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January 31, 1990


The opinion of the court was delivered by: Kimba M. Wood, District Judge.


Plaintiff Bank of Crete moves for an order directing that certain funds transferred to defendants' law firm to pay litigation expenses are subject to the preliminary injunction issued by this Court. See Bank of Crete v. Koskotas, No. 88 Civ. 8412, 1988 WL 140877 (S.D.N.Y. Dec. 19, 1988) (order granting preliminary injunction). That injunction barred defendants from transferring or withdrawing million of dollars in allegedly stolen assets within defendants' control in the United States and also denied defendants permission to use any of the frozen assets to pay counsel fees and expenses in defense of the underlying action.

Plaintiff contends that Broussalian's $1.4 million "gift" on behalf of defendants is derived from funds stolen from plaintiff by defendants and thus is subject to this Court's preliminary injunction. It challenges Broussalian's bona fides and seeks to cast doubt on whether Broussalian is a man of wealth. In this regard, plaintiff points to Broussalian's continued unwillingness to provide documentation as to the source of his wealth, as well as to his contradictory explanations concerning the method by which he obtained the $1.4 million. Plaintiff also alludes to Broussalian's refusal to turn over deposit slips and account statements relating to the Swiss bank account into which the funds were deposited, as well as to an affidavit from a Bank of Crete official indicating that Broussalian had previously received from Koskotas $157,000 in stolen bank funds. Based on these facts, as well as other contradictions in Broussalian's story, plaintiff asks this Court to declare that the $1.4 million was actually derived from funds stolen from the bank by Koskotas.

Defendants counter that Broussalian is a well-known businessman in the areas of soccer and jewelry who decided to put up the $1.4 million for payment of Koskotas' legal fees out of friendship and concern. According to their account, Broussalian's money is totally unconnected to Koskotas or the Bank of Crete and was put up without any guarantee of repayment. Defendants contend that plaintiff has presented no direct proof linking Broussalian's funds with those allegedly stolen from the Bank of Crete. To conclude that the $1.4 million is derived from stolen Koskotas funds, defendants argue, would be to substitute speculation for proof.

The Court is sympathetic to the obstacles encountered by plaintiff in ferreting out the true source of Broussalian's "gift" funds, but the Court finds, on the evidence presented, that plaintiff has failed to carry its burden of establishing that it will likely prove that these funds are, in fact, stolen Bank of Crete monies transferred by Koskotas to Broussalian. Although it is altogether possible that the "gift" is merely a repayment of stolen Bank of Crete funds that Koskotas gave or lent to Broussalian some time ago, the known facts are equally consistent with the funds having some other source that Broussalian is reluctant to reveal. The Court therefore directs that the money now held in escrow by Camp Barsh may be used to pay for counsel fees and legal expenses incurred on behalf of the defendants.

I. The Burden of Proof

This motion requires the Court to determine whether certain conduct is proscribed by the terms of a preliminary injunction. Federal courts that issue injunctions can and should give declaratory guidance defining the meaning and scope of injunctions issued. See Regal Knitwear Co. v. National Labor Relations Board, 324 U.S. 9, 15, 65 S.Ct. 478, 481-82, 89 L.Ed. 661 (1945) (party may petition court granting injunction to construe that order in a "concrete situation" posing a question as to its application); N.A. Sales Co., Inc. v. Chapman Industries Corp., 736 F.2d 854, 858 (2d Cir. 1984) (court may issue supplemental clarifying order to "add certainty to an implicated party's efforts to comply" with the terms of the injunction).

Plaintiff, on the other hand, contends that the motion bears little resemblance to a fraudulent conveyance action; it is merely a motion to clarify the obligations of one party under an injunction. Therefore, it claims that its burden of proof should be no more exacting than usual. Plaintiff also contends that because the information needed to establish that the funds belong to Koskotas is not within its control, but is known only to Koskotas and Broussalian, who refuse to divulge the facts, it would be inappropriate to place any burden of proof on plaintiff. Rather, plaintiff contends that the burden should be placed on the defendants to prove that the funds in question are not derived from funds wrongfully appropriated by Koskotas.

I cannot accept the contentions of either side. As indicated above, this motion is plainly neither one for summary judgment nor one involving a fraudulent conveyance; the motion simply asks the court to define one party's obligations under a previously issued court order. Therefore, it would be inappropriate for the Court to import a more exacting evidentiary standard into this context.*fn2

On the other hand, there is no basis for shifting the burden of proof*fn3 away from plaintiff on the facts of this case. It is true that considerations of fairness ordinarily prevent the burden from being placed on a litigant when the facts sought to be established are "peculiarly within the knowledge of his adversary." See United States v. New York, N.H. & H.R.R. Co., 355 U.S. 253, 256 n. 5, 78 S.Ct. 212, 214 n. 5, 2 L.Ed.2d 247 (1957); Ligi v. Regnery Gateway, Inc., 689 F. Supp. 159, 161 n. 5 (E.D.N.Y. 1988). However, this case involves the knowledge of a third party — Broussalian — who is neither plaintiff's "adversary" nor a party to this action. His failure to answer certain questions or to provide documentation as to the source of the funds, absent any evidence that Koskotas procured Broussalian's refusal to fully disclose the information, does not make him an "adversary" for purposes of shifting the burden of proof. Similarly, Koskotas' previous invocation of his Fifth Amendment privilege in response to questions regarding the source of funds he was then (in December, 1988) using to pay his attorneys and whether he arranged for any currency or assets to be sent to the United States, does not inexorably lead to the inference that he has any knowledge as to the source of the Broussalian funds.*fn4

However, I am mindful of the difficult position in which plaintiff is placed as a result of Broussalian's unwillingness to turn over certain documents that would resolve doubts as to the source of the funds. Therefore, the Court will apply the "likelihood of success on the merits" standard*fn5 generally applicable to preliminary injunctive relief.*fn6 Under this standard, a movant must "make a showing that the probability of his prevailing [on the merits] is better than fifty percent." Abdul Wali v. Coughlin, 754 F.2d 1015, 1025 (2d Cir. 1985); see also DiLaura v. Power Authority of New York, 654 F. Supp. 641, 647 (W.D.N.Y. 1987) (plaintiff must show that the "probability of success is greater than fifty percent"). In spite of this somewhat reduced evidentiary standard, however, this Court finds that plaintiff has failed to carry its burden of showing that it could or will ...

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