Recent 5th Circuit Ruling on Rule B Attachment
24 October 2024 -
On October 18, 2024, the Fifth Circuit resolved an interesting case involving maritime attachment and garnishment of a nonresident defendant’s property that required the court to decide where a bank account with a global bank is located. Ultra Deep Picasso Pte. Limited v. Dynamic Industries Saudi Arabia Limited, — F.4th —, 2024 WL 4523809.
Dynamic Industries Saudi Arabia Limited (“Dynamic”) had a contract with Saudi Aramco for an overseas project and subcontracted with Ultra Deep Picasso Pte. Limited (“Ultra”), a contractor that operates undersea vessels for marine construction projects, to provide certain services related to the Dynamic/Saudi Aramco project. The Ultra/Dynamic subcontract contained an arbitration provision covering “dispute[s] arising out of or relating to” the subcontract. The subcontract included specific payment terms, which were to be secured through a bank guarantee provided by Riyad Bank (“Riyad”). Disputes arose when Ultra alleged that after completing services related to the subcontract, Dynamic failed to pay, leading Ultra to seek enforcement of the payment guarantees against both Dynamic and Riyad.
Ultra sued Dynamic in the Southern District of Texas, asserting claims for breach of contract and, to secure its claims in arbitration, for maritime attachment and garnishment of Dynamic’s funds allegedly held by Riyad at its agency office in Houston. To effectuate its attachment claim, Ultra sought and was granted an ex parte order for Supplemental Rule B attachment of Dynamic’s assets “held by or at” Riyad.
Supplemental Rule B(1)(a) of the Federal Rules of Civil Procedure states that:
If a defendant is not found within the district when a verified complaint praying for attachment and the affidavit required by Rule B(1)(b) are filed, a verified complaint may contain a prayer for process to attach the defendant’s tangible or intangible personal property—up to the amount sued for—in the hands of the garnishees named in the process.
Dynamic and Riyad argued that Ultra “did not show that [Dynamic] had any property in [the Southern District of Texas], including any property deposited with [Riyad].” Ultra countered that “[Dynamic]’s property at Riyad is within [the Southern District of Texas] because Riyad, and any account it maintains worldwide, [are] located in the District for the purpose of Supplemental Rule B.” The District Court found that Riyad’s Houston agency office did not accept deposits or allow withdrawals and, as a result, no property of Dynamic’s was actually located in the Southern District of Texas. As a result, there was no property within the jurisdiction to attach, and the Court vacated Ultra’s Rule B attachment. Ultra appealed.
The issue for the Fifth Circuit was whether the mere fact that a foreign garnishee bank has a branch office in a U.S. jurisdiction means the bank’s customer’s accounts can be “found” within that U.S. jurisdiction for purposes of Supplemental Rule B attachment. To answer that question, the Court had to decide where a bank account is located.
Ruling in favor of Dynamic and Riyad, the Fifth Circuit affirmed the lower court’s order vacating the attachment. Holding that for the purposes of Rule B maritime attachment, the attached property must be physically within the district, the Fifth Circuit concluded that a bank account is found within the district “where its funds can be withdrawn.”
Maritime suitors often rely on attachment and garnishment of property, including funds and accounts, to secure their claims against foreign parties whose presence in the U.S. is often transitory. The Fifth Circuit’s decision in UltraDeep narrows those important remedies.
A copy of the decision can be viewed here, and thanks to Brittney I. Esie for her summary of the decision.