Axginc Corporation v. Plaza Automall, Ltd.

Filing 93

ORDER as to 84 85 Appeal of Magistrate Judge Decision to District Court, filed by plaintiff: Judge Scanlon's decision is affirmed for the reasons stated in the attached opinion. Ordered by Judge Allyne R. Ross on 10/2/2018. (Zimmer, Allison)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------------AXGINC CORPORATION f/k/a AXIS GROUP, INC.,
Plaintiff,
-againstPLAZA AUTOMALL, LTD.,
Defendant.
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14-cv-4648 (ARR) (VMS)
OPINION & ORDER

ROSS, United States District Judge:
Plaintiff, AXGINC Corporation (“plaintiff” or “judgment creditor”), appeals from United
States Magistrate Judge Vera M. Scanlon’s July 11, 2018 post-judgment discovery order (“the
order”). See Order, ECF No. 82; Tr. of Proceedings, ECF No. 83 (“Tr.”); J. Creditor’s AXGINC
Corporation’s Obj. to July 11, 2018 Order, ECF No. 84 (“Pl.’s Obj.”). In the order, Judge Scanlon
granted in part and denied in part plaintiff’s motion to compel discovery against defendant Plaza
Automall, Ltd. (“defendant” or “judgment debtor”) and several non-parties, and granted in part
and denied in part defendant’s cross-motion to quash or modify the discovery requests.
Specifically, Judge Scanlon ordered that the restraining notices, information subpoenas, and
document subpoenas served upon non-parties HSBC Bank USA (“HSBC”) and Manufacturers &
Traders Trust Company (“M&T Bank”) were vacated to the extent that they pertained to any
account other than those belonging to the judgment debtor. See Tr. 27:03–09. She further ordered
that the defendant must comply with the subpoenas and restraining notice served upon it
individually, and that the parties could return to her in the future in the event that they continued
to dispute the sufficiency of defendant’s responses to those discovery requests. See Tr. 34:13–21.

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On appeal, plaintiff argues that it provided ample evidence to restrain the bank accounts
belonging to the non-party car dealerships and to compel the production of documents related to
those accounts. See Pl.’s Obj. 12–20. According to plaintiff, evidence that the non-party car
dealerships regularly paid the defendant’s bills and expenses is sufficient to demonstrate that the
defendant had an “interest” in the non-party car dealerships’ bank accounts, which justifies the
imposition of a restraining notice and the release of documents related to those accounts. Id. at 12–
13. Because I find that Judge Scanlon did not err in vacating the restraining notices and subpoenas
as they relate to the non-party car dealerships’ bank accounts, I affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
In August 2014, plaintiff brought this action against defendant for unpaid base rent, late
fees, and interest stemming from defendant’s breach of a sublease agreement between the parties.1
See Compl., ECF No. 1. At the time of the agreement, defendant operated a car dealership in
Brooklyn, see Feb. 15, 2017 Opinion and Order 2, ECF No. 61, and it entered the lease agreement
in order to store its excess automobile inventory on the land, id. In February 2017, after finding
that defendant had breached the sublease agreement and that it could not prevail on any of its
affirmative defenses, I granted plaintiff’s motion for summary judgment and referred the matter to
Judge Scanlon to calculate damages. Id. at 1, 24. I adopted Judge Scanlon’s report and
recommendation for damages in November 2017,2 see Order Adopting R. & R., ECF No. 70,
which resulted in a clerk’s judgment awarding plaintiff $2,735,929.59. Clerk’s J., ECF No. 71.

1

I assume familiarity with the facts and circumstances of this case and discuss only those facts pertinent to
the plaintiff’s appeal.
In my order adopting the report and recommendation, I made a minor adjustment to Judge Scanlon’s
calculation of damages, which increased the amount of interest awarded to plaintiff. See Order Adopting
R. & R. 1–2, ECF No. 70.
2

2

Defendant subsequently appealed the judgment, see Notice of Appeal, ECF No. 72, and the appeal
is currently pending before the Second Circuit Court of Appeals, see Tr. 33:11–34:4.
After an unsuccessful attempt to mediate the appeal through the Second Circuit CAMP
program, plaintiff began efforts to collect on the judgment. Pl.’s Obj. 7. To date, plaintiff has not
been able to collect any funds toward the satisfaction of the judgment. Id. at 6–7. In an effort to
identify the defendant’s assets, plaintiff served a variety of discovery requests upon defendant and
several non-parties in May 2018. Id. at 7. Two of those requests are at issue in this appeal: (1) a
restraining notice, information subpoena, and document subpoena served upon HSBC
(collectively, “the HSBC request”), and (2) a restraining notice, information subpoena, and
document subpoena served upon M&T Bank (collectively, “the M&T Bank request”). 3 Id. The
HSBC request and M&T Bank request both sought to restrain bank accounts held by the defendant
individually, as well as those held by several non-party car dealerships (“the dealerships”). Id.
Plaintiff asserts that the accounts held by the dealerships were “regularly used as a source for
payment of Plaza Automall’s expenses” and thus they “do, in fact, represent ‘assets of the
judgment debtor.’” Id. at 12. The dealerships were not named as defendants in the original breach
of contract action or in any subsequent actions brought by plaintiff. Many of the dealerships share
portions of their name with defendant, including “Plaza Oldsmobile, Ltd.” “Plaza Hyundai, Ltd.,”
and “Plaza Motors of Brooklyn, Inc.” See id. at 1 n.3.

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Plaintiff did not actually serve M&T Bank with the information subpoena and restraining notice until after
it filed the motion to compel that predated this appeal. See Pl.’s Obj. 2 n.4. However, plaintiff served M&T
Bank with these two additional requests on June 13, 2018, about a month before Judge Scanlon’s hearing
on the motion to compel and defendant’s cross-motion to quash or modify the discovery requests. Id. Thus,
Judge Scanlon’s order regarding the scope of these requests pertained to both the HSBC and the M&T Bank
request, as the arguments underlying both requests were identical. See Tr. 2:10–3:07; Tr. 27:3–27:7
(holding that the “restraining notice subpoena[s] and the information subpoenas for any account or entity
other than Plaza Automall are vacated, the ones that we’re talking about here today.”).
3

When defendant and the non-parties failed to comply with the discovery requests,4 plaintiff
filed a motion to compel compliance and to hold defendant, HSBC, and M&T Bank in civil
contempt. See J. Creditor AXGINC Corporation’s Mem. of Law in Supp. of its Mot. for Civil
Contempt and to Compel Compliance, ECF No. 74-21 (“Pl.’s Mot.”). As support for its argument
that the discovery requests related to the car dealerships were proper under New York’s Civil
Practice Law and Rules (CPLR), plaintiff provided evidence of rent checks drawn on the
dealerships’ accounts from July 2007 through November 2013. Id. at 7. During the time that the
sublease between the parties was in effect, all of the checks submitted by defendant to pay rent
under the agreement were drawn on the bank accounts of the dealerships, and “not a single rent
payment was ever made by Plaza from an account in its own name.” Id. at 6. Plaintiff also alleges
that the dealerships paid—and in some cases, continue to pay—defendant’s legal bills, accounting
fees, and rental costs. See Tr. 15:06–08, Tr. 18:03–07. Defendant responded to plaintiff’s motion
to compel with a cross-motion to quash or modify the subpoenas—arguing, in relevant part, that
the HSBC request and the M&T Bank request inappropriately seek “private and confidential
banking information and/or documents concerning entities separate and distinct from the judgment
debtor,” and that there is no evidence that “Plaza Ltd. has ‘a pecuniary interest,’ or any other
interest, in the separate corporate entities that own each of the Plaza-branded car dealerships.”
Mem. of Law in Opp’n to Pl.’s Mot. for Civil Contempt of Court, and in Supp. of Def.’s CrossMot. to Quash or Modify the Subpoenas at Issue 2, ECF No. 76-4 (“Def.’s Cross-Mot.”).
On July 11, 2018, Judge Scanlon held a hearing on the motions in which she granted in
part and denied in part plaintiff’s motion to compel, and granted in part and denied in part

4

At the time that plaintiff filed the motion to compel, the only discovery requests that were overdue were
the information subpoenas served on Plaza and HSBC, see Def.’s Cross-Mot. 2, but plaintiff accused
defendant of “working to obstruct AXGINC’s enforcement efforts, and possibly . . . taking steps to subvert
AXGINC’s enforcement efforts,” Pl.’s Mot. 2.
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defendant’s motion to quash. Order 1. She held that defendant had two weeks in which to comply
with all discovery tools served upon it individually. Tr. 26:25–27:03. Further, while HSBC and
M&T Bank were instructed to comply with the requests that pertained to Plaza Automall itself, the
requests were vacated to the extent that they sought information about—or sought to restrain the
accounts of—any entity other than Plaza Automall itself. Tr. 27:03–09. In reaching her conclusion,
Judge Scanlon rejected plaintiff’s argument that evidence demonstrating that the dealerships had
routinely paid defendant’s bills formed a sufficient basis for the restraining notices and document
subpoenas that related to their bank accounts. Specifically, she held that plaintiff’s evidence was
not “sufficient to satisfy the requirements even under the cases [plaintiff] cit[es],” and that plaintiff
would have to demonstrate a more significant “connection between the accounts . . . regularly used
to pay the expenses and the assets of the judgment debtor” in order to obtain discovery on those
accounts. Tr. 27:09–18.
Plaintiff now appeals the order, arguing that Judge Scanlon erroneously interpreted the
standards governing restraining notices and subpoenas on third-parties, and that plaintiff’s
evidence demonstrated that defendant “‘has an interest’ in those [third party] accounts because
they were regularly used as a source for payment of Plaza Automall’s expenses.”5 Pl.’s Obj. 12.

In addition to challenging Judge Scanlon’s decision regarding the restraining notices and subpoenas on
the dealerships’ bank accounts, plaintiff asks this court to “direct[] that Plaza Automall fully comply with
the restraining notice, information subpoena[,] and subpoena that were served upon it.” Pl.’s Obj. 22.
However, Judge Scanlon’s order explicitly stated that the parties should return to her with any continuing
disputes about Plaza’s compliance with the discovery requests served upon it. See Tr. 34:16–21.
Furthermore, the parties have gone back to Judge Scanlon on this issue, submitting a status report on August
27, 2018 that lays out ongoing disputes regarding Plaza’s compliance with the requests. See Status Report
to Magistrate Judge Vera M. Scanlon, ECF No. 90. Thus, this request is not ripe for appeal, and I do not
address plaintiff’s arguments regarding the insufficiency of Plaza’s compliance with its discovery requests.
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STANDARD OF REVIEW
A district court shall reverse a magistrate judge’s order on a non-dispositive motion only
where the order is “clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(A); see also Fed.
R. Civ. P. 72(a). Courts generally consider post-judgment proceedings “inherently non-dispositive
in nature,” because they occur after “the rights of the parties have already been adjudicated.” Deep
v. Boies, No. 1:09-MC-0073, 2009 WL 10675920, at *2 (N.D.N.Y. Dec. 18, 2009), adopted by
2010 WL 11526762 (N.D.N.Y. Jan. 12, 2010). Furthermore, discovery disputes are considered
non-dispositive. See, e.g. Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir.
1990). A factual finding is clearly erroneous if “on the entire evidence,” the reviewing court “is
left with the definite and firm conviction that a mistake has been committed.” Easley v. Cromartie,
532 U.S. 234, 242 (2001) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).
“An order is contrary to law ‘when it fails to apply or misapplies relevant statutes, case law, or
rules of procedure.’” DeFazio v. Wallis, 459 F. Supp. 2d 159, 163 (E.D.N.Y. 2006) (quoting
Catskill Dev., L.L.C. v. Park Place Ent. Corp., 206 F.R.D. 78, 86 (S.D.N.Y. 2002)). This “highly
deferential standard ‘only permits reversal where the magistrate judge abused h[er] discretion.’”
Grief v. Nassau Cty., 246 F. Supp. 3d 560, 564 (E.D.N.Y. 2017) (alteration in original) (quoting
Ahmed v. T.J. Maxx Corp., 103 F. Supp. 3d 343, 350 (E.D.N.Y. 2015)). Therefore, a “magistrate
judge’s findings should not be rejected merely because the court would have decided the matter
differently.” Id. (citation omitted).
POST-JUDGMENT DISCOVERY STANDARD
After obtaining a money judgment, a judgment creditor “may obtain discovery from any
person—including the judgment debtor—as provided in [the Federal Rules of Civil Procedure] or
by the procedure of the state where the court is located.” Fed. R. Civ. P. 69(a)(2). New York’s

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CPLR, in turn, provides that, “[a]t any time before a judgment is satisfied or vacated, the judgment
creditor may compel disclosure of all matter relevant to the satisfaction of the judgment.” § 5223.
The rules provide for several discovery tools that may be used in service of the execution of a
money judgment, including “a subpoena requiring attendance for the taking of a deposition upon
oral or written questions,” § 5224(a)(1), a subpoena duces tecum, which requires “the production
of books and papers for examination at a time and place named therein,” § 5224(a)(2), and an
“information subpoena, accompanied by a copy and original of written questions,” § 5224(a)(3).
Additionally, New York procedure allows a party to issue a restraining notice upon the judgment
debtor or a third party. See § 5222(b). However, “[a] restraining notice served upon a person other
than the judgment debtor . . . is effective only if, at the time of service, he or she owes a debt to
the judgment debtor . . . or he or she is in the possession or custody of property in which he or she
knows or has reason to believe the judgment debtor . . . has an interest.” Id. (emphasis added). A
party served with a restraining notice “is forbidden to make or suffer any sale, assignment, transfer
or interference with any property in which he or she has an interest.” Id.
“Broad post-judgment discovery in aid of execution ‘is the norm in federal and New York
state courts.’” Amtrust North America, Inc. v. Preferred Contractors Ins. Co. Risk Retention Grp.,
LLC, No. 16-mc-0340, 2016 WL 6208288, at *2 (S.D.N.Y. Oct. 18, 2016) (quoting EM Ltd. v.
Republic of Argentina, 695 F.3d 201, 207 (2d Cir. 2012)). Judgment creditors “must be given the
freedom to make a broad inquiry to discover hidden or concealed assets of the judgment debtor.”
GMA Accessories, Inc. v. Elec. Wonderland, No. 07 Civ. 3219 PKC DF, 2012 WL 1933558, at *4
(S.D.N.Y. May 22, 2012). Still, a plaintiff may not “embark on a fishing expedition,” and “should
tailor its requests appropriately, in order to foster compliance and to achieve its ultimate goal, to

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wit, having its judgment satisfied.” D’Avenza S.p.A. In Bankruptcy v. Garrick & Co., No. 96 Civ.
0166(DLC)(KNF), 1998 WL 13844, at *3 (S.D.N.Y. Jan. 15, 1998).
Of particular relevance to plaintiff’s appeal, New York courts have interpreted the scope
of restraining notices issued pursuant to § 5222 narrowly, holding that restraining notices are only
“effective against assets in which the judgment debtor has an ‘interest.’” Amtrust North America,
Inc., 2016 WL 6208288, at *5. Therefore, “[t]o the extent a restraining notice purports to affect
any property other than that of the judgment debtor, [it is] improper under CPLR § 5222.” Id. A
judgment debtor’s interest in restrained property must be “a direct interest in the property itself
which, while it may require a court determination, is leviable and not an indirect interest in the
proceeds of the property.” Sumitomo Shoji New York, Inc. v. Chem. Bank New York Trust Co., 47
Misc. 2d 741, 744 (N.Y. Sup. Ct. 1965). Similarly, a document subpoena served on a third party
may be found overbroad or unreasonable if it “sweepingly pursues material with little apparent or
likely relevance to the subject matter.” U.S. v. Int’l Bus. Mach. Corp., 83 F.R.D. 97, 106–07
(S.D.N.Y. 1979).
DISCUSSION
I.

This appeal is not moot.
Defendant argues that plaintiff’s appeal of Judge Scanlon’s order is “effectively moot.”

Mem. in Opp’n to J. Creditor’s Obj. and Appeal of July 11, 2018 Decision & Order 10, ECF No.
86 (“Def.’s Opp’n”). Since initiating the appeal, plaintiff served restraining notices and
information subpoenas directly on the dealerships themselves, mandating that they “not make any
payments to anyone on behalf of the [j]udgment debtor, and [that they] account for what property,
if any, those entities possess which belongs to the [j]udgment [d]ebtor.” Id. at 2. Defendant argues
that these new discovery requests make the HSBC and M&T Bank requests irrelevant. Id. at 11–

8

12. Though I agree with defendant that the discovery requests served upon the dealerships allow
the “[j]udgment [c]reditor to conduct a ‘more focused discovery’” without requiring the disclosure
of “sensitive and private banking records and information having nothing to do” with Plaza, id. at
12, these discovery tools are not identical to those at issue in the appeal, and thus, the appeal is not
moot. As plaintiff notes, the restraining notices and subpoenas it served upon the banks would
have produced different results, including “freezing and preserving the sums on deposit” in the
dealerships’ bank accounts. J. Creditor AXGINC Corporation’s Reply on its Obj. to July 11, 2018
Order 3, ECF No. 87 (“Pl.’s Reply”). Furthermore, they would have gone into effect at an earlier
time, since the notices were served upon the banks before they were served on the dealerships. Id.
at 4. As a result, I find that this appeal is ripe for resolution, and proceed to analyze plaintiff’s
arguments.
II.

Judge Scanlon’s order to vacate the restraining notices and subpoenas as they
pertain to the dealerships’ bank accounts was not contrary to law.
Plaintiff makes several arguments on appeal, but they can all be resolved through one

central question: what is the necessary showing that a judgment creditor must make under § 5222
to demonstrate that a judgment debtor has an “interest” in a bank account held in the name of a
third party?6 I find that Judge Scanlon did not err when she concluded that evidence that the third
Plaintiff also objects to two closely related aspects of the order: (1) Judge Scanlon’s “determination . . .
that Plaza Automall and the non-party car dealerships were required to be given notice” of the discovery
requests, and (2) Judge Scanlon’s “determin[ation] that Plaza Automall’s attorneys did not have standing
to represent the non-party dealerships.” Pl.’s Obj. 3, 4. Because neither of these issues form the basis for
Judge Scanlon’s ultimate conclusion—that plaintiff failed to provide sufficient evidence to demonstrate
that defendant had an “interest” in the third-party bank accounts—I decline to reach them. See Tr. 28:03–
07 (noting, in announcing her final decision, that “[t]he checks that you are citing as strong evidence here .
. . don’t . . . create the kind of evidence, or even sufficient evidence” to support the discovery requests).
Furthermore, Judge Scanlon’s order did not reach a final determination about either standing or notice, but
rather indicated that she had some concerns about these issues that were independent of plaintiff’s
insufficient evidentiary showing. See, e.g., Tr. 9:01–09 (noting that the lack of notice, even if not required
by the CPLR, “seems like a huge due process problem”); Tr. 23:02–24:07 (analyzing the lack of notice, the
lack of standing, and plaintiff’s insufficient evidentiary showing together as a “due process problem”). I
find that Judge Scanlon was right to be concerned, as the lack of notice and the potential lack of standing
6

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party’s bank accounts are frequently used to pay the judgment creditor’s expenses does not
adequately demonstrate that the judgment creditor has an “interest” in those accounts—even if the
evidence is ample and well-documented.
Plaintiff cites to several cases “for the proposition that when a judgment debtor is using the
bank account of a third party to either pay its bills on a routine basis or deposit its income . . . the
judgment debtor will be deemed to have a pecuniary interest in all the funds on deposit in that
account.” Tr. 9:15–21. Read in isolation, certain language from these cases may support plaintiff’s
arguments, but when combined with the vast majority of cases requiring a more substantial
connection between the bank accounts and the assets of the judgment debtor, these cases are
unconvincing.
For example, plaintiff cites to Bingham v. Zolt, where the court held that an account can be
restrained under the CPLR where “the evidence demonstrates that a judgment debtor regularly has
used another’s bank account as a ‘recipient’ of the debtor’s personal assets or as a source for
payment of the debtor’s expenses.” 647 N.Y.S.2d 220, 221 (N.Y. App. Div. 1996) (emphasis
added). On its own, the italicized language might support plaintiff’s argument, but the facts of the
case are distinguishable from the facts presented here; in Bingham, the judgment debtor deposited
his own funds in his wife’s bank account, used funds from another account to pay his expenses,
and personally drew checks on that bank account to satisfy his debts. Id. In combination, these

emphasize the core deficiency in plaintiff’s requests—that the restraining notices and subpoenas served on
HSBC and M&T Bank extended to assets and private information that belonged only to the independent
third parties, and not to the judgment debtor. As a result, the discovery requests served on the banks were
both contrary to the CPLR and to the due process rights of the third-party car dealerships. See, e.g. JSC
Foreign Econ. Ass’n Technostroyexport v. Int’l Dev. & Trade Servs., Inc., 295 F. Supp. 2d 366 (S.D.N.Y.
2003) (noting that restraining the assets of independent third parties “is not only unsupported by the text of
N.Y. C.P.L.R. § 522 or any of the cases cited by the plaintiff, but would also pose significant due process
problems.”).
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activities were sufficient to allow the restraint of several third-party accounts.7 Id. Likewise, in
ERA Management, Inc. v. Morrison Cohen Singer & Weinstein, the court found that the restraining
notices were proper because the “bank accounts in question were regularly used to pay [the
judgment debtor’s] personal expenses, and indeed functioned . . . as ‘recipients’ of his personal
assets.” 605 N.Y.S.2d 91, 91 (N.Y. App. Div. 1993). Here, plaintiff has presented no evidence that
the dealerships’ bank accounts ever actually received money that belonged to the judgment
debtor—let alone that they served as the depository for the debtor’s assets.8 Plaintiff has only
shown that the dealerships’ accounts were used to pay for various expenses, including rent and
legal fees. See, e.g. Tr. 8:19–35 (noting that plaintiff has “over 71 examples” of the use of the
dealerships’ accounts to pay the debtor’s expenses). But, as Judge Scanlon rightly noted, this could
simply mean that the owners of the dealerships chose to pay the debtor’s legitimate bills and
sacrifice their profit as a result; it does not necessarily follow that “Plaza Automall, the debtor, has
any interest in those monies.” Id. at 16:01–02.

Plaintiff misrepresents the facts by arguing that Judge Scanlon “improperly relied” on her own personal
recollection of Bingham v. Zolt. In fact, Judge Scanlon merely noted that she had been involved in that case
as a lawyer, Tr. 27:20–25, and she correctly recounted the facts and holding as written in the opinion.
8
For the first time in its reply brief on appeal, plaintiff states that it has evidence that “Plaza Automall was,
in fact, making deposits into the non-party car dealerships’ bank accounts.” Pl.’s Reply 10. Plaintiff states
that this new information came from bank statements that were provided by M&T Bank in response to
plaintiff’s discovery requests two weeks after Judge Scanlon’s order, and that they are available for in
camera review. Id. at 10 n.7. However, plaintiff has provided the court with no information regarding these
deposits, nor any evidence to suggest that they actually occurred. Furthermore, this evidence was not on
the record in front of Judge Scanlon, and “[a]lthough this court has the power to consider new evidence on
appeal, ‘[g]enerally an appellate court will not consider an issue that has not been presented to the court
below.’” Harper v. Hunter College, No. 99-7464, 1999 WL 1015698, at *1 (2d Cir. Oct. 28, 1999) (quoting
United States v. Aulet, 618 F.2d 182, 185 (2d Cir. 1980)). To the extent that plaintiff is arguing that new
evidence it has acquired since the order provides it with a basis for serving a renewed restraining notice or
bringing a proceeding to demonstrate evidence of fraudulent conveyance or to initiate a turnover of funds,
see CPLR § 5225(b); § 5227, it is free to bring these arguments to Judge Scanlon in the future. See also Tr.
28:12–14 (noting that if, in the future, plaintiff has “other evidence that could support [its] view, certainly
[it] could come back” to the court).
7

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Moreover, courts that have interpreted ERA Management and Bingham have held that both
cases stand for the principle that a restraining notice can only be issued against a third party’s bank
accounts if there is evidence that those accounts actually hold “the assets of a judgment debtor.”
JSC Foreign Econ. Ass’n, 295 F. Supp. 2d at 392 (emphasis added) (“These cases, like the others
cited by the plaintiff, support the proposition that a judgment creditor may restrain the assets of a
judgment debtor wherever those assets may be.”); see also Amtrust North America, 2016 WL
6208288, at *6. Plaintiff attempts to distinguish JSC by noting that the court in that case concluded
that a creditor cannot restrain the assets of “an alleged alter ego” of the debtor “in anticipation of
a finding that those third parties are [in fact] alter egos” of the debtor. JSC Foreign Econ. Ass’n,
295 F. Supp. 2d at 392–93. Plaintiff argues that it is not currently seeking a determination that the
dealerships are the alter egos of the judgment debtor, and therefore JSC’s holding does not apply
to the facts presented here. See Pl.’s Obj. 14–15. But this distinction is immaterial; JSC ultimately
demonstrates that a judgment creditor may not restrain the bank account of a third party unless and
until it shows that the account actually contains funds that belong to the judgment creditor. JSC
Foreign Econ. Ass’n, 295 F. Supp. 2d at 393. Whether such a showing happens in conjunction
with or is completely separate from a determination that the third party is the alter ego of the
judgment debtor is irrelevant if the facts do not give rise to the debtor’s necessary “interest” in the
account. Id.; see also Belesis v. Lowery, No. 15-cv-2633 (JSR), 2017 WL 3641709, at *2 (S.D.N.Y.
July 31, 2017) (denying a restraining order placed on the bank account of a third party where the
judgment creditor “does not point to evidence that [the judgment debtor] deposited money
specifically into those accounts”).
Plaintiff cites several other cases that are equally inapposite, as they involved restraining
notices that were placed on the third parties themselves, rather than on bank accounts that contained

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funds completely distinct from the judgment debtor. See, e.g. CSX Transp., Inc. v. Island Rail
Terminal, Inc., 879 F.3d 462, 472 (2d Cir. 2018) (finding that third-party garnishees violated a
restraining notice served on them when they expended funds on the judgment debtor’s behalf);
Ray v. Jama Prods., Inc., 425 N.Y.S.2d 630, 631 (N.Y. App. Div. 1980) (noting that a third party
who had been restrained from paying the judgment debtor “may not circumvent the mandates of
[the] restraining notice by claiming that the judgment debtor has no interest in the money merely
because he will not acquire physical possession of such money”). There is a crucial difference,
however, between serving a restraining notice on the third party dealerships, and serving one on
the banks with the intent to restrain all of the dealerships’ assets. As defendant notes, plaintiff’s
subsequent efforts to conduct discovery on the dealerships—forbidding them from making
payments that benefit the judgment debtor—is not only consistent with the CPLR rules, but also
provides plaintiff with a “more focused discovery.” Def.’s Opp’n 12; see also Matter of H.J.
O’Connell Ass’n v. Ins. Pension & Welfare Fund of Roofers Local No. 241, 381 N.Y.S. 2d 659,
659 (N.Y. Sup. Ct., 1976) (noting that the court’s invalidation of the restraining notice placed on
the garnishee banks “does not leave the judgment creditor without recourse; it has already served
a restraining notice on the petitioner itself”).
Likewise, Judge Scanlon did not err when she held that the document subpoenas served on
the banks were vacated to the extent that they sought information about the dealerships’ bank
accounts. Because plaintiff provided no evidence that those accounts contained the assets of the
judgment debtor, any subpoenas directed towards them would have “sweepingly pursue[d]
material with little apparent or likely relevance to the subject matter.” Kingsway Fin. Servs., Inc.
v. Pricewaterhouse-Coopers LLP, No. 03 Civ. 5560(RMB)(HBP), 2008 WL 4452134, at *4
(S.D.N.Y. Oct. 2, 2008); see also D’Avenza, 1998 WL 13844, at *4 (finding subpoenas overly

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broad because they sought information from several third party entities, “regardless of whether
such information relates to or may be said to be reasonably related to the judgment debtor, its
assets, or suspected transfers of its assets”).
As a result, I find that Judge Scanlon correctly applied the legal standards that govern the
service of restraining notices and subpoenas on third parties.9
CONCLUSION
For the foregoing reasons, I affirm Judge Scanlon’s July 11, 2018 order. The parties are
directed to raise any continued disputes regarding plaintiff’s discovery requests with Judge
Scanlon.

So ordered.

Date: October 2, 2018
Brooklyn, New York

_______/s/______________
Allyne R. Ross
United States District Judge

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Plaintiff also argues, as a basis for reversal on appeal, that the order incorrectly relied on several facts not
in evidence. See Pl.’s Obj. 4–5; Pl.’s Reply 1–2. However, plaintiff provides no evidence that these facts
formed the basis for Judge Scanlon’s opinion, and cites to no authority to demonstrate that it was improper
for Judge Scanlon to note them.
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