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Mediterranea Di Navigazione SPA v. International Petrochemical Group S.A.

May 15, 2007

MEDITERRANEA DI NAVIGAZIONE SPA, PLAINTIFF,
v.
INTERNATIONAL PETROCHEMICAL GROUP S.A., DEFENDANT.



The opinion of the court was delivered by: John G. Koeltl, District Judge

OPINION AND ORDER

The defendant, International Petrochemical Group S.A. ("IPG"), moves pursuant to Rule E(4)(f) of the Supplemental Rules of Certain Admiralty and Maritime Claims to vacate an order of maritime attachment issued by this Court on September 5, 2006. On that day, the plaintiff, Mediterranea Navigazione SPA, filed a verified complaint against the defendant, alleging breach of a charter party (V. Compl. ¶¶ 5--8), and seeking an ex parte order of attachment in aid of a London arbitration (id. ¶¶ 9, 12). The Court reviewed the verified complaint and attorney affidavit and, after determining that the conditions of Supplemental Rule B appeared to exist, entered an order authorizing process of maritime attachment and garnishment. On about September 25, 2006, the defendant learned that, pursuant to the order of attachment, $473,857.15, the full amount sought by the plaintiff, had been attached. (See Aff. of Jurg Johner, Jan. 10, 2007, ¶¶ 3--4, Ex. A.) The funds were attached while in the hands of an intermediary bank in New York, the Bank of New York, during an electronic funds transfer ("EFT") originating from the defendant's bank in Switzerland and intended for a third party. (Id. ¶ 3.)

The defendant moved to vacate the order of attachment on January 25, 2007. On March 12, 2007, the defendant filed an "amended motion," which the defendant intended to supplement its original motion of January 25. Following several adjournments at the defendant's request, the Court heard argument on the motion on May 3, 2007. For the reasons discussed below, the defendant's motion to vacate the order of attachment is DENIED.

I.

Rule E(4)(f) provides that "[w]henever property is arrested or attached, any person claiming an interest in it shall be entitled to a prompt hearing at which the plaintiff shall be required to show why the arrest or attachment should not be vacated or other relief granted consistent with these rules." In order to obtain an attachment, apart from satisfying the filing and service requirements of Rules B and E, the plaintiff bears the burden of showing that "1) it has a valid prima facie admiralty claim against the defendant; 2) the defendant cannot be found within the district; 3) the defendant's property may be found within the district; and 4) there is no statutory or maritime law bar to the attachment." Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 445 (2d Cir. 2006); Wajilam Exports (Singapore) Pte. Ltd. v. ATL Shipping Ltd., No. 05 Civ. 7955 (GEL), 2006 WL 3019558, at *2 (S.D.N.Y. Oct. 23, 2006). The Court must vacate an attachment if the plaintiff fails to sustain its burden of demonstrating that the requirements of Rules B and E are satisfied. Aqua Stoli, 460 F.3d at 445.

II.

The defendant's challenge to the order of attachment, as supplemented by its "amended motion," rests on three grounds. First, the defendant argues that an EFT, while in the hands of an intermediary bank, is not the property of the defendant and thus cannot be attached. Second, the defendant argues that the attachment must be vacated because the plaintiff has failed to demonstrate a need for the attachment as security in aid of London arbitration. Third, the defendant argues that the terms of the charter party preclude the Rule B attachment. These arguments are without merit.

A.

The defendant argues that funds in the temporary hands of an intermediary bank pursuant to an EFT are neither the property of the sender nor the property of the intended beneficiary of the funds. Therefore, the defendant argues that the attachment should be vacated because the attached EFT funds, although having originated from the defendant's bank, no longer constituted the "property" of the defendant when the funds were attached at the intermediary bank in New York.

The defendant's argument is foreclosed by the law of this Circuit. In Winter Storm Shipping, Ltd. v. TPI, the Court of Appeals for the Second Circuit declared that "EFT funds in the hands of an intermediary bank may be attached pursuant to Admiralty Rule B(1)(a)." 310 F.3d 263, 278 (2d Cir. 2002). Like this case, Winter Storm involved the attachment of EFT funds that originated from the defendant at its bank. Id. at 266--67. The court recognized that EFT funds that are temporarily in the hands of an intermediary bank are attachable as the property of a defendant for the purposes of Rule B. See HBC Hamburg Bulk Carriers GMBH & Co. KG v. Proteinas y Oleicos S.A. de C.V., No. 04 Civ. 6884 (NRB), 2005 WL 1036127, at *4 (S.D.N.Y. May 4, 2005). The Court of Appeals reaffirmed this rule in Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., explaining that "[u]nder the law of this circuit, EFTs to or from a party are attachable by a court as they pass through banks located in that court's jurisdiction." 460 F.3d at 436 (citing Winter Storm, 310 F.3d at 263).

Although the Court of Appeals in Aqua Stoli mused in a footnote that "[t]he correctness of our decision in Winter Storm seems open to question," 460 F.3d at 445 n.6, the court did not--and indeed could not then--overrule its decision in Winter Storm. See United States v. Ianniello, 808 F.2d 184, 190 (2d Cir. 1986) ("The court is bound by a decision of a prior panel unless and until its rationale is overruled, implicitly or expressly, by the Supreme Court or this court en banc."), overruled on other grounds by United States v. Indelicato, 865 F.2d 1370, 1382 (2d Cir. 1989) (en banc); Seamar Shipping Corp. v. Kremikovtzi Trade Ltd., 461 F. Supp. 2d 222, 224 n.2 (S.D.N.Y. 2006). As Judge Casey explained: "That the court of appeals made mention, in a footnote, of a reason why Winter Storm might have been incorrectly decided is of no moment. Indeed, Aqua Stoli can only be read to reaffirm Winter Storm as the law of this circuit." Maersk, Inc. v. Neewra, Inc., No. 05 Civ. 4356 (RCC), 2006 WL 2854298, at *2 (S.D.N.Y. Oct. 6, 2006); see also Consub Delaware LLC v. Schahin Engenharia Limitada, No. 06 Civ. 13153 (SAS), 2007 WL 473728, at *4 (S.D.N.Y. Feb. 13, 2007) ("Despite the fact that the Second Circuit--in dicta--questioned the correctness of Winter Storm, it did not overrule Winter Storm.").

Nonetheless, the defendant claims that Winter Storm no longer reflects the law of this Circuit after Aqua Stoli. In support of its position, the defendant mistakenly relies on the district court decision in Seamar Shipping Corp. v. Kremikovtzi Trade Ltd. In that case, the district court narrowly construed the holding in Winter Storm, stating that "[g]iven that Aqua Stoli called Winter Storm into serious doubt... it would be illogical to construe other statements in Aqua Stoli to broaden Winter Storm." Seamar Shipping, 461 F. Supp. 2d at 225 (internal citation omitted). Applying that narrow construction, the court explained that "Winter Storm's holding that an EFT is the property of an originator while in transit does not imply a corollary rule that the EFT is also the property of a beneficiary while in transit." Id. Ultimately, the court looked to New York law for guidance and concluded that the beneficiary of an EFT has no property interest in the funds transfer until the transfer is complete. Id. at 226.

Unlike Seamar Shipping, the defendant in this case is the originator of the EFT, not the beneficiary. Thus, on these facts, the Court need not resolve whether Seamar Shipping's narrow construction of Winter Storm is correct.*fn1 Even the district court in Seamar Shipping recognized that, at the very least, Winter Storm held that an EFT is the property of an originator while in transit. The funds at issue here were attached while in the hands of an intermediary bank during an EFT that the defendant originated. Therefore, applying Winter Storm, the EFT ...


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