In shipping business, one issue challenging maritime parties is to identify shipowner. Owner of a ship may be hard to identify or hidden behind a complex corporate structures or agreements. Ships trade around the oceans, maritime claimants might have often had difficulty tracking down maritime defendants and getting shipowners into maritime court. Maritime transactions involve parties from different countries and getting the defendant into a maritime court accessible to the plaintiff can be difficult. In order to tackle this problem, maritime law has developed the process of maritime attachment.
When a maritime defendant (usually shipowner) cannot be found or served with enforceable legal process to bring the defendant to maritime court, maritime court will permit the plaintiff (usually claimant) to obtain a warrant of attachment against any of the defendant’s property (usually ship) that may be found within the geographical jurisdiction of the court. Maritime Attachment has two (2) important functions:
- Maritime Attachment provides a way for the maritime plaintiff (usually claimant) to get jurisdiction over the maritime defendant (usually shipowner)
- Maritime Attachment also secures a fund from which any judgment against the maritime defendant can be paid
Practically, maritime attachment looks very much like of maritime arrest. But, in many ways maritime attachment is a more powerful and more useful maritime remedy. Actually, Maritime Attachment and Maritime Arrest serve for the same function. Maritime Attachment and Maritime Arrest create a way for persons (claimants) to enforce claims against defendants who may be hard to find. Maritime Attachment and Maritime Arrest rest upon different concepts. Maritime Arrest is predicated upon the enforcement of a maritime lien, similar to an ownership interest in the ship. Maritime Attachment is based upon the idea that when a defendant (usually shipowner) cannot be found, but the defendant’s property (usually ship) can be found, plaintiff can exercise its rights against the property. Maritime Attachment is a powerful procedure intended to enhance the ability of a plaintiff to bring a defendant to court for the resolution of a maritime claim and to obtain security for the maritime claim. Maritime Attachment enables the plaintiff to obtain quasi in rem personal jurisdiction over a defendant (usually shipowner) based upon the presence of the defendant’s property (usually ship) in the judicial district and to hold that property (usually ship) as security to satisfy the claim.
In United States, when property (usually ship) is attached, that property is put under the control of the United States district court that issued the warrant of attachment. Property (usually ship) cannot be taken outside of the district, sold, moved, operated or used without a court order. Maritime Attachment is governed by the Federal Rules. Maritime Attachment is a traditional maritime right, based on the recognition that shipowners and other maritime defendants could otherwise be difficult to bring into court. Maritime defendants (usually shipowners) are notoriously hard to locate and difficult to subject to personal jurisdiction in court. In shipping business, if there had not had process of maritime attachment to enforce claims, there would be less advance credit and maritime commerce could be seriously restricted.
Right of maritime attachment is not limited to actions against a ship. Maritime Attachment can be exercised against any property tangible or intangible.
- Bills of Lading (B/L)
- Bank Account
- Debt in possession of debtor
- Electronic Fund Transfers (EFT)
- Fishing permits
- Charter Hire
Maritime Garnishment Vs Maritime Attachment
Maritime Garnishment refers to the exercise of control over property of the defendant (usually shipowner) in the hands of a third party, such as intangible property like a bank account. On the other hand, Maritime Attachment refers to the exercise of control over property in the hands of the defendant (usually shipowner), like a ship.
Effect of Maritime Attachment
Maritime Attachment establishes quasi in rem (case against ship) jurisdiction in what is otherwise an in personam case (case against a person or company, but not a ship). In Maritime Attachment, by attaching the property (ship) of the defendant, maritime plaintiff subjects the maritime defendant to the jurisdiction of the court for the in personam maritime claim, but only to the extent of the value of the property (ship) attached.
Purpose of Maritime Attachment:
Maritime Attachment has two (2) main purposes:
- Maritime Attachment establishes jurisdiction over the defendant or his property so that a dispute can be tried
- Maritime Attachment provides security for the claim of the plaintiff
Practically, Maritime Attachments are often sought not for any actual need to bring the defendant into court or to obtain security. Maritime Attachments are used as a tactical maneuver to get the defendant’s attention and force an early resolution of the claim.
Even though, purposes of Maritime Attachments are well-established, a maritime plaintiff does not need to support a request for maritime attachment by reference to those purposes or even to any actual need for the maritime attachment. Maritime Attachment might be obtained even when the parties have agreed to arbitration of their dispute or even when parties are already engaged in arbitration. In same manner, Maritime Attachment may be obtained even when the defendant is clearly solvent and little doubt exists that any judgment can and will be paid. As a result, any defense against a Maritime Attachment that focuses on arguments that the attachment is not necessary will miss the mark.
In United States, when property (usually ship) may be subject to Maritime Attachment is set out in Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims to the Federal Rules of Civil Procedure. Maritime Attachment is available when:
- Claim is a maritime claim, within the maritime jurisdiction
- Property (ship) of the defendant is found within the federal judicial district
- Defendant is not found within the judicial district
- For purposes of service of process
- For jurisdictional purposes
In Maritime Attachment, property (usually ship) to be attached might not be related to the claim. Purpose of Maritime Attachment is to ensure jurisdiction and security for a maritime claim, whether the property (ship) to be attached is actually related to the specific claim doesn’t matter.
Writ of Maritime Attachment is very similar to the process for obtaining a Warrant for Maritime Arrest. Firstly, claimant with a maritime claim against a defendant first needs to determine that the defendant has or will have property in a certain court district. Secondly, claimant with a maritime claim must be sure that the defendant is not present in the district for purposes of service of process or personal jurisdiction. Then, plaintiff can apply to the admiralty court in that district by filing a Verified Complaint against the defendant with a request for Maritime Attachment. Complaint must be verified as true by the plaintiff (not just by the lawyer), so that complaint can serve as a sort of affidavit supporting the issuance of the Writ of Attachment. Complaint must set out enough facts so that the court can determine that the claim is a well-founded claim within the court’s maritime jurisdiction and that the property is within the jurisdiction of the court. In addition to the Verified Complaint, the plaintiff’s attorney must submit an affidavit setting forth the attorney’s efforts to locate the defendant in the district. Plaintiff may have the summons and various orders signed by the clerk of the court upon a showing of exigent (urgent) circumstances.
Attorney’s Affidavit (written, sworn statement) must be under oath and state what the attorney has actually done to verify that the defendant is not present in the judicial district. Usually, Attorney’s Affidavit’s include:
- I have personally inquired or have directed inquiries into the presence of the Defendant in this District.
- I have personally searched through the Department of Assessments and Taxation website and have determined that, as of (date), the Defendant is not incorporated pursuant to the laws of (State), is not qualified to conduct business in (State), and has not nominated agents for service of process in (State), because the Department has no records for Defendant.
- I have inquired of the Telephone Company whether the Defendant can be located within this District. The Telephone Company has advised me that the Defendant does not have any telephone number listing within this District.
- I have further consulted several other telephone directories on the Internet and I have found no separate telephone or address listing for Defendant in this District.
- I have further made several searches of the Internet and can find no indication that Defendant can be found within this District.
- I have been able to determine that the Defendant has an office in (location) and is incorporated in (State of incorporation) and have found no indication that Defendant can be found within this district or has sufficient contacts with this District to defeat maritime attachment under Rule B of the Supplemental Rules for Admiralty and Maritime Claims, is a resident in (State), or has an agent in the (State) sufficient to defeat civil attachment pursuant to (State Statute). It is my belief, based upon my own investigation, that Defendant cannot be found within this District for purposes of Rule B of the Supplemental Rules for Admiralty and Maritime Claims and is neither a resident of the state nor has an agent in the state for purposes of civil attachment pursuant to (State Statutes).
Verified Complaint must be accompanied by the Attorney’s Affidavit, and should also be accompanied by a number of additional materials for consideration by the judge
MARITIME ATTACHMENT CHECKLIST
- Cover letter to Clerk of Court
- Civil cover sheet
- Filing Fee
- Verified Complaint (signed by the claimant)
- Documents supporting the claim set out in the Verified Complaint
- Affidavit of Counsel (defendant is not found in the judicial district, but the property is)
- Attorney Certification of Exigent Circumstances
- Request for Order of Issuance of Process of Maritime Attachment
- Draft Order of Issuance of Process of Maritime Attachment
- Process of Maritime Attachment (or Garnishment)
- Interrogatories to the Garnishee
- Request for Appointment of Special Process Server
- Draft Order Appointing Special Process Server, a Civil Cover Sheet and a Process Receipt and Return
- Process Fee
- Receipt of Service of Process
- Letter of Instruction to the Garnishee
- Motion to Appoint Substitute Custodian
- Draft Order Appointing Substitute Custodian
- Letter of Instruction to Substitute Custodian
- Six (6) copies of all documents
Generally, most requests for Maritime Attachment or Maritime Garnishment present exigent (urgent) circumstances. Defendant (usually shipowner) who gets wind of an impending attachment could take steps to remove the threatened property (usually ship) from the district to avoid the Maritime Attachment. In most maritime cases, the presence of the property in the district is transitory, for example:
- Ship that is calling at the port
- Presence of funds in an account
- Passage through the district of a debtor
If maritime court takes too long to review and execute necessary documents for Maritime Attachment, the chance to catch the property (usually ship) in the district could be lost. Concise statement explaining the circumstances is usually all that is required to establish that exigent (urgent) circumstances exist and to empower the clerk of the court to issue the Writ of Attachment.
Service of Maritime Garnishment order is only effective against property then in the hands of the garnishee (person whose money is garnished). If the plaintiff obtains an order garnishing the funds of the defendant in a bank account, the order only reaches the funds that are in the account at the time the order is served on the bank. If more funds are deposited into the account the following day or even an hour, those after-acquired funds are not reached by the order of garnishment.
Typically, banks need some time to process a garnishment order, bank might be in a difficult position if funds are deposited shortly after service of the garnishment order.
- If bank fails to turn over or hold funds in the account at the time the garnishment order was served, bank could be exposed to a claim from plaintiff or a violation of the court order.
- If bank wrongfully turns over or holds after-acquired funds, bank could be exposed to a complaint from the account-holder.
In order to protect against such risks, some banks include a clause in their deposit agreements that provides the account-holder’s consent to the turn-over or holding of funds deposited within a certain period of time from the service of garnishment order. In order to catch bank deposits by maritime garnishment, many banks entered into agreements with plaintiffs to accept a single order delivered at the start of business to apply to all funds deposited throughout the day and established their right to do so in the depository agreement.
Defendant have no right to argue against the signing of the Order for Issuance of Process of Attachment or Maritime Garnishment. Usually, defendant doesn’t even know that the order has been requested or signed until the process has been served. If defendant is pre-warned, the defendant may remove property from the district, so applications for maritime attachment or maritime garnishment are usually handled quickly and secretly. Process for submitting the Verified Complaint, Request for Order of Issuance of Process of Attachment and other papers is ex parte (defendant is even aware of the submission).
After the judge signs the Process for Attachment and related documents, plaintiff provides the package to the Process Server to serve it on the person holding the property to be attached or garnished. In the case of ships and other tangible property on board ships, service must be made, depending on the maritime nation, by Sheriff, Marshals, Port Police etc. For intangible property, process may also be given to a Special Process Server; for example, when the garnishment order is to be served on a bank or a debtor.
Generally, any person who is at least eighteen (18) years of age and not a party can be appointed as a Special Process Server to serve the Order of Garnishment. Practically, Special Process Servers are often plaintiff’s attorneys or employees of the law firm who have been trained on how best to make service of the documents.
Maritime Attachment of a ship looks very much like the Maritime Arrest of a ship. Service of the Process of Attachment or Garnishment must be served by Sheriff, Marshals, Port Police. Typically, when the ship arrives at the dock or in the port, Sheriff, Marshals, Port Police go on board with the Customs and Immigration officials who will meet the ship. Sheriff, Marshals, Port Police will give a copy of the documents to the ship’s master and will post a copy of the Process of Attachment in the pilothouse of the ship and also on the gangway. After posting, the ship is attached and under the legal control of the court. Ship cannot move, discharge cargo or take any other action without the permission of the court. Ship under attachment is controlled by the court and a court order is required for any movement of the ship. In order to monitor and watch over the ship, court appoints a custodian. Process resembles just as with a ship under arrest. Depending on the maritime nation court appoint Sheriff, Marshals, Port Police hire custodian (watchmen), unless plaintiff requests the appointment of a substitute custodian. Like the process of Maritime Arrest, during Maritime Attachment, the use of a substitute custodian might reduce the costs of the attachment which will mean that the attachment will yield greater value. In same manner, claimant may ask that the ship’s master be appointed as substitute custodian. Ship’s master will likely be employed by defendant in the lawsuit, but appointing the master usually benefits both parties (plaintiff and defendant). Appointing ship’s master as custodian reduce the custody costs down and ship’s master is usually the best person for the job.
Maritime Garnishment of Intangible Property
Intangible Property garnishment is accomplished by the service of the Order of Garnishment. Person holding the property is responsible to keep the property at the direction of the court. If person holding the property fails to do so, person will be liable to the plaintiff and in breach of the court order of garnishment. Generally, banks have established procedures for handling blocked accounts which involve providing notice to the account-holder.
Lawsuit Post Maritime Attachment
When defendant’s property is attached, property is subjected to the court’s jurisdiction and has been served with a federal, in personam complaint. Unless defendant wishes to challenge the attachment at a post-attachment hearing, defendant then prepares an answer and the matter proceeds like any other lawsuit, except that the defendant may make a limited appearance. Limited Appearance means, the defendant is deemed to have appear only for the purpose of defending the specific claim and not for any other purpose or any other case, unless they have been personally served with process in the other case. Property owner has a right to a prompt hearing to challenge the attachment. At court hearing, the plaintiff has the burden to show why the attachment should not be vacated, but the burden is not particularly heavy. Plaintiff does not need to prove the case, only show that the criteria for the maritime attachment or garnishment has been satisfied that:
- complaint sets out a facially valid maritime claim,
- property was found in the judicial district at the time the process was served
- defendant was not found in the judicial district for purposes of personal jurisdiction or service of process.
Vacating Maritime Attachment
Maritime Attachment cannot be defeated maritime by showing that it is not necessary or equitable. Maritime courts apply Rule B strictly, in other words, if the test for maritime attachment is satisfied, then the maritime attachment will be granted, except for a few limited circumstances. Courts have identified only a few limited circumstances where a maritime attachment that is otherwise in accordance with the rules may be vacated. Limited Circumstances:
- Plaintiff has already obtained sufficient security for the pending claim. The courts will not allow a plaintiff to attach more property than is needed to satisfy the pending claim.
- Court will also vacate a maritime attachment if the defendant shows that it is subject to personal jurisdiction and service of process in a convenient adjacent jurisdiction. For example, a court will not allow a plaintiff to attach property in Manhattan, if the defendant is present in Long Island. In other words, a court will not permit a plaintiff to go out of town to obtain a maritime attachment against a defendant who is resident in the same place as the plaintiff.
Existence of a maritime claim is essential to obtaining an order of maritime attachment or maritime garnishment. Defendant may try to vacate maritime attachment by showing that the matter does not actually fall within federal maritime jurisdiction. Ship sale and purchase contract dispute or ship construction contract dispute may seem like a maritime case, but because of the rules that have developed concerning the scope of maritime contract jurisdiction, such claims do not actually come within the maritime jurisdiction, so any attachment based on such a claim, if granted initially, should be vacated by the court. In same manner, plaintiff asserting an attachment based upon a maritime tort must be prepared to show that the tort falls within maritime tort jurisdiction. In order to be a maritime claim, the cause of action must have arisen on navigable waters or at least have been caused by a ship on navigable water and nature of the incident must bear a relationship to traditional maritime activity and have a potential impact on maritime commerce.
Underlying case might have no connection to the district where Process of Maritime Attachment is sought. Maritime Attachment gives the maritime plaintiff a tool to locate and attach property of the defendant to secure the maritime claim and obtain jurisdiction over the defendant.
Maritime Attachment cannot be vacated by showing a contractual choice of forum agreement. Usually, choice of forum clause in a contract, like voyage charter-parties, is an enforceable agreement that the parties will take their dispute to a specific court or to arbitration. On the other hand, maritime attachment ensures court jurisdiction over the defendant through attachment of the defendant’s property and also procures security for the plaintiff’s claim. As long as the maritime attachment meets the requirements under the rules, court should uphold the maritime attachment. If court finds that the parties (plaintiff and defendant) have a valid choice of forum agreement, court may stay the attachment case to allow the parties to litigate the matter in their chosen forum. At the conclusion of the litigation in the chosen forum, attached property may be liquidated, redeemed or returned as appropriate.
Maritime Attachment cannot be vacated if parties (plaintiff and defendant) are already in litigation or arbitration in some other jurisdiction or forum. As long as the requirements for a maritime attachment are satisfied, court should uphold the maritime attachment, even if the parties are already engaged in litigation or arbitration. Because one of the clear purposes of maritime attachment is to obtain security for the plaintiff’s claim. In some cases, plaintiffs bring an attachment case where the defendant’s property can be found solely to obtain such security for the claim. In those cases, attaching court typically upholds the attachment, but stays further proceedings, pending the outcome of the original litigation or arbitration. In other cases, a defendant in ongoing litigation or arbitration might seek maritime attachment in connection with a counterclaim against the original plaintiff, in an effort to either bring retaliatory pressure against the original plaintiff or to seek a different forum. While a court will uphold a well-supported maritime attachment, regardless of the attaching party’s motive, it would be unlikely to permit parties to use maritime attachment as a means to transfer forums. Instead, the court may uphold the attachment, but stay further proceedings.
A garnishee is the person holding the property of the defendant who is served with the order of garnishment. A garnishee may appear at a prompt post-attachment hearing to challenge the order of garnishment. A garnishee may argue that the property is not that of the defendant or is otherwise not subject to attachment. A garnishee is required to answer the Verified Complaint. A garnishee is required to answer any interrogatories that may have been served along with the order of garnishment. Answers must be given within twenty-one (21) days, unless the time period is further extended by the court. A garnishee could admit the possession of the property and pay it into the court. Interrogatories served on a garnishee are subject to the same rules as discovery in any other case. A garnishee must generally disclose any non-privileged information that is relevant to the matters set out in the Verified Complaint. Relevant information is any information reasonably calculated to lead to the discovery of admissible evidence. Interrogatories on a garnishee typically focus on the extent of the intangible property and the garnishee’s knowledge of other assets of the defendant. Unless the garnishee has made other arrangements with the defendant for the allocation of costs, the garnishee will bear its own costs in responding to an order of garnishment. Some depository agreements may require an account-holder to indemnify the bank against any legal costs associated with responding to orders of garnishment.
Laws and rules for Maritime Attachment or Maritime Garnishment proceeding are set out in:
- Federal Rules of Civil Procedure
- Supplemental Rules for Certain Admiralty and Maritime Claims and Asset Forfeiture Actions (Rules B and E)
- Admiralty Rules that govern the maritime attachment and garnishment procedures
Liability for Improper Maritime Attachment
If Maritime Attachment of property is vacated by court, defendant may seek damages for wrongful attachment. Damages for improperly attaching property are only granted if the court finds that the plaintiff or plaintiff’s counsel acted with:
- Bad faith
- Gross Negligence
- Attorney Misrepresents Facts
Agreement to Release Maritime Attached Property
Shipowner can have ship or other tangible property be released upon signing LOU (Letter of Undertaking) and posting of a sufficient bond. In other words, shipowner enters into an agreement with plaintiff by providing some security. In Maritime Attachment, as with Maritime Arrest, if parties (defendant and plaintiff) cannot agree on security and/or custodial costs will exceed value of the property (usually ship), court may order the property (ship) to be sold. For intangible property, like bank accounts and debts, garnishee may either continue to hold the property until being ordered otherwise by the court or may convey the property to the court.
In Maritime Attachment, as with Maritime Arrest, Letter of Undertaking (LOU) is an agreement between the defendant and defendant’s insurer on the one side and plaintiff on the other side. In Letter of Undertaking (LOU), plaintiff agrees to the release of the property from attachment, in consideration of the defendant’s agreement (LOU) to submit to the court that issued the Process of Attachment and to pay any judgment ordered by the court up to the value of the property and the insurer agrees (usually P&I Club) that it will ensure that the judgment is paid. Once Letter of Undertaking (LOU) is agreed and signed by the parties (defendant and plaintiff), Letter of Undertaking (LOU) becomes a substitute for the property and the property is released. Letter of Undertaking (LOU) usually benefit defendant and plaintiff, because Letter of Undertaking (LOU) avoids the costs that would otherwise be incurred by holding property (usually ship) in custody, such as port, bunker, custodian etc. Letter of Undertaking (LOU) permits property (usually ship) to continue to operate and earn revenues that could be used to pay the claim.
When Maritime Attachment is upheld, maritime attachment case is brought under district court’s maritime jurisdiction, with one notable exception. Defendant can bring counterclaims. Defendant can join other issues and parties to the dispute. On the other hand, defendant can make a limited appearance solely for the purpose of challenging the attachment. Furthermore, defendant can simply decline to litigate the case and accept a default judgment in the case. If defendant decide to defend against the substance of the case, then any decision reached will be binding in future litigation.
Maritime Attachment case can be joined with a Maritime Arrest case.
- Maritime Attachment case is in personam case against a defendant company or individual
- Maritime Arrest case is in rem case against a ship to enforce a maritime lien
Maritime Attachment must be brought under the court’s admiralty jurisdiction, plaintiff cannot demand a jury.