City of Almaty, Kazahkstan v. Mukhtar Ablyazov

Background

The court had previously entered an attachment order covering funds held in escrow by Monitor Herman Cahn under a monitorship order in a related state-court action. An attachment order is a court order preserving property to help secure payment of a potential judgment. The attached funds were connected to Triadou SPV S.A.’s interest in a real-estate project involving the Chetrit Entities. The court stated that Triadou had an interest in the funds when they were attached and that the funds were properly subject to attachment.

The monitor asked to withdraw $19,484.57 for fees and expenses incurred in connection with the monitorship, place another $100,000 in a separate non-interest-bearing account for future monitorship expenses, and transfer the remaining funds into short-term United States Treasury Bills. The Chetrit Entities and Triadou agreed to all of the requests. The City of Almaty and BTA Bank opposed the first two requests and did not oppose the Treasury-bill request.

Court’s analysis

The court did not decide the Kazakh Entities’ procedural arguments about whether the monitor had authority or standing to file the motion. Instead, it assumed for purposes of the decision that the monitor could bring the motion and held that the requests were still improper.

The attachment order prohibited the monitor from directly or indirectly transferring, directing, requesting, assisting in the transfer of, or otherwise affecting the value of the attached property. The court held that withdrawing approximately $120,000 for the monitor’s fees and future expenses would do exactly what the attachment order was intended to prevent. The court rejected the argument that the legitimate purpose of the expenses created an exception to the attachment order.

The court also treated the requested withdrawals as, in substance, a request to modify the attachment order under New York Civil Practice Law and Rules § 6223. It stated that modification depends on the need for continuing the attachment and the probability that the plaintiff will succeed on the merits. The court found no contention that the circumstances supporting the original attachment had changed.

The court further rejected the suggestion that the attachment order incorporated the terms of the state-court monitorship order or created an exception allowing payment of the monitor’s fees and expenses. It noted that the monitor could seek appropriate relief from the state court. The opinion also stated that a state-court motion seeking direct payment of the monitor’s fees and expenses had been denied without prejudice to renewal if this federal motion was denied.

As to the Treasury Bills, the court held that the proposed transfer would also violate the attachment order. But because the Kazakh Entities did not oppose that request, the court stated that it would permit the transfer if the parties and the monitor submitted a signed stipulation describing the precise scope of their agreement.

Disposition

Judge Alison J. Nathan denied the monitor’s motion and stated that the ruling resolved docket entry 987. The opinion did not state that the denial was with or without prejudice.