Gryphon Dom. VI, LLC v App Intl. Fin.Co., D.V.
Annotate this CaseDecided on February 9, 2005
Supreme Court, New York County
Gryphon Domestic VI, LLC
against
APP Intl. Fin. Co., D.V.
603315/02
Attorney for Plaintiff General Electric and Oak Tree
Richards, Spears, Kibbe, Orbe, LLP
One World Financial Center
New York, New York 10281
By: Arthur Greenspan, Esq.
212-530-1800
Attorneys for Gryphon Domestic VI, LLC
Cleary Gottlieb, Steen, Hamilton
One Liberty Plaza
New York, New York 10006
By: Deborah M. Buell, Esq.
212-225-2000
Attorneys for Defendants
White & Case, LLP
1155 Avenue of the Americas
New York, New York 10036
Att: David G. Hille, Esq.
212-819-8200
Schnader Harrison Segal & Lewis LLP
140 Broadway
New York, New York 10005
(212)973-8000
Att: Kenneth R. Puhala, Esq.
Helen E. Freedman, J.
In connection with their efforts to collect on a judgment of about $ 350 million, the plaintiffs/judgment creditors move for an order holding defendant/judgment debtor P.T. Indah Kiat Pulp & Paper Corporation (the "P.T. Indah")[FN1] and certain non-parties in contempt of court for violating restraining notices that plaintiffs served on them pursuant to CPLR 5222 (the "Notices").[FN2] The following were served: P.T. Indah and non-parties ABN AMRO Bank N.V. ("ABN"), DBS Bank Ltd. ("DBS"), and White & Case LLP ("White & Case"). Henceforth, the P.T. Indah, ABN, DBS, and White & Case will be referred to as the "Restrained Parties." For the reasons set forth below, the motion for a contempt finding is denied.
Background - According to the plaintiffs, the Restrained Parties are violating the Notices by preparing for a restructuring of the outstanding debt obligations (the "Outstanding Notes") issued by P.T. Indah certain affiliated Indonesian companies (the "Indonesian Debtors"). The [*2]plaintiffs in this action hold about five percent of the Outstanding Notes, whose face value totals about $ 7 billion. Under the restructuring plan (the "Restructuring"), the Indonesian Debtors have offered to exchange the Outstanding Notes, some of which are unsecured, for new, secured debt instruments with extended repayment terms. Participation is voluntary: the Restructuring would not affect the terms of the Outstanding Notes held by creditors who do not agree to the exchange.
Initially, the Indonesian Debtors invited all of their creditors, including the plaintiffs, to negotiate the terms of the agreements governing the Restructuring. After some preliminary discussions, however, the plaintiffs refused to participate further and commenced this action to collect on their Outstanding Notes. Thereafter the Indonesian Debtors excluded plaintiffs from the exchange offer. By decision and order dated February 4, 2003, plaintiffs were granted summary judgment against P.T. Indah and other defendants (the "Judgment Debtors").
Contempt - There are fundamental problems with plaintiffs' application for a contempt finding. First, plaintiffs do not allege conduct by the Restrained Parties that violates the Notices. Plaintiffs do not claim that the Restrained Parties have violated the Notices by transferring assets of the Judgment Debtors; rather, they allege that the Restrained Parties are planning to transfer assets. In essence, plaintiffs wish to enjoin the Restructuring. But a party can only be held in contempt for disobeying a court order, not in anticipation that it will disobey. SeeMcCormick v. Axelrod, 59 NY2d 574, 583 (1983).
Second, plaintiffs cannot be afforded injunctive relief, which is unavailable as a remedy for contempt; a court can only fine or imprison a contemnor. See Pitterson v. Watson, 299 AD2d 467, 468 (2d Dept. 2002); McCain v. Dinkins, 192 AD2d 217, 219-20 (1st Dept. 1993).
Third, the Restrained Parties cannot be found in contempt for transferring assets located outside New York. Restraining notices do not reach property in other jurisdictions. See ABKCO Indus. v. Apple Films, Inc., 39 NY2d 670, 674-75 (1976); Natl. Union Fire Ins. Co. of Pitts. v. Advanced Employment Concepts, Inc., 269 AD2d 101, 101 (1st Dept. 2000)
Restraints on P.T. Indah - Plaintiffs make no showing that P.T. Indah has violated the Notice allegedly served upon it, inasmuch as it has no property in New York.[FN3]
DBS - The Court lacks jurisdiction over DBS Bank Ltd. ("DBS"). The Company is organized under the laws of Singapore and does not keep an office in New York. The plaintiffs argue that DBS indirectly does business in this state either through affiliates or by virtue of its participation in the Restructuring. However, plaintiffs do not allege any facts showing that DBS's affiliates do business as its agent in New York, or that they are its alter egos. Accordingly, the affiliates' activities and presence in this state does not confer jurisdiction over DBS. See [*3]Frummer v. Hilton Hotels Intl., Inc., 19 NY2d 533, 537 (1967). In any event, DBS does not hold any property in New York, and thus the Notice served upon it was void ab initio. See CPLR 5222(b).
ABN - ABN does business from its New York City office and has assets in this State. However, it submits evidence confirming that it does not hold any of the Judgment Debtors' property in New York. Thus the Notice served upon it was void ab initio.
White & Case - In a prior decision, the Court held that the Notice served upon White & Case was void ab initio. Decision & Ord. dated Dec. 20, 2004.
ORDERED that the motion for a finding of contempt is denied.
Dated: February 9, 2005
Helen E. Freedman, J.S.C.
Footnotes
Footnote 1:Plaintiffs have withdrawn this motion for a contempt finding as against defendant Indah Kiat International Finance Company B.V.
Footnote 2:P.T. Indah contests whether the plaintiffs effected service. See infra.
Footnote 3:P.T. Indah also claims that it was not properly served with the Notice, but that issue does not need to be reached here.
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