The opinion of the court was delivered by: LASKER
This suit attacks the constitutionality of the New York Attachment Statute, CPLR § 6201 et seq., which permits ex parte pre-judgment attachment of the property of a defendant. In particular, it is claimed that CPLR § 6201(4)(5) and (8), and CPLR § 6211,
which collectively allow such attachment upon a plaintiff's ex parte allegation that the defendant has defrauded him, violate the due process clause of the Fourteenth Amendment in depriving the defendant of property without prior notice or hearing. Jurisdiction is alleged under 28 U.S.C. §§ 1331(a), 1343(3) and (4), 2201, 2202, 2281 and 2284, and plaintiffs seek declaratory and injunctive relief. By an earlier opinion, 377 F. Supp. 1055 (1974), a single judge found that the complaint presented a substantial constitutional question under the test of Goosby v. Osser, 409 U.S. 512, 93 S. Ct. 854, 35 L. Ed. 2d 36 (1973) and Idlewild Bon Voyage Liquor Corp. v. Epstein, 370 U.S. 713, 82 S. Ct. 1294, 8 L. Ed. 2d 794 (1962). This three judge court was convened to hear the matter pursuant to 28 U.S.C. § 2281 et seq.
Familiarity with the facts set forth in detail in the opinion of the convening judge is assumed. For present purposes it is sufficient to state that in August, 1971 plaintiff Sugar and his controlled corporation, Champion Sports Publishing, Inc. (Champion) contracted with defendant Curtis for the distribution by Curtis of Champion's publications. In the course of their dealings Curtis advanced funds to Champion which it was entitled to recoup under the terms of their agreement.
Sugar's corporate satrapy also included a publisher, Wrestling Revue, Inc., (Wrestling), a plaintiff here. About a year after the consummation of the Champion-Curtis contract, Curtis learned -- or came to believe -- that it had been defrauded because Wrestling, claiming to own periodicals which Curtis had the right to distribute under the Champion agreement, had contracted to sell some of them to third parties.
Curtis thereupon notified one such third party, National Sports Publishing Corporation (National, a defendant here), that it asserted a claim to moneys payable by National to Wrestling. National's response was to advise Wrestling and Sugar that it was withholding sums payable by National to Wrestling. On March 5, 1973, Wrestling sued National for breach of contract in New York Supreme Court, Westchester County. Subsequent to commencement of the Westchester action, Curtis moved in New York Supreme Court, New York County, without notice to Sugar, Champion or Wrestling, and prior to the filing of a complaint, for an order directing the Sheriff to levy on any property of Sugar, Champion or Wrestling. Curtis' motion, supported by an extensive and detailed affidavit, was based on its claim that:
(a) "Champion Sports has assigned, disposed of or removed property from the State of New York with intent to defraud its creditors" [CPLR § 6201(4)];
(b) "Champion Sports and Sugar, its principal officer, have been guilty of a fraud in contracting or incurring a liability upon an express contract" [CPLR § 6201(5)]; and
(c) "Champion Sports, Sugar and Wrestling Revue are liable to Curtis for damages in a cause of action for fraud and deceit" [CPLR § 6201(8)].
Curtis asserted that it was owed approximately $28,500. plus probable interest, Sheriff's fees and expenses. It posted a $10,000. bond to protect Sugar, Champion and Wrestling against the possibility that its claim was not ultimately proven. On April 13, 1973, still prior to Curtis' commencement of suit against Sugar, Champion and Wrestling, and without notice to them, but in accordance with CPLR § 6201 et seq., Mr. Justice Fine granted the order of attachment.
The attachment order and the consequent sheriff's levy on National,
precipitated this suit in which the original roles of the parties are reversed. Sugar and Wrestling are recast as the plaintiffs, while Champion and National are two defendants in a large group including the sheriff and various state officials charged with the enforcement of the statutes under attack.
Although the facts are relatively complex, the issue before us is a narrow one
because several recent Supreme Court decisions have dealt with similar statutes. Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S. Ct. 1820, 23 L. Ed. 2d 349 (1969); Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556 (1972) and Mitchell v. W. T. Grant Co., 416 U.S. 600, 94 S. Ct. 1895, 40 L. Ed. 2d 406 (1974).
Prior to Sniadach, decisions of the Court consistently sustained the constitutionality of prejudgment seizure of property subject to litigation, reasoning that ultimate adjudication on the merits would assure a defendant's rights. See, e.g., Ownbey v. Morgan, 256 U.S. 94, 41 S. Ct. 433, 65 L. Ed. 837 (1921); Coffin Brothers & Co. v. Bennett, 277 U.S. 29, 48 S. Ct. 422, 72 L. Ed. 768 (1928) and, particularly McKay v. McInnes, 279 U.S. 820, 49 S. Ct. 344, 73 L. Ed. 975 (1929) affirming per curiam the constitutionality of a Maine statute which provided for an ex parte order of attachment without requiring a supporting affidavit or plaintiff's bond.
Sniadach breached this previously impenetrable wall of authority. At issue in that case was the Wisconsin garnishment statute, which permitted a creditor to require the employer of a defendant alleged to be his debtor to withhold part of the defendant's wages pending final adjudication on the merits. The Court invalidated the statute holding that "absent notice and prior hearing [citation omitted] this prejudgment garnishment procedure violates the fundamental principles of due process." 395 U.S. at 342, 89 S. Ct. at 1823. In concurrence Mr. Justice Harlan emphasized "that due process is afforded only by the kinds of 'notice' and 'hearing' which are aimed at establishing the ...