Goldfarb v. Channel One Russia

Background

Goldfarb previously obtained a $25 million default judgment against Channel One Russia on two libel claims. The judgment awarded compensatory and punitive damages plus post-judgment interest. It also dismissed with prejudice Goldfarb’s claim for intentional infliction of emotional distress and three counterclaims filed by Channel One.

Channel One was later designated by the United States Treasury’s Office of Foreign Assets Control (OFAC) as a Specially Designated National. As a result, Channel One’s property and interests in property in the United States or controlled by a United States person were blocked and could not be transferred or otherwise dealt with without authorization.

Goldfarb sought information about Channel One’s assets and debts. The disclosures identified amounts owed to Channel One by International Media Distribution, LLC (IMD), Charter Communications Operating, LLC (CCO), and DirecTV, LLC. The identified amounts were $160,038.17 from IMD, $45,954.13 from CCO, and $152,999.79 from DirecTV.

Goldfarb applied to OFAC for authorization to enforce his judgment against Channel One’s United States-based assets. OFAC denied that application without prejudice, explaining that authorization to carry out a court order affecting the blocked property would be required, but that it was premature to issue a license before a court ordered the garnishees to turn over funds.

Legal framework

Goldfarb moved under Federal Rule of Civil Procedure 69, which governs enforcement of money judgments. Rule 69 requires the court to use the enforcement procedures of the state where it is located. The court therefore applied New York law, including New York Civil Practice Law and Rules Sections 5225(b) and 5227.

Section 5225(b) permits a judgment creditor to seek an order requiring a third party holding property in which the judgment debtor has an interest to turn over that property. Section 5227 permits a judgment creditor to seek an order requiring a person who is or will become indebted to the judgment debtor to pay the debt to the judgment creditor.

The court explained that, although Section 5227 refers to a special proceeding, a judgment creditor may proceed by motion in federal court when the court has personal jurisdiction over the garnishee. Courts in the district treat such turnover motions under the standard used for summary judgment. Under that standard, the creditor must show that there is no genuine dispute of material fact and that the creditor is entitled to the funds.

Court’s analysis

The court found no dispute about the fact or amount of the debts owed to Channel One by IMD, CCO, and DirecTV. Each garnishee stated that it did not oppose an order requiring it to turn over the identified amount, provided that payment occurred only after OFAC authorization. The court concluded that each garnishee was indebted to Channel One under Section 5227 and that the debts had matured.

Goldfarb withdrew his request for interest. The court therefore stated that its forthcoming order would not include interest. The court also declined to decide any possible future dispute between Channel One and the garnishees concerning the funds, because no such controversy was then before it.

Disposition

Judge John P. Cronan granted Goldfarb’s motion for a turnover order. The court directed each of IMD, CCO, and DirecTV to pay Goldfarb the amount it owed to Channel One, subject to Goldfarb first obtaining the required OFAC authorization. The Clerk of Court was directed to close Docket Number 211.