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DS-Rendite Fonds NR. 108 VLCC Ashna GmbH & Co Tankschiff KG v. Essar Capital Americas Inc.

United States Court of Appeals, Second Circuit

February 6, 2018

DS-RENDITE FONDS NR. 108 VLCC ASHNA GMBH & CO TANKSCHIFF KG, Plaintiff-Appellant,
v.
ESSAR CAPITAL AMERICAS INC., ESSAR CAPITAL LLC, ESSAR GROUP LLC, ESSAR MINERALS, INC., ESSAR STEEL ALGOMA INC., ESSAR TRADING INC., Garnishees-Appellees, and ENERGY TRANSPORTATION INTERNATIONAL LIMITED, ESSAR SHIPPING LIMITED, ESSAR SHIPPING AND LOGISTICS LIMITED, Defendants-Appellees.

          Submitted: October 28, 2016

         Appeal from a denial by the United States District Court for the Southern District of New York (George B. Daniels, Judge), of appellant's motion for a maritime attachment and garnishment under Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. We affirm.

          J. Stephen Simms, Simms Showers LLP, Baltimore, MD, for Plaintiff-Appellant [1]

          KATZMANN, Chief Judge, WINTER, and RAGGI, Circuit Judges.

          WINTER, Circuit Judge:

         DS-Rendite Fonds Nr. 108 VLCC Ashna GmbH & Co Tankschiff KG ("DS-Rendite") appeals from Judge Daniels's denial of its motion for an attachment and garnishment order under Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. We affirm.

         BACKGROUND

         We assume that the facts alleged in the underlying complaint are true. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); Transfield ER Cape Ltd. v. Indus. Carriers, Inc., 571 F.3d 221, 222 (2d Cir. 2009) (recognizing "[b]ecause maritime attachments are granted on the pleadings, we assume all allegations in the complaint to be true" (internal quotation marks omitted)). On or about November 2, 2009, DS-Rendite chartered the M/T Ashna to Energy Transportation International Limited ("ETIL") pursuant to a Time Charter ("Charter"). That same day, Essar Shipping Limited ("ESL") entered into a novation agreement assuming the obligations of ETIL in the event ETIL defaulted on the Charter. Approximately five years later, Essar Shipping and Logistics Limited ("ESLL")[2] guaranteed the obligations of ETIL and ESL arising under the Charter. ESLL also agreed to guarantee subsequent settlement agreements between DS-Rendite, ETIL, and ESL resulting from ETIL and ESL's alleged failure to pay the charter-hire costs due under the Charter. DS-Rendite then made "repeated demand[s]" for payment. App'x at 12.

         Appellant's complaint asserted a claim for breach of a maritime contract against appellees ETIL, ESL, and ESLL and simultaneously sought a maritime attachment and garnishment order against Essar Capital Americas Inc., Essar Capital LLC, Essar Group LLC, Essar Minerals, Inc., Essar Steel Algoma Inc., and Essar Trading Inc. (collectively "Garnishees") in the amount of $10, 586, 346.63. On September 8, 2015, the district court denied the motion for attachment. After the district court's denial of a motion for reconsideration, this appeal followed.

         DISCUSSION

         This is a classic quasi in rem proceeding. The plaintiff is seeking to assert a claim against a defendant, over whom the court does not (otherwise) have personal jurisdiction, by seizing property of the defendant (alleged here to be in the hands of a third party). Although Rule B states that it applies to "an in personam action, " Fed.R.Civ.P. Supp. R. B(1), a maritime in personam claim is more appropriately styled a quasi in rem action. "[T]he nature of the jurisdiction the court acquires by a Rule B attachment is properly denominated 'quasi in rem' because any judgment rendered is limited to the value of the attached property." Teyseer Cement Co. v. Halla Mar. Corp., 794 F.2d 472, 477 (9th Cir. 1986); see Maryland Tuna Corp. v. MS Benares, 429 F.2d 307, 311 (2d Cir. 1970) (action brought under Rule B is quasi in rem); Eng'g Equip. Co. v. S.S. Selene, 446 F.Supp. 706, 709 n.9 (S.D.N.Y. 1978) (same). In fact, Rule E, which governs quasi in rem actions, "applies to actions in personam with process of maritime attachment and garnishment." Fed.R.Civ.P. Supp. R. E(1); see Peter Friedenberg, The Use of Maritime Attachment as a Jurisdictional Device, 12 Cornell Int'l L.J. 329, 332 (1979) ("It should be emphasized that, despite the language in Rule B limiting its scope to claims brought in personam, the Rule is in fact a classic example of quasi in rem jurisdiction." (internal quotation marks omitted)).

          The concept of quasi in rem jurisdiction evolved in the Lord Mayor's Court in London and "served the useful purpose of mitigating the rigors of securing personal jurisdiction" over elusive defendants. Paul D. Carrington, The Modern Utility of Quasi in Rem Jurisdiction, 76 Harv. L. Rev. 303, 304-05 (1962). In a quasi in rem proceeding, "a thing owned by a specified person is seized as a basis for exercising jurisdiction to decide a claim against the owner." Restatement (Second) of Judgments § 6 cmt. a (1982).

         The quasi in rem device has proved particularly useful in admiralty, where defendants are so often transitory that the "process of foreign attachment is known of old in admiralty." Swift & Co. Packers v. Compania Colombiana Del Caribe, S.A., 339 U.S. 684, 693 (1950). Without the use of maritime attachment to provide jurisdiction over defendants' properties, many plaintiffs would not be compensated for meritorious claims, see id. (citing Manro v. Almeida, 23 U.S. 473, 489 (1825)), and international commerce would be diminished. The quasi in rem device, in modern form, is now provided by Rule B.

         In a Rule B proceeding, "the res is the only means by which a court can obtain jurisdiction over the defendant." Shipping Corp. of India v. Jaldhi Overseas Pte Ltd., 585 F.3d 58, 69 (2d Cir. 2009). So, "[o]nce that property or its substitute security is released, the court has no jurisdiction over the defendant." Teyseer, 794 F.2d at 477; cf. The Rock Island Bridge, 73 U.S. 213, 215 (1867) ("The lien and the proceeding in rem are, therefore, correlative -- where one exists, the other can be taken, and not otherwise."); see generally Gilmore & Black, The Law of Admiralty 622 (2d ed. 1975). If a plaintiff is not able to successfully attach the defendant's property under Rule B, the district court lacks jurisdiction over the defendant. Indeed, if the defendant is subject to typical in personam jurisdiction, Rule B cannot be used. STX Panocean (UK) Co. v. Glory Wealth Shipping Pte Ltd., 560 F.3d 127, ...


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