09 - 50 68 - cv G oodea r t h M ar i t i m e Lt d. v. C al derSea ca r r i erC or p.

UNI TED S TATES CO URT O F AP PEALS F O R T H E S E C O N D C IR C U IT S UM M ARY OR DER RU L I N G S B Y S U MM A R Y O R D E R D O N O T H A V E P R E C E D E N T I A L E F F E C T . C I T AT I ON T O A S UM M ARY ORD ER FI LED ON OR AF TER J ANU ARY 1 , 2 0 0 7 , I S P ERM I TTED AND I S GO VERN ED BY FE DERA L RULE OF AP PE LLATE P RO CEDU RE 3 2 . 1 AND THI S COUR T’ S LOCAL RULE 3 2 . 1 . 1 . W HEN CI TI NG A S UM M ARY ORD ER I N A DO C U M EN T FI LED W I TH TH I S COU RT, A P ARTY M US T CI TE E I T HE R T HE F E DE RA L A P P E ND I X OR A N E L E CT RO NI C DA T AB AS E ( W I T H T HE N OT AT I ON “ S UM M ARY ORD ER” ) . A P ARTY CI TI NG A S UM M ARY ORDE R M US T S ERVE A COP Y OF I T ON ANY PARTY NO T REPRES ENTED BY CO UNSEL. A t a s tate d ter m o f th e U n ited S tate s C o u rt o f A p p e a ls fo r th e S e c o n d C irc u it, h e ld atthe D ani el Patr i ck M oyni han U ni t ed St at es C ourthous e, 500 Pear l Str eet , i n the C i ty of N ew Y ork, on the 14 day of J ul y, tw o thous and t en. th P R E S E N T : R E E N A R A G G I,

GE RA RD E . L YNC H, DE NNY C HI N,

C i r cui tJudges .

------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ G O O D E A R T H M A R IT IM E L T D ., P la in tif f , BAJ A FE RRI ES USA L LC, C lai m ant-Appel lant ,

v. N o. 09- 5068- cv C A L D E R SE A C A R R I E R C O R P. , al s o know n as Cal de rSe a Carr i e rCorp. , RO LSTO N EN TER PRI SES, L T D ., D e fen da n ts , FE N B Y C O M PA N Y L I M I T E D , al s o know n as Fenby C o . L td ., D ef endant

-Appel l ee .

------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ A PPE A R I N G FO R A PPE L L A N T : J A M E S P. R A U , C ar di l l o & C orbett , N ew Y ork, N ew Y ork.2

AP P E AR I NG F OR AP P E L L E E : G A R T H S. W O L FSO N , M ahoney & K eane , L L P, N ew Y ork, N ew Y ork. A p p ea l f rom the U n it ed S tat es D istri ct C o u rtfor the S o u thern D istri ct of N ew Y o rk (R ic h a rd M . B e rm a n , Judge ). UP ON DUE C ONS I DE RA T I ON, I T I S HE RE BY OR DE RE D, AD J UDGE D, AND D E C R E E D th a t th e d istric t co u rt’s D e c e m b e r 7 , 2 0 0 9 o rd e r is V A C A T E D , an d th e c a se is RE M ANDE D. O n oraboutJ une 20, 2008, Fenby C om pany L t d. (“ Fenby”) re m i tt ed a $1, 398, 750. 00 f r ei ghtpaymentt o B aj a Ferr i es U SA L L C (“B aj a”) . B aj a di d not , how ever , r ece i ve $482, 775. 72 of

thats um becaus e, w hil e t he el ectr oni c f unds tr ans f

er( “EF T ”) w as pas s i ng thr ough a n i nt e rmedi a ry b a nki n New Y ork, G oo de a rth M a r i t i me Li mi t e d s uc c e s s f ul l y m oved f o ra tt a c h me n tpu r s u a n tt o Ru l e B o f th e S u p p l e me n t a l Ru l e s f o rAd mi r a l ty o rM a r i t i me C lai m s o f th e F ed era l R u les o f C ivil P roc ed u re (the “ A d m ir alty R u les”). S ee W inter S torm S h ipp ing , L td. v. T P I, 3 1 0 F . 3 d 2 6 3 , 2 7 8 (2d C ir . 2 0 0 2 ). A ft er w e o v erru led W inter S torm ’s hol di ng thata n EFT bei ng pr oces s ed by an i nt erm edi ary bank w as att achabl e pr operty under R u le B , see S h ipp ing C o rp. of In d ia L td. v. Jal d h i O v erse as P te L td., 5 8 5 F . 3 d 5 8 , 7 2 (2d C ir . 2009) ; s ee a l s o H aw knet , L t d. v. O ver s eas Shi ppi ng A genci es , 590 F. 3d 87, 91 ( 2d C i r . 2009) ( appl yi ng Shi ppi ng C orp. of I ndi a rul e r etr oact i vel y t o cas es open on di r ectr evi ew ) , the di s tr i ctcourtva cat ed the att achmenta nd s ubs equent l y or der ed the f unds r el eas ed t o Fenby. B aj a now appea l s f

r om the l att eror der , cont endi ng t hatt he f unds shoul d have be en r el eas ed3

t o i ti ns t ead. W e as s um e the part i es ’ f ami l i ar i ty w i th the f

act s and r ecor d of

pr i or pr ocee di ngs , w hi ch w e r ef er ence onl y as nece s s ary t o expl ai n ourdeci s i on. 1. J ur i s di ct i on P rel i m i nari l y, F enb y assert s that w e l ack jur i sdi ct i on t o h ear B aja’s appe al becau se B aj a neve ri nt e rve ne d a s a pa rty i n the di s tr i c tc ou rtbu t , r a the r , c ha l l e ng e d the a tt a c hm ent u n d e r A d m ira lty R u le E (4 )(f) a s a “ p e rso n c laim in g a n in ter e st” in a ttac h e d p ro p e rty . W h ile gener al l y onl y part i es of r ecor d i n the di s tr i ctc ourtha ve s t andi ng t o appeal i t s j udgm ent , s ee g e n e ra lly M a rin o v . O rtiz, 4 8 4 U .S . 3 0 1 , 3 0 4 (1 9 8 8 ) ( “ T h e ru le th a t o n ly p a rties to a law su it, o rth o s e th a tp r o p e r l y b e c o me p a rt i e s , ma y a p p e a l a n a d v e r s e j u d g me n t , i s we l l s e tt l e d . ” ) , we r ecogni ze “ an exc ept i on t o t hi s rul e w hen ‘ the nonparty has an i nt er es tthati s af f ect ed by the tr i al court ’ s j udgm ent, ’” A ur el i us C api t al Partner s , L P v. R epubl i c of A r gent i na, 584 F. 3d 1 2 0 , 1 2 7 (2 d C ir. 2 0 0 9 ) (q u o tin g H isp a n ic S o c ’y o f N .Y . C ity P o lice D e p ’t v . N .Y . C ity Pol i ce D ep’ t , 806 F. 2d 1147, 1152 ( 2d C i r . 198 6)) (perm i tt i ng nonparty t o appea l di s tr i ct c o u rto rd e rs a tta c h in g fu n d s it a d m in is te re d ); s e e a ls o W e s t v . R a d io -K e ith -O rp h e u m C o rp ., 7 0 F .2d 6 2 1 , 6 2 4 (2d C ir . 1 9 3 4 ) (L . H an d , J. ) (ob serv ing that w h ere “d ec ree aff e c ts [ person’s] i nter est s, he i s oft en al l ow ed t o app eal ”). T his excepti on appli es h ere b ecau se B a j a c l a i ms a n i nt e r e s ti n the v e ry f un ds the d i s tr i c tc ou rto r de r e d r e l e a s e d t o Fenby. A c c o rd in g ly , w e c o n c lu d e th a t B a ja h a s s tan d in g to a p p e a l ev e n th o u g h it n e v e r fo rm a lly beca m e a part y i n the di s tr i ctcourt . See O f f i ci al C om m . of

U ns ecur ed C r edi t or s of W or l dC om , I nc. v. SE C , 467 F. 3d 73, 77- 79 ( 2d C i r . 2006) ( perm i tt i ng nonparty t o appea l4

w her e i thad “pl aus i bl e” i nt er es taf f ect ed by di s tr i ctcourt ’ s j udgm ent ) ; cf . D evl i n v. Scar del l ett i , 536 U . S. 1, 7 ( 2002) ( cons i der i ng “w hetherpet i t i oners houl d be cons i der ed a

‘ party’ f orthe purpos es of

appea l i ng” appr oval of cl ass act i on sett l ementand not i ng that “[w ] e h av e n ev er . . . restri cted the righ t t o ap p ea l t o n am ed p arti es to the lit igation ”). 2. R el eas e of

A tt ache d Funds B aj a s ubm i t s thatthe di s tr i ctc ourterr ed by r el eas i ng the att ache d f unds t o Fenby, the o r i g i n a t o ro f

th e EF T, r a th e rth a n t o i t , th e b e n e f i c i a ry . “ W h e n th e r e i s n o f e d e r a l ma r i t i me la w to g u id e o u rd e c is io n , w e g e n e ra lly lo o k to s ta te la w to d e te rm in e p ro p e rt y ri g h ts .” Shi ppi ng C orp. o f

I ndi a Lt d. v. J al dhi O ver s eas Pt e Lt d. , 585 F. 3d at70. T he ques t i on of w h o is e n tit led to th e w ro n g ly a ttac h e d fu n d s is d iffic u lt b e c a u se , as w e e x p lain e d in Shi ppi ng C orp. of

I ndi a, “EF T s i n t he t empora ry pos s es s i on of an i nt erm edi ary bank ar e not property o f ei ther the o ri ginat or or the b enefi ci ary und er N ew Y ork l aw . ” Id. at 71; see al so i d. at71 n. 13 ( “I f

i ti s ar gued thatpr operty r i ght s m us tves ti n s om e ent i ty atal l t i m es , then p erh ap s N ew Y o rk law en v isag es E F T s as th e p rop erty o f th e interm ed iary b an k for th e sh o rt w h il e o r i n stan t du ri n g w h ich th ey rem ain in the b an k ’s po sses sion . ”). Fenby as s ert s thati ti s ent i t l ed t o the f unds underN . Y . U . C . C . § 4- A - 402, w hi ch excus es a s ender ’ s paymentobl i gat i on i f the f unds tr ans f

eri s notcompl et ed by ac cept ance of the bene f

i ci ary’ s bank. T hi s ar gum entf ai l s fortw o r eas ons . Fi r s t , the r ecor d does not s upportFenby’ s cont ent i on thatthi s E FT w as notcompl et ed bec aus e i tw as “ca ncel l ed by o p e ra tio n o f l a w ,” id . § 4 -A -2 1 1 (4 ), a n d “ [a ] ca n c e lle d p a y m e n t o rd e r c a n n o t b e a c c e p te d ,”5

i d. § 4- A - 211( 5) . T o the contr ary, mostof the f unds or i gi nal l y s entby Fenby – $915, 974. 28

– h a v e a lre a d y b e e n tra n sfe rre d to B a ja’ s b a n k . A s to th e re m a in in g fu n d s, w e th in k th a t B a ja is c o rre c t th a t th e a ttac h m e n t o n ly in ter ru p ted th e tra n sfe r, an d d id n o t ca n c e l it . S e c o n d , F e n b y c o u l d n o tr e c e i v e th e f u n d s d i r e c t l y f

r o m th e B a n k o f

Ne w Y o rk . As w e expl ai ned i n G r ai n T r ader s , I nc. v. C i t i bank N . A . , § 4- A - 402 “i ncorpor at [ es ] a ‘ pr i vi ty’ r equ i rem enti nt o the ‘ m oney bac k guar ant ee’ pr ovi s i on s o thati tappl i es onl y betw een the p a rt ie s to a p a rt ic u la r p a y m e n t o rd e r a n d n o t to th e p a rt ie s to th e fu n d s tr a n s fe r a s a w h o le .” 1 6 0 F . 3 d 9 7 , 1 0 1 ( 2 d Ci r . 1 9 9 8 ) . I n o th e rwo r d s , e v e n i f p a y me n twe r e e x c u s e d h e r e , § 4 - A402 pr ovi des no s upportforF enby’ s ar gum entt hati tcoul d re cei ve the f unds di r ect l y f

r om the B ank of

N ew Y ork, r atherthan f r om i t s ba nk, Pi r aeus Bank SA . See i d. at100- 02; s ee a lso N .Y . U .C .C . § 4 -A -4 0 2 c m t. 2 ( “ T h e m o n e y -b a c k g u a ra n tee is p a rticu lar ly im p o rta n t to O r i gi nat ori f

noncom pl et i on of the f

unds t r ans f

eri s due t o t he f

aul tof an i nt erm edi ary bank r atherthan B ank A . I n t hatcas e B ank A m us tre f und paym entt o O r i gi nat or , and B ank A has the b u rde n o f ob tai n ing refu n d from the in term ed iary b an k that itp aid.”). R el yi ng on B ank of

N ew Y ork v . N ori l s k N i ckel , 14 A . D . 3d 140, 789 N . Y . S. 2d 95 ( 1s tD ep’ t2004) , and Europe an A m er i can Bank v. B ank of N ova Scot i a, 12 A . D . 3d 189, 784 N . Y . S. 2d 99 ( 1s tD e p’ t20 04 ) , Baj a s ub mi t s t ha tw he n the a tt a c hmen tw a s va c a t e d, the EFT s houl d have pr ocee ded as i f i thad neverbeen a tt ache d. L i ke thi s cas e, N or i l s k N i ckel and E u ropean A m eri can B ank i nv olved E F T s that w ere at t ached ati nterm ediary ba n k s. In N o ri lsk N icke l, G en era l E x p o rtL td. ( “G en ex ”) o ri g inated a n E F T b y g iving p ay m en t ord ers6

t o i t s bank t o tr ans f

er$2. 5 m i l l i on t o N or i l s k. G enex’ s bank ac cept ed the paymentor derand s entpaymentorde r s t o an i nt erm edi ary bank, w hi ch f r oze the f

unds purs uantt o f

eder al l aw a u th o riz in g th e fre e z in g o f fu n d s tra n sfe rs r e late d to Y u g o sla v ia. W h e n h o stilit ies w ith Y ugos l avi a ende d t en yea r s l at er , the Fi r s tD epartm entr eas oned that“f eder al l aw unbl ocked the fu n d s[, a n d ] th e U C C then req u ir ed that the fu n d s b e tran sferred to the ri g h tf u l ow n er, N or i l s k. ” 14 A . D . 3d at147, 789 N . Y . S. 2d at100- 01; s ee a l s o i d. at145-46, 789 N . Y . S. 2d at99 ( ci t i ng N . Y . U . C . C . §§ 4- A - 502( 4) a nd 4- A - 503 i n hol di ng thatt i t l e t o f unds had pas s ed fr om or i gi nat or ) . L i kew i s e, i n Eur opean A m er i can B ank, the Fi r s tD epartm enta f f i rm ed a deci s i on r el eas i ng i l l egal l y att ache d f unds atan i nt erm edi ary bank and or der ed thatthe cont empl at ed tr ans f

erf r om the i nt erm edi ary bank t o the bene f i ci ary’ s bank be c om pl et ed. S ee 1 2 A . D . 3 d at 19 0 , 7 8 4 N . Y . S . 2 d at 10 1 (cit ing N . Y . U . C . C . § 4 -A -50 2 ). F en b y p o ints ou t th at, i n th ese case s, th e o ri g inato rs ap p are n tl y d id n o t dispu te w h ere the money shoul d go w hen the f r eez e of as s et s w as l i f

t ed. N on et heles s , thes e ca s es l end s upportt o B aj a’ s ar gum entt hatN ew Y ork l aw does notre qui r e thatfunds be re turned t o the o rig in a to r fo llo w in g a fre e z e o f a ss e ts, ev e n fo r an ex ten d e d p e rio d o f tim e , an d th a t, i n fa c t, th e fro z e n fu n d s m a y rig h tfu lly g o to th e b e n e fic iar y . G iv e n tha t N e w Y o rk law a p p a re n tly d o es n o t r eq u ir e the return o f fun d s to th e o ri g inato r, an d th at th e eq u it ies i n this case – w h ere the f unds w oul d have be en tr ans f err ed t o B aj a l ong ago w er e i tnotf orourerr oneous deci s i on i n W i nt erSt orm , w her e B aj a has nototherw i s e bee n pai d, and w her e the r ecor d cont ai ns noW hi l e Fenby argues that w e m ay n ot accoun tforequ i t able consi derat i on s i n d eci di ng 1 thi s cas e, the ca s e l aw i tr el i es on t o s upporti t s a r gum ents t ands onl y f orthe pr opos i t i on that w e m ay n o t l o o k to eq u ity to re a c h a n o u tcom e tha t w o u ld b e inc o n sist en t w ith N ew Y o rk law o r ou r ho lding s i n S h ipp ing C o rp. of I n d ia an d H aw k n et. C f. , e. g . , R eg atos v . N . F o rk B an k , 3 9 6 F . 3 d 4 9 3 , 4 9 5 (2 d C ir . 2 0 0 5 ) (“S ec ti o n 4 -A -10 2 sp ec if icall y p rov ides that ‘reso rt t o pr i nci pl es of

l aw or equi ty out s i de of A rt i cl e 4- A i s notappr opr i at e t o cr eat e r i ght s , dut i es an d l iabili ti es inc o n sist en t w ith th o se stated i n th is A rt icl e.’”). A s ex p lai n ed ab o v e, ho w ev er, o u rd e c i s i o n t o d a y i s n o ti n c o n s i s t e n twi th e i th e rNe w Yo rk o rf e d e r a l l a w. 7 evi dence of

a l egi t i m at e com pet i ng cl ai m fort he f unds fr om anotherpar ty – f avorr el eas i ng the f unds t o the bene f

i ci ary, w e conc l ude thatthe f unds s houl d be r el eas ed t o B aj a. 1 W e h av e c o n side red F en b y ’s oth er a rgu m en ts on ap p ea l and co n clud e that they are w i thoutm er i t . A ccor di ngl y, w e V A C A T E the di s tr i ctc ourt ’ s D ece m ber7, 2009 or derand R E M A N D w i th i ns truct i ons thati tent eran or derdi r ect i ng the B ank of N ew Y ork t o pr ocee d w i th the f

unds tr ans f

eras or i gi nal l y i nt ended. FOR TH E CO UR T: C A T H E R IN E O ’H A G A N W O L F E , C lerk o f C o u rt