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ITC Entertainment Ltd. v. Nelson Film Partners and Frank Menke

August 4, 1983


Plaintiff ITC Entertainment, Ltd., appeals from a January 5, 1983 order of the district court for the Southern District of New York (Stewart, J. ) vacating an order of attachment against nondomiciliary defendants Nelson Film Partners and Frank Menke. Reversed and remanded.

Author: Lumbard

Before: FEINBERG, Chief Judge, LUMBARD, Circuit Judge, and RE, Chief Judge*fn*

LUMBARD, Circuit Judge:

On December 27, 1982, Judge Stewart of the Southern District of New York granted a request by the plaintiff, ITC Entertainment, Ltd., for a prejudgment attachment order against nondomiciliary defendants Nelson Film Partners and Nelson Film's general partner, Frank Menke. Defendants moved for reconsideration on the ground that they were not "nondomiciliar[ies] residing without the state" within the meaning of New York's nonresident attachment statute, Civ. Prac. Law § 6201(1). The district court agreed and on January 5, 1983, vacated the attachment order on the ground that Menke had a "dwelling or abode" within the state at which service of process could be made; he was therefore not "residing without the state."

We granted a stay of the January 5 order pending determination of plaintiff's expedited appeal. Because we do not agree that under New York law a defendant's amenability to service of process within the state precludes an attachment against a "nondomiciliary residing without the state," we reverse the order vacating the attachment.


The underlying dispute in this diversity case concerns defendants' liability on a $2.7 million note payable to ITC by February 5, 1982. The note was signed by Nelson Film Partners, a limited partnership apparently established for the sole purpose of purchasing the film "Barbarosa" from ITC. Nelson Film's sole general partner is Frank Menke, whose primary business is the promotion of motion-picture syndicated tax shelters. ITC's complaint, filed on November 16, 1982, claims that Nelson defaulted on payment of the note, and that because Nelson is insolvent, Menke is liable for the debt as Nelson's general partner.

Immediately upon filing the complaint, ITC sought an order of attachment under Fed. R. Civ. P. 64 and New York Civ. Prac. L. § 6201(1) (McKinney 1980). The New York statute provides that in non-matrimonial cases where the plaintiff claims and would be entitled to money damages, the court may order an attachment against a defendant who is a "nondomiciliary residing without the state."

Defendants filed papers on December 3, opposing the motion on three grounds: that the nonresident attachment statute was inapplicable once the defendants had submitted themselves to the jurisdiction of the court, that if the statute were construed to permit attachment against nonresidents solely for security purposes it would be unconstitutional, and that plaintiff was unlikely to succeed on the merits.

On the basis of the undisputed facts and in view on the merits of plaintiff's claims and defendants' counterclaims, the district court made the following findings, none of which are challenged here. The plaintiff is likely to succeed on its claim to recovery on the $2.7 million note, and this claim is unlikely to be defeated by defendants' counterclaims. The defendants do not have sufficient assets to satisfy a $2.7 million judgment. Indeed, Nelson Film Partners has never had more than $30,000 in assets, and $25,000 of this was spent as a "downpayment" on "Barbarosa." Menke will soon be receiving highly liquid assets in connection with a related purchase of the film "On Golden Pond." Menke has the financial sophistication to invest these assets in a manner that would make enforcement of ITC's judgment difficult. Finally, Menke has at times conducted business "in a less than exemplary manner."*fn1 On the basis of the above findings and the defendants' apparent concession that they were "nondomiciliaries," the court found, in the exercise of its discretion, that an order of attachment should issue. The order was filed on December 29, 1981.

On December 31, defendants sought reconsideration and reargument, raising for the first time on the question of whether Menke, "concededly a nondomiciliary, could be said to reside without the state," given his ownership of and infrequent stays at a cooperative apartment at the Hotel Lombardy in New York City. Both sides filed memoranda on this issue, and a hearing was held on January 5, 1983.

The relevant facts concerning Menke's residence in the State of New York are undisputed. Menke has been a resident of Atlanta, Georgia, for the last sixteen years, and he currently maintains a home there with his wife and four children. He is active in Atlanta civic affairs, having served for the last five years by appointment of the Mayor and approval of the City Council as a Commissioner with the City of Atlanta Community Relations Commission. He votes and pays taxes in Georgia, not in New York. He is the sole stockholder in Menke and Company, which does business in Georgia.

Menke's business activities bring him to New York from time to time. He has maintained a business office in New York City for the last several years and has several business bank accounts here. There is no indication that he has any personal bank accounts in New York City. Menke's only apparent "personal" tie to New York is Room 510 at the Hotel Lombardy, a cooperative apartment that he purchased for $140,000 in 1982. Menke testified in a related action that he stayed at the apartment "infrequently," and in the record on this appeal he describes his visits as "sporadic."

The district court interpreted § 6201(1)'s requirement that the defendant "reside without the state" as unsatisfied whenever the defendant has an "actual place of . . . living at which service of process may lawfully be made" for the purposes of New York's law of service, Civ. Prac. Law § 308(2). Noting that the Hotel Lombardy apartment was a place at which effective service of process against Menke could be made, ...

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