Eleventh Circuit Clarifies the Permissible Reach of Rule B
In SCL BASILISK AG v. Agribusiness United Savannah Logistics LLC, Docket no. 16-15535 (Nov. 14, 2017), the Eleventh Circuit Court of Appeals clarified the permissible reach of Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions (“Supplemental Claims”) and explained the limits of state court remedies that intersect with Rule B’s application. In doing so, the Court upheld the limits of Rule B and reinforced maritime law’s supremacy over conflicting state remedies.
This commercial dispute arose out of a voyage charter party. Defendants had issued a letter of indemnity as part of the transaction, which required it to post security if the vessel were arrested or detained. A third party subsequently detained the vessel on an unrelated claim, and the vessel thus incurred damages. Plaintiffs initiated arbitration in London to recover these amounts from defendants. Plaintiffs also filed a Petition in the district court in Georgia to obtain security from defendants under Georgia state law, in aid of the London arbitration. The district court denied relief, and the Eleventh Circuit upheld that decision as discussed below.
First, it was held that the plaintiffs were not entitled to the requested relief under maritime law. Rule B of the Supplemental Rules, while providing a remedy for attachment as security for a claim, requires that the plaintiff file an affidavit that the defendant(s) “cannot be found” within the district. Here, the plaintiff’s Petition alleged the contrary – that the defendants could be found within the district at least to the extent that they were registered to do business there (which the Court of Appeals treated as sufficient). The Eleventh Circuit explained that Rule B’s purpose is twofold: ensure the defendant’s appearance and assure satisfaction of a potential judgment. Moreover, it held that those two purposes “may not be separated” and thus security may only be obtained as “an adjunct to obtaining jurisdiction.” Therefore, where the defendants are found within the district, Rule B may not be employed to obtain security.
The Eleventh Circuit also upheld the district court’s denial of relief under Georgia law. The Court of Appeals noted that Rule B allows for state remedies so far as they do not frustrate the interest of having uniformity in maritime law. That can be found when the Congress has already addressed the issue; if the state law contravenes a characteristic feature of general maritime law, or if the state remedy interferes with the “proper harmony” of maritime law remedies. The district court held that the Georgia law invoked by plaintiffs ran afoul of all three elements. The Court of Appeals explained in its affirmance that the Georgia law’s broad scope as urged by plaintiffs would undermine the more limited and permissible relief afforded by Rule B as enacted by Congress. Finally, in addressing a further argument by plaintiffs, the Court of Appeals noted that the district courts’ inherent admiralty powers must nevertheless not contravene Rule B’s limitations.
This decision clearly reaffirms the supremacy of maritime law over state law where the latter may frustrate uniformity in the application of remedies to maritime cases. It also upholds the proper application of Rule B as envisioned by Congress to be a limited remedy, despite the continued growth in the international resolution of maritime disputes.