Foley v. Union De Banques Arabes Et Francaises

Background

The court had previously granted in part and denied in part UBAF’s motion to dismiss. In that earlier ruling, it held that it had personal jurisdiction over UBAF, including regarding the plaintiffs’ claims seeking turnover of assets, and rejected UBAF’s argument that the court should not follow Peterson v. Islamic Republic of Iran. The court had not yet decided the separate analysis required under the Foreign Sovereign Immunities Act before property could be attached.

UBAF later told the court that a French bailiff had demanded that it turn over funds held for a Syrian financial institution. The plaintiffs initially moved for a temporary restraining order and a restraining notice under New York Civil Practice Law and Rules § 5222. At the hearing, however, the plaintiffs said they no longer sought a temporary restraining order and sought only the § 5222 restraining notice. That notice would have barred UBAF from transferring property of Syria and related entities or paying debts owed to those entities while the plaintiffs’ turnover claims were pending.

The court’s analysis

The court first rejected UBAF’s attempt to relitigate personal jurisdiction. It reaffirmed that it had specific personal jurisdiction over UBAF based on UBAF’s New York correspondent accounts.

The court then held that the separate-entity rule barred the requested restraint. That rule treats a bank’s branches as separate entities for post-judgment restraining notices. A notice served in New York therefore would not restrain assets held in the bank’s foreign branches. The court explained that the Second Circuit had held that the rule applies whether jurisdiction is based on a New York branch or a New York correspondent account, and whether the notice is issued by the court or served by a judgment creditor’s lawyer. Because the assets at issue were held in UBAF’s Paris branch, the rule prevented the court from restraining them.

The court identified an independent reason for denying the requested relief. The plaintiffs had not provided authority showing that § 5222 permits restraint of assets belonging to a non-debtor. The plaintiffs’ judgments were against Syria and certain Syrian military branches, while the funds were described as being held for a Syrian financial institution. The record did not establish whether that institution was privately owned or state-owned, or whether it was affiliated with Syria or the Syrian military. Without evidence that the funds were assets of a judgment debtor, the plaintiffs could not show that § 5222 authorized the restraint.

The court also addressed the plaintiffs’ reliance on the Terrorism Risk Insurance Act. The court stated that the Act applies only to blocked assets and that the relevant Syrian sanctions rules block property in the United States or in the possession or control of a U.S. person. The funds at issue were in Paris and held by a French bank, so they did not meet either definition on the current record. The court could not conclude that those funds had entered the United States or were part of the $2 billion in Syrian funds that the plaintiffs claimed had passed through UBAF’s New York correspondent account.

Disposition

The court declined to issue the requested restraining notice upon UBAF at that time. The opinion does not state that the plaintiffs’ turnover claims were dismissed or finally resolved by this order.