Rule B Update – Second Circuit Court of Appeals Confirms Jaldhi's Retroactive Application

On Friday, November 13, 2009, exactly four (4) weeks after its decision in The Shipping Corporation of India Ltd. v. Jaldhi Overseas Pte. Ltd., the Second Circuit Court of Appeals issued its decision in Hawknet, Ltd. v. Overseas Shipping Agencies, 2009 U.S. App. LEXIS 24970 (2d Cir. 2009) and ruled that Jaldhi's holding is to be applied retroactively.

In Hawknet, the Court expressly addressed the question of "whether the rule announced in Shipping Corporation of India applies retroactively", as well as whether the Defendant had waived the argument concerning the attachability of EFTs by not raising it prior to the ruling in Jaldhi. In an opinion written by Circuit Judge Cabranes (i.e. - the same Judge who wrote the Jaldhi opinion), the Court recognized the "general presumption" against retroactive application of statutes and regulations, but stated that no such presumption applies to Jaldhi. Specifically, the Court noted the U.S. Supreme Court's ruling in Firestone Tire & Rubber Co. v. Risjord, which stated that "by definition, a jurisdictional ruling may never be made prospective only." Id. at * 8, citing 449 U.S. 368, 379 (1981). Accordingly, the Second Circuit concluded: "Our holding in Shipping Corp. of India directly affects how the district court may obtain personal jurisdiction over defendants, and thus it is properly considered a 'jurisdictional ruling.' We conclude, therefore that our holding in Shipping Corp. of India applies retroactively." Id. at * 8-9.

In addition, the Court in Hawknet rejected the Plaintiff-Appellant's argument that the Defendant-Appellee had waived its right to assert on appeal that the District Court lacked personal jurisdiction because no such argument was raised by Defendant before the District Court. The Court noted that "the doctrine of waiver demands conscientiousness, not clairvoyance from parties." Id. at * 10. The Court recognized that Jaldhi's holding was "directly contrary to controlling precedent in this Circuit" and stated that the overruling of that precedent by Jaldi "provided defendant with a new objection to the District Court's jurisdiction over it, and... defendant did not waive this objection by failing to raise it before the District Court." Id. at * 10-11.

The impact on this latest decision from the Second Circuit is certain to be noticed almost immediately as the District Court judges begin reviewing Order to Show Cause responses and, specifically, Rule B plaintiffs' arguments that their pending attachments should be sustained. In view of Hawknet's express ruling that Jaldhi should be applied retroactively to pending attachments, it is unclear what, if any, arguments will be sufficient to sustain pending attachments.

Read a copy of the Second Circuit's decision in Hawknet, Ltd. v. Overseas Shipping Agencies

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