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.
This month’s roundup focuses on pleading standards, with three cases that emphasize the importance of careful drafting in order to ensure that a complaint or attachment claim meets the requirements of the Federal Rules and will survive an initial motion addressed to the pleadings. First, in Bensch v. Estate of Umar and DS-Rendite Fonds v. Essar Capital Ams. Inc., the Second Circuit instructs that admiralty plaintiffs in federal court need to follow the “plausibility” standard set forth in the Supreme Court’s 2007 decision in Bell Atl. Corp. v. Twombly, just as in other non-admiralty cases. Second, a district court in Texas, in K Inv. v. B-Gas Ltd., enforces Rule B’s verification requirement to ensure that the claimant is actually affirming that the statements in the complaint are true.
• Second Circuit Confirms Twombly’s “Plausibility” Standard Extends to Maritime and Admiralty Claims
• Under the Supreme Court’s 1957 decision in Conley v. Gibson, “the accepted rule [was] that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." 355 U.S. 41, at 45-46 (1957). But in 2007, with the issuance of Bell Atl. Corp. v. Twombly, the Supreme Court found that “after puzzling the profession for 50 years, this famous observation has earned its retirement.”
• After Twombly, Plaintiffs are now required to allege “enough facts to state a claim to relief that is plausible on its face,” taking all of the allegations in the complaint as true.
• Although Twombly was an antitrust case, its commentary on pleading standards has enjoyed much broader application. In admiralty cases, the Second Circuit has at least twice recently confirmed that Twombly and Iqbal apply to claims brought under the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. See Bensch v. Estate of Umar, 2 F.4th 70 (2d Cir. 2021); DS-Rendite Fonds Nr. 108 VLCC Ashna GmbH & Co Tankschiff KG v. Essar Capital Ams. Inc., 882 F.3d 44, 50 (2d Cir. 2018).
• On June 23, 2021, the Second Circuit confirmed in Bensch that maritime complaints brought under Rule F of the Supplemental Rules, seeking exoneration from or limitation of liability under the Limitation of Liability Act, 46 U.S.C. § 30511 et seq., must satisfy the plausibility standard set forth in Twomby and Iqbal. The opinion contains a helpful discussion of the “formerly distinct procedural regimes” for cases in equity, cases at law, and cases governed by separate admiralty rules of procedure. After the admiralty rules were merged with the Federal Rules of Civil Procedure, the Supplemental Rules were retained to preserve certain “distinctively maritime remedies.” But the Bensch court confirms that although those remedies were preserved, the pleading standards in federal court remain uniform and all complaints must show facts that plausibly state claims for relief.
• Bensch forms a bit of a trend, in line with the Second Circuit’s 2018 ruling in DS-Rendite. That case involved a Rule B application – but the Court likewise dismissed that claim, holding that to meet the pleading standard, a plausible identification of the “property” sought to be attached from the specific defendant at issue was required.
• Southern District of Texas Finds that Rule B’s Verification Requirement Means that Statements in the Complaint Must Be Affirmed as True and Correct:
• In Rule B attachment proceedings, a plaintiff is required to submit a verified complaint, in order to obtain the extraordinary remedy of an ex parte prejudgment attachment of a defendant’s assets.
• That is, in part, because seizing property or assets before the merits of the dispute are litigated and without notice to the defendant can cause serious business disruptions.
• The verification requirement was recently enforced in K Inv. v. B-Gas Ltd., in which a magistrate judge in the Southern District of Texas granted a motion to vacate Plaintiff’s alter-ego and Rule B claims arising out of an alleged breach of contract action. The Court released the security posted by the defendants and dismissed the case for lack of jurisdiction.
• In the June 4, 2021 report and recommendation, later adopted by the district court, the magistrate judge found that dismissal was required because the verification suffered from a basic but critical omission – it failed to contain the representation that the statements in the complaint were in fact “true and correct.” Without a representation from the plaintiff as to the truth of the statements in the complaint, the Court found that Rule B’s requirements were not met.