When Rule B Attachment Will Not Help

Since 2008, the shipping market (in particular, the bulker market) has been badly affected by a decreased demand for shipping, largely due to the global financial crisis. To date, the shipping market is struggling, and claims for unpaid charter hire continue to surface along with the traditional assortment of other claims that arise between contracting parties.

Claimants frequently look to admiralty counsel in the United States to secure their claims and/or to assist in enforcing foreign awards and judgments. Many shipping personnel around the world have at least a basic working knowledge of the attachment and arrest procedures in the U.S. and typically request their attorney to take immediate steps to affect those measures. Rule B attachment and Rule C arrest procedures typically provide the admiralty claimant with an effective tool to obtain security for their claim and to bring a recalcitrant defendant into court.

Clients must, however, be wary of three scenarios where attaching and/or arresting a vessel may expose them to additional losses. Those situations include when the attachment is "futile"; where bankruptcy looms over the vessel owner; or where the vessel itself, while in good condition, has no value because it has no market—the proverbial "white elephant."

Futility

When a vessel is attached or arrested, the dispute often mushrooms to include competing claims by various creditors of the owner and the vessel that can be broken down, usually, into two categories of competing interest. The first group is the "Rule B" attaching plaintiffs, which consists of claimants who have maritime claims against the owner that do not specifically relate to the attached vessel. The second group is the "Rule C" arresting plaintiffs, which consists of claimants who seek to enforce maritime liens in the arrested vessel itself, e.g., cargo interests, charterers, and the bank that holds a mortgage on the vessel.

Whenever property is attached under Rule B, Supplemental Rule E(4)(f) allows any party claiming an interest in the property to obtain a prompt hearing at which the attaching plaintiff must bear the burden of showing that the attachment is proper. When numerous competing interests appear, a "prompt hearing" usually results in discovery orders being issued, motion practice, and hearings being scheduled, all while the vessel remains under attachment and/or arrest.

The paramount disagreement between competing Rule B and Rule C interests is whether...