Winter Storm Shipping. Ltd. v. Tpi
| Decision Date | 14 January 2002 |
| Docket Number | No. 01 CIV 5650 SAS.,01 CIV 5650 SAS. |
| Parties | WINTER STORM SHIPPING, LTD., Plaintiff, v. TPI, a/k/a Thai Petrochemical, Industry Public Company Limited, Thai Petrochemical Industry PCL, TPI Oil (1997) Co., Ltd and TPI Oil Co. Ltd., Defendant. |
| Court | U.S. District Court — Southern District of New York |
Patrick F. Lennon, Tisdale & Lennon LLP, New York City, for Plaintiff.
John J. Sullivan, Hill Rivkins & Hayden LLP, New York City, for Defendant.
On June 21, 2001, Winter Storm Shipping, Ltd. ("Winter Storm") applied ex parte for an order of maritime attachment pursuant to the Federal Arbitration Act, 9 U.S.C. § 8 ("FAA"), and Rule B(1) of the Supplemental Rules for Certain Admiralty and Maritime Claims ("Rule B" or "Rule B(1)"). The order of attachment was granted the same day. See 6/21/01 Ex Parte Order for Process of Maritime Attachment, No. 01 Civ. 5650 ("Order of Attachment" or "Order").
Defendants Thai Petrochemical Industry and the other defendants (collectively, "TPI") now move to vacate the attachment of funds held by The Bank of New York ("BONY") in a suspense account. For the reasons set forth below, TPI's motion to vacate the attachment and to dismiss the complaint is granted.
In February 2001, TPI, a Thai corporation, entered into a maritime contract to charter the M/V Nimenia ("the ship") from Winter Storm, a foreign corporation with a place of business in Malta. See Verified Complaint ("Compl.") ¶¶ 2-4. According to Winter Storm, TPI breached the contract on March 7, 2001, at a port in Saudi Arabia by loading "non-contractual cargo crude oil" onto the ship. See id. ¶ 5. Winter Storm further alleges that TPI failed to pay freight costs of $205,757.90 as required by the contract. See id. ¶ 7. It is this sum, to which interests, costs and fees have been added for a total of $361,621.58, that Winter Storm seeks to recover in an arbitration instituted in London. Both parties have now appointed arbitrators, and the arbitration is proceeding. See Plaintiff's Opposition to Defendants' Motion to Vacate the Attachment and Dismiss the Complaint ("Pl.Opp.") at 1.
On June 21, 2001, Winter Storm brought an action in this Court to secure its claims in the London proceeding under the FAA and Rule B(1). Satisfied that plaintiff made a prima facie showing under Rule B by filing a verified complaint and an affidavit stating that defendants could not be found in this district, see infra Part II, this Court issued an order of attachment enabling Winter Storm to attach TPI's assets in this district. See Order of Attachment. The Order provided that
process of maritime attachment and garnishment shall issue against all goods, chattels, letters of credit, bills of lading, effects, debts and monies, tangible or intangible, belonging to, claimed by or being held for the Defendant by any garnishees within this district, including Chase Manhattan Bank, in an amount up to and including $361,621.58.
Id. at 2. Pursuant to the order, Winter Storm served various garnishees, including BONY. See Defendants' Memorandum of Law to Support its Motion to Vacate and Dismiss ("Def.Mem.") at 1. Winter Storm served BONY with a writ of maritime attachment on June 28, 2001, at 10:30 a.m., 12:15 a.m., and 4:44 p.m.; three more times on June 29, 2001; and, following a weekend during which banks were closed, on July 2, 2001 at 10:58 a.m. See Pl. Opp. at 2.
Winter Storm succeeded in arresting a wire transfer ("electronic fund transfer" or "EFT") initiated by TPI. At some point prior to July 2 at 6:48 a.m. (Eastern Standard Time), TPI had instructed its bank in Thailand, the Bank of Ayudhya, to transfer funds from TPI's account to an account at the Royal Bank of Scotland in London. See Defendants' Reply in Support of its Motion to Vacate ("Def.Reply") at 3. At 6:48 a.m. on July 2, in its capacity as an intermediary between the Thai and British banks, BONY received a payment order from the Bank of Ayudhya via the SWIFT electronic funds transfer system. See Pl. Opp. at 2. BONY debited the Bank of Ayudhya's account and, aware of earlier writs of attachment served by plaintiff, placed the sum of $361,621.58 in a suspense account. See id.
Courts order maritime attachment pursuant to the FAA, 9 U.S.C. § 8, and Rule B(1).1 Rule B is properly invoked when a plaintiff files (1) a verified complaint in personam sufficient to make a prima facie showing that the plaintiff has a maritime claim against the defendant in the amount sued for, and (2) an affidavit swearing that the defendant is not present in the district. Supp. R. B(1); see also 2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 21-2 at 471 (2d ed.1999).
Because TPI has moved to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), this Court must accept as true all material factual allegations in the complaint. See Atlantic Mut. Ins. Co. v. Balfour Maclaine Int'l Ltd., 968 F.2d 196, 198 (2d Cir.1992). The party asserting jurisdiction, however, bears the burden of demonstrating that such jurisdiction exists. See Shipping Fin. Serv. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir.1998). Winter Storm thus bears the burden of demonstrating why the attachment, which is the basis for this Court's jurisdiction over TPI, should not be vacated. See Fed.R.Civ.P. E(4)(f); Maritima Petroleo E Engenharia, LTDA v. Ocean Rig I AS, 78 F.Supp.2d 162 (S.D.N.Y. 1999).
Maritime attachment is an ancient remedy that has become a "characteristic feature" of the general maritime law. Aurora Maritime Co. v. Abdullah Mohamed Fahem & Co., 85 F.3d 44, 47 (2d Cir.1996) (citing American Dredging Co. v. Miller, 510 U.S. 443, 447-48, 114 S.Ct. 981, 127 L.Ed.2d 285 (1994)). Maritime law itself is a separate body of substantive and procedural law, distinct from common law. See U.S. Const. art. III, § 2; see also Schiffahartsgesellschaft Leonhardt v. Bottacchi S.A., 773 F.2d 1528, 1533 (11th Cir.1985). The present Rule B, promulgated under the Rules Enabling Act, 28 U.S.C. §§ 2071-77, is "simply an extension of [the] ancient practice" of maritime attachment. Aurora, 85 F.3d at 47-8.
Rule B and its predecessors provide for attachment when the defendant cannot be found within the district because:
to compel suitors in admiralty (when the ship is abroad and cannot be reached by a libel in rem) to resort to the home of the defendant, and to prevent them from suing him in any district in which he might be served with a summons or his goods or credits attached, would not only often put them to great delay, inconvenience and expense, but would in many cases amount to a denial of justice.
Id. at 48 (citing In re Louisville Underwriters, 134 U.S. 488, 493, 10 S.Ct. 587, 33 L.Ed. 991 (1890)). In the absence of this practice, "defendants, their ships, and their funds could easily evade the enforcement of substantive rights of admiralty law." Aurora, 85 F.3d at 47. See also Polar Shipping, Ltd. v. Oriental Shipping Corp., 680 F.2d 627, 637 (9th Cir.1982) ( ).
Rule B serves two purposes: to provide a means to assure satisfaction if a suit is successful, and to insure a defendant's appearance in an action. See Aurora, 85 F.3d at 48 (citing Swift & Co. v. Compania Colombiana Del Caribe, 339 U.S. 684, 693, 70 S.Ct. 861, 94 L.Ed. 1206 (1950)). Because these purposes are "inextricably linked to a plaintiff's substantive right to recover" and maritime attachment is a characteristic feature of the general maritime law, no state legislation or other law may contravene Rule B or in any way interfere with it. Aurora, 85 F.3d at 48.
The key question here is whether a wire transfer intercepted at an intermediary bank is property, because Rule B(1) only allows for "a prayer for process to attach the defendant's tangible or intangible personal property...." Supp. R. B(1) (emphasis added).2 Rule B itself, however, does not define this phrase. Nor does the Committee Note to Rule B provide any guidance as to whether an electronic fund transfer, as it passes through an intermediary bank, is attachable property.
In answering this question, this Court must apply federal law because the validity of a maritime attachment is governed by federal law. See Reibor Int'l Ltd. v. Cargo Carriers Ltd., 759 F.2d 262, 266 (2d Cir.1985); Maryland Tuna Corp. v. Nichimen Co., 429 F.2d 307, 320 (2d Cir.1970) (). Where there is little or no federal precedent on point, however, courts sitting in admiralty look to state law to "fashion[] suitable federal common law." Reibor, 759 F.2d at 266 ( Det Bergenske Dampskibsselskab v. Sabre Shipping Corp., 341 F.2d 50 (2d Cir.1965)).
There is no federal precedent on point. Although Winter Storm claims that two federal cases stand for the proposition that a wire transfer at an intermediary bank constitutes property, the decisions are inapposite. The first, United States v. Daccarett, 6 F.3d 37 (2d Cir.1993), held that a wire transfer is a seizable res as defined by a forfeiture statute. Id. at 54. The claimants of seized funds in that case argued that the money was wrongly seized because electronic fund transfers ("EFTs") are mere electronic communications. See id. The court applied the plain language of the civil forfeiture statute in issue, which provided for the seizure of "moneys, negotiable instruments, securities, or other things of value [, and] all proceeds traceable" to narcotics transactions. Id. (citing 21 U.S.C. § 881(a)(6)) (emphasis added).3 Daccarett summarized its holding: "Therefore, an EFT while it takes the form of a bank...
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