Monday, December 7, 2009

Attaching electronic funds in martime jurisdiction

The Second Circuit recently overturned its previous position regarding the attachment of electronic fund transfers (EFTs) for purposes of maritime jurisdiction.

Rule B of the Federal Rules of Civil Procedure Supplemental Rules allows courts to attach tangible or intangible property of a named defendant in admiralty cases if certain conditions are met.  This procedure is often used by parties involved in foreign litigation or arbitration to aid in enforcement of judgments.

The EFT issue arises when a defendant transfers money from one bank to another, and the money is funneled through an intermediary bank located in the jurisdiction (most often in New York).  When the funds are in New York, they are attached for purposes of litigation -- a procedure that does not require notice.  In an case earlier this decade, Winter Storm Shipping, LTD. v. TPI , 310 F.3d 263 (2d. Cir. 2002), the Second Circuit ruled that EFT funds were eligible for Rule B attached.

Last month, the Second Circuit overruled this holding in The Shipping Corp. of India LTD v. Jaldhi Overseas PTE LTD , - F.3d -, -, 2009 WL 3319675 (2d. Cir., 2009).  The court based its decision on an interpretation of the New York Uniform Commercial Code, holding that the funds are in temporary possession of the intermediary bank, and therefore are not property of the EFT initiator.   However, the court also cited practical concerns motivating its decision such as the increased case load resulting from these lawsuits, and the high costs that the intermediary banks must spend in defending them.


Federal Courts, Federal Rules of Civil Procedure, Recent Decisions | Permalink

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