The opinion of the court was delivered by: William C. Conner, District Judge.
Plaintiff, the City of New York, moves this Court pursuant to Rule 64, Fed.R.Civ.P., and Article 62 of the New York Civil Practice Law and Rules (McKinney 1980 & Supp.1988) ("CPLR"), for an attachment against the following assets of defendants Stanley M. Friedman and Marvin B. Kaplan: (1) a bank account at European American Bank in the name of Stanley M. Friedman, P.C., in the amount of $276,963.64; (2) two bank accounts at Chemical Bank in the name of Marvin B. Kaplan in the total amount of $5,130.00; and (3) an account at Chemical Bank in the amount of $400,000.00 in the name of Desu Consulting and Leasing Co. Retirement Trust, account # 006-044-425. The City also seeks injunctions against Friedman and Kaplan, or any other persons, firms or corporations acting in their behalf or under their control, barring them from disposing of, transferring, or secreting the assets, and barring Chemical Bank and European American Bank from releasing the assets.
Plaintiff initially brought this motion on December 22, 1987, by order to show cause. The Court provisionally granted the attachment and a temporary restraining order until such time as it could give the motion full consideration.
On January 14, 1988, the Court issued an opinion and order vacating the attachment and denying the requested relief, 676 F.Supp. 546. The Court stayed execution of the order vacating the attachment to allow plaintiff to pursue an expedited appeal.
The City now moves for reargument pursuant to Rule 3(j) of the Civil Rules of this Court. In its original motion, the City had relied exclusively on CPLR § 6201(4). Now, in addition to arguing that the Court erred in its interpretation of § 6201(4), the City asserts that it is entitled to an attachment pursuant to CPLR § 6201(3). For the reasons set forth below, the motion is granted in part and denied in part, and upon reargument the motion for a continued order of attachment is granted.
In this action the City seeks treble damages under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c) & (d) (1982), for injury sustained as a result of defendants' bribery of Geoffrey Lindenauer, the former Deputy Director of the City's Parking Violations Bureau ("PVB"), and Donald Manes, the former Queens Borough President.*fn1 The bribes were intended to influence favorably the actions of Manes and Lindenauer as public servants in connection with the award of a $22.7 million municipal contract to defendant CitiSource, Inc. On November 25, 1986, a federal jury found Friedman and Kaplan guilty of criminal charges of racketeering, RICO conspiracy and mail fraud in connection with the award of the CitiSource contract. The jury found that defendants Friedman and Kaplan, unlawfully, willfully and knowingly conducted and participated in the conduct of the affairs of the PVB through a pattern of racketeering activity, as that term is defined by sections 1961(1) and 1961(5) of RICO, by bribing Manes and Lindenauer with shares of CitiSource stock which were held for them by defendant Friedman.
On March 11, 1987, Friedman and Kaplan were sentenced and judgment of conviction was entered. Friedman was sentenced to a twelve-year prison term, to be followed by five years probation, and ordered to forfeit his CitiSource shares. The Court also barred Friedman from participating in politics in any way, other than to exercise his right to vote. Kaplan was sentenced to a four-year prison term and a $250,000 fine, and ordered to forfeit his CitiSource shares. Friedman and Kaplan have appealed their convictions. The appeal, which was argued in September 1987, is still pending.
On about March 27, 1986, the Manhattan District Attorney filed an indictment against defendants Friedman and Kaplan and other CitiSource principals based on the fraudulent procurement of the CitiSource contract and the subsequent public offering of CitiSource stock. The District Attorney also obtained orders of attachment in a related state civil forfeiture action against the assets which are at issue in this case. The attachment orders were based on the same circumstances which gave rise to the state indictment. On December 17, 1987, the New York Court of Appeals barred the District Attorney from proceeding with the criminal prosecution of Friedman and Kaplan under the state indictment, on the ground that the state prosecution violated the double jeopardy clause of the State and Federal Constitutions. Matter of Marvin B. Kaplan, 71 N.Y.2d 222, 525 N.Y.S.2d 1, 519 N.E.2d 802 (1987). The state court has since vacated the attachment in the civil forfeiture action.
In his affidavit in support of the order to show cause, and in his supplemental affidavit in support of the motion to continue the attachment, John F. Grubin, the Chief of the Commercial Litigation Division of the Corporation Counsel, states that Friedman called the European American Bank prior to any court order vacating the state court attachment, and inquired about withdrawing money from the Stanley M. Friedman, P.C. account. Grubin Aff. at 5, n. 4; Grubin Supp.Aff. at ¶ 17. Grubin also alleges that Kaplan attempted to transfer to himself, in bearer form, a $400,000 treasury bill which was being held in the Desu Retirement Trust. Grubin Supp.Aff. at ¶ 19. Friedman has submitted the affidavit of Jon D. Karnofsky, counsel to European American Bank, in which Karnofsky asserts that Friedman was merely inquiring as to the procedure for gaining access to his account if the attachment was lifted. Karnofsky Aff. at ¶ 9. Kaplan has submitted an affidavit made by Barbara Petrillo, a manager in REBC Associates, which performs administrative functions for the trustees of the Desu Retirement Trust. The Petrillo affidavit states that the trust agreement provides Kaplan with the authority to register any of the trust's securities in his own name, as trustee. Petrillo Aff. at ¶ 7.
In denying plaintiff's original motion, the Court relied on the purpose and legislative history of § 6201(4).*fn2 As discussed in that opinion and in the Second Circuit's opinion in Keeton v. Hustler Magazine, Inc., 815 F.2d 857, 860-61 (2d Cir.1987), the legislative history demonstrates that § 6201(4) was adopted to facilitate the enforcement of judgments. Here, however, the City is not suing to enforce a judgment, but rather seeks to employ the doctrine of collateral estoppel to prevent the defendants in this action from litigating issues of fact that they already litigated in the criminal RICO case. The City has failed to refute the Court's holding that an attachment of defendants' assets under § 6201(4) is beyond the purpose for which the statute was adopted. Therefore, insofar as the City seeks an attachment based on § 6201(4), the motion for reargument is denied.
The City now also asserts that it is entitled to an attachment under CPLR § 6201(3). § 6201(3) provides for an attachment when "the defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts." The City argues that Friedman's call to the European American Bank to inquire about the release of his funds, and Kaplan's inquiries concerning the Desu Retirement Trust account, demonstrate an attempt to dispose of property with intent to frustrate the enforcement of any future judgment rendered in favor of the City.
As stated in the Court's prior opinion, attachment is a harsh remedy for which the supporting evidence must be strictly construed against the plaintiff. See Interpetrol Bermuda, Ltd. v. Trinidad & Tobago Ltd., 135 Misc.2d 160, 168, 513 N.Y.S.2d 598, 603 (Sup.Ct.1987). A plaintiff seeking an attachment under § 6201(3) must show that defendant has or is about to dispose of property with the intent to defraud creditors or frustrate the enforcement of a judgment. Societe Generale Alsacienne De Banque, Zurich v. Flemingdon Dev. Corp., 118 A.D.2d 769, 772, 500 N.Y.S.2d 278, 281 (2d Dep't 1986). It is well established that when a plaintiff seeks an attachment on the ground that defendant has acted with intent to defraud, fraud will not be lightly inferred. Brastex Corp. v. Allen Int'l, Inc., 702 F.2d 326, 331 (2d Cir.1983); Wohl v. Westheimer, 610 F.Supp. 52, 54 (S.D.N.Y.1985); Societe Generale, 118 A.D.2d 769, 772-73, 500 N.Y.S.2d 278, 281; McLaughlin, Practice Commentaries to CPLR, § C6201:4 (McKinney's 1980). Evidence which establishes defendant's intent to dispose of property, standing alone, does not justify an attachment. Richardson Greenshields Securities, Inc. v. Mui-Hin Lau, 651 F.Supp. 929, 933 ...