New York Law Review

Tag: International Comity

  • Morgenthau v. Avion Resources Ltd., 11 N.Y.3d 384 (2008): Sufficiency of CPLR 313 for Service on Foreign Defendants

    11 N.Y.3d 384 (2008)

    Compliance with CPLR 313 alone constitutes proper service upon foreign defendants in New York actions when no treaties or international agreements supplant New York’s service requirements; principles of international comity do not mandate compliance with the foreign nation’s service laws.

    Summary

    New York County District Attorney Morgenthau initiated a civil forfeiture action against Brazilian depositors allegedly involved in an illegal international money transfer scheme. The defendants argued that service was improper because it did not comply with Brazilian law, which requires service via letters rogatory. The New York Court of Appeals held that service under CPLR 313 was sufficient because no treaty mandated a specific form of service, and principles of comity did not require importing foreign service laws. The court emphasized that CPLR 313 allows service outside the state in the same manner as within the state, aiming to enhance the possibility of acquiring personal jurisdiction over non-residents.

    Facts

    Federal agents uncovered an alleged international money transfer scheme operating from Brazil to Manhattan. Defendants allegedly violated Brazilian currency laws and New York banking laws by transferring money through a money transfer station. Federal authorities seized over $21 million but were later ordered to relinquish control of the funds. Subsequently, District Attorney Morgenthau commenced a civil forfeiture action pursuant to CPLR article 13-A, seeking $636,924,865. Plaintiff served 14 individual defendants and representatives of five corporate defendants in Brazil, utilizing methods prescribed under the CPLR. Some defendants were served through their attorneys under alternative service methods.

    Procedural History

    The Supreme Court vacated an attachment order and dismissed the complaint, concluding that service failed to comply with the Inter-American Convention on Letters Rogatory and Brazilian service requirements, violating principles of comity. The Appellate Division affirmed, finding no abuse of discretion in declining to confirm the attachment orders and holding that service procedures were improper for failing to comply with Brazilian law and comity principles. The Court of Appeals granted leave to appeal.

    Issue(s)

    Whether service of process pursuant to CPLR 313 on defendants in a foreign country is sufficient to confer personal jurisdiction, or whether one must additionally satisfy the service requirements of that foreign locale.

    Holding

    No, because compliance with CPLR 313 alone constitutes proper service upon foreign defendants where no treaties or international agreements supplant New York’s service requirements, and principles of international comity do not mandate a different result.

    Court’s Reasoning

    The Court of Appeals reasoned that the plain language of CPLR 313 does not require fulfilling a foreign locale’s service of process requirements. The statute allows service outside the state “in the same manner as service is made within the state.” The court emphasized the statute’s purpose of removing state lines and enhancing the possibility of acquiring personal jurisdiction over non-residents. The court stated, “[T]he permissive methods of service without the state have been increased in order to enhance the possibility of acquiring in personam jurisdiction over non-residents subject to our courts’ jurisdiction.” The court found that principles of comity did not compel a different result, as comity need not be applied to service of process issues where the CPLR’s requirements of service upon foreign defendants are fulfilled. “[C]omity is not an additional hurdle for a plaintiff to overcome in serving a party in a foreign country.” The court distinguished situations involving treaties, like the Hague Service Convention, which mandate specific forms of service, but noted that Brazil is not a signatory to that convention. While both the US and Brazil are signatories to the Inter-American Convention on Letters Rogatory, Article 2 of that treaty does not mandate letters rogatory as the exclusive means of service. Since CPLR 313 was satisfied for the individual and corporate defendants, the service was proper.

  • Moscow Fire Ins. Co. v. Bank of New York & Trust Co., 280 N.Y. 269 (1939): Effect of Soviet Nationalization Decrees on Foreign Assets

    Moscow Fire Ins. Co. v. Bank of New York & Trust Co., 280 N.Y. 269 (1939)

    A foreign government’s nationalization decrees are given effect by U.S. courts, but only to the extent that they do not conflict with U.S. public policy protecting the rights of domestic creditors.

    Summary

    This case addresses the distribution of assets of a Russian insurance company’s New York branch after the company was nationalized by the Soviet government. The court held that while U.S. courts generally recognize foreign nationalization decrees, New York public policy dictates that the assets within the state should first be used to protect the claims of U.S. creditors and policyholders. After those claims are satisfied, any remaining assets can be subject to the nationalization decree. The case highlights the balance between international comity and the protection of domestic interests.

    Facts

    Moscow Fire Insurance Company, a Russian corporation, established a branch in New York and deposited assets as required by New York insurance law to protect U.S. policyholders and creditors. Following the Russian Revolution, the Soviet government nationalized all insurance companies, including Moscow Fire. The New York branch was later liquidated by the Superintendent of Insurance. All domestic creditors and policyholders of the NY branch were paid. Foreign creditors and shareholders then claimed the remaining assets.

    Procedural History

    The Superintendent of Insurance was appointed liquidator. After domestic claims were satisfied, the remaining assets were deposited with the Bank of New York & Trust Co. Creditors and stockholders of the parent company (none of whom were U.S. nationals) sued to claim these assets. The United States intervened, asserting a claim to the assets based on an assignment from the Soviet government. The lower courts ruled against the U.S. intervention, leading to this appeal.

    Issue(s)

    1. Whether the nationalization decrees of the Soviet government extinguished all claims against the assets of the Moscow Fire Insurance Company, including those of foreign creditors.
    2. Whether New York’s public policy allows for the protection of domestic creditors over the enforcement of foreign nationalization decrees when distributing the assets of a foreign company’s branch located in New York.
    3. Whether the assignment from the Soviet government to the United States granted the U.S. priority claim to the assets over foreign creditors.

    Holding

    1. No, because the nationalization decrees are not automatically given full effect in the U.S. when they conflict with domestic public policy.
    2. Yes, because New York’s public policy mandates the protection of local creditors and policyholders of a foreign entity’s branch before foreign decrees can be enforced.
    3. No, because the assignment is subject to the public policy of protecting domestic creditors. The court reasoned that U.S. public policy prevented the complete enforcement of the Soviet decree.

    Court’s Reasoning

    The court acknowledged the general principle of recognizing foreign government actions within their own territories. However, it emphasized that this principle is limited by the public policy of the forum where the assets are located. In this case, New York’s public policy, as reflected in its insurance law, prioritizes the protection of domestic creditors and policyholders. The court reasoned that the assets deposited in New York were intended as a safeguard for those local interests.

    The court distinguished the case from situations where the Soviet government directly sued to recover assets, noting that the presence of domestic creditors altered the balance. The court stated that while the Soviet government’s decrees are valid within its own territory, they cannot override the established protections for U.S. claimants concerning assets located within New York.

    The dissenting opinion argued that the Soviet decrees should be given full effect, asserting that the assignment to the U.S. government should have granted the U.S. priority claim. The dissent contended that U.S. courts should not interfere with the political agreement between the two governments. However, the majority held firm that the protection of domestic interests was a paramount consideration that limited the effect of both the nationalization decrees and the subsequent assignment.