The Maritime Litigation Roundup is published by Seward & Kissel LLP and covers decisions of interest in judicial, administrative or arbitral bodies as well as notable regulatory or other newsworthy developments in the space. For any suggestions on future coverage or should you like more information about the matters addressed, please contact Brian P. Maloney at maloney@sewkis.com. Special thanks to Cody Hubbs and Carmella O’Hanlon for their contributions to this month’s roundup.
This month’s roundup reviews Glander Int’l Bunkering Inc. v. M/V Teresa (IMO 9175016), a February 17, 2022 decision from the Eastern District of New York, which addresses the questions of jurisdiction in the context of a motion to vacate a writ of attachment and whether a court may order all or part of the property to be sold at an interlocutory sale to be sold free and clear of all liens.
The Parties
- Plaintiff Glander is engaged in the business of selling and supplying marine fuel and other supplies.
- Defendants M/V TERESA (the “Vessel”) and Barge ACADIA (“Acadia”) form a Liberian-flagged tug and barge combination located in the Eastern District of New York and owned by Defendant Unico Marine (“Unico”), who is in the marine transportation business.
- Plaintiff JMB Shipping (“JMB”) owns three vessels and their accompanying barges. Unico entered into bareboat charter agreements with JMB for the use of these three vessels.
The Claims at Issue
- On December 9, 2021, Glander filed a complaint against the Vessel for breach of maritime contract and to enforce maritime liens pursuant to 46 U.S.C. § 31342. On December 10, 2021, the Court issued a warrant of arrest in rem for the Vessel and Acadia.
- The charter agreements between Unico and JMB require any claim arising out of the agreement to be brought in arbitration. As such, Unico filed an arbitration under those agreements on October 14, 2021 claiming damages against JMB for JMB’s repossession of the chartered vessels. JMB also asserted claims against Unico for breach of the charter agreements.
- Since Local Admiralty Rule E.2 states “[w]hen a vessel . . . has been arrested, attached, or garnished . . . anyone having a claim against the vessel or property is required to present the claim by filing an intervening complaint”, JMB intervened and filed a Rule B action for the purposes of obtaining security for its claims against Unico. On December 16, 2021, the Court issued a writ of attachment on behalf of JMB Shipping under Rule B against the Vessel and Acadia. After JMB informed the Court of Unico’s intent to sell the Vessel and the Acadia1, Unico filed a motion to vacate JMB’s writ of attachment under Rule E(4)(f) and Local Rule E.1.
Motion to Vacate
- The Court examined Unico’s Motion to Vacate JMB’s Writ of Attachment, first looking to the factors under Federal Rule of Civil Procedure Supplemental Rules (B)(1)(a) and (E). Under these rules, an attachment should issue if the plaintiff meets their burden in showing that:
- 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; and
- There is no statutory or maritime law bar to the attachment.
- Here, there was no question that JMB Shipping had a valid prima facie admiralty claim against Unico (breach of a charter agreement), Unico had property in the Eastern District of New York (the Vessel and Acadia), and there was no statutory or maritime law bar to attachment. The only factor in dispute was whether Unico could be “found” within the district.
- Because a Rule B writ of attachment is an extraordinary pre-judgment remedy, where a prospective defendant can be “found” within the district, attachment of assets under that rule is not warranted. Generally speaking, that is because the assets of a defendant who may be found within the district need not be attached in order for the Court to exert jurisdiction over that party.
- Here, Unico entered into an agreement to arbitrate disputes in New York with JMB, had registered to do business with the New York secretary of State, and appointed an agent for service of process in the Southern District of New York. Thus, the Court found that Unico was “found” in the Southern District of New York, not the Eastern District.
- Since the Southern District was a “convenient adjacent jurisdiction” where the defendant could be subject to suit, “across the river” from the Eastern District, the Court vacated the Writ of Attachment.
Motion for Interlocutory Sale
- The Court next turned to the pending Motion for Interlocutory Sale. A Court may grant such a motion if (1) the attached or arrested property is perishable, or liable to deterioration, decay or injury by being detained in custody pending the action; (2) the expense of keeping the property is excessive or disproportionate; or (3) there is an unreasonable delay in securing release of the property.
- The parties did not dispute the sale, and thus the Court ordered the assets to be sold. However, JMB asked the Court to refrain from ordering the sale free and clear of all liens, encumbrances and/or claims.
- Under the particular circumstances of the case, the Court found that it was not required to order a private sale free and clear of all liens, encumbrances, and/or claims under the circumstances of the case, stating:
Neither Rule E nor Local Admiralty Rule E.4 requires the Court to order a private sale free and clear of these obligations. In fact, “[a] judicial sale of vessels by an admiralty court acting in rem divests not only all liens held by claimants who intervened in or had notice of the proceeding but all liens everywhere. Upon the sale of a vessel, the liens attach to the proceeds of the sale. . .
The Court agrees with JMB Shipping that a private sale of the vessels would not have resulted in a sale free and clear of all liens and that Unico Marine should not have the benefit [of] such a sale absent a showing that it is necessary to preserve the value of the property.
2022 U.S. Dist. LEXIS 28930, *20 (S.D.N.Y. Feb. 16, 2022). The Court thus found that it had the discretion to confirm the terms of a private sale, as opposed to a judicial sale, but did not also provide the seller with the benefit of extinguishing all liens and encumbrances as part of that process.
- Given these findings, the Court ordered the interlocutory sale of the Vessel and the Acadia, consistent with the parties’ private Memorandum of Agreement.
1 Unico contracted to sell the Vessel and the Acadia pursuant to a Memorandum of Agreement dated December 3, 2021. On January 14, 2022, Unico filed a motion for the interlocutory sale of the Vessel and Acadia, which Glander joined and JMB did not object to.