Second Circuit Deals Another Blow to Rule B Claimants
The fallout from the Second Circuit Court of Appeals' overturning of the now-infamous Winter Storm case continues.
As had been previously discussed on this blog, the Second Circuit's ruling in Winter Storm, Ltd. v. TPI authorized claimants from around the world to use Admiralty Rule B to attach Electronic Fund Transfers (EFTs) passing through New York banks. This was significant because many US-Dollar funds transfers--even those involving totally foreign transactions--often will instantaneously pass through intermediary banks in New York. As a result of the Winter Storm ruling, parties could obtain security for their claims by seeking a Rule B attachment in New York and tying up funds held by the opposing party, no matter where the dispute was being decided or where the EFTs were headed.
This Rule B procedure had developed into a cottage industry for many New York maritime attorneys, but in October 2009 the Second Circuit reversed course in the case of The Shipping Corporation of India v. Jaldhi Overseas PTE, Ltd., overruling Winter Storm and holding that EFTs cannot be attached under Rule B. This case, which was also reported on this blog, generated a lot of comment and subsequent litigation on the status of the thousands of Rule B cases that were pending in New York federal courts.
Now the Second Circuit has weighed in again, giving courts a free hand in managing these Rule B cases. In the recent decision of Sinoying Logistics Pte Ltd. v. Yi Da Xin Trading Corp., the Second Circuit upheld the District Court's sua sponte dismissal of a Rule B attachment of EFTs and dismissal of the case on jurisdictional grounds. The appeals court found that the District Court acted properly when finding that no Rule B jurisdiction existed and, in the absence of any proof of further property located in the district, dismissal of the complaint was correct.
Although this is not a surprising result, this case is another confirmation that the death knell for Rule B attachments of EFTs has been sounded by the Second Circuit. The hopes, held by some, that courts would retreat from the Jaldhi ruling or limit its scope have surely been dashed. It also confirms that courts in the Second Circuit will have no obligation to protect claimants who used this mechanism in reliance on the Winter Storm and who are now left without security for their claims.
Lafcadio Darling specializes in maritime and commercial litigation, representing a wide variety of business and consumer clients. In addition to being licensed in Washington and California, Lafcadio also holds a LL.M. from University College London and is a licensed solicitor in England & Wales
