Royal Swan v. GLOBAL, 94 Civ. 7129 (HB).

• Decision Date: 16 November 1994
• Docket Number: No. 94 Civ. 7129 (HB).,94 Civ. 7129 (HB).
• Citation: 868 F. Supp. 599
• Parties: ROYAL SWAN NAVIGATION COMPANY LIMITED, Plaintiff, v. GLOBAL CONTAINER LINES, LTD., Defendant.
• Court: U.S. District Court — Southern District of New York

868 F. Supp. 599

ROYAL SWAN NAVIGATION COMPANY LIMITED, Plaintiff, v. GLOBAL CONTAINER LINES, LTD., Defendant.

No. 94 Civ. 7129 (HB).

United States District Court, S.D. New York.

November 16, 1994.

Todd P. Kenyon and William N. France, Healy & Baillie, New York City, for plaintiff.

Peter G. Drakos and Christophil B. Costas, Cardillo & Corbett, New York City, for defendant.

OPINION AND ORDER

BAER, District Judge.

This case involves a motion to vacate an ex parte attachment of defendant's bank account ordered pursuant to Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure. Three days following the order the court provided for a post-attachment hearing. At that time, the defendant made the instant motion and moved as well for damages, attorneys' fees, expenses and costs incurred in connection with the attachment.

I. BACKGROUND

Plaintiff Royal Swan Navigation Company Limited ("Royal Swan") is a foreign navigation company and hires out its ships to shipping companies. Defendant Global Container Lines Ltd. ("Global")¹ is a foreign corporation that ships goods overseas. On December 1, 1993, the parties entered into an agreement, or "charter party," in which the defendant would charter the plaintiff's vessel, Master Panos. Shortly after the vessel set sail in January of 1994, it encountered rough weather off the coast of Canada. As a result, some of the defendant's deck cargo came loose forcing the Master Panos to take refuge in Newfoundland, Canada. The Master Panos remained in Newfoundland while defendant restored her cargo and made her fit to sail.

In March of 1994, defendant deducted from the amount it owed plaintiff the time period and expenses spent in Newfoundland restowing the cargo. Plaintiff claims that clause 64 of their charter party, which states that "all deck cargo is to be carried at Charterer's risk," entitles it to the deducted portion. Defendant, meanwhile, contends that the shifting of the cargo and subsequent necessity of taking refuge were the fault of plaintiff's captain. On April 29, 1994, the plaintiff demanded arbitration in accordance with clause 17 of the charter party, which provides that the parties will arbitrate disputes in New York City. On May 23, 1994, the defendant appointed its arbitrator. On June 21, the panel was ready to proceed with the arbitration. The arbitration proceedings, which will take place in the Southern District of New York ("Southern District"), have not yet commenced. On September 30, 1994, plaintiff filed for the Rule B attachment in order to obtain security for the unpaid amount. The attachment was granted on October 31, and on that day, the warrant of attachment was served on defendant's account at Mashreq Bank in the Southern District.

Global asserts several grounds in support of its position that the attachment should be vacated. First, it asserts that the attachment violated Rule B because Global could be "found within" the Southern District. Second, it argues that even if it could not be "found within" the Southern District, the attachment should be set aside because it is abusive in that Royal Swan has exploited the artificial boundary between the Southern and Eastern Districts of New York by pursuing a Rule B attachment in the Southern District when it could easily pursue the more common route of an in personam action in the Eastern District.

I find that Global could not be "found within" the Southern District for the purposes of Rule B, because there were no individuals authorized to accept service of process on behalf of Global who were present in the Southern District on a regular basis. Nonetheless, I find the attachment must be vacated as "unfair." Royal Swan has not shown it requires security for any arbitral award it may eventually obtain against Global.

II. DISCUSSION

A. "Found Within" A Given District Under Supplementary Rule B

Rule B authorizes, in admiralty and maritime cases, attachment of a defendant's assets as a means of obtaining jurisdiction over a defendant provided the defendant cannot be "found within" the federal district in which the assets are sought to be attached. Supp.R.Fed.R.Civ.P. B(1). The purpose of Rule B is to enable the plaintiff both to acquire jurisdiction over the defendant and obtain security for any resulting judgment. Swift & Co. Packers v. Compania Colombiana Del Caribe, S.A., 339 U.S. 684, 70 S.Ct. 861, 94 L.Ed. 1206 (1950). Cases have held that being "found within" a given district consists of "a two-pronged inquiry: first, whether the defendant can be found within the district in terms of jurisdiction ("prong one"), and second, if so, whether it can be found for service of process ("prong two")." Seawind Compania, S.A. v. Crescent Line, Inc., 320 F.2d 580, 582 (2d Cir. 1963) (citing United States v. Cia Naviera Continental S.A., 178 F.Supp. 561, 563 (S.D.N.Y.1959)). Because I find, as detailed below, that Global could not be "found within" the Southern District of New York for the purposes of service of process, it is not necessary to consider whether Global's activities in connection with the Southern District rendered it subject to in personam jurisdiction here.

Service upon a corporation can be made, in accordance with Rules 4(e)(1) and 4(h)(1) of the Federal Rules of Civil Procedure and section 311 of the New York Civil Practice Law and Rules (McKinney 1990), by, among other methods, delivering a copy of the summons and complaint to a director, officer, managing agent, general agent, cashier, or assistant cashier of the corporation, or any other agent authorized by appointment to receive service.

Global argues that Royal Swan could have served process on it within the Southern District in several different ways. Global first states that Royal Swan "commenced the underlying arbitration with Global by serving Global's lawyers with its formal demand for arbitration thereby using Global's lawyers, whose office is in the Southern District as agents for service of process," and then argues that Royal Swan "could have commenced an in personam action by again serving Global's attorneys who would have again accepted service on behalf of Global." Def.'s Supp.Mem. in Support of Vacat'n of Order of Attachm't and Garnishm't at 4. While status as a party's attorney, without more, does not render the attorney an agent of the party for purposes of service of process, Integrated Container Serv., Inc. v. Starlines Container Shipping Ltd., 476 F.Supp. 119, 125 (S.D.N.Y.1979), a party can of course appoint virtually anyone, including an attorney, as agent for that purpose. Here, however, Global stops short of asserting that its lawyers were its agents for service of process. Instead, Global merely asserts that Royal Swan "used" its lawyers as such agents, and that its lawyers would have "again accepted service." Physically accepting process for another party does not mean the acceptor was appointed to do so. (In such a case, however, the party might choose to waive the deficiency in service.) And even if Global's attorneys had been appointed to accept arbitration demands, that does not necessarily mean they were also appointed to accept process. Thus, there is insufficient evidence to conclude that Global had appointed its attorneys as its agents for the purposes of accepting service of process.

Next, Global states that one of its directors travels to the Southern District "almost once a week to appear at the United Nations Headquarters, Purchase and Transportation Service Division at the U.N. Plaza." Supp. Aff. of Hormoz Shayegan, Director of Global at 3. In addition, Global continues, given that the parties' pending arbitration is set to proceed in the Southern District, a "Global director or authorized personnel" would "most surely ... have attended the arbitration hearings...." Def.'s Supp.Mem. in Support of Vacat'n of Order of Attachm't and Garnishm't at 3. Consequently, Global argues, it "could have easily been found and served" in the Southern District. Id. at 4-5. Moreover, Global contends, although the arbitration panel was ready to proceed by June 21, 1994, Royal Swan "has done nothing since to commence hearings in the arbitration." Id. at 3. In this manner, Global asserts, Royal Swan's actions are analogous to those in Shewan v. Hallenbeck, 150 F. 231 (S.D.N.Y.1906), where the Southern District vacated an attachment obtained pursuant to a predecessor rule to Rule B because the party seeking the attachment strategically delayed pursuing an action against its adversary solely in order that an attachment could be obtained when the adversary, as expected, left the Southern District a year later. Royal Swan refutes this, claiming that it has not delayed the commencement of hearings for the purpose of obtaining a Rule B attachment, but instead needed time to obtain and instruct an expert who will "determine the cause of the shifting deck cargo" and testify at the hearings. Aff. of Todd Kenyon, Att'y for Royal Swan, at 2.

While a party seeking a Rule B attachment must make a bona fide effort to find its adversary in the given district, e.g., Seawind Compania, S.A. v. Crescent Line, Inc., 320 F.2d 580 (2d Cir.1963), it is not necessary that an exhaustive search be conducted. Indeed, in contrast to the instant case, where Global asserts that the transient presence of certain individuals in the Southern District satisfies prong two of the Rule B test, most cases concern whether a party has searched enough to locate an existing permanent office where individuals capable of being served can regularly be found — something much easier to discover than the presence of a transient individual. E.g., Federazione Italiana Dei Consorzi Agrari v. Mandask Compania De Vapores, S.A., 158 F.Supp. 107 (S.D.N.Y.1957). The presence of a Global director "almost once a week" at a certain office at the United Nations Headquarters is insufficient to satisfy...