Second Circuit Court of Appeals Reaffirms Jaldhi and Confirms that EFTs In Suspense Accounts May Not Be Reattached

On an appeal of an order by the United States District Court for the Southern District of New York vacating a writ of attachment of the Defendant's funds, in Scanscot v. Tracomex, the United States Court of Appeals for the Second Circuit affirmed that EFTs are not the Defendant's property even though Defendant is both originator and beneficiary. Scanscot Shipping Services v. Metales Tracomex, 09-5280-cv (2d Cir. August 12, 2010).

Plaintiff appealed the District Court's ruling, alleging that The Shipping Corporation of India v. Jaldhi Overseas Pte. Ltd, which held that EFTs are not the property of the beneficiary while in the temporary possession of an intermediary bank, did not apply to his case. Id. Plaintiff claimed that, since the Defendant was both the originator and the beneficiary of the attached EFTs, the EFTs should be found to be the property of the Defendant. Plaintiff further argued that, even if the Court found that Jaldhi applied, Plaintiff should nonetheless be allowed to attach the suspense account in which the garnishee bank had isolated the attached funds.

The Court, however, found that, although the Defendant was in the position of both originator and beneficiary, it does not change the Rule B analysis where neither position would confer an interest in the creditor-debtor relationships held between the multiple banks involved in the transfer of funds. Id. Furthermore, "when a district court improperly attaches an EFT, having no jurisdiction to do so under Rule B, and the intermediary bank responds by transferring the attached funds to a non-EFT account, a creditor may not then reattach those funds in the new account." Id. Therefore, the Court found that the "suspense account created by the bank neither cures the jurisdictional defect nor provides a basis for reattachment of the same funds." Id. Finally, the Court rejected the Plaintiff's argument that Jaldhi's retroactivity is subject to a case-by-case rebuttable presumption.

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