G&B endeavors to settle business disputes practically and without the need for litigation (and indeed attempted to do so in this case prior to the arbitration). When necessary, however, our attorneys advocate for our clients to the fullest extent of the law in front of courts or arbitral forums.
G&B obtains significant ruling against national brokerage firm, limiting New Jersey’s attachment statutesPermalink
Date: December 21, 2018
There was no serious dispute that the disagreement between our client and the brokerage firm, was subject to FINRA arbitration in New York. Our client had no ties whatsoever to New Jersey. She did not live in the state, own property in New Jersey, or conduct business in New Jersey. The brokerage company acknowledged this fact, but claimed the basis for the prejudgment ex parte seizure was because the brokerage company’s “headquarters” was located in New Jersey. With this rationale, the brokerage company claimed it could seize our client’s funds at any national bank where our client had an account, even if there was no actual account in New Jersey.
This rationale clearly violated the minimum contacts test under the United States Constitution for obtaining personal jurisdiction over a defendant. We also moved on the grounds that the bank failed to comply with the requirements of the New Jersey statutes governing pre-judgment attachment, specifically N.J. Court Rules 4-60 and N.J. Rev. Stat. § 2A:15-41 and 42 (2016). We further moved because the brokerage agreement between the bank and our client required that any disputes arising out of the agreement be governed by New York law, and further stated that out client would accept service of process from the bank. Since a requirement of the attachment statutes is that the party against whom attachment is sought cannot be served within the state, we argued that the service provision in the brokerage agreement meant that prong of the statutory requirement could not be met.
After extensive oral argument before the Hon. Francis B. Schultz, the Court ruled that there was no jurisdiction over our client in the State of New Jersey. The Court further ruled that merely the presence of a bank branch in the state did not mean that a party could seek to attach any assets of a bank customer, regardless of that customer’s connection to New Jersey. Additionally, Judge Schultz ruled that the service provision in the brokerage agreement meant that the bank could not meet the requirements of the relevant pre-judgment attachment statutes. Accordingly, the Court permanently vacated the writs of attachment and ordered our client’s funds released immediately.
This case highlights the limits of jurisdiction. While the State of New Jersey (like many other states) has a “long-arm statute” to ensure that parties that avail themselves of the protection of New Jersey law cannot evade jurisdiction, the Court’s decision shows that there are limits to how far jurisdiction extends. Specifically, the Court’s decision indicated that a party cannot seek to attach a foreign bank account merely because the bank where the account is maintained has a separate branch office in New Jersey. Rather, the Court found that the State of New Jersey had to have some minimum contacts with the person against whom attachment was sought in order to exercise jurisdiction over that party. It further shows that a choice of law clause and/or a service provision in a contract should be carefully considered by the drafter, as merely selecting a venue of convenience for your client may foreclose them from seeking to bring a claim in a venue with more advantageous statutes.