United States District Court, S.D. New York
For Alaska Reefer Management LLC, Plaintiff: Don Philip Murnane, Jr, Manuel Antonio Molina, FREEHILL HOGAN & MAHAR, LLP.
For Network Shipping Limited, Defendant: Martin F Casey, CASEY & BARNETT, LLC.
For JPMorgan Chase Bank, N.A., Garnishee: Robert Anthony Fitch, RAWLE & HENDERSON, LLP.
OPINION & ORDER
John F. Keenan, United States District Judge.
Before the Court is a motion by Garnishee JPMorgan Chase Bank, N.A. (" Chase" ), for the release of funds presently restrained under Rule B of the Supplemental Rules of Certain Admiralty and Maritime Claims (" Rule B" ). For the reasons that follow, the Rule B attachment is vacated but the order of vacatur is stayed pending additional discovery.
The Court assumes familiarity with the facts as set forth in its June 16, 2014 Opinion & Order. See Alaska Reefer Mgmt. LLC v. Network Shipping Ltd., No. 14 Civ. 3580, (S.D.N.Y. Jun. 16, 2014) (ECF No. 24). For purposes of this motion, the Court notes the following additional facts. Plaintiff initiated the instant action in order to secure Defendant's assets under Rule B. This Court granted the application on May 20, 2014.
Pursuant to the Court's order, Chase was first served with a writ of attachment by Plaintiff Alaska Reefer Management LLC (" Alaska Reefer" ) on May 21, 2014. (ECF No. 26 at 2.) A search of Chase's records identified an account numbered XXXX3884 (" account 3884" ) maintained at Chase in the name of Defendant Network Shipping Ltd. (" Network Shipping" ). (Id.) The account is subject to an Automatic Dollar Transfer Service Agreement (the " ADT Agreement" ) between Chase, Network Shipping, and Del Monte International GMBH (" Del Monte" ). (Id.) The Agreement authorizes Chase to automatically transfer funds from Del Monte's London account into Network Shipping's New York account whenever the latter account is overdrawn. (ECF No. 30 at 20.)
At the time that the first writ was served, account 3884 did not have a positive balance and so there were no funds available to attach. (ECF No. 26 at 5.) According to Chase, however, its personnel treated the writ as requiring a garnishment of future deposits and placed a hold on the account for an arbitrary amount of $9,999,999.99. (ECF No. 26 at 5.) During the overnight hours of May 22 into May 23, 2014, Chase's computer system interpreted this hold as an overdraft, which, pursuant to the terms of the ADT agreement, caused Chase to transfer money from Del Monte to Network Shipping in order to bring account 3884 to a zero balance. (Id. at 6.) Both Chase and Alaska Reefer acknowledge that this transfer of funds from Del Monte to Network Shipping was caused by Chase's unilateral error. (ECF No. 26 at 12; ECF No. 30 at 12-13.) Alaska Reefer again served Chase with a writ of attachment on May 23, 2014. (ECF No. 26 at 6.) Because the hold was not an actual debit transaction, the automatic transfer caused Network Shipping's account to show a positive balance of at least the $3,290,287.38 that Plaintiff sought to attach. (Id.) Accordingly, Chase restrained $3,290,287.38 of the transferred funds as required by the writ. (Id.)
In response to the restraint of funds by Chase, Network Shipping moved to vacate the attachment on the ground that it was amenable to suit in New Jersey, a convenient adjacent jurisdiction. (ECF No. 7.) A hearing on the matter was held on June 5, 2014. On June 11, 2014, Chase belatedly filed an Answer to Alaska Reefer's Interrogatories, advising the Court that a bank error had caused the inadvertent transfer of funds from a nonparty to Network Shipping's New York account. One
day later, Network Shipping filed a motion for counter-security, in which it also raised Chase's error for the first time. In response, Alaska Reefer submitted a letter to the Court on June 16, 2014, contending that the attachment was proper despite Chase's alleged error. That same day, the Court issued an order concluding that Network Shipping had not demonstrated that it could be found in New Jersey for ...