Justice Michael D. Stallman recently observed in Global Technology v. Royal Bank of Canada that the federal district courts and New York state trial courts are “deeply divided” on whether the separate entity rule remains good law.1 Since the New York Court of Appeals’ decision in Koehler v. Bank of Bermuda, 12 N.Y.3d 533 (N.Y. 2009), state and federal courts have interpreted Koehler’s impact on the separate entity rule quite differently. Most federal district courts have held that Koehler abrogated the separate entity rule, at least in the post-judgment context. By stark contrast, every New York trial court that has considered the issue since Koehler has found that the doctrine remains good law.
However, just last month, Judge Loretta A. Preska sought to bridge the divide by acknowledging and agreeing with the New York state courts. In Hamid v. Habib Bank, No. 11 Civ 920, slip op. at *22 (S.D.N.Y. March 14, 2012), Judge Preska held that the separate entity rule remains good law, and that it serves important policy objectives. Judge Preska was “particularly mindful” that the New York state courts that have considered the separate entity rule post-Koehler have held that the Court of Appeals’ decision could not be read to have overturned the rule without stating so in express terms.
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