The United States District Court for the Northern District of New York recently held that a restraining notice served on a Wells Fargo Advisors branch in Albany was sufficient to restrain the out-of-state assets of a non-party. See Berkshire Bank v. Tedeschi, 2016 WL 1029526 (N.D.N.Y. Mar. 15, 2016). In the case, the plaintiff obtained a judgment against the defendant and discovered that the defendant had received dividends from some Wells Fargo Advisors investment accounts. One of the accounts was held by an Arizona partnership, which was 98% owned by a trust for which the defendant was a trustee, 1% owned by defendant and 1% owned by the defendant’s son. When the plaintiff served the restraining notice on the Wells Fargo Advisors branch in Albany, the defendant moved to have it set aside because (i) the assets belonged to the partnership, not the defendant, and (ii) the plaintiff could not restrain out-of-state assets without registering the judgment in the state in which the assets were located. The court first found that the plaintiff could restrain the non-party assets because it had made a prima facie showing of a fraudulent conveyance, specifically in that the defendant had transferred a significant sum of money from her personal account to that of one of her business entities the day after the plaintiff had been awarded summary judgment in its action against the defendant, and that money was subsequently transferred to the account at issue here. The court then found that the restraining notice properly restrained the out-of-state property. Citing to Koehler v. Bank of Bermuda, Ltd., 12 N.Y.3d 533 (2009), the court found that “a court’s personal jurisdiction over a bank garnishee authorizes it to order the bank to turnover out-of-state property. This conclusion equally applies to a restraining notice.” In a footnote, the court added that there was no evidence that New York’s “separate entity” doctrine, which requires a judgment creditor to serve the bank branch in which the assets are located in order to restrain out-of-state assets, applied to a brokerage account.
For an analysis of the applicability of the separate entity doctrine, please click here.