CAREY v. SUGAR
Argument of Philip H. Busner
Chief Justice Warren E. Burger: We will hear arguments next in Carey against Randolph and the Curtis Circulation against Randolph.
Is it a funny name, isn’t it?
Bert Randolph Sugar and Wrestling Revue.
Mr. Busner you may proceed.
Mr. Philip H. Busner: Mr. Chief Justice and may it please the Court.
This case raises the question whether a State can devise pre-judgment seizure remedies to protect its citizens against fraud which will comport with Due Process under the Fourteenth Amendment of the United States Constitution.
It comes to this Court on direct appeal from a three Court judgment by a three Court judge panel that was convened in the Southern District of New York whose judgment held unconstitutional.
All of the provisions of the New York attachment statute, the grounds of which are based upon fraudulent activity by a defendant.
The provisions have found at Sub-sections 4, 5 and 8 of Section 6201 of the New York Civil Practice Law and Rules.
Sub-division 4 provides that a judge in his discretion upon a prima-facie showing by evidentiary facts that a defendant with intent to defraud his creditors has assigned, disposed up, or secreted his assets or that he is about to do the same.
Sub-division 5 permits a judge in his discretion to issue such an order upon a prima-facie demonstration that the plaintiff has a cause of action in contract, and secondly that the defendant has committed a fraud at the inception of that contract.
Sub-division 8 permits the judge in his discretion to issue such an order upon a demonstration, prima-facie by the plaintiff that he has a cause of action for either fraud or deceit.
I think it would be helpful as a model, if I briefly stated the facts which underlay the attachment in this action and which led to the commencements of the action in the Lower Court.
The appellant, Curtis Circulation Company, a national distributor of magazines enfident to a written agreement with Bert Randolph Sugar, a publisher of sports magazines, and a corporation which he then called Champion Sports.
Under the terms of the agreement Curtis agreed to make advances to the Champion based upon estimates f sales of the magazines.
And the agreement provided that in the event that the payments they made were excessive because the estimates turned out to be wrong.
They would have a right to recoup those over payments from subsequent additions of the magazines that were covered by this agreement.
At the time the contract was entered into, Sugar represented to Curtis that he control the Champion, and Champion was the owner of the magazines.
After it had been in effect for some 18 months and at a time when substantial monies were due to Curtis by Champion and the contract still had three-and-a-half years to run, Curtis discovered that Sugar has stripped Champion of all of its assets and had arranged to sell all of its magazines to two purchasers.
It learned that the seller under the two purchase agreements was not Champion, with respect to whom Sugar represented, it was the owner of the magazine, but another corporation called Wrestling Revue, over which Sugar also had control.
And it also learned that all the consideration payable under these two agreements of sale were payable by the purchasers to Wrestling and not the Champion.
It learned that Sugar had represented to the purchasers that Wrestling was always the owner of the magazines that Champion, although the ostensible owner was just publishing these magazines under an alleged license agreement with the Wrestling that it had failed pay to its license fees, hence Wrestling revoked the license and now is in the position to come to these purchasers and sell all of these magazines, free of any obligation under the Curtis Distribution Agreement.
Based upon those facts, Curtis determined that it must have defraud that the inception of the contract when Sugar said that Champion was the owner of the magazines.
Or that Sugar had defrauded it after the contract and stripped Champion of its assets like by concocting this alleged license agreement and the purported ownership by Wrestling.
Accordingly, that the term that had to act promptly to arrest the further flow of those assets in the hands or places where it would not be able to satisfy its right to recoup or its right to damages for fraud.
The contract still having a three-and -half years to run and they having lost their opportunity to distribute those magazines.
Curtis supplied ex parte pursuant to Section 6211 of the New York statute for an order of attachment.
In support of that application as the statute requires, it submitted this one affidavit of its secretary which contained evidentiary facts.
The facts largely but in greater detail than those that I just described your Honors.
And next to the affidavit was to verify complaint in the action, a copy of the distribution agreement and a detailed statement of the account between Curtis and Champion, showing the monies then do an owing to Curtis.
Unknown Speaker: Verified complaint, isn’t it?
He has to take the same recitals that as were contained, I suppose in the affidavit and as you have orally told us.
Mr. Philip H. Busner: The gravament of the complaint was largely the same, but the complaint was broader and less detailed and did not go into the evidentiary facts to the same extent, the affidavit did.
Unknown Speaker: And the complaint was submitted to the judge along with the affidavit?
Mr. Philip H. Busner: Yes.
Unknown Speaker: And you contend you have pocket process.
You still do, do not you?
When you file a complaint, the first that anything gets in the filed at a Court in New York, as if this is, this used to be true as I understand it, and tell me if it is still true.
First time anything gets filed in the Court is when you ask the Court for some sort of action.
Mr. Philip H. Busner: That is correct.
The statute talks about commencing an action at the time you ask for a provisional remedy.
In this case would be attachment.
Although I do want make it plain, you do not have to serve the compliant to other papers in advanced, it is an ex parte application.
The statute does require you to serve the complaint on 24 hours notice, when it is demanded and beyond 60 days.
That length of period being designed primarily for interim jurisdiction where the defendant might be out of state and might take quite a while to serve and possibly require an order of publication and so forth.
Unknown Speaker: The issues here involve all three sub paragraphs four, five and eight of 6201.
Mr. Philip H. Busner: Yes, they do, Mr. Justice.
We moved under all four sections and the order was granted under all four sections.
Unknown Speaker: Which is what fraud or the inception of contract?
Mr. Philip H. Busner: The first one is fraudulent secretion of assets.
Five is the contract action fraud in the inception of the contract.
And eight is simply an action in fraud and decei.
Unknown Speaker: Eight is an action for fraud or deceit.
Mr. Philip H. Busner: That is correct.
Unknown Speaker: Was their any finding here that these assets would be wasted so as to the defendant would be judgment proof?
Mr. Philip H. Busner: You mean a finding by a Court or what Curtis learned?
No, there was no evidentiary hearing below and there has been no such finding by a Court, certainly not in a Federal Court and its now on the ready calendar of the State Court.
We just do not have a record on that right now, Mr. Judge.
With respect to the grounds upon which the Lower Court relied for its decision, it really relied entirely upon three distinctions which it perceived this case had from this Courts decision in Mitchell against W. T. Grant.
It held first, if I can paraphrase it, that although it recognize the defendants and the State of New York had a right to immediately move to vacate the attachment.
One of the matters discussed at length in Mitchell, this Court found that under New York Law, the burden of proof upon the preliminary hearing was on the defendant and they held that did not comport with due process.
Secondly, reading Mitchell most narrowly, the Court seem to require as a Sine qua none of any prejudgment seizure that the plaintiff have a prior vendors lien or statutory lien in the property which he sought to attach.
Finally, related to the second ground but somewhat different was the Court's finding that allegations of fraud, are not immutable to pass a proof on a preliminary hearing.
As I read the Court's decision, that being the case, there really, if one follows that to his logical conclusion, you just cannot get a prejudgment seizure based on fraud that will comport with Due Process.
Because the Lower Courts certainly wrote in view of the decision in Mitchell which incidentally was decided after the complaint was originally filed but before the three judges convened to hear and determine the action, Mitchell, as I read it, certainly does not place the emphasis on whether the writ is issued in the first instance, ex parte or whether its done have to notice, the emphasis there is the preliminary hearing.
I think the Lower Court correctly followed that concept but in holding from its reading of Mitchell that fraud could not be easily proved at a preliminary hearing, therefore fraud could never be the basis for an attachment.
I think is extraordinary preposition on space.
The Courts seemed to go equally as flaw with respect to the vendors lien.
I do not think that this Court intended in Mitchell that absent to vendors lien or statutory lien, a plaintiff could not under any circumstances gets a prejudgment seizure.
Unknown Speaker: Suppose the New York Law permitted a seizure attachment prior to any notice or hearing and then provided and for, no hearing whatsoever after the attachment and prior final hearing and judgment on whether or not the attachment was proper, would you argue that that law was valid?
Mr. Philip H. Busner: If I understand your question absolutely no hearing between the ex parte taking and plenary trial.
My understanding of your decision in Mitchell, Mr. Justice White and, I am sorry, you wrote it but the it is Court's decision and also Court’s decision in North Georgia against Di-Chem would indicate that may, that I could not successfully make that argument.
I think it is clear that there has to be some opportunity before the plenary trial.
Unknown Speaker: To do what?
Mr. Philip H. Busner: For the defendant to come in and at least get the judges here to test what the plaintiff has told the judge.
Unknown Speaker: And that goes broader than whether or not there may be a danger of loosing the asset?
You have to -- wouldn’t you agree it has to go to at least to some extent to the merits of the basic claim?
Mr. Philip H. Busner: Yes.
But to a very limited extent.
Unknown Speaker: All right.
Whatever it is that, it has to bear on that claim to that extent.
Mr. Philip H. Busner: That is correct.
I think to be fair under the -- yes I believe it did.
Justice Byron R. White: Now that you say that the New York Law -- As I understand the District Court it said that under the New York Law, it understood it, the opportunity for the defendant to make any showing between the ex parte attachment and the plenary trial related solely to the danger of loosing the asset.
Mr. Philip H. Busner: I am sorry, I misunderstood what you were asking me before.
Do you mean the so-called unnecessary security test that the Court applied below when you talk about the danger of --
Justice Byron R. White: I will put it the other way then so that (Inaudible)
Mr. Philip H. Busner: Thank you, your Honor.
I am not sure that I do.
But I will -- thank you.
Chief Justice Warren E. Burger: Mr. Busner you may continue.
Mr. Philip H. Busner: I would like to correct that impression I may have left by virtue of a question asked to me of Mr. Justice Blackmun earlier in the argument.
The question was asked whether there was a finding in this case that there had been secretion of assets.
I took the question to mean whether there had been final determination or a judgment, of course there was a finding by judge who signed the order of attachment based upon the allegations and proofs submitted to him on the ex parte application.
With respect to your question that Mr. Justice White left with me at the adjournment, I am not sure what the question was but I believe you were referring to the ground on the New York statute which permits the defendant to move to vacate the attachment upon a showing that the security is unnecessary to the plaintiff.
Were you referring to that Mr. Justice?
Unknown Speaker: Perhaps, that is so (Inaudible) or plaintiffs have some merits?
Mr. Philip H. Busner: As I read Mitchell and the North Georgia against Di-Chem, if that were the case, if the defendant were restricted to the question whether the security was necessary, I think the law would be unconstitutional but—
Unknown Speaker: (Inaudible)
Mr. Philip H. Busner: Absolutely and it is clear from the face of the statute.
It is clear from the legislative reports.
It is clear from all of the decisions that have preceded the three-judge decision on that subject including most of the decisions cited by the three-judge court.
And since the decisions of the three-judge court, there have been at least a half-a-dozen perhaps—
Unknown Speaker: (Inaudible)
Mr. Philip H. Busner: Quite obviously, and mostly egregious --
Unknown Speaker: But it is been kind of (Inaudible)
Mr. Philip H. Busner: I think that would have to follow from Mitchell and Di-Chem because I think that those cases do require some sort of opportunity for the defendants to immediately go to the judge and point out any improprieties that exist in the papers upon the initial application.
Justice Byron R. White: (Inaudible)
Mr. Philip H. Busner: Yes.
The motion was made on that ground Mr. Justice White.
Before the three judges were convened to hear and determine, we made that motion to Judge Laska who had originally had the case and he rejected that ground and—
Unknown Speaker: (Inaudible)
Mr. Philip H. Busner: Both.
We asked the Court to abstain and to dismiss and to give the State Court an opportunity to test the validity of the attachment or the intent of defendant here to raise the Constitutional objection the State Court to do it there.
Unknown Speaker: What New York Courts decided these later case?
Mr. Philip H. Busner: Except, there was one appellate division second department case that cited that refused to follow the three-judge court as did a number of other Lower Court decisions.
Unknown Speaker: (Inaudible) Court of Appeals with that?
Mr. Philip H. Busner: With that case, I just do not have any knowledge whether that case has been taken to the Court of Appeals.
Unknown Speaker: Does this development -- since the judgment of the three-judge court suggests that they should a vacation and remand for reconsideration in light of the New York decision?
Mr. Philip H. Busner: No, I do not think so, your Honor.
Because I think the law was clear on that point these --
Unknown Speaker: In fact, the three-judge court looked at the New York Law and it cited what it thought were controlling authorities in New York, including cases in courts higher than the courts that had a adapted since the decision.
Do you think they--
Mr. Philip H. Busner: That is correct but there is absolutely no authority that they cited.
Unknown Speaker: I know you do not agree with our reading of it but nevertheless they read it, they read New York Law that way.
Mr. Philip H. Busner: Yes.
But I think my disagreement is more than a simple advocacy on my own part.
It is quite obvious from the language of the statute.
It is quite obvious from the circumstance that the very decisions that they cited except for two or three were all decided upon grounds other than the unnecessary security test.
The Lower Court for instance said that they were interpreting cases; the Statement was that theses cases for 50 years had so construed the statute.
The fact of the matter is that the unnecessary security test was only added to the statute in 1963, when our Civil Practice Law and Rules superseded the prior state practice statute which was known as the Civil Practice Act.
Without that provision at all, it has always been the law in the State of New York.
I do not think there is any reasonable argument about it.
Unknown Speaker: I am sure, it is most unusual for this Court to reexamine findings of Federal District or Courts of Appeals at matters of State Law.
Mr. Philip H. Busner: I think this is so obvious Mr. Justice if you will forgive I just have to say—
Unknown Speaker: You can have this argument anytime since --
Mr. Philip H. Busner: If that so, I think this the classic case.
It is most obvious in this case from the legislative reports and from all of the decisions not only the decisions which followed the Lower Court decision.
Justice Byron R. White: Do you think your opponent is going to agree with you?
Mr. Philip H. Busner: I would not be at all surprised Mr. Justice White.
The point was never raised by my opponent in his briefs to the three-judge court.
Where they got it from is just beyond me.
It is that obviously bad my opinion.
Based on that basic misapprehension by the three-judge court, they also came to the conclusion which really formed the main grounds of their decision that the burden of proof was upon the defendant in New York upon the motions to vacate.
Numerous New York decisions have stated quite clearly that the burden of proof remains upon the plaintiff beyond his original applications and upon the motion to vacate.
It is true other decisions have stated that upon the motion to vacate the defendant carries the burden.
But I submit when you view the entire statutory scheme, those cases really stand for no more than the proposition that the plaintiff already having submitted his proofs and his evidentiary facts, showing his prima-facie case now comes the defendant when he makes his motion, its incumbent upon him to test or try to rebut that prima-facie showing.
And I think that procedure in New York obviously comports with Due Process.
Unknown Speaker: (Inaudible) the opportunity that the defendant must have to either extract from you or to have you make a showing and through the validity of your case, do you think that showing can be wholly satisfied with papers?
With just affidavits?
Mr. Philip H. Busner: Yes.
Once we make --
Unknown Speaker: The defendant moves to set aside the attachment after the submission ex parte and you agree that there is open -- an issue on the merit?
Do you think that he is entitled to require that you have a live witness there or with an—
Mr. Philip H. Busner: Unless the issue is extremely narrow such as on a general release or if the defendant was supposed to be somewhere that he can demonstrate he was not there or some issue like that upon which he can have an evidentiary hearing on CPLR 2218 which is the general section covering motions, except for that quite frankly, if all he is going to do is raise issues of fact or defenses, he will not get an evidentiary hearing in all probability in New York.
I do not think it is otherwise in Louisiana.
Unknown Speaker: (Inaudible) Do you think that you have to make any showing other than on the merits other than what you demonstrated ex parte to give the attachment?
Mr. Philip H. Busner: No.
I think we would go through the procedure of using live witnesses and the same documents on an oral hearing.
Unknown Speaker: (Inaudible) get to an oral hearing at all?
Mr. Philip H. Busner: That is correct.
I misunderstood your last question Mr. Justice?
Unknown Speaker: Do you think the New York Law now makes adequate provisions for whatever hearing, the defendant is entitled to—
Mr. Philip H. Busner: Yes I do.
Unknown Speaker: And I am just trying to ask you whether you think he is entitled to have an evidentiary hearing?
Mr. Philip H. Busner: As a matter of comporting with due process whether that is a necessity, no, I do not, I think the New York procedure comports with Due Process without offering that evidentiary hearing in every case.
I conceive of certain case where the judge would order an evidentiary hearing.
Unknown Speaker: Well, then you say you do not -- at this hearing after the initial seizure to which you think the defendant is entitled to, you are suggesting that the plaintiff need not how anything other than what he has already showing in an affidavit.
Mr. Philip H. Busner: In most cases I can not build specific models but should think if the defendant came forward with some compelling evidence which would demonstrate that the plaintiff’s initial showing was not correct or created a substantial doubt with respect to that, that the plaintiff would have to come forward and that often happens on these motion in State Courts.
Unknown Speaker: The big difference is as I understand it, the post attachment hearing is an adversary hearing at which the defendant may be present and take part, he makes the motion that there is pre-attachment hearing is ex parte.
Mr. Philip H. Busner: That is correct, Mr. Justice.
Unknown Speaker: That is the big difference, isn’t it?
Mr. Philip H. Busner: Yes, Mr. Justice.
Unknown Speaker: So that there is then there is the possibility, the opportunity depending on the facts of circumstances to have an evidentiary hearing after the attachment.
Mr. Philip H. Busner: That is true in New York.
Unknown Speaker: I just wanted to make that clear.
Mr. Philip H. Busner: Yes sir.
Unknown Speaker: (Inaudible) that he had made it a very bad mistake.
Your computer has blown a fuse or something and but he -- certainly, it would be no time to resolve differences in conflicts over the evidence.
Mr. Philip H. Busner: Correct, you do not have the opportunity in New York, I suggest anymore than Louisiana to have a plenary trial of the underlying controversies.
And I believe Mitchell was clear on that point that a plenary trial resolving the merits of the controversy between the parties is just not necessary before property is taken that the issues can be narrow.
Chief Justice Warren E. Burger: Mr. Greenwald.
Argument of A. Seth Greenwald
Mr. A. Seth Greenwald: Mr. Chief Justice and may it please the Court.
The importance of the question on this appeal is rather obvious certainly to the State of New York because it brings into issue, the types of situations where the provisional remedy of attachment is proper and constitutional basically of course the remedy of attachment is an ex parte order.
And this type of order, this ex parte type of order has been a matter of frequent concern to this Court in the past several years.
In fact, this is the fourth time, I think within the last three or four years that this type of issue has come before this Court.
And I think we have to ask ourselves in what circumstances preliminary relief can be granted ex parte in a manner in the Court with a Due Process clause of the Fourteenth Amendment of the United States Constitution.
And of course while the broad outlines are available in this area and most recently in Mitchell against W. T. Grant and North Georgia against Di-Chem, many of the specifics are still in doubt in the subject of much discussion.
I think the Lower Court decision and order in this instant case is a demonstration of the confusion that exists in this area.
Now, I think we should consider the basic rule or basic procedure that sequestrations or as in Louisiana or in the Mitchell and attachments issue ex parte and it is also clear that the fact of issues ex parte is constitutional.
And that the mere postponement of judicial inquiry is not a violation of due process.
However, I also recognize that there are safeguards necessary when ex parte order is issued.
And in this regard Mitchell, the Mitchell case is an example of some of those safeguards or what types of safeguards are sufficient.
But Due Process of course is not inflexible.
On the other hand, I would say on the other end of the spectrum, the decision of Di-Chem is an example of what is absolutely unacceptable.
Now, as to the purpose of attachment, I think there is no dispute that New York has a sufficient purpose for granting attachments in this area which are basically fraud.
But that is a security aspect.
Of course there is another aspect jurisdiction which is not involved in the decision here but as I say we are dealing with the security type of attachment.
This is where the State seeks to protect the ultimate collectability of a judgment rather than to assert jurisdiction in the first instance.
And of course, in New York these type of security attachments are only allowed in certain specified instances.
They are not available in every law suit, you can not just because you have a lawsuit, get an attachment or seek one.
And, I would further state that it is a point for the legislature to determine that you need the remedy of attachment in this fraud situation.
Fraud of course is pernicious vice and it always has been a concern, I think to any, to Courts and the legislature.
Now, in the Court judgment opinion below, they seem to make a finding that because the attaching party in the instant case, did not have a vendor’s lien that it only had a claim of fraud that it also had some evidence that assets were being secreted or taken out of the State, that attachment should not be necessary.
I submit that, in view of the legitimate purpose of the attachment in the instant case, that finding of determination is an error because it basically prevents a State from ever protecting its citizens against this type of fraud situation.
I would also submit that it is an unduly narrow reading of the holding of Mitchell against W. T. Grant or the tenure of that decision and I would also submit that this view that it is narrow reading of Mitchell was confirmed by this Courts opinion in the Di-Chem case where the Georgia attachment of garnishment statute was struck down and the matter of vendor’s lien was not even mentioned, never mentioned once.
I think it still remains the rule, as it was many years stated that it is for the legislature to determine what circumstances in an attachment shall be granted and of course, it is for the Court to decide whether the facts of any particular case warrant the remedy of attachment.
Now, as I have noted the prevention of fraud is an important State interest.
This was even recognized in the case of Fuentes against Shevin as one of its exceptions to the prior assertion of State power ex parte and I submit that this assertion by the State of its interest in prevention of fraud or secretion of assets or rendering uncollectible judgment should be upheld by this Court in the instant case because as in Mitchell it avoids self-help.
If you do not have this remedy available you will have instances of self-help and since by the way, this is a commercial case, it does facilitate commerce.
Now, I wish to emphasize that while we do have the question of fraud, there is a great deal of importance to be placed upon the fact that in New York a judge issues the writ of attachment.
There is judicial supervision at every step of the way.
Now, I think it is important to note and this Court has placed emphasis on the judicial function, it is not just that a judge is a more powerful official than a clerk or a neutral official.
It is rather and I emphasize this that he can exercise discretion.
He can determine whether there is a cause of action, whether there are evidentiary facts to support the remedy.
In New York indeed, even if the papers formally support the granting of the writ of attachment, a judge in his discretion can still refuse to grant that writ.
It is not just simply plugging in the numbers of New York and getting your writ of attachment.
That is quite different from many other States.
I submit it is quite different even from Louisiana statute or the facts of the Louisiana Mitchell case.
Justice William H. Rehnquist: You do not just hand the affidavit to the judge and he automatically signs it.
Mr. A. Seth Greenwald: Absolutely not.
Indeed the facts of this case as I understand them are that my co-counsels, the attorney for the private party went up to Justice Bryan (ph) with his affidavits and further papers and I might add, he was then sent back for further proof for evidence.
He just did not go once and get the writ of attachment, he had to produce more.
The judge would not sign this order of attachment without even more.
There are no standard forms in New York, we have forms of publishers I dare say, there are no standard forms in New York for checking the boxes and getting a writ of attachment.
I have seen such examples of such forms in other States for getting writs of attachment.
Indeed I feel, that is rather obvious in the Mitchell, Louisiana situation that you have the standard points asserted and you will get your sequestrations.
But that is certainly not the case in New York.
Unknown Speaker: How often in your practice, have you ever had an application turned down?
Mr. A. Seth Greenwald: I would say I have never made an application for writ of attachment.
I am in the Attorney General’s Office.
We do not practice generally commercial law or at least my section does not.
I am sorry.
Unknown Speaker: (Voice Overlap)
Mr. A. Seth Greenwald: But I think Mr. Busner, my co-counsel Mr. Busner has stated that it has happened to him, I believe it does happen but that is --
Unknown Speaker: The record shows that it happens or you make a just a general statement.
Mr. A. Seth Greenwald: I am just making a general statement.
It is not part of the record.
Justice Thurgood Marshall: (Inaudible) I am not clear to just how exactly how you moved to, when the attachment is made, how you move to vacate and just what, I mean what grounds are this Under the New York law?
Mr. A. Seth Greenwald: Mr. justice Marshall,under the New York law as soon as the defendant learns of the attachment, he can immediately move under CPLR 6223 to vacate that attachment.
The grounds under which he can move are as broad as the grounds upon which the attachment was granted.
He can challenge that there is a cause of action.
He can challenge whether there is sufficient evidentiary facts there.
He can raise factual issues.
He can also, and this is a final ground, he can also state that the security is unnecessary to the plaintiff.
Now, that last point which was the District Court's conclusion as the only ground led to an inference that while the grounds of the attachment might not have been proven, if it was still necessary to the security of the plaintiff, that attachment would stand and that is error.
I submit that is fundamental error because there are other grounds.
It was the basis of the Lower Courts decision that you really did not get a meaningful hearing or opportunity to vacate the attachment in New York.
Justice Thurgood Marshall: What is your position on all of these grounds, are they in the statute or is it a general effort to (Inaudible)
Mr. A. Seth Greenwald: Well, all of these grounds are matters of judicial interpretation.
This case does involve a great deal --
Unknown Speaker: (Inaudible)
Mr. A. Seth Greenwald: What?
Unknown Speaker: (Inaudible)
Mr. A. Seth Greenwald: Yes this could -- in the proper circumstances, yes, there would be an evidentiary hearing.
Justice Thurgood Marshall: And that makes some kind of a showing to get a evidentiary hearing.
Mr. A. Seth Greenwald: Yes, of course.
You would have to make that if the point that you make is a factual question you would get with live witnesses.
Now, the example, would like to give is when you make that unnecessary to the security of the plaintiff grounds.
That is basically on jurisdictional attachments.
The defendant would say for example, and I have a case cited in my brief, I think Maitrejean in the appellate division, that I am a national corporation, I have millions of dollars in assets, I am not going any place, I have appeared in the case, you have jurisdiction.
Factually, you do not need this security.
Now, of course if the plaintiff wanted to challenge this point, he could bring in his witnesses.
But the point is, there are factual issues often times involved, but normally in New York, as my co-counsel has said, it is a matter legal argument by attorneys.
Justice Thurgood Marshall: Of course, the same judge usually hears it?(Inaudible)
Mr. A. Seth Greenwald: It will go on the regular motions calendar in New York county, where the writ of attachment was issued here, it was a special, what the judge, the ex parte judge signs the attachment and issues the writ and if you make a motion to vacate those on the regular litigated motions part and another judge would normally hear it, in smaller counties, often times if it is done very quickly the same judge will hear it.
Unknown Speaker: Mr. Greenwald, do I correctly understand that the motion to vacate may, in some circumstances not carry with it, a general appearance by the defendant whereas in some situations it would be a general appearance.
Mr. A. Seth Greenwald: I think in some circumstances it might not be a general appearance.
Unknown Speaker: I think the statute indicate that it can be made without entering a general appearance.
Mr. A. Seth Greenwald: Yes.
That is jurisdictional attachments and once again we are not involved with that in this case.
Unknown Speaker: I was just wondering if there is any difference in the scope of the grounds which may be asserted for vacating the attachment as between the two kinds of motions.
Mr. A. Seth Greenwald: Well, I think you would normally get into the factual issues more frequently with jurisdictional attachments such as you get a jurisdictional attachment because the defendant is a non-resident.
He may assert the fact that he is a resident and then you have a factual issue, is he or is he not a resident.
The point of the matter is as far this, the fraud type attachment, the defendant is or is about to or has secreted assets and while this may be a ultimate factual issue there have been evidentiary facts submitted on the ex parte application to support this inference.
And once again, I emphasize that on the motion to vacate, you are not trying the complete of cause action, you are not trying the defendant’s defenses to the cause of action, and I would submit also it is quite clear that this is the same situation as in a Louisiana or Mitchell motion to vacate in hearing, you are not trying the defenses.
Unknown Speaker: (Inaudible) that the District Court has misread the New York, applicable New York Laws but what is open on the motion to vacate the attachment.
Mr. A. Seth Greenwald: Yes, it is most certainly has misread the applicable New York law and I wish to emphasize this Court that in the area or of what is the law of the State of New York, it is the Courts of the State New York, that state that law.
And most clearly because this has never really been an issue in the State of New York since the Lower Court decision here as has been stated any number of State Courts have stated that the law of the State of New York is otherwise and the Lower Court said it was.
And indeed the point of abstention had been raised previously and I believe, there was some issue of whether to be the abstention to get an interpretation of New York State Law or the younger type of abstention.
The Lower Court determined, number one: that it did not have to abstain in the, as to what New York Law was because it was positive, it was clear.
Of course, the more positive a person, more frequently, I submit he is in error, and that was evidenced by the fact that leading New York commentators.
Leading New York Judges, New York State Court Judges said, “Gee-whiz! That is just not the law of the State of New York.
And I think it is --
Unknown Speaker: The state was a party at that point or not?
Mr. A. Seth Greenwald: Well the State, the Attorney General’s Office has been a party for this case in this very inception.
Unknown Speaker: Yes.
But did you support any of the motions to abstain?
Mr. A. Seth Greenwald: We had raised, yes, the issue of abstention, I did not basically—
Unknown Speaker: (Inaudible) The abstention was just a stay in the federal action until any State law issues would be settled.
Mr. A. Seth Greenwald: No, I submit that it was different.
Basically I am now arguing also for younger type abstention.
Unknown Speaker: You are talking about a dismissal so that all the issues including the federal issues could be settled in the pending State Court.
Mr. A. Seth Greenwald: That is quite correct, because it might be very well not be --
Unknown Speaker: That kind of a motion was never made, was it?
Mr. A. Seth Greenwald: Yes it was basically on the motion to dismiss.
The convening judge in his opinion stated, and this is, I correct my brief, the convening judge said that was an issue for the three-judge court, so he was not passing on it quite correctly.
Then in the body of the three-judge court decision it did not even mention abstention.
And frankly, I did not push it because at that time the case of Hoffman against Persu (ph) had not been decided and it was generally considered that abstention only applied solely to criminal cases.
But the three-judge court opinion, in a footnote, I think it is footnote, one of the last footnote stated, the single judge has already decided that this is not a proper case to abstain and by the way the same judge who wrote the convening opinion wrote the three-judge court opinion so you have a complete circle.
He says first time, I am not going to decide it --
Unknown Speaker: (Inaudible) The question here, maybe you know your colleagues?
That the error here was not abstaining.
Mr. A. Seth Greenwald: That is frankly true.
Unknown Speaker: Subsumed are there any other question present?
Mr. A. Seth Greenwald: I grant that it was not.
But I do think it is subsumed and in the sense that I really think that in this area, this Court should recognize the discretion of a judge in granting or denying this writ.
There is a basic element of comedy here, you have here in this case, two State Court Judges --
Unknown Speaker: If you do this sue sponte, even you though you have presented question.
Mr. A. Seth Greenwald: Well, I admit it is not one of the questions presented and it was not one of the questions presented on our jurisdictional statement but I do think frequently, if this is in the proper circumstances, this Court does render such a judgment --
Justice Byron R. White: That question is not -- you did not present the question and yet you are just essentially arguing that we should disagree with the three-judge court as to what New York law is.
Mr. A. Seth Greenwald: Well, it is more than your Honor, no, Justice White, its more than you should disagree.
You do not have to disagree.
You have to and it has been often said by this court, you have to agree with what the State Court say, State Court law is.
And there was an issue raised or question raised about the New York Court of Appeals.
I wish to emphasize that this is a provisional remedy; it is not a final judgment.
The jurisdiction of the New York Court of Appeals is quite limited, it is basically limited to final judgments.
It only gets these issues after final judgment and whether an attachment ever survives all of that procedural matter is questionable.
Indeed, I would say the only --
Unknown Speaker: (Inaudible) lacks jurisdiction in this circumstance or that ordinarily will not exercise the (Inaudible).
Mr. A. Seth Greenwald: It in self under the statute I believe lacks jurisdiction.
It is possible that the Appellate Division itself would certify the question but that is a very rare circumstance.
And indeed, the Appellate Divisions can pass on questions of fact and law, they exercise of discretion by that judge who even, besides getting motions to vacate, you can appeal in New York.
Unknown Speaker: Mr. Greenwald you have got kind of a tough road to hold.
If you are simply asking us to superimpose, our judgment as to New York law on that of three New York federal judges all of whom were at one time New York practitioners, I think you have got to put it to a some other way than simply for us to announce what New York law is.
Mr. A. Seth Greenwald: I do not it is necessary for your Honors to announce what New York Laws is.
New York law has been announced by the Courts of the State of New York.
I submit that, while it is generally said that the law --
Unknown Speaker: What are you talking about?
Mr. A. Seth Greenwald: Also Appellate Division, Appellate Division Justices.
Justice Thurgood Marshall: Do you think that we are bound by the trial court judges.
Mr. A. Seth Greenwald: I think that in this --
Justice Thurgood Marshall: Do you?
Mr. A. Seth Greenwald: I do not say that you are bound by a trial court judges but in this area normally the Appellate Divisions are basically the final word as to what the law is—
Justice Thurgood Marshall: Is the any proper division or just Trial Court judges that assign to the Appellate Division.
Mr. A. Seth Greenwald: Well, they have appellate jurisdiction over these trial court judges and I think it should be recognized that once again in the federal state hierarchy, the matter of comedy and federalism on matters of State law, the State Courts, I think --
Justice Thurgood Marshall: (Inaudible) Any State Judge can bind this Court.
Mr. A. Seth Greenwald: I am not saying, I think, yes, they certainly are very, very persuasive, I would say, on matters of State Law as opposed to constitutional law.
I think they do bind you on matters of State Law.
Justice Thurgood Marshall: (Inaudible) a judge.
Mr. A. Seth Greenwald: Not a single -- I would not say a single judge because a single judge does not even bind, say the State of New York.
Justice Thurgood Marshall: Can you give me any case in which District Court said that --the cases you are talking, when the Supreme Court, the highest Court of the State Supreme Court.
Mr. A. Seth Greenwald: Yes, of course.
Unknown Speaker: I think you might cite an earlier diversity case in about 337 U.S. where this Court did hold that a South Carolina Trial Court decision was binding as a matter of State Law in the absence of any pronouncement from a higher court of the state.
Mr. A. Seth Greenwald: Well, I think that, while I am not acquainted with that decision I think that is a fair statement and in view of --
Unknown Speaker: (Inaudible)
Mr. A. Seth Greenwald: Gary Thompkins (ph).
Unknown Speaker: Or other cases where the intermediate Court of Appeals’ decision has been held expressive of State Law?
Mr. A. Seth Greenwald: Well, I think, well it is rather obvious.
Unknown Speaker: (Inaudible)Three-judge court here though cite Court of Appeals cases.
Mr. A. Seth Greenwald: Yes, they did cite Court of Appeals.
Unknown Speaker: And they relied on the highest court in the State for its enclosure.
Mr. A. Seth Greenwald: But I would also state if you look at those Court of Appeals cases they went up—
Unknown Speaker: I know you are going to say they misread this.
Mr. A. Seth Greenwald: No, I am not going to say they “misread” them but also as Judge Cardozo said in Zenith Case in New York Court of Appeals, Zenith Bathing Pavilion, attachments are not for the asking, there must be evidence, there must be proof which is a statement of the general premise.
When an attachment case got up to the New York Court of Appeals it was purely on a question of the jurisdiction to grant that attachment in the first place the matter of law, not the question of the facts.
The New York Court of Appeals is called a Court of Law, it does not judge the facts.
The facts are determined or can be modified say by the Appellate Division.
But once that case gets up to the New York Court of Appeals, the only way the Court of Appeals can change that judgment is to say as a matter of law on a very strong showing that the law was applied wrongly below said, vacate that attachment.
Indeed I think it was Wulfsohn against Russian Republic, they said this is going to be attached, this attachment is going to be vacated because the Russian Soviet Republic is—
Unknown Speaker: (Inaudible) I gather is that the three-judge court simply as you have said earlier, “misread” New York Law.
You are not familiar with the Helaki (ph) case in this case Court, are you?
That happen to be a case in which the Second Circuit read the New Jersey Law as expressed in the opinion of the New jersey Supreme Court in a way that was clearly wrong.
And yet this Court said it could not review it and the reason I felt distressed about it was that I wrote the opinion for the New Jersey Supreme Court and I was a member of that Court.
And I knew how wrong it was but yet this Court would not review the holding of the Second Circuit as to what New Jersey Law was.
Mr. A. Seth Greenwald: Let me put this way, we have in this case a statute of the State of New York that has been declared unconstitutional on the basis that you do not have a meaningful opportunity to vacate an attachment under New York Law.
Now, this flowed primarily as we say from an erroneous ruling of New York Law.
I think that certainly this Court does have jurisdiction to decide that the New York statute viewed as a whole and that is the basic test in this area, viewed as a whole is a constitutional statute.
It is not an ancient statute.
It is a matter of the 1963 --
Unknown Speaker: (Inaudible) I believe.
But then when you answered, Mr. Justice White, if the three-judge court properly stated New York law then its judgment is correct.
Mr. A. Seth Greenwald: Well, I would explain that.
I am not trying to back away.
Because if the only ground you could vacate an attachment on in the State New York was that it was unnecessary to the security of the plaintiff.
That would mean that while the plaintiff has not proven his grounds, the attachment would still stand because it might be necessary to secure it and on that basis of course, you would not have a meaningful hearing or a meaningful opportunity to vacate that attachment.
But that is simply not the case, it is obviously not the case.
We have a judge granting the writ in the first place.
He is exercising the discretion.
You can immediately move to vacate that attachment, you go once again back to a judge who exercises his discretion as to whether that writ should be granted, should have been granted.
There is no doubt in my mind that the issues on that motion to vacate the attachment has brought us the issues that originally came up on the ex parte application.
Unknown Speaker: What if they are, what if they are?
How about the answer to Mr. Justice Brennan's question, if the issue is as limited on the motion, as the three-judge court said that it was or they were, do you agree with your colleague?
Mr. A. Seth Greenwald: Not necessarily because this Court has said a limitation on litigable issues is not a denial of Due Process.
That was Lindsey against Normet, the Court or a procedure can limit the number of issues that can be litigated at any particular time.
Once again we have emphasized that we have a statute that fully comports with due process.
It is a necessary statute.
I would also -- one final point, the three-judge court made something about the fact that fraud was not perhaps not as amenable a proof as a vendor’s lien.
Well, assuming this may be the case and by the way the Appellees in the amicus curiae seem to be at odds at this issue, on this issue which really insufficient reason to eliminate all pre-judgment attachments involving allegations of fraud.
We certainly have the counter balancing interest of the State.
And once again, you have the situation where a judge determines the issues, he exercises his discretion and at this point, I would like to reserve my remaining for rebuttal.
Chief Justice Warren E. Burger: Well, Mr. Ledes.
Argument of John G. Ledes
Mr. John G. Ledes: Mr. Chief Justice and may it please the Court.
I think, I should devote the first two minutes to removing this word and phrase fraud from the discussion once and for all.
At page 55A of this appendix is the agreement in the form prepared by Curtis.
It is there form, it was prepared by in their office, by their employees typed by them.
And the publisher is Champion Sports.
Significantly, it has no date.
It was signed on the back side by Mr. Bert Sugar on behalf of Champion Sports.
Not knowing when this contract was signed we have a great cause of fraud being conducted here and we are at a loss to understand how we in this ex parte proceeding and then under 6223 can not address ourselves an affidavits and answer and take on this challenge because in spite of what my brothers have said, they have not cited a case, not one isolated singular case and it is not the law of a New York conclusively there is no right to a hearing and evidence.
There is no right to adversary hearing.
The Court of Appeals of New York has said it three times; only one case was mentioned in their brief and I might point out that the reference to the Zenith case was in the reply brief.
And it was the dicta of Mr. Justice Cardoza, the finding of the case and the simple finding was that there was no statement of a cause of action as against defendants BCD and E by simple implication of allegations made against A.
You could hold A, but you cannot hold BC and D, it was a jurisdictional defect.
That was the decision; of course Mr. Justice Cardoza took the opportunity of writing some lovely words about the care of the Courts.
It was not finding of the Court.
American Reserve Insurance many years later certainly made it very clear that the finding in Zenith was correct two years late, I believe it was, no two years before, Wulfsohn made the rule.
The rule was clear in Wulfsohn.
Jurisdictional defects in 6223 are not set forth but it is an inherit right that we have got to remember Article 62 was a creation of the legislature.
What we did inherit in the body along the 13th States was certain basic Common Law principles.
And one of these Common Law principles was the right to move against a complaint for failure to state a cause of action for jurisdictional reasons.
In its interpretation of 6223 the New York Court of Appeals has three cases, Wulfsohn, Zenith and American Reserve.
And my brothers in answer to your questions only cited Zenith for the dictum but be that as it may I do not know impelling reason why the other two cases were not cited.
But I would like to continue my argument on this, minor element of fraud and when we refer to person here as Mr. Sugar is a substantial person.
In the reply brief of the Attorney General a most interesting statement was made at page 5, impact on the data, the appellees are utterly nonsensical here, if Sugar is “a most substantial citizen” then he should be able to discharge the attachment CPLR 6222, the bonding provision.
The instant action involves a commercial transaction, the commercial transaction did not involve Mr. Sugar according to their document except as a signatory and I might point out that 55A in the appendix, the contract has no representations or warranties of ownership as a mandatory condition to the distribution arrangement.
And it has that mystical last statement we lawyers prepare in one form, this agreement sets forth the entire understanding of the bodies that went on and and on about nothing except things in writing shall amend it, there is no representation and warranty here of ownership.
As an attorney and as a publisher for 15 years, I have published over a thousand publications, 90% of them had been under license by license, simply by license.
But to get back away from the fraud and look at the cases that have come before the Court.
There is no question this is a constitutionally cognizable interest.
I base my logic in this matter before the Court on a basic four point theory.
The cognizable interest, the duality of the interest and ownership, the nature of the creditor’s interest and what was the process --
Justice Thurgood Marshall: Did you put all of that in on your motion to vacate?
Mr. John G. Ledes: No, your Honor.
Justice Thurgood Marshall: Why not?
Mr. John G. Ledes: Under 6223, the only basis upon which I can vacate is if the --
Justice Thurgood Marshall: Where can I find that section you are talking about?
Mr. John G. Ledes: 6223, you will find in the brief of Carey at—
Justice Thurgood Marshall: Brief of whom?
Mr. John G. Ledes: In the brief of Carey in the Appendix -- Appendix A in the brief of Carey.
Justice Thurgood Marshall: (Inaudible)
Mr. John G. Ledes: This is the brief of appellant Carey.
At page 29 your Honor.
At page 29, entitled vacating or modifying attachment.
Justice Thurgood Marshall: (Inaudible) it says that you cannot raise it.
Mr. John G. Ledes: The cases that have interpreted 6223 say that the only thing I can raise, those cases of Wulfsohn, if we may go to the table of cases but not in their brief.
In my brief, your Honor, the case has incited my point out by the Court most correctly.
American Reserve Insurance, which is at II page brief, China Insurance Company.
Justice Thurgood Marshall: I can get it better.
In this particular case did you move to vacate?
Mr. John G. Ledes: No, your Honor, I did not move to vacate.
Justice Thurgood Marshall: So how do you know what could have happened?
Mr. John G. Ledes: Your Honor, I know this.
Your Honor, I would be trying a case before I could get to the Court of Appeals, for three to four years in New York without a dime in my clients pocket, there is not before this Court, the issue of the Fourteenth Amendment and Equal Protection but it is inherit without a dime to try this case.
Justice Thurgood Marshall: Before the State Court could try it, do you rather have a Federal Court to try it?
Mr. John G. Ledes: Your Honor, I did not say that your Honor.
I would much prefer to try it in the Federal Court but that is not the issue.
Your Honor, the issue here is how I can get in to the Court with this attachment, call witnesses, I do not want to go into the deprivations that have taken place here on my client because its deals with my point later on on bonding.
Your Honor, it was stated, I believe by Mr. Justice Blackmun in pointing out the bonding question that was involved in Di-Chem.
Fidelity of Baltimore is the one of the leading bonding companies in this practice that were engaged in.
I approached them several times and they said a bond would be readily available if we would deposit with them securities with an adequate margin over the principal amount or a savings account passbook in the full amount and as you appreciate, your Honor, if I had either one of the two, my client did that, we would not have been bothering with this motion.
We would had the funds to try this case.
Justice William H. Rehnquist: Well, you mean the fund to try the case is the fund to pay the debtor?
Mr. John G. Ledes: No.
Your Honor let me point out about the debt.
Go into the plaintiff’s appendix in the Lower Court case which is part of this record.
There are series of five correspondents there.
The debt has been variously alleged at a hundred and twenty thousand, a hundred, a 66,000, 32,000, 67,000 and 17,000 and might I point out your Honor that the money is not Champion’s, its Wrestling Revue.
Wrestling Revue was in by virtue of these (Inaudible) to chance type of practice we have in New York.
You see, under this rule the transaction was not as in Di-Chem.
Company A selling to Company B, Company C who was due to receive the money and have not received it yet under a contract of sale was wrapped in to the deal by the allegations of fraud and deceit.
So, unlike Di-Chem and the law as it appears to be in Georgia.
Justice William H. Rehnquist: In fact, the Harris against Balk type of garnish, isn’t it?
Mr. John G. Ledes: Not necessarily your Honor.
We have that, as I would look at the Di-Chem situation, it is a simple commercial transaction and by the way when we are talking commercial transactions, if we look at the entire thing and that we had an announcement that the promissory note had terms of garnishment in back of it, on front of it somewhere.
We have the same situation in Fuentes, we have the same situation in the Mitchell.
In Di-Chem, we had a creditor-debtor relationship.
In this case we have a situation where an individual has been named supposedly as having committed fraud.
What the fraud was or how it was in a licensing agreement and the company and they attached the money.
If you look at the money they attached to Mr. Sugar’s, it is absolutely categorically clear.
That is within Naydeck.
There is no departure, there was no prior notice, there was no hearing.
Unknown Speaker: What do you submit, you are entitled to hear as far as due process is concerned?
Mr. John G. Ledes: As far as due process, your Honor, if I would were to draft the statute for New York --
Unknown Speaker: You do not suggest you are entitled to a pre-seizure hearing of any kind?
Mr. John G. Ledes: No.
Unknown Speaker: And you, but you do suggest that within a reasonably promptly thereafter you should have had an opportunity to do what?
Mr. John G. Ledes: First of all, we should have a prompt hearing on certain limited matters.
The allegation and the burden of proving not the debt or the alleged debt, the fraud, what constitutes the fraud, so that we can, you see your Honor for us to come in—
Unknown Speaker: That goes to whether or not the attachment before judgment was justified.
Mr. John G. Ledes: Yes.
Strictly that your Honor.
Unknown Speaker: Now how about the merits of the case?
How about on the, whether there was a debt?
Mr. John G. Ledes: On the issue of the debt your Honor and we have been going around the circle on that, I noticed—
Unknown Speaker: And I have not --
Mr. John G. Ledes: No, no, my adversary and I, my (Inaudible).
On the debt here your Honor, we, they established with the so-called debt in a rather confused way.
We have asked them --
Unknown Speaker: Well, do you think they have any?
In that hearing, do you think when the hearing is held, do you think that the other side, the plaintiff in the case has to show anything more than what he has already shown, namely, affidavits and a decent paper case.
Mr. John G. Ledes: With respect to Wrestling, yes.
With respect to Champion upon which the Wrestling situation exists, there must be shown at least some clear, concise and final, final numbers your Honor because when they attached, they attachment 28,000, and we have a statement in the file in their handwriting as of May showing 17,000.
Now what I am trying to say your Honor, they have held us by the nose and by the arms and they have been punching us and we do not know if we had the money to pay it.
And it was within our means, possibly it could have been paid out of this money.
But we have gone too far down the road now, your Honor.
We have been out with this money for three years.
Unknown Speaker: You do not, if they refine their papers showing, it would be enough, you do not suggest they have to call witnesses and (Inaudible)
Mr. John G. Ledes: No, your Honor.
They will at trial, have to prove.
Unknown Speaker: Yes, but they can make their case adequately on paper if they --
Mr. John G. Ledes: Oh, yeah.
On paper, yes.
This would get closer, viz-a-viz Champion at a vendor-vendee relationship.
But with respect to Wrestling and with respect to Sugar, the standard was absolutely impossible.
And I might point out now, Sugar is an indigent.
But when I say he a substantial man, he is not that substantial, substantial in the community.
If I took the Attorney General’s statement and took in reverse and asked the question, if he was not substantial would he not be entitled to Due Process?
They infer that if he had money, let him go bond it.
If he does not have money, which is the interpretation, they waived these Courts and New York have viewed this.
If you do not have it and you cannot defeat it by showing that there is no allegation of a cause of action your debt, you got to go to trial without the money as we do.
Unknown Speaker: Now, lets go back a minute to the fraud part.
I take it you are saying that in the post attachment hearing, the plaintiff in the case has to go forward with some evidence beyond what he is already, alleged in his affidavit?
Mr. John G. Ledes: But for sure.
Unknown Speaker: I mean with live witnesses.
Mr. John G. Ledes: With live ones, because the nexus of the grab here of attachment—
Unknown Speaker: I understand that.
I am just trying to find out what your claim is with respect to what due process requires?
Mr. John G. Ledes: Now your Honor as to the interpretation --
Unknown Speaker: And then you think that this is the final judgment on the fraud?
Mr. John G. Ledes: No.
No your Honor.
This is not final judgment on the Court.
Unknown Speaker: How much of a showing of fraud that has to be made?
Mr. John G. Ledes: The showing fraud has to be made with witnesses.
Unknown Speaker: I know but what is the standard, Probable cause?
Mr. John G. Ledes: Your Honor,I would need a few days to think about that.
I have never looked at it that way.
Unknown Speaker: This is what, this is inherent and this is what the issue is here with respect to whether New York law is deficient or not.
Mr. John G. Ledes: You need more then probable cause, your Honor.
I would dare say in my view point for the purposes of attachment which is a drastic remedy, we should reverse the standard set by the Court of Appeals about vacating that the plaintiff, let us say must ultimately fail in fraud as to fraud, he must put enough of a case up to show that the plaintiff most probably will succeed.
Most probably, because when you put a situation here, they are holding—
Unknown Speaker: When you make your motion, you are entitled to walk in the Court room and sit there and being holy, silent until and unless the plaintiff produces evidence and live witnesses to sufficiently to demonstrate fraud to the level that you have just suggested.
Mr. John G. Ledes: Your Honor.
I would trust that they would permit me the delight of cross examination of the cause to make it.
But absent that I would think that that would be most helpful.
Unknown Speaker: I think that (voice overlap)
Mr. John G. Ledes: It would be constitutional.
Absolutely your Honor, I would go further than that, in New York your Honor, there are, this, what was enacted here under 6223 is most intriguing and I did not take it up in my brief but it is a simple logic.
In New York we have a motion for summary judgment.
And we have a motion also available to us to dismiss the action for failure to state the cause of action.
These motions are not statutory.
They came down with us 200 some odd years ago, 200 to be precise.
We inherited this right.
These are motions that strangely enough were not expanded upon when they gave the statutory right to garnish.
In fact it was constricted.
Those very motions were constricted.
If you read 6223, there is a provision in 6223 that is most interesting.
In 6223 the provision states very clearly that the Court must mandatorily give the plaintiff an opportunity to correct the defect.
In effect, 6223 took from us the statute, not the statutory, the inherit right to attack.
If we can—
Unknown Speaker: Are you saying, there is a constitutional right to prevent something from amending their complaint?
That is nonsense.
Mr. John G. Ledes: No, your Honor, the Garnishment statute.
What I am saying is the Garnishment statutes took the standard that pre-existed, it did not open up an opportunity as been argued for an adversary hearing.
There is not a case in this whole file that talks about adversary hearings.
In fact, 6223 took from us what we had under, I think it was 3002 or 3112, it took from us the right to strike for failure to state a cause of action because under 6223 on which we could collect damages.
We had to give up something.
They apparently thought we should, the motion be part, 6223 is enactable, unusable because it gives you the opportunity of correcting the plaintiff’s defects because the statute specifically says that upon the motion, meaning 6223, the Court shall give the plaintiff a reasonable opportunity to correct any defect.
Justice William H. Rehnquist: Do you say that is unconstitutional?
It has nothing to do with case of course.
Mr. John G. Ledes: No, I am, no, not, what I am simply saying your Honor, make 6223.
The creation of a right by the legislature, we did indeed because it, we have this right before to vacate by puling the rug, the complaint out from under the attachment.
But they put 6223 probably prophetically to think some 75 or 80 years later I would be arguing here.
So that someone could argue, we have a right to a hearing.
We had the right to that hearing back in those days.
This so-called hearing is a gig.
In New York, the cases are unambiguously clear and the cases they cite most of which I have referred to in my brief deal with jurisdictional points in Maitrejean, there was a failure, very levy on on properties which is a low, it is an Appellate Division case dismissed, it did not fail to establish a prima-facie case of any intent to defraud.
Case after case after case but those cases and those judges were very good.
Unknown Speaker: Could I interrupt for just a minute to help me out on the New York law.
You read this statute as precluding an evidentiary hearing as I understand it.
It does not say it—
Mr. John G. Ledes: I would read the statute as being worse than Georgia.
Unknown Speaker: Well, let me get my question out before you try to answer.
Mr. John G. Ledes: Oh, I am sorry.
Unknown Speaker: I do not find any words in the statute that say that judge may not hold an evidentiary hearing.
I think it specifies one ground on which he must vacate the attachment but as I would read that it might be optional with the judge to do it.
Is there a case which squarely holds that it would be error for the judge to hold an evidentiary hearing on a motion to vacate?
Mr. John G. Ledes: Your Honor there is no case, against your question, there is no case that so states nor is there a case, what has happened is the judiciary through this might point to it the statute is so involved in --
Unknown Speaker: In area of the law, have you ever been involved in a case in which a trial judge did hold an evidentiary hearing and a motion to vacate?
Mr. John G. Ledes: Your Honor, the only time I came close to it, and it was an argument of the motion and that happened where an attachment was based --
Unknown Speaker: Yes or no?
Mr. John G. Ledes: The answer is no.
I have never known, I have never, and I do not think they are ever going to find a case with a hearing with witnesses.
I know there is none, your Honor.
And I might point out in the motion practice in New York, a judge does sign the writ.
We go up with the papers and we give it to the clerk and those are really competent clerks there.
They are usual guys, they go through and make all the corrections and I must say I’ve tried about eight to ten times on very important point to try to get in to see a judge.
I have never been successful in 20 years of motion practice.
Justice Thurgood Marshall: Does the record show that the judge did look at it and the judge did ask for rather --
Mr. John G. Ledes: Your Honor, the only --
Justice Thurgood Marshall: Is that true in this case?
Mr. John G. Ledes: Your Honor.
Justice Thurgood Marshall: Is that true in this case?
Yes or no?
Mr. John G. Ledes: No, as far as I am concerned Judge Bryan (ph) called me up and said what is this all about (Inaudible)
Justice Thurgood Marshall: Does the record show that the judge asked for additional facts.
Mr. John G. Ledes: Which judge?
Justice Thurgood Marshall: The one that signed the attachment eventually.
Mr. John G. Ledes: No, no your Honor.
Justice Thurgood Marshall: It does not show in the record?
Mr. John G. Ledes: That is their statements.
Your Honor Judge Fine who—
Justice Thurgood Marshall: You say it is not in the record?
Mr. John G. Ledes: Your Honor, I am stating --
Justice Thurgood Marshall: Yes or no?
Mr. John G. Ledes: There are corrections made either by the judge or by the clerk.
I am no position sir.
Justice Thurgood Marshall: I give up.[Laughing]
Mr. John G. Ledes: No, your Honor I deny that the judge did that.
It was signed by him.
But I dint know and I cannot personally say, they make that allegation in this, in their brief.
But I know what my experience is, Your Honor we bring it and we never get by the clerk.
Unknown Speaker: That is, let me put a simple case to you and get away from the complications of this case.
One of the grounds for attachment in New York is that the defendant is a non-resident of the State.
Is that correct?
Mr. John G. Ledes: Yes, your Honor.
Unknown Speaker: All right.
Let us assume you have an attachment in which the only ground alleged is that the defendant is not a resident of the State of New York.
Mr. John G. Ledes: Yes, your Honor.
Unknown Speaker: You have the right under 6223 to make a motion.
You represent the defendant and you know he is a resident of New York.
You make your motion, what do you say to the judge?
Does he give you an opportunity to say that your client is not a resident of New York?
Mr. John G. Ledes: Your Honor I can cite a specific case --
Unknown Speaker: My Question first.
Mr. John G. Ledes: Do you go directly to the judge as I did to make the argument with the certificate of doing business or incorporation in New York, as matter of Publisher’s Press versus MS Publishing, And if that judge, Judge Amsterdam does not hear you and she did not, she refused to hear me, I went on an oral motion to the Appellate Division and was heard by Judge Melchowitz(ph) and I presented the document to him and he heard me strictly on the issue of whether we were doing business and nothing else.
Unknown Speaker: Prevailed on the issue as to whether or not the defendant was a resident.
That would dispose of the attachment wouldn’t it?
Mr. John G. Ledes: The disposes of the attachment in that particular case—
Unknown Speaker: That is all I am asking you at the moment.
Mr. John G. Ledes: Yes your Honor.
Unknown Speaker: Now, I understood you to say earlier in your argument that 6223 allowed the dismissal of an attachment only for the grounds specified by the three-judge District Court in this case.
Mr. John G. Ledes: Your Honor, it is how you read it.
They say vacate or to vacate or provide it which --
Unknown Speaker: I will put it to you this way.
In light of what the three-judge District Court said, do you read its decision as preventing a State judge in New York from dismissing an attachment on the ground that you have demonstrated that the defendant does live in the State of New York?
Mr. John G. Ledes: (Inaudible) Of course, no it does not preclude that.
Unknown Speaker: It does not preclude that so that is at least one other ground on which an attachment may be dismissed in New York.
Mr. John G. Ledes: Yes.
Unknown Speaker: Number of other grounds, if the defendant proves there is no ground for attachment --
Mr. John G. Ledes: Your Honor, jurisdiction—
Unknown Speaker: (Inaudible) seven or eight of them.
Mr. John G. Ledes: Yes.
They were cited, several of them.
They stated as I used to phrase in my brief about sweeping in the jurisdictional decree.
If the Court has no jurisdiction under the Garnishment statute and by the cases to find in for the general jurisdiction right, its failure to state the cause of action and there are dozens of them.
As I mentioned the Zenith taking case about a hall and five men and all that jazz.
There was just, there were numerous reasons and the Courts do dismiss.
Unknown Speaker: (Inaudible)basis that is that the security of the defendant or the plaintiff is not implicated by the attachment.
That the only factual basis, that is what the three-judge court said.
Mr. John G. Ledes: Yes.
That is the only factual basis expressly specified by this statute and it was written into the books as my brother Busner here pointed out twelve years ago to accommodate the non-resident aspects of the attachment statute.
Unknown Speaker: We have 6223 as denying to the trial judge the right to consider any proper ground that you may present for the dismissal of the attachment, do you?
Mr. John G. Ledes: No.
In fact, I would go further your Honor.
I would think 6223 would not have precluded the courts of New York to conduct an adversary hearing and I might point out at appendix B -- very kindly the Attorney General’s brief of New York cited Regnell versus Page, at page 37, the Civil Court, the court below Supreme New York, the Court of Common Pleas, the presiding Administrative Justice Thompson set forth the rule that all orders of attachment must provide that the plaintiff within three days after levy shall move unnoticed of the defendant, the garnishee and the sheriff will leave to prove the grounds upon which the order of attachment was issued.
The burden of proof on such a motion is on the plaintiff and the attachment will be deemed vacated if such a motion is not made.
Your Honor the Courts for eight years had the opportunity of interpreting the statute.
So that they could build it up but we have reached the (Inaudible) here.
Eighty years later, about the way this case, this law could have been structured by the Court, but its too broad and too rambling and with the public and the defendants in this area have been -- my defendant Wrestling Revue, the moving party in this case is totally out of business, its been wiped out.
I am in this case because I have a stubborn individual named Sugar who went to Law School which may have been a problem with his mentality wanted to take this case and to scrape the money up.
I am in this Court simply because we have had no opportunity to even prepare our case on the bare allegation and here we have no right to a hearing and the Court for all these years has never set down the standard.
Unknown Speaker: Mr. Ledes, let me just go over it once more if I may cause I am still thinking of your questioning with Mr. Justice White.
The issue you wanted, the issue you wanted to have tried in the New York Courts but under your view of the law could not have tried is not the issue of fraud, is that right?
Mr. John G. Ledes: For the purposes of vacating the attachment, it would be my view point, a full adversary hearing where the plaintiff would have had the burden to show that it would probably succeed in proving its fraud allegation.
Unknown Speaker: That is the,That is the critical defect that you did not have the right by statute to a hearing on the fraud issue at which the burden would have been on the plaintiff to establish probable cause if he could prevail.
Mr. John G. Ledes: I would add one phrase on the statute and the cases interpreting that very broad amorphous statute.
Chief Justice Warren E. Burger: You have five minutes left Mr. Greenwald.
Rebuttal of A. Seth Greenwald
Mr. A. Seth Greenwald: Thank you Mr. Chief Justice.
I would make the brief observation that certainly my adversary would have been making a fine presentation to the litigated motion part of New York State Supreme Court, New York County when he was arguing about whether there was fraud in this case or whether there was not fraud in this case or whether the allegations was sufficient and the like.
I think though that we should recognize that this is the United States Supreme Court and it should be emphasized that basically this was a decision below based upon the unconstitutionality of the State statute and we should always keep that in mind.
Now I have been informed by the way, when there was a question of adversary hearings, a case, I think it was a famous case a few years ago called Lily Pons’ involving the singer Lily Pons.
And it was an adversary hearing on residency, it was a jurisdictional attachment.
For example, once again, I think your Honors have all recognized that residency is a factual issue.
But what seems to be mistaken here is that when we are dealing with questions of fraud, there is a basically a compelling State interest to put the funds into an effect escrow and mind you in New York under this attachment the funds do not go to the plaintiff, they are kept by the sheriff.
To keep these funds available.
This is I believe different, generally in sequestration situation.
And there is in this compelling necessity to have a fraud attachment, the concomitant that at the very institution of the suit, you cannot expect the plaintiff to prove his case of fraud in to-to, there is no question to convince the judge to sign that order ex parte or to convince him to deny the motion to vacate the attachment.
You are going to have some evidentiary facts, something more than a mere scintilla, something more than suspicion or surmise.
It definitely, I think is clear from the New York cases that you do get a genuine hearing, it may be legal, it may be factual.
And at this hearing and I would say it is a real hearing—
Unknown Speaker: Mr. Greenwald, could you tell us the strongest case you have got on the proposition that the moving party on a motion to vacate is entitled to an evidentiary hearing?
Mr. A. Seth Greenwald: Well, I think the most recent case, I am not going to say, the strongest case, is of course the exposition in Regnell against Page which I put in as as appendix to my brief, that brief of Carey.
Unknown Speaker: But I am asking the strongest case.
Mr. A. Seth Greenwald: The strongest case?
Well, I think that it is not a matter of whether a case is strong or weak.
The fact of the matter is there are certain circumstances in which an evidentiary hearing is provided.
We have to realize that in the instant case the defendant, Mr. Sugar never moved to vacate that attachment.
You do not have before you anything in this record to know what type of hearing he would have got.
He just skewed the hearing in the State Court.
He came running at the Federal Court.
Unknown Speaker: I will change the question.
Is there a New York case prior to the decision of the three-judge court that sheds any light on the issue?
Mr. A. Seth Greenwald: Well I did mention of course the fact, I think would describe as, mentioned to me, the Lily Pons case.
I think also and I think it was an Appellate Second Department.
One of the cases in my brief involved a National Corporation and it had been attached.
And mind you, and they showed the evidence, it was unnecessary, it was determined, the attachment was unnecessary for the security of the plaintiff.
And mind you, I do not know if there was an evidentiary hearing.
The basic point is that at the time of moving to vacate that attachment in New York, you are not going to trying the case.
You are not going to be trying the question of, as a matter of law, was there fraud?
You will simply try determining whether that judgment, ex parte, not judgment, ex parte writ was issued properly the--
Justice Thurgood Marshall: What case is that?
I mean, you have given us all this theory of what goes on but I mean what case do you have?
Mr. A. Seth Greenwald: Well, I think, I cannot off hand state what case and I think that is important.
Justice Thurgood Marshall: But do not you feel obliged to find one?
Mr. A. Seth Greenwald: Well, let me put it this way, Justice Marshall, the fact of the matter is that these were not issues in the State of New York until this three-judge court opinion and judgment came down.
It was not considered a problem in the State of New York as to what happened here or what happened there.
Oh, excuse me, I have been pointed to the case of (Inaudible) which discusses about the standards of fraudulent intent.
Unknown Speaker: What page on the brief is that?
Mr. A. Seth Greenwald: I think that was on page 30, 26 of the Curtis brief.
Chief Justice Warren E. Burger: Thank you gentlemen.
The case is submitted.