## Facts

- The City of New York (the City) sued CitiSource, Inc. and several individuals, including Stanley M. Friedman and Marvin Kaplan, asserting civil claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) arising from an alleged bribery scheme to obtain a City contract.
- In a related federal criminal case, a jury found Friedman and Kaplan guilty of bribing City officials with shares of CitiSource stock to influence the award of a municipal contract valued at about $22.7 million.
- New York State also pursued proceedings tied to the alleged fraudulent procurement of the contract. In a related civil forfeiture matter, the Manhattan District Attorney obtained state-court attachment orders against certain bank accounts associated with Friedman, Kaplan, and a retirement trust.
- The New York Court of Appeals later ruled the state prosecution barred on double jeopardy grounds, and the state-court attachments were vacated.
- Around the time the state attachments were about to be dissolved, Friedman contacted his bank to ask how to withdraw funds from an attached account.
- After the District Attorney obtained an attachment order against other property, Kaplan attempted to move funds from a retirement trust account into his own name.
- In the federal civil RICO case, the City moved under Fed. R. Civ. P. 64 and New York CPLR article 62 for prejudgment attachment and related restraints covering specified bank accounts tied to Friedman, Kaplan, and the retirement trust.
- The court initially granted temporary relief but then (in a prior opinion) vacated the attachment and denied the requested relief; execution of that order was stayed to permit an expedited appeal.
- The City then moved for reargument, adding CPLR § 6201(3) as a ground for attachment (in addition to CPLR § 6201(4)).

## Issues

1. Whether the City could obtain an attachment under CPLR § 6201(4) in this civil RICO action by relying on federal criminal convictions arising from the same events.
2. Whether the City established a statutory basis for attachment under CPLR § 6201(3) by showing Friedman and Kaplan had disposed of, or were about to dispose of, property with intent to defraud creditors or frustrate enforcement of a potential judgment.
3. Whether, on reargument, the City made a sufficient evidentiary showing to justify a continued attachment of the identified bank accounts and related restraints.

## Decision

- The court granted reargument in part and denied it in part.
- The court again rejected CPLR § 6201(4) as a basis for attachment, concluding the City’s civil RICO damages claims were not “based on” a qualifying judgment in the City’s favor.
- The court granted a continued order of attachment under CPLR § 6201(3) as to the specified bank accounts, based on evidence supporting an inference that Friedman and Kaplan were attempting to place assets beyond reach.
- The court also granted related injunctive relief ancillary to the attachment to prevent transfers or releases of the attached funds while the civil case proceeded.

## Legal Principles

- Fed. R. Civ. P. 64 permits a federal court to use state-law prejudgment remedies, including attachment, in the manner provided by the law of the forum state.
- Under New York law, attachment is an extraordinary remedy; the movant must satisfy the statutory ground for attachment with competent proof and show a probability of success on the merits.
- CPLR § 6201(4) applies when the plaintiff’s cause of action is based on a judgment, decree, or order entitled to recognition and enforcement; a third party’s criminal conviction does not, by itself, supply the required “judgment” foundation for a new civil damages action.
- CPLR § 6201(3) allows attachment when a defendant, with intent to defraud creditors or frustrate enforcement of a judgment that may be entered for the plaintiff, has assigned, disposed of, encumbered, secreted, or removed property (or is about to do so).
- Intent under CPLR § 6201(3) may be shown by circumstantial evidence, including the timing and manner of attempted transfers or withdrawal inquiries in close proximity to known restraints or anticipated civil exposure.
- A court may issue restraints directed to defendants and financial institutions as ancillary relief to preserve the effectiveness of an attachment and maintain the status quo.

## Conclusion

In City of New York v. CitiSource, Inc., the court held that the City could not obtain prejudgment attachment under CPLR § 6201(4) merely by pointing to related federal criminal convictions, but it granted a continued attachment (and related restraints) under CPLR § 6201(3) after finding evidence that Friedman and Kaplan were likely attempting to move or access funds to frustrate collection of any future civil RICO judgment.


City of New York v. CitiSource, Inc., 679 F. Supp. 393 (1988)