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AURORA MARITIME CO. v. ABDULLAH MOHAMED FAHEM & CO

July 19, 1995

AURORA MARITIME CO., LTD., Plaintiff, against ABDULLAH MOHAMED FAHEM & CO., Defendant. MEDMAR, INC., Plaintiff, -against- FAHEM & CO., Defendant.

SONIA SOTOMAYOR, U.S.D.J.


The opinion of the court was delivered by: SONIA SOTOMAYOR

SONIA SOTOMAYOR, U.S.D.J.

 In these admiralty cases, garnishee The Hongkong and Shanghai Banking Corporation Limited ("HSBC") seeks to vacate attachments issued to plaintiffs under Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims ("Rule B"). For the reasons set forth below, the motion to vacate the attachments is denied.

 Background

 The facts in this case are not in dispute. Plaintiffs Aurora Maritime ("Aurora") and Medmar Inc. ("Medmar") entered into an agreement with Abdullah Mohamed Fahem & Co. ("Fahem") to transport grain from the United States to Yemen. Disputes involving each of the plaintiffs arose over the charter agreement, which disputes were submitted to arbitrations in London, England *fn1" See Affidavit of Richard A. Spehr, sworn to June 24, 1994 ("Spehr Aff."), at P 2.

 To protect their rights in the event that they prevailed in their arbitrations, each plaintiff obtained orders from this Court pursuant to Rule B attaching an account Fahem kept at HSBC in the amount of $ 633,713.39 (hereinafter the "Account"). HSBC has had outstanding loans to Fahem in excess of $ 56 million since the Account was attached. HSBC argues that the Rule B attachments should be vacated because New York Debtor and Creditor Law § 151 ("§ 151") gives it an absolute right of set-off that survives even after a Rule B attachment has been effectuated. Plaintiffs claim that Rule B preempts the set-off remedy provided for in § 151.

 Discussion

 Preemption in Maritime and Admiralty Cases

 The parties agree that preemption questions in admiralty cases are governed by American Dredging Co. v. Miller, 127 L. Ed. 2d 285, U.S. , 114 S. Ct. 981 (1994). Plaintiff in American Dredging was an injured seaman who brought Jones Act and unseaworthiness claims in a Louisiana state court. Defendant moved to dismiss the action under the doctrine of forum non conveniens. Although the Louisiana Code of Civil Procedure rejects the doctrine of forum non conveniens in Jones Act and maritime law cases, the trial court held that it was bound to apply that doctrine under federal maritime law and granted defendant's motion to dismiss the complaint.

 The American Dredging Court observed that a state court could not provide remedies "'in rem for any cause of action within the admiralty jurisdiction.'" 114 S. Ct. at 985 (quoting Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 124, 68 L. Ed. 582, 44 S. Ct. 274 (1924)). The Court recognized, however, that a state court could exercise in personam jurisdiction and "'adopt such remedies, and ... attach to them such incidents, as it sees fit' so long as it does not attempt to make changes in the 'substantive maritime law.'" 114 S. Ct. at 985 (quoting Madruga v. Superior Court of California, 346 U.S. 556, 561, 98 L. Ed. 290, 74 S. Ct. 298 (1954) (quoting Red Cross Line, 264 U.S. at 124)). When a state law changes substantive maritime law, however, the state law is preempted. Substantive maritime law is changed where the state remedy works "material prejudice to the characteristic features of the general maritime law or interferes with the proper harmony and uniformity of that law in its international and interstate relations." Id. (quoting S. Pac. Co. v. Jensen, 244 U.S. 205, 216, 61 L. Ed. 1086, 37 S. Ct. 524 (1917)).

 The American Dredging Court went on to examine whether the doctrine of forum non conveniens was either a "'characteristic feature' of admiralty or a doctrine whose uniform application is necessary to maintain the 'proper harmony' of maritime law." Id. The Court found that the Louisiana Code's rejection of the application of the forum non conveniens doctrine in Jones Act and maritime law cases was not preempted because that doctrine did not "originate in" and was not "unique to" federal admiralty law. 114 S. Ct. at 986; see also id. at 987 (refusal to apply forum non conveniens does not work material prejudice to a characteristic feature of general maritime law because forum non conveniens has long been a doctrine of general application).

 The Court recognized that its holding might produce disuniformity, and "it would be idle to pretend that the line separating permissible from impermissible state regulation is readily discernible in our admiralty jurisprudence, or indeed is even entirely consistent within our admiralty jurisprudence." Id. at 987-88 (citations omitted). The Court, however, did not find it necessary to harmonize these tensions because forum non conveniens is essentially

 
a supervening venue provision, permitting displacement of the ordinary rules of venue when, in light of certain conditions, the trial court thinks that jurisdiction ought to be declined. But venue is a matter that goes to process rather than substantive rights--determining which among various competent courts will decide the case. Uniformity of process (beyond the rudimentary elements of procedural fairness) is assuredly not what the law of admiralty seeks to achieve, since it is supposed to apply in all the courts of the world. Just as state courts, in deciding admiralty cases, are not bound by venue requirements set forth for federal courts in the United States Code, so also they are not bound by the federal common-law venue rule (so to speak) of forum non conveniens. Because the doctrine is one of procedure rather than substance, petitioner is wrong to claim support from our decision in Pope & Talbot, Inc. v. Hawn, 346 U.S. 406, 74 S. Ct. 202, 98 L. Ed. 143 (1953), which held that Pennsylvania courts must apply the admiralty rule that contributory negligence is no bar to recovery ... Unlike burden of proof (which is a sort of default rule of liability) and affirmative ...

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