Cala Rosa Marine Co. v. Sucres et Deneres Group
| Decision Date | 04 February 2009 |
| Docket Number | No. 09 Civ. 425 (SAS).,09 Civ. 425 (SAS). |
| Citation | 613 F.Supp.2d 426 |
| Parties | CALA ROSA MARINE CO. LTD., Plaintiff, v. SUCRES ET DENERES GROUP a/k/a Sucden Middle East Part of Sucres Et Denrees Group and Sucden Middle East a/k/a Sucden Middle East Part of Sucres Et Denrees Group, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Garth S. Wolfson, Esq., Mahoney & Keane, LLP, New York, NY, for Plaintiff.
I. INTRODUCTION
On January 15, 2008, Cala Rosa Marine Co. Ltd. ("Cala Rosa" or "plaintiff') commenced this action and requested an ex parte order directing attachment and garnishment ("Attachment Order") of up to $889,463.59 of the assets of Sucden Middle East Part of Sucres Et Denrees Group ("Sucden" or "defendant") and affiliated companies. Plaintiff requests this Court to order that any process served on a garnishee shall be deemed continuously served through the end of the next business day. Plaintiff further requests this Court to appoint a special process server, designated by plaintiff, to serve the process. The request for a maritime attachment order is granted but, for the reasons stated below, the requests for continuous service and a specially appointed process server are denied.
II. BACKGROUND
A. The 2004 Memorandum of Agreement and Subsequent Arbitration
On September 22, 2008, Cala Rosa, as owner of a vessel, and Sucden, as charterer, executed a Charter Party Agreement ("Charter Party") for the carriage of a cargo of sugar from Brazil to Algeria. Under the terms of the Charter Party, defendant was responsible for the pre-loading condition of the cargo and any inherent defect in the cargo. The Algerian cargo receivers claimed that the sugar was delivered to the Algerian port in a damaged condition and required plaintiff to post security in the amount of $284,977 to secure this claim.1 Further, plaintiff alleges that defendant failed to pay $380,864.63 in freight and demurrage costs. Plaintiff alleges that defendant is liable to plaintiff for all these sums.
The Charter Party contains a clause mandating London arbitration for all claims arising under the Charter Party, and plaintiff has commenced London arbitration.2 On January 15, 2009, plaintiff commenced this action under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("REFAA"), 9 U.S.C. §§ 201-209, which permits attachment in actions that seek to enforce foreign arbitral awards.3 Including estimated attorneys' fees and costs, plaintiff seeks an attachment in the amount of $889,463.59.
Plaintiff seeks, inter alia, to attach Electronic Funds Transfers ("EFTs") as they pass through New York banks.4 Plaintiff alleges "on information and belief [that] defendants have or will have during the pendency of this action" assets in the hands of the garnishee banks.5
In the affidavit in support of attachment, plaintiff requests that the Attachment Order contain two special provisions.6 First, plaintiff requests that the Attachment Order contain a provision for continuous service. Plaintiff explains:
In order to avoid the necessity of physically serving the garnishees/banks daily and repetitively, plaintiff respectfully seeks leave of the Court, for any process that is served on a garnishee to be deemed effective and continuous service throughout the remainder of the day upon which service is made, commencing from the time of such service and such service to be further deemed effective and continuous through the end of the next business day, provided that another service is made that day.7
Second, plaintiff requests that the Court appoint a plaintiff-retained special process server who, along with the United States Marshal, will be authorized to serve the Attachment Order, as well as any supplemental process that might issue, on the garnishees. Plaintiff states that this is necessary because "daily service of Rule B orders would impose upon the United States Marshal an overwhelming burden and would cause to be visited on litigants . . . disproportionate costs and inefficiency."8
III. LEGAL BACKGROUND
A. Attaching After-Acquired Property
In Reibor International Limited v. Cargo Carriers (KACZ-CO.) Limited, the Second Circuit considered whether a maritime plaintiff may attach "after-acquired property"—i.e., property that was not in the hands of the garnishee at the time the attachment order was served.9 In Reibor, plaintiff served an order of maritime attachment on a garnishee bank at about 10:25 a.m., but the bank did not receive the transferred funds until 2:21 p.m. that afternoon.10 The bank attached the funds. The district court vacated the attachment, holding that a plaintiff may only attach funds that are in the hands of the garnishee at the time the attachment order is served.11 The Second Circuit affirmed. Addressing the permissibility of attaching after-acquired property under Rule B, the court first noted that
The Admiralty Rules themselves offer little guidance. Rule B does not mention attachment of after-acquired property. Two other rules, Rule C and Rule E, appear to contemplate service on garnishees actually in possession of the property to be attached, but neither addresses the issue of after-acquired property directly.12
Because federal case law also failed to provide guidance, the court adopted, under federal common law choice of law principles, the New York rule against attaching property not in the hands of the garnishee at the time of service. Quoting Judge Joseph McLaughlin's commentary on New York practice, the court found New York's law to be clear in this regard: "Where the order of attachment is left with a thirdparty garnishee . . . the levy is absolutely void unless the garnishee has some property belonging to the defendant or owes the defendant a debt at the time the order is left with him."13 The court decided to adopt the New York rule because "`a decision ... contrary to the general rule of the state might have, disruptive consequences for the state banking system'" and adopting state law "minimize[s] disruptive divergences between state and federal law."14
The court rejected Reibor's equitable argument against enforcing the New York rule in a case where the funds came into the garnishee bank mere hours after the attachment order was served. In rejecting this argument, the court dryly noted that "the rule works, to be sure, to the detriment of an attaching creditor, but that is simply the way the law was intended to operate."15 Further, Reibor's proposed rule "could have considerable impact on international banking practices" and prove "extremely and unfairly taxing" on New York banks.16
In ContiChem LPG v. Parsons Shipping Company, Limited, the Second Circuit addressed whether a maritime plaintiff "could accomplish indirectly, by means of an order restraining to-be-attached property, that which it could not do directly in light of the well-established prohibition against maritime attachments of after-acquired property."17 In an effort to circumvent Reibor's prohibition on attaching after-acquired property, ContiChem obtained a temporary restraining order from the district court preventing the bank from releasing any funds belonging to the defendant that transferred through the bank.18 Once EFTs were held pursuant to the restraining order, plaintiff served a maritime attachment order on the bank and attached the funds that were then in the hands of the garnishee bank.19
The district court first found that the restraining order was invalid under New York law and then vacated the Rule B attachment under Reibor.20 The Second Circuit affirmed, holding that plaintiff "improperly attempted to circumvent the rule against attachment of property not yet in [the garnishee bank's hands]."21
In Winter Storm Shipping Limited v. TPI, the Second Circuit held that EFTs emanating from defendant's bank account are "property" belonging to defendant subject to attachment.22 Upon receiving initial process of the attachment order, the garnishee bank decided, without a court order, to place a hold on any funds that transferred through the bank emanating from the defendant's accounts.23 In this respect, the bank effectively treated the service of process of the attachment order as being continually served. Once the bank held defendant's EFTs, plaintiff served supplemental process of the Attachment Order while the funds were at the bank and attached the funds.24 The fact that the attachment was served while the funds were at the bank, the Court held, placed the case outside the ambit of Reibor's well-established rule against attachment of after-acquired property.25 Further, the case did not fall within the ambit of ContiChem because the bank made the unilateral decision to place a hold on future transfers and plaintiffs actions were, therefore, "entirely blameless."26
In recent years, many district courts have begun to issue attachment orders that direct the garnishee to treat the order as continuously served for a day. Given the Reibor prohibition on attachment of after-acquired property and given that "`[a]n EFT may be in the possession of a financial institution for only a very short period of time,' and may move through the bank `almost instantaneously,' it follows that it would be virtually impossible for plaintiffs to attach EFTs unless garnishee banks are permitted to accept continuous service."27 The continuous service provision is thus "intended to avoid `the absurdity, security problems, and inconvenience of requiring the garnishee banks to accept service repeatedly throughout the day.'"28 Indeed, "the absence of such a continuing service provision — either by court order or by consent from the garnishee — would inevitably result in the posting of lawyers and/or process servers at bank offices around the clock in an attempt to capture EFTs at the precise moment of their arrival."29
IV. LEGAL STANDARD
Under Rule B of the...
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