Opinion
00 CV 279 (JG)
June 11, 2003
HAROLD KINGSLEY, Kingsley, Kingsley Calkins, Hicksville, N.Y. for Plaintiff
HENRY P. GONZALEZ, Rodriguez, O'Donnell, Fuerst, Gonzalez Williams, Washington, DC, for Defendant
MEMORANDUM AND ORDER
By order dated March 28, 2003, I adopted Judge Levy's Report and Recommendation ("Report") and granted plaintiff's motion to enforce liability against non-party XL Specialty Insurance Company ("XL"). On April 1, 2003, I received XL's objections to that Report. By order dated April 7, 2003, I informed the parties that I was inclined to consider those objections as a motion for reconsideration and directed plaintiff to respond to the objections no later than April 21, 2003. On April 10, 2003, XL filed a motion for reconsideration. I received plaintiffs response to XL's objections to the Report on April 22, 2003. For the reasons set forth below, I grant the motion for reconsideration, and I hereby deny plaintiff's motion to enforce liability against XL. Accordingly, my order dated March 28, 2003 adopting Judge Levy's Report is hereby vacated.
Plaintiff brought this maritime action in January 2000 against the vessel M/V Ming Propitious and Ling Bridge Transport Inc. ("Ling Bridge") to recover $31,201.18 for damage to a cargo of steel plate shipped from Kaohsiung, Taiwan to Los Angeles under a bill of lading dated January 3, 1999, issued by defendant Ling Bridge. As a result of Ling Bridge's failure to appear in this action, I issued a default judgment against it on July 24, 2000, in the amount of damages sought, plus pre-judgment interest in the amount of $4,095.15 and costs totaling $170.00. When Ling Bridge failed to satisfy the judgment, plaintiff brought this action against XL. XL is the successor in interest to the company that issued a surety bond which provides that the issuer will pay "any judgment for damages arising from [Ling Bridge's] transportation related activities. . . ." (Report at 2.) The bond had been posted by Ling Bridge in order to secure a license from the Federal Maritime Commission to do business in the United States.
The central issue in this case is whether plaintiff can use Rule 65.1 of the Federal Rules of Civil Procedure to enforce a default judgment against XL, a non-party surety. Rule 65.1 provides, in pertinent part:
Whenever these rules, including the Supplemental Rules for Certain Admiralty and Maritime Claims, [the "rules"] require or permit the giving of security by a party; and security is given in the form of a bond or stipulation or other undertaking with one or more sureties, each surety submits to the jurisdiction of the court and irrevocably appoints the clerk of the court as the surety's agent upon whom any papers affecting the surety's liability on the bond or undertaking may be served. The surety's liability may be enforced on motion without the necessity of an independent action.
Fed.R.Civ.P. 65.1 (emphasis added).
Admittedly, the scope of this rule is not immediately apparent. See generally 11A Charles Alan Wright, Arthur R. Miller May Kay Kane,Federal Practice and Procedure § 2971 (2d ed. 1995) (discussing application of Rule 65.1). For example, the proper interpretation of the words "require or permit" is not clear. Plaintiff suggests that the rule permits enforcement against any surety as long as its undertaking was not explicitly prohibited by the rules. XL argues that the words "require or permit" narrow the scope of the rule to surety obligations that the rules explicitly require or permit. I find it unnecessary to resolve this issue because I find that Rule 65.1 cannot be applied unless the security is posted by a party to the action while the action is pending.
Rule 65.1 generally applies to enforce bonds given as security in connection with temporary restraining orders or preliminary injunctions, or where stays of judgment pending appeal require the filing of an undertaking. See id; see, e.g., Agnew v. Alicanto, 125 F.R.D. 355 (E.D.N.Y. 1989) (bond posted pursuant to a temporary restraining order);Aerotrade v. Republic of Haiti, 399 F. Supp. 618 (S.D.N.Y. 1975) (undertaking filed pursuant to an attachment order); Connecticut Hosp. Ass'n v. O'Neill, 891 F. Supp. 693 (D. Conn. 1995) (bonds posted in connection with a preliminary injunction). Plaintiff has cited no controlling authority indicating that Rule 65.1 can be used to enforce liability outside the context of the posting of a security by a party in connection with a lawsuit Moreover, by its plain language Rule 65.1 governs where a "party" has given a security. Therefore, in order for the rule to apply, a lawsuit must be pending when the bond is posted. That the "surety's liability may be enforced on motion without the necessity of an independent action" (emphasis added) further demonstrates that the rule governs only where a lawsuit is pending when the security is given.
Ling Bridge did not post the surety bond as a party to a lawsuit. Therefore, while it may be true that the Shipping Act of 1984, 46 App. U.S.C. § 1701 et seq. (2002), as amended by the Ocean Shipping Reform Act of 1998, subjects sureties to absolute liability, under the facts of this case, Rule 65.1 is not available as a method to enforce that liability. To hold otherwise would strip the rule of the clear limitation imposed upon its application by the use of the word "party." Accordingly, plaintiff's motion is hereby denied.
So Ordered.