The opinion of the court was delivered by: Sweet, U.S.D.J.
These factors weigh in favor of granting dismissal under Rule 41(a)
(2). CSC sought to dismiss its claims upon receiving a release from
Kelleher to any claims he may have had to the CD in question, or to any
claims he may have had against CSC arising out of or relating to its
safekeeping or custody of the CD. There was no delay in requesting
dismissal. There is also no suggestion of "undue vexatiousness" on the
part of CSC, and its explanation for seeking dismissal is more than
adequate. CSC has achieved the result that it wanted — full release
from competing claims to the CD. See, e.g., Gap, Inc., 169 F.R.D. at 588
(finding a "plausible explanation" for dismissal where "defendants no
longer appear to be engaged in the complained of activity"). CSC cannot
be forced to continue as a plaintiff and engage in motion practice where
the dispute which initially led it to seek interpleader relief no longer
The Waggoner parties argue that the motion should be denied based on
the "advanced stage" of the proceedings and because of the purported
prejudice created by the prospect of relitigation in state court.
However, the cases cited by the Waggoner parties relate to claims that
had progressed to a much later stage than this proceeding and involved
plaintiffs who would have sought to relitigate their claims in state court
upon dismissal. See Hartford Acc. & Indem. Co. v. Costa Lines Cargo
Services, Inc., 903 F.2d 352, 361 (5th Cir. 1990) (finding no abuse of
discretion in denying dismissal where one defendant had already been
granted summary judgment, a jury trial had been set, the plaintiff was
"far less than prompt" in seeking voluntary dismissal, and the plaintiff
would seek to relitigate its claims); Beicher v. Serriano, No. 95 Civ.
1340 (RSP/GJD), 1998 WL 146256, at *3 (N.D.N.Y. Mar. 19, 1998) (denying
dismissal where the case had progressed "significantly" and plaintiff was
not reasonably diligent in seeking dismissal); Philan Insurance Ltd. v.
Frank B. Hall & Co., 786 F. Supp. 345, 349 (S.D.N.Y. 1992) (denying
dismissal when the litigation had been pending for more than four years,
there was less than one month before the scheduled trial conference, and
plaintiffs expressly asserted that they wished to bring the remaining
state claims in state court)
For these reasons, dismissal is appropriate under Rule 41(a)(2).
B. This Court Lacked Subject Matter Jurisdiction
1. The Lack of Value in the CD Deprived This Court of Jurisdiction
Jurisdiction in this action was predicated solely on
28 U.S.C. § 1335, the interpleader statute. In order to establish
jurisdiction under this section, the party seeking interpleader relief
"bears the burden of establishing that the requirements for interpleader
are satisfied." J.B.I. Indus., Inc. v. Suchde, No. 99 Civ. 12435 (AGS),
2000 WL 1174997, at *14 (S.D.N.Y. Aug. 17, 2000) (citations omitted).
Section 1335 provides:
28 U.S.C. § 1335. Accordingly, to satisfy the jurisdictional
prerequisites, it must be shown that "the property . . . in controversy
. . . is valued at a minimum of $500." J.B.I. Indus., Inc., 2000 WL
1174974, at *14 (citations omitted).
Although the CD purported to be in the "face amount" of $10 million, by
its express terms the CD has only the value of funds that have been
deposited with BTCB. Because JVW had no funds on deposit with BTCB at the
time this action was filed, and has no funds on deposit with BTCB at this
time, the CD that is the subject of this interpleader action is not worth
the $500 jurisdictional minimum.
Pursuant to its terms, the CD expired on June 25, 1999, and reverted to
a savings account held by JVW at BTCB. Accordingly, upon expiration, the
holder of the CD had no right to demand payment from BTCB. Only the owner
of the savings account, JVW, was entitled to withdraw or transfer the
funds on deposit.
Further, after June of 1999 when the CD expired, the account statements
for JVW's brokerage account at First Equity reflected a "zero" value for
the CD. These statements, which were available to CSC as the clearing
agent for First Equity, confirm that CSC knew, or could have known, that
at the time it filed this action the jurisdictional threshold was not
satisfied, as did JVW and Waggoner, Waggoner having caused BTCB to issue
a third CD to another Dominican company that he created and controlled,
Overseas Projects, Ltd.
Although Kelleher asserted claims to the CD and made statements that
the CD was valuable, he had no knowledge of the various bank transfers
undertaken by JVW, Waggoner, or the newlyformed Overseas Projects, Ltd.
and cannot confer jurisdiction on this Court.
JVW and Waggoner have attempted to overcome the jurisdictional defect
by arguing that CSC had a good faith concern that it was being subjected
to multiple claims in excess of $500. This argument is unavailing. The
$500 jurisdictional threshold must be satisfied independently of an
interpleader plaintiff's belief that it is subject
to multiple claims.
See Atlantic Bank of New York v. Homeowners Financial Corp., No. 97 Civ.
1274 (LMM), 1999 WL 144508, at *2 (S.D.N.Y. March 17, 1999) ("The
requirements for statutory interpleader are: (1) the amount in
controversy must be $500 or greater; (2) two or more of the claimants are
of diverse citizenship; and (3) the stakeholder has deposited the
disputed funds into the registry of the court.")
As an initial matter, CSC's purported good faith belief that it was
facing multiple claims in excess of $500 is questionable in light of the
fact that all CSC had to do was to look at the First Equity/Paine Webber
account statements to determine that the CD's value was zero. Good faith
certainly implies the exercise of some reasonable level of diligence.
Further, JVW and Waggoner have cited cases addressing an interpleader
plaintiff's good faith belief that it is facing multiple claims, not a
good faith belief that the property is worth in excess of $500. For
example, in Sotheby's Inc. v. Garcia, 802 F. Supp. 1058 (S.D.N.Y. 1992),
an interpleader defendant sought dismissal for lack of interpleader
jurisdiction by challenging the merits of another interpleader
defendant's claim to the subject property. Similarly in Rubinbaum LLP v.
Related Corp. Partners V, L.P., 154 F. Supp.2d 481 (S.D.N.Y. 2001), the
issue was whether section 1335 includes jurisdiction over individuals
with potential claims to the subject property who have not yet asserted
those potential claims. The court in Rubinbaum did not discuss the $500
interpleader threshold because the subject property, funds held by
plaintiff as an escrow agent, was cash of $906,963.56. See id. at 483.
By establishing the $500 jurisdictional minimum and requiring the
satisfaction of that requirement prior to reaching the question of a
proposed interpleader plaintiff's good faith belief that it is facing
multiple claims, the statutory scheme leaves no room for the subjective
measurement of value which JVW and Waggoner propose. Indeed, to permit
the $500 value threshold to be satisfied by a subjective belief would
ignore the language of the statute and render the requirement
meaningless. See Krishna v. Colgate Palmolive Co., NO. 90 Civ. 4116
(CSH), 1991 WL 125186, at *2 nn. 3-4 (S.D.N.Y. July 2, 1991) (explaining
that while, under 28 U.S.C. § 1335, "the amount in controversy must
exceed $500.00," the statute, by contrast, "provides for interpleader
jurisdiction when `two or more adverse claimants . . . are claiming or
may claim to be entitled to such money or property . . . .'") (quoting
28 U.S.C. § 1335) (emphasis in original)
II. The Court Has No Jurisdiction over the Cross-Claims and the Summary
Judgment Motion is Denied
JVW and Waggoner argue that, even if CSC's action is dismissed, this
Court is not deprived of jurisdiction to adjudicate the cross-claims
among the Waggoner Parties, Kelleher, and SSBT. Specifically, they argue
that (i) this Court may exercise supplemental jurisdiction over the cross
claims, and (ii) an independent basis for jurisdiction exists,
notwithstanding dismissal of CSC's interpleader claims.
A. Supplemental Jurisdiction Is Not Appropriate
The exercise of supplemental jurisdiction by the district courts is
governed by 28 U.S.C. § 1367. Subsection (c) provides that:
[t]he district courts may decline to exercise
supplemental jurisdiction . . . if (1) the claim raises a
novel or complex issue of State law; (2) the claim
substantially predominates over the claim or claims
which the district court has original jurisdiction; (3)
the district court has dismissed all claims over which it
has original jurisdiction; or (4) in exceptional
circumstances, there are other compelling reasons for
28 U.S.C. § 1367 (c). "The decision whether or not to exercise
supplemental jurisdiction under § 1367(c) involves considerations of
judicial economy, convenience, comity, and fairness to litigants."
Ponticelli v. Zurich Am. Ins. Group, 16 F. Supp.2d 414, 438 (S.D.N.Y.
1998) (citations omitted). Only one of the four prongs of section
1367(c) must be satisfied in order to decline to exercise supplemental
jurisdiction. See Riley v. Town of Bethlehem, 44 F. Supp.2d 451, 467
(N.D.N.Y. 1999) ("A district court . . . may decline to exercise
supplemental jurisdiction over a claim for any one of four enumerated
exceptions set forth in 28 U.S.C. § 1367 (c)") (internal quotations
Here, the only federal claim presented in this action has been
dismissed. Accordingly, supplemental jurisdiction over the remaining
cross-claims is inappropriate since dismissal of all federal claims
before trial generally calls for the dismissal of any remaining state law
claims. See Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343-350 (1988) ("In
the usual case in which all federal-law claims are eliminated before
trial, the balance of factors . . . will point toward declining to
exercise jurisdiction over the remaining state-law claims."); Town of
West Hartford v. Operation Rescue, 915 F.2d 92, 104 (2d Cir. 1990) ("[I]t
is well settled that `if the federal claims are dismissed before trial,
even though not insubstantial in a jurisdictional sense, the state claims
should be dismissed as well.'") (quoting United Mine Workers v. Gibbs,
383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966)).
Further, the deposit contract upon which JVW has sued SSBT for breach
explicitly provides that "the relationship between SSBT and the Account
Holder [JVW] shall be governed by and construed in accordance with the
laws of the Commonwealth of the Bahamas." This contract includes
provisions limiting SSBT's liability for actions taken in reliance upon
forged instructions and placing the burden of proving that instructions
were not authorized on the account holder. The interpretation and
application c)f these provisions in accordance with Bahamian law will be
central to the resolution of JVW's breach of contract claim against
SSBT. Because "the principles embodies by subsection (c)(1) [of
28 U.S.C. § 1367] are implicated by complex issues of foreign law as
well as state law," supplemental jurisdiction would not be appropriate.
Mars Inc. v. Nippon Conlux Kabushiki-Kaisha, 825 F. Supp. 73, 75-76
(D.Del. 1993) (declining to exercise supplemental jurisdiction under
1367(c)(1) because court "anticipates disagreements among the parties as to
the substance of Japanese patent law"); see also Morse v. Univ. of Vt.,
973 F.2d 122, 128 (2d Cir. 1992) ("[I]t may be an abuse of discretion for
a district court to refuse to dismiss a pendent state claim after it
dismisses a federal claim, particularly where the state cause of action
that remains for decision in federal court involves novel questions of
state law.") citing Raucci v. Town of Rotterdam, 902 F.2d 1050, 1054 (2d
Cir. 1990)); In re New York Trap Rock Corp., 160 B.R. 876 (S.D.N.Y.
1993), aff'd in part, vacated in part on other grounds, 42 F.3d 747 (2d
Cir. 1994) (declining to exercise supplemental jurisdiction where the
remaining claims presented novel questions under the law of Argentina and
where Argentina was the primary location of the underlying relevant
The issues raised by the cross-claims, all issues of state or foreign
law, predominate over those relating to the ownership of the CD. This
action is fundamentally about the failed business venture between
Waggoner and Kelleher and the circumstances surrounding SSBT's investment
of the funds deposited in the JVW account. "Where the state claims
constitute the real body of a case to which federal claims are an
appendage, declining jurisdiction under [subsection (c)(2)] is
appropriate to prevent a situation wherein permitting litigation of all
claims in the district court can accurately be described as allowing a
federal tail to wag what is in substance a state dog." City of New
Rochelle v. Town of Mamaroneck, 111 F. Supp.2d 353, 371 (S.D.N Y 2000)
(citations and internal quotations omitted).
Finally, comity, a factor which informs the analysis of whether or not
to exercise supplemental jurisdiction, Gibbs, 383 U.S. at 726; Itar-Tass
Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 447 (2d Cir.
1998), calls for dismissal of the cross-claims. Comity is properly
granted to a foreign court upon the showing that the foreign court is of
competent jurisdiction, and that the laws and the public policy of the
forum state and the rights of its citizens will not be violated. See
Hilton v. Guvot, 159 U.S. 113, 202-03, 16 S.Ct. 139, 158-59, 40 L.Ed. 95
(1895); Clarkson Co. v. Shaheen, 544 F.2d 624, 629 (2d Cir. 1976); Kenner
Products Co., a Division of CPG Products Corp. v. Societe Fonciere et
Financiere Agache-Willot, 532 F. Supp. 478, 479 (S.D.N.Y. 1982) It is
particularly appropriate to grant comity with respect to foreign
bankruptcy proceedings, as equity requires the resolution of all claims
in a single proceeding. See Ecoban Fin. Ltd. v. Grupo Acerero Del Norte,
S.A. DE C.V., 108 F. Supp.2d 349, 351-52 (S.D.N.Y. 2000).
SSBT has been placed into receivership in the Bahamas, the equivalent
of U.S. bankruptcy proceedings. The courts in this and other circuits
consistently have granted comity to Bahamian liquidation proceedings,
recognizing the sufficiency of those proceedings in protecting the laws
and public policy of the United States and the rights of its residents.
See, e.g., In re Thornill Global Deposit Fund, Ltd., 245 B.R. 1, 16
(Bankr. D. Mass. 2000); In re Hackett, 184 B.R. 656, 659 (Bankr.
S.D.N.Y. 1995); In re Spanish Cay Co., Ltd., 161 B.R. 715, 726 (S.D.
Fla. 1993); In re Culmer, 25 B.R. 621, 632 (Bankr. S.D.N.Y. 1982).
Accordingly, the disposition of SSBT's assets should be determined by the
Bahamian court before which the liquidation proceedings are pending. The
Bahamian liquidation proceedings will most adequately protect the rights
of all of SSBT's creditors, including JVW and Waggoner, who chose the
Bahamas as the location to deposit their funds and begin their investment
In consideration of all of the above-mentioned factors, supplemental
jurisdiction is not appropriate.
B. There is No Independent Basis for Jurisdiction Over the
Waggoner and JVW contend that, notwithstanding dismissal of CSC's
interpleader claims, this Court has an independent basis for subject
matter jurisdiction over the cross-claims pursuant to 28 U.S.C. § 1332.
Specifically, the Waggoner parties state that claims were asserted by
Kelleher personally against Waggoner, and because no other entities are
involved in those claims, diversity jurisdiction exists.
Both parties acknowledge that in deciding whether diversity is
present, the Court has a duty to "look beyond the
pleadings, and to
arrange the parties according to their sides in the dispute." City of
Indianapolis v. Chase National Bank, 314 U.S. 63, 69, 62 S.Ct. 15, 17, 86
L.Ed. 47 (1941) (internal quotations omitted). However, the Waggoner
parties have requested that this Court ignore CSC's involvement and
imagine a hypothetical conflict between only Kelleher (of U.K.) and
Waggoner (of Texas) Presumably, under this scenario Waggoner and JVW (of
Dominica) would have counterclaimed against Kelleher, and brought in SSBT
(of the Bahamas) as a defendant on the cross-claims. But regardless of
who brings the action and how the parties become involved, any suit
involving Waggoner, JVW, Kelleher, and SSBT necessarily involves aliens
adverse to each other. See Corporacion Venezolana de Fomento v. Vintero
Sales Corp., 629 F.2d 786, 790 (2d Cir. 1980) ("[T]he presence of aliens
on two sides of a case destroys diversity jurisdiction.") (citation
omitted); see also Franceskin v. Credit Suisse, 214 F.3d 253, 258 (2d
Cir. 2000); Int'l. Shipping Co., S.A. v. Hydra Offshore, Inc.,
875 F.2d 388, 391 (2d Cir. 1989); Kunica v. St. Jean Fin., Inc.,
63 F. Supp.2d 342, 349 (S.D.N.Y. 1999). Accordingly, this attempt to
create diversity jurisdiction is ineffective. See Federal Ins. Co. v.
Safeskin Corp., No. 98 Civ. 2194 (DC), 1998 WL 832706, at *2-3 (S.D.N Y
Nov. 25, 1998).
C. The Motion for Summary Judgment is Denied for Lack of
On March 11, 2002, JVW filed a motion for summary judgment on its
cross-claim for breach of contract. For the reasons stated above, this
Court does not have jurisdiction over the cross-claims in this action.
Accordingly, the motion for summary judgment is denied for lack of
III. The Attachment is Vacated
SSBT has requested that the attached assets be returned to the
possession of SSBT's receiver in the Bahamas pursuant to
11 U.S.C. § 304. As mentioned, SSBT has been placed into liquidation
proceedings in the Bahamas, the equivalent of a United States bankruptcy
Section 304 of the Bankruptcy Code was enacted to permit a foreign
representative of a foreign bankruptcy estate to file a petition to
protect the assets of the debtor's estate located in the United States and
to prevent the dismemberment and distribution of those assets. It
provides, in relevant part:
(a) A case ancillary to a foreign proceeding is
commenced by the filing with the bankruptcy court of a
petition under this section by a foreign representative.
(b) Subject to the provisions of subsection (c) of
this section, if a party in interest does not timely
controvert the petition, or after trial, the court may
(2) order turnover of the property of such estate,
or the proceeds of such property, to such foreign
(3) order other appropriate relief.
11 U.S.C. § 304 (a), (b)
JVW and Waggoner attack SSBT's application for a turnover of assets
under 11 U.S.C. § 304 as procedurally defective because it "comes for
the first time in reply papers." (Sur-Reply at 14) The prohibition
against raising new matter for the first time in reply has no application
where, well prior to the drafting of the reply brief, the opposing party
seeks and obtains the right to file a sur-reply. See Becker v. Ulster
Cty., 167 F. Supp.2d 549, 555 n. 1 (N.D.N.Y. 2001) (citing Bonnie &
Comp. Fashions, Inc. v. Bankers Trust Comp., 945 F. Supp. 693, 708
(S.D.N.Y. 1996); Litton Indus. v. Lehman Bros.
Kuhn Loeb Inc.,
767 F. Supp. 1220, 1235 (S.D.N.Y. 1991), rev'd on other grounds,
967 F.2d 742 (2d Cir. 1992)). JVW sought and obtained the opportunity to
respond to SSBT's section 304 application which, of course, resulted from
the march of time.
The Waggoner parties also argue that this Court is unable to reach the
merits of SSBT's application because SSBT did not move before the
bankruptcy court for relief under Section 304. By its terms, Section 304
requires that a "foreign representative" commence a case ancillary to a
foreign proceeding "by filing a petition with the bankruptcy court." No
such petition has been filed as to the attached funds at issue in this
action. However, on February 22, 2002, SSBT, on behalf of Raymond
Winder, its Provisional Liquidator, filed a Section 304 petition in the
United States Bankruptcy Court for the Southern District of New York.
That petition exempted from its request the turnover of the assets that
have been attached in this action. See Verified Petition Pursuant to
Section 304 of the Bankruptcy Code to Commence a Case Ancillary to a
Foreign Proceeding, No. 02-10812, at 9 n. 1 (Feb. 22, 2002)
However, as the Court of Appeals held in Cunard, an ancillary
proceeding under Section 304 is not meant to be the exclusive
remedy for a
foreign bankrupt. See Cunard, 773 F.2d at 455. The principle of
international comity may, for example, guide the decision on whether to
grant the relief requested by a party. See id. at 456; see also Hembach
v. Ouikpak Corp., No. Civ. A. 97-3900, 1998 WL 54737, at *4 n. 4
("Interpool and Cunard also sanction, implicitly and expressly, the
bringing of a motion to extend comity to a foreign bankruptcy proceeding
in this court rather than the bankruptcy court.")
SSBT has not asked for relief on grounds of comity, and has based its
request solely on the authority of Section 403 of the Bankruptcy Code.
Since it filed this motion, it has filed a Section 403 petition in the
Bankruptcy Court of this District for, inter alia, the turnover of all of
its U.S. assets other than those attached by this Court. In light of
these developments and the authorities cited above, this Court finds that
the Bankruptcy Court is the appropriate forum for SSBT's request.
Accordingly, the attachment will be vacated due to the dismissal of
this action and the Court's lack of subject matter jurisdiction at the
time of the order of attachment. Any application for a request to
turnover these assets pursuant to Section 403 should be filed with the
IV. SSBT Is Entitled To Attorney's Fees
Article 62 of the New York Civil Practice Law and Rules (CPLR), the
statutory basis for this Court's order of attachment, permits a defendant
whose property has been wrongfully attached to recover "all costs and
damages, including reasonable attorney's fees, which may be sustained by
reason of the attachment . . . if it is finally decided that the
plaintiff was not entitled to an attachment of the defendant's property."
CPLR § 6212(e). The purpose of this section is "to make the
attaching plaintiff strictly liable for all damages occasioned by a
wrongful attachment" including "reasonable attorney's fees, which may be
sustained by reason of the attachment." Roth v. Pritikin, 787 F.2d 54, 59
(2d Cir. 1986) (citation and internal quotations omitted).
"A defendant is not required to prevail on the merits in order for the
court to award damages" under section 6212(e). Rashi Textiles, U.S.A.,
Inc. v. Rhomberg Textile Gesellschaft M.B.H., 857 F. Supp. 1051, 1054
(S.D.N.Y. 1994); see also ENH, Inc. v. Int'l Diffusion SRL, No. 97 Civ.
3202 (LAP), 1997 WL 294388, at *3 (S.D.N.Y. June 2, 1997). Rather, a
dismissal of the case or of the attachment on any basis, procedural or
substantive, is sufficient to support an award of damages and attorney's
fees. See, e.g., Victrix S.S. Co., S.A. v. Salen Dry Cargo A.B.,
825 F.2d 709 (2d Cir. 1987) (awarding fees where case was dismissed and
attachment vacated based on comity considerations in light of foreign
bankruptcy proceeding); Gaskin v. Stumm Handel GmbH, 390 F. Supp. 361
(S.D.N.Y. 1975) (awarding costs and damages pursuant to Rule 6212(e)
where case in which attachment had been granted was dismissed based on a
forum selection clause requiring litigation of disputes in Germany),
Minskoff v. Fidelity and Cas. Co., 28 A.D.2d 85, 87, 281 N.Y.S.2d 410,
411 (1st Dep't 1967) (awarding damages incurred during attachment upon a
dismissal based on forum non conveniens grounds).
JVW and Waggoner have contended that damages for wrongful attachment
are appropriate only upon some showing of culpable conduct. As stated,
however, an attaching plaintiff is strictly liable for all damages
resulting from a wrongful attachment. Roth, 787 F.2d at
59. The language of the statute is unambiguous in this regard:
The plaintiff shall be liable to the defendant for all
costs and damages, including reasonable attorney's fees,
which may be sustained by reason of the attachment if the
defendant recovers judgment, or if it is finally decided
that the plaintiff was not entitled to an attachment of
the defendant's property.
CPLR § 6212(e) (emphasis added); see also Merck & Co., Inc. v.
Technoquimicas S.A., No. 01 Civ. 5345 (NRB), 2001 WL 963977, at *3
(S.D.N.Y. Aug. 22, 2001) ("[I]t is significant that § 6212(e) is not
worded in the conditional. . . . Thus, New York law requires an award of
fees by virtue of the fact that the attachment was vacated as
SSBT is entitled to an award of attorney's fees that it has incurred
since the entry of the order of attachment on November 17, 2000. At the
time this action was filed and at the time JVW and Waggoner asserted
claims against SSBT, the Court lacked subject matter jurisdiction.
Waggoner was in possession of a new CD that represented and was purchased
with the same funds that had once backed the expired CD that was alleged
to be the original basis of jurisdiction. In addition, Waggoner
personally liquidated JVW's bank account prior to the commencement of this
action. In light of these circumstances and the authorities cited above,
an award of attorney's fees under § 6212(e) is appropriate.
For the reasons set forth, this action is dismissed. There is no
jurisdiction over the cross-claims and, therefore, JVW's motion for
summary judgment is denied. The attachment of SSBT's assets will be
vacated but a turnover will not be ordered.
The request for attorneys' fees is granted.
Settle judgment on notice.