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Allied Maritime Inc. v. Descatrade SA

September 3, 2010

ALLIED MARITIME, INC., PLAINTIFF-COUNTER-DEFENDANT-APPELLANT,
v.
DESCATRADE SA, ALSO KNOWN AS DESCA TRADE SA, DEFENDANT-COUNTER-CLAIMAINT-APPELLEE.



SYLLABUS BY THE COURT

Plaintiff appeals from a December 16, 2009, order of the United States District Court for the Southern District of New York (Shira A. Scheindlin, Judge) vacating the process of maritime attachment and garnishment issued on April 15, 2009 attaching defendant's assets to secure a putative foreign arbitral award. The District Court dismissed the complaint for want of jurisdiction. We hold that the District Court properly concluded that it lacked jurisdiction over defendant's bank account in Paris, France, the suspense account created by the bank in response to the attachment order, and any other intangible property arising from the electronic funds transfer.

Affirmed.

The opinion of the court was delivered by: JOSÉ A. Cabranes, Circuit Judge.

Argued: June 24, 2010

Before: MINER, CABRANES, WESLEY, Circuit Judges.

We consider again questions arising from the attachment of electronic funds transfers ("EFTs") under Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure ("Rule B").

Plaintiff Allied Maritime, Inc., appeals from a December 16, 2009 order of the United States District Court for the Southern District of New York (Shira A. Scheindlin, Judge) vacating a process of maritime attachment and garnishment (the "attachment") issued on April 15, 2009, that attached defendant Descatrade's assets in the Southern District of New York and dismissing Allied's complaint for lack of jurisdiction. On appeal, Allied argues that the District Court erred by (1) refusing to attach Descatrade's account at BNP Paribas in Paris; (2) refusing to attach the suspense account, which Allied claims is located in New York; (3) refusing to attach Descatrade's right to a refund under the "money back guarantee" provision of the Uniform Commercial Code ("U.C.C."), N.Y. U.C.C. § 4-A-402(4); (4) denying Allied's request for discovery; and (5) declining to fashion an equitable remedy to restrain Descatrade's funds.

BACKGROUND

This case arises out of a maritime dispute between Allied and Descatrade over damages sustained to the M/V Lok Pratap, a vessel Descatrade chartered from Allied on July 9, 2008, to transport cargo from China to West Africa. The dispute is currently in arbitration in London, where Allied is seeking approximately $1.4 million in damages. On April 10, 2009, Allied filed a complaint in the District Court seeking to attach Descatrade's assets under Rule B as pre-judgment security for Descatrade's obligations resulting from the arbitration in London.

When Allied filed its complaint, EFTs between two foreign banks that "cleared" momentarily through a so-called "intermediary bank"*fn1 in the Southern District of New York were, under the existing law of our Circuit, attachable property of the originator or beneficiary of the transfer under Rule B. See Winter Storm Shipping, Ltd. v. TPI, 310 F.3d 263 (2d Cir. 2002). See generally Citibank, N.A. v. Wells Fargo Asia Ltd., 495 U.S. 660, 663 (1990) (explaining the process of "clearing" transactions between foreign dollar-denominated accounts in New York); Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58, 60 n.1 (2d Cir. 2009) (explaining the operation of EFTs). As a result, on April 15, 2009 the District Court issued an attachment order and Allied served process on eleven banks in the Southern District through which it believed Descatrade might seek to transfer funds. In the normal course, such an order is issued ex parte-that is, without notice to the putative defendant, who would receive notice only if any of its property were attached. ProShipLine, Inc. v. Aspen Infrastructures, Ltd., 585 F.3d 105, 111 (2d Cir. 2009).

On June 25, 2009, Descatrade instructed BNP Paribas in Paris to transfer $400,000 from an account at BNP Paribas in Paris to an account at HSBC France, also in Paris. BNP Paribas initiated an EFT, directing HSBC USA, N.A. in New York to credit Descatrade's account at HSBC France in Paris and to debit BNP Paribas's account with HSBC USA in New York. However, before the EFT reached HSBC USA, BNP Paribas suspended the transaction and placed the funds in a separate "suspense account" in an attempt to comply with the attachment order. It is unclear from the record on appeal whether the EFT was suspended-and the suspense account created-in New York or Paris.

On October 16, 2009, we overruled the decision that had permitted the attachment of EFTs in the hands of an intermediary bank under Rule B.*fn2 Jaldhi,585 F.3d at 71, abrogating Winter Storm, 310 F.3d at 263. Because our opinion in Jaldhi altered the law of Rule B attachments in our Circuit, on October 21, 2009 the District Court sua sponte entered an order to show cause why it should not vacate the April 15, 2009 order of attachment.

In response, Allied argued that our holding in Jaldhi applied only to EFTs restrained at intermediary banks and that, because the EFT initiated by Descatrade had been restrained at the originating bank, BNP Paribas, Jaldhi did not apply. The District Court concluded-without applying Jaldhi-that New York's separate entity rule, see Det Bergenske Dampskibsselskab v. Sabre Shipping Corp., 341 F.2d 50, 53 (2d Cir. 1965), precluded Allied from attaching Descatrade's BNP Paribas account in Paris through service on BNP Paribas in New York, Allied Maritime, Inc. v. Descatrade SA, No. 09 Civ. 3684, 2009 WL 4884160, at *2 (S.D.N.Y. Dec. 16, 2009).

Allied also argued that in the event the District Court concluded that it could not reach Descatrade's account at BNP Paribas in Paris, Descatrade retained an attachable interest in the suspense account pursuant to the U.C.C.'s "money back guarantee" provision, N.Y. U.C.C. § 4-A-402, which allows an originator to recover its funds in the event a funds transfer is not completed for any reason. Allied Maritime,2009 WL 4884160, at *2--3. The District Court rejected this argument as well. The District Court determined that it was "unlikely" that the suspense account was located in New York. Id. at *2.Assuming, however, that it was indeed located in New York, and that the recovery right created under N.Y. U.C.C. § 4-A-402 may be an attachable interest, the District Court concluded that the location of the recovery right in this case ...


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