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RICHARDSON GREENSHIELDS SECS., INC. v. MUI-HIN LAU

December 30, 1986

RICHARDSON GREENSHIELDS SECURITIES, INC., Plaintiff,
v.
MUI-HIN LAU, HO SIH FONG, KAU-YING LAU, YING LUP LAU, and WAI YAU CHI, Defendants



The opinion of the court was delivered by: KRAM

SHIRLEY WOHL KRAM, U.S.D.J.

This action was commenced on August 24, 1984. It is brought in diversity pursuant to 28 U.S.C. § 1332. Plaintiff, a futures commission merchant, claims that the defendants owe deficit balances totalling $167,212.48, plus interest and attorneys' fees, on commodities futures trading accounts which they had established with plaintiff.

 Plaintiff successfully applied for an order of attachment and a temporary restraining order against certain property of defendants pursuant to Rules 64 and 65 of the Federal Rules of Civil Procedure and Sections 6201 et seq. of the New York Civil Practice Law and Rules on November 19, 1986. Plaintiff also applied for an order to show cause converting the temporary restraining order into a preliminary injunction at that time. Plaintiff's order of attachment and temporary restraining order were extended through December 11, 1986 by this Court at a conference on December 1, 1986. Defendants' application for an order to show cause vacating plaintiff's temporary restraining order and order of attachment was denied from the bench on December 5, 1986. On December 8, 1986, plaintiff moved for an order confirming the order of attachment. This motion was heard at oral argument on December 15, 16, 17 and 22, 1986. This Court has now considered plaintiff's application to convert the temporary restraining order into a preliminary injunction and plaintiff's motion to confirm the order of attachment. For the reasons set forth below, plaintiff's application and motion to confirm are modified and, as modified, are granted.

 FACTS,

 Plaintiff, Richardson Greenshields Securities, Inc. ("Richardson"), is a duly registered futures commission merchant. Defendants (collectively, the "Laus") are former customers of Richardson. The Laus are all closely related. Ho Sih Fong is Mui-Hin Lau's wife; Kau-Ying Lau is Mui-Hin Lau's sister; Ying Lup Lau (also known as Michael Lau) is Mui-Hin Lau's son; and Wai Yau Chi is Michael Lau's wife. None of the Laus are American citizens, but Michael Lau and his wife live in the United States.

 Richardson's account documents show that four commodities futures trading accounts were opened on December 30, 1982, one each in the names of Mui-Hin Lau, Ho Sih Fong, and Kau-Ying Lau, and one in the joint names of Michael Lau and his wife, Wai Yau Chi. Identical accounts formerly were maintained with another futures commission merchant, Prudential Bache Securities, Inc. ("Bache"); these accounts were closed and the Richardson accounts were opened when the Laus account representative at Bache became an account representative at Richardson. The Richardson agreements, acknowledgments and Powers of Attorney are identical in nature and scope to the predecessor accounts with Bache, and it is undisputed that the predecessor account documents are authentic and were opened by each of the Laus in the same names as the Richardson accounts.

 Each Richardson account is evidenced by a signed Customer's Agreement, a signed acknowledgment that the customers had read and understood the Risk Disclosure Statement, and a Power of Attorney (except for Michael Lau's account for which there was no Power of Attorney). Pursuant to the terms of each Customer Agreement, the customer is liable for (1) any deficits in his account; (2) interest and service charges on any deficit balance in his account at the rate customarily charged. by plaintiff; and (3) costs and attorney's fees incurred by Richardson in collecting any such deficit. Some of the forms are not complete; for example, one form lacks a date.

 In addition to maintaining his own joint account with his wife, Michael Lau was given Powers of Attorney over Mui-Hin Lau's and Kau-Ying Lau's accounts and authority to make trades on their behalves at the time of execution of the Customer Agreements. Daniel Lau, who neither opened a commodities futures trading account with Richardson, nor is a defendant in this action, was given a Power of Attorney over Ho Sih Fong's account, as well as authority to make trades on her behalf, and paid Richardson the initial balances due on each of the Lau accounts.

 On July 9, 1984, Richardson began liquidating each of the Lau accounts following nonpayment of monies owed to Richardson and informed Daniel Lau of this action by telex on the same day. On July 24, 1984, plaintiff demanded payment of the Lau deficit accounts from Daniel Lau. As of July 31, 1984, the Lau accounts contained deficit balances totalling $167,212.48.

 Mui-Hin Lau also had deposited two securities, 1500 shares of Boeing and 200 shares of Fisher Foods, in a Richardson securities account. These stocks were seized by Richardson. The Boeing stock was liquidated for approximately $70,000, and that money is maintained in a noninterest bearing securities account at Richardson. The Fisher Foods stock, which is of nominal value, has not been liquidated. Richardson commenced this action on August 24, 1984.

 Although the Richardson account representative communicated directly with Mui-Hin Lau on at least one occasion during the course of the customer agreements with Richardson, defendants now claim that Michael Lau and Daniel Lau forged the signatures of Mui-Hin Lau, Ho Sih Fong and Kau-Ying Lau, their father, mother and aunt, on their account opening documents and that these signatures were unauthorized.

 Richardson determined that the defendants (except Wai Yau Chi, Michael Lau's wife) are shareholders in the United Orient Bank in New York City, that Daniel Lau is a director of the bank, that the Lau family intends to sell a total of 356,422 shares which they hold in the bank -- 102,046 shares of which are owned by the defendants themselves -- to a citizen of the Dominican Republic for an aggregate purchase price of $3,296,908.13, and that the sale of the Lau family shares in the United Orient Bank was imminent. Richardson then sought and received from this Court an order of attachment and a temporary restraining order on November 19, 1986, restraining the Laus from transferring their assets out of this Court's jurisdiction.

 DISCUSSION

 The Preliminary ...


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