Judge Scheindlin Rejects Rule 69(a) Authority to Attach Foreign Property

Judge Scheindlin also has just published a decision (Mones v. Commercial Bank of Kuwait, S.A.K.,--- F.Supp.2d ----, 2005 WL 1653930 (S.D.N.Y. July 12, 2005)) rejecting the authority to order a foreign bank to transfer assests from abroad into the Southern District of New York under FRCP Rule 69(a). New York law, to which the S.D.N.Y. must look under Rule 69, clearly does not provide the court with the authority to require a financial intermediary to transfer property from outside the jurisdiction said the court. However, Rule 69 provides two exceptions that could have been interpreted to provide such authority:

Rule 69 does contain two clauses that arguably provide the Court with power beyond the limitations of state law. First, state law is superceded “where any statute of the United States governs” and second, enforcement of judgments shall be by writ of execution, governed by state procedures, “unless the court directs otherwise.” The first exception is irrelevant because no federal statute governs this case. However, several courts have discussed the possibility that the second exception, “unless the court directs otherwise,” authorizes courts to exceed state procedures governing writs of execution and to enforce money judgments by ordering delivery of a judgment debtor's assets in just these circumstances. While the Second Circuit does not appear to have interpreted Rule 69's “otherwise” clause, the First Circuit has held that the “ ‘otherwise’ clause is narrowly construed” and that there is no reason to depart from the traditional view that Rule 69(a)“ ‘limit[s] all federal process on money judgments to the type of process available under state law.” ’ The “otherwise” clause should be invoked only in “extraordinary circumstances” and “does not authorize enforcement of a civil money judgment by methods other than a writ of execution, except where ‘well established principles [so] warrant.” In Motorola Credit Corporation v. Uzan, a judgment creditor moved for an order requiring various banks.

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Petitioner has failed to show any special or extraordinary circumstances that would warrant the invocation of the “otherwise” language in Rule 69, even if this Court considers that clause to authorize the exercise of power beyond the limits of New York law.