Omar refuses to comply voluntarilyit has no officers in New York who could be punished for contempta court officer appointed under Rule 70 of the Federal Rules of Civil Procedure could be sent to Montevideo to make demand upon the Citibank branch in the name of the United States. [15] If the branch refuses payment, it will breach its contract to pay on demand. An action for breach of the contract could then be brought by the depositor against Citibank in New York (see n. 27, infra ). Once that obligation accrues in New York, the Government can garnish it to satisfy the personal judgment. Of course, if the court could directly order Citibank in New York to pay the debt, the obligation would be payable within the district (see Part IV, infra, p. 404), in which case the quasi in rem statute would serve without necessitating elaborate personal jurisdiction theories. The reasons why this procedural cake-walking should not commend itself are manifest. Foreign courts in customary international practice (which Uruguay presumably follows) do not enforce foreign tax judgments. [16] Therefore Uruguay would undoubtedly not consider valid a demand made by the court-appointed officer for the property within Uruguayan borders. If the refusal to pay the court officer is proper under the Uruguayan law which governs the contract, there can be no breach which would give rise to a cause of action in New York, Zimmermann v. Sutherland, 274 U. S. 253. Furthermore the prospect is more than startling that a district court, aware that a foreign country would not enforce its judgment, would nonetheless dispatch a court officer to the foreign jurisdiction to accomplish that end by self-help. [17]