Drexel Burnham Lambert Group v. A.W. Galadari
United States Court of Appeals for the Second Circuit
777 F.2d 877 (1985)
A. W. Galadari, a Dubai citizen, and A. W. Galadari Commodities (Commodities), a partnership under Galadari’s management (defendants), had accounts with an affiliate of Drexel Burnham Lambert Group, Inc. (Drexel) (plaintiff). In 1982, Galadari and Commodities executed a promissory note to the affiliate for about $19.5 million. The note stipulated that New York law would apply and was signed in New York. Galadari offered about six million shares of the Union Bank of the Middle East (Union) as security. By 1984, Galadari and Commodities had stopped making payments on the note. The affiliate had assigned the note to Drexel. Drexel sued Galadari and Commodities in federal district court in New York for breach of the terms of the note. A Committee of Receivers (committee) appointed by the government of Dubai appeared on Galadari’s and Commodities’ behalf. Four days after Drexel sued, the government of Dubai bought all Galadari’s Union shares, including those used as collateral for the note. A day later, the crown prince and deputy ruler of Dubai issued a decree to liquidate Galadari’s assets and established the committee. The decree excluded the Union shares from the receivership estate and from being considered collateral for Galadari’s debt. Drexel moved for summary judgment, and the committee moved to dismiss or stay Drexel’s action. Based on affidavits and the committee’s arguments, the district court dismissed Drexel’s complaint on grounds of international comity. On appeal, the committee argued that its decree was an emergency measure intended to ward off economic disaster and that Galadari’s assets would be distributed equitably. Drexel argued that the decree fraudulently deprived Drexel of its stake in the Union shares. Drexel asserted that the committee’s proceedings would not include a meeting of creditors and would offer limited opportunities for appeal.
Rule of Law
Holding and Reasoning (Van Graafeiland, J.)
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