In a recent case involving multiple courts and actions, Jewel Owner Ltd and International Shipping Partners secured a victory before the US Court of Appeals for the Eleventh Circuit.
In late 2011 Jewel entered into a settlement agreement with Quail Cruises (which had defaulted on its charter hire contract), providing that any monies recovered by Quail Cruises in its case against CVC would be paid to Jewel, up to the sum of approximately $3.4 million. In late 2012 it transpired that Quail Cruises and CVC had entered into a secret settlement agreement, under which CVC was to pay $5 million to Quail Cruises' parent corporation Quail Travel, which at that time was in bankruptcy in Spain. Once the money arrived in Spain, it would likely be split among the parent company's creditors. Since the deal would circumvent the settlement agreement previously reached between Jewel and Quail Cruises, Jewel filed a motion to intervene, asserting its right to the funds under theories of constructive trust and equitable lien. Jewel also filed a petition for injunction in the state court against Quail Cruises and CVC, in order to block any transfer of the money, which the judge issued on the same day.
Shortly after the injunction was issued, Quail Travel filed a Chapter 15 bankruptcy action in the Southern District of Florida. Quail Travel sought to obtain an order finding that the $5 million was their property. However, other parties also claimed the funds. In November 2013 the bankruptcy judge ruled that Quail Cruises held a 50% interest in the money, leaving $2.5 million to be divided between Jewel and another creditor. The parties to the respective cases agreed to a settlement.
The settlement agreement provided that CVC would transfer the $2.5 million belonging to Quail Cruises to the trust account of Quail's attorneys in two equal instalments. Those funds would in turn be disbursed to Jewel and the other creditor in agreed percentages. The first instalment was paid without incident. However, the day before the second instalment was to be paid, World Wide Supply (WWS) – a litigant against Quail Cruises and Jewel in yet another case – attached the funds, pursuant to an emergency motion under Rule B, while they were in the attorney's trust account. WWS's attorneys were the same as those representing CVC – the party providing the funds. Jewel filed immediate motions to vacate the attachment, asserting that they were under constructive trust pursuant to a court order and not subject to attachment. It also disputed the 'emergency' nature of the motion on the grounds that the attorneys were aware of the payment schedule and had had nearly two months to file a non-emergency motion – facts that they failed to disclose to the district judge.
After a briefing and two long hearings, the magistrate judge agreed with Jewel's position and recommended that the attachment be vacated. The district judge agreed and vacated the attachment. She also awarded Jewel attorney's fees for having the Rule B writ vacated.
As regards WWS's liability, the court granted Jewel's summary judgment motion on the merits. WWS appealed the Rule B dissolution (but not the summary judgment on liability) to the US Court of Appeals for the Eleventh Circuit. Jewel argued that the trial court had been correct in vacating the attachment, as the funds belonged to it (and not Quail Cruises). On September 30 2015 the court, agreeing with Jewel without the need for oral argument, published its opinion affirming the district court's decision and upholding the dissolution of the attachment writ.
Thus, not only did Jewel win the liability case, it also protected its settlement funds in another matter regarding a Rule B attachment and was awarded attorney's fees for doing so.
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