The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge
On November 20, 2008 this Court granted Plaintiff A. Elephant Corp.'s ("AEC") application for an ex parte Order of Maritime Attachment and Garnishment (the "Order of Attachment") pursuant to Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Fed. R. Civ. P. (the "Supplemental Rules"). Defendant HiFocus Group Limited ("HiFocus") now moves pursuant to Rule E of the Supplemental Rules for vacatur of the Order of Attachment and, pursuant to Fed. R. Civ. P. 12(b)(2) and 12(b)(6), for dismissal of the Verified Complaint. For the foregoing reasons, HiFocus' motion is GRANTED.
This case concerns an alleged breach of a Memorandum of Agreement dated August 19, 2008 (the "MOA") for the purchase and sale of the ocean-going vessel the M/T A Elephant (the "Vessel"), registered under the flag of Liberia. (Verified Compl. filed November 18, 2008 ("Compl.") at ¶5, Ex. 2 at ¶ 1.) Pursuant to the terms of the MOA, HiFocus agreed to buy the Vessel from AEC for the sum of $24,231,375.00.*fn1 (Compl.at ¶¶ 5-8.) Under the terms of the MOA, the sale of the Vessel included "all her outfit, equipment, anchors and chains . . . provisions, bunkers, and lubrication oil" and the Vessel was to be delivered in Chittagong, Bangladesh "under her own power, safely afloat, substantially intact" and with her "Main Engine and Generators under working condition." (Compl. at Ex. 2 ¶¶ 1, 3.) Pursuant to the MOA, the Vessel was to be "sold for demolition only," and AEC, as seller, was obligated to "assist the Buyers in beaching the vessel at Buyers' designated breaking up plot in Chittagong." (Id. at ¶¶ 3, 11.)
AEC alleges that HiFocus breached the MOA by failing to make payment of a deposit of 20% of the purchase price, or $4,846,275, on or before August 21, 2008. (Id. at ¶ 9.) Pursuant to Clause 4 of the MOA, upon HiFocus' breach AEC was "at liberty (but not bound) to resell the vessel" and recover losses from HiFocus. AEC sold the Vessel on September 3, 2008, for $22,172,500.00, or $2,058,875 less than the purchase price under the MOA.
On November 20, 2008, AEC applied to this Court for and was granted an ex parte Order of Attachment in the amount of $2,787,390.67, the amount of AEC's alleged losses plus estimated interest and attorneys' fees. HiFocus moved to vacate the Order of Attachment and dismiss this action on January 15, 2009.
"The power to grant attachments in admiralty is an inherent component of the admiralty jurisdiction given to the federal courts under Article III of the Constitution. U.S. Const. art. III, § 2." Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 437 (2d Cir. 2006). Supplemental Rules B and E govern attachment of assets in maritime actions. Pursuant to Rule B, a plaintiff who files a verified complaint and an affidavit which states the defendant cannot be found in the district is entitled to an attachment of a defendant's assets up to the amount in dispute. Fed. R. Civ. P. Supp. R. B(1). Rule E entitles a defendant whose assets have been attached to a "prompt hearing at which the plaintiff shall be required to show why the arrest or attachment should not be vacated." Fed. R. Civ. P. Supp. R. E(4)(f).
Faced with a motion for vacatur under Rule E(4)(f), the plaintiff bears the burden to establish compliance with the filing and service requirements of Rules B and E and 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 460 F.3d at 445. If the plaintiff cannot establish that it has a valid prima facie admiralty claim against the defendant, the attachment must be vacated and the action dismissed for lack of subject matter jurisdiction. See Primera Maritime (Hellas) Ltd. v. Jiangsu Eastern Heavy Industry Co. Ltd., No. 08 Civ. 11299 (JGK), 2009 WL 249249, *2 (S.D.N.Y. Feb. 2, 2009).
Both HiFocus' entitlement to vacatur of the Order of Attachment as well as this Court's subject matter jurisdiction turn on whether this dispute lies within the Court's admiralty jurisdiction. "For almost a century, it has been considered 'elementary hornbook law' that a contract for the sale of a vessel does not come within the federal courts' admiralty jurisdiction." Smith v. Mitlof, 198 F.Supp.2d 492, 499 (S.D.N.Y. 2002) (quoting International Shipping Co., S.A. v. Hydra Offshore, Inc., 675 F.Supp. 146, 150 (S.D.N.Y.1987). In the Second Circuit, this rule is often cited with reference to the 1918 case The Ada, 250 F. 194, 198 (2d Cir.1918) (Rogers, J., concurring) ("The rule is settled that contracts for . selling a ship, are not maritime contracts and within the jurisdiction of the admiralty.")
Plaintiff contends, however, that the Supreme Court's decision in Norfolk Southern Ry. Co. v. Kirby, 543 U.S. 14 (2004) ("Kirby")and the Second Circuit's subsequent decision in Folksamerica Reinsurance Co. v. Clean Water of New York, 413 F.3d 307 (2d Cir. 2005) have loosened the boundaries of federal admiralty jurisdiction and thereby called into question the rule of The Ada. The Supreme Court has noted that "the trend in modern admiralty case law ... is to focus the jurisdictional inquiry upon whether the nature of the transaction was maritime." Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603, 611 (1991). In Kirby, a "maritime case about a train wreck," the Supreme Court found that bills of lading for transport of cargo from Australia to an inland U.S. city were "maritime contracts because their primary objective [was] to accomplish the transportation of goods by sea." 543 U.S. at 24. After Kirby,the answer to the jurisdictional question "'depends upon ... the nature and character of the contract,' and the true criterion is whether it has 'reference to maritime service or maritime transactions.'" Kirby, 543 U.S. at 23-24 (quoting North Pacific S.S. Co. v. Hall Brothers Marine Railway & Shipbuilding Co., 249 U.S. 119, 125 (1919)).
The Second Circuit has acknowledged that "there are 'few clean lines between maritime and non-maritime contracts,'" Folksamericana, 413 F.3d at 311 (quoting Kirby, 543 U.S. at 23), but clarified that the boundaries of admiralty jurisdiction over contracts are "defined by the purpose of the jurisdictional grant-to protect maritime commerce." Id. (citing Exxon, 500 U.S. at 608). In Folksamerica, the Circuit reiterated that a two-step inquiry is required to determine if a dispute lies within a district court's admiralty jurisdiction. First, the court must answer the threshold question of whether the "subject matter of the dispute" implicates the "concerns underlying admiralty and maritime jurisdiction." Folksamerica, 413 F.3d at 312. Second, if the dispute implicates such concerns, the district court must ask whether the "primary objective" of the contract in question concerns maritime commerce. Id. at 315. (citing Kirby 543 U.S. at 25).
In Kalafrana Shipping Ltd. v. Sea Gull Shipping Co., Ltd.,591 F.Supp.2d 505 (S.D.N.Y. 2008) Judge Scheindlin concluded that the "broad language" of Kirby and Folksamerica "support the demise of the holding in The Ada." In Kalafrana the dispute arose from a memorandum of agreement for the sale of an operational vessel and concerned the responsibility for the cost of certain necessary repairs. Id. at 506. In concluding that the dispute sounded in admiralty, Judge Scheindlin wrote "a contract for the purchase of a launched ship that ...