Mashreqbank v AlGosaibi Heirs: Ruling Against Mashreq

Last week the Supreme Court of New York updated its website for filings in two cases brought by Mashreqbank against the AlGosaibis.  AlGosaibi heirs refer to the 20 individuals who are the partners in Ahmad Hamad AlGosaibi and Brothers.

To put what follows in context, Mashreqbank has filed three cases in the Supreme Court of New York.

1. A case against The International Banking Corporation which has been effectively stayed by a filing under Chapter 15 of Title 11.  This effectively "ended" Mashreq's case in NY.
2. A case against Ahmad Hamad al Gosaibi and Brothers (the partnership as an entity).  In its response AHAB added Maan AlSanea as a Third Party Defendant.  This is NY Supreme Court Case Index #601650/2009.
3. A case against the twenty individuals comprising the AHAB partnership.   This is NY Supreme Court Case Index #602171/2009.

I printed out a massive stack of documents from the latter two cases and have been merrily reading away the AHAB case documents.  I noticed that the stack of documents from Case #3 above was much smaller.  So I've turned my attention temporarily to that case.

Two developments.

First, as noted above, Justice Richard Lowe III has ruled against Mashreqbank's motion for the Court to order an attachment of defendants' assets, personal property, funds and electronic funds transfers that are located in New York.   He has done so "without prejudice" meaning that Mashreqbank can attempt to remedy the defects in its pleading and file again to obtain the order.  The ruling is dated 25 February 2010 but was only filed on the Supreme Court website on 8 March.  If you want to look yourself, this is document #46.  Instructions on how to access the Supreme Court Website are here.  Be sure to use the right Case Index Number 602171/2009 when you search.

What was the problem?  

The lawsuit concerns two FX deals that Masreqbank undertook.  One with AHAB (the US$150 million which is the subject of Case #2 above) and one with TIBC (which is the subject of Case #1 above).  The transactions themselves were not directly with the partners in AHAB.  

Mashreqbank's lawyers failed to "join" the two contracting parties (AHAB and TIBC) to this lawsuit.  

And in the words of Justice Lowe:  

"To state a contractual cause of action against the individual partners where the partnership is not joined, the complaint must allege that the partnership is insolvent or otherwise unable to meet its obligations."

Mashreqbank has not done this in this case.

Perhaps equally or more important (since Justice Lowe is also on the "bench" for Case #2 above), Mashreqbank has not joined the partners as defendants in Case #2 above. This seems a potentially "fatal" flaw.

Speaking about precedent case Vets North, Inc v Libutti 9278 AD2d 406, 407 [2d Dept 2000]) in which Vets North had not joined the partners and then tried to enforce a judgment against the partners:

The Court determined that plaintiff could not enforce the judgment, because the partners had not been named in the proceeding against the partnership.  "Resort to the personal assets of individual partners is possible only as to those general partners who were named individually as defendants and personally served with process in the proceeding which resulted in the judgment." (id; see also Tally v 885 Real Estate Associates, 11 AD3d 242, 242 [1st Dept 2004])

It looks like Mashreqbank's counsel has some filing to do in both cases.  Since their motion was denied without prejudice they get a second bite at the apple.  (Sorry, I couldn't resist the pun).

The second was that earlier Mashreqbank (14 January 2010) had agreed to drop Mr. AlSanea's wife (Sana Abdulaziz Hamad alGosaibi) as a defendant.  The stipulation (Document #45) is  rather short and gives no reason for this move.  It would seem to me that Mashreqbank would be looking to line up as many pockets  as it could to ensure that it retrieves all the money owed it.   And that amount is not inconsiderable.  Beyond the cases in New York, Mashreqbank has filed a case in the UAE for a total amount of AED1,457,164,610.14 (US$397,047,577.70).

Given all that is at stake, letting Ms. Sana off the hook is a rather curious move indeed.