Moquinon, Ltd. v. Gliklad, Index No. 650366/2017, 4/6/2017 (Singh, J.)

Attachment in Aid of Arbitration; Promissory Note; CPLR 7502(c); Preliminary Injunction

By: Brandon Dorman | Staff Writer

Respondent, Gliklad, and Michael Cherney executed a promissory note worth $270 million (“Note”) in Russia. Respondent later moved to enforce the Note in New York Supreme Court. Gliklad received a loan from Petitioner, a shell corporation controlled by Oleg Deripaska, to cover litigation costs. Summary judgment was granted in favor of Respondent; he was awarded $385 million. Additionally, the Court ordered Respondent “the right to all debts and obligations due and owing to [Cherney], and the right to receive payment thereof, from Iskander Makmudov and Oleg Deripaska.” After the litigation, Respondent and Cherney entered into a settlement agreement in response to the Court’s granting of summary judgment.  Petitioner subsequently moved for an attachment in aid of arbitration pursuant to CPLR 7502(c), arguing that the Respondent did not repay the loan, the settlement was too low, and section 4 of the loan agreement was violated.

Respondent’s loan was for $5 million with a simple interest rate of 10% per annum and a bonus interest contingent upon the success of the lawsuit. It was to be repaid by December 31, 2015 or upon collection of the Note. Section 4 of the loan gave Petitioner the right to match the settlement “by paying to borrower an amount in cash equal to (i) the settlement or compromise minus (ii) the loan amount plus accrued interest” within 30 days of notice. Petitioner argued that a three-prong test did not need to be satisfied in order to receive an attachment and instead, he only had to show that an attachment was necessary to obtain relief. Respondent responded that “[Petitioner] must show that: (1) the arbitration award would be “rendered ineffectual” without it; (2) probability of success on the merits; (3) the damages sought exceed all counterclaims known to it; and (4) the existence of a cause of action for money damages.”

The Court focused on distinguishing between an application for a preliminary injunction and an application for an attachment. Central to the dispute was whether Petitioner needed to satisfy the three-prong test of: “(1) likelihood of success on the merits of the claim; (2) irreparable injury in the absence of the injunction, and (3) a balance of equities in favor of the moving party.” The Court held that an attachment does not need to satisfy the three-prong test. The Court reasoned that an attachment is granted when one party proves that an attachment is necessary to effectuate the arbitration award. Here, because (1) Respondent was a non-domiciliary, (2) he did not have assets in New York aside from the settlement proceeds, and (3) part of the proceeds were going towards attorney fees and his ex-wife, the Court found the attachment necessary to ensure an arbitration award. In addition, the Court reasoned that the attachment was only appropriate to the specific amount Petitioner can prove with reasonable certainty.

The Court therefore awarded Petitioner an attachment of $5 million in damages and $1 million in interest out of the $450 million which it sought, and required Petitioner to attach a $2 million undertaking in case the attachment was not warranted. Additionally, the Court did not agree with Petitioner that there was a violation of Section 4 of the loan agreement, because Petitioner was orally notified of the settlement.

Moquinon, Ltd. v. Gliklad, Index No. 650366/2017, 4/6/2017 (Singh, J.).

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