New York Appellate Court Permits Discovery of Banking Information from Branches outside New York

The issue in Matter of B&M Kingstone, LLC v. Mega Intl. Commercial Bank Co., Ltd., 2015 N.Y. App. Div. Lexis 6345, (1^st Dept. August 11, 2015), is whether the “separate entity” rule bars New York courts from compelling a bank’s New York branch to produce information pertaining to that bank’s foreign branches. The “separate entity” rule is that “each branch of a bank is a separate entity, in no way concerned with accounts maintained by depositors in other branches or at the home office.” Cronan v. Schilling, 100 NYS 2d 474, 476 (Sup. Ct. NY County 1950). This rule was upheld by the New York Court of Appeals in Motorola Credit Corp. v. Standard Chartered Bank, 24 NY3d 149 (2014), solely with respect to preventing restraint of assets held in foreign branch accounts where parties sought to restrain and turnover those assets in New York.

In B&M Kingstone, the petitioner served an information subpoena on the New York branch of Mega International Commercial Bank, an international bank organized in Taiwan with branches located in 14 other countries, one of which was in New York. Mega refused to produce information other than pertaining to its New York branch arguing, amongst other things, lack of jurisdiction, that the “separate entity” rule precluded enforcement and that principles of international comity would require Mega to violate banking regulations in multiple jurisdictions.

The Court noted it had jurisdiction since Mega consented to the necessary oversight in return for permission to operate in New York. Further, Mega does not claim that compliance with the information subpoena would be onerous or unduly expensive. Thus, the court’s general personal jurisdiction permits it to compel the branch to produce any requested information that can be found through electronic searches performed at the branch. Finally, Mega did not show it would face liability from violating a foreign country’s banking laws nor show that the interest of another country is greater than New York’s interest in enforcing its judgments and regulating banks operating within its jurisdiction.

The implication of this decision is that New York branches of foreign banks are not insulated from producing information and documents pertaining to assets of judgment debtors held by the bank outside the US even where the New York branch conducts “narrow and limited” operations in New York.