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Cromwell, Conn.-based Carey Manufacturing Co. has 20 years experience producing latches, handles and catches for industrial applications. But it was astounded by a new legal “catch” created by its bank — freezing its account at the Middletown branch of Wachovia Bank for $13,464.78 on the strength of a Syracuse, N.Y., default judgment that never got near a Connecticut court. Instead, the default judgment creditor convinced officials at the 540 Madison Ave. branch of Wachovia to freeze the funds in Connecticut, on the rationale that, because the bank has branches nationwide, it needn’t follow the “separate entity rule” that treats each branch as a distinct business entity for jurisdictional purposes. “Our client is outraged,” said John M. Wolfson, of Hartford’s Feiner Wolfson. In response, partner Robert A. Feiner filed suit against Wachovia on March 17 to release the funds, alleging negligence, conversion, breach of faith, breach of contract and unfair trade practices. Wolfson said he’s concerned that other Connecticut companies and individuals “could be at risk under Wachovia’s interpretation of the law.” The complaint contends that Wachovia’s action is contrary to C.G.S. � 52-607, the Uniform Enforcement of Foreign Judgments Act, which gives full faith and credit for foreign judgments “except one filed by default in appearance or by confession of judgment.” A confession of judgment is a contract provision allowed in some states, (not Connecticut) which permits a creditor to appear in court in the debtor’s place and “confess” liability for the debt. Like a default for failure to appear, it lacks procedural and due process safeguards, and can often be reopened for a fair hearing. In 2003, Carey was sued in a Syracuse court by Anoplate Corp., to assert a $6,682.39 claim against Amatom LLC, a company that had been acquired by Carey. Relying on Connecticut practices, Feiner Wolfson decided not to appear in that inconvenient forum, and wait to assert its jurisdictional and other defenses when the default judgment was filed in Connecticut — an expected step in the collection process. Carey’s lawyers first protested the bank fund freeze with letters to Wachovia’s Middletown officers, citing the foreign judgment statute and a 2000 Superior Court case, Doe v. CFS Bank, in which Milford Superior Court Judge Trial Referee Jack L. Grogins granted summary judgment for a depositor whose Milford branch account was frozen. Grogins noted the CFS Bank case was a matter of first impression in Connecticut, “because the courts have not examined the situs of a Connecticut resident’s bank account for the purpose of levying an out-of-state judgment.” New York had plenty of law on this, Grogins found. The bank relied on the 1980 New York federal court case, Digitrex v. Johnson, which created a narrow exception to the separate entity rule, based on the fact that banks are now largely computerized between headquarters and branches. But Grogins found that the Digitrex exception to the separate entity rule was further narrowed by subsequent New York federal cases, and required that the freeze notice has to be served on the bank’s main office, that the branch and main office have to be in the same jurisdiction, and the locations have to be connected by high-speed computers. “The New York federal district courts do not permit a New York restraining notice to extend to a bank branch outside of New York,” Grogins wrote, concluding “this court considers the New York judgment against the plaintiff to be a foreign judgment as it is not within the same jurisdiction as the defendant’s Connecticut branch.” Wachovia’s in-house lawyers in Philadelphia weren’t persuaded. On Feb. 9, bank official Elizabeth M. Barbis wrote to Feiner, saying Wachovia doesn’t believe the CFS Bank case “is applicable to a national bank with branches in multiple states.” She added that it has been Wachovia’s consistent position over the years “that, when a levy is served on the Bank at any of our locations, the Bank is obligated [by] law to comply with the order contained in that levy as it relates to accounts maintained by the judgment debtor anywhere in the Bank’s network.” Releasing the freeze, Barbis noted, could place Wachovia in contempt of the New York court. BANK DISCRETION Feiner said that Carey chose not to defend in New York on grounds the New York courts had no jurisdiction over it, and contends that no jurisdiction can be proven. “Personal jurisdiction is a technicality? It goes to the core of litigation — your suit does not stand unless you have subject matter jurisdiction and personal jurisdiction.” He added that few, if any, bank depositors take the view expressed by Wachovia, that each depositor’s funds are simultaneously in every branch and every state, and subject to local attachment. Banking lawyer Elizabeth C. Yen, of Hudson Cook’s New Haven office, is not connected with the case. She noted the bank may rely on the contract provisions of its customer agreement. The one posted on the Internet, Yen noted, requires that customers grant the bank “full discretion to freeze your account and not honor any further transactions” until a claim or dispute is resolved. Likewise, depositors must also agree to let the bank accept service of process on their behalf in any jurisdiction, “because we have financial centers or offices in numerous jurisdictions and states other than where your account was opened …” The Carey case may not get a day in court under a separate clause of the customer agreement Wachovia is invoking — mandatory arbitration.

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