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Drexel Burnham Lambert Inc. v. Ruebsamen - 7/21/1988

Award Amount- $0.00

Case Summary: In this groundbreaking case, our firm represented Drexel in pursuing a claim against two West German individuals for a margin debit balance of $230,000 in their securities account. Following the October 1987 stock market crash Drexel made several margin calls on the Ruebsamens' options account, and the result of the various margin calls was a $230,000 debit balance. Drexel sought an order of attachment in New York State Supreme Court to set aside $250,000 in a separate brokerage account, pending the outcome of an arbitration concerning the margin balance that was to take place in Germany. The Court held that in order to obtain an attachment in aid of an arbitration proceeding, under Section 7502(c) of New York's Civil Practice Law and Rules, the party need only establish that an arbitration award would be rendered ineffectual absent an order of attachment or an injunction. This standard is significantly less difficult to meet than under circumstances where a litigant is seeking an attachment or injunction where no arbitration is involved. Thus, the decision added an important chapter to the law of arbitration by making available a significant remedy: a mechanism to preserve funds from which an award would be satisfied under circumstances where the award might otherwise be rendered meaningless, such as where the defendant is close to insolvency or resides outside the country. The Court ultimately denied Drexel's request for an injunction, because an international convention, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, precluded the pre-arbitration attachment sought by Drexel.

Jeffrey L. Liddle

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