Eitzen Bulk A/S v. Ashapura Minechem, Ltd.

10-0976-cv
Eitzen Bulk A/S v. Ashapura Minechem, Ltd.
UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2
August Term, 2010 3
(Argued: January 26, 2011 Decided: February 15, 2011) 4
Docket No. 10-0976-cv 5
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EITZEN BULK A/S, 7
8 Plaintiff-Appellee, 9
10 ABC, 11
12 Plaintiff, 13
14 v. 15
16 ASHAPURA MINECHEM, LTD., 17
18 Defendant-Appellant, 19
20 DEF, ASHAPURA GROUP OF INDUSTRIES, ASHAPURA SHIPPING LIMITED, 21 ASHAPURA INTERNATIONAL LIMITED, BOMBAY MINERALS LTD., ASHAPURA 22 CLAYTECH LTD., ASHAPURA ALUMINUM LTD., EAGLE FUEL PVT. LTD., 23 PRASHANSHA CERAMICS LTD., PENINSULA PROPERTY DEVELOPERS PRIVATE 24 LTD., SHARDA CONSULTANCY PRIVATE LTD., ASHAPURA CONSULTANCY 25 SERVICE PRIVATE LTD., ASHAPURA MINECHEM UAE (FZE), ASHAPURA 26 HOLDINGS UAE (FZE), ASHAPURA MARITIME FZE, ASHAPURA SHIPPING 27 (UAE) FZE, ASHAPURA SHIPPING UAE, ASHAPURA FINANCE LTD., ASHAPURA 28 INFIN PVT LTD., ASHA PRESTIGE CO., ASHAPURA VOLCLAY LTD., 29 ASHAPURA VOLCLAY CHEMICALS PRIVATE LTD., ASHAPURA AL-ZAWAWI 30 MINERALS, LLC, SHANTILAL MULTIPORT INFRASTRUCTURE PRIVATE LTD., 31 ASHAPURA ARCADIA LOGISTIC PRIVATE LIMITED, ASHAPURA CHINA, 32 ASHAPURA CHINA CLAY COMPANY, MANICO MINERALS INTERNATIONAL, 33 ASHAPURA AMCOL., 34
35 Defendants. 36
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39
40

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2
B e f o r e: WINTER, SACK, and LIVINGSTON, Circuit Judges. 1
2
Appeal from an order of the United States District Court for 3
the Southern District of New York (Alvin K. Hellerstein, Judge) 4
denying a defendant-appellant’s motion to vacate maritime 5
attachments of electronic fund transfers entered prior to our 6
decision in Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte 7
Ltd., 585 F.3d 58 (2d Cir. 2009). Plaintiff’s claim was reduced 8
to final judgment pre-Jaldhi but has not yet been executed 9
against the attached funds, which were retained by the banks in 10
suspense accounts pursuant to the Rule B attachments. We hold 11
that the entry of a judgment upholding plaintiff’s claim as to 12
liability does not affect the retroactive applicability of Jaldhi 13
where that judgment has not yet been executed against the 14
attached property. Accordingly, we vacate the decision and 15
remand with instructions to release the property. 16
17 CHARLES BART CUMMINGS, Baker & 18
McKenzie LLP, New York, New York, 19 for Defendant-Appellant. 20
21 MICHAEL E. UNGER (Lawrence J. Kahn, 22 Eric J. Matheson, on the brief), 23 Freehill Hogan & Mahar LLP, New 24 York, New York, for Plaintiff- 25 Appellee. 26
27 WINTER, Circuit Judge: 28
Ashapura Minechem, Ltd., appeals from Judge Hellerstein’s 29
order denying its motion to vacate maritime attachments of 30
electronic fund transfers (“EFTs”) entered pursuant to Rule B 31

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3
of the Supplemental Rules for Admiralty or Maritime Claims and 1
Asset Forfeiture Actions (“Rule B”). Fed. R. Civ. P. Supp. R. 2
B. We have previously held that EFTs are not properly 3
attachable under Rule B, Shipping Corp. of India Ltd. v. Jaldhi 4
Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009), and that Jaldhi 5
applies retroactively “to all cases open on direct review.” 6
Hawknet, Ltd. v. Overseas Shipping Agencies, 590 F.3d 87, 91 7
(2d Cir. 2009). We now hold that EFTs attached pre-Jaldhi must 8
be released where the plaintiff obtained a final judgment but 9
has not executed it against the attached funds that are being 10
retained by banks in suspense accounts pursuant to Rule B 11
attachments. 12
Accordingly, we vacate and remand with instructions to 13
release the attached property. 14
BACKGROUND 15
The underlying dispute does not concern us. It suffices 16
to say that, in September 2008, Eitzen, the plaintiff, obtained 17
a Rule B attachment of EFTs of which Ashapura, the defendant, 18
was an originator or beneficiary. By early 2009, Eitzen had 19
attached over $1.7 million in EFTs, which the garnishee banks 20
transferred into suspense accounts. Eitzen ultimately obtained 21
an arbitration award in London of approximately $36.6 million, 22
which it moved to confirm in the Southern District. On July 23
24, 2009, before our decision in Jaldhi, the district court 24
entered judgment for the full amount of the arbitration award 25

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4
and ordered the garnishee banks to turn the restrained property 1
over to Eitzen within ten days after entry of the judgment. 2
Ashapura did not appeal. Eitzen’s collection efforts were 3
stalled when other creditors of Ashapura asserted their own 4
claims against the funds in the suspense accounts. By March 5
24, 2010, however, those creditors’ claims were all either 6
voluntarily withdrawn or determined against them, leaving only 7
Eitzen’s attachment in effect. 8
On November 9, 2009, Ashapura filed a motion to vacate the 9
Rule B attachment pursuant to Jaldhi. The district court 10
denied the motion. Noting that this case "involve[d] actual 11
funds, held in suspense accounts, not EFTs," and that, under 12
Jaldhi and Hawknet, it "lacked jurisdiction to order the funds 13
attached," the court stated that "they nevertheless were 14
attached and plainly [the court has] jurisdiction to order 15
their disposition." It held that neither Jaldhi nor Hawknet 16
"confronted issues arising from an evasive judgment debtor or 17
multiple claims of creditors, including a judgment creditor." 18
The court then upheld the attachment as an exercise of its 19
equity powers. Ashapura brought the present appeal. 20
DISCUSSION 21
Eitzen argues that this case is not governed by Jaldhi and 22
Hawknet because the district court’s judgment and turnover 23
order below caused the attachment to "merge" into the final 24
judgment prior to the filing of those opinions. Eitzen further 25

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1At 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
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contends that Hawknet’s retroactive application of Jaldhi does 1
not apply here because the case is no longer "open on direct 2
review," Hawknet, 590 F.3d at 91, given Ashapura’s failure to 3
appeal. We find both arguments unpersuasive. 4
The attachment of EFTs between Ashapura and third parties 5
was invalid under the rule announced in Jaldhi, 585 F.3d at 71. 6
Because the judgment against Ashapura was not executed against 7
the funds, its finality did nothing to alter the legal basis of 8
the banks’ retention of the funds in the suspense accounts. 9
See Scanscot Shipping Servs. GmbH v. Metales Tracomex LTDA, 617 10
F.3d 679, 682 (2d Cir. 2010) ("The new suspense account neither 11
cures the jurisdictional defect nor provides a basis for 12
reattachment of the same funds."). 13
Although the question of Ashapura’s liability may no 14
longer be “open on direct review,” Hawknet, 590 F.3d at 91, the 15
funds remaining in suspense accounts were being retained by the 16
banks solely on the basis of the Rule B attachment and that 17
retention was therefore open to review on a Rule E(4)(f) 18
motion. 1 The reduction of Eitzen’s claim to judgment 19

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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)).
2We 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.”
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eliminated all doubt as to Ashapura’s liability, but neither 1
Jaldhi nor Hawknet turned on the strength of the merits of the 2
underlying actions brought by the attaching parties. And so 3
far as the equities between the parties favoring Eitzen are 4
concerned, we have specifically forbidden resort to equitable 5
considerations in addressing motions to vacate pre-Jaldhi 6
attachment orders. See Sinoying Logistics Pte Ltd. v. Yi Da 7
Xin Trading Corp., 619 F.3d 207, 214 (2d Cir. 2010) ("[F]ar 8
from encouraging district courts to apply Jaldhi selectively 9
based on an examination of the equitable considerations in the 10
remaining EFT-attachment cases, Hawknet requires district 11
courts to vacate any attachment orders granted before [the] 12
decision in Jaldhi insofar as those orders are now inconsistent 13
with Jaldhi."). We consequently hold that the district court 14
was obligated, pursuant to Jaldhi and Hawknet, to vacate the 15
attachment order. 2
16

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Fed. R. Civ. P. 69(a)(1); see Thomas J. Schoenbaum, Admiralty and Maritime Law
§ 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
CONCLUSION 1
For the foregoing reasons, we vacate the district court’s 2
order denying Ashapura’s motion to vacate the Rule B attachment 3
and remand with instructions to release those funds. 4
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