United States District Court, E.D. Kentucky, Central Division, Lexington
K. CALDWELL, CHIEF JUDGE
matter is before the Court on plaintiff LMR Construction
LLC's motion for a permanent injunction. (DE 1-1; DE 6).
In response to LMR's motion, defendant JPMorgan Chase
Bank, National Association filed a motion to dismiss
LMR's petition on the grounds that it failed to state a
claim. (DE 7). For the following reasons, Chase's motion
to dismiss is GRANTED and LMR's motion for a permanent
injunction is DENIED.
a Kentucky limited liability company that has performed
construction projects in various states, including Kentucky,
Tennessee, Texas, and Idaho. (DE 6, Mem. at 2). In 2015, LMR
opened three accounts with Chase, using the branch located at
201 East Main Street, Lexington, Kentucky 40507 (DE 6-1,
Bishop Aff. ¶ 2). Also in 2015, LMR found itself in a
precarious financial position, which led it to obtain cash
advance loans from out-of-state lenders. (DE 6, Mem. at 2).
Some of the out-of-state lenders required LMR to sign a
“Confession of Judgment” at the time of obtaining
the loans. (DE 6-1, Bishop Aff. ¶ 7).
about August 22, 2016, Chase notified LMR that the bank had
been served with a judgment entered by the Supreme Court of
the State of New York, County of Westchester. (DE 6-1, Bishop
Aff. ¶ 8). Chase received two levies and demands sent to
its office in Indianapolis, Indiana, from the office of the
New York City Marshal relating to two cases against LMR. (DE
8-3, Ex. 3 at 5, 19, 23). Acting upon the legal process it
received, Chase froze LMR's accounts.
actions in freezing LMR's accounts led LMR to file suit
in Fayette County Circuit court in Fayette County, Kentucky.
Chase then removed the action to this Court.
motion for a permanent injunction, LMR essentially argues
that Chase improperly froze its accounts. LMR's argument
is based on the theory that Chase should have required the
third-party creditor to follow applicable New York and
Kentucky law. (DE 6, Mem. at 9). As a remedy for this
asserted wrong, LMR asks that the Court order Chase to
unfreeze LMR's accounts and reimburse LMR in full for any
funds that may have been delivered to the third-party
response to LMR's petition for relief and motion for
permanent injunction, Chase has filed a motion to dismiss for
failure to state a claim. (DE 7). In its motion, Chase argues
that its actions in freezing LMR's accounts were proper.
The Court must first address Chase's motion to dismiss.
motion is brought pursuant to Federal Rule of Civil Procedure
12(b)(6). That rule is a mechanism to enforce Rule 8, which
governs the sufficiency of a complaint. In determining
whether a plaintiff has properly pled a claim, the Supreme
Court has stated that: “[w]hen there are well-pleaded
factual allegations, a court should assume their veracity and
then determine whether they plausibly give rise to an
entitlement to relief.” Ashcroft v. Iqbal, 556
U.S. 662, 679 (2009).
preliminary matter, the Court notes that the parties in this
case had an agreement that permitted Chase to freeze
LMR's accounts without having to determine the validity
or enforceability of the legal process it received. (DE 8-2,
Ex. 2 at 23). Such a contractual agreement has served as a
basis upon which another United States District Court has
dismissed a case with a similar posture. See McCarthy v.
Wachovia Bank, N.A., 759 F.Supp.2d 265, 274 (E.D.N.Y.
parties have argued various legal theories in support of
their positions. However, as the Court views the record, the
dispositive question is whether LMR's accounts with Chase
are located in Kentucky. Answering this question will require
the Court to address the specific component of LMR's
argument that the third-party creditor's judgment did not
comply with Kentucky's registration requirements, and
therefore, Chase acted improperly in freezing the accounts.
LMR states that its accounts with Chase “were opened
and operate out of a Kentucky Chase Bank” branch (DE
1-1, Mtn. ¶ 1), LMR has not plead any facts to
demonstrate that this is true. Further, by failing to plead
any facts that show its accounts with Chase are located in
Kentucky, LMR has also failed to demonstrate why compliance
with the Kentucky Uniform Enforcement of Foreign Judgments
Act would be required.
further, LMR has not shown that the third-party creditor and
Chase, by extension, have acted improperly under New York
law. Instead, although the Court need not decide the issue of
validity of the New York levies, a review of the case law
reveals that, under New York law, a court in New York, upon
obtaining personal jurisdiction over a garnishee bank, may
order that party to garnish property owned by a judgment
debtor and deliver it to a judgment creditor, even when that
property is located outside of New York. See
McCarthy, 759 F.Supp.2d at 275 (applying Koehler v.
Bank of Bermuda Ltd., 911 N.E.2d 825, 833 (N.Y. 2009)).
in this rule is the distinction between pre-judgment
attachment and post-judgment enforcement. Pre-judgment
attachment is based on jurisdiction over property, and
post-judgment enforcement is based on jurisdiction over
persons only. Koehler, 911 N.E.2d at 829. For
pre-judgment attachment, in rem jurisdiction is a
requirement to protect the interests of third parties as to
any assets that are in dispute. Id. at 830-31.
However, in post-judgment enforcement proceedings, in
rem jurisdiction is not required. Id. at 831.
“the law of pre-judgment remedies, while suggestive,
does not automatically govern post-judgment remedies, which
are available only after all doubt as to liability has been
erased.” McCarthy, 759 F.Supp.2d at 276
(quoting McCahey v. L.P. Inv'rs, 774 F.2d 543,
548 (2d Cir. 1985)). Instead, if a level of procedural
protection including notice and a hearing is not
constitutionally required for pre-judgment attachment when
liability has not been determined, “[a] fortiori, it
can hardly be required where the creditor's claim has
been finally confirmed by ...