Commonwealth of the Northern Mariana Islands v. Canadian Imperial Bank of Commerce 1

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12-1857-cv
Commonwealth of the Northern Mariana Islands v. Canadian Imperial Bank of Commerce
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UNITED STATES COURT OF APPEALS 2
For the Second Circuit 3
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August Term, 2012 6
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(Argued: August 22, 2012 Decided: May 15, 2013) 8
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Docket No. 12-1857-cv 10
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COMMONWEALTH OF THE NORTHERN MARIANA ISLANDS, 13
Plaintiff-Appellant, 14
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—v.— 16
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CANADIAN IMPERIAL BANK OF COMMERCE, 18
Garnishee-Appellee, 19
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WILLIAM H. MILLARD, 21
Defendant, 22
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THE MILLARD FOUNDATION, 24
Intervenor. 25
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Before: CABRANES, STRAUB AND HALL, Circuit Judges. 29
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Appeal from an April 12, 2012 order of the United States District Court for the Southern District 32
of New York (Lewis A. Kaplan, Judge) denying Plaintiff-Appellant’s application for a turnover 33
order pursuant to N.Y. CPLR § 5225(b). Recognizing that this case turns upon unresolved issues 34
of New York State law, we certified to the New York Court of Appeals the following two 35
questions: 36
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(1) May a court issue a turnover order pursuant to N.Y. CPLR § 5225(b) to an entity that does 38
not have actual possession or custody of a debtor’s assets, but whose subsidiary might 39
have possession or custody of such assets? 40
(2) If the answer to the above question is in the affirmative, what factual considerations 41
should a court take into account in determining whether the issuance of such an order is 42
permissible? 43
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The New York Court of Appeals has responded in the negative to the first question and thus 1
declined to answer the second. In light of this decision, we AFFIRM the order of the District 2
Court and VACATE the injunction which has been in place pending appeal. 3
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MICHAEL S. KIM, Kobre & Kim LLP, New York, NY, Melanie L. Oxhorn, 6
Ithaca, NY, for Plaintiff-Appellant. 7
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SCOTT D. MUSOFF (Timothy G. Nelson, Gregory A. Litt, on the brief) 9
Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, for 10
Garnishee-Appellee. 11
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PER CURIAM: 13
This is an appeal from an order of the District Court for the Southern District of New 14
York (Lewis A. Kaplan, Judge) denying Plaintiff Commonwealth of the Northern Mariana 15
Islands’ (“CNMI”) motion for a turnover order under Rule 69 of the Federal Rules of Civil 16
Procedure and N.Y. CPLR § 5225(b), and granting an injunction pending appeal. After hearing 17
oral argument, we certified to the New York Court of Appeals the following questions: 18
1. May a court issue a turnover order pursuant to N.Y. CPLR § 5225(b) to an entity that 19
does not have actual possession or custody of a debtor's assets, but whose subsidiary 20
might have possession or custody of such assets? 21
2. If the answer to the above question is in the affirmative, what factual considerations 22
should a court take into account in determining whether the issuance of such an order is 23
permissible? 24
N. Mar. I. v. Canadian Imperial Bank of Commerce, et al., 693 F.3d 274, 275 (2d Cir. 2012). 25
The New York Court of Appeals accepted certification. N. Mar. I. v. Canadian Imperial 26
Bank of Commerce, 19 N.Y.3d 1040, 954 N.Y.S.2d 2 (N.Y. 2012). The court answered the first 27
question in the negative, holding that in order “for a court to issue a post-judgment turnover 28
order pursuant to CPLR 5225(b) against a banking entity, that entity itself must have actual, not 29
merely constructive, possession or custody of the assets sought. That is, it is not enough that the 30
banking entity’s subsidiary might have possession or custody of a judgment debtor’s assets.” N. 31

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Mar. I. v. Canadian Imperial Bank of Commerce, No. 58, 2013 WL 1798585, slip op. at 1-2 1
(N.Y. Apr. 30, 2013). The court thus declined to answer the second question. Id. at 4. In light 2
of its decision, we now AFFIRM the order of the District Court and VACATE the injunction. 3
Familiarity with the facts of this case, as set forth in the District Court opinion below and 4
the New York Court of Appeals’ opinion, is presumed. Previously, the District Court, in a well- 5
reasoned and thoughtful opinion, denied Plaintiff’s motion for turnover, finding that the 6
Canadian Imperial Bank of Commerce (“CIBC”) could not be said to have “possession or 7
custody” over Defendant Millard’s Cayman Islands bank accounts within the meaning of N.Y. 8
CPLR § 5225(b). N. Mar. I. v. Millard, 287 F.R.D. 204, 213-14 (S.D.N.Y. 2012). In support of 9
its motion, CNMI had pointed to, inter alia, CIBC’s 92 percent ownership of CIBC 10
FirstCaribbean International Bank (“CFIB”), a governance structure by which CIBC had full 11
oversight of CFIB’s operations, as well as overlaps in personnel between the two entities. Id. at 12
206-07. Examining the plain language of the statute, the District Court reasoned that omission in 13
the relevant section of the word “control,” which was used elsewhere in the CPLR, could not be 14
treated as inadvertent. Id. at 210-11. Thus, the court found that while CNMI had focused on the 15
“practical ability” of CIBC to order CFIB to turn over the judgment debtors’ assets, id. at 208, it 16
had not satisfied its burden under N.Y. CPLR § 5225(b) to show that CIBC was in “possession 17
or custody” of the Millards’ CFIB accounts. Further, although the Millards’ accounts were 18
housed at CFIB, that entity, “however closely linked to CNMI,” was not served in this action. 19
Id. at 214. 20
The New York Court of Appeals unambiguously confirmed the District Court’s 21
conclusion when it held that in order “for a court to issue a post-judgment turnover order 22
pursuant to CPLR 5225(b) against a banking entity” it was “not enough that the banking entity’s 23

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subsidiary might have possession or custody of a judgment debtor’s assets.” N. Mar. I., 2013 1
WL 1798585, slip op. at 2. The New York Court of Appeals, much like the District Court, 2
reasoned that the plain language of § 5225(b) “refers only to ‘possession or custody,’ excluding 3
any reference to ‘control, ’” id., slip op. at 6, and that “[t]he absence of this word is meaningful 4
and intentional,” id. 5
With this answer to the dispositive certified question, we now AFFIRM the District 6
Court’s opinion. 7
Recognizing that it was dealing with an “unsettled question of New York law on which it 8
[was] unlikely to have the last word,” the District Court issued an injunction preventing the 9
further dissolution or movement of the Millards’ accounts pending appeal. N. Mar. I., 287 10
F.R.D. at 214-215. Upon affirmance of the District Court’s order denying the motion for a 11
turnover order, we hereby VACATE that injunction. The mandate shall issue forthwith. 12

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