In the New York County Commercial Division, Justice David B. Cohen’s ruling in B&M Kingstone, LLC v. Mega Int’l Comm. Bank Ltd., 2022 NY Slip Op. 30481(U) (Sup. Ct. N.Y. Cnty. 2022) makes clear that New York courts can compel New York branches of non-US banks to disclose information relating to accounts or assets held by branches outside of the United States. It also demonstrates that obtaining such information through judgment enforcement procedures can prove difficult.
Specifically, the Court found that Mega, a Taiwanese bank with a branch in New York City, was not in contempt for allegedly failing to comply with a prior order that instructed the bank’s New York branch to produce a witness to testify as to foreign account information. The Court also denied the bank’s request for costs and attorneys’ fees incurred in responding to the deposition subpoenas and contempt motion.
The dispute arose when B&M sought to enforce a judgment against non-party judgment debtors who allegedly had bank accounts with Mega. B&M served a post-judgment subpoena on Mega’s New York branch seeking information and documents related to accounts of the judgment debtors. Mega objected on the basis that its New York branch was not in possession of the information because it did not hold such accounts. In a September 19, 2014 order, the Court granted B&M’s motion to hold Mega in contempt for failing to comply with the subpoena seeking the account information. The Court held that Mega’s New York branch could access information concerning accounts outside of the United States through electronic searches, and no foreign laws prevented enforcement of the subpoena, and therefore Mega was required to comply with the subpoena. The Appellate Division affirmed.
In December 2016, B&M served four deposition subpoenas on certain Mega employees. In an April 27, 2018 order, the Court denied Mega’s motion to quash the subpoenas, among other things, but granted Mega the right to identify the first witness to produce for deposition, subject to B&M’s right to move to compel production of the remaining witnesses and Mega’s right to object. Mega produced Daniel Lin, the Vice President and Deputy General Manager and compliance officer of Mega’s New York branch.
B&M argued that Mega was in contempt of the deposition subpoena and the Court’s April 27, 2018 order because Lin claimed to be unable to testify as to details of the debtors’ accounts held by the foreign branch of the bank, or was instructed by counsel not to respond to certain deposition questions that B&M asserted were essential to determine whether the bank held assets of the judgment debtors and whether those assets were concealed or transferred to avoid satisfying the judgment.
The Court held that B&M failed to meet its burden on a motion for contempt to show by clear and convincing evidence that Mega violated a clear and unequivocal court order. The Court first reasoned that Mega produced Lin for deposition in accordance with the order and that B&M did not recall Lin to testify further or invoke its right to renew its motion to compel Mega to produce any of the remaining three deponents. The Court further reasoned that Mega identified another witness for B&M to depose, but when it turned out that the new witness was no longer under Mega’s control, B&M did not pursue a deposition. Moreover, Mega did not serve any demands on the New York branch to conduct any further searches. In sum, B&M failed to exhaust its remedies before moving for contempt.
Finally, the Court denied the bank’s motion for attorneys’ fees and costs incurred in defending against the contempt motion (totaling over $450,000), holding that it was appropriate for B&M to seek discovery from either the judgement debtor or a third-party to ascertain whether any assets were concealed or transferred to defraud the judgment creditor or to hinder its ability to collect on the underlying judgment.