Major League Baseball Properties v. Corporacion de Television y Microonda Rafa

Background

Major League Baseball Properties, Inc. (MLB) and Corporacion de Television y Microonda Rafa, S.A. (Telemicro) disputed Telemicro’s rights to broadcast Major League Baseball content in the Dominican Republic. After Telemicro failed to make payments required by its contract, MLB terminated the contract, demanded arbitration, and obtained an arbitration award in its favor. The district court confirmed the award and entered a judgment exceeding $6 million.

To collect the judgment, MLB moved for turnover under Federal Rule of Civil Procedure 69(a) and New York Civil Practice Law and Rules section 5225(b). MLB sought Telemicro’s funds in bank accounts in the Dominican Republic, a Bell 407 helicopter, Telemicro’s right to receive payments under a broadcasting agreement between Telemicro International Holding Corporation (TIHC) and a third party, and funds in a JPMorgan Chase Bank account held by TIHC. MLB also served Chase with a restraining notice concerning the TIHC account.

Telemicro did not respond to the turnover motion. TIHC opposed turnover of the broadcasting-agreement proceeds and the Chase-account funds, and it filed a motion to quash, meaning to cancel, the restraining notice. Magistrate Judge Gabriel W. Gorenstein recommended granting MLB’s motion in part and denying it in part, denying TIHC’s motion to quash, and ordering turnover of the property identified in the recommendation. TIHC objected only to the recommendation concerning the Chase account and asked the court to clarify that the ruling concerned only the Chase account, not other TIHC property.

Legal standard

Under Rule 69(a), enforcement of a federal money judgment generally follows the procedure of the state where the federal court is located. The relevant New York provision, section 5225(b), allows a judgment creditor to seek money or personal property held by another person when the judgment debtor has an interest in the property and either is entitled to possess it or the judgment creditor’s rights are superior to those of the person holding it.

The court explained that a Rule 69(a) turnover motion is treated like a summary-judgment motion. Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment under the law. The court reviewed the portions of the magistrate judge’s report challenged by TIHC for clear error because TIHC repeated arguments it had already made rather than identifying a specific error. The court reviewed the unchallenged portions for clear error as well.

Chase account and actual control

TIHC argued that Telemicro’s alleged “actual control” of the Chase account could not establish that Telemicro had an interest in the account. The court rejected that argument. Relying on Second Circuit precedent, the court held that although possession of funds generally creates a presumption of ownership, that presumption can be rebutted by evidence that the judgment debtor actually controlled the funds. The relevant question was whether Telemicro controlled the funds and used them for its own benefit as an owner would, rather than merely benefiting from TIHC’s use of the account.

The court also upheld the finding that Telemicro actually controlled the Chase account. The evidence included testimony that Telemicro’s owner, Juan Ramon Gomez Diaz, authorized essentially all payments from the account and that a TIHC administrator followed payment instructions from Telemicro without consulting anyone else at TIHC. The report also identified evidence that the account paid third parties for services provided to Telemicro and paid various family members of Gomez Diaz.

The court rejected TIHC’s explanations that the payments resulted from an oral agreement under which Telemicro sold TIHC rights to resell advertising space and transmit television programs, and that TIHC operated independently. The report found little evidence supporting the alleged oral agreement beyond statements in an owner’s declaration, evidence that the companies did not treat their relationship as a genuine contractual relationship, and evidence that TIHC did not act as an independent company by limiting Telemicro’s use of the account. TIHC did not identify evidence that the magistrate judge had overlooked or misinterpreted. The court therefore overruled TIHC’s objection.

The court further accepted the conclusion that actual control satisfied both parts of the New York turnover test: Telemicro had an interest in the Chase account and was entitled to possess or retrieve the funds. The court explained that a company able to issue checks from an account to pay creditors is effectively able to access and benefit from the account’s funds.

Other property and final orders

The court adopted the report’s recommendations concerning the other property. It ordered the Dominican Republic banks—Banesco Banco Multiple SA, Banco Multiple Caribe, and Banco de Reservas de la Republica Dominicana—to turn over Telemicro’s Dominican accounts. It ordered Telemicro to turn over its Bell 407 helicopter and its right to payment under the Distribution Agreement. The report recommended denying turnover to the extent MLB sought funds from TIHC under that agreement because MLB had not alleged that TIHC possessed or controlled those funds; the district court adopted the report in its entirety.

The court ordered Chase to turn over the funds in TIHC’s account. It denied TIHC’s motion to quash the restraining notice. It also denied TIHC’s request for clarification as unnecessary because the order clearly concerned the funds in the Chase account and did not address other TIHC property.

The final dispositions were: MLB’s motion for turnover was granted in part and denied in part; TIHC’s motion to quash was denied; and the report and recommendation was adopted in its entirety.