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United States District Court, S.D. New York


The opinion of the court was delivered by: LEWIS KAPLAN, District Judge


This is an action for breach of a maritime charter party. The matter now is before the Court on defendant's motion to vacate an order of maritime attachment on the grounds that it could be "found in the district" or, alternatively, that the attached funds were held in an off-shore account beyond the territorial reach of the Court. I.

  Plaintiff Yayasan is a foreign corporation involved in the shipping business. Defendant Scandinavian Liquid Carriers Limited ("SLCL") is a Liberian corporation that charters vessels from others to transport chemical and product cargos for third parties.*fn1 From time to time, it also "charters out product and chemical tankers to sub-charterers on a time or voyage charter basis. SLCL earns most of its income and profit from the differential between the . . . rate[s] at which it charters vessels [in] and the . . . rate[s] at which it either charters those same vessels [out] . . . or books movement of cargoes."*fn2 Its managing agent, Copenhagen Tankers A/S, is a Danish entity whose representative, Henrik Madsen, handles SLCL business matters worldwide from Denmark.*fn3

  Under the charter party at issue, SLCL contracted with Doquest, Inc., the previous owner of the M/V DANUM, to charter the vessel for twelve months beginning in March 2001.*fn4 Yayasan then purchased the DANUM from Doquest in October 2001, and it claims that it thereby came into privity with SLCL with respect to the charter.*fn5

  SLCL allegedly served a notice of termination of the charter party shortly after Yayasan purchased the ship.*fn6 Approximately one year later, Yayasan demanded arbitration of the matter*fn7 pursuant to a clause in the charter party which designated venue in New York. The parties' respective local counsel thereafter had some discussions and exchanged preliminary correspondence regarding the arbitration, which remains pending.*fn8 New York counsel for both sides in the arbitration now represent their clients in this action.

  Yayasan filed this action in aid of the arbitration*fn9 on June 9, 2004. In addition to damages, the complaint sought an immediate ex parte order of maritime attachment under Rule B(1). Yayasan alleged that SLCL could not be found within the district but had accounts and credits "within the District at various banks."*fn10 It alleged that it made unsuccessful efforts to locate SLCL in the district before filing suit: it contacted the Secretary of State — which advised that SLCL is not licensed to do business in New York — and consulted various local telephone directories which failed to reveal a listing for SLCL.*fn11 It did not contact SLCL's New York arbitration counsel — Nourse & Bowles — to ascertain whether that firm was authorized to accept service of process on behalf of SLCL.

  The Court granted the order of maritime attachment on June 9, 2004. Yayasan subsequently served a series of restraining notices on the New York branch of the Danske Bank in response to which the bank segregated and froze $500,000 held in an SLCL account.*fn12

  Yayasan sent notice of the attachment to SLCL's counsel, Nourse & Bowles, on June 14, 2004.*fn13 Approximately two weeks later, on June 28, 2004, Yayasan's counsel asked Nourse & Bowles if it was authorized to accept service of process on SLCL's behalf.*fn14 Attorney Vayda of Nourse & Bowles promptly wrote to his client, purportedly to "confirm" that Nourse & Bowles was so authorized. He received a faxed response the following day, June 29, from the Danish Defence Fund — an entity acting on SLCL's behalf — which stated, in relevant part:

"Re: MV Danum. Dear Jack, Thank you for your fax of yesterday. Having discussed the matter with Niels Stig Christensen of Copenhagen Tankers, you are hereby authorised to accept service of proceedings in this particular matter only."*fn15
  Nourse & Bowles subsequently appeared for SLCL in this action and moved to vacate the order of maritime attachment. The parties engaged in limited discovery. The two issues for decision are whether (1) SLCL was "found in the district," within the meaning of Admiralty Rule B, when Yayasan filed suit, and (2) the situs of SLCL's Danske Bank account is New York or the Cayman Islands. II.

  A. "Not Found in the District"

  1. General principles of maritime attachment

  Maritime attachment is a centuries-old remedy that "antedates both the congressional grant of admiralty jurisdiction to the federal district courts and the promulgation of the first Supreme Court Admiralty Rules in 1844."*fn16 Admiralty Rule B, which codifies the law, is "simply an extension of this ancient practice."*fn17 The device exists for the benefit of merchants engaged in the far flung maritime trade, who face special risks in seeking legal redress "against perpetrators of maritime injury [who] are likely to be peripatetic."*fn18 Without it, "defendants, their ships, and their funds easily could evade the enforcement of substantive rights of admiralty law."*fn19

  Rule B allows an admiralty plaintiff to include in the complaint a request for an ex parte order of attachment against the defendant's "tangible or intangible personal property — up to the amount sued for — in the hands of garnishees named in the process."*fn20 A maritime attachment serves the dual purpose of obtaining the appearance of a foreign defendant and ensuring satisfaction of a favorable judgment.*fn21 Accordingly, a Rule B attachment is available only "[i]f a defendant is not found within the district" where the suit is brought.*fn22

  2. Standard

  The phrase "not found within the district" is not defined in the Rule. Nevertheless, it denotes two types of absence. First, in order to be subject to maritime attachment the defendant must lack sufficient contacts with the forum to render it subject to personal jurisdiction. Second, the defendant must not amenable to service of process.*fn23 A plaintiff must show that the defendant is absent in both senses in order to sustain the attachment. Moreover, a plaintiff must make a bona fide effort to locate the defendant in the district before seeking a Rule B attachment,*fn24 although an "exhaustive search" is not required.*fn25

  3. Was SLCL "found in the district?"

  In this case, it is necessary to address only the question whether SLCL was amenable to service of process here at the time Yayasan obtained the order of attachment. Under Fed.R. Civ. P. 4(h), service on a corporation may be made in a judicial district by service upon an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process. SLCL does not contend that it had an officer or a managing or general agent here. Rather, it argues that it could have been served in the district by service upon Nourse & Bowles, its New York arbitration counsel.

  As defense counsel essentially conceded at oral argument,*fn26 Nourse & Bowles was not SLCL's agent for service of process merely because it was serving as its counsel in the arbitration. "By rendering . . . legal services, counsel does not become an agent for service of process."*fn27 Moreover, the record demonstrates that SLCL had not authorized Nourse & Bowles to accept service of process in this action on June 9, 2004. That authority was not conferred until June 29, 2004, in the Danish Defence Club fax.*fn28 The suggestion that the June 29 fax merely confirmed preexisting authority cannot be reconciled with its clear language, particularly the phrase "you are hereby authorised."*fn29

  Accordingly, the Court finds that Nourse & Bowles was not authorized to accept service of process on SLCL's behalf on June 29, 2004. Consequently, had Yayasan contacted the firm on June 9 to inquire as to whether it was so authorized, the only accurate answer would have been "no," although counsel, as a matter of courtesy and convenience, doubtless would have sought such authority from its client, as it later did.

  SLCL nevertheless contends that the failure of plaintiffs' firm to contact Nourse & Bowles to inquire about its authority to accept service before filing suit was a failure to exercise the due diligence required by Seawind. The argument is unavailing. The decisions brought to the Court's attention that vacated Rule B attachments for plaintiffs' lack of due diligence uniformly involved circumstances in which there was an agent present in the district who had been expressly authorized to accept service before plaintiff sought the attachment and who would have been discovered through diligent efforts.*fn30 In this case all the diligence in the world, including calling Nourse & Bowles, would not have led to discovery of an SLCL agent for service of process in this district because there was none.

  SLCL essentially concedes this point. Instead, it urges the Court to adopt a due diligence standard that would have required Yayasan first to call Nourse & Bowles and then, upon learning that Nourse & Bowles was not authorized to accept service, to wait a "reasonable time" while it conferred with its client as to whether such authority would be granted.*fn31 The only authority cited by counsel in support of a rule that would require plaintiff's counsel to conduct itself in this way is Tug Go Getter,*fn32 neither the facts nor the holding of which support SLCL's position.*fn33

  SLCL's proposed rule would undermine maritime attachment. More is at play here than what otherwise might appear to be a lack of professional courtesy among counsel or tactical maneuvering by Yayasan to obtain leverage in the arbitration or this suit. As plaintiff's counsel argued, the "reasonable time" advocated by SLCL readily could afford a window of opportunity to a "peripatetic wrongdoer" quickly to move assets out of the district in order to evade process, liability and judgment. Plaintiff's counsel advised the Court, uncontradicted by defense counsel, that this is a common occurrence in the shipping business.*fn34 SLCL — a Liberian corporation that owns no ships*fn35 or other assets besides the funds in its Danske Bank account and admits that it earns most of its income from a form of maritime arbitrage*fn36 — well could have reacted to such a call by transferring the funds out of the Danske Bank account,*fn37 which it could have done at lightning-speed whether the amount in the bank was one dollar or, as SLCL contends, $1.5 million. Of course this is not to say that SLCL would have done so.*fn38 But accepting SLCL's position would reflect adoption of a rule that would allow a defendant who otherwise was safely outside the district effectively to avoid Rule B attachment by waiting until after the plaintiff filed a Rule B motion and then getting its assets out of the district.*fn39 This practice would "eviscerate the time-honored process of maritime attachment."*fn40

  SLCL's proposed rule would run counter also to what is implicit in the Rule B agency cases — namely, that in order to be "found in the district," a defendant had to be present in the district at the time when the attachment is sought. As SLCL did not have an authorized agent for service of process in the district at the time when Yayasan sought the Rule B attachment, SLCL was "not found in the district" for purposes of Rule B.


  Danske Bank has a branch at 280 Park Avenue in Manhattan. That is where it was served with process pursuant to which it froze $500,000 of SLCL's funds. SLCL nevertheless argues that the attachment must be vacated, even if it was "not found in the district," because its Danske Bank account is in the Cayman Islands, beyond the territorial reach of the Court.

  A Rule B attachment reaches only property located within the district in which the suit is brought.*fn41 As the Court of Appeals has held, "accounts in a foreign branch bank are not subject to attachment or execution by the process of a New York court served in New York on a main office, branch or agency of the bank."*fn42 New York's "separate account" rule similarly restrains the reach of process, maritime or otherwise.*fn43 SLCL therefore is correct in asserting that the attachment must be vacated if the situs of the account is in the Cayman Islands.

  In this wired age, the location of an intangible, especially a bank account, is a metaphysical question. By and large, bank deposits exist as electronic impulses embedded in silicone chips. In a sense, therefore, bank funds are both everywhere and nowhere. But the problem is not a new one. Before the advent of electronic banking, courts grappled with the dilemma of pinpointing the location of intangible assets.*fn44 It is a dilemma that calls for a practical judgment. As Judge Cardozo so eloquently put it in Severnoe Securities Corporation v. London & Lancashire Inc.:*fn45


"The situs of intangibles is in truth a legal fiction, but there are times when justice and convenience requires that a legal situs be ascribed to them . . . [citations omitted] . . . At the root of the selection is generally a common sense appraisal of the requirements of justice and convenience in particular conditions."*fn46
  In this case, a number of factors favor the Cayman Islands. Mr. Vanderkelen, an officer of Danske Bank, testified that the SLCL account is with Danske Bank's Cayman Islands branch.*fn47 This is corroborated directly by documentary evidence, including the September 24, 1999, letter from Danske Bank to SLCL (c/o The International Trust Company of Liberia) confirming the opening of a money market account "with the Cayman Islands Branch."*fn48 In addition, several Danske Bank statements purporting to show monthly activity in SLCL's account are headed "Danske Bank — Cayman Islands Branch — c/o New York Branch."*fn49 Moreover, Mr. Vanderkelen testified that SLCL's money market account was opened in the Cayman Islands branch so that Danske Bank could pay interest on it, something that is allowed under the law of the Cayman Islands, but not of New York.*fn50 Finally, there is a suggestion by Mr. Vanderkelen that the Cayman Islands branch is autonomous from the New York office; he stated that the Cayman Islands branch is a "separate branch licensed by the Cayman Islands Monetary Authority."*fn51

  In contrast, there is powerful evidence that SLCL's account is in New York in any practical sense. In reality, it appears that the Cayman Islands branch is a paper bank entirely controlled and managed by Danske Bank's New York operation.

  First, according to Mr. Vanderkelen's uncontradicted testimony, the Caymans branch has no physical existence outside of the New York branch — there is no physical Caymans branch office, there are no Cayman employees, and there are no tangible Danske Bank assets or liabilities in the Caymans.*fn52

  Second, the Danske Bank's Caymans accounts are entirely "serviced, administered and held exclusively by and through the facilities of [Danske Bank's] New York Branch as correspondent of, manager of, and record-keeper of the Caymans Branch."*fn53 Mr. Vanderkelen illustrated the point with a discussion of how wire transfers in and out of SLCL's account are executed through a Clearing House Interbank Payments System ("CHIPS") account held by Danske New York. The Caymans branch does not have a CHIPS account because it legally cannot — no foreign bank can be a part of the CHIPS network. Thus, as "correspondent. . . ., manager . . ., and record-keeper of the Cayman Branch" Danske New York "executes all such transfers via its information systems in New York for the Cayman Branch."*fn54

  Third, Mr. Vanderkelen testified that the Caymans branch accounts are subject to New York and U.S. legal and regulatory oversight.*fn55

  Whatever niceties of banking law may permit a new York branch of a foreign bank to create an entirely "paper" or electronic branch in the Cayman Islands and thereby to escape certain U.S. banking regulations, this case calls for application of a pragmatic rule of reason. In all practical respects the Cayman Islands branch was part of the New York branch. The Court therefore finds that the account and funds that SLCL maintained with Danske Bank were in New York at the time of Yayasan's attachment.*fn56


  For the foregoing reasons, SLCL's motion to vacate the maritime attachment is denied.


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