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Disney Enterprises, Inc. v. Honore

United States District Court, E.D. New York

December 21, 2017

FINANZ ST. HONORE, B.V., Defendant.

          OPINION & ORDER


         Patriarch Partners Agency Services, LLC ("PPAS") has moved to intervene in this litigation pursuant to Federal Rule of Civil Procedure 24(a)(2) in order to move to vacate or amend the May 1, 2017 Attachment Order. Disney Enterprises, Inc. ("Disney") has opposed this motion and, separately, seeks an extension of the Attachment Order; Disney also asks that I deem the restraining notice sent to Finanz St. Honore B.V. ("Finanz") to have been served. For the reasons set forth herein, PPAS's motion is denied and Disney's applications are granted.

         I. Background

         Because I assume the parties' familiarity with the facts underlying this litigation, I provide only a brief overview of the litigation and a description of the facts pertinent to the current dispute. On December 5, 2016, 1 granted summary judgment as to liability against Finanz. The amount of damages owed to plaintiff Disney was not resolved at that time. Upon my granting summary judgment to Disney, Finanz, after having vigorously defended the lawsuit, disappeared from the litigation. Finanz's counsel, Lowenstein Sandler LLP ("Lowenstein"), was granted leave to withdraw on May 26, 2017. Since Lowenstein's withdrawal, Finanz still has not appeared or retained new counsel. On April 26, 2017, fearing that Finanz would not pay any judgment ultimately issued against it, Disney moved for a pre-judgment attachment of Finanz's assets, including Finanz's intellectual property. On May 1, 2017, 1 held a conference regarding Disney's application. The conference was attended by counsel for Disney, Lowenstein (which had yet to be relieved as counsel), and Jeannine Chanes, Esq., who stated that she represented non-party PPAS. As discussed at the conference, neither Lowenstein, Disney's counsel, nor I knew that PPAS would be appearing.[1] At the conference, I granted Disney's motion for an attachment and denied PPAS's oral application to intervene.

         Pursuant to my order (the "Attachment Order"), Disney was permitted to attach Finanz's assets in the amount of $700, 000, and all persons and entities who received notice of the Attachment Order, including PPAS, were enjoined and restrained from transferring any property in which Finanz had an interest, including its intellectual property ("Attached Assets"). On July 21, 2017, Disney was granted summary judgment as to damages in the amount of $867, 587.18.

         On July 31, 2017, PPAS filed its motion to intervene in this action. After multiple extension requests by the parties, Disney opposed this motion on October 13, 2017, and PPAS filed its reply on November 17, 2017.

         I held oral argument on December 11, 2017. At that time, Disney stated that it did not intend to seek an extension of the Attachment Order, which was set to expire on January 3, 2018. On December 13, 2017, PPAS, based upon Disney's representation that it was not going to seek an extension of the Attachment Order, withdrew its motion to intervene. However, on December 18, 2017, Disney wrote a letter to the court asking that the Attachment Order be extended until "either the Judgment is satisfied or a receiver is appointed to take control of Finanz's assets." Disney December 18 Letter ("Disney Letter") at 1. In this letter, Disney also asks that the court deem "the restraining notice DEI served on [Finanz] via certified mail on October 26, 2017 sufficiently served and effective as of that date." Id. PPAS responded to Disney's letter on December 20th and argues that an extension of the Attachment Order is unwarranted. Since I will consider Disney's request for an extension of the Attachment Order, I will treat PPAS as not having withdrawn its intervention motion.

         II. Discussion

         A. PPAS's Proposed Intervention

         Pursuant to Federal Rule of Civil Procedure ("FRCP") 24(a)(2), in order to intervene, a party must, inter alia, assert an interest relating to the property or transaction that is the subject of the action and be so situated that, without intervention, disposition of the action may, as a practical matter, impair or impede the applicant's ability to protect its interest. See XL Specialty Ins. Co. v. Lakian, 632 Fed.Appx. 667, 669 (2d Cir. 2015).

         As an initial matter, PPAS does not have an interest in the subject of this action-whether Disney is entitled to attorneys' fees from Finanz. Rather, PPAS's concern arises from Disney having obtained an Attachment Order to secure its judgment against Finanz. PPAS argues that it is this Attachment Order that gives it a basis to intervene because it attaches assets that serve as collateral for loans made to Finanz by the Lenders for whom PPAS represents it is an agent.[2]

         Regarding PPAS's interest in the Attached Assets, it is not "illegal nor improper to grant an order of attachment to one creditor simply because another creditor claims a priority. The order of attachment serves merely to preserve plaintiffs rights. Once a plaintiff has its order of attachment, then it or any other creditor may commence a special proceeding to determine whose right is superior." Manufacturers & Traders Trust Co. v. Lowenstein, 91 A.D.2d 848 (4th Dept. 1982). To be sure, the priority of creditors must be determined at some point. As Disney indicated at oral argument and reinforced in its letter, it intends to make a motion for a turnover and to appoint a receiver. See Disney Letter at 1, n.l. I conclude, and PPAS appears to agree, that the appropriate time for PPAS to litigate whether its interest is superior to that of Disney's is at such a proceeding. See PPAS December 20, 2017 Letter at 2.

         Moreover, PPAS has not shown how the Attachment Order is currently impairing or impeding its ability to protect its interest in the Attached Assets. The Attached Assets serve as collateral for loans made by the Lenders PPAS says it represents. Based upon statements made at oral argument and PPAS's letter, PPAS has not sought to foreclose on these Attached Assets and the Attached Assets remain in Finanz's possession.[3] Since the Attachment Order only preserves the status quo that has existed for many years prior to its issuance, the prejudice in extending it is minimal (if any prejudice exists at all). See SEC v. Callahan, 2 F.Supp.3d 427, 438 (E.D.N.Y. Mar. 5, 2014) (denying motion to intervene because proposed intervenor would "suffer ...

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