SIFMA, IIB Submit Amicus Briefs in Motorola Credit Corporation v. Standard Chartered Bank Case

SIFMA and the Institute of International Bankers ("IIB") submitted separate amicus briefs in support of the position of Standard Chartered Bank ("Standard Chartered"), which is seeking relief from a restraining order obtained by the Motorola Credit Corporation ("Motorola") as part of Motorola's effort to collect on a multi-billion dollar judgment against the Uzan family.

The restraining order requires Standard Chartered to freeze assets of the Uzans held in its branches in the United Arab Emirates. Standard Chartered sought relief from the restraining order, arguing that New York's "separate entity rule" precludes the application of the restraining order to the bank's U.A.E. branches. The U.S. District Court for the Southern District of New York sided with Standard Chartered, and Motorola appealed to the Second Circuit Court of Appeals. In January, the Second Circuit certified the following question to the New York Court of Appeals: "whether the separate entity rule precludes a judgment creditor from ordering a garnishee bank operating branches in New York to restrain a debtor's assets held in foreign branches of the bank."

Essentially, the separate entity rule treats a bank's branches as separate entities for the purpose of assessing the court's personal jurisdiction. The rule would therefore excuse a bank like Standard Chartered from complying with a restraining order with respect to assets in a foreign branch, where the court has personal jurisdiction over the New York branch but not the foreign branch. However, Motorola contends that the rule has no ongoing viability, and that post-judgment remedies are governed by Article 52 of the C.P.L.R., which includes no exception for banks with branches in multiple jurisdictions, and which allows creditors to obtain restraining orders against any party over which the court has personal jurisdiction.

SIFMA urged the Court to uphold the separate entity rule, stating that its purpose for submitting the amicus brief is to highlight key precedents requiring the retention of the rule, and "to reflect on the broader consequences of this case that SIFMA believes should dictate an affirmative response" to the question of the rule's application. According to SIFMA, this case is of particular importance, since SIFMA members with New York branches frequently have experienced litigation from judgment creditors having little connection with New York State and seeking to use New York's post-judgment enforcement procedures to freeze and obtain turnover of assets located in non-New York branches. Since this creates significant risks of "double liability" for the banks concerned, SIFMA stated, it hopes that the Court can now reaffirm the separate entity rule.

IIB, along with the Clearing House Association LLC, European Banking Federation, and New York Bankers Association (the "Associations"), also submitted an amicus brief holding a similar position to SIFMA, stating that they have a substantial interest in this action because of the adverse precedent it would set for their member banks and all international banks with branches or offices in New York. According to the Associations, a rule that authorizes post-judgment, global restraint of accounts maintained, or assets held, at non-U.S. branches, or international banks with New York branches or offices would "create serious problems for international banks doing business in New York, and would adversely affect New York's position as a pre-eminent financial center."

See: SIFMA Amicus Brief; IIB Amicus Brief.
See also: Second Circuit's Certification to Court of Appeals.