245 Park Member LLC v. HNA Group Company Limited

Background

245 Park Member LLC sought confirmation of an April 30, 2022 arbitration award against HNA Group (International) Company Limited in the amount of $185,412,763.60. The confirmation proceeding was originally filed in state court and removed to the Southern District of New York. The court stated that it had subject-matter jurisdiction under the New York Convention, the federal law governing recognition and enforcement of certain foreign and nondomestic arbitration awards, and under the diversity-jurisdiction statute. The parties had consented to personal jurisdiction in New York.

245 Park moved for a prejudgment order of attachment under Federal Rule of Civil Procedure 64 and New York Civil Practice Law and Rules § 6212. A prejudgment attachment temporarily secures a respondent’s assets to help ensure that a possible future judgment can be satisfied. 245 Park also sought an order requiring HNA to give 14 days’ advance notice before selling any assets that HNA owned directly or indirectly.

The court had previously issued and extended a temporary restraining order preventing HNA from transferring assets in an aggregate amount of $1 million, up to the amount of the arbitration award. The temporary restraining order also required advance notice of certain property sales.

Legal standards and analysis

Under Rule 64, the availability of attachment was governed by the prejudgment-remedy law of New York. Under New York law, the applicant had to show: (1) a cause of action; (2) probable success on the merits; (3) a statutory ground for attachment; and (4) that the amount demanded exceeded all known counterclaims.

The court found that the first and fourth requirements were undisputed. The proceeding to confirm the arbitration award supplied a cause of action, and there were no counterclaims. The dispute centered on probable success and the existence of a statutory ground for attachment.

HNA argued that 245 Park was unlikely to succeed because the arbitration process was fundamentally unfair and contrary to the parties’ arbitration agreement. HNA pointed to the arbitrator’s refusal to allow discovery and hold an evidentiary hearing concerning HNA’s fraud and in pari delicto defenses. The court rejected that argument. It explained that fundamental unfairness requires the challenging party’s opportunity to be heard to have been grossly and totally blocked. The arbitrator had considered extensive written submissions and had issued a reasoned scheduling decision explaining that the parties’ agreement required an extremely expedited process.

The agreement required the parties to submit their positions and materials within seven business days after the arbitrator’s appointment, and required a decision within 30 days after submission. The court concluded that these terms displaced provisions in the JAMS Streamlined Arbitration Rules and Procedures concerning discovery and hearings. The arbitrator’s interpretation was entitled to substantial deference, and the court found that the arbitrator had provided more than a minimally adequate justification for that interpretation. The court therefore concluded that the arbitration was not fundamentally unfair and did not violate the parties’ agreement. On that basis, 245 Park was likely to succeed in confirming the award.

The parties did not dispute that HNA was a foreign corporation not qualified to do business in New York, which was a statutory ground for attachment. Because HNA had consented to personal jurisdiction, however, 245 Park also had to show a real risk that HNA’s financial position or conduct would prevent enforcement of a future judgment. The court found that 245 Park had made that showing. HNA’s parent had declared bankruptcy in China, several United States affiliates were in bankruptcy proceedings, and the entity owning the 245 Park Avenue property connected to the guaranty was among those affiliates. HNA also stated that it would not receive proceeds from two potentially imminent asset sales. The court further found that HNA’s failure to provide meaningful details about its assets and business operations supported the conclusion that it posed a substantial risk of being unable to satisfy the potential judgment.

The court also concluded that this substantial risk entitled 245 Park to advance notice of any sale of assets that HNA owned directly or indirectly. HNA’s objection that indirectly held assets should not be covered did not persuade the court because HNA did not explain why the notice requirement was inappropriate.

Disposition

The court granted 245 Park’s motion for an order of attachment and an order requiring advance notice of any disposition of HNA’s assets. The court stated that it would enter 245 Park’s proposed orders with some modifications. The opinion does not specify those modifications.