Foreign Bank Cannot Be Compelled to Turn Over Funds in a Depositor''s Account Located Outside the United States
April 7, 2006
Michael Weissman - Chicago
Mones v. Commercial Bank of Kuwait, S.A.K., 399 F.Supp. 2d 310 (S.D.N.Y. 2005) arose out of a judgment creditor’s effort to have a foreign bank cited for contempt of court “because it failed to turn over funds of a depositor-judgment debtor located outside the United States.’’
On June 18, 2003, Bruce E. Mones obtained judgment against all of the limited partners of the limited partnerships known as Special Situation Investment Holdings, Ltd. and Special Situation Investment Holdings, L.P.II. A post-judgment restraining order was served on the bank on September 17, 2003, directing the turnover of funds belonging to the judgment debtors and restraining the bank from transferring any property of the judgment debtors. Although the bank was headquartered in Kuwait, it had a New York branch until June 30, 2003, when it voluntarily halted all banking operations.
On December 4, 2003, Mones served notice he would seek a turnover order against the bank and had it served at the bank’s main office in Kuwait. On December 23, 2003, the turnover order was entered and served upon the bank both in New York and Kuwait. Because there was no compliance with the turnover order, Mones sought the entry of a contempt order against the bank.
In response, the bank argued that it was not subject to the jurisdiction of the court because its New York branch had been liquidated prior to entry of judgment and because the court did not have authority to direct it to transfer assets located outside the United States to the judgment creditor.
The court ruled in favor of the bank holding that even if it had jurisdiction over the bank, it lacked power to order the turnover of assets held by the bank in Kuwait. And the contempt motion was not granted because the court said the turnover order was invalid.
What’s the Point?
The court’s ruling is correct because there was no consent by the bank to the court’s jurisdiction, but the Mones case could be compared with the decision in Kosmond v. Kosmond, 357 Ill. App. 3d 972, 80 N.E. 2nd 596 (1st Dist. 2005), wherein all parties in interest appeared generally in the litigation and an order was entered freezing funds held in the account of a defendant in Germany.
For more information, e-mail Michael L. Weissman at michael.weissman@hklaw.com or call toll free, 1-888-688-8500.