Wielding the Weapon of Security for Costs: A Maritime Defendant's Perspective
ABA Tort Trial & Insurance Practice Section, Admiralty and Maritime Committee Newsletter
April 1, 2009
James "Jim" Hohenstein- New York
Christopher R. Nolan- New York
Maritime Practice Group Leader James Hohenstein and Partner Christopher Nolan authored an ABA Tort Trial & Insurance Practice Section, Admiralty and Maritime Committee Newsletter article titled, "Wielding the Weapon of Security for Costs: A Maritime Defendant's Perspective."
It happens all too often these days. A maritime company's CEO, claims handler, FD&D underwriter, or outside counsel is leisurely reading Tradewinds, Lloyd's List, or Fairplay and sees an article about another company filing suit against it in New York. But that company has no contracts or port calls in New York. So, why then, New York? It's a Supplemental Rule B application to obtain security for an underlying proceeding elsewhere, filed in the hopes of attaching electronic funds transfers of the defendant passing through intermediary banks located in New York. Anger is followed by rage. "But those bums just asked for a letter of guarantee last week" or "they know we'd have a letter of undertaking posted, why go after our money in New York?" Fair points and questions. Yet a plaintiff is able to institute an ancillary Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions in order to obtain security in support of a court proceeding or arbitration proceeding, whether already commenced or soon to be commenced.
Once the maritime company/now Rule B defendant determines whether there are any grounds to vacate the attachment, the next natural and logical emotion is often vengeance. What can the defendant do to the maritime plaintiff? Often times the defendant cannot seek counter-security, because any counter-claim it may have must arise out of the same transaction or occurrence as the underlying claim of the plaintiff as set forth in the plaintiff's verified complaint. But, the Rule B defendant insists, it does have a claim. It is expending attorneys' fees in the underlying arbitration or court proceeding to defend itself against the plaintiff's specious claims. Surely attorneys' fees are recoverable costs which support a security claim. Aren't they? In the immortal words of the cautious counselor at law: Maybe…if you follow the right rules. A few key statutes and the Supplemental Rules must be considered to answer the question.
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