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Eitzen Bulk A/S v. Ashapura Minechem

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2010


February 15, 2011

EITZEN BULK A/S, PLAINTIFF-APPELLEE, ABC, PLAINTIFF,
v.
ASHAPURA MINECHEM, LTD., DEFENDANT-APPELLANT, DEF, ASHAPURA GROUP OF INDUSTRIES, ASHAPURA SHIPPING LIMITED, ASHAPURA INTERNATIONAL LIMITED, BOMBAY MINERALS LTD., ASHAPURA CLAYTECH LTD., ASHAPURA ALUMINUM LTD., EAGLE FUEL PVT. LTD., PRASHANSHA CERAMICS LTD., PENINSULA PROPERTY DEVELOPERS PRIVATE LTD., SHARDA CONSULTANCY PRIVATE LTD., ASHAPURA CONSULTANCY SERVICE PRIVATE LTD., ASHAPURA MINECHEM UAE (FZE), ASHAPURA HOLDINGS UAE (FZE), ASHAPURA MARITIME FZE, ASHAPURA SHIPPING (UAE) FZE, ASHAPURA SHIPPING UAE, ASHAPURA FINANCE LTD., ASHAPURA INFIN PVT LTD., ASHA PRESTIGE CO., ASHAPURA VOLCLAY LTD., ASHAPURA VOLCLAY CHEMICALS PRIVATE LTD., ASHAPURA AL-ZAWAWI MINERALS, LLC, SHANTILAL MULTIPORT INFRASTRUCTURE PRIVATE LTD., ASHAPURA ARCADIA LOGISTIC PRIVATE LIMITED, ASHAPURA CHINA, ASHAPURA CHINA CLAY COMPANY, MANICO MINERALS INTERNATIONAL, ASHAPURA AMCOL., DEFENDANTS.

Appeal from an order of the United States District Court for the Southern District of New York (Alvin K. Hellerstein, Judge) denying a defendant-appellant's motion to vacate maritime attachments of electronic fund transfers entered prior to our decision in Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009).

The opinion of the court was delivered by: Winter, Circuit Judge:

10-0976-cv

Eitzen Bulk A/S v. Ashapura Minechem, Ltd.

Argued: January 26, 2011

Before: WINTER, SACK, and LIVINGSTON, Circuit Judges.

Plaintiff's claim was reduced to final judgment pre-Jaldhi but has not yet been executed against the attached funds, which were retained by the banks in suspense accounts pursuant to the Rule B attachments. We hold that the entry of a judgment upholding plaintiff's claim as to liability does not affect the retroactive applicability of Jaldhi where that judgment has not yet been executed against the attached property. Accordingly, we vacate the decision and remand with instructions to release the property.

29 Ashapura Minechem, Ltd., appeals from Judge Hellerstein's 30 order denying its motion to vacate maritime attachments of 31 electronic fund transfers ("EFTs") entered pursuant to Rule B 1 of the Supplemental Rules for Admiralty or Maritime Claims and 2 Asset Forfeiture Actions ("Rule B"). Fed. R. Civ. P. Supp. R. 3 B. We have previously held that EFTs are not properly 4 attachable under Rule B, Shipping Corp. of India Ltd. v. Jaldhi 5 Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009), and that Jaldhi 6 applies retroactively "to all cases open on direct review." 7 Hawknet, Ltd. v. Overseas Shipping Agencies, 590 F.3d 87, 91 8 (2d Cir. 2009). We now hold that EFTs attached pre-Jaldhi must 9 be released where the plaintiff obtained a final judgment but 10 has not executed it against the attached funds that are being 11 retained by banks in suspense accounts pursuant to Rule B 12 attachments. 13 Accordingly, we vacate and remand with instructions to 14 release the attached property.

15 BACKGROUND

16 The underlying dispute does not concern us. It suffices 17 to say that, in September 2008, Eitzen, the plaintiff, obtained 18 a Rule B attachment of EFTs of which Ashapura, the defendant, 19 was an originator or beneficiary. By early 2009, Eitzen had 20 attached over $1.7 million in EFTs, which the garnishee banks 21 transferred into suspense accounts. Eitzen ultimately obtained 22 an arbitration award in London of approximately $36.6 million, 23 which it moved to confirm in the Southern District. On July 24 24, 2009, before our decision in Jaldhi, the district court 25 entered judgment for the full amount of the arbitration award 1 and ordered the garnishee banks to turn the restrained property 2 over to Eitzen within ten days after entry of the judgment.

3 Ashapura did not appeal. Eitzen's collection efforts were 4 stalled when other creditors of Ashapura asserted their own 5 claims against the funds in the suspense accounts. By March 6 24, 2010, however, those creditors' claims were all either 7 voluntarily withdrawn or determined against them, leaving only 8 Eitzen's attachment in effect.

9 On November 9, 2009, Ashapura filed a motion to vacate the 10 Rule B attachment pursuant to Jaldhi. The district court 11 denied the motion. Noting that this case "involve[d] actual 12 funds, held in suspense accounts, not EFTs," and that, under 13 Jaldhi and Hawknet, it "lacked jurisdiction to order the funds 14 attached," the court stated that "they nevertheless were 15 attached and plainly [the court has] jurisdiction to order 16 their disposition." It held that neither Jaldhi nor Hawknet 17 "confronted issues arising from an evasive judgment debtor or 18 multiple claims of creditors, including a judgment creditor."

19 The court then upheld the attachment as an exercise of its 20 equity powers. Ashapura brought the present appeal.

21 DISCUSSION

22 Eitzen argues that this case is not governed by Jaldhi and 23 Hawknet because the district court's judgment and turnover 24 order below caused the attachment to "merge" into the final 25 judgment prior to the filing of those opinions. Eitzen further 1 contends that Hawknet's retroactive application of Jaldhi does 2 not apply here because the case is no longer "open on direct 3 review," Hawknet, 590 F.3d at 91, given Ashapura's failure to 4 appeal. We find both arguments unpersuasive.

5 The attachment of EFTs between Ashapura and third parties 6 was invalid under the rule announced in Jaldhi, 585 F.3d at 71. 7 Because the judgment against Ashapura was not executed against 8 the funds, its finality did nothing to alter the legal basis of 9 the banks' retention of the funds in the suspense accounts. 10 See Scanscot Shipping Servs. GmbH v. Metales Tracomex LTDA, 617 11 F.3d 679, 682 (2d Cir. 2010) ("The new suspense account neither 12 cures the jurisdictional defect nor provides a basis for 13 reattachment of the same funds.").

14 Although the question of Ashapura's liability may no 15 longer be "open on direct review," Hawknet, 590 F.3d at 91, the 16 funds remaining in suspense accounts were being retained by the 17 banks solely on the basis of the Rule B attachment and that 18 retention was therefore open to review on a Rule E(4)(f) 19 motion.*fn1 The reduction of Eitzen's claim to judgment 1 eliminated all doubt as to Ashapura's liability, but neither 2 Jaldhi nor Hawknet turned on the strength of the merits of the 3 underlying actions brought by the attaching parties. And so 4 far as the equities between the parties favoring Eitzen are 5 concerned, we have specifically forbidden resort to equitable 6 considerations in addressing motions to vacate pre-Jaldhi 7 attachment orders. See Sinoying Logistics Pte Ltd. v. Yi Da 8 Xin Trading Corp., 619 F.3d 207, 214 (2d Cir. 2010) ("[F]ar 9 from encouraging district courts to apply Jaldhi selectively 10 based on an examination of the equitable considerations in the 11 remaining EFT-attachment cases, Hawknet requires district 12 courts to vacate any attachment orders granted before [the] 13 decision in Jaldhi insofar as those orders are now inconsistent 14 with Jaldhi."). We consequently hold that the district court 15 was obligated, pursuant to Jaldhi and Hawknet, to vacate the 16 attachment order.*fn2

1 CONCLUSION

2 For the foregoing reasons, we vacate the district court's 3 order denying Ashapura's motion to vacate the Rule B attachment 4 and remand with instructions to release those funds.


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