“Court Abandons 2002 Ruling That Boosted Attachments” (New York Law Journal)

October 19, 2009

In its October 19 issue, the New York Law Journal reported on the overruling of Winter Storm Shipping, Ltd. v. TPI, 310 F.3d 263 (2002) in The Shipping Corporation of India Ltd. v. Jaldhi Overseas Pte Ltd., 08-3477-cv. Winter Storm held that Admiralty Rule B, in effect, preempted state law and imposed a maritime rule regarding the property interests in fund balances held by intermediary banks in the funds transfer process; whereas Article 4A of the Uniform Commercial Code, adopted in New York and all 50 states, prevents the attachment of a fund balance because it is property neither of the "originator" nor the "beneficiary" of the funds transfer or "EFT." In Winter Storm, the court held that electronic funds transfers at an intermediary bank were property of the originator of the funds transfer. The issue presented by the parties in Jaldhi was whether the Winter Storm ruling should be extended to transactions where the defendant was a funds transfer beneficiary, as numerous district courts had held. The parties to the appeal split, of course, on that issue. The Clearing House as amicus curiae opposed extending Winter Storm, and also asked the court to overturn Winter Storm, which they did. The article noted that the U.S. Court of Appeals for the Second Circuit said the Winter Storm case “triggered a flood of maritime attachment orders and posed a threat to both the strength of the U.S. dollar and New York City's standing as an international financial center.”

Bruce Clark who represented The Clearing House, was quoted in the article and said that 2,000 maritime attachment cases have been filed in the Southern District in the year ending in September. “Not all of them are successful, but the potential that they might be successful has a marked impact on the banking system because the problem is people could have avoided attachment by dealing in currencies other than dollars and not with New York banks,” he said. The Jaldhi opinion makes New York far more hospitable to the global payments system and strengthens the primacy of the U.S. dollar as the currency of choice for international business transactions.

S&C represented The Clearing House in six different appeals, beginning with the motion for reconsideration of Winter Storm and ending with Jaldhi and Export-Import Bank of the United States v. Asia Pulp & Paper Company, Ltd. et al., (2d Cir. 09-2254-cv), argued last month and still pending.