Wells Fargo Bank NA v. Wyo Tech Investment Group LLC

          ORDER

          Dominic W. Lanza, United States District Judge

         INTRODUCTION

         In September 2016, CWT Canada II Limited Partnership, Resources Recovery Division, and Jean Noelting (collectively, “Judgment Creditors”) obtained a $7 million judgment in New York state court against Dennis Danzik and RDX Technologies Corporation (collectively, “Judgment Debtors”). In October 2017, the Judgment Creditors' law firm, Schlam Stone & Dolan, LLP (“Law Firm”), utilized this judgment to issue a “restraining notice” to a New York-based branch of Wells Fargo bank. The notice asserted that Wells Fargo was required to freeze a particular account with a balance of $546, 282.55. Upon receipt of the notice, Wells Fargo froze the account.

         Although the Judgment Creditors had reasons to suspect the Judgment Debtors held an interest in the frozen account, the account was not actually held in either of the Judgment Debtors' names. Instead, it was held in the name of Wyo Tech Investment Group LLC (“Wyo Tech”), an Arizona-based company. When Wyo Tech learned its account had been frozen, it complained to the Judgment Creditors and to Wells Fargo, disputed whether the Judgment Debtors had any interest in the account, and threatened to sue. In response, Wells Fargo filed an interpleader action in this Court.

         Since the interpleader action was instituted in November 2017, Wyo Tech has asserted a veritable smorgasboard of counterclaims, crossclaims, and third-party claims. In August 2018, the Court issued an order (Doc. 69) dismissing Wyo Tech's counterclaims against Wells Fargo and directing Wells Fargo to transfer the disputed funds into an account held by the Clerk of Court. That transfer has now occurred, and three additional motions are now fully briefed and ripe for resolution: (1) a motion to dismiss Wyo Tech's crossclaims against the Judgment Creditors and third-party claims against the Law Firm^[1](Doc. 48), (2) Wyo Tech's “Motion for Immediate Release of Wrongly Restrained Funds” (Doc. 72), and (3) Wells Fargo's motion for attorneys' fees and costs (Doc. 85).^[2]

         As explained below, the Court will grant the motion to dismiss Wyo Tech's crossclaims and third-party claims because the Court lacks personal jurisdiction over any of the parties against whom those claims are asserted. Next, the Court will deny Wyo Tech's motion for “immediate release” of the disputed funds because that motion is, in essence, a prematurely-filed summary judgment motion whose resolution should be deferred until later in the case. Finally, the Court will deny without prejudice Wells Fargo's motion for attorneys' fees and costs.

         BACKGROUND

         On November 9, 2017, Wells Fargo brought a complaint for interpleader under 28 U.S.C. § 1335 and Federal Rule of Civil Procedure 22. (Doc. 1.) Wells Fargo was facing competing claims on one of its accounts between Wyo Tech and the Judgment Creditors. In connection with this complaint, Wells Fargo also brought a Motion to Interplead Funds and for Order of Discharge. (Doc. 7.)

         On January 17, 2018, Wyo Tech filed its amended answer. (Doc. 37.) The amended answer included (1) counterclaims against Wells Fargo for wrongful garnishment and aiding and abetting wrongful garnishment and tortious interference with contractual relations and business expectancies; (2) crossclaims against the Judgment Creditors for wrongful garnishment, tortious interference with contractual relations and business expectancies, and abuse of process; and (3) third-party claims against the Law Firm.^[3] The underlying facts alleged in Wyo Tech's answer, and in Wells Fargo's complaint, are essentially identical:

         On or about October 18, 2017, the Law Firm caused a restraining notice, purportedly issued pursuant to section 5222(b) of the New York Civil Practice Law and Rules (“CPLR”), to be served on Wells Fargo at its location at 1755 Broadway, New York, New York 10019. (Counterclaim ¶ 7, Crossclaim ¶ 9; TPC ¶ 8.) The Law Firm was acting on behalf of the Judgment Creditors. (Counterclaim ¶ 7, Crossclaim ¶ 9; TPC ¶ 8.)

         The restraining notice provided that the Judgment Creditors had obtained a judgment in the amount of $7, 033, 491.13 against Dennis M. Danzik and RDX Technologies Corporation (f/k/a Ridgeline Energy Services, Inc.) and that the judgment and accrued interest remained unpaid. (Counterclaim ¶ 8, Crossclaim ¶ 10; TPC ¶ 9.) This judgment had been obtained by the Judgment Creditors in GEM Holdco, LLC, et al. v. CWT Canada II Limited Partnership, et al., Case Index No. 650841/2013, in the Supreme Court of the State of New York, County of New York (“the GEM Holdco case”). (Counterclaim ¶ 12, Crossclaim ¶ 14; TPC ¶ 13.) Wyo Tech was not a party to the GEM Holdco case and was not named as a debtor in the judgment. (Counterclaim ¶ 13; Crossclaim ¶ 15; TPC ¶ 14.)

         The restraining notice issued to Wells Fargo stated that “it appears that you are in possession or in custody of property in which the judgment debtor has an interest as well as account(s) or any other property, tangible or intangible or interest in any property in the name of the judgment debtor, including, but not limited to, the account reflected in the check in the attached Exhibit A, and any other accounts held in the name of Wyo Tech Investment Group LLC.” (Counterclaim ¶ 9; Crossclaim ¶ 11; TPC ¶ 10.) The referenced check was drawn on a Wells Fargo account ending in -2809 in Wyo Tech's name. (Counterclaim ¶ 9; Crossclaim ¶ 11; TPC ¶ 10.) The restraining notice further stated that “you are hereby forbidden to make or suffer any sale, assignment, or transfer of, or any interference with any property in which the judgment debtors have any interest, except upon direction of the sheriff or pursuant to an order of the court until the aforesaid judgment is satisfied or vacated.” (Counterclaim ¶ 11; Crossclaim ¶ 13; TPC ¶ 12.)

         After being served with the restraining notice, Wells Fargo impounded all funds in the -2809 account. (Counterclaim ¶ 14; Crossclaim ¶ 16; TPC ¶ 15.)

         On October 24, 2017, Wyo Tech representatives called counsel for Wells Fargo to point out that Wyo Tech was not listed as a Judgment Debtor and that the money in the frozen account was investor money in which the GEM Holdco case Judgment Debtors had no right, title, or interest. (Counterclaim ¶¶ 15-16; Crossclaim ¶¶ 17-18; TPC ¶¶ 16-17.) The Wyo Tech representatives also contacted the Law Firm that day with the same information and asked the Judgment Creditors to withdraw the restraining notice. (Crossclaim ¶ 19; TPC ¶ 18.)

         On November 2, 2017, Wyo Tech's counsel emailed a letter to Wells Fargo's legal counsel, copying counsel for the Judgment Creditors, again notifying them that the GEM Holdco case Judgment Debtors had no interest in the impounded funds. (Counterclaim ¶ 17; Crossclaim ¶ 20; TPC ¶ 19.) This letter further asserted that the restraining notice was without binding effect and requested that Wells Fargo and the Judgment Creditors restore the funds. (Counterclaim ¶ 17; Crossclaim ¶ 20; TPC ¶ 19.)

         On November 6, 2017, the Law Firm wrote a letter that disputed Wyo Tech's position and asserted that Wyo Tech was liable to the Judgment Creditors for the fraudulent transfers of Dennis Danzik, one of the Judgment Debtors in the GEM Holdco case. (Crossclaim ¶¶ 21-23; TPC ¶¶ 20-22.) The letter claimed that a number of payments had been made from the -2809 account “to Danzik, his family members, his company, or his cronies.” (Crossclaim ¶ 23; TPC ¶ 22.)

         In response, Wyo Tech's counsel sent a letter on November 8, 2017, notifying the Judgment Creditors and their counsel that Wyo Tech would seek “appropriate legal sanctions” if Wyo Tech's rights to the account were not restored. (Crossclaim ¶¶ 25-27; TPC ¶¶ 24-26.) The Judgment Creditors did not respond to this letter and continued to refuse to withdraw the restraining notice. (Crossclaim ¶¶ 28, 30; TPC ¶¶ 27, 29.)

         ANALYSIS

         I. Motion to Dismiss

         The Judgment Creditors and Law Firm (collectively, “the movants”) have moved to dismiss all of the crossclaims and third-party claims asserted against them by Wyo Tech. (Doc. 48.) The movants argue that (1) all of Wyo Tech's crossclaims and third-party claims should be dismissed under Rule 12(b)(2) based on a lack of personal jurisdiction, (2) Wyo Tech's third-party claims should be dismissed because they are “procedurally deficient” under Rule 14(a), and (3) all of Wyo Tech's crossclaims and third-party claims should be dismissed under Rule 12(b)(6) for failure to state a claim. Id.

         The Court must begin by addressing personal jurisdiction. Indeed, “a federal court generally may not rule on the merits of a case without first determining that it has jurisdiction over the category of claim in suit (subject-matter jurisdiction) and the parties (personal jurisdiction).” Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 430-31 (2007). “[T]he Supreme Court has specifically instructed that a district court must first determine whether it has jurisdiction before ...