Petition — Hashemi v. Inter-Regional Financial Group, Inc.

| Supreme Court, U. &.

FILED

1 DEC 1 1977

|_MICHAEL RODAK, JR., CLERK

IN THE

Supreme Court of the United States

October Term, 1977

No. 7 7 2778

CYRUS HASHEMI,

Petitioner,

— =

INTER-REGIONAL FINANCIAL GROUP, INC.,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

FRANK W. MURPHY

SLAVITT, CONNERY & VARDAMIS

618 West Avenue

Norwalk, Connecticut 06852

(203) 838-7555

ttorne for Petitioner

ä —-

INDEX

PAGE

r ese 1

/ ˙· T 2

/ .. n 2

Constitutional Provisions, Statutes and Regulations

r Wed c˙ô C % ˙Ä%.. de reekSeben 3

, vevces 4

Reasons for Granting the Wriltt 8

/ A ·—üw-WW 25

APPENDIX:

A. Opinion of United States Court of Appeals

for the Second Circuit, dated September 1,

——. . nash 26008 la

B. Judgment of the District Court for the Dis-

trict of Connecticut, dated December 28, 1976 8a

C. Opinion of the Honorable Jon O. Newman of

the United States District Court, dated Oc-

. kee iansaedeen bikes 12a

; D. Opinion of the Honorable Jon O. Newman on

Motion for Reargument, dated April 12, 1977 18a

E. Excerpts from Relevant Statutes ........... 21a

F. A Portion of the Testimony of Cyrus Hashemi

before the Honorable Jon O. Newman, on

h... 24a

ii

TABLE OF CASES, STATUTES AND OTHER AUTHORITIES

PAGE

Constitutional Provisions:

United States Constitution, Amendment XIV, Section

„„ ͤi!.!... - ˙—⁰ũ·¹ ] UU 4, 19, 23

Cases:

Airline Stewards and Stewardesses Association v.

TWA, 273 F.2d 69 (2d Cir. 1959), cert. den.,

362 U.S. 988 (1960), 80 S. Ct. 1075, 4 L. Ed.

c 18

Barber v. Morgan, 84 Conn. 618, 81 Atl. 791 (1911) 10

Burns v. Gould, 172 Conn. 210 (1977ꝙq77»7 9

Chambers v. Blickle Ford Sales, Inc., 313 F.2d 252

, % nenbhees eudeses 8

Clime v. Gregor, 145 Conn. 74, 75 (19589) 8

Fleming v. Grey Manufacturing Co., 352 F. Supp.

, eee 13

Frost v. Davis, 288 F. 2d 497 (5th Cir. 19617) 15

Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983, 82

D . 18, 19

Hodes v. Hodes, 176 Ore. 102, 155 P. 2d 564 (1945) 16

Huron Holding Corporation v. Lincoln Mine Operat-

ing Company, 312 U.S. 183, 61 S. Ct. 513, 85

L. Ed. 1148, Reh. Den., 313 U.S. 598, 61 S. Ct.

GA eee 8

International Shoe Company v. Washington, 326 US.

310, 66 S. Ct. 154, 90 L. Ed. 95 (1945) .... 21, 22

Knapp v. McFarland, 462 F.2d 935 (2d Cir. 1972) 15

Leasco Data Processing Equipment Corp. v. Maxweil,

rT BS? 8 8} fe SS | ere 18

Ledgebrook Condominium Association, Inc. v. Lusk

Corporation, 172 Conn. 577 (1977) .......... 8

iii

PAGE

Milliken v. Meyer, 311 U.S. 457, 468, 61 S. Ct. 339,

,, Creer ee Tere 21

Mitchell v. W. T. Grant Co., 416 U.S. 600, 95 S. Ct.

1995, 40 L. Ed. 2d 406 (1974) .............. 18

Nederlandsche Handel-Maat-Schappij, N.V. v. Sentry

Corporation, 163 F. Supp. 800 (E.D. Pa. 1958) 14

Neifeld v. Steinberg, 438 F.2d 432 (3d Cir. 1971)

15, 16

North Georgia Finishing, Inc. v. Di-Chem, Inc., 419

U.S. 601, 95 S. Ct. 719, 42 L. Ed. 2d 751 (1975) 18

Shaffer v. Heitner, — U.S. —, 53 L. Ed. 2d 683

ME ¢i¢guus cttudéeuuheenes sae aeaens 21, 22

Sniadach v. Family Finance Corporation, 395 U.S.

337, 89 S. Ct. 1820, 23 L. Ed. 2d 349 (1969) ... 20

Westerman v. Gilbert, 119 F. Supp. 355 (D. R. I.

yy%406 Cena ad air h ween abaeed ae 04k 40% 15

White v. Leary, 6 Sup. 37 (1938) ................ 12

Winslow v. Fletcher, 53 Conn. 390 (1885) ...... 10, 20

Statutes:

, . 2

CR errr errr Terr rT 3

Conn. General Statutes, § 33-87 (former) ......... 11

Conn. General Statutes, § 33-88 (former) ......... 12

Conn. General Statutes, § 42a-8-317 ......... 4,8,9,12

Conn. General Statutes, § 52-278a-n .............. 3

Conn. General Statutes, § 52-289 ........... 4, 9, 11, 20

Conn. General Statutes, § 52-36c47“/ 20

Conn. General Statutes, § 42a, Article 8, (Official

Commentary to Uniform Commercial Code) ... 9

iv

PAGE

Other Authorities:

% Coe, “Atha, OT occcvccesseinescie 11

Federal Rules of Civil Procedure, Rule 64 ........ 4

Federal Rules of Civil Procedure, Rule 65 ........ 4

L 11

Stephenson, Connecticut Civil Procedure 12, 20

Uniform Commercial Code, § 8-317 .......... 8, 9, 13,

14, 15, 16

1 Uniform Laws Annototed, Master Edition, Uni-

form Commercial Code“, 1977 Supplement 4

Uniform Stock Transfer Aeta 11,13

IN THE

Supreme Court of the United States

October Term, 1977

CYRUS HASHEMI,

Petitioner,

—_— —

INTER-REGIONAL FINANCIAL GROUP, INC.,

Respondent.

— — <> — —

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

— — ee —-———S

To: THE HONORABLE, THE CHIEF JUSTICE AND ASSOCIATE

JUSTICES OF THE SUPREME COURT OF THE UNITED

STATES

—ͤ —-—-— — —

The petitioner, Cyrus Hashemi, prays that a Writ of

Certiorari issue to review the judgment of the United

States Court of Appeals for the Second Circuit rendered

in these proceedings on September 1, 1977.

Opinions Below

The opinion of the United States Court of Appeals for

the Second Circuit, dated September 1, 1977, as yet

unreported, appears at Appendix A. (Infra la). The

2

judgment of the United States District Court for the

District of Connecticut, dated September 28, 1976, appears

at Appendix B. (Infra 8a). The judgment of the

District Court is based upon the opinion of the Honorable

Jon O. Newman, Judge of the District Court, dated

October 28, 1976, which is unreported, and appears at

Appendix C. (Infra 12a). Finally, the opinion of Judge

Newman denying the defendant’s motion for reargument,

dated April 12, 1977, similarly unreported, is also rele-

vant, and appears at Appendix D. (Infra 18a).

Jurisdiction

The judgment of the United States Court of Appeals

for the Second Circuit was entered on September 1, 1977.

(Appendix A, infra la). This petition for certiorari

was filed less than ninety days from the aforesaid date.

The jurisdiction of this Court is invoked under 28 U.S.C.

Sec. 1254(1).

Questions Presented

The respondent (plaintiff below) commenced an action

in the United States District Court for the District of

Connecticut, based upon a claim in excess of Ten Thousand

Dollars, and diversity of citizenship, seeking an award of

money damages against the petitioner (defendant below).

In conjunction with the filing of the complaint, the re-

spondent sought a prejudgment remedy order of attach-

ment of securities o ned by the petitioner, and a manda-

tory injunction order in support of this request for pre-

judgment attachment. The District Court found prob-

able cause for the granting of the respondent’s application

for a prejudgment remedy, and issued a mandatory in-

junction order directing the petitioner to surrender a

particular dollar amount of securities to the clerk of

the Court for the sole purpose of attachment. (Appendix

3

B, infra 10a). This Court of Appeals affirmed. The

questions presented are: :

(1) Did the Court of Appeals err in affirming the

order of the District Court, which issued a mandatory

injunction directing the petitioner to deposit securities

located outside of the United States and outside of Con-

necticut in the District Court for the District of Con-

necticut for the sole purpose of permitting the respondent

to perfect an attachment?

(2) Did the Court of Appeals, in affirming the

District Court, err in exercising jurisdiction over assets

of the petitioner which are not now, and have never been,

in the United States, based upon a statute of the State

of Connecticut?

(3) Is the scope and nature of the District Court

order, as affirmed by the Court of Appeals, in a pre-

judgment remedy proceeding, a denial of due process

under the Fourteenth Amendment to the Constitution

of the United States?

(4) Did the Court of Appeals, in affirming the

District Court order, misapply the Connecticut statute,

which is a portion of the Uniform Commercial Code?

Constitutional Provisions, Statutes and

Regulations Involved

The jurisdiction of the District Court in this case is

based upon diversity of citizenship and the claim by

the respondent in excess of Ten Thousand Dollars. 28

U.S.C. Sec. 1331 (a). The respondent’s application for a

prejudgment remedy was made pursuant to the applicable

provisions of the Connecticut General Statutes, Sec. 52-

278a through 52-278n, concerning the procedures to be

followed in order to secure an order of attachment. In

4

addition, concerning the particular securities to be at-

tached, Sections 52-289 and 42a-8-317 of the Connecticut

General Statutes are also applicable.“ (Copies of excerpts

from the Connecticut General Statutes are attached as

Appendix E, infra 21a, 22a). The latter two sections de-

fine the rights or legal interests which may be attached, and

the manner of attaching shares of corporate stock or

other corporate rights or securities, as defined by the

Uniform Commercial Code. Since this is a diversity

case, the applicable Connecticut statutes were applied by

the District Court by virtue of Rules 64 and 65 of the

Federal Rules of Civil Procedure. Finally, the constitu-

tional provision is the due process clause, Amendment IV,

Section 1, of the United States Constitution.

Statement of the Case

On or about November 28, 1975, Coronado Group

Limited (hereinafter referred to as Coronado“) bor-

rowed the sum of $250,000 fror? Banque Scandinave en

Suisse (hereinafter referred to as Banque Scandinave“),

pursuant to a loan agreement. The loan to Coronado

from Banque Scandinave was secured by an irrevocable

Letter of Credit issued by the First Nationa] Bank of

St. Paul, and an Indemnity and Guaranty Agreement was

executed by the parties in order to further secure the

loan.

1Sec. 42a-8-317 of the Connecticut General Statutes is Sec.

8-317 of the Uniform Commercial Code. This provision of the

Uniform Commercial Code has been adopted, together with the

rest of the Uniform Commercial Code, in the District of Columbia

and in all states except Louisiana, which has not adopted Article

8, but has adopted other portions of the Uniform Commercial

Code. (1 Uniform Laws Annotated, Master Edition, “Uniform

Commercial Code”, 1977 Supplement, Page 5).

5

The respondent’s complaint alleges that in July, 1976,

the First National Bank of St. Paul paid the sum of

$250,000 to Banque Scandinave pursuant to the Letter

of Credit, and that it in turn paid the First National

Bank of St. Paul. Suit was thereafter commenced against

the petitioner alleging a breach of the terms cf the In-

demnity and Guaranty Agreement.

Since this appeal arises from the granting of a man-

datory injunction in aid of a prejudgment remedy ap-

plication, there has not yet been a full development of

the issues in the case below, and there has not been a

full trial on the merits. However, a basic review of the

legal positions of the parties would be appropriate.

Both the petitioner and the respondent were major

stockholders of Coronado, and each were represented on

the Coronado Board of Directors. The respondent was

to provide “financial accommodations” up to the amount

of $250,000 prior to the close of business on December

31, 1976. No financial accommodations were provided

by the respondent. In addition, even though an exten-

sion of the loan agreement was granted by Banque

Seandinave, the respondent elected not to advance an

interest payment in order to prevent the default by

Coronado.

As a result, the petitioner has asserted a breach of the

Agreement, and a failure of its consideration, thereby

rendering it void and unenforceable. Secondly, he has

asserted that this action was premature in that the loan

agreement could have been extended if the respondent

had fulfilled its obligations. The petitioner, in his coun-

terclaim, has alleged that various representatives of the

respondent on the Coronado Board of Directors caused

it to be in default on the loan agreement for the corporate

purposes of the respondent, in breach of the director’s

6

fiduciary duty to Coronado,’ as well as other misconduct

which resulted in a petition for liquidation of Coronado.

It is clear from this cursory examination that there

are substantive questions in dispute between the parties,

and complex factual and legal issues to be litigated.

For the purpose of this petition, the important ques-

tion does not involve the finding of probable cause for the

issuance of the order by the District Court,’ but the

scope of the prejudgment remedy order. After making

certain findings of fact, including a finding that the peti-

tioner’s securities are located outside of the State of

Connecticut, and substantially all of them outside of the

United States (Finding 10, infra 9a), Judge Newman

concluded that there was probable cause for the granting

of a prejudgment remedy, and that an injunction order

should issue-in aid of an attachment. (Finding 11, infra

10a). He ordered the deposit of securities with the

clerk of the Court. (/nfra 10a).

During the pendency of the case before the Court of

Appeals, and prior to its decision, the respondent moved

for a finding of contempt, and the petitioner moved for

reargument. Although Judge Newman denied the mo-

tion for reargument for jurisdictional reasons, footnote

2 to his opinion is particularly instructive. (Appendix D,

infra 19a).

* Although the respondent has moved to dismiss the first

count of the counterclaim, it has conceded that one count is

properly before the Court. Judge Zampano has not yet ruled on

the motion to dismiss.

»The defendant, of course, does not concede that probable

cause exists. However, the important question on appeal is one

of law.

At the time of the contempt hearing, the petitioner

testified that his securities were not at that time, and

had never been, in the United States. (Appendix F, infra

24a). There is no claim by the respondent in its com-

plaint or otherwise that there has been any fraudulent

transfer of the petitioner’s securities outside of the United

States to avoid legal process, nor is there any claim that

any of his securities are the subject matter of the litiga-

tion between it and the petitioner.“ |

Thereafter, the United States Court of Appeals for

the Second Circuit affirmed the District Court order.

While finding that the order was appealable, since it was

in the nature of a mandatory injunction, the Court of

Appeals held that the District Court order met the re-

quirements of Connecticut law, and that there was no

denial of procedural due process. (Appendix A, infra

Ta).

For the reasons set forth below, it is respectfully

submitted that the order of the United States Court of

Appeals affirming the District Court order was in error.

The only basis for the Connecticut involvement in this case

is diversity jurisdiction obtained over the petitioner, a resident

of Connecticut. Other assets were seized under the Connecticut

attachment statutes, and the petitioner substituted a bond in lieu

of attachment.

There has not yet been full compliance with the District

Court order to bring securities into the United States for attach-

ment purposes, because of difficulties which the petitioner has

experienced under Iranian law in liquidating the securities and

transferring the assets to the United States.

8

Reasons for Granting the Writ

A. The decision of the Court below is in conflict

with decisions in other jurisdictions interpreting

the portion of the Uniform Commercial Code

applicable here.

The statute upon which the District Court and the

Court of Appeals relied, Sec. 42a-8-317(2) of the Con-

necticut General Statutes, is Sec. 8-317 of the Uniform

Commercial Code. Since the same statute is in effect in

virtually all of the states, and in the District of Columbia,

we have an important question involving uniformity of

interpretation of a statute. However, before discussing

this point in detail, we must consider the essential ele-

ments of an attachment order.

There is no federal statute permitting an attachment.

The only authority for the order of the District Court,

which is the subject of this petition, is the Connecticut

statute. Any order issued by the District Court must be

based upon existing state law, and applied in the Federal

Court pursuant to Rules 64 and 65 of the Federal Rules

of Civil Procedure. Huron Holding Corporation v.

Lincoln Mine Operating Company, 312 U.S. 183, 61 S.Ct.

513, 85 L.Ed. 1143, Reh. Den., 313 U.S. 598, 61 S.Ct.

840, 85 L.Ed. 150; Chambers v. Blickle Ford Sales, Inc.,

313 F.2d 252 (2d Cir. 1963). Secondly, under the com-

mon law of the State of Connecticut, an order of attach-

ment is not a right, but rather is a matter strictly gov-

erned by statute. Clime v. Gregor, 145 Conn. 74, 75,

138 A.2d 794 (1968) ; Ledgebrook Condominium Associa-

tion, Inc. v. Lusk Corporation, 172 Conn. 577 (1977).

Although the Uniform Commercial Code deals with a

number of subjects, Sec. 8-317 is a portion of the Code

dealing with investment securities. The purpose of

9

Article 8 of the Uniform Commercial Code is not related

to attachment or garnishment in any way, but rather

deals with the sale and transfer of securities. “It has

been called a negotiable instrument law of investment

securities.” (Official Commentary to Uniform Commercial

Code, Sec. 42a, Article 8, Connecticut General Statutes,

at 253). It is primarily intended to deal with the rights

of various parties involved in the sale and transfer of

corporate securities, including shares of stock. Burns v.

Gould, 172 Conn. 210 (1977). If Sec. 8-317 deals with

attachment in any way, it is only in an incidental and

insignificant manner. While there may be some instances

where, as a result of the transfer or sale of a security,

certain extra-territorial effect may be given to the statute

between parties to the transaction, and certain injunction

orders may be issued by the court with regard to a

security which is the subject of a dispute, it is clear that

Sec. 8-317 does not apply to the attachment of shares of

corporate stock which are not involved in the underlying

transaction.

The Court of Appeals disregarded the provisions of

Sec. 52-289 of the Connecticut General Statutes, which

specifically deals with the question of attachment of

shares of corporate stock, and found it inapplicable. It

should be noted that Sec. 52-289 is the only statute in

Connecticut which gives any right of attachment of cor-

porate shares of stock. If Sec. 52-289 is inapplicable,

then there is no Connecticut statute which authorizes at-

tachment of shares of capital stock. Under Sec. 52-289

there are three essential steps for a valid attachment of

stock or other rights in a corporation: (1) service must

be made on the defendant personally or at his usual

place of abode; (2) service must be made on the corpo-

ration; and (3) the shares of stock must be seized by

the officer making the levy. The net effect of this require-

ment is to limit orders of attachment of corporate rights

10

in shares of stock in Connecticut corporations. Winslow

v. Fletcher, 53 Conn. 390, 4 Atl. 250 (1885); Barber v.

Morgan, 84 Conn. 618, 81 Atl. 791 (1911).

In Winslow v. Fletcher, supra, the defendant, who

resided in the State of Indiana and owned stock in an

Indiana bank, deposited a stock certificate with a blanket

power to sell and transfer with au insurance company in

Connecticut. The Court held tha. even though the stock

was physically located in Connecticut, and subject to

seizure here, it could not be attached. The Court pointed

out that, while the certificates are evidence of ownership,

and for some purposes may be regarded as property,

they are distinct from the stockholder’s interest in the

capital of the corporation, and therefore are not “goods

and effects within the meaning of the statute relating to

foreign attachment.” (Supra at 396). In conclusion, the

Court stated the following:

Thus, the question before us in one aspect of

it, resolves itself into the question of the construc-

tion of our statute. Obviously, the statute can

have no operation outside the limits of the state.

When it speaks of “rights or shares in the stock

of any corporation”, it has exclusive reference to

corporations existing under our laws, and it can-

not affect the rights in corporations existing under

the laws of other states. Therefore the statute

referred to does not authorize the attachment of

the defendant’s interest in the stock in question.

It is further contended that this interest may

be attached under the general statute relating to

attachments, it being the policy of our law to sub-

ject all a man’s estate not specifically exempt to

the payment of his debts. But that statute relates

to ordinary process and not to the process of

foreign attachment; it is limited and must be

11

limited, to property in this state; it has and can

have no extra- territorial operation. (53 Conn. at

400).

Section 52-289 of the Connecticut General Statutes

continues in full force and effect. The general law of

this State concerning attachment of corporate rights or

shares and this statute has remained unchanged for a

number of years, except in one important respect. The

Uniform Commercial Code was adopted as 1959 Public

Act 133, effective October 1, 1961. Consequently, any

applicable provisions of the Uniform Commercial Code,

including Sec. 42a-8-317 of the Connecticut General

Statutes, must be read consistently with Sec. 52-289.

In addition, although some states have enacted legisla-

tion authorizing attachment of a defendant’s shares of

stock in any corporation, including a foreign corporation,

Connecticut has not adopted such legislation. (7 CJS,

“Attachment”, Sec. 79, notes 26 and 28). However, re-

gardless of the law in other states, it is clear that any

attachment order to be valid must follow the mandatory

requirements of Connecticut law.

Prior to the adoption of the Uniform Commercial

Code, Connecticut adopted the Uniform Stock Transfer

Act. The former Sec. 33-87 of the Connecticut General

Statutes, being the Connecticut equivalent of the Uniform

Stock Transfer Act, added a requirement to Sec. 52-289

of the Connecticut General Statutes, which provided that

an attachment or levy upon shares of stock was ineffec-

tive “until such certificate is actually seized by the officer

making the attachment or levy, or is surrendered to the

corporation which issued it, or its transfer by the holder

enjoined.” * However, it is clear that even under this

Sec. 33-87 was repealed by the adoption of the Uniform

Commercial Code (1959 Public Act 133), which replaced the en-

tire Uniform Stock Transfer Act.

12

provision, while a transfer by the holder might be en-

joined, it clearly applied only to stock in Connecticut cor-

porations, and the three-step procedure outlined above

was required. While under the former statutory provi-

sion, an order enjoining transfer pending perfection of

the attachment might have been issued, there was no such

authority for an injunction order directing surrender of

the securities for the purpose of attachment. Conse-

quently, unless there has been a change in pre-existing

Connecticut law brought about by the adoption of the

Uniform Commercial Code,’ it is clear that Connecticut

law does not now authorize, and has never authorized, a

mandatory injunction as issued by the District Court.

As a matter of fact, the language of Sec. 42a-8-317 spe-

cifically states that the security must be seized, or sur-

rendered to the issuer at its source, and if other orders

of the court are issued as an aid to reach the security in

question, it can only be done “as is allowed at law or in

equity.” (Emphasis added). Thus, the section does not

expand the existing law, but merely refers to it and in-

corporates it by reference. (Stephenson, Connecticut Civil

Procedure, Sec. 66e at 269-270). There is no decision

of any court interpreting the Uniform Stock Transfer

Act or the Uniform Commercial Code to permit the

application of the order issued by the District Court.

The Court of Appeals relied upon two Connecticut de-

cisions, one in the State Court and one in the Federal

Court. The State Court action, White v. Leary, 6 Conn.

Supp. 37 (1938), was not a judgment of the highest

court of the State. However, the Judge of the Superior

Court issuing the order in that case was dealing with a

corporate dispute involving the stock of a Connecticut

Sec. 42a-8-317 has two paragraphs. The first parallels the

former Sec. 33-87, but makes language changes not relevant here-

in. However, the second paragraph has the exact same language

as the former Sec. 33-88.

13

corporation. Thus, the attachment order was thoroughly

consistent with Sec. 52-289 of the Connecticut General

Statutes, and the cases cited above. It was not a case

decided under the Uniform Commercial Code, or its prede-

cessor, the Uniform Stock Transfer Act. This is the

only State Court authority on point, and is consistent

with the petitioner’s interpretation of Sec. 52-289 of the

Connecticut General Statutes, and the interpretation of

Professor Stephenson.

This brings us to the legal effect of the decision in the

case of Fleming v. Grey Manufacturing Co., 352 F. Supp.

724 (D. Conn. 1973). Both the Court of Appeals and

Judge Newman relied upon and followed this case in

rendering their respective decisions. However, in his

memorandum of decision, Judge Newman cast consider-

able doubt on the applicability of the Fleming case, and

indicated that in the absence of that case, he might have

decided the question differently. (See Appendix D, foot-

note 2, infra 19a). Secondly, insofar as Fleming may

be read so as to imply that such relief may be granted

under Sec. 8-317 of the Uniform Commercial Code, it is

contrary to Connecticut law and should be overruled.

The case involved a breach of contract action in which

the plaintiff sought to attach stock owned by the defend-

ant in subsidiary and affiliated corporations. The con-

tract in question dealt with an agreement for the sale of

stock of a New York corporation, which stock was owned

by various inter-related corporations, including two Con-

necticut corporations, which were the main defendants.

The Court did not order that stock be brought into Con-

necticut for the purpose of attachment. Rather, the

Court merely granted injunctive relief with regard to

the transfer of the stock in question. Since the contract

for the sale of the stock was the subject matter of the

dispute, we have a distinctly different question than the

one presented in the instant case. It is clear that under

Sec. 8-317 of the Uniform Commercial Code, the Court

14

may issue equitable orders to protect the interests of the

parties during the pendency of the litigation, and this

would include injunctive orders dealing with any stock

or other securities which are the subject matter of the

litigation. It does not follow, however, that a court may

go so far as to issue injunctive orders with regard to

stock and securities which have no relation to the litiga-

tion. As a result, it is clear that Fleming is inapplicable

to this case.

On the other hand, the Court of Appeals ignored the

only decision directly on point. Nederlandsche Handel-

Maat-Schappij, N. V. v. Sentry Corporation, 163 F. Supp.

800 (E.D. Pa. 1958). The question was squarely pre-

sented to the District Court in this case, wherein the

plaintiff asked the Court to compel the defendant to bring

shares of stock from other states into the district and

place them in the hands of a United States Marshall for

attachment under Pennsylvania law. The Court held

that such an order was not authorized by existing Penn-

sylvania law,“ nor was it authorized by Sec. 8-317 of

the Uniform Commercial Code:

The defendant asserts that the securities cannot

be attached because they are without the geo-

graphical limits of this court and therefore be-

yond the jurisdiction and not subject to our de-

crees. With this we agree. It is well established

that the basis for a writ of foreign attachment

is the presence of property within the jurisdiction

of the court. (Citations omitted).

Since there appears to be no controversy over the

allegation that the securities in question are in a

place other than Pennsylvania, it is clear that this

court lacks jurisdiction over them, and plaintiff's

»The Uniform Commercial Code provision of 8-317 is exactly

the same in Pennsylvania as in Connecticut.

15

motion for a preliminary injunction must fail.

(Supra at 803).

The only other reported decisions interpreting Sec. 8-317

of the Uniform Commercial Code are not in any way con-

trary to the holding of the District Court in Pennsylvania.

Knapp v. McFarland, 462 F.2d 935 (2d Cir. 1972) dealt

with a sheriff’s right to “poundage” in a case involving

the effectiveness of a levy of execution on a stock cer-

tificate in the hands of a bank acting as custodian.

Secondly, Neifeld v/ Steinberg, 438 F.2d 423 (3d Cir.

1971) is in accord/with the decision quoted above, even

though decided on other grounds. In the course of the

opinion, it was noted that a writ of foreign attachment

which commenced the suit, which was served on a stock-

broker holding some of the defendant’s securities, was

invalid by reason of the sheriff's failure to seize such

securities. The Court pointed out the importance of

manual seizure of the securities in order to effect a valid

attachment. (Supra at 432).

It is also interesting to note that the Court of Ap-

peals referred to the decision of the Fifth Circuit in

Frost v. Davis, 288 F.2d 497 (5th Cir. 1961). However,

in that case, the Court held that the stock must be phys-

ically seized in order to have a valid attachment, and

went on to state:

The requirement that the officer actually seize the

certificate is something more than a procedural

provision; it is a positive statutory provision

against the attachment, levy or garnishment un-

less there is compliance with the act. (at 499).

(See also Westerman v. Gilbert, 119 F. Supp. 355 (D.

R. I. 1953) ).

As a result, we have a distinctly different manner of

interpretation between the District Court of Pennsylvania

16

and the District Court in Connecticut, and insofar as

Neifeld v. Steinberg, supra, is applicable, a conflict be-

tween the Third Circuit and the Fifth Circuit on one

hand, and the Second Circuit on the other hand, in this

important question of the application of the Uniform

Commercial Code provision of 8-317 to the question of

attachment.’

Finally, both the Court of Appeals and the District

Court, as well as the District Court in the Fleming case,

relied upon the citation of Hodes v. Hodes, 176 Ore. 102,

155, P.2d 564 (1945), which is set forth in Comment 2

of the Uniform Commercial Code. It is respectfully

submitted that reliance upon Hodes, a post-judgment pro-

ceeding, is misplaced. In that case, a debtor-husband,

who failed to pay support to his wife, was ordered to

deliver certain stock in an Oregon corporation which he

had concealed across the river in Washington, to an

Oregon sheriff for levy of execution. It is clear from the

decision that the particular nature of the case involving

husband and wife was significant, and that all of the

steps to perfect the attachment had been performed in

Oregon, except seizure. Service had been made person-

all on the debtor-husband, and had been made on the

offices of the corporation located in Oregon. Thus, there

was jurisdiction in Oregon both over the person of the

debtor-husband, and over the stock itself, since it was in

an Oregon corporation. Finally, the stock represented

part of the joint assets of the marriage, and therefore

was subject to levy and equitable orders for that reason

alone, quite apart from the Uniform Stock Transfer Act.

In other words, once again, the stock was part of the

subject matter of the dispute, and not totally extraneous

to the matters in dispute in the litigation.

*It should be noted, however, that Frost v. Davis was not

interpreting 8-317 of the Uniform Commercial Code.

17

There is no claim in this case that the petitioner

transferred stock out of the State of Connecticut or the

United States to avoid litigation. There is no claim that

any securities owned by the petitioner are in any way

related to any issue in this litigation. There is no dis-

pute as to the title of any of the petitioner’s securities.

The only relationship between the petitioner’s securities

and this litigation is the fact that the respondent wishes

to secure its position by requiring the petitioner to bring

into the jurisdiction securities which were never located

in the State of Connecticut. It is respectfully submitted

that the Court of Appeals and the District Court erred

in issuing an order giving extra-territorial effect to a

Connecticut statute.

B. The Court of Appeals failed to address itself

to the question of the extra-territorial effect of

the statute as applied by the District Court

order.

The Court of Appeals did not address itself to the

question of whether a defendant in litigation can be or-

dered to bring assets which had not been fraudulently

concealed in any way into a state before a judgment is

rendered. This is distinctly different from the routine

attachment of assets within the jurisdiction. It is one

thing for a person to voluntarily bring his assets into

the jurisdiction, or to pay any judgments rendered

against him. It is quite another to order him, in the

prejudgment remedy situation, to deposit assets with

the Court which are neither the subject matter of the dis-

pute, nor in any way related to any issue in the litiga-

tion. Such an order gives an unfair advantage to a

plaintiff prior to judgment. It is a startling proposition

to think that the assets of an individual wherever located

can be ordered into any court for the purpose of attach-

ment, before there has been a full development or trial of

the legal issues or merits of a case.

18

Indeed, in this case, we not only have an attempt to

apply a Connecticut statute in states other than Con-

necticut, we have an attempt to apply a Connecticut

statute outside of the territory of the United States.

While in some instances, the Congress of the United

States may have authority to exercise jurisdictional power

on an extra-territorial basis (e.g. Leasco Data Processing

Equipment Corp. v. Maxwell, 486 F.2d 1326 (2d Cir.

1972) ), this is a power which has been narrowly applied

and has never been applied in situations such as the in-

stant one. (See: Airline Stewards and Stewardesses As-

sociation v. TWA, 273 F.2d 698 (2d Cir. 1959), cert.

denied, 362 U.S. 988 (1960), 80 S.Ct. 1074, 4 L.Ed.2d

1031.

It is respectfully submitted that there is no authority

for mandatory injunction directing a defendant to bring

assets from outside of Connecticut inte the state for

attachment, and from outside of the United States into

Connecticut for attachment. Such extra-territorial effect

flies in the face of well established principles and should

not be permitted.

C. The scope and extent of the order is violative

of due process.

As stated above, it is extraordinary indeed to have a

person ordered to bring assets into a jurisdiction, and

thereby lose control over them, for the sole purpose of

attachment in a prejudgment remedy application. As a

result of the harsh effect of attachment and seizure

statutes without an opportunity to be heard, this Court

addressed itself to the problem of procedural due process

in a series of cases. See North Georgia Finishing, Inc. v.

DiChem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751

(1975); Mitchell v. W. T. Grant Co., 416 U.S. 600, 95

S.Ct. 1995, 40 L.Ed 2d 406 (1974); Fuentes v. Shevin,

19

407 U.S. 67, 92 S.Ct. 1983, 82 L.Ed. 556 (1972). As

pointed out by the Court of Appeals, there was prior

notice of the respondent’s motion for prejudgment remedy

and injunction, an opportunity to be heard in the District

Court, and an opportunity for discovery. As a result,

the Court of Appeals concluded that the action of the

District Court in this regard complied with due process

requirements as set forth in the cases above. However,

it is respectfully submitted that application of the due

process clause is not based upon a mechanical or artificial

test as to the steps followed, but must be applied in rela-

tion to the particular litigation and the nature and scope

of the order which is sought.

We are not making a claim that the procedural re-

quirements of the Connecticut statute concerning pre-

judgment remedies were not met. Moreover, there is no

claim that the mechanical steps needed to provide pro-

cedural due process were not met in this case. However,

even though a statute may be valid in its scope, if it is

applied in a manner which is inconsistent with due process

as required by the Fourteenth Amendment to the United

States Constitution, then it may be found to be invalid as

applied. It is respectfully submitted that the nature and

scope of the mandatory injunction order is in itself a

denial of due process.

As we have previously pointed out, there are substan-

tial defenses raised in this case, including matters by

way of set-off and counterclaim. In view of the nature

of the defenses raised by the petitioner, the magnitude of

the dollar amounts involved, and the complicated legal

and factual questions involved, the type and nature of

the hearing on a prejudgment. remedy application is in-

adequate as a matter of law. It is unreasonable to re-

quire a defendant to fully prove his defenses at a pre-

liminary stage in a proceeding, within a short time after

initiation of the suit, and prior to the use of discovery

20

techniques to develop the issues in the case. The effect

of the attachment order in this case is to effectively and

finally deprive the petitioner of the use and enjoyment

of his property, without a meaningful hearing. Sniadach

v. Family Finance Corporation, 395 U.S. 337, 89 S. Ct.

1820, 23 L.Ed.2d 349 (1969). The due process standard

must take into account the nature of the loss to the party

whose property is being seized, the magnitude of the effect

of an attachment order on the defendant, and the ade-

quacy of a hearing which can be granted.

Secondly, we have an even more important due process

question here. Fundamental principles of fairness and

essential due process require that a defendant in a law-

suit not be required to bring his assets from anywhere

in the world into a jurisdiction during the pendency of

litigation. While it may be argued that a man should

be responsible for his debts and obligations, it does not

follow from this principle that he be required at a pre-

judgment stage to bring his assets from wherever they

may be located to a particular jurisdiction for the mere

convenience of a plaintiff in a lawsuit. Although the

order in this case is limited to corporate shares of stock

and other corporate securities, once this kind of attach-

ment is justified, then it would appear that any kind of

attachment for any purpose is justified.

The net effect of the Court order is to place the peti-

tioner in a worse position than if judgment had been

rendered against him after a full and fair trial on the

merits. Pursuant to Sec. 52-367 of the Connecticut Gen-

eral Statutes (22a), the procedure for a levy of execution

on corporate stock is substantially similar to that set forth

in Sec. 52-289 for the attachment of stock. Stephenson,

op. cit., supra, Sec. 251; see Winslow v. Fletcher, supra.

Under these circumstances, the attachment order of the

District Court places the defendant in a substantially

worse position than he would have been in if judgment

21

had been rendered against him after a trial on the merits.

By what right is a plaintiff entitled to such an unfair

advantage prior to judgment?

In applying the due process clause under the Four-

teenth Amendment, this Court has in certain situations

applied a standard based upon “traditional notions of

fair play and substantial justice.” Milliken v. Meyer,

311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940).

As a result, there is a long line of cases, beginning with

International Shoe Company v. Washington, 326 U.S. 310,

66 S.Ct. 154, 90 L.Ed. 95 (1945), and culminating in the

recent decision in Shaffer v. Heitner, — U.S. —, 53 L.Ed.

2d 683 (1977). While these cases are not directly ap-

plicable, the basic principle enunciated in this series of

cases would appear to be applicable to the facts of this

case. In determining whether or not jurisdiction could

be exercised, this Court, beginning with the International

Shoe case, turned away from a mechanical or artificial

evaluation of a defendant’s activities in the forum state,

to review the kind and quality of contact which the forum

state has with a party in order to determine whether or

not jurisdiction may properly be exercised. As noted in

the International Shoe case:

Whether due process is satisfied must depend

rather upon the quality and nature of the activity

in relation to the fair and orderly administration

of the laws which it was the focus of the due

process clause to insure. That clause does not

contemplate that a state may make binding a

judgment in personam against an individual or

corporate defendant with which the state has no

contact, ties or relations. (Supra at 319).

In the instant action, we have in personam jurisdic-

tion over the petitioner. He is a resident of Connecticut,

and has been for a number of years. However, simply

because there is in personam jurisdiction over a person

22

does not lead to a conclusion that the person may be or-

dered to deposit assets wherever located with the District

Court in Connecticut for the sole purpose of attachment,

consistently with the due process clause. This is especially

true in a prejudgment remedy stage of a case. The

International Shoe Co. test was recently applied by this

Court in Shaffer v. Heitner, supra, in which Deleware

asserted jurisdiction against non-resident corporate fidu-

ciaries whose sole contact with the state was ownership

of stock which was not related to the subject matter of

the litigation, nor related to the underlying cause of ac-

tion. Mr. Justice Marshall, in delivering the opinion

of the Court, analyzed in considerable detail the naturé

of the due process test, both as to in personam and as to

in rem and quasi in rem jurisdiction. It was concluded

that the Delaware statute in question, basing jurisdiction

quasi in rem, did not meet the minimum contacts test

enunciated in International Shoe Co. and other cases, and

thus the assertion of jurisdiction over the defendants in

that case was “inconsistent with that constitutional limi-

tation on state power.” (53 L.Ed.2d at 703). The basic «

rationale of Shaffer v. Heitner, supra, and other similar

decisions, is that there are limitations upon the exercise

of jurisdiction over a person or property based upon the

due process clause of the Fourteenth Amendment, which

must not only take into account the procedures involved,

but also “traditional notions of fair play and substantial

justice”, and the scope and effect of an order may not

be “inconsistent with the basic values of our constitu-

tional heritage.” (53 L.Ed.2d at 705).

As a result, it is respectfully submitted that a pre-

judgment remedy attachment order which directs a de-

fendant to bring assets into the jurisdiction which had

never been located here for the sole purpose of permitting

the attachment of those assets, is violative of those “tradi-

tional notions of fair play and substantial justice.” Such

an order is devastating on the person. There is no valid

23

basis for the conclusion that there has been any attempt

to conceal assets or remove them from the jurisdiction

of the Court. Moreover, there is no justification for the

extension of jurisdiction, under the Connecticut prejudg-

ment remedy procedure, to any assets wherever they may

be located.

The nature and scope of the prejudgment remedy

order of the Court is unconstitutional in its nature and

violates the due process clause of the Fourteenth Amend-

ment, and should be reversed.

CONCLUSION

For these reasons, it is respectfully submitted

that a writ of certiorari should issue to review the

judgment and opinion of the United States Court

of Appeals for the Second Circuit.

Respectfully submitted,

FRANK W. MURPHY

SLAVITT, CONNERY & VARDAMIS

618 West Avenue

Norwalk, Connecticut 06852

(203) 838-7555

Attorney for Petitioner

APPENDICES

— —

1a

APPENDIX A

Opinion of the United States Court of Appeals

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

No. 991—September Term, 1976.

(Argued May 26, 1977 Decided September 1, 1977.)

Docket No. 77-7026

—ͤ —k—ñ ~~ ee —

INTER-REGIONAL FINANCIAL GROUP, INC.,

Plaintiff-Appellee,

v.

CYRUS HASHEMI,

Defendant-A ppellant.

—ͤ——— = 49 — —

Before:

VAN GRAAFEILAND, Circuit Judge,

MEHRTENS * and PIERCE,** District Judges.

tg <> —ñ ñ ñ́ů————

Appeal from an order entered in the Distriet of Con-

necticut, Jon O. Newman, Judge, directing the defendant

to bring certain stock certificates into the State of Con-

necticut and to surrender them to the clerk of the court

to be attached.

Affirmed.

* Of the Southern District of Florida, sitting by designation.

** Of the Southern District of New York, sitting by designa-

tion.

2a

Appendix A—Opinion of the United States

Court of Appeals

FRANK W. MurpPHy, Esq., Norwalk, Conn.

(Slavit, Connery & Vardamis, Norwalk,

Conn., of counsel), for Defendant-A ppel-

lant.

PAUL E. KNAG, Esq., Stamford, Conn. (Cum-

mings & Lockwood, Stamford, Conn., of

counsel), for Plaintiff-A ppellee.

rr) 2

PIERCE, District Judge:

This is an appeal from an order entered in the United

States District Court for the District of Connecticut, Jon

O. Newman, Judge, which granted plaintiff’s motion for a

prejudgment attachment and for an order directing the

defendant to deliver into the custody of the clerk of the

court certain stock certificates to be attached to secure a

judgment sought in a breach of contract action. We affirm.

I.

Plaintiff, Inter-Regional Finance Group (Inter-Re-

gional) commenced this diversity action to recover dam-

ages from the defendant, Cyrus Hashemi (Hashemi), for

an alleged breach of an indemnity agreement. The com-

plaint alleges that pursuant to a loan agreement dated

November 28, 1975, Coronado Group, Ltd., a company of

which Hashemi was then president, borrowed $250,000

from the Banque Scandinave en Suisse. The loan was

secured by an irrevocable letter of credit, applied for and

obtained by Inter-Regional from the First National Bank

of St. Paul (First National). In its application for the

letter of credit, Inter-Regional agreed to reimburse First

National for any payments made pursuant to the letetr

of credit.

3a

Appendix A—Opinion of the United States

Court of Appeals

The complaint further alleges that to secure perform-

ance by Coronado, Hashemi subsequently entered into an

indemnity agreement with Inter-Regional whereby Ha-

shemi was to reimburse Inter-Regiona! for any payments

made to First National. On July 15, 1976, First National

paid $250,000 to Banque Scandinave en Suisse under the

letter of credit, and on the same date was reimbursed by

Inter-Regional. It is alleged that Inter-Regional there-

after unsuccessfully sought indemnity from Hashemi.

The complaint filed in this action was accompanied by

an application for a prejudgment remedy calling for the

attachment of certain of Hashemi’s persona’ property and

an “injunction” requiring Hashemi to bring certain secu-

rities into the state for the purpose of attachment. Plain-

tiff sought an order to show cause, which was issued by

Judge Zampano, with a temporary restraining order en-

joining the defendant from transferring any of his secu-

rities. The application for the prejudgment remedy was

referred to Judge Newman, who twice extended the re-

straining order and scheduled the matter for a prejudg-

ment hearing pursuant to Conn. Gen. Stat. Ann. § 52-278d.

After the hearing Judge Newman made a finding of

“probable cause” that Inter-Regional would succeed on the

merits and that plaintiff would suffer irreparable harm

unless the order as sought y plaintiff was entered. Judge

Newman thereafter issued an order on December 28, 1976

directing the defendant to surrender to the deputy clerk

of the United States District Court in Bridgeport, Con-

necticut, certificates evidencing publicly traded, market-

able securities owned by him, with an aggregate market

value of $312,500, or, if the defendant did not own such

publicly traded, marketable securities, he was directed to

surrender privately traded securities or a combination of

publicly and privately traded securities to be attached in

4a

Appendix A—Opinion of the United States

Court of Appeals

the manner authorized by the court. The defendant ap-

peals from this order.

II.

As a general rule, orders granting, denying, continu-

ing or vacating attachments are not reviewable either as

final orders pursuant to 28 U.S.C. § 1291, interlocutory

orders pursuant to 28 U.S.C. § 1292(a) (1) or, under the

“collateral order” exception provided by Cohen v. Bene-

ficial Loan Corp., 337 U.S. 541, 546 (1949). See W. T.

Grant Co. v. Haines, 531 F.2d 671, 678 (2d Cir. 1976);

Rosenfeldt v. Comprehensive Accounting Service, Corp.,

514 F.2d 607, 610 (7th Cir. 1975) (Stevens, J.); West v.

Zurhorst, 425 F.2d 919, 920 (2d Cir. 1970) (Friendly,

J.). However, here the order of the district court re-

quired the defendant to do more than simply surrender

the certificates to the custody of the clerk of the court to

be attached. The defendant was first required to bring

the certificates into the State of Connecticut from their

locations in other states, and indeed, even in other coun-

tries. Since the transportation of the certificates into the

state was a necessary step preceding the actual attach-

ment, we find that the district court below and the parties

correctly treated the December 28th order as an injunc-

tion. Cf. Rosenfeldt, supra at 609. As such, it is appeal-

able pursuant to 28 U.S.C. § 1292(a) (1).

Although plaintiff-appellee argues on this appeal that the

December 28th order is not an injunction and therefore not appeal-

able, the papers submitted on plaintiff’s behalf in the district

court, not only contemplated the issuance of a mandatory injunc-

tion but specifically referred to the order sought as an “injunc-

tion”.

5a

Appendix A—Opinion of the United States

Court of Appeals

III.

Having concluded that the order is an injunction and

thus appealable, we turn to appellant’s arguments that the

district court did not have the authority under Connecti-

cut law to direct him to bring securities into the state in

aid of an attachment and that he was denied due process.

Rule 64 Fed.R.Civ.P. makes available to federal dis-

trict courts all remedies providing for the seizure of prop-

erty to secure satisfaction of judgment in the same man-

ner as is provided by law of the state in which the court

is sitting. Under Connecticut law, the prejudgment

remedy of attachment is authorized by § 8-317 of the

Uniform Commercial Code, Conn. Gen. Stat. Ann. § 42a-

8-317. Although this section requires that there be actual

physical possession and control of the stock certificates by

the sheriff before the attachment is perfected, see Neifeld

v. Steinberg, 438 F.2d 423, 432 (3d Cir. 1971), subdivi-

sion (2) of the statute authorizes the court to issue an

injunction in aid of the attachment which may take the

form of a mandate requiring the defendant to bring the

8 8-317 provides in relevant part:

(1) No attachment or levy upon a security or any

share or other interest evidenced thereby which is out-

standing shall be valid until the security is actually seized

by the officer making the attachment or levy but a security

which has been surrendered to the issuer may be attached

or levied at the source.

(2) A creditor whose debtor is the owner of a security

shall be entitled to such aid from courts of appropriate

jurisdiction, by injunction or otherwise, in reaching such

security or in satisfying the claim by means thereof as is

allowed at law or in equity in regard to property which

cannot readily be attached or levied upon by ordinary legal

process.

6a

Appendix A—Opinion of the United States

Court of Appeals

certificates into the state, as was done here, and to deliver

them into the actual physical control and possession of

the sheriff. See Fleming v. Gray Manufacturing Co.

32 F. Supp. 724, 726 (D. Conn. 1973); Cf. Frost v. Davis,

288 F.2d 497, 499 (5th Cir. 1961); Wilson v. Columbia

Casualty Co., 118 Ohio St. 319, 160 N.E. 906 (1928). But

see, Nederlandsche Handel-Maatshappij, N.V. v. Sentry

Corp., 163 F. Supp. 800, 803 (E.D. Pa. 1958). Directly

on point is the Fleming case which the court below relied

upon as support for its interpretation of Connecticut law

on prejudgment attachments. Further support is found

in the Comment 2 of the Uniform Commercial Code, which

is re-codified in the Connecticut statute. The citation of

Hodes v. Hodes, 176 Or. 102, 155 F.2d 564 (1945) therein

makes it evident that the drafters of the Code envisioned

the exact procedure as was employed by the district court.

In Hodes, the court in proceeding under the Code’s pre-

cursor, the Uniform Stock Transfer Act, directed that a

debtor-husband, who had failed to pay support, deliver

certain stock located in another state to the Oregon sheriff.

Moreover, it appears that even prior to Hodes, one Con-

necticut court issued a similar order to a defendant in

order to facilitate the perfectior of a prejudgment attach-

ment. See White v. Leary, 6 Conn. Supp. 37 (1938).

We find, therefore, that Judge Newman properly inter-

852-289 Conn. Gen. Stat. Ann. also authorizes prejudgment

attachments. However, this statute has long been interpreted as

allowing a levy only upon stock of corporations incorporated in Con-

necticut under the now timeworn rationale that ownership in stock

existed only at the situs of the corporation. See, e. g., Winslow

v. Fletcher, 53 Conn. 390, 4 A. 250 (1886), Appellant relies heavily

upon this interpretation of the statute in support of his argu-

ment. However, Judge Newman specifically rejected the notion

that § 52-289 had any application to the facts of the instant case

since none of the companies involved were Connecticut corpora-

tions. Thus, we find this reliance by appellant to be misplaced.

7a

Appendix 4 - Opinion of the United States

Court of Appeals

preted the Connecticut statute as authorizing the injune-

tion issued.

Appellant's claim that he was denied procedural due

process is without merit. He was afforded prior notice of

plaintiff's motion for prejudgment remedy and an injunc-

tion, given an opportunity to be heard on the motion at a

prejudgment hearing held in compliance with Bell v. Bur-

son, 402 U.S. 535, 540 (1971), and provided with an

opportunity for discovery. The actions of the district

court in this regard complied with due process require-

ments. See North Georgia Finishing, Inc. v. Di-Chem,

Inc., 419 U.S. 601 (1975); Mitchell v. W. T. Grant Co.,

416 U.S. 600 (1974); Fuentes v. Shevin, 407 U.S. 67

(1972).

Thus, finding appellant’s arguments to be without

merit, we hold that the December 28th order issued by

the district court met the requirements of Connecticut law

with respect to prejudgment attachment.

Affirmed.

8a

APPENDIX B

Opinion of the United States District Court

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

Civil Action No. B-76-216

— — — 2 — —

INTER- REGIONAL FINANCIAL GROUP, INC.,

Plaintiff,

V.

CRUS HASHEMI,

Defendant.

en —

INJUNCTION

This cause came on to be heard upon order to show

cause on plaintiff's motion for an injunction and pre-

judgment remedy, and the court, having considered the

complaint, the affidavits and deposition transcript sub-

mitted and, as to finding of fact number 10, the state-

ments of defendant’s counsel in his brief, makes the fol-

lowing findings of fact and conclusions of law:

FINDINGS OF FACTS

1. The defendant Cyrus Hashemi is a citizen of Iran,

with his usual place of abode at 44 Arrowhead Way,

Darien, Connecticut.

2. Plaintiff is a Delaware corporation whose princi-

pal offices are located in Minneapolis, Minnesota.

3. The amount in controversy herein exceeds the sum

of $10,000 exclusive of interest and costs.

9a

Appendix B—Opinion of the United States District Court

4. Plaintiff made application to the First National

Bank of St. Paul on November 24, 1975 for a Letter of

Credit to secure a loan made to Coronado Group, Ltd. by

Banque Scandinave en Suisse. A copy of the application

is attached to the complaint herein.

5. The Letter of Credit was issued by the First

National Bank of St. Paul pursuant to plaintiff’s applica-

tion.

6. Defendant entered into a certain indemnity agree-

ment with the plaintiff dated February 11, 1976, under

which defendant agreed to indemnify and hold harmless

plaintiff from any and all liabilities it might actually be

called upon to pay by reason of, inter ulia, its obligations

under the application for the Letter of Credit dated

November 24, 1975. A copy of the indemnity agreement

is attached to the complaint herein.

7. On July 15, 1976, First National Bank of St.

Paul paid $250,000 to Banque Scandinave en Suisse

under the Letter of Credit and called upon plaintiff to

reimburse it in said amount.

8. The plaintiff paid the First National Bank of

St. Paul the sum of $250,000 on July 15, 1975 pursuant

to its undertaking under the application to reimburse

First National Bank of St. Paul for the amount paid

on the Letter of Credit.

9. Defendant has made no payment to plaintiff de-

spite plaintiff's demand that he do so.

10. All of the defendant’s securities are located out-

side the State of Connecticut, and ‘substantially all of

them are outside the United States. (Defendant’s Brief

on Scope of Attachment Order, p. 2)

10a

Appendix B—Opinion of the United States District Court

11. There is probable cause for plaintiff’s claim that

the defendant is indebted to the plaintiff in a sum in

excess of $250,000 pursuant to said indemnity agree-

ment attached to the complaint herein, and plaintiff will

suffer irreparable injury unless an injunction in aid of

»said attachment issues as prayed by plaintiff.

CONCLUSION OF LAW

Pursuant to applicable Connecticut law and Rules 64

and 65 of the Federal Rules of Civil Procedure, plaintiff

is entitled to a prejudgment remedy and injunction in

aid thereof to secure the claim being made herein.

Upon said findings of fact and conclusion of law, it

is hereby.

ORDERED, that defendant shall surrender to the Deputy

Clerk of this Court in Bridgeport for attachment by the

United States Marshal certificates evidencing publicly

traded, marketable securities owned by him with an

aggregate market value of $312,500, provided that if the

defendant does not own publicly traded, marketable secu-

rities with an aggregate market value of not less than

$312,500, he shall surrender to said Deputy Clerk all

his publicly traded, marketable securities plus privately

traded securities with an aggregate market value of not

less than $500,000 minus 160% of the value of publicly

traded securities surrendered; all such securities shall be

endorsed in blank, to be attached in accordance with the

attachment process authorized herein, and shall not be

transferred pending further order of this Court, and it

is further

ORDERED that in the first instance, the determination

of value shall be made in good faith by the defendant;

that the defendant shall furnish the plaintiff with all

lla

Appendix B—Opinion of the United States District Court

documentation on which he relies for his determination

of value and that in the event plaintiff gontests such de-

termination of value by the defendant, the issue may be

presented to this Court for a determination by it, and it

is further

ORDERED that surrender of the securities as aforesaid

shall be effected on or before Jan. 14, 1977, and it is

further

ORDERED that a writ of attachment and garnishment

may issue to secure the sum of $300,000.

Dated this 20 day of Dec., 1976.

s, JON O. NEWMAN

JON O. NEWMAN

United States District Judge

12a

APPENDIX C

Ruling on Application for Prejudgment Remedy

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

Civil No. B-76-216

rr OO ꝓ dÜ4—

INTER-REGIONAL FINANCIAL GROUP, INC.

V.

CYRUS HASHEMI

rr —

Plaintiff seeks $250,000 in damages plus costs and

attorney’s fees for defendant’s alleged breach of an in-

demnity agreement. Jurisdiction is based on diversity

of citizenship. Plaintiff seeks a prejudgment remedy

under Fed. R. Civ. P. 64 and § 52-278a of the Connecticut

General Statutes to secure any judgment that may be

entered. Since the assets of the defendant that are

presently located in the state of Connecticut fall far short

of the amount claimed in the suit, plaintiff asks that the

Court enter an order enjoining the transfer of defendant’s

securities and requiring the defendant to bring his stock

certificates, currently located in other states and countries,

into the state of Connecticut, where they will become

subject to the prejudgment remedy.

The complaint alleges that pursuant to a loan agree-

ment dated November 28, 1975, Coronado Group, Ltd.

borrowed $250,000 from Banque Scandinave en Suisse.

The loan was secured by an irrevocable letter of credit

issued by the First National Bank of St. Paul. The

letter of credit had been obtained by the plaintiff for

13a

Appendix C—Ruling on Application for

Prejudgment Remedy

Coronado. In plaintiff's application for the letter of

credit, plaintiff agreed to reimburse First National Bank

of St. Paul for any payments made under the letter of

credit. Subsequently plaintiff and defendant entered into

an indemnity agreement under which defendant agreed

to indemnify and hold the plaintiff harmless from any

and all liabilities it might be called upon to pay by

reason of its obligations under the application for the

jetter of credit. On July 15, 1976, First National Bank

of St. Paul paid $250,000 to Banque Scandinave en Suisse

under the letter of credit, and on the same date the

plaintiff reimbursed the St. Paul bank. Plaintiff de-

manded indemnification from the defendant under the

indemnity agreement, but the defendant has made no

payment.

The defendant admits the execution of the agreement

but interposes certain affirmative defenses and counter-

claims. He asserts that the plaintiff's representatives on

the Coronado Board of Directors breached their fiduciary

duty to Coronado and that plaintiff, rather than de-

fendant, breached the agreement. He cites the plaintiff's

failure to pay the interest on the note to put off the date

when the note would be called due, and imputes to the

plaintiff an intention to force Coronado into liquidation

to the detriment of Coronado and defendant as minority

stockholder in Coronado.

Under § 52-278d of the Connecticut prejudgment

remedy statute the defendant has the right to a hearing

on whether or not there is probable cause to sustain the

validity of the plaintiff's claim. This hearing has been

held, and the parties have had a full opportunity to

brief the issues.

l4a

Appendix C —Ruling on Application for

Frejudgment Remedy

. The Connecticut probable cause standard on a pre-

judgment remedy hearing is no higher than the “reason-

able grounds to believe” standard of probable cause in

the context of criminal law. It is not necessary at this

stage to predict the outcome. Long v. Abbott Mortgage

Corp., Civil No. N-74-133 (D. Conn. Apr. 28, 1975).

This probable cause standard is met in the present case.

The indemnity agreement clearly sets forth the defend-

ant’s obligations. The exhibits and affidavit of Robert

Fischer support the allegations of the complaint that

these obligations were triggered when the plaintiff made

its payment to the St. Paul bank and that the defendant

breached ‘ts obligations by failing to reimburse the

plaintiff. While it is possible that defendant will succeed

in defeating plaintiff's claim at trial, the probable validity

of the claim is sufficiently shown at this stage.

The defendant argues that the probable cause neces-

sary for a prejudgment remedy is undermined by the

existence of defenses and counterclaims which might

ultimately defeat plaintiff's claims or drastically diminish

the amount of recovery or even entitle defendant to

recover from the plaintiff. The mere assertion of such

defenses and counterclaims will not deprive plaintiff of its

right to a prejudgment remedy once it has established

probable cause. Perhaps, on a record quite different from

the present one, a defense might be so strong as to.make

meaningless the otherwise-established probable cause. A

statute of limitations operating to bar a claim might be

an example. In the present case, however, while the

defenses may be established at trial, they do not appear

on the present record to be so certain as to bar the

plaintiff from obtaining security while the issues are

litigated. It is significant that plaintiff has submitted

affidavits in support of its claim while the defendant’s

15a

Appendix C—Ruling on Application for

Prejudgment Remedy

own claims remain unsubstantiated apart from the allega-

tions of the pleadings and the arguments of counsel.

Nor can the defendant’s counterclaim seeking $300,000

in damages plus ancillary relief deprive the plaintiff of a

prejudgment remedy. The Court has considerable latitude

under Fed. R. Civ. P. 13 to treat these counterclaims

separately from the plaintiff's claims. Although de-

fendant might prefer that the Court treat the plaintiff's

claims and the defendant’s counterclaims as canceling each

other out at the prejudgment stage, it seems preferable

to grant plaintiff its remedy once it establishes probable

cause on its own claims and allow defendant to proceed

independently for his own prejudgment if he can make a

similar showing.

The entry of a prejudgment remedy is therefore appro-

priate. The only remaining question is whether the Court

can require the defendant to bring into the state of Con-

necticut the stock certificates presently located outside

the jurisdiction. It is acknowledged that these stock

certificates evidence shares in out-of-state corporations,

and thus § 52-289, regulating attachment of corporate

rights or shares, is inapplicable since that section has

been construed to apply only to shares of stock in domestic

corporations. Winslow v. Fletcher, 53 Conn. 390 (1885).

Attachment and levy upon shares of stock in all cor-

porations, including corporations not incorporated in the

state of Connecticut, are now governed by § 8-317 of the

Uniform Commercial Code, Conn. Gen. Stat. § 42a-8-317.

That section provides that no attachment or levy upon

a security is valid until the security is actually seized

by the officer making the attachment. To deal with the

problem of securities that are not readily accessible to

16a

Appendix C—Ruling on Application for

Prejudgment Remedy

physical seizure, § 8-317(2) provides that a creditor

“shall be entitled to such aid from courts of appropriate

jurisdiction, by injunction or otherwise, in reaching such

security or in satisfying the claim by means thereof as

is allowed at law or in equity in regard to property which

cannot readily be attached or levied upon by ordinary

legal process.” (Emphasis added). Clearly this Court

could use its injunctive powers to require the defendant

to deliver up the securities if they were located within

the state. And, although enforcement considerations be-

come somewhat more problematic when the securities are

located out-of-state,’ the authority of the Court to enter

an order of the sort requested by the plaintiff has already

been established in the District of Connecticut. Fleming

v. Gray Mfg. Co., 352 F. Supp. 724 (D. Conn. 1973).

In Fleming the plaintiffs sought to attach certain securi-

ties located outside the state of Connecticut. They re-

quested an order enjoining the defendants from trans-

ferring the securities and requiring them to deliver the

share certificates to the Court. This relief was granted,

with the exception that where the defendant owned shares

in certain subsidiaries which then in turn owned shares

in still other corporations, and where only some of the

first level of subsidiaries were subject to the jurisdiction

of the Court, the Court held that the injunction could

reach only those parties actuaily before the Court. Thus

the only way in which the Court’s order fell short of

the requested relief in that case was that the subsidiaries

not subject to the Court’s jurisdiction were not enjoined

from transferring the stock they owned nor required to

deliver the certificates to the Court.

The Court’s contempt power, of course, is always available.

17a

Appendix C—Ruling on Application for

Prejudgment Remedy

On the basis-of the Fleming case, the type of pre-

judgment remedy including an injunction sought by the

plaintiff is granted. The injunction against transfer of

securities and requiring defendant to bring certificates

evidencing his securities into the jurisdiction will be

granted only to the extent reasonably necessary to secure

the amount prayed for in the complaint. Publicly traded

securities with a value of 125% of the ad damnum or

privately traded securities with a value of 200% of the

ad damnum will be deemed sufficient security. A revised

form of the proposed order may be submitted.

Dated at New Haven, Connecticut, this 28th day of

October, 1976.

/s/ JON O. NEWMAN

JON O. NEWMAN

United States District Judge

18a

APPENDIX D

Ruling on Motion for Reargument

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

Civil No. B-76-216

En ae ĩů—rßvvX————

INTER-REGIONAL FINANCIAL GROUP, INC.

V.

CYRUS HASHEMI

——— 2. ł ˙VU——

On October 28, 1976, this Court granted plaintiff's

application for a prejudgment remedy. The ruling pro-

vided in part for defendant to bring into the District of

Connecticut securities now held outside the jurisdiction

in an amount sufficient to secure the sum of $300,000.

An injunction implementing that ruling was entered on

December 28, 1976. The date for compliance was January

14, 1977. Defendant took an appeal from that order

and has now moved to reargue in this Court.

At the time the motion for reargument was filed, defendant

was not in compliance with the Court’s order, and a motion for

contempt filed by the plaintiff was pending. At the time of the

show cause hearing on the contempt motion, the Court indicated

to the defendant that it would take no action on his motion to

reargue unless and until he took steps toward compliance. Recent

communications from the defendant and his counsel show that

such steps are being taken. While full compliance has not yet

occurred, a ruling on the motion for reargument is now appro-

priate.

19a

Appendix D—Ruling on Motion for Reargument

The prejudgment remedy in this case was entered

largely on the authority of Fleming v. Gray Mfg. Co.,

352 F. Supp. 724 (D. Conn. 1973), a prior decision of

this District, from which no appeal was taken. Neither

the United States Court of Appeals for the Second Circuit

nor the Connecticut Supreme Court has authoritatively

spoken on the issue of the authority of a trial court at

the prejudgment stage to order a defendant over whom

the court has personal jurisdiction to bring into the juris-

diction assets held outside the court’s territorial juris-

diction. The Fleming case supports the order entered,

but there is other authority to the contrary. See Neder-

landsche Handel-Maat-Schappij, N. V. v. Sentry Corp., 163

F. Supp. 800 (E.D. Pa. 1958). The defendant raises

ddricus questions going to the power of the Court to

issue such an order. These questions deserve authorita-

tive resolution.’

The matter is on appeal to the Second Circuit at the

present time, and this Court lacks jurisdiction to modify

its order. Even if jurisdiction were re-acquired and,

upon reargument, the order were vacated, the plaintiff

would undoubtedly seek to appeal. Since defendant’s

ppeal has been scheduled for briefing and argument by

2 While this Court felt obliged to follow Fleming as the law

of this District, were the question open, I would have questioned

whether the Uniform Commercial Code provision relied on in

Fleming, Conn. Gen. Stat. § 42a-8-317(2), was dispositive. That

provision clearly permits a court with in personam jun isdiction

over a defendant to require that defendant to bring his securities

into the jurisdiction when the lawsuit seeks to determine owner-

ship of the shares and perhaps other interests in the shares as

well. But it is far less certain whether that provision authorizes

a prejudgment remedy to bring shares into the jurisdiction solely

to secure a judgment yet to be entered in a suit unrelated to de-

termining stock interests.

20a

Appendix D—Ruling on Motion for Reargument

the Court of Appeals, the only effect of granting the

motion to reargue would be to delay the time of ultimate

resolution of the issue.

Accordingly, the motion for reargument is denied.

Dated at New Haven, Connecticut, this 12 day of

April, 1977.

/s/ JON O. NEWMAN

JON O. NEWMAN

United States District Judge

21a

APPENDIX E

Excerpts From Relevant Connecticut Statutes

§ 52-289. Attachment of corporate rights or shares

Rights or shares in the stock of any corporation, to-

gether with the dividends and profits due and growing

due thereon, may be attached and taken on execution.

Such attachment shall be made by leaving a true and

attested copy of the process and of the accompanying

complaint, with the proper endorsement thereon of the

officer serving the same, with the defendant or at his

usual place of abode, if within the state, and with the

secretary, clerk or cashier of such corporation or, if such

corporation has no secretary, clerk or cashier or if he is

absent from the state, then at the principal place in the

state where such corporation transacts its business or

exercises its corporate powers. When an officer with a

writ of attachment applies to such secretary, clerk or

cashier, for the purpose of attaching such rights or shares,

the secretary, clerk or cashier shall furnish him with a

certificate, under his hand, in his official capacity, specify-

ing the number of rights or shares which the defendant

holds in the stock of such corporation, with the encum-

brances thereon, if any, and the amount of dividends

thereon due, and upon the failure of any secretary, clerk

or cashier to furnish such officer with such certificate, he

shall be fined not more than two hundred dollars. Such

rights or shares, together with the dividends and profits,

shall be held to respond to the judgment which may be

recovered in such action for sixty days after its rendi-

tion; but no attachment of shares of stock for which a

certificate is outstanding shall be valid until such cer-

tificate is actually seized by the officer making the attach-

ment, or is surrendered to the corporation which issued

it. (1949 Rev., § 8031; 1959, P. A. 574, § 5.)

22a

Appendix E—Excerpts From Relevant

Connecticut Statutes

§ 42a-8-317. Attachment or levy upon security

(1) No attachment or levy upon a security or any

share or other interest evidenced thereby which is out-

standing shall be valid until the security is actually seized

by the officer making the attachment or levy but a secu-

rity which has been surrendered to the issuer may be

attached or levied at the source.

(2) A creditor whose debtor is the owner of a secu-

rity shall be entitled to such aid from courts of appro-

priate jurisdiction, by injunction or otherwise, in reach-

ing such security or in satisfying the claim by means

thereof as is allowed at law or in equity in regard to

property which cannot readily be attached or levied upon

by ordinary legal process. (1959, P.A. 133, § 8-317, effec-

tive Oct. 1, 1961.)

§ 52-367. Levy on corporate stock

The levy of an execution on the rights or shares which

any person owns in the stock of any corporation, together

with the interest, dividends and profits, due and growing

due thereon, shall be by leaving a true and attested copy

thereof with the secretary, clerk or cashier, with an

attested certificate, by the officer making such levy, that

he levies upon such rights or shares to satisfy such execu-

tion; but when any bank incorporated by this state, or

any banking association located and transacting business

in this state, has no cashier or the cashier is absent there-

from, or any other corporation incorporated under the

laws of this state has no secretary or clerk therein, the

officer shall leave the copy of the execution, and the cer-

tificate in this section prescribed, at the principal house

or place in this state where such corporation transacts

23a

Appendix E—Excerpts From Relevant

Connecticut Statutes

its business or exercises its corporate powers. When

any proper officer, with a writ of execution, applies to

such secretary, clerk or cashier, for the purpose of so

levying upon such rights or shares, the secretary, clerk

or cashier shall furnish him with a certificate under his

hand, in his official capacity, stating the number of rights

or shares the defendant holds in the stock of such corpo-

ration, with the encumbrances thereon, if any, and the

amount of dividends thereon due. Thereupon such officer

shall, as in other cases, post and sell the same, together

with such interest, dividends and profits, or such part

thereof as is sufficient to satisfy such execution; and shall

give to the purchaser a written conveyance of such rights

or shares; and shall also leave with such secretary, clerk

or cashier a true and attested copy of the execution and

of his return thereon; and the purchaser shall thereupon

be entitled to all dividends and stock, and to the same

privileges as a member of such corporation as such debtor

was entitled to; but no levy upon shares of stock for

which a certificate is outstanding shall be valid until

such certificate is actually seized by the officer making

the levy, or is surrendered to the corporation which

issued it. (1949 Rev., § 8110; 1959, P.A. 574, § 6.)

24a

APPENDIX F

(A portion of the testimony of Cyrus Hashemi before

the Hon. Jon O. Newman, on February 23, 1977)

CYRUS HASHEMI, called as a witness, having been

first duly sworn by the Clerk, testified as follows:

The Clerk: State your name and address.

The Witness: Cyrus Hashemi, 44 Arrowhead

Way, Darien, Connecticut.

Direct Examination by Mr. Murphy:

. Mr. Hashemi, do you own any publicly-owned

traded marketable stocks or bonds? A. I do.

Q. And can you give us an approximate value of those

stocks and bonds at market at the present time? A. I

believe the approximate value is about 60 or 62 thousand

dollars.

Q. Are those bonds located in the—stocks or bonds

located in the State of Connecticut? A. No, they are not.

Q. Have they ever been located in the State of Con-

necticut? A. No.

Q. Are they located in the United States? A. No,

they are not.

Q. Have they ever since you have been the owner of

any of them been located in the United States? A. No.

Q. Do you have them physically in your possession

right now? A. No.

Q Are they held in some type of management account?

A. They are.

Q. Do you have a present up-to-date accounting as to

the management status of that account? A. I don’t, but

I could ask for one.

25a

Appendix F—(A portion of the testimony of Cyrus

Hashemi before the Hon. Jon O. Newman, on

February 23, 1977)

The Court: Are these securities available to

you on your demand?

The Witness: They are in a management ac-

count, your Honor, and that would mean that I

would have to physically demand their release to

me and when I do, they release them.

The Court: All right. When you say phys-

ically you don’t mean in person, do you?

The Witness: Yes, sir, your Honor.

The Court: They would honor your cabled in-

structions?

The Witness: No, your Honor, because my

signature is there and I have to sign there in per-

son. It’s a management account. I can certainly

have a power of attorney drawn and get someone

else to do. I can do that, too.

The Court: Is there someone at the location

of these securities who you could authorize to do

that?

The Witness: Someone with the management

company or

The Court: In that city. I don’t want to

have you unnecessarily incur the expense of flying

to wherever these are. Is there a law firm or some

official who you could authorize?

The Witness: It’s very difficult to do that. I

would have to send somebody from here or go

myself, but I am prepared to do that.

26a

Appendix F—(A portion of the testimony of Cyrus

Hashemi before the Hon. Jon O. Newman, on

February 23, 1977)

Your Honor, may I also say that I have sub-

mitted to the Court of Appeals this proposal about

three weeks ago to the effect that I was prepared

to have these securities brought into the country

and posted and I believe in that letter I also said

that I was prepared to sign an affidavit to the

effect that I did not—I do not own more than this

amount of publicly traded securities.

The Court: All right.

a ee