This one is sure to be of interest to bankers: Commonwealth of the Northern Mariana Islands v Canadian Imperial Bank of Commerce, 2013 NY Slip Op 3018. William and Patricia Millard each owed $18 million in taxes to the Commonwealth of the Northern Mariana Islands, a US colony in the Pacific. Before the Commonwealth was able to obtain judgments against them in the territory, the Millards renounced their US citizenship and decamped to the Cayman Islands. The Commonwealth sought an order in the New York courts against garnishees holding assets of the fugitive couple, including CIBC's Cayman subsidiary. At issue was whether CIBC itself could be ordered to direct the subsidiary to turn over the Millards' funds. The NY district court thought it was at least arguable that CIBC could, certifying the question as one for the state's appellate court to decide.
The New York Court of Appeals rejected the Commonwealth's argument that CIBC could, in practical terms, order its subsidiary to cough up the money. The state's Civil Practice Law and Rules refers to the enforcement of judgment debts against a party which has 'custody or possession' of property in which the debtor has an interest, not a more expansive notion of control -- a word which seems, in fact, to have been deliberately omitted from the relevant provision. Actual, not constructive, custody or possession is required. Implicit in the judgment, it would seem (there could be a clearer statement of the principle), is the idea that parent and sub are separate entities, and that possession of assets by the one does not amount to possession of them by the other. Recently confirmed by the 2d Circuit in related proceedings: Commonwealth of the Northern Mariana Islands v CIBC (2d Cir, 15 May 2013).
See also Yaiguaje v Chevron Corp, 2013 ONSC 2527, where Justice Brown held that the Ontario courts had the jurisdiction to enforce an $18-billion Ecuador judgment against Chevron Canada, which had been served in Ontario, and against Chevron US, even though the latter had no assets in the jurisdiction. He did, however, stay the proceedings against Chevron US on the grounds they could never succeed: Chevron US had no assets in Ontario and never would, the assets of Chevron Canada were emphatically not those of Chevron US – of which Chevron Canada was a '7th generation indirectly-owned subsidiary' – and there were no facts on which to ground a veil-piercing exercise (fraud, agency, alter ego and the like). Better analysis from Justice Brown than the New York court.