Recent Developments In Pre-Judgment Attachments In New York, Maritime And Otherwise

Following is a brief discussion of some of the more notable recent developments in the New York attachment and garnishment arena. Some of the developments relate to Rule B maritime attachments, and others relate more broadly.

Controlling Law in Rule B Alter Ego Attachments

A recent decision from the Second Circuit Court of Appeals clarified two important points primarily relating to alter ego attachment actions. As many are aware, a plaintiff may obtain a Rule B attachment where it is asserting a "valid prima facie maritime claim" against a party who cannot be "found" within the district, but who has an attachable interest in property located within the district. This issue of whether a plaintiff has a valid prima facie maritime claim has caused confusion in some cases where the underlying claim is subject to foreign law and will be litigated or arbitrated in a foreign proceeding. In such case, whose law controls the inquiry of whether an attachment is warranted?

That question was answered by the Second Circuit in Blue Whale Corp. v. Grand China Shipping Development, 722 F.3d 488 (2d Cir. 2013), which held that the inquiry is actually a two-pronged one, breaking down into whether the claim is "maritime" and whether it is "prima facie valid." The first prong is a procedural question—i.e., is the claim within the subject matter of the U.S. federal courts. Thus, federal law always controls that question—i.e., if the claim would be maritime within the meaning of federal maritime law, then it is a maritime claim irrespective of how it may be classified under the foreign law governing the merits of the dispute.

The second prong, however, raises a substantive issue because the ultimate question is whether the claim, as pled, states a valid cause of action under the law that controls the merits of that claim. In many cases, the governing law will be clear from, for instance, a choice of law clause in the governing contract. With an alter ego claim, however, the analysis is not so simple. In such a claim, the plaintiff is contending that a third party—i.e., not the party to the contract or the party actually committing the tort—should have its "corporate veil" pierced because it is no more than the alter ego of the primary defendant. What law should govern such a claim—particularly in the typical situation where the plaintiff and defendant are from different foreign countries and the dispute involves a foreign-flagged vessel carrying cargo to and from foreign ports?

In Blue Whale, the Second Circuit concluded that a choice of law clause in the contract should not control, because an alter ego claim is not strictly a claim under the contract but involves the separate question of when one party should be liable for another's obligations. The court also rejected the notion that federal maritime law should always govern the question. Instead, the Second Circuit ruled, a court must...