This Court concludes that the first argument in support of dismissal lacks merit. It is well-settled under federal and New York state law that a state court is without power to restrain an in personam action before a federal court where the federal court has jurisdiction over the parties and the subject matter. Donovan v. City of Dallas, 377 U.S. 408, 84 S.Ct. 1579, 12 L.Ed.2d 409 (1964); General Atomic Co. v. Felter, 434 U.S. 12, 98 S.Ct. 76, 54 L.Ed.2d 199 (1977); Beardslee v. Ingraham, 183 N.Y. 411, 76 N.E. 476 (N.Y. 1906); Jamaica Hospital v. Blum, 416 N YS.2d 294, 68 A.D.2d 1 (N.Y.App.Div. 1979); Thompson v. Samson United Corp., 113 N.Y.S.2d 607, 203 Misc. 48 (N.Y.App.Div. 1952) holding that federal bankruptcy power is paramount because it was exercised by Congress to exclude every competing proceeding in state or federal tribunals. Furthermore, where the federal court is the first to acquire jurisdiction over the res, the state court is precluded from exercising its jurisdiction over the same res to impair the federal court's jurisdiction.
DLA Piper US LLP, New York City ( Joseph G. Finnerty III, Arthur F. Fergenson and Howard S. Schroder of counsel), and Bondas, Skarzynski, Walsh Black, LLC (James A. Skarzynski, Evan Shapiro and Eleftherios Stefas of counsel) for appellants. I. The First Department violated the Supremacy Clause of the United States Constitution by nullifying a federal court final judgment. ( Frew v Hawkins, 540 US 431; Hunt v Mobil Oil Corp., 557 F Supp 368; Washington v Washington State Commercial Passenger Fishing Vessel Assn., 443 US 658; Delaware Val. Citizens' Council for Clean Air v Commonwealth of Pa., 755 F2d 38; Central Nat. Bank v Stevens, 169 US 432; Riggs v Johnson County, 6 Wall [ 73 US] 166; Stoll v Gottlieb, 305 US 165; Deposit Bank v Frankfort, 191 US 499; Matter of New York State Commr. of Correction v Gulotta, 194 AD2d 540; Jamaica Hosp. v Blum, 68 AD2d 1.) II. The First Department misapplied basic principles of contract interpretation to the insurance policies' "investment banking" exclusion. ( Mount Vernon Fire Ins. Co. v Creative Hous., 88 NY2d 347; Silva v Utica First Ins. Co., 303 AD2d 487; Matter of Manhattan Pizza Hut v New York State Human Rights Appeal Bd., 51 NY2d 506; People v Shapiro, 50 NY2d 747; Bailey v AGR Realty Co., 260 AD2d 322; State of New York v Home Indem. Co., 66 NY2d 669; Newin Corp. v Hartford Ace. Indem. Co., 62 NY2d 916; Hartford Ace. Indem. Co. v Wesolowski, 33 NY2d 169; Matter of Ideal Mut. Ins. Co. [Superintendent of Ins. of State of N.Y. — Harbour Assur. Co. of Bermuda], 231 AD2d 59; Tierra Props, v Lloyd's Ins. Co., 206 AD2d 288.)
We therefore hold that, except in the most compelling circumstances, the courts of this state should decline to afford litigants the opportunity to launch collateral attacks on orders issued by federal courts and should refuse to grant relief that would entail interfering with the execution of such orders. See Jamaica Hospital v. Blum, 68 App. Div.2d 1, 416 N.Y.S.2d 294 (1979); Banco Do Brasil v. Madison Steamship Corporation, 61 Misc.2d 1028, 1030-32, 307 N.Y.S.2d 341 (N.Y.Sup.Ct. 1970); Wolgin v. State Mutual Investors, 265 Pa. Super. 525, 532-34, 402 A.2d 669 (1979); see also Reserve Mining Co. v. Minnesota Pollution Control Agency, 267 N.W.2d 720, 725 (Minn. 1978).
The court in a proper case will grant the motion." This power is not limited to situations in which the setoff is sought to be applied to judgments rendered between the parties in different actions or courts (see, Jamaica Hosp. v. Blum, 68 A.D.2d 1, 6).
Significantly, the Supreme Court restated the principle enunciated in Donovan that “the right to litigate in federal court is granted by Congress and, consequently cannot be taken away by a state' “ (434 U.S. at 16,quoting Donovan, 377 U.S. at 413). General Atomic Company and Donovan are the law of the land and have been followed by the state courts in New York, including the Appellate Division, Second Department, whose decisions are also binding on this Court ( see Jamaica Hospital v. Blum, 68 A.D.2d 1, 6 [2d Dept 1979] [Lazer, J] ). This being said, and while the merit of Plaintiff's federal action is for the federal court, the Court makes a number of observations.
The City contends that plaintiff is effectively asking this court to interfere with the sentencing order of the federal court, which ordered restitution to the City. Citing Jamaica Hosp. v Blum ( 68 AD2d 1, 6 [2nd Dept 1979]), the City argues that this court does not have the power to second-guess the federal court's order. Jamaica Hospital, however, involves a rather different situation.