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International Bank With a Branch in New York Was Required to Comply with an Information Subpoena—“Separate Entity Rule” Which Prevents New York Courts from Enforcing Restraining Notices and Turnover Orders Directed to Branches of Foreign Banks Located Outside New York, Does Not Prevent New York Courts from Directing the New York Branch of a Foreign Bank to Comply with an Information Subpoena, Even though the Information Sought Relates to Foreign Branches–The Information Sought Is Available Through Electronic Searches Made by the New York Branch of the Bank

The First Department, in a full-fledged opinion by Justice Acosta, determined that defendant international bank, Mega (based in Taiwan with branches in 14 countries), was required to comply with an information subpoena issued to its New York branch. The essence of the action is the collection of a $39 million judgment. It was alleged that Mega was aiding the judgment debtor in preventing collection. Because the information requested was available to Mega through electronic searches conducted from the New York branch, and because Mega had consented to the necessary regulatory oversight in return for permission to operate in New York, Mega was directed to comply with the information subpoena:

The issue is whether the separate entity rule bars New York courts from compelling Mega’s New York branch to produce information pertaining to Mega’s foreign branches.

The separate entity rule is that “each branch of a bank is a separate entity, in no way concerned with accounts maintained by depositors in other branches or at the home office” … . The continuing validity of this arcane rule was recently upheld by the Court of Appeals … , solely with respect to restraining notices and turnover orders affecting assets located in foreign branch accounts  * * *. … [T]he rule does not bar the court’s exercise of jurisdiction over Mega to compel a full response to the information subpoena.

Moreover, public policy interests and innovations in technology support such an exercise of jurisdiction. … “[B]road post-judgment discovery in aid of execution is the norm in federal and New York state courts” … , and “New York law entitles judgment creditors to discover all matters relevant to the satisfaction of a judgment” … . * * *

“The information requested by the Information Subpoena can be found via electronic searches performed in [the bank’s] New York office, and [is] within this jurisdiction” … . Matter of B&M Kingstone, LLC v Mega Intl. Commercial Bank Co., Ltd., 2015 NY Slip Op 06482, 1st Dept 8-11-15

 

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