Koehler v. Bank of Bermuda Ltd.

05-2378-cv
Koehler v. Bank of Bermuda Ltd.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT
_______________________________

August Term, 2007

(Argued: February 29, 2008 Decided: September 23, 2008)

Docket No. 05-2378-cv
_______________________________

LEE N. KOEHLER,

Petitioner-Appellant,
v.

THE BANK OF BERMUDA LIMITED,

Respondent-Appellee.
_______________________________

Before: CABRANES, POOLER, and KATZMANN, Circuit Judges.
_______________________________

Lee N. Koehler appeals from two orders of the United States District Court for the

Southern District of New York (Charles S. Haight, Jr., Judge): a March 9, 2005 memorandum

opinion and order and an August 10, 2005 memorandum opinion and order, insofar as those

orders vacated an October 29, 1993 order for payment or delivery of property of the judgment

debtor, held that Koehler could not reach an accommodation with the judgment debtor and

continue to pursue his action against The Bank of Bermuda Limited (“BBL”), and denied

reconsideration of those issues. We hold that the district court erred in ruling that the Maryland

settlement extinguished Koehler’s action against BBL. We certify to the New York State Court

1
of Appeals the question of whether a court sitting in New York may order a bank over which it

has personal jurisdiction to deliver stock certificates owned by a judgment debtor (or cash equal

to their value) to a judgment creditor, pursuant to N.Y. C.P.L.R. Article 52, when those stock

certificates are located outside New York.

VACATED in part. Question CERTIFIED to the New York State Court of Appeals.

__________________________

BRIAN G. WEST, Towson, MD (Paul F. Newhouse, on the brief) for
Petitioner-Appellant,

DANIEL B. RAPPORT, Friedman Kaplan Seiler & Adelman LLP, New York,
NY (Robert J. Lack, Vanessa Richards, on the brief) for Respondent-Appellee.

__________________________

POOLER, Circuit Judge:

Lee N. Koehler appeals from two orders of the United States District Court for the

Southern District of New York (Charles S. Haight, Jr., Judge), a March 9, 2005 memorandum

opinion and order and an August 10, 2005 memorandum opinion and order, insofar as those

orders vacated an October 29, 1993 order for payment or delivery of property of the judgment

debtor, held that Koehler could not reach an accommodation with the judgment debtor and

continue to pursue his action against The Bank of Bermuda Limited (“BBL”), and denied

reconsideration of those issues. The district court concluded that Koehler’s July 2004 settlement

agreement had extinguished his claims against BBL, and that in any event, the district court

lacked in rem jurisdiction over stock certificates held in Bermuda.

We hold that the district court erred in concluding that the settlement agreement

2
extinguished Koehler’s action against the bank. Whether the district court nevertheless correctly

denied Koehler’s petition for a writ of execution, on the ground that it lacked in rem jurisdiction,

depends on whether a court in New York may, pursuant to N.Y. C.P.L.R. 5225(b) or N.Y.

C.P.L.R. 5227, order a bank over which it has personal jurisdiction to deliver stock certificates

owned by a judgment debtor (or cash equal to their value) to a judgment creditor, pursuant to

N.Y. C.P.L.R. Article 52, when those stock certificates are located outside New York. Because

this question has not been directly addressed by the New York State Court of Appeals and is

controlling in the disposition of Koehler’s petition, we certify the question to the New York State

Court of Appeals. We retain jurisdiction over the case and will decide the appeal after we have

learned the views of the New York State Court of Appeals or that court declines certification.

BACKGROUND

On June 4, 1993, the United States District Court for the District of Maryland awarded

Koehler a $2,096,343 default judgment against A. David Dodwell.1 Koehler registered the

judgment in the United States District Court for the Southern District of New York on July 23,

1993, pursuant to 28 U.S.C. § 1963. Dodwell, a resident of Bermuda, owned stock in a Bermuda

corporation, The Reefs Beach Club Limited (“The Reefs”). It is undisputed that the stock

certificates representing Dodwell’s shares in The Reefs were always located in Bermuda. On the

understanding that BBL possessed the certificates, which Dodwell had initially pledged to BBL

as collateral for a loan, Koehler began garnishment proceedings against BBL.

1
Dodwell moved to vacate the judgment for lack of personal jurisdiction. The United
States District Court for the District of Maryland held that service upon Dodwell had been
ineffective, and vacated the judgment. The Fourth Circuit, however, reversed the District Court,
Koehler v. Dodwell, 152 F.3d 304 (4th Cir. 1998), and Koehler’s judgment against Dodwell was
reinstated.

3
 On July 26, 1993 and August 10, 1993, Koehler served, on a New York subsidiary of

BBL, a writ of execution, under N.Y. C.P.L.R. 5232(a), and a restraining notice, which cited Fed.

R. Civ. P. 69(a) and N.Y. C.P.L.R. 5222(b). On October 27, 1993, Koehler filed a “motion for

payment or delivery of property of judgment debtor.” In that petition, Koehler claimed that if the

stock certificates no longer represented security for BBL’s loan to Dodwell, then either they were

capable of delivery by BBL under N.Y. C.P.L.R. 5225 or they represented a debt to Dodwell and

their value should be paid by BBL to Koehler under N.Y. C.P.L.R. 5227. On October 29, 1993,

the United States District Court for the Southern District of New York (Robert J. Ward, Judge)

signed, ex parte, an order to show cause why BBL should not be ordered to deliver property or

pay over a debt owed to Dodwell and an “order for payment or delivery of property of the

judgment debtor,” which required BBL to deliver to Koehler any stock certificates owned by

Dodwell or to pay to Koehler any debt owed to Dodwell, up to the sum of $2,096,343.2

BBL then challenged the district court’s personal jurisdiction over it, an issue that the

parties proceeded to litigate for the next ten years. See, e.g., Koehler v. Bank of Bermuda, Ltd.,

No. M18-302, 1994 U.S. Dist. LEXIS 1540, 1994 WL 48825 (S.D.N.Y. Feb. 16, 1994); Koehler

v. Bank of Bermuda, Ltd., No. M18-302 (CSH), 1995 U.S. Dist. LEXIS 18223, 1995 WL

728467 (S.D.N.Y. Dec. 8, 1995); Koehler v. Bank of Bermuda, Ltd., 101 F.3d 863 (2d Cir.

1996); Koehler v. Bank of Bermuda, Ltd., No. M18-302, 1997 WL 370791 (S.D.N.Y. July 2,

1997); Koehler v. Bank of Bermuda, Ltd., No. M18-302, 2003 U.S. Dist. LEXIS 1946, 2003 WL

289640 (S.D.N.Y. Feb. 11, 2003). Magistrate Judge Michael H. Dolinger found that BBL,

2
It appears that Koehler did not inform the district court at this time that the certificates
were located in Bermuda. See Koehler v. Bank of Bermuda, Ltd., 2005 U.S. Dist. LEXIS 16521,
at *4, 2005 WL 1924746, at *2 (S.D.N.Y. Aug. 10, 2005).

4
“whether through deliberate decision or extreme indifference to its obligations, failed to comply

over an extended period of time both with its discovery obligations and with specific rulings of

[the district] court.” Koehler, 2003 U.S. Dist. LEXIS 1946, at *20-21, 2003 WL 289640 at *7.

Eventually, in October 2003, BBL consented to the personal jurisdiction of the Southern District

of New York over it, as of the commencement of the proceeding ten years earlier.

In March 2004, the district court ordered BBL to file an affidavit concerning the present

location, ownership, and disposition of the shares in The Reefs owned by Dodwell at the time

Koehler commenced his action. Koehler v. Bank of Bermuda, Ltd., No. M18-302 (CSH), 2004

U.S. Dist. LEXIS 3772, at *64, 2004 WL 444101, at *21 (S.D.N.Y. Mar. 10, 2004). In April

2004, BBL informed Koehler and the court that it was no longer in possession of Dodwell’s

stock certificates. The obligations for which BBL had held the certificates as collateral had been

satisfied in 1993 and BBL (ignoring Judge Ward’s turnover order) had transferred the stock to a

Bermudan company that existed for Dodwell’s benefit in July 1994.

In the meantime, however, Koehler initiated garnishment proceedings against The Reefs

and a British West Indies corporation, Windward Properties Limited (“Windward”), in which

Dodwell owned stock, in the United States District Court for the District of Maryland. Koehler

had also asserted separate claims against Dodwell and The Reefs in state court – the Circuit

Court for Baltimore County, Maryland. In July 2004, in the course of the District of Maryland

proceedings, Koehler entered into a settlement with Windward, Dodwell, and The Reefs.

Koehler agreed to be paid $475,000, of which he asserts that $75,000 was to be credited to the

default judgment, and $400,000 to his claims against The Reefs and Dodwell in the action

pending in Maryland state court. In return, he agreed not to sue Dodwell for enforcement of the

5
default judgment. The parties signed the settlement agreement on July 12, 2004, followed by an

addendum and a general release on July 13, 2004.

In March 2005, the United States District Court for the Southern District of New

York (Charles S. Haight, Jr., Judge), denied Koehler’s petition for writ of execution and his

request to amend the petition to include claims of negligence, fraudulent conveyance, fraudulent

concealment, and negligent misrepresentation, and dismissed his proceedings with prejudice.

Koehler v. Bank of Bermuda, Ltd., No. M18-302 (CSH), 2005 U.S. Dist. LEXIS 3760, 2005 WL

551115 (S.D.N.Y. March 9, 2005). The district court concluded “that the settlement between

Koehler and Dodwell discharges any rights Koehler may have had to pursue claims against

BBL,” 2005 U.S. Dist. LEXIS 3760, at *20, 2005 WL 551115, at *7, and that in any event it had

“no in rem jurisdiction over Dodwell’s share certificates, which underlies Koehler’s remaining

claims against BBL,” 2005 U.S. Dist. LEXIS 3760, at *21, 2005 WL 551115, at *7. The district

court subsequently denied Koehler’s motion for reconsideration. Koehler v. Bank of Bermuda,

Ltd., No. M18-302 (CSH), 2005 U.S. Dist. LEXIS 16521, 2005 WL 1924746 (S.D.N.Y. Aug. 10,

2005). Koehler appeals both orders.

The orders under appeal effectively vacated the October 29, 1993 turnover order.

Because an order requiring securities to be brought into New York from another state or country

is treated as an injunction, In re Feit & Drexler, Inc., 760 F.2d 406, 412 (2d Cir. 1985),

Inter-Regional Financial Group, Inc. v. Hashemi, 562 F.2d 152, 154 (2d Cir. 1977), the orders

under appeal are reviewable as “interlocutory orders . . . dissolving [an] injunction[],” 28 U.S.C.

§ 1292(a)(1).

We hold that the district court erred in ruling that the Maryland settlement extinguished

6
Koehler’s action against BBL, and we certify the question of its in rem jurisdiction to the New

York State Court of Appeals.

DISCUSSION

I. THE SETTLEMENT

On July 12, 2004, attorneys for Koehler, Dodwell, The Reefs, and Windward signed a

settlement agreement. Koehler agreed to be paid $475,000. In return, he released the other

parties to the agreement from claims and proceedings.

Paragraph 1.A of the Settlement Agreement specified that the “Releasors” are “Koehler

and his heirs, personal representatives, and assigns,” and that the “Releasees” are “Dodwell,

Reefs, Windward, IRR3, and their respective employees, directors, officers, representatives,

agents, successors, subsidiaries, affiliates, and attorneys.” The same paragraph provides that

“‘Releasees’ shall not include the BOB Group . . . .” An addendum to the Settlement Agreement,

signed the following day, makes it clear that “BOB” refers to the Bank of Bermuda Group, which

“is defined to mean The Bank of Bermuda Limited, its officers, directors, attorneys, accountants,

successors, assigns, affiliates, and/or amalgamation partners.”

Paragraph 2 of the Settlement Agreement required Koehler as the Releasor to give

“[r]elease of and from any and all claims, actions, proceedings, garnishments, of any nature

whatsoever against Releasees, known or unknown, worldwide, from the beginning of time to the

date of the release, and in the future to the extent such claims or proceedings arise out of events

occurring prior to the date of this Settlement Agreement, to the full extent permitted by law,

except however, that the release to Dodwell shall not in any way constitute a release of the

3
Island Resorts Reservations Limited.

7
Default Judgment, nor is it intended in any way [to] impair or prejudice Koehler’s claims against

BoB in New York.” Paragraph 2.A of the Settlement Agreement provided as follows. “Subject

to # 5, Releasors covenant and agree: (i) to refrain from taking any action to collect, execute

upon, or enforce all or any part of the Default Judgment against Dodwell or against any other

person, entity, asset, or thing, with the exception that Releasor may pursue claims against BOB

as discussed in paragraph 5 below, and (ii) hereafter not to record or re-record the Default

Judgment in any judicial or governmental, public, or commercial record anywhere in the world,

except as required to pursue the permitted actions against BoB.”

Paragraph 5 of the Settlement Agreement provided that “[t]he Releasees acknowledge

that there is currently pending in United States District Court for the Southern District of New

York a garnishment proceeding between Koehler and BOB. Nothing in this Settlement

Agreement shall be construed so as to prohibit or preclude or otherwise limit Koehler from

continuing to prosecute such New York action against the BOB Group, or adding claims or

causes of action or defenses against the BOB Group therein, except however that Koehler shall

not seek, obtain, assume, acquire by assignment or operation of law or fact, or exercise any

rights, claims or causes of action which BOB has or may have against any Releasee now or in the

future.” In Paragraph 5A, the releasees in turn released Koehler “from any existing or future

claim arising out of an assertion by the BOB of a claim against them for indemnity or damages as

the result of Koehler pursuing any claim against BOB.”

Under the express language of the settlement agreement, paragraph 10, Maryland law is

controlling. In Maryland, “[r]eleases are contracts. Therefore, they are construed and applied

according to the rules of contract law. Moreover, it is well settled that [a] release is to be

8
construed according to the intent of the parties and the object and purpose of the instrument, and

that intent will control and limit its operation.” Owens-Illinois, Inc. v. Cook, 872 A.2d 969, 985

(Md. 2005) (internal quotation marks and citations omitted); see also Shriver v. Carlin & Fulton

Co., 141 A. 434, 440 (Md. 1928). Furthermore, “[t]he parties to a release, absent legislative

restriction, ordinarily are free to expand or contract the scope of the instrument in accordance

with their agreement.” Morgan v. Cohen, 523 A.2d 1003, 1009 (Md. 1987) (holding that release

of original tortfeasor does not, of itself, produce legal result of releasing claims against

subsequent negligently treating physician, and that any Maryland decisions to the contrary are

overruled).

We agree with the district court that “the intent of the parties clearly appears from the

face of the agreement. . . . Koehler [made] a covenant not to sue Dodwell to enforce the Default

Judgment against him, while keeping the judgment itself intact.” Koehler, 2005 U.S. Dist.

LEXIS 3760, at *9, WL 551115, at *3. We also agree that “[o]rdinarily, a settlement between

judgment creditor and judgment debtor eliminates the right of the judgment creditor to pursue

claims against a judgment debtor’s garnishee . . . because the settlement removes the underlying

debt upon which the judgment creditor’s claim against the garnishee is based.” Id. (emphasis

added). See Baltimore & Ohio R.R. Co. v. Equitable Bank, N.A., 550 A.2d 407, 411-12 (Md.

Ct. Spec. App. 1988). We disagree with the district court in that we conclude that Koehler was

able to, and did, reserve his rights against the garnishee.

The settlement agreement, at paragraph 2, expressly left the District of Maryland default

judgment against Dodwell intact, as the district court found. Moreover, the language of the

agreement makes it plain that Koehler intended to reserve his rights to sue BBL. The settlement

9
agreement provided that the release would “not . . . in any way impair or prejudice” Koehler’s

claims against BBL in the Southern District of New York and that it shall not be construed “so as

to prohibit or preclude or otherwise limit Koehler from continuing to prosecute” the action

against BBL. In fact, under the General Release signed on July 13, 2004, the settlement and

release expressly allow for the possibility that BBL will pursue a claim against Dodwell, arising

from Koehler’s action against BBL. Finally, Dodwell expressly acknowledged his possible

future risk of liability to BBL for indemnity or damages as the result of Koehler’s pursuing a

claim against BBL.

Accordingly, it is clear that the intent of the parties was that Koehler would no longer sue

Dodwell directly to enforce the judgment against him but would continue litigation against BBL.

BBL argues that, because of its status as a garnishee rather than a surety, the settlement

agreement does not fit comfortably within the ambit of Maryland’s “reservation of rights”

doctrine. See Chicago Title Ins. Co. v. Lumbermen’s Mut. Cas. Co., 707 A.2d 913, 921 (Md. Ct.

Spec. App. 1998); see also Federal Land Bank, Inc. v. Esham, 406 A.2d 928, 940 (Md. Ct. Spec.

App. 1979). We disagree.

While Chicago Title is specifically concerned with reservation of rights against a surety,

it does not hold that reservation of rights is limited to sureties. Indeed, Chicago Title extends to

sureties a general principle previously applicable to judgment debtors, namely that “[a] right

against other debtors is held to be reserved in any case where it appears from the terms of the

release that it was not intended or expected that all the debtors should be released.” Chicago

Title, 707 A.2d at 920-21 (quoting Roe v. Citizens National Bank, 358 A.2d 267, 270 (Md. Ct.

Spec. App. 1976), in turn quoting Williston on Contracts § 338). The Chicago Title court traced

10
this principle to Shriver v. Carlin & Fulton Co., 141 A. 434, 440 (Md. 1928) (stating that “a

release is to be construed according to the intent of the parties and the object and purpose of the

instrument, and that intent will control and limit its operation. Hence the legal operation of a

release of one of two or more joint debtors may be restrained by an express provision in the

instrument that it shall not operate as to the other.”).

BBL points to no Maryland case standing for the proposition that a judgment creditor

may not settle with a judgment debtor while reserving rights against a named garnishee. And

there is no reason to suppose that the general principle that a creditor may reserve his rights

against one party while releasing another, which has been applied to multiple judgment debtors,

see Shriver, 141 A. at 440, sureties, see Chicago Title, 707 A.2d at 920-21, and successive

tortfeasors, see Morgan, 523 A.2d at 1009, is inapplicable to garnishees.

The district court ruling, as it stands, makes a release encompass, by operation of law,

parties specifically excluded by the release. That is not the law in Maryland. We conclude that

the district court erred in ruling that the Maryland settlement extinguished Koehler’s action

against BBL.

Koehler’s motion to certify questions of local law to the Maryland Court of Appeals is

denied as moot.

II. IN REM JURISDICTION

A. Authority under New York Civil Practice Law and Rules

Under Federal Rule of Civil Procedure 69(a), a district court has the authority to enforce a

judgment by attaching property in accordance with the law of the state in which the district court

sits. In New York, that law is the New York Civil Practice Law and Rules. Section 5225

11
authorizes a court to order the delivery of property that belongs to a judgment debtor but is not in

his possession. N.Y. C.P.L.R. 5225(b). A similar proceeding is available when a debt is sought

from a person who is or will be indebted to the judgment debtor. N.Y. C.P.L.R. 5227. Koehler

invoked both provisions in his October 1993 petition. We assume, without deciding at this

juncture, that the stock Koehler sought was property of Dodwell that would be subject to

judgment enforcement, under N.Y. C.P.L.R. 5201, were it located within New York.4

In vacating the 1993 turnover order, the district court relied on what it perceived to be the

well-established principle that it could not attach property that is not within its jurisdiction.

2005 U.S. Dist. LEXIS 3760, at *32, 2005 WL 551115, at *11. The cases it cites are Fiduciary

Partners, Inc. v. Philippine Export & Foreign Loan Guaranty Corp., 921 F. Supp. 1113, 1119-21

(S.D.N.Y. 1996) (stating that property sought to be levied against by writ of execution under

N.Y. C.P.L.R. 5232 must exist within the court’s jurisdiction); National Union Fire Ins. Co. v.

Advanced Employment Concepts, Inc., 703 N.Y.S.2d 3, 4 (N.Y. App. Div. 1st Dep’t 2000)

(holding that, “[i]n order to be subject to attachment, property must be within the court’s

jurisdiction”); Intercontinental Credit Corp. v. Roth, 578 N.Y.S.2d 955, 956 (N.Y. Sup. Ct. 1990)

(noting that “a New York court cannot attach property not within its jurisdiction”), vacated on

other grounds, 595 N.Y.S.2d 602 (N.Y. Sup. Ct. 1991); and Gavilanes v. Matavosian, 475

4
The district court held that the Bermuda stock certificates sought by Koehler were not
leviable in New York, as property against which a money judgment may be enforced, under N.Y.
C.P.L.R. § 5201(b). 2005 U.S. Dist. LEXIS 3760, at *21-28, 2005 WL 551115, at *8-10. And
the district court held that the stock certificates did not fit within the N.Y. C.P.L.R.
§ 5201(a) definition of debts against which a money judgment may be enforced. 2005 U.S. Dist.
LEXIS 3760, at *28-31, 2005 WL 551115, at *10-11. But the district court did not hold that the
stock certificates failed to fit within the N.Y. C.P.L.R. § 5201(b) definition of property against
which a money judgment may be enforced.

12
N.Y.S.2d 987, 989 (N.Y. Civ. Ct. 1984) (stating that “[i]t is well established that a New York

court cannot attach property not within its jurisdiction”). See also Mones v. Commer. Bank of

Kuwait, S.A.K., 399 F. Supp. 2d 310, 317 (S.D.N.Y. 2005) (stating that “[c]ourts have repeatedly

held . . . that [N.Y. C.P.L.R. 5225] power is limited to ordering the delivery of property that is

located within the court’s jurisdiction.”), vacated on other grounds, 204 Fed. Appx. 988 (2d Cir.

2006).

It seems clear that a court sitting in New York, that has personal jurisdiction over a

judgment debtor, may order the judgment debtor himself to deliver property into New York. See,

e.g., Gryphon Domestic VI, LLC v. APP Int’l. Fin. Co., B.V., 836 N.Y.S.2d 4, 9 (N.Y. App. Div.

1st Dep’t 2007) (holding that a court in New York can order a judgment debtor, over whom it has

personal jurisdiction, to turn over out-of-state assets, under N.Y. C.P.L.R. 5225(a)); Starbare II

Partners, L.P. v. Sloan, 629 N.Y.S.2d 23 (N.Y. App. Div. 1st Dep’t 1995) (holding that a court in

New York was entitled to order a judgment debtor to deliver artwork in his possession, under

N.Y. C.P.L.R. 5225, although the artwork was located outside new York, because it had personal

jurisdiction over him). It is less clear that courts have the authority to order a person or entity

other than the judgment debtor to deliver assets into New York, when that person or entity is

located in a foreign jurisdiction.

The relevant inquiry is whether Judge Ward had the authority to require a bank in

Bermuda to turn over Dodwell’s assets. Arguably, “there is no precedent indicating that the

court has this authority over a financial intermediary.” Mones, 399 F. Supp. 2d at 318.

However, BBL has consented to the district court’s personal jurisdiction over it, and it is possible

to read New York case law as providing that a court may order any entity over which it has

13
personal jurisdiction to turn over out-of-state property, regardless of whether that entity is the

judgment debtor. See Gryphon Domestic VI, 836 N.Y.S.2d at 9 (noting that “the explicit

rationale [in Starbare II Partners, 629 N.Y.S.2d at 23] was that the court could order the

defendant judgment debtor to turn over property because it had personal jurisdiction over the

defendant”); Morgenthau v. Avion Resources Ltd., 849 N.Y.S.2d 223, 226 (N.Y. App. Div. 1st

Dep’t 2007) (endorsing plaintiff’s position that “the New York courts have the power to

command a garnishee present in the state to bring out-of-state assets under the garnishee’s

control into the state”).

If the personal jurisdiction that a court has over a judgment debtor is the key to its ability

to force him to facilitate judgment enforcement by bringing his own property into New York,

then we see no principled reason why a court in New York should not be able to order a

garnishee that has submitted to its personal jurisdiction to deliver property within its control.

Although a writ of execution, which is issuable to a New York sheriff, cannot be levied outside

New York, we perceive nothing in the text of N.Y. C.P.L.R. 5225 that would limit the power of a

court to order a party within its personal jurisdiction to deliver property to New York. However,

we acknowledge that the issue is unsettled in New York, and that it must be resolved by the New

York State Court of Appeals, before we can determine whether the district court correctly

vacated the turnover order.

We are also mindful that, even if “[s]hares of stock are intangible property . . . yet for

practical purposes they are merged in stock certificates.” Agar v. Orda, 190 N.E. 479, 480 (N.Y.

1934). See Thyroff v. Nationwide Mut. Ins. Co., 864 N.E.2d 1272, 1276 (N.Y. 2007); Eberhard

v. Marcu, 530 F.3d 122, 136 n.14 (2d Cir. 2008). The district court concluded that stock

14
certificates in general must be located within the state in order to be attached, citing ABKCO

Indus., Inc. v. Apple Films, Inc., 350 N.E.2d 899, 901 (N.Y. 1976) (stating in dicta that “some

intangibles are deemed to have become embodied in formal paper writings . . . and in such

instances attachment depends on the physical presence of the written instrument within the

attaching jurisdiction.”) and Dyer v. Dyer, 247 N.Y.S. 540, 541-42 (N.Y. App. Div. 1st Dep’t

1931) (noting that “[s]hares owned by a non-resident defendant in a foreign corporation are not

property within the State of New York, even though the corporation [is] doing business here,

unless the stock certificates themselves are found within the State.”). 2005 U.S. Dist. LEXIS

3760, at *27, 2005 WL 551115, at *9. We note that such propositions appear at first sight to be

inconsistent with recent developments in which at least one New York court has ordered the

turnover, under N.Y. C.P.L.R. 5225, of extraterritorial stock certificates. See Gryphon Domestic

VI, 41 A.D.3d 25, 836 N.Y.S.2d 4.

These unresolved issues regarding the reach of courts in New York over extraterritorial

assets lie at the intersection of New York State civil practice and New York State policy. It is

our understanding that the highest court in New York has yet to resolve them. Moreover, these

issues appear to be dispositive of the district court’s conclusion that the stock certificates Koehler

is seeking, which have always been located in Bermuda, are not subject to judgment enforcement

in New York. 2005 U.S. Dist. LEXIS 3760, at *21-31, 2005 WL 551115, at *7-11.

We therefore certify to the New York State Court of Appeals the question whether a court

sitting in New York may, pursuant to N.Y. C.P.L.R. 5225(b), order a bank over which it has

personal jurisdiction to deliver stock certificates owned by a judgment debtor (or cash equal to

their value) to a judgment creditor, pursuant to N.Y. C.P.L.R. Article 52, when those stock

15
certificates are located outside New York. The New York State Court of Appeals may, of

course, reformulate or expand this question as it wishes.

B. Authority under Federal Rules of Civil Procedure

As an alternative, Koehler sought from the district court attachment of the stock

certificates “by means of the equitable powers of [the district court] found in the ‘unless the court

directs otherwise’ clause of Rule 69(a).” Koehler, 2005 U.S. Dist. LEXIS 3760, at * 40, 2005

WL 551115, at *13. “A money judgment is enforced by a writ of execution, unless the court

directs otherwise. The procedure on execution -- and in proceedings supplementary to and in aid

of judgment or execution -- must accord with the procedure of the state where the court is

located, but a federal statute governs to the extent it applies.” Fed. R. Civ. P. 69(a)(1) (emphasis

added).

The district court denied such equitable relief, and Koehler does not raise the “unless the

court directs otherwise” argument to this Court. We consider this alternative argument waived.

Norton v. Sam’s Club, 145 F.3d 114, 117 (2d Cir. 1998).

Finally, Koehler argues that “Judge Ward had authority to issue the Turnover order

pursuant to the inherent equitable powers of federal courts to enforce money judgments via the

remedy known as creditor’s bills.” A creditor’s bill was used at common law “to permit a

judgment creditor to discover the debtor’s assets, to reach equitable interests not subject to

execution at law, and to set aside fraudulent conveyances.” Grupo Mexicano De Desarrollo v.

Alliance Bond Fund, Inc., 527 U.S. 308, 319 (1999) (citations omitted). Since Koehler does not

assert that he invoked the mechanism of the creditor’s bill in his petitions to the district court

seeking enforcement of the default judgment, we have no occasion to decide whether such a

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remedy was available.

We have considered Koehler’s other arguments and find them unavailing.

CONCLUSION

For the foregoing reasons, we VACATE that part of the district court’s March 9, 2005

opinion and order that ruled that the settlement between Koehler and Dodwell discharged any

rights Koehler may have had to pursue claims against BBL, and we CERTIFY the following

determinative issue of state law to the New York State Court of Appeals pursuant to Second

Circuit Local Rule § 0.27 and New York State Court of Appeals Rules of Practice § 500.27 (22

N.Y.C.R.R. § 500.27): whether a court sitting in New York may order a bank over which it has

personal jurisdiction to deliver stock certificates owned by a judgment debtor (or cash equal to

their value) to a judgment creditor, pursuant to N.Y. C.P.L.R. Article 52, when those stock

certificates are located outside New York.

We also hereby ORDER that the Clerk of the Court transmit to the Clerk of the New

York State Court of Appeals a Certificate in the form attached, together with a copy of this

opinion and a complete set of the briefs, appendices, and record filed by the parties in this Court.

This panel will retain jurisdiction to decide the case once we have had the benefit of the views of

the New York State Court of Appeals or that court declines certification. Finally, we order the

parties to bear equally any fees and costs that may be requested by the New York State Court of

Appeals.

CERTIFICATION

The following question is hereby certified to the New York State Court of Appeals

pursuant to Second Circuit Local Rule § 0.27 and 22 N.Y.C.R.R. § 500.27, as ordered by the

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United States Court of Appeals for the Second Circuit. May a court sitting in New York order a

bank over which it has personal jurisdiction to deliver stock certificates owned by a judgment

debtor (or cash equal to their value) to a judgment creditor, pursuant to N.Y. C.P.L.R. Article 52,

when those stock certificates are located outside New York?

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