Attachments Under Rule B Of The Supplemental Rules Of Federal Civil Procedure

Author:Ms Wendy Schwartz, Joanne Lewis and Danica S. You
Profession:Reed Smith

Introduction A recent landmark decision in the US case, The Shipping Corporation of India Limited v Jaldhi Overseas Pte Ltd (the "Jaldhi Case") has drastically limited the effectiveness of the Rule B attachment as a means of securing a maritime claim in New York. The decision of the Second Circuit Court of Appeal in New York held that "electronic fund transfers" (EFTs) do not constitute "property" which can be frozen under Rule B.

Rule B of the Supplemental Rules of Federal Civil Procedure The Rule B attachment had become one of the easiest and most popular methods of obtaining security for a maritime claim (which more recently expanded to include claims under commodities sale/purchase contracts with "maritime elements"). An applicant must show there is a "maritime" claim and that the defendant has, or was likely to have, property, but no presence, in the state in which the application is brought.

The Rule B attachment became a particularly prevalent weapon in New York because importantly EFTs passing through the New York banking system were classed as "property" situated in that state. This meant that all transfers to/from a defendant in US Dollars could be frozen by the Rule B attachment, without the claimant needing to pinpoint specific bank accounts or property, and thereby cause massive inconvenience to a defendant and the banks served with the attachment orders. This was as a result of the decision in Winter Storm Shipping Limited v TPI 310 F.3d 263, 278 (2nd Circuit 2002).

The Jaldhi Case and Effect on Future Rule B attachments The Court of Appeals for the State of New York has now removed this benefit by ruling that EFT's are no longer deemed to be "property" within the meaning of the Supplemental Rules of Federal Civil Procedure and therefore are no longer reachable by a Rule B attachment.

Obviously the Rule B attachment still exists as a remedy across the US, but in New York its scope has been cut back to what it was in 2002 prior to the first instance Winter Storm decision. It will still apply to freeze the defendant's "property" situated in the state in which the relief is granted, but "property" will now be confined to assets such as bank accounts, vessels and...

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