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Mar 17, 2014

New York Court Affirms Separate Entity Ruling on Appeal

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On March 11, 2014, a New York state appellate court affirmed an important decision on the “separate entity” rule that is favorable to all multinational banks that maintain a New York branch. New York’s separate entity rule protects banks from judgment creditors who seek to restrain or attach assets located outside of New York by serving process on a bank’s New York branch. The continued viability of that rule has been called into question since the 2009 Court of Appeals decision in Koehler v. Bank of Bermuda. On October 22, 2012, in Ayyash v. Koleilat, a New York court ruled in favor of Shearman & Sterling clients in reaffirming the continued viability of the separate entity rule and applying it to bar extraterritorial enforcement and discovery requests. The Appellate Division, First Department, affirmed that decision this week on alternative grounds. The favorable decision in Ayyash adds to the tally of cases that have found that the separate entity rule survived Koehler. The increasing weight of authority that has reached this conclusion may influence the Court of Appeals when it has occasion to resolve the issue once and for all—which is likely to happen sooner rather than later (likely early 2015) in light of the Second Circuit’s recent certification of the issue in Tire Engineering v. Bank of China. This note provides an overview of the Ayyash decisions and applicable law.

View full memo, New York Court Affirms Separate Entity Ruling on Appeal

Authors and Contributors

Brian H. Polovoy

Partner

Litigation

+1 212 848 4703

+1 212 848 4703

New York

Danforth Newcomb

Of Counsel

Litigation

+1 212 848 4184

+1 212 848 4184

New York

Henry Weisburg

Partner

International Arbitration

+1 212 848 4193

+1 212 848 4193

New York

Practices