Court Addresses Unresolved Issue in Ninth Circuit: What standard applies to determine whether to continue pre-judgment maritime attachments under Rule B of the Supplemental Admiralty Rules?

SIKOUSIS LEGACY, INC. v. B-GAS LIMITED, 2024 U.S. App. LEXIS 6975 *, 2024 WL 1245338 (9th Cir. March 25, 2024).

            M/T Berica, owned by Bergshav Aframax, Ltd. (“Aframax”), was attached in a quasi-in rem proceeding Rule B of the Federal Rules of Civil Procedure Supplemental Rules for Admiralty or Maritime Claims by Sikousis Legacy, Inc. and Plaintiffs-in-Intervention Bahla Beauty, Inc. and K Investments, Inc. (collectively, “Plaintiffs”) to fulfill arbitral awards owed to Plaintiffs by a different corporate entity, B-Gas Ltd. (later named “Bepalo”). Plaintiffs attempted to pierce the corporate veil to hold Aframax liable for the arbitral award against Bepalo. The trial court vacated the pre-judgment attachment. Plaintiffs appealed.[1]

            The appellate panel first addressed an unresolved issue in the Ninth Circuit: What standard applies to determine whether to continue pre-judgment maritime attachments? The panel affirmed the standard applied by the district court judge: “probable cause to believe the plaintiff will prevail on the merits of its admiralty claim.”[2] Other district courts in the circuit have adopted this standard in pre-judgment attachment cases.[3]

            Other federal circuit courts which have confronted the issue also have adopted this standard, namely the U.S. Courts of Appeals for the Third and Fourth Circuits.[4] It is also consistent with other Ninth Circuit precedent citing Equatorial Marine Fuel Mgmt. Servs. PTE v. MISC Berhad.[5] Judge Bea writing for the panel continued: “A plaintiff meets his burden by establishing a reasonable probability of success as to each element of his claim. A reasonable probability requires less than a preponderance but requires more than a mere possibility of success.”[6] The court noted that the determination whether the plaintiff attaching the vessel has met its burden of proof is left to the discretion of the district judge and reviewed for abuse of discretion.[7]

            After reviewing the facts (and noting that the restructuring scheme of the defendants “may not have been ‘above board,’”[8] there was sufficient evidence that Bepalo was an independent entity not controlled by the Bergshav Group.[9] The trial court did not abuse its discretion. The vacatur of the attachment was affirmed.

[1] 2024 WL 1245338 at *1.

[2] Id. at *5.

[3] See OS Shipping Co. v. Glob. Mar. Tr. Priv. Ltd., 2011 WL 1750449, at *5 (D. Or. May 6, 2011); Benicia Harbor Corp. v. M/V IDA LOUISE, 2023 WL 7092230, at *2 (E.D. Cal. Oct. 26, 2023); Kanaway Seafoods, Inc. v. Pac. Predator, 2022 WL 19569230, at *2 (D. Alaska July 29, 2022); Sea Prestigio, LLC v. M/Y Triton, 2010 WL 5376255, at *1 (S.D. Cal. Dec. 22, 2010); Del Mar Seafoods Inc. v. Cohen, 2007 WL 2385114 at *3 (N.D. Cal. Aug. 17, 2007).

[4] Salazar v. Atl. Sun, 881 F.2d 73, 79 (3d Cir. 1989), Amstar Corp. v. S/S ALEXANDROS T., 664 F.2d 904, 912 (4th Cir. 1981); Addax Energy SA v. M/V Yasa H. Mulla, 987 F.3d 80, 88 (4th Cir. 2021).

[5] 591 F.3d 1208 (9th Cir. 2010). In Equitorial Marine, the claimant attaching the vessel asserted an unjust enrichment and breach of contract claim for failure to pay for bunker fuel furnished to the vessel through a trader which went bankrupt. The distinction is that the case at bar is pre-judgment attachment for an arbitral award.  

[6] 2024 WL 1245338 at *6.

[7] Id. at n.8.

[8] Id. at *8

[9] Id.