United States District Court, S.D. New York
For AXA Versicherung AG, on its own behalf and as successor in interest to Albingia Versicherungs AG, Petitioner: Joseph T. McCullough, Iv, LEAD ATTORNEY, James J Boland, Robin C. Dusek, Freeborn & Peters LLP, Chicago, IL; Sean Thomas Keely, Hogan Lovells U.S. LLP, New York, NY.
JED S. RAKOFF, United States District Judge.
Petitioner AXA Versicherung AG (" AXAV" ) filed this action on August 6, 2012, against respondents New Hampshire Insurance Company, American Home Assurance Company, and National Union Fire Insurance Company of Pittsburgh, Pennsylvania (collectively, " AIG" ), petitioning for confirmation of an arbitration award. On consent of the parties, this Court issued an order confirming the award on September 5, 2012, and final judgment was entered the following day. After judgment, AXAV served restraining notices on AIG seeking to secure payment of certain sums of interest on the award, which AXAV claims remain due but which AIG disputes. By letter brief, AIG now moves to quash the restraining notices. For the reasons that follow, that motion is hereby denied.
The pertinent facts are not in dispute. On July 27, 2012, an arbitration panel issued an award ordering AIG to pay AXAV approximately $10 million in compensatory damages and $1 million in punitive damages, plus interest, for claims related to certain reinsurance facilities between the parties dating back to 1998. The award provides that interest is to be calculated at " 6.5% compounded annually due on the respective paid or unpaid balances . . . through the date of payment/credit." Final Award at 14.
The award obligated AIG to make payment in full to AXAV within 30 days, i.e., by August 26, 2012. After AXAV submitted its interest calculations to AIG, AIG requested an extension of this deadline to review the calculations. As later memorialized in an email from AIG's counsel to the arbitration panel on August 27, 2012, AXAV agreed to the extension, upon condition that (1) AIG would not challenge the award and would stipulate to its confirmation by this Court and (2) " that interest at 6.5% as provided in the Final Award will continue to accrue until the amount is paid in full." AXAV Letter at 2 (quoting August 27, 2012 email). As agreed, the parties promptly filed a proposed order confirming the award with the Court, which the Court signed on September 5, 2012. Final judgment entered the next day.
After extensive discussions, the parties eventually reached agreement on the interest due under the award on October 12, 2012, on which date AIG purportedly wired all but $3,032 of the agreed amount to AXAV. On October 18, 2012, however, AXAV informed AIG that it had not received the transferred funds. Upon investigation, AIG discovered and informed AXAV that the transfer had mistakenly been made, not to AXAV's account, but rather to a bank account belonging to a French affiliate of the AXA Group, AXA Re, now known as Colisee Re. In return, AXAV informed AIG that in 2006 Colisee Re's active business had been sold to a third party, now known as Partner Re, and that it was Partner Re that exercised day-to-day control over the account to which the funds had mistakenly been sent. After
various delays and discussions among AIG, AXAV, Colisee Re, and Partner Re, the funds were eventually returned to AIG on November 20, 2012. That same day, AIG wired the returned funds to AXAV. The sum AIG wired on November 20, however, was the same sum it had attempted to wire on October 12, and thus did not include the $3,032 shortfall or any interest for the intervening period.
The instant dispute concerns the proper rate of interest due for the five-and-a-half-week period between October 12 and November 20. AIG contends that, at most, the statutory federal judgment rate set in 28 U.S.C. § 1961 should apply, and that, " in light of AXA[V]'s apparent unwillingness to assist in retrieving the funds from its corporate affiliate, and the fact that AIG only agreed to pay interest until the transfer, there [i]s good reason why no additional interest [i]s warranted." AIG Letter at 2. AXAV responds that AIG was to blame for the mistaken transfer and that, in any case, the proper interest rate is 6.5%, as AIG agreed and confirmed to the arbitration panel on August 27, 2012.
To secure payment based on that interest rate, AXAV, on January 23, 2013, served restraining notices on AIG pursuant to N.Y. CPLR § 5222 for $126,896. On January 29, 2013, AXAV also served AIG with subpoenas in connection with the restraining notices, seeking information regarding AIG's assets. AIG now moves to quash the restraining notices on the ground that the amounts they seek to secure are based on the wrong interest rate and thus are overstated.
As a threshold matter, AXAV questions whether the Court possesses authority to grant the relief AIG requests. AIG points to N.Y. CPLR § 5240, which provides that a court " may at any time, on its own initiative or the motion of any interested person, and upon such notice as it may require, make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure." AXAV responds that that provision is a state procedural rule, and therefore has no bearing on this proceeding in federal court.
But AXAV's conclusion does not follow from its premise. While N.Y. CPLR § 5240 is clearly a New York state procedural rule, Federal Rule of Civil Procedure 69 provides that " [t]he procedure on execution [of a federal judgment for money damages] -- and in proceedings supplementary to and in aid of judgment or execution - must accord with the procedure of the state where the court is located." This proceeding to adjudicate the propriety of AXAV's effort to ...