The opinion of the court was delivered by: JOHN KOELTL, District Judge
The plaintiff, JSC Foreign Economic Association Technostroyexport
("Techno"), applies pursuant to Federal Rule of Civil Procedure 64 and
Article 62 of the New York Civil Practice Law and Rules ("C.P.L.R.") for
an order of attachment against the assets of defendants Brigitte Jossem
and Atrium Square, Inc. In September and October 2003, Jossem and Atrium
Square sold real property worth approximately $1.3 million. None of the
proceeds of these sales went to Jossem or Atrium Square, and at least
$300,000 was transferred to an offshore company. The plaintiff contends
that the circumstances of the transactions establish that Jossem and
Atrium Square intend to frustrate the enforcement of any judgment against
them, and that
the plaintiff is therefore entitled to an attachment against the
remainder of Jossem's and Atrium Square's assets.
New York law governs the availability of provisional remedies,
including orders of attachment, in this Court. See Fed.R. Civ.
P. 64 Pursuant to C.P.L.R. § 6201(3), an order of attachment
may be granted where the plaintiff has demanded and would be entitled to
a money judgment, and where:
the defendant, with intent to . . . 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
N.Y. C.P.L.R. § 6201(3). Section 6212 of the C.P.L.R. further
provides that in order to obtain an order of attachment the moving party
must show "that there is a cause of action, that it is probable that the
plaintiff will succeed on the merits, that one or more grounds for
attachment provided in section 6201 exist, and that the amount demanded
from the defendant exceeds all counterclaims known to the plaintiff."
N.Y.C.P.L.R. § 6212(a).
Under New York law, therefore, a party is entitled to an order of
attachment pursuant to § 6201(3) upon demonstrating that: "(1) it has
stated a claim for a money judgment; (2) it has a probability of success
on the merits; (3) the defendant `with intent to defraud his creditors or
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;' and (4)
the amount demanded from the defendant is greater than the amount of all
counterclaims known to the party seeking attachment." Bank Leumi
Trust Co. v. Istim, Inc., 892 F. Supp. 478, 481 (S.D.N.Y. 1995).
However, even if the plaintiff satisfies all of the statutory
requirements for an order of attachment, the issuance of relief remains
in the discretion of the Court, because attachment is recognized to be a
harsh and extraordinary remedy. See Bank of China v, NBM
L.L.C., 192 F. Supp.2d 183, 186 (S.D.N.Y. 2002); Buy This,
Inc. v. MCI Worldcom Communications, Inc., 178 F. Supp.2d 380, 383,
384 n.8 (S.D.N.Y. 2001).
The Court has previously concluded that the plaintiff has stated an
alter ego claim against defendant Jossem and a reverse veil
piercing claim against defendant Atrium Square. JSC Foreign Econ.
Ass'n Technostroyexport v. Int'l Dev. & Trade Servs., Inc.,
295 F. Supp.2d 366, 378-79 (S.D.N.Y. 2003). Both claims are part of the
plaintiff's effort to enforce a prior judgment against defendant
International Development and Trade Services, Inc. ("IDTS"), a judgment
that now exceeds $200 million. See id. at 370. Because the
defendants have not set
forth any counterclaims in the papers before the Court, the amount
demanded from the defendants exceeds the amount of all counterclaims
known to the plaintiff. Therefore, the plaintiff has established the
first and fourth requirements for an order of attachment.
In determining whether there is a likelihood of success on the merits,
all legitimate inferences should be drawn in favor of the party seeking
the attachment. See Bank Leumi, 892 F. Supp. at 482. In
general, New York courts will pierce the corporate veil "whenever
necessary to prevent fraud or achieve equity." Walkovszky v.
Carlton, 223 N.E.2d 6, 7 (N.Y. 1966) (internal quotation marks and
citation omitted). No definitive rule governs when courts will pierce the
corporate veil, because the decision "in a given instance will
necessarily depend on the attendant facts and equities." Morris v.
New York State Dep' t of Taxation S Fin., 623 N.E.d 1157, 1160
(N.Y. 1993). "Generally, however, piercing the corporate veil requires a
showing that: (1) the owners exercised complete domination of the
corporation in respect to the transaction attacked; and (2) that such
domination was used to commit a fraud or wrong against the plaintiff
which resulted in the plaintiff's injury." Id. at 1160-61. The
same element must be established to succeed on a reverse veil
piercing claim. See Am. Fuel Corp. v. Utah Energy
Dev, Co., 122 F.3d 130, 134 (2d Cir. 1997); State v.
Eastern, 647 N.Y.S.2d 904, 908-09 (Sup.Ct. 1995).
Courts will consider a lengthy list of factors when determining whether
it is appropriate to pierce the corporate veil, including: "(1) the
absence of the formalities and paraphernalia that are part and parcel of
the corporate existence, i.e., issuance of stock, election of directors,
keeping of corporate records and the like, (2) inadequate capitalization,
(3) whether funds are put in and taken out of the corporation for
personal rather than corporate purposes, (4) overlap in ownership,
officers, directors, and personnel, (5) common office space, address and
telephone numbers of corporate entities, (6) the amount of business
discretion displayed by the allegedly dominated corporation, (7) whether
the related corporations deal with the dominated corporation at arms
length, (8) whether the corporations are treated as independent profit
centers, (9) the payment or guarantee of debts of the dominated
corporation by other corporations in the group, and (10) whether the
corporation in question had property that was used by other of the
corporations as if it were its own." William Passalacqua Builders,
Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 139 (2d Cir.
The plaintiff has submitted sufficient evidence, in connection with
this motion and the prior motion for a preliminary injunction, to show
that it is likely to succeed on the merits on its alter ego and reverse
veil piercing claims against Jossem and Atrium Square. The
evidence submitted shows that Jossem was the sole shareholder, chairman,
and director of IDTS. (IDTS's Response to Information Subpoena attached
as Ex. 20 to Declaration of Ira M. Feinberg dated Sept. 5, 2003
("Feinberg Decl."), at 1). The evidence shows that Jossem, along with her
mother Edith Reich, the sole officer of IDTS, used IDTS's funds to pay
numerous personal expenses. (See Exs. 28-29 to Feinberg Decl.)
The evidence shows that IDTS operated out of Reich's and Jossem's home,
and it did not adhere to customary corporate formalities. (Feinberg Decl.
¶ 29 and Exs. 34-36.) The evidence also shows that Reich and Jossem
diverted payments made to IDTS to Reich's personal bank account in
Switzerland, and it shows that IDTS paid Jossem large "consulting fees."
(See Decl. of Ernst Kohler dated Aug. 26, 2003 attached as Ex.
7 to Decl, of Tracey A. Tiska dated Feb. 5, 2004 ("Tiska Decl."), at
¶¶ 1-6; Ex. 8 to Tiska Decl.) Such conduct dissipated assets of IDTS
that Techno could otherwise have used to satisfy its judgement against
IDTS. See Godwin Realty Assocs. v. CATV Enterp., Inc.,
712 N.Y.S.2d 39, 41 (App
Div. 2000) ("The stripping of corporate assets by shareholders to
render the corporation judgment proof constitutes a fraud or wrong
justifying piercing the corporate veil.") IDTS was dissolved on September
24, 1997 for failure to pay taxes. (Feinberg Decl. ¶ 39.) The
evidence submitted supports a finding that the plaintiff is likely to
succeed on the merits of its alter ego claim against Jossem.
The evidence supports a similar conclusion with respect to the
plaintiff's reverse veil piercing claim against Atrium Square.
Jossem is the sole officer of Atrium Square. (Feinberg Decl. Exs. 66-68,
70.) The very real estate transactions at issue on this motion suggest
that Jossem did not distinguish between her assets and those of Atrium
Square. The closing documents do not distinguish between money owed to,
or paid on behalf of, either Atrium Square or Jossem. (See
Decl, of Matthew A. Michaels dated Feb. 3, 2004 ("Michaels Decl."),
Ex.5.) Moreover, a former director of Atrium Square, Dennis John Edwards,
now has a position with Dothlyn Investments Limited ("Dothlyn"), the
offshore entity that received $300,000 of the proceeds generated by the
sale of the properties. (Id.) Atrium Square apparently no
longer has any assets. (Transcript of Hearing dated Feb. 6, 2004 ("2/6/04
Tr."), at 18.) These
facts together indicate that the plaintiff is likely to succeed on
its reverse veil piercing claim against Atrium Square.
To meet the third requirement for an attachment pursuant to C.P.L.R.
§ 6201(3), the plaintiff must establish: "(i) that the defendant
either is about to or has assigned, disposed of, encumbered or secreted
property, or removed it from the state, and (ii) that the defendant has
acted or will act with the intent to defraud his or her creditors, or to
frustrate the enforcement of a judgment that might be rendered in
plaintiff's favor." Bank Leumi, 892 F. Supp. at 482. It is
undisputed that Jossem and Atrium Square have sold the three Red Dirt
Road properties and have transferred a portion of the proceeds outside
the state of New York. Indeed, it is also undisputed that Jossem and
Atrium Square retained none of the proceeds of the sales of these
properties. Atrium Square now holds no assets in the State of New York.
The plaintiff has also sufficiently established that Jossem and Atrium
Square disposed of these properties with actual intent to frustrate the
enforcement of a judgment that might be rendered in the plaintiff's
favor. In the context of a motion for an attachment, fraud is not lightly
inferred, and the moving party must establish fraudulent intent with
evidentiary facts, not conclusory allegations. Societe Generale
Banque, Zurich v, Flemingdon Dev. Corp., 500 N.Y.S.2d 278,
281 (App. Div. 1986). It is not sufficient to submit affidavits
containing allegations that merely raise suspicions of fraudulent intent;
rather, "[i]t must appear that such fraudulent intent really existed in
the defendant's mind." Id. at 281-82 (internal quotation marks
omitted) (collecting cases). Because direct evidence of an intent to
defraud or to frustrate the enforcement of a judgment is rare, the intent
required under C.P.L.R. § 6201(3) is usually inferred from the
circumstances. See Arzu v. Arzu, 597 N.Y.S.2d 322, 325 (App.
The circumstances of the property transactions here, documented in the
record before the Court, amply support a finding that Jossem and Atrium
Square engaged in the transactions with actual intent to frustrate
enforcement of a judgment against them. Jossem and Atrium Square together
sold three separate properties for a total of $1.3 million. Jossem and
Atrium Square entered sales contracts for two of the properties with the
Town of Easthampton in June 2003, prior to the filing of the present
action in July 2003, but the sales closed in September 2003/ when the
plaintiff's motion for a preliminary injunction was pending. The sale of
the third property closed in October 2003, pursuant to a contract that
Jossem entered sometime after this action had this action had commenced
The closing documents for those sales indicate that neither Atrium
Square nor Jossem received any part of the resulting proceeds.
(See Exs. 5 & 8 to Michaels Decl.) The disbursement of the
proceeds of the sales of all three properties is hazy at best, and
counsel for Jossem and Atrium Square could not explain where all the
proceeds went and why. Counsel explained that about $600,000 was paid to
mortgage holders, Dothlyn and S.G. Assets LLC; however, Dothlyn is an
offshore entity located in either the British Virgin Islands or the Isle
of Man, and a former director of Atrium Square, Dennis John Edwards, was
also a director of Dothlyn. (See Michaels Decl. Ex. 6; Tiska
Decl. Ex. 6.) There were substantial closing costs, and $100,000 is
listed as held in escrow, although the nature and beneficiary of the
escrow is unexplained. The closing documents reflect over $400,000 paid
to one Jerrold Morgulas, `Esq., whom defense counsel did not identify and
whose share of the proceeds is left unexplained. (See Michaels
Decl. Exs.5, 8; 2/6/04 Tr. at 19.) These sales left Atrium Square
without any assets, and neither Atrium Square nor Jossem allegedly
received any money as a result of the sales. Under these circumstances,
the plaintiff has presented more than sufficient evidence to support a
finding of actual intent to frustrate the enforcement of a judgment.
See Fireman's Fund Ins. Co. v. Kapralos, 942 F. Supp. 836, 841
(E.D.N.Y. 1996) (granting attachment where money "found its way
into a bank account located in Switzerland"); Jannuzzo v. De
Cuevas, 627 N.Y.S.2d 919, 919 (App. Div. 1995) (finding attachment
properly granted "based upon plaintiff's proof that defendant was
attempting to frustrate the judgment by assigning art work that
constituted the bulk of her assets in this state"); Mishkin v.
Kenney & Branisel, Inc., 609 F. Supp. 1254, 1256 (S.D.N.Y. 1985)
(Weinfeld, J.) ("The defendants' course of conduct, if not restrained,
threatens to denude K & B of its rapidly diminishing assets.");
United Parcel Serv., Inc. v. Jay Norris Corp., 423 N.Y.S.2d 125,
127 (Sup.Ct. 1979) (finding intent to frustrate enforcement of
judgment where defendant had close relationship with transferee in
conveyance, defendant failed to give notice of conveyance, defendant
could not account for actual payment of consideration set out in sale
agreement, and defendant was left as corporate shell following
Because the Court finds that the plaintiff has satisfied all of the
requirements for an order of attachment pursuant to C.P.L.R. §
6201(3), and because the Court concludes that an order of attachment is
required in order to prevent defendants Jossem and Atrium Square from
frustrating the enforcement of any judgment against them, the Court
grants the plaintiff's motion for an attachment. The attachment will be
conditioned on the
plaintiff's posting a bond in the amount of $250, 000.
See C.P.L.R. § 6212(b). The Court will consider any
applications made by the defendants to ...