2010 Year-End Review: Rule B Attachments of Property Are Alive and Well
Over the last several years, Rule B became the dominant means by which to obtain security in maritime disputes. The ability to attach an adversary’s electronic fund transfers was such a powerful tool that use of Rule B was rampant and soon supplanted all other means of obtaining security so long as the statutory requirements were met.
A Misperception About Rule B Persists
Since the U.S. Court of Appeals for the Second Circuit issued its opinion in Shipping Corp. of India Ltd. v. Jaldhi Overseas PTE Ltd,1 which terminated the restraint of electronic fund transfers at intermediary banks in New York state, there has been a misperception that Rule B attachments would cease. Indeed, this misperception has lingered throughout 2010. We have prepared this brief alert to dispel this misperception, as shrewd maritime consumers are still attaching assets at a brisk pace wherever they may be found throughout the United States.
Rule B still allows the attachment of all types of tangible and intangible property, from bank accounts, vessels, cargo, bunkers, debts and monies or accounts in which a defendant has an interest. Rule B may be used to attach property in which an adversary may have a contingent interest (such as a claim in a lawsuit) or a reversionary interest (such as an escrow account). So long as the underlying claim on which the attachment is based is maritime in nature (such as a charter party, contract of affreightment, FFA, performance guarantee, ship repair, collision, provision of bunkers, stores, parts, etc.), a maritime attachment order will be issued.
Interestingly, courts sitting in admiralty around the country have primarily relied on case law developed in the Southern District of New York during the last decade because the large volume of Rule B cases created a comprehensive body of precedent to deal with the complex and nuanced issues that were litigated in New York state over the last several years. While the Jaldhi decision prevented further restraints of electronic fund transfers, it did not reverse precedent concerning the standards for proving a prima facie case for attachments, counter-security, alter-ego claims, etc.
In 2010, Jaldhi did not deter courts from granting orders of attachments. There has been near universal recognition that the electronic wire transfers between intermediary banks analysis is confined to those restraints only and does not impact the traditional Rule B attachments of property which is unchanged. Indeed, the Rule B statute has not been amended in any way.
As an example of the continued use of Rule B attachments in 2010, review of activity in the U.S. District Court for the Southern District of Texas is instructive. Over 200 maritime cases were filed in that District alone in 2010. Of the 200, nearly half of the cases concerned Rule B attachments, along with a few Rule C arrests which incidentally had Rule B components. The types of property restrained varied, although the majority concerned property aboard a vessel or soon to be loaded onboard. Vacaturs of attachments primarily concerned the attempted restraint of property based on a sales contract dispute which are not wholly maritime claims.
One noticeable trend involves registration. Companies that trade heavily in a certain port are more likely to register as a foreign company doing business in that U.S. state. By registering with the secretary of state of a particular U.S. state, the company is immunized from having its property
restrained pursuant to Rule B. However, as companies which registered in New York to avoid Rule B attachments are realizing, they may avoid the attachments of property under federal maritime law, but it exposes the companies to restraint under state law and makes it easier to have judgments recognized and enforced against them in that state. Judgment enforcement considerations are addressed in our February 11, 2011 Maritime alert, 2010 Year-End Review: Judgment Recognition and Enforcement Post-Koehler.
Holland & Knight – Advising on All Matters Related to Rules B and C
During the last year our firm has sought, obtained and sustained the arrest and/or attachment of vessels and other tangible and intangible property in courts/ports around the United States, including:
- the West Coast (Central District of California and Northern District of California)
- the Gulf Coast (Southern District of Texas, Eastern District of Louisiana)
- the East Coast (the Southern District of Florida, the District of South Carolina, the Eastern District of Virginia, the District of Delaware, and the Southern District of New York)
The types of assets for which maritime attachment orders have been issued include containers, bunkers, cargoes, the debts of a defendant, bank accounts and vessels. Through our network of offices in Boston, New York, Washington, D.C., Jacksonville, Fort Lauderdale, Miami, Tampa, Los Angeles, San Francisco and Portland, we have many of the busiest ports in the country covered. We cover the remaining large ports through long-standing relationships with local counsel. Through this network, we are able to coordinate the restraint of assets around the country and the logistical requirements thereafter should security not be immediately posted.
Legal and Logistical Aspects of Vessel Arrests and Attachments This webinar was held on January 26, 2011.
Speakers: Michael J. Frevola, Partner in Holland & Knight’s Maritime Practice Group
G. Robert Toney, Chairman of National Liquidators/National Maritime Services, Inc.
Use this link to get copies of both speakers’ PowerPoint presentations in PDF format (for easy printing) and follow along with the webinar.
1 585 F.3d 58, 66-67 (2d Cir. 2009).