On October 16, 2009, the United States Court of Appeals for the Second Circuit, in a dramatic decision issued in a procedurally unusual manner, overruled its own 2002 decision that had permitted federal courts to interdict international funds transfers processed by New York banks. The 2002 decision—Winter Storm Shipping, Ltd. v. TPI, 310 F.3d 263 (2d Cir. 2002)—was widely criticized as having fundamentally misunderstood the nature and legal character of an electronic funds transfer.
Many international transactions between non-U.S. entities are denominated in U.S. dollars, and most dollar-denominated payments between foreign entities occur by electronic funds transfers processed by intermediary banks in New York. Winter Storm erroneously held that an intermediary bank processing a funds transfer is in possession of "property" of a party to the transfer that is capable, like funds in a deposit account, of being attached by means of the ancient device of maritime attachment.
Winter Storm opened the maritime attachment floodgates. Federal courts in New York began to receive hundreds of maritime attachment requests each day. New York banks were heavily burdened with attachment orders, which they were required by law to execute. Non-U.S. companies subject to maritime-related claims could never be certain that international dollar payments would be completed as intended (and many of them were not). Federal court dockets and the back-office operations of New York banks were severely strained, and, because some companies abandoned U.S. dollars as the currency in which to denominate international transactions, the primacy of the U.S. dollar in international transactions was threatened.
Usually a decision of a three-judge panel of the Court of Appeals can be overruled only by a majority of all of the Court's judges in active service (or, of course, by the U.S. Supreme Court). However, the new decision that overruled Winter Storm, Shipping Corp. of India, Ltd. v. Jaldhi Overseas Pte Ltd., 2009 WL 3319675 (2d Cir. Oct. 16, 2009), was issued by another three-judge panel. Apparently convinced not just that Winter Storm was erroneous but also that its malign effects demanded action faster than could be accomplished by the somewhat cumbersome process by which all of the judges in active service act together, the panel circulated its opinion to all of the active judges for comment and obtained their consent to its dispatch of Winter Storm.