Post on 25-Dec-2015
transcript
CHARTERERS’ DEFAULT:
Security and Discovery
in the U.S.
By Charlotte Valentin
Rule C Arrest
Rule B Attachments
Discovery
Rule C Arrest
• In Rem – arrest of the vessel itself
RULE B ATTACHMENTS
RULE B is not dead!
Rule B still exists
Attachment is no longer possible for Electronic Funds Transfers (“EFT’s”)
Supplemental Rule B for Certain Admiralty and Maritime Claims (“Rule B”) provides
“If a defendant is not found within the district…, a verified complaint may contain a prayer for process to attach the defendant’s tangible or intangible personal property – up to the amount sued for – in the hands of garnishees named in the process. Fed. R. Civ. P. Supp. Rule B(1).
Purpose of Rule B
Without it, “defendants, their ships, and their funds easily could evade the enforcement of substantive rights of admiralty law.”
Obtaining jurisdiction over a foreign defendant and ensuring satisfaction (security) of a favorable judgment.
The Three Elements Needed For a Rule B Attachment
A valid maritime claim against the defendant
Defendant cannot be found within the district
Defendant’s property may be found within the district.
Element 1: A Maritime Claim
Maritime Claims
Charter party disputes, regardless of when arbitration or litigation is to occur
Ship repair contracts
Cargo claims
Maritime indemnity claims
Separable maritime portions of non-maritime contracts such as commodities purchase & sale contracts
Personal injury claims
Marine insurance contracts
Arbitration awards or foreign judgments on maritime claims.
Non Maritime Claims
Purchase and sales contracts
FFA breach claims
Contracts for brokerage services
Inseparable commodities purchase & sale contracts
Contracts to build a ship
Element 2: “Presence” In The District
“Presence” is determined by a two pronged inquiryFIRST, whether (the defendant) can be found within the district in terms of jurisdiction, and
SECOND, if so, whether it can be found for service of process.
Whether to register to do business
Generally, registering to do business in a state and having a registered agent for service of process is enough to qualify as being present
For EFT’s – New York
Pro: No Rule B attachment in that jurisdiction
Con: Subjects the company to jurisdiction in the jurisdiction for any claim
Element 3: “Property” Within The District
RULE B PROVIDES AN EXPANSIVE DEFINITION OF PROPERTY - Any tangible or intangible personal property
- vessels- bunkers- funds (but not EFT’s)- debts- real estate
THE DEFENDANT’S INTEREST IN THE PROPERTY MUST BE CLEAR
Bunkers – difficulties
Legal difficulties: Who owns the bunkers?
Practical difficulties: Removing bunkers−Attaching party must arrange
−Can be difficult
−Risk of pollution
−Arrange for storage
Alter Ego And Rule BALTER EGO DEFENDANTS MAY ONLY BE NAMED WHERE THE PLAINTIFF CAN SHOW REASONABLE GROUNDS THAT:
the primary defendant uses its alter ego to perpetrate a fraud
or
where the primary defendant so dominates and disregards its alter ego’s corporate form that the alter ego was actually carrying on the controlling corporation’s business instead of its own.
Under that standard, … actual domination, rather than the opportunity to exercise control, must be shown.”
Must provide the court with evidence/documents supporting allegations of corporate relationships – the court may allow discovery on this issue.
Challenging The Attachment – Motion To Vacate/Reduce
PLAINTIFF MUST PROVE
It has a valid prima facie admiralty claim against the defendant
The defendant cannot be found within the district
The defendant‘s property may be found within the district
There is no statutory or maritime bar to the attachment
BASES FOR VACATING
The defendant is subject to suit in a convenient adjacent jurisdiction
The plaintiff could obtain in personal jurisdiction over the defendant in the district where the plaintiff is located
The plaintiff has already obtained sufficient security for the potential judgment, by attachment or otherwise
BASES FOR REDUCTION
The plaintiff’s claim is overstated and cannot be justified based reasonable calculation of damages and evidence.
Charterers’ options when attachment has been granted:
Challenge the attachment (motion to vacate)
Post security (LOU, L/C, bond – the plaintiff can only be forced to accept a bond or cash)
Negotiate settlement of claim or security (escrow account, etc.)
File a counterclaim (counterclaim must arise from same transaction and cannot be solely for costs and fees)
Counter security is usually limited to the security amount
Discretion of judge
If attachment fully secured, counterclaim security often allowed for full amount of counterclaim
Wrongful Attachment
A plaintiff in a maritime case can be liable in damages for wrongful attachment.
However, the defendant must prove that the plaintiff acted with:
bad faithmalice, orgross negligence
Most U.S. courts do not allow wrongful attachment to be asserted as a counterclaim in the same suit that was initiated by such attachment.
DISCOVERY
Discovery in aid of foreign proceedings:
The court may order person or party to provide testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal
Foreign lawsuit
Foreign arbitration (including London arbitration)
Available when the court has
Subject matter jurisdiction – underlying proceedings / arbitration is brought under a maritime contract
Personal jurisdiction over
Person
Company
Vessel
THANK YOU