Noble Shipping v. Euro-Maritime

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DMC Category Rating: Confirmed

Case Note Submitted by Elizabeth S. McKenna, an attorney with the firm of Healy & Baillie, LLP, New York. Healy & Baillie are the International Contributors to the website for the United States of America

Facts
On May 23, 2003, defendant Euro-Maritime Chartering ("Euro") entered into a maritime contract with plaintiff Noble Shipping ("Noble"). Noble alleged that Euro had failed to pay US$229,450.00. The charter provided that any disputes that arose under the charter would be subject to arbitration in London. As of the date of the District Court’s decision in this case, the arbitration was ongoing.

On August 11, 2003, Noble filed an action in the Southern District of New York seeking to secure its claim in the London arbitration. Noble’s complaint alleged that HSBC Bank USA ("HSBC USA") had or soon would have assets "believed to be due and owing" to Euro and that Euro was not present in the Southern District within the meaning of Rule B* of the Supplemental Admiralty Rules. That Rule allows a party to attach property as security for a maritime claim where the party whose assets are attached is not "present" (that is, for jurisdictional purposes) within the district where the attachment takes place.

After determining that Noble had made a prima facie case under Rule B, the district court issued a writ of attachment "against all tangible and intangible property belonging to, claimed by or being held for the defendant by HSBC Bank USA in an amount up to and including US$229,450.00," thus permitting Noble to attach Euro’s assets in the Southern District.

In an unrelated transaction, Euro had entered into a charter agreement with a Japanese company, the Marubeni Corporation ("Marubeni"). Marubeni agreed to payment in the amount of US$1,780,096.50 for Euro’s services. Euro’s invoice instructed payment via wire transfer to its account at an HSBC bank in Greece ("HSBC Greece"). As a result of the payment being in United States currency, it had to be routed to HSBC Greece’s account through a bank in the United States, HSBC USA. However, the Euro invoice specified payment to the HSBC Greece account number and stated that the payment through HSBC USA was for Euro’s benefit.

Subsequently, in mid-August 2003 when Marubeni wired funds to Euro, US$229,450.00 of the payment amount was frozen pursuant to the writ of attachment. HSBC USA notified HSBC Greece via wire that it had frozen the above amount as per an ex parte order of maritime attachment. Approximately a week later, HSBC placed the US$229,450.00 in an interest-bearing time deposit account for Euro’s benefit. Neither Marubeni nor its New York subsidiary had made a claim on the attached funds.

Judgment
The court observed that Rule B permits a plaintiff to attach "intangible" items such as debts, whether not yet matured or only partially matured, owed to the defendant. Citing Winter Storm Shipping, Ltd. v. TPI, 310 F.3d 263, 268 (2d Cir. 2002), the court noted that maritime attachment of electronic funds transfers (‘EFTs’) are common in the shipping industry. The court further noted that the Winter Storm court had concluded that EFTs are property subject to attachment under Rule B.

Euro sought to distinguish Winter Storm, arguing that the attached funds could not be considered its "property" within the meaning of Rule B because they never reached Euro’s HSBC Greece account. Euro argued that the funds were not its property at the time they were attached at HSBC USA but that they still belonged to Marubeni, as originator, at the precise time of the attachment.

The district court rejected this argument, concluding that under Rule B, funds transferred pursuant to an EFT may be attached as the property of the funds’ intended beneficiary. As such, the US$229,450.00 was a debt due and owing to Euro; thus, the attachment of those funds at HSBC USA was an appropriate remedy and Euro’s motion to vacate the attachment was denied.

Note: 
*Rule B(1)(a) 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.

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