Opinion
No. 00 Civ. 8633 (RLC).
August 23, 2001.
Attorneys for Plaintiff: FOREHT, LAST, LANDAU, MILLER KATZ, LLP, New York, New York; RICHARD S. LAST, Of Counsel.
Attorney for Defendant: MARTIN L. BROTHERS, New York, New York; MARTIN L. BROTHERS, Of Counsel.
OPINION
Both plaintiff Haywin Textile Products, Inc. ("Haywin"), and defendant International Finance Investment and Commerce Bank Limited ("IFIC"), move for reconsideration of different aspects of the court's June 11, 2001 order. IFIC also seeks to amend the terms of the temporary restraining order previously issued in connection with this litigation. Haywin moves for summary judgment pursuant to Rule 56, F.R. Civ. P. IFIC also makes a rather informal Rule 56 cross-motion for summary judgment.
BACKGROUND
This litigation has quickly become a convoluted procedural morass due in no small part to the efforts of counsel for both parties. In this case, there already have been over thirty entries to the docket, six motions (presented with varying degrees of formality), two opinions from the court and numerous letters — all before there has been even an initial status conference. This is a complicated case involving sophisticated issues of international law. Unfortunately, the parties seem to be operating under misunderstandings of the earlier rulings of the court and the law applicable to this case. Furthermore, the parties' sarcastic exchanges have only aggravated the situation. To say that the presentation of this case has been less than enlightening would be an understatement. In an effort to reach the appropriate resolution of this dispute, the court will address in this single opinion the numerous motions filed by the parties.
A brief review of the facts of this case was included in the court's first opinion regarding the defendant's motion to dismiss. Haywin Textile Products, Inc. v. International Finance Investment and Commerce Bank, Ltd., 137 F. Supp.2d 431, 433-34 (S.D.N.Y. 2001) (Carter, J.). While familiarity with that opinion is presumed, the court will repeat, for purposes of context, some of that factual background along with elaborations which are appropriate for the consideration of these motions.
In 1992, Haywin, a New York company, commenced a civil action in the Superior Court of New Jersey, Essex County, Law Division, against several parties. One of the defendants in that action was a corporation named Azmat Bangladesh Ltd. ("Azmat"). Azmat is organized under the laws of Bangladesh and has its principal place of business in that country. Azmat initially appeared in the New Jersey action and filed an answer and alleged counterclaims. Eventually, on January 14, 1994, Haywin was awarded a default judgment against Azmat in the amount of $1,089,080.30 plus postjudgment interest.
IFIC does not contest the validity of the New Jersey judgment.
Haywin then filed suit against Azmat in Bangladesh for enforcement of the New Jersey judgment. IFIC, among others, was also named as a pro forma defendant in the Bangladeshi action. IFIC is a Bangladeshi banking institution. IFIC concedes that because Azmat was in default of a debt owed IFIC, IFIC transferred all 5000 Azmat shares to its name, and IFIC became the new owner of Azmat. (Ahmed Aff. in Opp'n to Mot. for Sum. J. ("Ahmed Aff.") ¶ 13; Def.'s Mem. in Opp'n to Mot. for Summ. J. at 10.) On May 3, 1995, IFIC and Azmat (along with several other parties) entered into a "Deed of Agreement" ("Agreement"). Haywin bases its present action against IFIC in part on Clause One of the Agreement which states: "IFIC Bank and the newly constituted Board of Directors of [Azmat] will assume full responsibility of [Azmat] for all purpose [sic] including towards payment of its past and future liabilities if any till the legal liquidation of [Azmat]." Apparently, there has not yet been a legal liquidation of Azmat. IFIC is still the record owner of all Azmat shares and still has full control of the company. (Ahmed Aff. at ¶ 26.)
IFIC argues that under Bangladeshi banking laws, it was not permitted to own a company like Azmat. (Ahmed Aff. ¶ 4.) However, IFIC also recognizes that it, in fact, became the "effective owner" of Azmat. (Def.'s Mem. in Opp'n to Mot. for Summ. J. at 5, 10.) Thus, whatever label IFIC wishes to use, it is clear that the effect is the same: IFIC owned all Azmat stock and had unlimited control of Azmat's assets.
IFIC does not dispute these facts. It does, however, elaborate upon the circumstances surrounding the Agreement. IFIC contends that it took control of Azmat's shares and property in hopes of selling them, with the profits from such a sale serving to satisfy Azmat's debt to the bank. IFIC notes that it found this method of collecting its debt preferable to the only other option available to it: the rather laborious endeavor of a formal foreclosure proceeding. (Ahmed Aff. ¶¶ 9-11.) IFIC also asserts that it sold the assets of Azmat to a company called Moonavi Textile Complex Limited ("Moonavi") and the excerpt from the Deed of Agreement quoted above simply represents an indemnification of Moonavi by IFIC, not a global acceptance of liability for Azmat's debts.
Haywin filed suit in New York state court against IFIC. In its complaint, Haywin sought reimbursement under two theories. In its first cause of action, it sought payment of Azmat's debt under the theory that IFIC breached its contractual obligation to assume responsibility for Azmat's debts. In other words, it argued that Haywin was a third party beneficiary to the Agreement. In the second cause of action, Haywin attempted to establish liability under a theory that IFIC is a successor-in-interest to Azmat. On November 13, 2000, IFIC removed the New York action to federal court.
In an opinion dated June 11, 2001, ("June 11 Order") the court found that Bangladeshi law controlled this dispute and that Bangladeshi law does not recognize third party beneficiaries. Accordingly, the court dismissed Haywin's first cause of action. The court then ruled that IFIC had failed to demonstrate that Bangladeshi law differed from New York law with respect to successor liability, and that the court would therefore apply New York law in considering that cause of action.
DISCUSSION
IFIC's Motion for Reconsideration
In connection with the affidavit submitted by IFIC regarding the modification of the temporary restraining order, IFIC makes a half-hearted request for reconsideration of the court's June 11 Order. (Brothers Aff. in Supp. of Def.'s Application to Modify Restraining Order ¶ 5.) As a preliminary matter, to the extent that IFIC is making such a motion, it is procedurally defective in several significant respects. For example, the "motion" is not accompanied by a memorandum of law, as required by Local Civil Rule 7.1.
IFIC does not specify whether it is moving for reconsideration pursuant to Rule 59, F.R. Civ. P. or Rule 60, F.R. Civ. P. To the extent it argues the court misapplied the law in its earlier decision, Rule 59 is a more appropriate vehicle. See 12 James Win. Moore et al., Moore's Federal Practice, § 59.05[7] [b] (3d ed. 2000). This issue is academic, however, because the court's denial of this motion is not contingent upon whether it is brought pursuant to Rule 59 or Rule 60.
Even if IFIC's motion was procedurally proper, it would fail on the merits. IFIC describes how it is "mystified" by the court's holding with regard to successor liability arguing that the facts of the case demonstrate that under New York law, IFIC cannot be held liable under this rationale. Id. ¶ 15. The facts to which IFIC refers, however, go beyond the face of the complaint, and are therefore inappropriate for inclusion in the consideration of a motion to dismiss. The court did refer to some outside information when determining whether to apply the law of Bangladesh or New York. However, to the extent that either party provided additional affidavits and materials which went beyond the requirements of that task, they were ignored in considering the defendant's dismissal motion.
In arguing that it could not be liable as a successor-in-interest, IFIC describes its control of Azmat and IFIC's attempt to sell the assets of Azmat to Moonavi. (Brothers Aff. in Supp. of Def.'s Application to Modify Restraining Order ¶¶ 9-15.)
Haywin's Motion for Reconsideration
Haywin moves, pursuant to Rule 59(e), F.R. Civ. P., and Local Civil Rule 6.3, for reconsideration of the court's June 11 Order insofar as the court dismissed the plaintiff's first cause of action. Haywin contends that, in holding that Bangladeshi law does not recognize the right of a third party beneficiary to enforce a contract, the court ignored the affidavit of Haywin's expert on Bangladeshi law. Haywin's argument is without merit.
The court carefully considered the analyses of both the plaintiff's and the defendant's experts. The experts arrived at opposite conclusions with regard to whether a Bangladeshi court would recognize Haywin's rights as a third party beneficiary. The court therefore relied upon the broad language of one of the few cases on the subject which held that "'[t]erms of a contract can be enforced only by the contracting parties and not by third party' [air]." June 11 Order at 4 (quoting Trang Ice and Cold Storage Co., Ltd. v. Amin Fish Farm and Indus., Ltd., 46 DLR 42 (1994)). Neither Haywin, nor its expert, ever proffered a single case standing for the position that Bangladeshi courts recognize third party beneficiaries. As such, there was no reason for the court to second guess the expansive holding of Trang.
The court notes that the affidavit from Haywin's expert, Md. Moksudur Rahinan, was riddled with conclusory statements. Additionally, he used the labels "successor-in-interest" and "third party beneficiary" almost interchangeably. For example, on page one of his affidavit, Rahman noted that he was analyzing Haywin's position as an "intended third party beneficiary" but then went on to describe IFIC in terms suggesting it was a successor-in-interest to Azmat. Giving him the benefit of the doubt, the court gleaned from this ambiguity that Rahman meant that Bangladeshi law might allow Haywin to recover in a case such as this, presumably under a successor-in-interest theory, since there was Bangladeshi case law rejecting the notion of third party beneficiaries. June 11 Order at 7 n. 1.
Haywin also raises an entirely novel argument in connection with its reconsideration motion. Haywin contends that a Bangladeshi statute of limitations indicates that, under Bangladeshi law, third parties enjoy rights under a contract in certain situations. That statute sets forth a three year limitations period for a suit for specific performance of a contract "even when the right vests in a third party." Bangladeshi Limitation Act of 1986, Art. 113 (Attached to Def.'s Mem. in Opp'n to Mot. for Summ. J.). Haywin is too late in raising this issue.
In a motion for reconsideration pursuant to Rule 59(e) and Local Civil Rule 6.3, a party generally may not raise facts or arguments not previously presented to the court. See EEOC v. Local 638, etc., No. 71 Civ. 2877 (RLC), 2001 WL 12007 at *1 (S.D.N.Y. Jan. 2, 2001) (Carter, J.). A party, however, may seek relief from a prior order by raising new information pursuant to Rule 60(b). The court will therefore consider this aspect of Haywin's reconsideration motion to be brought under Rule 60(b).
In the court's first opinion regarding IFIC's motion to dismiss, the court delayed a final determination of the dismissal motion until both parties had an opportunity to provide additional information on Bangladeshi law. Haywin, 137 F. Supp.2d at 435, 438. Haywin took advantage of this opportunity enlisting the services of an expert to provide an affidavit to the court. Haywin has provided no justification for why it could not present this statute of limitations at the time specified by the court. Accordingly, the court will not consider this newly submitted information. See United States v. Potamkin Cadillac Corp., 697 F.2d 491, 493 (2d Cir. 1983) (holding that for a reconsideration motion based upon newly discovered evidence, movant must demonstrate that evidence could not have been previously discovered through due diligence); Tri-Star Pictures, Inc. v. Leisure Time Productions, B.V., No. 88 Civ. 9127 (DNE), 1992 WL 296314 at *3 (S.D.N.Y. Oct. 6, 1992) (Edelstein. J.) (same).
Haywin's Motion for Summary Judgment
Haywin moves for summary judgment pursuant to Rule 56, F.R. Civ. P. Haywin argues that IFIC became a successor-in-interest to Azmat, and therefore became responsible for Azmat's debt.
To prevail on a motion for summary judgment under Rule 56, the moving party bears the initial burden of demonstrating that there is no genuine issue of material fact to be tried, and that it is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then shifts to the non-moving party to "set forth specific facts showing that there is a genuine issue for trial." Rule 56 (e) F.R. Civ. P. "In addition, the court must independently search the record to determine if any issue of fact remains." Lakhaney v. Anzelone, 788 F. Supp. 160, 162 (S.D.N.Y. 1992) (Carter, J.). The court is not to "weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue" which must be reserved for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In this case, there are few factual disputes. Instead, the parties are sharply divided as to which facts are relevant and as to questions of law.
In the June 11 Order, the court ruled that it would look to New York law in considering the successor-in-interest claim because Haywin had failed to demonstrate that Bangladeshi law was substantially different. "In general, successor liability will lie [under New York law] when: (1) there is an express or implied agreement to assume the other company's debts and obligations; (2) the transaction was fraudulent; (3) there was a de facto merger or consolidation of the companies; or (4) the purchasing company was a mere continuation of the selling company." June 11 Order at 6-7 (citations omitted).
IFIC continues to offer additional materials with regard to successor liability under Bangladeshi law. See, e.g. Zahir Letter (July 16, 2001). Having already afforded IFIC more of an opportunity to be heard on this matter than it is entitled, See Haywin, 137 F. Supp.2d at 435, 438, the court will not revisit this issue.
Haywin's argument is based principally upon the first situation imposing successor liability, i.e. that IFIC expressly assumed responsibility for the debts of Azmat after taking control of the company. The court noted in its June 11 Order that the applicability of this theory of successor liability is a complicated issue in this case because of the controlling Bangladeshi law denying third party beneficiaries standing to sue for enforcement of a contract. (June 11 Order at 7.) The court did not rule on this question in the June 11 Order, however, finding it unnecessary for a resolution of the defendant's motion to dismiss. The matter is now ripe for the court's consideration.
In the context of liability as a successor corporation, the Deed of Agreement may be relevant notwithstanding the law of Bangladesh regarding third party beneficiaries. The Agreement is important precisely because of the relationship it evinces between Azmat and IFIC. When a party sues as a third party beneficiary to a contract, that party makes a claim that he particularly is entitled to performance. (This is evidenced by New York's requirement that a party be an intended third party beneficiary to have standing to sue for performance of a contract. See Fourth Ocean Putnam Corp. v. Interstate Wrecking Co., Inc., et al., 495 N.Y.S.2d 1, 4-5 (1985)). When a party sues claiming that the defendant is a successor-in-interest, however, his argument is not premised upon his particular status, but rather upon the defendant's position of exposure to general liability for the debts of the predecessor. The assumption of liabilities contained in the Agreement is relevant not because it suggests that IFIC agreed to pay Azmat's specific debt to Haywin, but rather because it illustrates the type of relationship IFIC had with Azmat. See R.C.M. Executive Gallery Corp. v. Rols Capital Co., 901 F. Supp. 630, 636 (S.D.N.Y. 1995) (Koeltl, J.) (holding that under New Jersey law — which is identical to that of New York for these purposes — defendant bears successor liability because of its relationship to predecessor, not because of its relationship to plaintiff).
IFIC concedes that it took control of all shares of Azmat stock, replaced the board of directors of Azmat, and sold all of the assets of the company to Moonavi. IFIC did this to satisfy debts owed by Azmat. In making this sale, IFIC assumed full responsibility for any claims against Azmat. IFIC cannot pillage the assets of Azmat, unilaterally leaving behind only a "shell" corporation which is incapable of satisfying the claims of other creditors, and expect to escape liability. See Ladjevardian, 431 F. Supp. at 839-40 (holding that successor liability is more likely to attach where the predecessor company is left unable to satisfy its debts). IFIC concedes that it bypassed the more formal requirements of foreclosing on Azmat's assets. While this may have been more expedient for IFIC, it also subjected the bank to greater responsibility for Azmat's debts. Haywin's motion for summary judgment is granted. IFIC's Motion for Summary Judgment
The fact that IFIC sought to collect on a debt, rather than operate Azmat as a business does not absolve IFIC of successor liability. See Arnold Graphics Indus. v. Independent Agent Ctr., 775 F.2d 38, 42-43 (2d Cir. 1985).
IFIC contends that because the assumption of liability was included in the contract to sell Azmat's assets to Moonavi rather than in an agreement whereby IFIC took control of Azmat, the assumption is only meant to protect Moonavi from future claims against the Azmat assets and does not import successor liability to IFIC. The timing of the assumption of liability is not determinative of this analysis. Nor is it particularly relevant that IFIC only intended to indemnify Moonavi. Because IFIC was the full owner of Azmat, the assumption of liability, even in the limited context suggested by IFIC, is critical because it evinces an acknowledgment by IFIC of its relationship to Azmat — a relationship which is sufficient to sustain successor liability.
IFIC has submitted a copy of an opinion from a Bangladeshi court in a related case involving a claim by Haywin against IFIC and Azmat, whereby the court vacated an order of attachment against IFIC. (Def.'s Opp'n to Mot. for Summ. J.) Not only is the opinion not controlling authority for this court, but it is also not relevant to the issues presently under consideration. IFIC conceded earlier in this litigation that the claims filed in this action have not been included in the Bangladeshi action. See Haywin, 137 F. Supp.2d at 436. Furthermore, it appears that the Bangladeshi court vacated the attachment because IFIC had already sold all of Azmat's assets. The fact that IFIC sold Azmat's assets does not affect this court's successor-in-interest analysis.
Because the court finds IFIC liable as a successor-in-interest based upon the first theory of successor liability, it need not decide whether the other three theories could be applicable in this case.
IFIC appears to make an informal cross motion for summary judgment. (Def.'s Mem. in Opp'n to Mot. for Summ. J. at 1.) To the extent that it is making such a motion, IFIC has neglected, once again, many important procedural formalities, such as the filing of a Local Civil Rule 56.1 statement of undisputed facts. Nor has it filed a formal notice of motion so that an appropriate schedule for responsive papers could be established. Because of the court's decision granting summary judgment to Haywin, such a motion by IFIC would be moot in any event.
One issue raised in connection with IFIC's "motion" is worth addressing, however, because it is relevant to Haywin's motion for summary judgment. IFIC argues that a Bangladeshi statute of limitations bars Haywin's suit. (This is the same statute Haywin relies upon in its motion for reconsideration.) As an initial matter, the court sees no reason why this defense could not have been included in IFIC's prior Rule 12 motion to dismiss. Regardless, the statute of limitations presented by IFIC is apparently inapplicable to this case. According to the copy of the statute of limitations provided to the court, it applies only to actions seeking specific performance of a contract. Under New York law, a party can only be compelled to perform its contractual obligations where the plaintiff has no adequate remedy at law. See La Mirada Products Co., Inc. v. Wassail PLC, 823 F. Supp. 138, 140 (S.D.N.Y. 1993) (Mukasey, J.). That is not the case here as Haywin can be made whole through monetary compensation. IFIC does not argue that Bangladeshi law is any different from New York law with regard to specific performance, and the notes of decisions interpreting the statute of limitations submitted by IFIC do not indicate that it is.
IFIC is not required to raise a statute of limitations defense in a Rule 12 motion, see Santos v. District Council of New York City, etc., 619 F.2d 963, 967 (2d Cir. 1980), but raising it at that time certainly would have been more efficient.
IFIC submitted a letter to the court, dated July 24, 2001, requesting leave to present information regarding its statute of limitations defense. This submission was made before the return date for Haywin's Rule 56 motion, but after the motion was fully submitted. In its letter, IFIC included a correspondence from its expert discussing a Bangladeshi statute of limitations other than the one raised in IFIC's response to the summary judgment motion. This new limitations period purports to govern actions filed pursuant to indemnification agreements. The expert's letter is not verified, however, and a copy of the statute to which he refers has not been submitted to the court.
The applicability of this statute is questionable since Haywin's successor-in-interest claim is not an indemnification action. Even if it was relevant to this case, the court would not grant IFIC yet another extension to file additional materials regarding this new statute. When IFIC filed its response to Haywin's summary judgment motion it raised a defense based upon a Bangladeshi statute of limitations. (Brothers Aff. ¶ 6.) IFIC complained that it was having difficulties developing this argument because of delays with communications to Bangladesh. (Id. ¶ 4.) While such delays might be an excuse for IFIC's inability to get any information regarding Bangladeshi law on the subject, the delays are no excuse for IFIC submitting the wrong statute of limitations on its first attempt. The failure to submit this new statute of limitations earlier is the fault of defense counsel, not the lines of communication.
IFIC's Application to Alter the Temporary Restraining Order
In the June 11 Order, the court ruled that an order of attachment relating to IFIC's New York bank accounts is appropriate in this case. The court delayed issuing such an order, however, until IFIC had an opportunity to substantiate its claim that the terms of the temporary restraining order are inappropriate in that they result in a harm to IFIC which cannot be adequately offset by the bond amount posted by Haywin. IFIC has submitted an affidavit which demonstrates that various accounts have been attached in a total amount of $4,121,328.18. The temporary restraining order was supposed to restrain IFIC's accounts up to $1,753,717.30. Apparently, every bank in which IFIC funds are deposited has restrained funds up to this amount.
Haywin has responded that it is amenable to altering the situation so that IFIC's accounts are only restricted to the extent that a total of $1,753,717.30 is available to satisfy any liability. Therefore, it appears that the parties should be able to stipulate to terms for an order of attachment which would prevent the apparent over-garnishment of IFIC's accounts. of course, because the court is awarding summary judgment to plaintiff, this issue would be rendered moot by IFIC's payment of the judgment amount. However, in the event that the judgment has not been paid, for whatever reason, by September 14, 2001, the parties should prepare and submit a stipulated order of attachment for the court's approval.
CONCLUSION
Both the plaintiff's and the defendant's motions for reconsideration are denied. Plaintiff Haywin's motion for summary judgment pursuant to Rule 56, F.R. Civ. P., is granted. Haywin shall submit a judgment on notice to IFIC containing a calculation of interest no later than the close of business on September 7, 2001. The parties will bear their own costs and expenses associated with this litigation.
IT IS SO ORDERED.