the Advisory Committee Notes to Rule B indicated that the Advisory Committee had rejected the idea of restricting the availability of Rule B attachments in this manner.
B. "Abusive" Attachments Under Supplementary Rule B
Global further argues that, even if it could not be "found within" the Southern District, Royal Swan's attachment should be set aside because it is "abusive." Def.'s Mem. in Support of Vacat'n of Order of Attachm't and Garnishm't at 10. Explains Global, "Instead of easily pursuing Global [by way of an in personam action] in the Eastern District [of New York] . . . Plaintiff has chosen to cross the artificial boundary into the Southern District in order to attach Global's bank account . . . ." Id. at 1. Indeed, Global might point out that Royal Swan simply could have remained in the Southern District and pursued an in personam action instead of utilizing the Rule B attachment (assuming that Global's activities in connection with the Southern District rendered it subject to in personam jurisdiction here). In making its argument, Global relies heavily on the Southern District case of Integrated Container Serv., Inc. v. Starlines Container Shipping, Ltd., 476 F. Supp. 119 (S.D.N.Y. 1979). Over a decade after the Advisory Committee had issued the Notes discussed above, the Integrated court, while following the Notes as I do here, held that "where an attachment is obtained unfairly in one district where a proper lawsuit could be commenced in another district without unfairness or inconvenience, the courts may easily remedy the situation by exercising discretion to set aside an unfair attachment."
Integrated, 476 F. Supp. at 124 (citing D/S A/S Flint v. Sabre Shipping Corp., 228 F. Supp. 384 (E.D.N.Y. 1964), aff'd on other grounds sub nom. Det Bergenski Dampskibsselskab v. Sabre Shipping Corp., 341 F.2d 50 (2d Cir. 1965)). Integrated found that the attachment at issue was not "unfair," because "there can be no doubt that plaintiffs' need for security is real, that their quest for attachment is not a tactic of harassment." Id. See also Central Hudson Gas and Elec. Corp. v. Empresa Naviera Santa, SA, 845 F. Supp. 150, 153 (S.D.N.Y. 1994) ("The Rule was not abused, inasmuch as there was a substantial risk that [plaintiff] would not be able to locate sufficient assets to satisfy its claims, which in turn were not frivolous." (citations omitted)); Western Bulk Carriers (Australia), Pty. v. P.S. Int'l. Ltd., 762 F. Supp. 1302, 1309 (S.D. Ohio 1991) ("The Court does have discretion to set aside an unfair attachment where the use of the maritime remedy is abusive, such as where an attachment is obtained unfairly in one district while a proper lawsuit could be commenced in another district without unfairness or convenience." (citing Integrated)).
The Integrated holding appears consistent with Rule B's purpose, which, as noted above was explained by the Supreme Court in Swift & Co. Packers v. Compania Colombiana Del Caribe, S.A., 339 U.S. 684, 94 L. Ed. 1206, 70 S. Ct. 861 (1950), as enabling the plaintiff to acquire jurisdiction over a defendant and obtain security for any resulting judgment against the defendant. Under circumstances where the plaintiff can obtain jurisdiction over the defendant in the same or a nearby
district independently of a Rule B attachment, and where the plaintiff does not need the security of the attachment to satisfy any judgment it may obtain a situation that the Advisory Committee may not have considered
--the need for either of Rule B's recognized functions does not exist.
Employing a Rule B attachment in those situations is consequently "unfair," given, at the least, the inconvenience, and at the worst, the significant financial injury, that the defendant experiences, and should not be permitted.
C. Royal Swan's Need for Security
In Integrated, three months before the attachments were granted, the defendants, foreign corporations, had closed their common New York office, disconnected their common telephone line in New York, and, in fact, ceased doing business anywhere. Integrated, 476 F. Supp. at 123. Those facts left little doubt as to the plaintiff's need for security. Accordingly, at the post-attachment hearing in the instant case, the court indicated that one of its primary concerns in adjudicating the motion to vacate revolved around whether or not Royal Swan needed the security of the attachment in light of Global's oral assertions, reflected in its papers, that Global "has continuously maintained offices in Garden City, New York since 1985," has maintained the account that was attached with the same bank since 1985, which account is Global's "primary bank account," and "regularly conducts business in the City of New York
with ship owners, ship brokers, insurance companies, lawyers, accountants, suppliers, and other professionals engaged in the shipping business." Aff. of Hormoz Shayegan, Director of Global at 1-2, 4.
Pursuant to Rule 12 of the Admiralty Rules of the Southern District of New York, the party seeking to maintain the attachment bears the burden of showing "why the . . . attachment should not be vacated" after the adversary has "shown . . . any improper practice or a manifest want of equity on the part of the" other party. Indeed, this burden was detailed in the order that granted the attachment, which order Royal Swan had itself drafted for my signature. In the memorandum that it prepared at my direction after the post-attachment hearing, however, Royal Swan made no claim that it would have difficulty satisfying any ultimate arbitral award against Global. It did not allege, for example, that Global was financially troubled or that it would encounter difficulty in locating Global's assets. Nor did it request discovery on the matter.
During the ex parte correspondence that the court engaged in with Royal Swan in the court's efforts to ascertain if "the conditions set forth in [Rule B] appear to exist," as it is required to do by that rule, Royal Swan indicated that it was ignorant of the nature and size of Global's presence in Garden City
and could not state one way or the other whether Global engaged in business activity in the Southern District. After Global made its assertions at the hearing and in its initial papers, and after the court informed the parties of what it identified as the relevant issues, Royal Swan's failure to address them in the memorandum it subsequently submitted can be taken to mean only that Royal Swan is now sufficiently informed. Global has maintained offices in Garden City continuously since 1985 and there are no allegations that Global is financially troubled. Global has not resisted arbitration nor given any other indication that it is attempting to avoid adjudication of the dispute, a factor that might lead a plaintiff to suspect the need for security. It therefore appears that Royal Swan does not need security for its claim any more than the typical plaintiff might, and, in the absence of even an assertion by Royal Swan to the contrary, I cannot find that it needs the security of the Rule B attachment. I therefore vacate the attachment.
D. Global's Motion for Expenses
My decision indicates that although an attachment is available in accordance with the letter of Rule B, it should not be granted if it does not accord with the spirit of the rule. As indicated above, the ex parte correspondence this court engaged in with Royal Swan sought to ascertain whether the desired attachment satisfied both the letter and spirit of the rule, by examining whether Royal Swan had a need for security. In that regard, Royal Swan informed the court that it was unaware of the extent of Global's presence in the Eastern and Southern Districts. Because the court understood the difficulty of obtaining that information without alerting Global to the possible attachment, it granted the attachment with the intention that the adversarial process, including discovery, would quickly reveal whether a need for security exists. Notwithstanding that I have vacated the attachment, the awarding of expenses is inappropriate where, as here, obtaining the information needed to conclude whether an attachment is permissible may very well render the issue moot by alerting the other party of the plaintiff's plans. See supra pp. 7-8 (discussing how Royal Swan had no duty to discover the presence of certain Global directors at the United Nations Headquarters particularly because it would "potentially alert Global to the imminent attachment"). If, however, Global has reason to believe that Royal Swan was cognizant of the extent of Global's presence, whether as a result of its interaction with Global in connection with the charter party at issue, Global's stature in the industry, or other circumstances, it may bring a motion for reconsideration of this motion for expenses, where the court will also consider the imposition of sanctions for the misrepresentations that might have been made to the court.
The Rule B attachment is vacated. The motion for expenses is denied.
Dated: New York New York
November 15, 1994
Harold Baer, Jr.