New York Court Affirms Separate Entity Ruling On Appeal

On March 11, 2014, a New York state appellate court affirmed an important decision on the "separate entity" rule that is favorable to all multinational banks that maintain a New York branch. New York's separate entity rule protects banks from judgment creditors who seek to restrain or attach assets located outside of New York by serving process on a bank's New York branch. The continued viability of that rule has been called into question since the 2009 Court of Appeals decision in Koehler v. Bank of Bermuda. On October 22, 2012, in Ayyash v. Koleilat,¹ a New York court ruled in favor of Shearman & Sterling clients in reaffirming the continued viability of the separate entity rule and applying it to bar extraterritorial enforcement and discovery requests. The Appellate Division, First Department, affirmed that decision this week on alternative grounds.²The favorable decision in Ayyash adds to the tally of cases that have found that the separate entity rule survived K