Central Shipping Company v. Internaut Shipping

Citations: 679 F. Supp. 2d 390; 2010 A.M.C. 2027; 2010 U.S. Dist. LEXIS 3031; 2009 WL 5342062Docket: 09 Civ. 6222 (VM)

Court: District Court, S.D. New York; January 11, 2010; Federal District Court

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Defendant Internaut Shipping Ltd. requested the reopening of a case and the vacating of a writ of attachment issued by the Court, referencing a recent ruling from the Second Circuit in Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd. Internaut also sought the release of a bond amounting to $5,448,322.30, which it had posted under a substitute security agreement. Plaintiff Central Shipping Company Ltd. contended that the Jaldhi decision did not apply, as they had released property originally attached as an electronic funds transfer (EFT) and Internaut had voluntarily posted the bond. The Court found Jaldhi and another case, Hawknet, inapplicable to this situation. It noted that the Attachment Order had been vacated on July 27, 2009, and thus was no longer in effect. Internaut's request to vacate the Attachment Order was deemed unnecessary since it had already been set aside. The Court emphasized that Internaut's real aim was to nullify a valid contract under the Bond Agreement, which remained intact and was not challenged legally by Internaut aside from the Attachment Order issue. Consequently, the case would proceed based on the terms of the Bond Agreement, following the vacatur of the Attachment Order.

The Court determined that Internaut voluntarily consented to its jurisdiction, independent of the previously vacated attachment under the Bond Agreement. Internaut's request to vacate the July 15 attachment order was denied due to equitable considerations. The Bond Agreement allowed the release of restrained property without specifying its source, meaning it could include assets unrelated to electronic fund transfers (EFTs). Additionally, Central Shipping's agreement prevented it from arresting or attaching Internaut's vessels or assets, which provided Internaut with substantial benefits from the Bond Agreement. Granting Internaut’s request would unjustly restore its position prior to the attachment order while potentially depriving Central Shipping of benefits it may have lost due to reliance on the Bond Agreement. The Court highlighted the authority of admiralty courts to grant equitable relief, reinforcing its decision to deny Internaut's request. The November 25 Order confirmed the denial of Internaut's application to vacate the July 15 attachment order and release the associated bond, following a precedent from the Second Circuit that invalidated Rule B maritime attachment orders based on EFTs.

The Court concluded that the cases of Jaldhi and Hawknet were not applicable, as the Bond Agreement and a prior Court order from July 25 had already vacated the July 15 Order. As a result, Internaut had regained access to previously restrained funds, and there was no existing order to vacate. The Court noted that the Bond served as substitute security in the litigation, with the parties having mutual obligations under the Bond Agreement, including Central Shipping’s agreement not to attach Internaut's assets or disrupt its operations. Unlike typical maritime attachment cases where an original attachment order remains effective, the Court highlighted that the original order authorizing the restraint had been vacated, shifting the jurisdiction from an attachment-based to a consensual basis through the Bond.

The Court decided against releasing the Bond, citing equitable considerations due to changed circumstances wherein Central Shipping had given up rights to attach other assets. Internaut sought reconsideration or permission to file an interlocutory appeal under 28 U.S.C. 1292(b). The Court denied the motion for reconsideration, stating that Internaut did not present new evidence or legal authority that could change the outcome. However, recognizing the exceptional nature of the case and the ongoing ambiguity in maritime law following Jaldhi and Hawknet, the Court granted leave for an interlocutory appeal, asserting that the legal questions involved could significantly impact the litigation's resolution. The Court's order officially denied Internaut's reconsideration motion but granted the motion for interlocutory appeal.