Judge Hellerstein Issues Rulings on Pending Motions to Vacate
On the eve of the United States Supreme Court's Order denying the petition for a writ of certiorari in The Shipping Corporation of India, Ltd. v. Jaldhi Oversea Pte Ltd., District Court Judge Hellerstein issued an Order and Opinion Denying and Granting Motions to Vacate Attachments in two (2) of his pending Rule B cases. Americas Bulk Transport Ltd. v. IMT, Docket No. 08 Civ. 6970 (AKH); Eitzen Bulk A/S v. Ashapura Minechem Ltd., Docket No. 08 Civ. 8319 (AKH) (S.D.N.Y. Mar. 18, 2010). Hellerstein, who had held a consolidated oral argument in mid-November on several motions to vacate attachments, was the last remaining District Court judge to rule on the effect of Jaldhi on his pending Rule B attachment cases. Although several of the cases considered at the November argument subsequently settled and/or were otherwise dismissed by the parties, Americas Bulk and Eitzen Bulk have been under the Judge's consideration for nearly four (4) months. Although the Judge ultimately granted the motion to vacate in Americas Bulk, his denial of the defendant's motion to vacate in Eitzen Bulk may present a ray of hope for those few Rule B plaintiffs whose attachments remain pending.
In a seventeen (17) page decision, Judge Hellerstein first considered the unique factual circumstances of each of the two (2) cases. In Americas Bulk, an electronic fund transfer (EFT) originated by the Defendant was stopped by garnishee Wachovia Bank and held by the bank in its "General Ledger Account" while the arbitration proceedings between the parties took place. The Defendant moved to vacate the attachment after the Second Circuit's decision in Jaldhi. Eitzen Bulk involved a Rule B attachment in aid of London arbitration, which resulted in the attachment of approximately $1.7 million at various garnishee banks. The Plaintiff in Eitzen Bulk moved forward with arbitration in London, despite the Defendant ignoring the arbitration demand, and ultimately obtained an award in the total sum of $36,606,769.74. Eitzen Bulk then successfully moved for recognition and enforcement of the arbitration award before Judge Hellerstein. Judge Hellerstein ordered the garnishee banks to turn over the attached funds to Eitzen Bulk in partial satisfaction of its judgment; however, these funds were also attached by several other creditors of the Defendant and the garnishee banks would not release the funds. Eitzen Bulk subsequently commenced an interpleader action to determine the priority of claims to the attached funds, which was pending at the time Jaldhi was decided. Thereafter, the Defendant moved to vacate the attachment in light of Jaldhi.
Before considering the factual circumstances of the two (2) cases, Judge Hellerstein examined the relevant laws concerning maritime attachment of electronic fund transfers. He then noted that both Defendants had moved to vacate the attachments because, according to Jaldhi and Hawknet, the Court lacked jurisdiction to authorize the attachment of EFTs being processed by intermediary bans and, accordingly, the funds must be released "regardless of the merits and regardless of prejudice and hardship." Notwithstanding, the Court noted that "[a]n admiralty court is a court of equity" and that "equity and justice should therefore be given due consideration even when undoing an act that should not have occurred." Judge Hellerstein then discussed the Jaldhi andHawknet decisions in detail before reaching the issue of "ownership" of the attached funds. The Court conceded that according to Jaldhi and Hawknet, he lacked jurisdiction to order that the funds be attached; however, he noted that "they nevertheless were attached and plainly I have jurisdiction to order their disposition." First, he noted that in Americas Bulk, the Plaintiff had only a contingent ownership interest in the funds, depending on the outcome of the pending arbitration proceedings. In Eitzen Bulk, the Plaintiff was a judgment creditor seeking to impress the lien of a judgment creditor. Judge Hellerstein noted that the Eitzen Bulk situation was one that had not been addressed by either Jaldhi or Hawknet. He further noted that even in Americas Bulk, while the funds may have initially been attached as EFTs, "the suspense account created by the intermediary bank is as much a res as any other res... I am called on to decide how the funds in suspense should be distributed."
Accordingly, Judge Hellerstein turned to the Court's equity powers and reviewed the individual circumstances presented by each case. Because the parties in Americas Bulk were still engaged in arbitration in London, and because "there is no reason to believe that the London proceedings are dependent on the attachment", the Court found no reason of equity to sustain the attachment or to require the defendant to give security for unproved claims. As such, he vacated Americas Bulk's attachment.
In Eitzen Bulk, however, the Plaintiff was a judgment creditor that had already obtained an arbitration award, as well as judgments of the English High Court and the New York court. Judge Hellerstein noted that there were no more contingencies to Eitzen Bulk's claim, except for payment, and that the Defendant had "at every turn, engaged in a course of conduct designed to evade debts owing to Eitzen Bulk and others." Because the Court found that "the merits, and the equities, strongly favor Eitzen Bulk", the Court denied the Defendant's motion to vacate.
The Defendant in Eitzen Bulk filed its Notice of Appeal on March 23, 2010. Judge Hellerstein has agreed to stay the release of the attached funds to the Plaintiff pending appeal, provided that the parties stipulate to an expedited briefing schedule and that Defendant files a supersedeas bond covering interest, costs and attorneys' fees.
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