hk alert blue whale corp v grand china shipping

7/28/2019 HK Alert Blue Whale Corp v Grand China Shipping

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ALERT

New York Appeals Court Issues Important Rule B andMaritime Corporate Veil-Piercing Decision

Lenient U.S. Maritime Law Veil -Piercing Standard Should Continue to Apply in MostInstances

July 17, 2013

Michael J. "Mike" Frevola

Christopher R. Nolan Warren E. Gluck

For the past sixty years, and until January 11, 2013, U.S. federal courts routinely have applied thecomparatively expansive (and potentially creditor-friendly) "maritime law of veil piercing" whenexamining veil-piercing and/or alter ego claims in Rule B maritime attachment (i.e., security)proceedings and maritime judgment enforcement cases. Courts applied the U.S. maritime veil-piercing standard regardless of whether the claim or dispute arose from a charter party or otheragreement specifying a particular law would apply to disputes, such as, as often is the case, Englishlaw.

As a result of a significant ruling by the U.S. Court of Appeals for the Second Circuit yesterday, it islikely that U.S. maritime veil-piercing/alter ego law will continue to apply in most maritime veil-piercing/alter ego cases. The Second Circuit held that where a multinational shipping disputeimplicates several potential sources of law, none of which have a "particularly strong connection" to

the dispute, the United States has the strongest "'points of contact' with this claim by virtue of thelocation of [the defendant]'s property [in the United States]."

An Unprecedented Approach

In the matter of Blue Whale Corp. v. Grand China Shipping Development Co. et al., 1Doc. No. 13-0192-cv (2d Cir. July 16, 2013), the plaintiff brought a Rule B action in New York seeking to attachproperty of a Chinese entity located in New York on the theory that the entity was the "alter ego" ofanother Chinese entity, as well as to "pierce the corporate veil."

After its property had been attached by the plaintiff, the alleged alter ego moved to vacate theattachment. It argued that the English law of veil-piercing should apply because the dispute aroseout of a charter party that contained an arbitration clause that specified English law and that, under

the more stringent English veil-piercing law, the plaintiff's allegations were insufficient to state a claimunder English law. The district court accepted the alleged alter ego's argument in the absence ofauthority presented to the contrary and ruled that English law governing veil-piercing applied to theRule B dispute. The plaintiff appealed.

Appeal Confirms the Irrelevancy of Choice of Law Clauses in Veil-Piercing Analysis

The Second Circuit heard the appeal on an expedited basis. On July 16, 2013, after briefing andargument were completed, the appeals court issued a 28-page decision reversing the lower court's


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Notes

1 A copy of the decision can be found here.

2 Notably, while the issue was not directly before it in Blue Whale , the Second Circuit suggested infootnote 7 of its decision that in the judgment enforcement context (i.e., when a maritime claimantwaited until after it had obtained a foreign judgment or arbitration award to commence its propertyseizure efforts), no Lauritzen choice of law analysis would be required and U.S. maritime veil-piercing law would apply.

Authors

Michael J. Frevola is a litigator specializing in the areas of admiralty andcommercial litigation. He has tried cases, argued motions and briefed and arguedappeals before federal and state courts. He has represented clients in federalmediations and maritime and commercial arbitrations and has conducted shipboardand overseas investigations in support of maritime litigation and to perform owners'

due diligence.

In the admiralty and maritime field, Mr. Frevola focuses on Rule B maritime attachments and Rule Carrests, lien priority and maritime bankruptcy disputes, charter party disputes, seamen's wage andpenalty wage disputes and collision litigation. In the context of Rule B maritime attachments, Mr.Frevola has represented plaintiffs and defendants in numerous proceedings involving both theattachment of electronic funds transfers and other assets such as vessels, cargo, bunkers, bankaccounts and other property nationwide. He has been published and has spoken multiple timesinternationally regarding Rule B maritime attachments. In the lien priority/bankruptcy context, Mr.Frevola has represented lenders in several significant bankruptcies or workouts, including theMillenium Seacarriers bankruptcy adversary proceedings. In the charter party context, Mr. Frevolahas represented numerous tanker owners and bulker owners in disputes related to claims

concerning freight, deadfreight, demurrage, misdelivery, vessel underperformance, unseaworthinessand other breaches of charter parties. In the wage dispute context, Mr. Frevola has defendedshipowners in crew wage class actions.

In the commercial litigation and arbitration fields, Mr. Frevola concentrates on real propertyforeclosures, predatory lending claims, defense and judgment enforcement proceedings, commercialarbitrations concerning claimed breaches of various sales or franchising agreements and issuespertaining to First Amendment rights.212.513.3516 | [email protected]

Christopher R. Nolan is a partner in the Litigation Section of Holland & Knightconcentrating in the areas of international law with emphasis on admiralty and

commercial litigation. Mr. Nolan is also the immediate past chair of the American BarAssociation's TIPS Admiralty & Maritime Law Committee.212.513.3307 | [email protected]


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Warren E. Gluck is a litigation associate. His practice covers a broad array ofdomestic and international, litigation, admiralty, and insolvency issues and isexperienced in all aspects of the litigation process.212.513.3396 | [email protected]

The Lawyers resident in all offices, unless otherwise indicated in an individual attorney biography, are not certified by the Texas Board of LegalSpecialization. Attorney Advertising.Copyright 19962013 Holland & Knight LLP. All rights reserved.

hk alert blue whale corp v grand china shipping

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