Eitzen Bulk A/S v. Ashapura Minechem, Ltd., No. 10-976 (2d Cir. 2011)
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10-0976-cv Eitzen Bulk A/S v. Ashapura Minechem, Ltd. 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term, 2010 4 (Argued: January 26, 2011 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Docket No. Decided: February 15, 2011) 10-0976-cv - - - - - - - - - - - - - - - - - - - - - - - - - - - - EITZEN BULK A/S, Plaintiff-Appellee, ABC, Plaintiff, v. ASHAPURA MINECHEM, LTD., Defendant-Appellant, DEF, ASHAPURA GROUP OF INDUSTRIES, ASHAPURA SHIPPING LIMITED, ASHAPURA INTERNATIONAL LIMITED, BOMBAY MINERALS LTD., ASHAPURA CLAYTECH LTD., ASHAPURA ALUMINUM LTD., EAGLE FUEL PVT. LTD., PRASHANSHA CERAMICS LTD., PENINSULA PROPERTY DEVELOPERS PRIVATE LTD., SHARDA CONSULTANCY PRIVATE LTD., ASHAPURA CONSULTANCY SERVICE PRIVATE LTD., ASHAPURA MINECHEM UAE (FZE), ASHAPURA HOLDINGS UAE (FZE), ASHAPURA MARITIME FZE, ASHAPURA SHIPPING (UAE) FZE, ASHAPURA SHIPPING UAE, ASHAPURA FINANCE LTD., ASHAPURA INFIN PVT LTD., ASHA PRESTIGE CO., ASHAPURA VOLCLAY LTD., ASHAPURA VOLCLAY CHEMICALS PRIVATE LTD., ASHAPURA AL-ZAWAWI MINERALS, LLC, SHANTILAL MULTIPORT INFRASTRUCTURE PRIVATE LTD., ASHAPURA ARCADIA LOGISTIC PRIVATE LIMITED, ASHAPURA CHINA, ASHAPURA CHINA CLAY COMPANY, MANICO MINERALS INTERNATIONAL, ASHAPURA AMCOL., Defendants. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 2 3 B e f o r e: WINTER, SACK, and LIVINGSTON, Circuit Judges. Appeal from an order of the United States District Court for 4 the Southern District of New York (Alvin K. Hellerstein, Judge) 5 denying a defendant-appellant s motion to vacate maritime 6 attachments of electronic fund transfers entered prior to our 7 decision in Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte 8 Ltd., 585 F.3d 58 (2d Cir. 2009). 9 to final judgment pre-Jaldhi but has not yet been executed Plaintiff s claim was reduced 10 against the attached funds, which were retained by the banks in 11 suspense accounts pursuant to the Rule B attachments. 12 that the entry of a judgment upholding plaintiff s claim as to 13 liability does not affect the retroactive applicability of Jaldhi 14 where that judgment has not yet been executed against the 15 attached property. 16 remand with instructions to release the property. 17 18 19 20 21 22 23 24 25 26 27 28 29 We hold Accordingly, we vacate the decision and CHARLES BART CUMMINGS, Baker & McKenzie LLP, New York, New York, for Defendant-Appellant. MICHAEL E. UNGER (Lawrence J. Kahn, Eric J. Matheson, on the brief), Freehill Hogan & Mahar LLP, New York, New York, for PlaintiffAppellee. WINTER, Circuit Judge: Ashapura Minechem, Ltd., appeals from Judge Hellerstein s 30 order denying its motion to vacate maritime attachments of 31 electronic fund transfers ( EFTs ) entered pursuant to Rule B 2 1 of the Supplemental Rules for Admiralty or Maritime Claims and 2 Asset Forfeiture Actions ( Rule B ). 3 B. 4 attachable under Rule B, Shipping Corp. of India Ltd. v. Jaldhi 5 Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009), and that Jaldhi 6 applies retroactively to all cases open on direct review. 7 Hawknet, Ltd. v. Overseas Shipping Agencies, 590 F.3d 87, 91 8 (2d Cir. 2009). 9 be released where the plaintiff obtained a final judgment but 10 has not executed it against the attached funds that are being 11 retained by banks in suspense accounts pursuant to Rule B 12 attachments. 13 14 15 16 Fed. R. Civ. P. Supp. R. We have previously held that EFTs are not properly We now hold that EFTs attached pre-Jaldhi must Accordingly, we vacate and remand with instructions to release the attached property. BACKGROUND The underlying dispute does not concern us. It suffices 17 to say that, in September 2008, Eitzen, the plaintiff, obtained 18 a Rule B attachment of EFTs of which Ashapura, the defendant, 19 was an originator or beneficiary. 20 attached over $1.7 million in EFTs, which the garnishee banks 21 transferred into suspense accounts. 22 an arbitration award in London of approximately $36.6 million, 23 which it moved to confirm in the Southern District. 24 24, 2009, before our decision in Jaldhi, the district court 25 entered judgment for the full amount of the arbitration award 3 By early 2009, Eitzen had Eitzen ultimately obtained On July 1 and ordered the garnishee banks to turn the restrained property 2 over to Eitzen within ten days after entry of the judgment. 3 Ashapura did not appeal. 4 stalled when other creditors of Ashapura asserted their own 5 claims against the funds in the suspense accounts. 6 24, 2010, however, those creditors claims were all either 7 voluntarily withdrawn or determined against them, leaving only 8 Eitzen s attachment in effect. 9 Eitzen s collection efforts were By March On November 9, 2009, Ashapura filed a motion to vacate the 10 Rule B attachment pursuant to Jaldhi. 11 denied the motion. 12 funds, held in suspense accounts, not EFTs," and that, under 13 Jaldhi and Hawknet, it "lacked jurisdiction to order the funds 14 attached," the court stated that "they nevertheless were 15 attached and plainly [the court has] jurisdiction to order 16 their disposition." 17 "confronted issues arising from an evasive judgment debtor or 18 multiple claims of creditors, including a judgment creditor." 19 The court then upheld the attachment as an exercise of its 20 equity powers. 21 22 The district court Noting that this case "involve[d] actual It held that neither Jaldhi nor Hawknet Ashapura brought the present appeal. DISCUSSION Eitzen argues that this case is not governed by Jaldhi and 23 Hawknet because the district court s judgment and turnover 24 order below caused the attachment to "merge" into the final 25 judgment prior to the filing of those opinions. 4 Eitzen further 1 contends that Hawknet s retroactive application of Jaldhi does 2 not apply here because the case is no longer "open on direct 3 review," Hawknet, 590 F.3d at 91, given Ashapura s failure to 4 appeal. 5 We find both arguments unpersuasive. The attachment of EFTs between Ashapura and third parties 6 was invalid under the rule announced in Jaldhi, 585 F.3d at 71. 7 Because the judgment against Ashapura was not executed against 8 the funds, its finality did nothing to alter the legal basis of 9 the banks retention of the funds in the suspense accounts. 10 See Scanscot Shipping Servs. GmbH v. Metales Tracomex LTDA, 617 11 F.3d 679, 682 (2d Cir. 2010) ("The new suspense account neither 12 cures the jurisdictional defect nor provides a basis for 13 reattachment of the same funds."). 14 Although the question of Ashapura s liability may no 15 longer be open on direct review, Hawknet, 590 F.3d at 91, the 16 funds remaining in suspense accounts were being retained by the 17 banks solely on the basis of the Rule B attachment and that 18 retention was therefore open to review on a Rule E(4)(f) 19 motion.1 The reduction of Eitzen s claim to judgment 1 At oral argument, a question arose as to the existence of tension between Jaldhi s holding that EFTs are not the property of either the originator or the beneficiary, 585 F.3d at 71, and Supplemental Rule E(4)(f), pursuant to which the present motion was brought. Rule E(4)(f) states that "any person claiming an interest in [the attached property] shall be entitled to a prompt hearing at which the plaintiff shall be required to show why the . . . attachment should not be vacated . . . ." Fed. R. Civ. P. Supp. R. E(4)(f). While Jaldhi and Hawknet state that at the time of attachment, the funds are not property of either the originator or the beneficiary for purposes of Rule B, each has an interest in the funds because the attachment affects the legal relations between them. Moreover, preventing a party such as Ashapura from moving to vacate an illegal attachment would lead to a ruling 5 1 eliminated all doubt as to Ashapura s liability, but neither 2 Jaldhi nor Hawknet turned on the strength of the merits of the 3 underlying actions brought by the attaching parties. 4 far as the equities between the parties favoring Eitzen are 5 concerned, we have specifically forbidden resort to equitable 6 considerations in addressing motions to vacate pre-Jaldhi 7 attachment orders. 8 Xin Trading Corp., 619 F.3d 207, 214 (2d Cir. 2010) ("[F]ar 9 from encouraging district courts to apply Jaldhi selectively And so See Sinoying Logistics Pte Ltd. v. Yi Da 10 based on an examination of the equitable considerations in the 11 remaining EFT-attachment cases, Hawknet requires district 12 courts to vacate any attachment orders granted before [the] 13 decision in Jaldhi insofar as those orders are now inconsistent 14 with Jaldhi."). 15 was obligated, pursuant to Jaldhi and Hawknet, to vacate the 16 attachment order.2 We consequently hold that the district court that while the district court has power to order an illegal attachment, it has no power to vacate it -- a result that cannot be intended by Rule E(4)(f). Finally, Hawknet itself involved a Rule E(4)(f) motion. See Hawknet, 590 F.3d at 90, 93 (relying on Jaldhi to affirm district court s vacatur of attached EFTs under Rule E(4)(f)). 2 We note that this resolution is consistent with both the Federal Rules of Civil Procedure and New York law, although we rely on neither. Under the latter, it would appear that attachments may be vacated at any time before property or debts are actually applied to the satisfaction of a judgment: Prior to the application of property or debt by a sheriff or receiver to the satisfaction of a judgment, any interested person may commence a special proceeding against the judgment creditor or other person with whom a dispute exists to determine rights in the property or debt. N.Y.C.P.L.R. 5239. This state procedural rule is operable in an execution of a federal money-judgment based on Federal Rule of Civil Procedure 69(a)(1), which provides that [t]he procedure on execution -- and in proceedings supplementary to and in aid of judgment or execution -- must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies. 6 1 2 CONCLUSION For the foregoing reasons, we vacate the district court s 3 order denying Ashapura s motion to vacate the Rule B attachment 4 and remand with instructions to release those funds. 5 6 7 8 9 10 11 Fed. R. Civ. P. 69(a)(1); see Thomas J. Schoenbaum, Admiralty and Maritime Law ยง 21-16 (4th ed. 2010) ( Execution, postjudgment garnishment, and other supplementary proceedings [related to maritime attachment] are available in accordance with the practice and procedure of the state in which the federal district court is located. (citing Fed. R. Civ. P. 69(a))). 7
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