Rule B Third Episode
Rule B Third Episode: some get vacations, others have to pay.
In a fascinating exercise of judicial commonsense and equity, Judge Alvin Hellerstein has just handed down two decisions which are likely to be determinative as to which pre “Haldhi” and “Hawknet” Rule B attachments will be vacated and which will not.
The good news is for those Respondents whose cases have not been decided against them on the substance by a competent tribunal. The bad news is for those Respondents whose cases have been decided against them by a competent tribunal and who are, in consequence, “judgment” or, perhaps more accurately, “award” debtors.
In a double decision handed down on 18th March 2010 (Americas Bulk Transport Ltd v. IMT and Eitzen Bulk v. Ashapura Minechem Ltd) denominated “Order and Opinion Denying and Granting Motions to Vacate Attachments”, Judge Hellerstein decided (as the cited wording suggests) that in one case the motion to vacate should be denied whereas in the other it would be granted.
After a careful review of the authorities and a historical examination of the court’s equity jurisdiction, Judge Hellerstein came to the conclusion that where there was a final determination on the merits against the Respondents and where the Respondents had used every trick in the book to avoid enforcement of the original arbitration award, equity demanded that the funds attached under a Rule B Order should be paid out to the Claimants. This was the decision in the Eitzen Bulk case.
However, where proceedings on the merits were still progressing at arbitration and there was no reason to suppose that the Respondents, if found liable, would fail to honour any final award against them, there was no reason of equity to depart from the general American procedural rule that “plaintiffs must await the outcome of an arbitration or litigation before they can require a defendant to give security for unproved claims.”
In a case‑law system, it is always instructive to examine the actual words used by the judge in coming to his decision. Thus the essence of Judge Hellerstein’s reasoning is set out in the section headed “Conclusion”, and I cite it in full as follows:
“V. Conclusion:
In Americas Bulk Transport Ltd. V. IMT Shipping & Chartering GmbH.
Defendant IMT instituted arbitration in London soon after the attachment in this district was effected. They continue to engage in the arbitration and, from their reports, are engaged in discovery proceedings ordered by the arbitrators. There is no reason to believe that the London proceedings are dependent on the attachment, and there has been no showing that an arbitral award in favour of Americas Bulk would not be paid by IMT. No reason of equity has been shown to depart from the rule prevailing generally in American courts that plaintiffs must await the outcome of a litigation or arbitration before they can require a defendant to give security for unproved claims.
Eitzen Bulk A/S v. Ashapura Minechem Ltd. presents a different story. Eitzen Bulk is a judgment creditor, having obtained an arbitration award pursuant to its contract, and judgments of the English High Court and of this Court. It seeks to impress its liens as a judgment creditor over the funds that Ashapura demands. All contingencies of Eitzen Bulk’s claim have been removed, except for payment, and there is an interpleader in this Court to determine the priority of competing claims to the attachment. Indeed, the bank has been discharged of all further obligation. Furthermore, the case presents a history of Ashapura’s active resistance and evasion of payment, played over a world‑wide canvas. The merits, and the equities, strongly favour Eitzen Bulk. Ashapura’s motion to vacate is denied.
In Americas Bulk Transport Ltd. V. IMT, 08 Civ. 6970 (AKH), the order of attachment, issued on August 6, 2008, is hereby vacated.
In Eitzen Bulk A/S v. Ashapura Minechem Ltd. 08 Civ. 8319 (AKH), the motion to vacate the attachment is denied.”
Practically speaking, this decision will have an enormous impact on the disposal of the remaining motions to dismiss pre “Haldhi” Rule B attachments of EFT’s if only because Judge Hellerstein has been allotted the task of dealing with a large number of, as yet, undetermined motions to vacate.
Last, but certainly not least, I must thank my colleague and correspondent in New York, Ken Citron of Snow, Becker and Kraus, for having provided me with a copy of Judge Hellerstein’s decisions so swiftly after their deliverance.
J. S. ( Stephen) Smid