Scanscot Shipping Services (Deutschland) GmbH v. Metales Tracomex LTDA, No. 09-5280 (2d Cir. 2010)
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09-5280-cv Scanscot Shipping Services (Deutschland) GmbH v. Metales Tracomex LTDA 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term 2009 4 (Argued: May 4, 2010 5 Decided: August 12, 2010) Docket No. 09-5280-cv 6 -----------------------------------------------------x 7 SCANSCOT SHIPPING SERVICES GmbH, 8 9 10 11 Plaintiff-Appellant, -v.METALES TRACOMEX LTDA, Defendant-Appellee. 12 -----------------------------------------------------x 13 Before: NEWMAN, WALKER, and LYNCH, Circuit Judges. 14 Plaintiff-Appellant Scanscot Shipping Services appeals from 15 the December 9, 2009 order of the United States District Court 16 for the Southern District of New York (Paul G. Gardephe, Judge) 17 vacating the attachment of certain electronic fund transfers 18 ("EFTs") held by garnishee Wachovia Bank in New York City, which 19 the district court had previously attached pursuant to Rule B of 20 the Supplemental Admiralty Rules for Certain Admiralty Maritime 21 Claims of the Federal Rules of Civil Procedure ("Rule B"). 22 We hold, in conformity with Shipping Corporation of India -1- 1 Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009) 2 ( Jaldhi ), that EFTs for which the defendant is both the 3 originator and the beneficiary are not the property of the 4 defendant and, therefore, may not be attached pursuant to Rule B. 5 We further hold that when an intermediary bank responds to an 6 order of attachment, later determined to be wrongful, by 7 sequestering the wrongly attached funds in a non-EFT suspense 8 account, a creditor may not then reattach those funds in the new 9 account. We reject Scanscot s argument that Jaldhi s 10 retroactivity is subject to a case-by-case rebuttable 11 presumption. 12 waived. 13 its order of attachment. Finally, we deem Scanscot s request for discovery We therefore AFFIRM the district court s order vacating 14 15 16 17 18 19 20 21 22 23 24 25 26 MICHAEL E. UNGER (Lawrence J. Kahn, on the brief), Freehill Hogan & Mahar LLP, New York, New York, for Plaintiff-Appellant. CHRISTOPHER CARLSEN, Clyde & Co U.S. LLP, New York, New York, for Defendant-Appellee. PER CURIAM: Plaintiff-Appellant Scanscot Shipping Services ( Scanscot ) 27 appeals from the December 9, 2009 order of the United States 28 District Court for the Southern District of New York (Paul G. 29 Gardephe, Judge) vacating the attachment of certain electronic -2- 1 funds transfers ("EFTs") held by garnishee Wachovia Bank in New 2 York City, which the district court had previously attached 3 pursuant to Rule B of the Supplemental Admiralty Rules for 4 Certain Admiralty Maritime Claims of the Federal Rules of Civil 5 Procedure ("Rule B"). 6 Defendant-Appellee Metales Tracomex ( Tracomex ) was both the 7 originator and the beneficiary of the attached EFTs, this 8 circuit's recent decision in Shipping Corporation of India v. 9 Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009) ( Jaldhi ), Scanscot argues that, inter alia, because 10 is inapplicable to the attachments in this case and that the 11 district court therefore erred in vacating its prior attachment 12 order in light of Jaldhi. 13 We assume the parties' familiarity with the procedural 14 history of the case, and recite only those facts pertinent to 15 this appeal. 16 Tracomex for the carriage of cargo from Argentina to Mexico. 17 Tracomex allegedly repudiated the charter by refusing to provide 18 cargo for loading, and Scanscot initiated arbitration proceedings 19 to recover deadfreight. 20 moved in the district court for the attachment of, inter alia, 21 certain EFTs held at Wachovia Bank in New York. 22 court granted Scanscot s motion, and, in response to the order of 23 attachment, Wachovia placed the attached funds in a suspense 24 account. Scancot entered into a maritime charter with While arbitrating its claim, Scanscot -3- The district 1 Following the district court s issuance of the order of 2 attachment, this court decided Jaldhi, and shortly thereafter the 3 district court ordered Scanscot to show cause why the order of 4 attachment should not be vacated in light of Jaldhi. 5 receipt of the parties declarations in response to the order to 6 show cause, the district court vacated its previous order of 7 attachment, ruling that Jaldhi precluded the attachment, pursuant 8 to Rule B, of the EFTs held at Wachovia. 9 order vacating the prior attachment.1 10 Upon Scanscot appeals that The district court's decision to vacate its prior attachment 11 order relied on a threshold ruling of law, i.e., whether 12 Tracomex s EFTs are properly attachable under Rule B, which this 13 Court reviews de novo. 14 attachment of "the defendant's tangible or intangible personal 15 property." 16 reading of the text, it is clear that to attach an EFT under Rule 17 B, the EFT must both (1) be 'tangible or intangible property' and 18 (2) be the 'defendant's.'" 19 established that (1) federal courts must look to state law to 20 determine whether EFTs can be considered a "defendant's" property Jaldhi, 585 F.3d at 66. Fed. R. Civ. P. Supp. R. B(1)(a). Rule B permits "From a plain Jaldhi, 585 F.3d at 66. 1 Jaldhi This panel heard oral argument on May 4, 2010 regarding Tracomex s motion for summary affirmance. We denied that motion in an order issued May 6, 2010, provided a briefing schedule, and stated that the parties could request further oral argument if desired. Neither party having requested further argument, the panel now proceeds on the basis of the parties briefs. -4- 1 under Rule B, 2 the temporary possession of an intermediary bank are not the 3 property of either the originator or the beneficiary of the EFT, 4 id. at 71; and (3) for those reasons, EFTs held in an 5 intermediary bank in New York cannot be subject to attachment 6 under Rule B where the defendant is either the originator or the 7 beneficiary, id. 8 id. at 70; (2) under New York state law, EFTs in Scanscot attempts to distinguish Jaldhi, arguing that Jaldhi 9 involved EFTs for which the defendant was only the beneficiary, 10 whereas this case involves EFTs for which Tracomex is both the 11 originator and the beneficiary. 12 Jaldhi explains, New York considers EFTs in the temporary 13 possession of an intermediary bank to be the property of neither 14 the originator nor the beneficiary of that EFT. 15 After an EFT is initiated by an originator s bank, the funds at 16 issue cease to be the property of the originator; the funds do 17 not then become the property of the beneficiary until the EFT is 18 completed by acceptance of a payment order by the beneficiary s 19 bank. 20 until it is completed, an EFT takes the form of debts between the 21 three banks involved in the transfer, debts to which neither the 22 originator nor beneficiary is a party. 23 Palestine Monetary Auth. v. Strachman, 62 A.D.3d 213, 229, 873 24 N.Y.S.2d 281 (1st Dep t 2009)(explaining the mechanics, and the Id. at 70. This argument is unavailing. As Id. at 71. After it is initiated by an originator, and -5- See id.; see also 1 nature of the debts owed between the parties at each stage, of an 2 EFT). 3 and beneficiary does not change the Rule B analysis where neither 4 position would confer an interest in the creditor-debtor 5 relationships held between the three relevant banks. 6 district court properly determined that it lacked jurisdiction to 7 attach the EFTs held by Wachovia in this case. 8 9 That Tracomex may be in the position of both originator Thus, the Scanscot further argues that Wachovia's "voluntary" decision to obey the district court's attachment order created an 10 attachable interest even where none may have previously existed. 11 We reject Scanscot s attempt to benefit from Wachovia's reaction 12 to a tainted attachment order. 13 account solely as a result of an order of attachment relating to 14 funds now determined to be beyond the reach of the district 15 court. 16 defect nor provides a basis for reattachment of the same funds. 17 When a district court improperly attaches an EFT, having no 18 jurisdiction to do so under Rule B, and the intermediary bank 19 responds by transferring the attached funds to a non-EFT account, 20 a creditor may not then reattach those funds in the new account. 21 See, e.g., Nova Maritime B.V.I. Ltd v. Transvast Shipping Co. 22 Ltd., No. 08 Civ. 6869, 2009 WL 4884162, at *2 (S.D.N.Y. Dec. 16, 23 2009) ("Nova's subsequent service of process on funds moved to a 24 suspense account at Deutsche Bank does not cure the underlying Wachovia created the suspense The new suspense account neither cures the jurisdictional -6- 1 jurisdictional defect."); Calais Shipholding Co. v. Bronwen 2 Energy Trading Ltd., No. 07 Civ. 10609, 2009 WL 4277246, at *3 3 (S.D.N.Y. Nov. 24, 2009) ("The Court declines to manipulate the 4 Second Circuit's decision in [Jaldhi] by permitting a party to 5 benefit from the tainted results of an improper attachment."). 6 Scanscot further argues that the district court erred in 7 failing to consider whether Jaldhi should apply retroactively to 8 the EFTs attached in this case. 9 that Jaldhi applies to attachments entered prior to Jaldhi s This court has held, however, 10 issuance, even despite a party's reliance on that prior 11 attachment. 12 F.3d 87, 91 (2d Cir. 2009). 13 described in Hawknet refers to a general presumption that our 14 "controlling interpretation of federal law . . . be given full 15 retroactive effect in all cases still open on direct review." 16 Id. at 91 n.7. 17 notwithstanding, Hawknet does not imply that the parties in every 18 case may attempt to rebut a case-specific presumption of 19 retroactivity. 20 Hawknet, Ltd. v. Overseas Shipping Agencies, 590 The "presumption of retroactivity" Scanscot s argument to the contrary Finally, Scanscot contends that the funds attached in this 21 case may not actually be EFTs, but rather may be some other, 22 unspecified instrument relating to a possible currency exchange. 23 Scanscot argues that the district court erred in denying 24 discovery on that issue and asks that we remand to allow such -7- 1 discovery. Scanscot does not identify when or in what way this 2 argument was raised before the district court. 3 Scanscot s argument on appeal is undermined by Scanscot's own 4 response to the district court's order to show cause why the 5 attachments should not be vacated, in which Scanscot specifically 6 identified the Wachovia-held assets as EFTs. 7 Scanscot's belated request for discovery is waived. 8 Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 132 (2d Cir. 9 2008). Moreover, In any event, See In re 10 In sum, we hold, in conformity with Jaldhi, that EFTs for 11 which the defendant is both the originator and the beneficiary 12 are not the property of the defendant and, therefore, may not be 13 attached pursuant to Rule B. 14 intermediary bank responds to an order of attachment, later 15 determined to be wrongful, by sequestering the wrongly attached 16 funds in a non-EFT suspense account, a creditor may not then 17 reattach those funds in the new account. 18 argument that Jaldhi s retroactivity is subject to a case-by-case 19 rebuttable presumption. 20 discovery waived. 21 arguments and we conclude that they are without merit. 22 We further hold that when an We reject Scanscot s Finally, we deem Scanscot s request for We have considered Scanscot's remaining We therefore AFFIRM the district court s order vacating its 23 order of attachment. 24 All outstanding motions are hereby DENIED as moot. -8-
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