Second Circuit Overrules Judge Hellerstein and Confirms that EFTs Attached Pre-Jaldhi
Must Be Vacated Despite Equitable Considerations
Nearly one (1) year after Judge Hellerstein ruled that equitable considerations warranted sustaining a pre-Jaldhi attachment of a judgment debtor's electronic fund transfers ("EFTs"), the Second Circuit Court of Appeals has now reversed that decision, holding that "EFTs attached pre-Jaldhi must be released where the plaintiff obtained a final judgment but has not executed it against the attached funds that are being retained by banks in suspense accounts pursuant to Rule B attachments." Eitzen Bulk A/S v. Ashapura Michechem, Ltd., 10-0976-cv (2d Cir. Feb. 15, 2011).
In Eitzen Bulk, the Plaintiff had obtained a Rule attachment order against Defendant Ashapura as security for ongoing London arbitration. Pursuant to the attachment order, Plaintiff attached more than USD 1.7 million in EFTs originated by or for the benefit of the Defendant. Thereafter, Plaintiff obtained an arbitration award in London, which was recognized and confirmed as a New York judgment by Judge Hellerstein in the Southern District of New York on July 24, 2009. Although the Plaintiff sought the release of the EFTs in partial satisfaction of the judgment, additional creditors with partial interests in the attached EFTs stalled Eitzen Bulk's collection efforts
Following the Second Circuit's decision in The Shipping Corporation of India Ltd. v. Jaldhi Overseas Pte. Ltd., the Defendant filed a motion to vacate the Rule B attachment. Judge Hellerstein ultimately denied Defendant's motion, noting that 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, and finding that "the merits, and the equities, strongly favor Eitzen Bulk." The Second Circuit Court of Appeals disagreed, finding that its prior rulings had "specifically forbidden resort to equitable consideration in addressing motions to vacate pre-Jaldhi attachment orders." Because the Plaintiff had not executed against the attached EFTs prior to the Jaldhi decision, the Second Circuit held that the District Court was obligated under Jaldhi and Hawknet to vacate the attachment order. Accordingly, the Court vacated the district court's order denying the Defendant's motion to vacate the Rule B attachment and remanded the case with instructions to release the attached EFTs.
Accordingly, the Fourth Circuit held that the District Court's sentencing error was not a harmless error but substantially affected Lewis' rights, vacated the sentence rendered against Lewis, and remanded the case for proper sentencing.
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