The opinion of the court was delivered by: John G. Koeltl, District Judge
Defendant Zheng Tai Shipping Group Limited ("Zheng Tai") 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 October 22, 2008. On that date, the plaintiff, Aggelikos Prostatis Corp. ("Aggelikos"), filed a verified complaint against Zheng Tai and defendant Shun Da Shipping Group Limited ("Shun Da"), alleging a breach of contract claim in the amount of $16,688,015.11, and seeking an ex parte order of attachment in aid of a London arbitration (the "Verified Complaint"). 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 against the assets of Zheng Tai and Shun Da (the "Attachment Order"). Pursuant to the Attachment Order, the plaintiff attached several electronic fund transfers to or from defendant Zheng Tai.
For the reasons discussed below, the defendant's motion to vacate the order of attachment is granted.
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., 475 F. Supp. 2d 275, 278 (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.
In the Verified Complaint, the plaintiff asserts the following facts. The plaintiff is a foreign corporation existing under the laws of Liberia, and defendants Zheng Tai and Shun Da are foreign corporations existing under the laws of China. At all relevant times, the plaintiff was the owner of a motor vessel known as "Angelic Protector" (the "Vessel"). On or about July 17, 2008, the plaintiff contracted with Shun Da to sell the Vessel to Shun Da under certain terms and conditions for $19.5 million. Under the Memorandum of Agreement executed by the plaintiff and Shun Da, (the "Agreement"), Shun Da was to pay a security deposit of 15% of the purchase price, or $2,925,100.00, within four banking days from the date of the Agreement. The balance of the purchase price, together with bunker and lub oil charges, were to be paid in cash into an account in the plaintiff's name prior to October 16, 2008, the expected date of delivery of the Vessel. (See Compl. ¶¶ 2-10.)
The plaintiff alleges that Shun Da breached the Agreement by failing to remit the balance of the purchase price of the Vessel and/or failing to carry out the terms and conditions for the purchase of the Vessel. (See Compl. ¶ 12.) It further alleges, and defendant Zheng Tai concedes, that the security deposit owed to the plaintiff was paid by Zheng Tai. (See Compl. ¶¶ 24-25; Declaration of Wu Zhengmao ("Wu Decl.") ¶¶ 18-20.) Primarily on the basis of this payment, the plaintiff alleges that Zheng Tai is either a receiving/paying agent of Shun Da, partners and/or joint venturers with Shun Da, or otherwise affiliated with Shun Da. (See Compl. ¶¶ 21-23.)
Defendant Zheng Tai moves to vacate the order of attachment on two alternative grounds. First, it argues that the plaintiff has no valid prima facie admiralty claim against it because the underlying cause of action -- breach of a contract to purchase a vessel -- does not provide a basis for admiralty jurisdiction. Second, it argues that there is no basis for the attachment because Shun Da has no interest in the attached funds, and Zheng Tai is not the alter ego of Shun Da.
It is "elementary hornbook law that a contract for the sale of a vessel is not within the admiralty jurisdiction of the district courts." Int'l Shipping Co., S.A. v. Hydra Offshore, Inc., 675 F. Supp. 146, 150 (S.D.N.Y. 1987), aff'd 875 F.2d 388 (2d Cir. 1989); see also CTI-Container Leasing Corp. v. Oceanic Operations Corp., 682 F.2d 377, 380 n.4 (2d Cir. 1982); The Ada, 250 F. 194, 197-98 (2d Cir. 1918) (Rogers, J., concurring). Indeed, a leading treatise on admiralty law instructs that "[a]lthough never held by the Supreme Court, it has been well established by the lower courts that contracts for the sale of the vessel are non-maritime. The doctrine is perhaps best understood as an analogy to the rule that excludes shipbuilding contracts from the admiralty jurisdiction." 1 S. Friedell, Benedict on Admiralty § 186 (7th ed. 2008). The plaintiff argues that "the seascape" has changed in recent years with respect to what disputes fall within the admiralty jurisdiction. The plaintiff is correct that the way courts determine what disputes fall within the admiralty jurisdiction has changed. However, this change has not swept within the admiralty jurisdiction a contract that is strictly for the sale of a vessel, such as the contract in this case.
The chief cases credited by the plaintiff with "alter[ing] the seascape" of admiralty jurisdiction are Norfolk S. Ry. Co. v. James N. Kirby, Pty. Ltd., 543 U.S. 14 (2004), and Folksamerica Reinsurance Co. v. Clean Water of New York, Inc., 413 F.3d 307 (2d Cir. 2005). Kirby involved two bills of lading that provided for the transportation of goods from Australia to Alabama, which required carriage by sea from Australia to Savannah, Georgia and carriage by land from Savannah, Georgia to Huntsville, Alabama. Kirby, 543 U.S. at 18-19. The Supreme Court held that because the "primary objective [of the bills of lading] is to accomplish the transportation of goods by sea from Australia to the eastern coast of the United States," the contracts were maritime in nature. Id. at 24. The rationale of Kirby was that maritime law must catch up with the modern realities of maritime transportation, which often includes a land component. See id. at 25 ("Maritime commerce has evolved along with the nature of transportation and is often inseparable from some land-based obligations. The international transportation industry clearly has moved into a new era . . . .") (internal quotation marks omitted).
Kirby loosened the boundaries of admiralty jurisdiction. The Supreme Court criticized in broad terms the rigid "spatial approach" taken by some lower federal courts in deciding whether intermodal transportation contracts for intercontinental shipping were maritime in nature. These courts "held that admiralty jurisdiction does not extend to contracts which require maritime and nonmaritime transportation, unless the nonmaritime transportation is merely incidental -- and that long-distance land travel is not incidental." Id. at 26. The Supreme Court's holding in Kirby invalidated that approach to distinguishing maritime from nonmaritime contracts, which "depend[ed] solely on geography." Id. at 27. The Supreme Court held that "the boundaries of admiralty jurisdiction over contracts . . . [are] conceptual, rather than spatial," and instructed that "[t]o ascertain whether a contract is a maritime one . . . . The answer depends upon the nature and character of the contract, and the true criterion is whether it has reference to maritime service or maritime transactions." Id. at 23-24 (internal quotation marks, alterations, and ellipses omitted).
In Folksamerica, the Court of Appeals for the Second Circuit echoed Kirby's "primary objective" inquiry. The Court of Appeals held that an insurance policy with both marine and land components was within the admiralty jurisdiction because "the insurance contract at issue is primarily or principally concerned with maritime objectives, although there were incidental non-maritime elements." Folksamerica, 413 F.3d at 315. By applying Kirby to an insurance contract, the Court of Appeals extended the scope of the analysis in Kirby beyond the determination of whether transportation contracts were maritime in nature. The Court of Appeals wrote that Kirby "suggests a global principle" that a "mixed" contract comprised of both maritime and nonmaritime components should be considered maritime in nature if "the primary or principal objective" of the contract is maritime commerce. Id. Because the insurance contract in Folksamerica had marine insurance as its principal object, and it is well ...