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Concord Line Co. Ltd. v. Just Oil & Grain PTE Ltd.

June 14, 2010


The opinion of the court was delivered by: Alvin K. Hellerstein, U.S.D.J.


Defendant Just Oil & Grain Pte Ltd. moves, pursuant to Admiralty Rule E and Shipping Corp. of India v. Jaldhi, 585 F.3d 58 (2d Cir. 2009), to vacate the order of attachment entered in Plaintiff's favor. For the reasons stated below, the motion is granted.


The instant action arises out of Defendant's alleged failure to pay "demurrage charges due and owing to Plaintiff under the charter party contract." Complaint ¶¶ 6-7. On June 2, 2008, Plaintiff filed a complaint seeking an attachment of funds, pursuant to Admiralty Rule B, in aid of arbitration and to gain jurisdiction over Defendants. Plaintiff claimed damages, fees, and interest of $53,466.72. Id. ¶ 8. Plaintiff represented that it would, pursuant to the charter party, initiate arbitration in Hong Kong after it initiated the attachment proceedings in this District. Id. ¶¶ 9, 11, 24, 37. I granted Plaintiff's application for a Rule B attachment and, pursuant to the order of attachment, J.P. Morgan Chase attached $53,466.72 in the form of an electronic fund transfer (EFT), originated by Defendant and intended for a third-party payee. The funds were restrained and placed in a suspense account held by the garnishee bank.

Notice of the attachment was duly sent to Defendant and Plaintiff commenced arbitration proceedings in Hong Kong in August 2008. Plaintiff served its submissions in the arbitration proceedings on August 29, 2008, and Defendant filed its defenses and counterclaims on November 10, 2008. Plaintiff replied on December 30, 2008. Plaintiff contends that Defendant did not provide timely notice of whether it intended to introduce any witness statements, but the parties eventually exchanged fact witness statements. On April 21, 2010, Plaintiff submitted to the arbitrator a letter requesting an order to exchange final submissions.

The parties had fully briefed Defendant's motion to vacate when I requested supplemental briefing to respond to the issues raised in my opinion and order in Americas Bulk Transport Ltd. v. IMT, 08 Civ. 6970 (AKH), Eitzen Bulk A/S v. Ashapura Minechem Ltd., 08 Civ. 8319 (AKH), 2010 U.S. Dist. LEXIS 26277 (S.D.N.Y. Mar. 19, 2010).


a. The Rules of Attachment

Article III of the Constitution, in extending federal jurisdiction "to all cases of admiralty and maritime jurisdiction," gives district courts the inherent power to grant maritime attachments. U.S. Const. art. III, § 2. Admiralty courts have issued maritime attachments "as far back as the authentic history of those tribunals can be traced." Atkins v. The Disintegrating Co., 85 U.S. (18 Wall.) 272, 303 (1874). Attachments secure a defendant's appearance and ensure at least partial recovery if the plaintiff succeeds in the action or related arbitration. Swift & Co. Packers v. Compania Colombiana del Caribe, S.A., 339 U.S. 684, 693 (1950) (citing Manro v. Almeida, 23 U.S. (10 Wheat.) 473, 489 (1825)). The need for maritime attachments is particularly strong because it is often "more difficult to find property of parties to a maritime dispute than of parties to a traditional civil action. Maritime parties are peripatetic, and their assets often transitory." Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 443 (2d Cir. 2006); see In re Louisville Underwriters, 134 U.S. 488, 493 (1890). The Admiralty Rules respond to these issues by providing a broad attachment rule, "under which the attachment is quite easily obtained." Aqua Stoli Shipping Ltd., 460 F.3d at 443.

Attachment procedures are codified in the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure. Under Admiralty Rule B, when a defendant cannot be found in the district in which a complaint is filed, a plaintiff may "attach the defendant's... intangible personal property... in the hands of garnishees." Fed. R. Civ. P. Supp. R. B(1)(A). If intangible property is to be attached, the process server "shall execute the process by leaving with the garnishee or other obligor a copy of the complaint and process requiring the garnishee or other obligor to answer as provided in [the Admiralty Rules]." Id. R. B(1)(d).

Admiralty Rule E codifies procedures to vacate attachments. Rule E(4)(f) requires the court to give defendants a "prompt hearing," and places the burden to justify the attachment on the party that procured it. Plaintiffs must "show why the arrest or attachment should not be vacated." Id.

b. Shipping Corp. of India and Hawknet

The dispute in Shipping Corp. of India arose from the charter of a ship by an Indian corporation to a Singapore corporation, for shipment of iron ore from India to China. As the ship began to load its cargo, one of its cranes collapsed, killing the crane operator and causing defendant to suspend the charter. Eventually, the ship's equipment passed inspection, the suspension was ended, and the shipment of iron ore was completed. However, the defendant refused to pay the ship owner's bill, leading to an order for attachment from this court in aid of arbitration in London under the charter agreement. Levies pursuant to the order for attachment captured $4,689,247 in EFTs, mostly intended for Shipping Corp. of India. The sum was deposited in the court's registry, subject to the court's further orders. Shipping Corp. of India v. Jaldhi Overseas Pte. Ltd., 08 Civ. 4328 (JSR) (S.D.N.Y. Oct. 14 2008) (Doc. No. 23).

The Court of Appeals, overruling Winter Storm, expressed concern that its prior holding in Winter Storm, authorizing attachments of EFTs transmitted to and from New York clearing banks, had introduced "uncertainty" in transferring funds internationally, "undermined the efficiency of New York's international funds transfer business," "discourage[d] dollar-denominated transactions," and "damage[d] New York's standing as an international financial center." Shipping Corp. of India, 585 F.3d at 62. The court commented that on "further consideration," Winter Storm's justifications were "unpersuasive"; its reliance on ...

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