Home Jurisdiction Foreign garnished banks that maintain New York bank accounts for conducting dollar transactions and the funds held in the correspondent accounts of such banks are not subject to personal jurisdiction or quasi in rem | Schlam Stone & Dolan LLP

Foreign garnished banks that maintain New York bank accounts for conducting dollar transactions and the funds held in the correspondent accounts of such banks are not subject to personal jurisdiction or quasi in rem | Schlam Stone & Dolan LLP


On August 3, 2022, at Chaar v Arab Bank PLC, Index No. 651780/2022, New York County Commercial Division Judge Margaret Chan denied plaintiffs’ motion to affirm a prior seizure order for lack of quasi in rem jurisdiction. While the plaintiffs alleged various activities of the defendant banks and their officers and board members in New York, including conducting banking business, trading on the New York Stock Exchange, and investing in the real estate, these activities were not sufficiently related to the plaintiffs’ claims to establish the minimum contacts required by the Constitution. The Court explained:

The preliminary question is whether the court has quasi in rem jurisdiction over the defendants based on the corresponding bank accounts. Quasi in rem jurisdiction is a viable method of subjecting a non-domiciliary to suit in that state under CPLR 301 (Banco Ambrosiano, SPA v Artoc Bank & Tr. Ltd., 62 NY2d 65, 71, 464 NE2d 432, 476 NYS2d 64 [1984]). “The question of whether quasi in rem jurisdiction exists in a given case involves an inquiry into the presence or absence of the minimum contacts prescribed by the Constitution” (id. at 72). “The precepts of due process are not offended by requiring [a defendant] defend [a] claim in new york [where] he maintained an important link with the State and undertook a useful activity there” (id. at 73).

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. . . In arguing that the minimum standard of contact for quasi in rem jurisdiction has been met, plaintiffs acknowledge that the inquiry is about “the significance of the relationship between [the property] in New York and the applicants [sic] Complaint,” citing Emirates NBD Bank PJSC v System Construct LLC (NYSCEF #247 – Reply2 at 28; 2022 WL 445866 at 2 [Sup Ct, NY County 2022]). Plaintiffs still fail to demonstrate that such a relationship is satisfied here.

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Plaintiffs cite Majique Fashions, Ltd. v Warwick & Co., (67 AD2d 321, 325, 327, 414 NYS2d 916 [1st Dept 1979]) to posit that “the mere presence of a current account with a US bank located in the Forum State led to the application of a seizure under IN REM” (NYSCEF # 135, ¶ 30 [emphasis in original]). However, in addition to failing to distinguish quasi-in-rem jurisdiction from in-rem jurisdiction, the plaintiffs are wrong. “Jurisdiction in rem. . . involves an action in which a plaintiff is after a particular thing, rather than seeking general financial judgment, i.e. he wants[[ownership] of the particular item of property….Quasi in rem, however, implies a situation where all the plaintiff wants is money” (id. at 326). The plaintiffs here are only asking for money, so we are dealing with a quasi in rem jurisdiction. Plaintiffs’ appeal to Hausler against JP Morgan Chase Bank, NA (740 F Supp 2d 525, 539-540 [SD NY 2010] [noting the critical importance of the distinction between in-rem and quasi-in-rem jurisdiction]), which found in-rem jurisdiction but not quasi-in-rem jurisdiction, is therefore also irrelevant (NYSCEF #247 at 22-23).

Plaintiffs are also mistaken in their characterization of the Majique court’s decision. In Majique, the court found that the plaintiff had established a quasi-actual basis of jurisdiction by seeking to seize the bank accounts of a non-resident foreign defendant company. Notably, the court found that because the bank account was designated by the defendant for the plaintiff to remit payment to the defendant and the defendant performed inspection services for goods imported into New York, there was a relationship between the non-resident defendant, the State and the litigation beyond the “fortuitous presence” of the accounts in New York (67 AD2d at 327). Given this relationship, the court concluded that “the defendant. . . expected or ought reasonably to have expected that his actions under the agency agreement would have consequences in that state” (id.). Such a relationship is lacking in the present case. . . .

Plaintiffs’ focus on alleged transactions on the New York Stock Exchange and substantial real estate investments by “customers and by members of the management and board of directors of defendants’ banks” also fails to link these activities to the plaintiffs’ claims (NYSCEF #247-29). Plaintiffs’ assertions that Defendants handled wire transfers, letters of credit, investments, online banking, and opened correspondent accounts in New York are also unsuccessful (NYSCEF #135, ¶’s, 31; 52;54;56; [**6] 58; 60; 62; 64). And plaintiffs’ appeal to Banco National Ultramarino, SA against Chan (169 Misc. 2d 182, 641 NYS2d 1006 [Sup Ct, NY County 1996, affd sub nom Banco National Ultramarino, S.A. v Moneycenter Tr. Co., 240 A.D.2d 253, 659 N.Y.S.2d 734 [1st Dept 1997]) is misplaced. In Banco National, it was undisputed that the defendant’s New York business checking account was the channel through which the alleged fraudulent theft and laundering scheme was linked to the plaintiff’s claims. It was also clear that the account holder defendant had ordered that the laundered funds be transferred to that account. In contrast, the alleged conduct here appears to be more ministerial than the deliberate activities of Banco National.

Plaintiffs’ assertion that Defendants “made continuous and systematic use of the corresponding accounts[,]even if admitted as true, merely serves to establish the necessary relationship under the quasi in rem standard of jurisdiction, on which plaintiffs “strictly” base their connection (NYSCEF #247 at 55 id. at 8 ). Since there is no basis of jurisdiction over the defendants, the court need not address the additional arguments raised by the parties.