Maritime Law Discussion Blog

The Winter Storm Era's Contribution to Rule B

2011-03-29T23:20:00.000-04:00

I plan on publishing a series of posts detailing the Winter Storm Era's development of Rule B jurisprudence and admiralty law as a whole. Of particular interest is the effect of decisions such as Aqua Stoli on maritime attachments going forward. Rule B remains a tool to obtain jurisdiction over peripatetic maritime defendants and security for potential judgments. Admittedly, after the Second Circuit's change of heart in Jaldhi, the potency of Rule B has been considerably diminished. Over the next few weeks, I will discuss Rule B going forward. My first substantive post will discuss Aqua Stoli's remaining vitality as setting forth the mechanics of a Rule E(4)(f) motion to vacate. Another question is whether courts in other circuits will cite to and properly apply Aqua Stoli's dictates.

GE Seaco

2011-02-20T20:19:00.002-05:00

GE Seaco in flux. See Article.

Originating Bank EFTs Not Subject to Jaldhi

2011-02-15T17:59:00.002-05:00

Because Jaldhi dealt only with the restraint of EFTs passing through intermediary banks located in this district, see Jaldhi, 585 F.3d at 61, originating Bank EFTs fall outside the scope of Jaldhi's holding. Therefore, the Court upheld the attachment with respect to the funds restrained by an originating bank.

GRANITE ENTERPRISES LIMITED, v. VIRGOZ OILS & FATS PTE. LTD. and PT PERMATA HIJAU SAWIT, No. 09 Civ. 4534. (S.D.N.Y. February 9, 2010) (Sweet, J.)

Banking Law

2011-02-12T14:35:00.000-05:00

EXPORT-IMPORT BANK OF THE UNITED STATES, Plaintiff-Appellant,
v.
ASIA PULP & PAPER COMPANY, LTD., PT INDAH KIAT PULP & PAPER TBK, PT PABRIK KERTAS TJIWI KIMIA TBK, PT PINDO DELI PULP & PAPER MILLS, Defendants-Appellees.
No. 09-2254-cv.

United States Court of Appeals, Second Circuit.

This decision clarifies some post Jaldhi issues in the context of banking law.

Healthcare Law Declared Unconstitutional

2011-02-01T11:23:00.002-05:00

Although unrelated to maritime law, it is worth noting that a federal district judge in Florida declared President Obama's health care law unconstitutional. Regardless of your views on the law, this is a significant development. Health care is a massive issue, implicating virtually everyone in the United States. A copy of the opinion can be found here. Judge Vinson began his 78 page opinion by succinctly stating:
I emphasized once before, but it bears repeating again: this case is not about whether the Act is wise or unwise legislation, or whether it will solve or exacerbate the myriad problems in our health care system. In fact, it is not really about our health care system at all. It is principally about our federalist system, and it raises very important issues regarding the Constitutional role of the federal government.

Egypt Crisis

2011-01-31T15:30:00.003-05:00

Watching the turmoil in Egypt, I couldn't help but wonder what effect, if any, this will have on the movement of vessels through the all-important Suez Canal. Let's hope that the situation is resolved as quickly and as peacefully as possible.

Google Scholar

2011-01-30T14:53:00.002-05:00

I would like to praise the innovation of Google. In addition to revolutionizing the way we communicate and receive our information, Google Scholar has now made case law available to anyone with access to the internet. A free service, Google Scholar has given all people access to case law from most jurisdictions. The common law accounts for so much our societal interactions and freedoms. Citizens should not have to pay to have ready access to the common law and Google has now removed that bar. I encourage all readers to try Google scholar today. See the below linked Second Circuit decision in Scanscot.

Update

2011-01-04T11:56:00.002-05:00

I will post some summaries of post-Jaldhi cases. Although the Second Circuit acted decisively, there have been some outstanding issues pending which warrant discussion.

Clearing the Brush

2010-09-12T21:31:00.002-04:00

The Second Circuit made clear that the District Court may dismiss a case sua sponte for lack of personal jurisdiction, and need not fashion an equitable remedy where its former ruling in Winter Storm formed the basis for quasi in rem jurisdiction. See the opinion here.

The court appears to want all traces of the Winter Storm era gone.

Kawasaki Clarifies the Scope of the Carmack Amendment

2010-08-22T21:44:00.002-04:00

Deciding an issue that many followers of the maritime legal landscape deemed ripe for adjudication, the Supreme Court held that the inland portion of a shipment of goods from overseas under a through bill of lading is governed by the Carriage of Goods by Sea Act (COGSA) rather than the Carmack Amendment to the Interstate Commerce Act. Justice Kennedy explained that the critical inquiry was whether the Carmack Amendment applies when the rail transportation falls in the middle of a larger trip that originated overseas. In particular, the question is whether a rail carrier receiving cargo from a ship counts as a “receiving carrier” within the meaning of the Carmack Amendment. The Court held that when cargo starts its journey overseas under a through bill of lading, the railroads that take up the goods at a U.S. port are not “receiving carriers” and therefore Carmack does not apply. As a result, the Court held that this case had to be litigated in Tokyo.

A copy of the opinion is available both on the Court's website and on google scholar.

Animal Feeds and Class Arbitration

2010-08-09T22:34:00.002-04:00

The US Supreme Court held that the Federal Arbitration Act prohibits arbitrators from imposing class arbitration on parties who have not agreed to authorize class arbitration. Stolt-Nielsen v. AnimalFeeds. Justice Alito, writing for the majority ruled that an arbitrator cannot compel a party to submit to class arbitration unless there is a contractual basis for concluding that the party so agreed. Without any evidence that the parties agreed to engage in class arbitration, imposing such arbitration would violate the “foundational FAA principle that arbitration is a matter of consent.” Class arbitration fundamentally differs from a standard arbitration between two parties and arbitrators cannot presume that a party consenting to one would automatically consent to the other.

While the opinion focused mainly on issues surrounding arbitration, it contains a thorough discussion of the principles underlying arbitration and clarifies various points. Maritime practitioners are well advised to read the full opinion of the court.

Reactionary Congress

2010-07-06T23:39:00.002-04:00

There is talk that Congress may alter or even repeal the Death on the High Seas Act (DOHSA) and / or Limitation of Liability Act in wake of the BP Oil disaster. I have posted a link to the NY Times article on the subject. These developments are troubling given the potential ramifications that wholesale repeal of these Acts would have on the maritime industry. We will keep posted. Times Article

New Supreme Court Cases

2010-06-21T17:06:00.003-04:00

I will post summaries of the recent Supreme Court cases that relate to admiralty practice. Although they are not Rule B related, they still warrant discussion.

Tim

Relief Denied

2010-03-23T19:30:00.001-04:00

The Supreme Court has denied the Petition.

The Final Fate of Rule B

2010-03-15T15:12:00.002-04:00

The Shipping Corp of India (SCI) has filed a Petition for Certiorari to the Supreme Court. A copy of the petition can be found here. The Maritime Law Association of the United States has filed an amicus brief, which can be found here. The nine justices will conduct a conference later this week to determine the status of this appeal. We expect a decision early next week. More details to follow.

Retroactive Application of Jaldhi: Messy Conclusion(?) to the Winter Storm Era

2009-11-14T16:55:00.003-05:00

Judge Cabranes made clear on Friday that Jaldhi's rule will apply retroactively. There will be more discussion of the ramifications of this application in the weeks to come. Coining Jaldhi as a "jurisdictional ruling," the Court quickly decided that it had overcome the presumption against retroactivity. But the fact remains, that after this set of events, reliance on the law at the time it is when one acts can offer little assurance or guidance. What now happens to plaintiffs who obtained security and pursued a claim on the merits, but no longer have a way to satisfy a judgment?
Read the Hawknet decision here.

Redundant: Aosta

2009-11-02T09:47:00.002-05:00

Second Circuit again cites its Jaldhi, refusing to change its mind as it did a few weeks ago.

Interesting Article

2009-10-26T12:58:00.000-04:00

Please find it here: Article.

A Storm of Orders to Show Cause

2009-10-24T17:13:00.003-04:00

Judges are issuing orders to show cause like there is no tomorrow. A select few have outright sua sponte dismissed cases. And it looks like there may be no tomorrow for maritime parties in need of security. All those who have pursued maritime claims on the merits because they knew they had security attached, very well may be out of luck because the New York federal courts are sick and tired of Rule B and may apply this Jaldhi case retroactively, making reliance on the law as it existed at the time one acted a thing of the past. The explanation the Second Circuit gave us for overturning Winter Storm was:

Upon further consideration, we find Winter Storm's reasons unpersuasive and its consequences untenable. Most importantly, we find that Winter Storm's reliance on Daccarett was misplaced. Daccarett did not decide that the originator or beneficiary of an EFT had a property interest in the EFT; it held only that funds traceable to an illegal activity were subject to forfeiture under 21 U.S.C. § 881. See Aqua Stoli, 460 F.3d at 445 n.6 ("Because Daccarett was a forfeiture case, its holding that EFTs are attachable assets does not answer the more salient question of whose assets they are while in transit."). Under the forfeiture laws, funds can be seized even if they do not constitute property of the defendant because "no property right shall exist in . . . [all] moneys . . . traceable to [a violation of Title 21, Chapter 13, Subchapter I of the United States Code]." 21 U.S.C. § 881(a). To be eligible for forfeiture, the EFTs needed only to be traceable to the illegal activities, and thus the court in Daccarett was required only to assess whether the EFTs in that case were in fact traceable to illegal activities. No further inquiry into the identity of the owner of the EFTs was necessary--indeed, that question was wholly irrelevant.

For maritime attachments under Rule B, however, the question of ownership is critical. As a remedy quasi in rem, the validity of a Rule B attachment depends entirely on the determination that the res at issue is the property of the defendant at the moment the res is attached. See, e.g., Transportes Navieros y Terrestres S.A. de C.V. v. Fairmount Heavy Transp. N.V., 572 F.3d 96, 108 (2d Cir. 2009). Because a requirement of Rule B attachments is that the defendant is not "found within the district," the res is the only means by which a court can obtain jurisdiction over the defendant. 12 If the res is not the property of the defendant, then the court lacks jurisdiction. In contrast, civil forfeiture is a remedy in rem. In rem jurisdiction is based on the well-established theory that the "thing is itself treated as the offender and made the defendant by name or description." California v. Deep Sea Research, Inc., 523 U.S. 491, 501, 118 S. Ct. 1464, 140 L. Ed. 2d 626 (1998). Thus, for in rem remedies such as forfeitures, ownership of the res is irrelevant, as the court has personal jurisdiction regardless of who owns the res at issue. Although not considered by the Winter Storm panel, this distinction provides, in our view, a principled basis for allowing EFTs to be subject to forfeiture but not attachment. In sum, Daccarett provides no persuasive guidance on the validity of Rule B attachments of EFTs and should not serve as the foundation for a rule that allows the attachment of EFTs under Rule B.

The rest of the opinion was policy discussion of the increased work load for the courts and strain on banks.

Proshipline

2009-10-23T09:52:00.002-04:00

Second Circuit issues ruling in Proshipline.

Rule B's future is seriously called into question and the morass of ethical and due process concerns will plague the maritime bar and the courts for a substantial period of time. The hastiness of the judiciary may end up complicating matters for itself, at least in the short term.

Initial Reactions to the Jaldhi Case

2009-10-19T19:21:00.007-04:00

The Jaldhi decision's aftermath is most evident when one pulls up Winter Storm on LEXIS and sees a big red stop sign on the case that has provided authority to attach intermediary EFT's pursuant to Rule B. Although it is difficult to accept the Second Circuit's choice to overrule its own seven year old case and possibly affect the massive body of case law defining the contours of Rule B, it is important to note the clamor of district judges and the banking industry. Outside of moving the Second Circuit to rehear the case en banc and appealing to the Supreme Court, the maritime bar must determine its next moves.

I believe that legislative advocacy is a real option. Allowing the courts to effectuate a remedy and then take vitiate it seems unworkable. Although our Congress has many pressing issues presently before it, lobbyists should descend on Washington to fix this situation. Such radical, systemic changes should be on the table because the common law as it currently stands appear unstable. These alternatives will be explored in posts to come. Any new developments such as appeals will be reported here immediately.

End of the Line? Second Circuit Overrules Winter Storm

2009-10-16T11:20:00.003-04:00

I think the reader should read the opinion.

This Second Circuit panel overruled a previous panel from seven years ago. The court cited strain on the banking system and misplaced reliance on its opinion in Dacarett. The court seriously diminished Rule B's effectiveness as a remedy and will leave many maritime parties where they were pre Winter Storm: out of luck. Perhaps the maritime industry should lobby Congress to re vamp Rule B and give the judiciary less discretion.

Second Aqua Stoli Factor

2009-09-11T11:09:00.001-04:00

Peter Dohle Schiffahrts KG v. Sesa Goa Ltd., No. 08 Civ. 10277 (SAS), 2009 U.S. Dist. LEXIS 60664 (S.D.N.Y. Jul. 15, 2009)

In Dohle, the parties did not contest that the requirements of Aqua Stoli had been met and thus the burden shifted to the Defendant to show why the Court should vacate the attachment. Defendant argued that the attachment should have been vacated under the second Aqua Stoli factor, which permits vacatur if Dohle can obtain personal jurisdiction over the Defendant in the district where the Dohle is located. Judge Scheindlin clarified this factor and noted that “the” district where Plaintiff is located closely aligns with the legal term “domicile.” Since Dohle’s domicile was in Hamburg and jurisdiction could only be obtained over Defendant in London or India, the Court refused to vacate the attachment. Judge Scheindlin declined to expand the holding in Aqua Stoli to define being “located” in a jurisdiction to include mere presence in the form of an agent.

The Court also declined to reduce the amount of the attachment where Plaintiff provided an affidavit that included a “reasonable and detailed” explanation for the security sought.

Alter Ego Imputed Presence

2009-08-13T21:05:00.004-04:00

In light of the principles of alter ego jurisdiction and service of process outlined in its STX Panocean decision, the Second Circuit held that if a corporation is registered with the New York Department of State--and is therefore "found within the district" for the purposes of Rule B--that corporation's alter egos are also "found within the district" and, therefore, the property of those alter egos is not subject to maritime attachment. In affirming the district court’s vacatur of the maritime attachment, the Court agreed with the lower courts that had previously ruled on this question. Transfield ER Cape Ltd. v. Indus. Carriers, Inc., 2009 U.S. App. LEXIS 14938, Docket No. 09-1733-cv, (2d Cir. 2009)

Reduction of Attachment

2009-07-08T21:41:00.001-04:00

The Second Circuit recently discussed the circumstances in which a court pursuant to Rule E(5) or (6) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions of the Federal Rules of Civil Procedure (the "Supplemental Rules") may reduce the amount held by maritime attachment. In an opinion by Judge Katzmann, the court affirmed District Judge Preska’s order reducing the amount of the attachment. The court held that a court may assess preliminarily the reasonableness of plaintiff's damages claim when setting a security under Rule E(5) and may weigh this and other equitable considerations when evaluating whether good cause exists to reduce a security under Rule E(6). In making a preliminary assessment of plaintiff's damages claim, the court should be satisfied that the plaintiff's claims are not frivolous, but it should not require the plaintiff to prove its damages with exactitude. Because the court agreed that TNT likely could not have shown that the wrongful arrest of the Vessel actually caused its claimed damages, which according to TNT's allegations were suffered after TNT was aware of the wrongful arrest but before it took any action to secure the Vessel's release. Therefore, the district court did not abuse its discretion in drawing the preliminary conclusion that TNT was likely to recover only the costs it incurred in securing the release of the Vessel.

TRANSPORTES NAVIEROS Y TERRESTRES S.A. DE C.V. v. FAIRMOUNT HEAVY TRANSPORT N.V, 2009 U.S. App. LEXIS 13394 (2d Cir. 2009)