Blue Whale Corp. v. Grand China Shipping Dev. Co., Ltd., et al., No. 13-192 (2d Cir. 2013)
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This case stemmed from a maritime contract entered into by Blue Whale and Development. Blue Whale filed a complaint in district seeking to attach property belonging to Development's alleged alter ego, HNA, in anticipation of a future arbitration award against Development pursuant to Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims. The court concluded that the district court properly applied federal maritime law to the procedural question of whether Blue Whale's claim sounded in admiralty, and the claim did sound in admiralty because it arose out of a maritime contract; the issue of the claim's prima facie validity was a substantive inquiry; however, the district court's application of English law to this question was improper because the charter's party's choice-of-law provision did not govern Blue Whale's collateral alter-ego claim against HNA; and drawing on maritime choice-of-law principles, the court held that although federal common law did not govern every claim of this nature, federal common law did apply here, primarily because of the collateral claim's close ties to the United States. Accordingly, the court remanded for reconsideration of the prima facie validity of Blue Whale's alter-ego claim under federal common law.
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13-0192-cv Blue Whale Corp. v. Grand China Shipping Dev. Co., Ltd., et al. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term, 2012 (Argued: April 17, 2013 Decided: July 16, 2013) Docket No. 13-0192-cv BLUE WHALE CORPORATION, Plaintiff-Appellant, -v.GRAND CHINA SHIPPING DEVELOPMENT CO., LTD, AKA SHANGHAI GRAND CHINA SHIPPING DEVELOPMENT CO., LTD., GRAND CHINA LOGISTICS HOLDING (GROUP) COMPANY LIMITED, HNA GROUP CO. LTD., Defendants-Appellees. Before: POOLER, WESLEY, DRONEY, Circuit Judges. Plaintiff-Appellant Blue Whale Corporation ( Blue Whale ) appeals from the January 11, 2013 Order by the United States District Court for the Southern District of New York (Nathan, J.) vacating its prior Rule B maritime attachment order against Defendant-Appellee HNA Group Company, Ltd. ( HNA ). Contracting parties Blue Whale and Defendant-Appellee Grand China Shipping Development Company, Ltd. ( Development ) are currently engaged in arbitration in London to resolve a dispute that arose out of the parties 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 maritime shipping contract. In anticipation of an arbitration award against Development, Blue Whale brought a Rule B claim in the Southern District of New York against Development s alleged alter ego, HNA, seeking to attach approximately $1.3 million worth of HNA assets located in New York. The district court vacated the Rule B attachment order after Defendants-Appellees challenged the sufficiency of Blue Whale s alter-ego claim under Rule E(4)(f). The district court evaluated the prima facie validity of Blue Whale s veil-piercing claim under English law, pursuant to the choice-of-law provision in the charter party, and determined that Blue Whale had insufficiently alleged that HNA was an alter ego of Development. Because we find that Blue Whale s alter-ego claim was collateral to the contractual dispute and that English law did not govern, we apply federal maritime conflicts-of-law analysis to determine the governing law. Accordingly, we VACATE the district court s order and REMAND with instructions to reevaluate the prima facie validity of Blue Whale s claim under federal common law. VACATED AND REMANDED. GEORGE M. CHALOS (Katherine N. Christodoulatos, Briton P. Sparkman, on the brief), Chalos & Co., P.C., Oyster Bay, NY, for PlaintiffAppellant. THOMAS H. BELKNAP, JR. (W. Cameron Beard, Of Counsel, on the brief), Blank Rome LLP, New York, NY, for Defendants-Appellees. MICHAEL J. FREVOLA (Christopher R. Nolan, Warren E. Gluck, on the brief), Holland & Knight LLP, New York, NY, for Amicus Curiae White Rosebay Shipping S.A. 41 42 2 1 2 WESLEY, Circuit Judge: This admiralty law dispute arises from a distinctly 3 international transaction: a Chinese company contracted to 4 transport goods from Brazil to China aboard a Liberian 5 vessel. 6 an inherently federal choice-of-law question one we 7 resolve via application of maritime conflicts-of-law 8 principles. The existence of so many foreign interests yields 9 10 Background 11 Plaintiff-Appellant Blue Whale Corporation ( Blue 12 Whale ), a foreign company,1 entered into a charter party (a 13 maritime contract) with Defendant-Appellee Grand China 14 Shipping Development Company, Ltd. ( Development ), a 15 Chinese company, on May 25, 2011. 16 provided for transport of 250,000 metric tons of iron ore 17 from Brazil to China aboard a Blue Whale vessel registered 18 in the republic of Liberia. 19 required Development to pay 98% of the total freight costs The charter party The contract purportedly 1 Throughout this litigation, Blue Whale is identified only as a foreign corporation. We note that Blue Whale lists a business address in Monrovia, Liberia, on a freight invoice issued to Defendant-Appellee Grand China Shipping Development Company, Ltd., and that at least one of Blue Whale s vessels is registered in Liberia. 3 1 to Blue Whale within seven days of loading the iron ore; 2 allegedly, Development failed to make this payment. 3 Whale therefore held the vessel and its contents until 4 Development satisfied the claimed debt, resulting in more 5 than $1 million in damages borne by Blue Whale. 6 commenced arbitration against Development in London pursuant 7 to the charter party s clause specifying that [a]ny 8 disputes arising under the Contract, if not settled 9 amicably, shall be referred to arbitration in London [with] 10 11 British law to apply. Blue Blue Whale The arbitration is ongoing. On March 26, 2012, Blue Whale filed a complaint in the 12 United States District Court for the Southern District of 13 New York seeking to attach property belonging to 14 Development s alleged alter ego, Defendant-Appellee HNA 15 Group Company, Ltd. ( HNA ), also a Chinese company, in 16 anticipation of a future arbitration award against 17 Development. 18 Admiralty and Maritime Claims ( Rule B ) allows plaintiffs 19 to seek an attachment of defendant s tangible or intangible 20 personal property up to the amount sued for in the hands 21 of garnishees named in the process, [i]f a defendant is 22 not found within the district at the time the complaint is Rule B of the Supplemental Rules for Certain 4 1 filed. 2 that Development and HNA are in fact a single business 3 enterprise and that the district court should allow Blue 4 Whale to pierce the corporate veil to reach in-district HNA 5 assets of approximately $1.3 million. 6 FED. R. CIV. P. SUPP. R. B(1)(a). Blue Whale alleged On May 17, 2012, the district court (Nathan, J.) issued 7 an order authorizing attachment of HNA s holdings in third- 8 party Pacific American Corporation a privately-held direct 9 subsidiary of HNA based in New York in an amount up to 10 approximately $1.3 million. HNA subsequently moved to 11 vacate the district court s maritime attachment order under 12 Rule E(4)(f), which provides that a person claiming interest 13 in attached property shall be entitled to a prompt hearing 14 at which the plaintiff shall be required to show why the 15 arrest or attachment should not be vacated. 16 SUPP. R. E(4)(f). FED. R. CIV. P. 17 Under Rule B, attachment is only appropriate if, inter 18 alia, the plaintiff has a valid prima facie admiralty claim 19 against the defendant. 20 Whale had alleged a claim sounding in admiralty and that the 21 court had maritime jurisdiction. 22 disagreed over what substantive body of law controlled Neither party disputed that Blue 5 However, the parties 1 whether Blue Whale had alleged a valid prima facie claim to 2 pierce the corporate veil. 3 governed pursuant to the charter party s choice-of-law 4 provision and that Blue Whale had failed to allege 5 sufficient facts to support a prima facie alter-ego claim. 6 In response, Blue Whale argued that federal common law 7 controlled the inquiry because Rule B is procedural in 8 nature and, in addition, because it is well-settled that 9 federal courts sitting in admiralty must apply federal HNA argued that English law 10 common law when examining corporate identity. 2 11 of Law in Opposition to Motion to Vacate Maritime Rule B 12 Attachment, at 8-9, Blue Whale Corp. v. Grand China Shipping 13 Dev. Co., Ltd., et al., No. 12 Civ. 02213 (AJN) (S.D.N.Y. 14 2012). 15 Memorandum The district court separately analyzed the two elements 16 required for Blue Whale s claim: (1) whether the claim 17 sounded in admiralty; and (2) whether the claim was prima 18 facie valid. First, the court held that whether Blue Whale 2 Apparently, neither party raised the issue of whether HNA (a non-signatory to the charter party between Blue Whale and Development) could be bound by the English choice-of-law clause. As the district court noted, there are cases that speak to this issue and find that courts may force non-signatories to adhere to choice-of-law clauses. See, e.g., FR 8 Singapore Pte. Ltd. v. Albacore Maritime Inc., 754 F. Supp. 2d 628, 636 (S.D.N.Y. 2010). 6 1 adequately pled an admiralty claim was a procedural question 2 governed by federal maritime law because it related to the 3 court s subject matter jurisdiction (a point not disputed by 4 the parties). 5 jurisdiction over the claim. 6 held that the substantive question of whether Blue Whale had 7 pled a valid prima facie alter-ego claim was controlled by 8 English law pursuant to the contractual choice-of-law 9 provision. The court therefore exercised maritime Second, the district court Under English law, the court concluded that Blue 10 Whale had not alleged an adequate prima facie claim to 11 pierce the corporate veil, and therefore vacated the 12 attachment.3 3 The district court also made an alternative ruling supporting vacatur. Under Rule B, attachment is impermissible if a defendant can be found within the district. FED. R. CIV. P. SUPP. R. B(1)(a); see also Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 445 (2d Cir. 2006), overruled on other grounds by Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009). Because HNA had registered to do business in New York State after the district court issued the Rule B attachment order, the district court reasoned that HNA could now be found in the district and that vacatur was appropriate under Rule E. On this basis, the court also denied Blue Whale s request to stay its decision and grant Blue Whale an opportunity to obtain limited discovery and to amend its complaint. Both Blue Whale and HNA recognize that the district court erred by finding that HNA s post-attachment registration to do business in New York State undermined Blue Whale s basis for a Rule B attachment order. See ProShipLine, Inc. v. Aspen Infrastructures, Ltd., 585 F.3d 105, 112 n.4 (2d Cir. 2009) ( The time for determining whether a defendant is found in the district is set at the time of the filing of the verified 7 1 Supported by Amicus Curiae White Rosebay Shipping S.A. 2 ( White Rosebay ),4 Blue Whale appeals from the district 3 court s January 11, 2013 order vacating the prior Rule B 4 maritime attachment order against HNA. 5 6 Discussion 7 We review a district court s decision to vacate a 8 maritime attachment for abuse of discretion; however, we 9 review de novo any legal determinations on which this 10 discretion rests. Williamson v. Recovery Ltd. P ship, 542 11 F.3d 43, 48 (2d Cir. 2008). 12 B to permit a plaintiff to obtain an order of attachment if 13 14 15 16 17 18 it can show that This Court has interpreted Rule 1) it has a valid prima facie admiralty claim against the defendant; 2) the defendant cannot be found within the district; 3) the defendant s property may complaint that prays for attachment and the affidavit required by Rule B(1)(b). ); see also Marimed Shipping Inc. v. Persian Gulf Shipping Co. Inc., 567 F. Supp. 2d 524, 527 (S.D.N.Y. 2008). HNA could not be found within the district for purposes of Rule B attachment because the text of the rule itself establishes that a defendant is found within the district when a verified complaint . . . [is] filed. FED. R. CIV. P. SUPP. R. B(1)(a) (emphasis added). Thus, the district court s alternative basis for vacating the attachment order fails as a matter of law. 4 White Rosebay s interest in this appeal stems from its separate commencement of two admiralty veil-piercing actions against HNA (and other parties). 8 1 2 3 4 5 Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 6 434, 445 (2d Cir. 2006), overruled on other grounds by 7 Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 8 585 F.3d 58 (2d Cir. 2009). 9 this showing when challenged under Rule E, a district court 10 11 be found within the district; and 4) there is no statutory or maritime law bar to the attachment. If a plaintiff fails to make must vacate the prior order of attachment. Id. The principal issue on appeal is whether Blue Whale 12 satisfied its burden of pleading a valid prima facie 13 admiralty claim against HNA in satisfaction of the first 14 prong of Aqua Stoli. 15 evaluation requires us to answer two questions: (1) whether 16 Blue Whale s claim against HNA sounds in admiralty; and (2) 17 whether the claim is prima facie valid. 18 questions, in turn, necessitates determining the governing 19 body of law. 20 that the district court properly applied federal maritime 21 law to the procedural question of whether Blue Whale s claim 22 sounds in admiralty, and we agree that the claim does sound 23 in admiralty because it arose out of a maritime contract. As the district court recognized, this Each of these For the reasons explained below, we conclude 24 9 1 We also agree with the district court that the issue of 2 the claim s prima facie validity is a substantive inquiry. 3 We conclude, however, that the district court s application 4 of English law to this question was improper because the 5 charter party s choice-of-law provision does not govern Blue 6 Whale s collateral alter-ego claim against HNA. 7 draw on maritime choice-of-law principles to hold that 8 although federal common law does not govern every claim of 9 this nature, federal common law does apply here, primarily 10 because of the collateral claim s close ties to the United 11 States. 12 of the prima facie validity of Blue Whale s alter-ego claim 13 under federal common law. Instead, we We remand for reconsideration by the district court 14 15 16 17 18 I. The Rule B Inquiry Is Procedural in Part and Substantive in Part 19 District of New York on the issue of what law governs 20 whether [a] plaintiff has pled a facially valid admiralty 21 claim . . . and the Second Circuit has not ruled on it. 22 Fatah Int l Nav. Co. Ltd. v. Shivsu Canadian Clear Waters 23 Tech.(P) Ltd., 649 F. Supp. 2d 295, 299 (S.D.N.Y. 2009). 24 Some district courts within this Circuit presume that There is a split of authority in the Southern 10 Al 1 federal law governs all questions concerning the validity 2 of a Rule B attachment. 3 Caverton Marine Ltd., No. 08-cv-5435 (BSJ), 2008 WL 4905460, 4 at *2 (S.D.N.Y. Aug. 7, 2008) (assessing whether plaintiffs 5 pled a valid maritime claim).5 6 that despite Rule B s undoubted[] status as a procedural 7 rule, Rule B itself does not provide the basis for 8 determining the existence of a valid prima facie admiralty 9 claim, and instead, the existence of a valid prima facie Harley Mullion & Co. Ltd. v. Other district courts reason 10 claim turns on substantive law. 11 Al Fatah, 649 F. Supp. 2d at 300.6 5 See also Emeraldian Ltd. P ship v. Wellmix Shipping Ltd., No. 08 Civ. 2991 (RJH), 2009 WL 3076094, at *2-3 (S.D.N.Y. Sep. 28, 2009) (applying federal common law without discussion of English choice-of-law clause in charter party); Euro Trust Trading S.A. v. Allgrains U.K. Co., No. 09 Civ. 4483 (GEL), 2009 WL 2223581, at *2-3 (S.D.N.Y. July 27, 2009) (agreeing that the better view is that federal law governs all questions concerning the validity of a Rule B attachment, but specifically deciding that federal law governs whether plaintiff alleged a valid maritime claim (internal quotation marks omitted)); Budisukma Permai SDN BHD v. N.M.K. Prods. & Agencies Lanka (Private) Ltd., 606 F. Supp. 2d 391, 395-96 (S.D.N.Y. 2009) (discussing choice of law in the context of deciding whether plaintiff had a valid maritime claim). 6 See also Indagro S.A. v. Bauche S.A., 652 F. Supp. 2d 482, 489-90 & 490 n.9 (S.D.N.Y. 2009) (outlining the dispute and finding that law of the contract governs whether plaintiff pled a valid prima facie claim and federal law governs whether that claim sounds in admiralty); Kulberg Fins. Inc. v. Spark Trading D.M.C.C., 628 F. Supp. 2d 510, 515, 518-19 (S.D.N.Y. 2009) (endorsing numerous courts[ ] view that existence of a valid prima facie admiralty claim turns on the . . . law of the contract ); Precious Pearls, Ltd. v. Tiger Int l Line Pte Ltd., 11 1 2 3 4 A. Whether a Claim Sounds in Admiralty Is a Procedural Question Governed by Federal Maritime Law Despite the divide, what is clear is that federal law 5 controls the procedural inquiry, namely, whether a 6 plaintiff s claim sounds in admiralty. 7 Euro Trust Trading S.A. v. Allgrains U.K. Co., No. 09 Civ. 8 4483 (GEL), 2009 WL 2223581, at *3 (S.D.N.Y. July 27, 2009). 9 This question is inherently procedural by virtue of its See id. at 299 n.4; 10 relationship to the courts subject matter jurisdiction and, 11 thus, is controlled by federal maritime law. 12 parties do not dispute that Blue Whale s claim sounds in 13 admiralty because it arises out of a maritime contract. 14 The more difficult question is whether federal law also 15 controls a court s assessment of the validity of a 16 plaintiff s prima facie claim. 17 18 19 20 21 Here, the B. Whether a Claim Is Prima Facie Valid Is a Substantive Question Governed by the Relevant Substantive Law If the prima facie validity component of the inquiry is No. 07 Civ. 8325 (JGK), 2008 WL 3172998, at *2 (S.D.N.Y. July 31, 2008) (without discussion, applying English law pursuant to contract clause to assess whether contingent indemnity claim was ripe); Sonito Shipping Co., Ltd. v. Sun United Maritime Ltd., 478 F. Supp. 2d 532, 536 (S.D.N.Y. 2007) ( The existence vel non of a valid maritime claim for purposes of a Rule B writ of attachment turns upon the applicable substantive law, in this case the law of contract. ). 12 1 procedural in nature, federal law will control; if it is 2 substantive, the relevant substantive body of law will 3 control. 4 New York have laid out the competing arguments for us. 5 Harley Mullion & Co. Ltd. v. Caverton Marine Ltd., the court 6 explained its reasoning for finding that the better view is 7 that federal law governs all questions concerning the 8 validity of a Rule B attachment as follows: The district courts in the Southern District of In 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 If, in order to comply with the requirements set forth in Aqua Stoli, a claim must be valid under the substantive law that will govern the underlying action, parties initiating or responding to a Rule 4(E) [sic] challenge would be routinely required to litigate issues of foreign law and courts would have to probe into the merits of the underlying claim. This sort of detailed examination is inappropriate at a Rule 4(E) [sic] hearing as it would undermine the prima facie standard and is at odds with the limited inquiry contemplated by Aqua Stoli. No. 08-cv-5435 (BSJ), 2008 WL 4905460, at *2 (S.D.N.Y. Aug. 26 7, 2008) (internal quotation marks omitted). By contrast, 27 in Al Fatah, the district court rejected this 28 29 30 31 32 33 34 position because Rule B itself does not provide the basis for determining the existence of a valid prima facie admiralty claim. . . . [T]he existence of a valid prima facie claim turns on substantive law. Where the 13 1 2 3 4 5 6 substantive law underlying the claim is foreign, it would make no sense to determine the claim s prima facie validity under U.S. law. 649 F. Supp. 2d at 300. 7 explained that his conclusion [was] not inconsistent with 8 Aqua Stoli[] because even if an inquiry conducted under 9 foreign law might be more difficult than the same Then-District Judge Chin further 10 assessment under United States law, it need not necessarily 11 be any more rigorous. 12 Id. We agree with Judge Chin s reasoning. Admiralty law 13 provides the remedy; substantive law defines the right to 14 the remedy. 15 is a substantive inquiry that should be governed by the 16 relevant substantive law. 17 sounds in admiralty is a procedural question, the answer to 18 which supplies the source of a court s subject matter 19 jurisdiction. 20 Assessing the prima facie validity of a claim By contrast, whether a claim As the district court here recognized, the decisions 21 incorporating the reasoning in Harley Mullion typically do 22 so in the context of resolving a dispute over whether a 23 plaintiff has sufficiently alleged an admiralty claim not 24 whether a plaintiff has pled a valid prima facie claim. 25 Indagro S.A. v. Bauche S.A., 652 F. Supp. 2d 482, 490 14 See 1 (S.D.N.Y. 2009) ( Where the question is not whether the 2 claim is maritime in nature, but rather whether the 3 plaintiff has pled a valid claim at all, courts in this 4 District have considered whether the plaintiff alleged a 5 prima facie claim under the substantive law governing the 6 parties dispute. ). 7 statements to the effect that all Rule B queries are 8 procedural in nature and are governed by federal law 9 effectively constitute dicta no one disagrees that federal 10 law controls the determination of whether a claim sounds in 11 admiralty. 12 As a result, in these cases, We hold that federal maritime law governs whether a 13 claim sounds in admiralty and that the relevant substantive 14 law governs whether a plaintiff has alleged a valid prima 15 facie claim. 16 facie validity of a plaintiff s claim because substantive 17 law supplies the relevant measure for deciding whether or 18 not the claim is legally sufficient. 19 that courts must apply the correct substantive law i.e., 20 the law which defines the rights and responsibilities of the 21 parties to the dispute. 22 question in this case: what substantive law controls the 23 validity of Blue Whale s alter-ego claim? We use substantive law to assess the prima Of course, this means This introduces the more difficult 15 1 2 II. Federal Maritime Choice-of-Law Analysis Determines the Relevant Substantive Law 3 There are three approaches for evaluating what law 4 governs Blue Whale s alter-ego claim in this case: invoking 5 the charter party s choice-of-law provision, which specifies 6 English law; automatically applying federal common law 7 because the court is examining corporate identity ; or 8 engaging in a federal maritime choice-of-law analysis. 9 Because we find that the charter party s choice-of-law 10 clause does not govern this collateral alter-ego claim, we 11 hold that federal maritime choice-of-law principles dictate 12 the proper controlling substantive law. 13 maritime choice-of-law analysis yields federal common law as 14 the relevant governing law by virtue of the claim s 15 connection to the United States. In this case, a 16 17 18 19 A. The Contractual Choice-of-Law Clause Does Not Control Because the Alter-Ego Claim Is Collateral 20 court s conclusion, that the charter party s choice-of-law 21 clause requires applying English substantive law to govern 22 this dispute. 23 Corp., 8 F.3d 130, 132 (2d Cir. 1993), teaches us that 24 choice-of-law clauses in underlying contracts are First, we reject HNA s contention, and the district Kalb, Voorhis & Co. v. American Financial 16 1 irrelevant to assessing alter-ego claims. In that case, 2 Kalb, the plaintiff, held debentures (collateral-free debts 3 or notes) issued by third-party corporation Circle K. 4 at 131. 5 11, Kalb sued as a creditor of Circle K to pierce the 6 corporate veil and impose liability for the debentures on 7 the defendant, a former controlling stockholder of Circle K. 8 Id. 9 pierce the veil against the defendant; the question in the Id. After Circle K filed for bankruptcy under Chapter Shortly thereafter, Circle K asserted its own rights to 10 case was whether a claim alleging that the debtor or 11 bankrupt is the alter ego of its controlling stockholder 12 belonged to Circle K or Kalb. 13 Id. at 132. In considering the choice of law in this diversity 14 case, we determined that it was appropriate to apply the 15 choice-of-law principles of the forum state (New York) 16 rather than relying on the choice-of-law clause in the 17 debentures. 18 provisions in the debentures [were] irrelevant [because t]he 19 issue is the limited liability of shareholders of a 20 corporation not Circle K s obligations under the 21 debentures. 22 23 Id. We noted that [t]he choice of law Id. Similarly, here the issue is HNA s legal status as an alter ego of Development, not the obligations under or 17 1 subsequent alleged violations of the charter party between 2 Development and Blue Whale. 3 sounds in admiralty because it arose from this maritime 4 contract however, the substance of the attachment claim 5 concerns whether HNA is an alter ego of Development. 6 corporate identity inquiry is indeed distant from the 7 dispute over the charter party s provisions regarding the 8 transport of iron ore. 9 issue of piercing the corporate veil is collateral to the Blue Whale s claim against HNA This For this reason, we find that the 10 contract, and thus this Court is not bound by the choice of 11 law provision. 12 Matson (USA) Ltd., Inc., 848 F. Supp. 751, 759 (E.D. Mich. 13 1994); see also Wehlage v. EmpRes Healthcare Inc., 821 F. 14 Supp. 2d 1122, 1127-28 (N.D. Cal. 2011); JSC Foreign 15 Economic Ass n Technostroyexport v. Int'l Dev. and Trade 16 Servs., Inc., 295 F. Supp. 2d 366, 385-86 (S.D.N.Y. 2003) 17 (determining that action to enforce judgment was in no way 18 connected to or related to the performance of the shipment 19 contracts and that arbitration clause did not govern).7 United Trade Assocs. Ltd. v. Dickens & 7 There are a number of cases that indicate that had Blue Whale prevailed at the London arbitration proceeding in advance of bringing an action for attachment or enforcement in the United States, federal common law and not English law would govern the court s evaluation of HNA s alleged alter-ego status. See, e.g., Bridas S.A.P.I.C. v. Gov. of Turkmenistan, 345 F.3d 347, 353, 18 1 2 3 4 B. Federal Common Law Does Not Apply Automatically for Examining Corporate Identity Second, we reject the proposition advanced by Blue 5 Whale and White Rosebay that federal common law 6 automatically governs the alter-ego claim. 7 Amicus Curiae White Rosebay cite numerous cases for the 8 proposition that Blue Whale and 9 10 11 12 13 14 15 courts in this Circuit have consistently held . . . [that] [f]ederal courts sitting in admiralty must apply federal common law when examining corporate identity. Clipper Wonsild Tankers Holding A/S v. Biodiesel Ventures, 16 LLC, 851 F. Supp. 2d 504, 507-08 (S.D.N.Y. 2012) (quoting In 17 re Holborn Oil Trading Ltd., 774 F. Supp. 840, 844 (S.D.N.Y. 18 1991)).8 However, many of these cases, as well as matters 358-60 (5th Cir. 2003) (remanding after applying federal common law instead of contractually-specified English law to determine whether Government of Turkmenistan was subject to arbitration, and thus liable for arbitration award, as alleged alter ego of contracting party) (cited favorably in Compagnie Noga D Importation et D Exportation, S.A. v. Russian Federation, 361 F.3d 676, 686 (2d Cir. 2004)). 8 See also Constellation Energy Commodities Grp. Inc. v. Transfield ER Cape Ltd., 801 F. Supp. 2d 211, 223 (S.D.N.Y. 2011) (applying federal common law to evaluate plaintiff s claim to enforce arbitration award against alleged alter-ego defendants); Emeraldian, 2009 WL 3076094, at *2-3 (applying federal common law to assess validity of plaintiff s prima facie alter-ego maritime claim without discussing applicability of English choice-of-law provision); Arctic Ocean Int l Ltd. v. High Seas Shipping Ltd., 622 F. Supp. 2d 46, 53 (S.D.N.Y. 2009) (same). 19 1 cited more broadly in support,9 are focused principally on 2 the scope of courts admiralty jurisdiction, rather than on 3 the source of substantive law. 4 federal maritime law need not go hand in-hand, see, e.g., 5 Lauritzen v. Larsen, 345 U.S. 571 (1953), even in the 6 context of examining corporate identity. 7 Admiralty jurisdiction and It appears that this Court s decision in Kirno Hill 8 Corp. v. Holt, 618 F.2d 982 (2d Cir. 1980) (per curiam), is 9 at the root of the principle that federal common law governs 10 the analysis of corporate identity. Kirno Hill did not 11 involve Rule B, a contract specifying choice of law, 12 international parties or contracts, or, in fact, any quarrel 13 over choice of law. 14 dispute over personal liability for obligations under a 15 charter party. 16 law, which is the law we apply in an admiralty case, to Instead, the case centered around a Id. at 984. We applied federal maritime 9 See Swift & Co. Packers v. Compania Colombiana Del Caribe, S.A., 339 U.S. 684 (1950); Williamson, 542 F.3d at 49-50; see also Williamson v. Recovery Ltd. P ship, No. 06 Civ. 5724 (LTS)(FM), 2007 WL 102089, at *2 (S.D.N.Y. Jan. 16, 2007) ( The choice of law clauses, whatever their significance in the ultimate determination of the merits of the dispute, do not divest the federal court of subject matter jurisdiction. ); see also Budisukma, 606 F. Supp. 2d 391 (adopting Harley Mullion analysis to decide primary issue of whether plaintiff s claim was maritime in nature and not specifying whether reasoning for applying federal common law, instead of English law, to assess validity of alter-ego claims was on a similar basis). 20 1 determine whether an undisclosed principal was bound by 2 contracts made by an agent acting within his authority. 3 at 985. 4 Id. Subsequent cases citing Kirno Hill for the proposition 5 that federal common law dictates whether or not a maritime 6 plaintiff has sufficiently pled a claim to pierce the 7 corporate veil tend to proceed along one of two lines. 8 First, there are cases like Clipper Wonsild Tankers Holding 9 A/S v. Biodiesel Ventures, LLC, 851 F. Supp. 2d 504 10 (S.D.N.Y. 2012), opining that courts must choose between 11 state law and federal common law. 12 alter-ego defendants argued that plaintiffs Rule B claims 13 should be governed by Texas law because of the parties 14 diversity and defendants status as Texas corporations. 15 at 506-07. 16 had expressly (and properly) invoked the court s admiralty 17 jurisdiction since a charter party lay at the center of the 18 dispute. 19 When the choice is between state law and federal common law, 20 the federal interest in maintaining uniformity in the 21 quintessentially federal realm of admiralty supersedes any 22 competing interest in applying state law. 23 Dredging Co. v. Miller, 510 U.S. 443 (1994). In Clipper, alleged Id. The district court disagreed because plaintiffs Id. at 507-08. This result strikes us as correct. 21 See generally Am. 1 Second, there are Rule B attachment cases in which 2 district courts must grapple with foreign parties disputes 3 that arose (or sometimes sank) in foreign waters. 4 Ocean International, Ltd. v. High Seas Shipping Ltd., 622 F. 5 Supp. 2d 46 (S.D.N.Y. 2009), for example, a Russian 6 plaintiff-company secured a Rule B attachment order in the 7 Southern District of New York against a Marshall Islands 8 defendant-company and an alleged alter-ego Canadian 9 defendant-company. Id. at 47-48. In Arctic In evaluating the alleged 10 alter ego s attack on the attachment order,10 the district 11 court assessed the prima facie validity of plaintiff s 12 alter-ego claim under federal common law. 13 The district court applied federal common law instead of 14 Russian law, Marshall Islands law, Canadian law or English 15 law (which was specified by the charter party s arbitration 16 choice-of-law provision, id. at 48) because federal courts 17 sitting in admiralty have tended to apply federal maritime 18 common law, id. at 53 (citing In re Holborn, 774 F. Supp. 19 at 844). 10 Id. at 53-56. The alleged alter-ego defendant moved to dismiss the complaint under Rules 12(b)(2) and 12(b)(6) rather than challenging the attachment under Rule E(4)(f) because no property had actually been attached in the approximately eleven months that the Rule B order had been in force. Arctic Ocean, 622 F. Supp. 2d at 50. However, as the district court recognized, defendant s arguments would have similar force at a Rule E(4)(f) hearing. Id. 22 1 Although the district court may well have reached the 2 correct result in Arctic Ocean, we do not believe that Kirno 3 Hill (or its progeny) compels courts examining corporate 4 identity to apply federal common law. 5 recognize that district courts frequently have found value 6 in using federal common law to evaluate the validity of 7 collateral claims in Rule B attachment proceedings. 8 today is to clarify that the decision of which body of law 9 to apply should be the product of a maritime choice-of-law 10 That said, we Our aim analysis. 11 12 13 14 15 C. Maritime Choice-of-Law Analysis Shows that Federal Common Law Controls Because United States Law Has the Strongest Connection to the Relevant Transaction 16 conflicts-of-law test in Lauritzen v. Larsen, 345 U.S. 571 17 (1953). 18 Co.[], under which a federal court exercising its diversity 19 jurisdiction looks to the choice-of-law doctrine of the 20 forum state, does not govern suits invoking the court s 21 admiralty jurisdiction. 22 Atlanttrafik Exp. Serv. Ltd., No. 86 Civ. 1313 (RLC), 1988 23 WL 75262, at *2 (S.D.N.Y. July 13, 1988). 24 parties properly invoke admiralty jurisdiction, courts apply 25 federal maritime choice-of-law rules. The Supreme Court first announced the maritime The rule of Klaxon Co. v. Stentor Electric Mfg. Itel Containers Int l Corp. v. 23 Id. Thus, when 1 In Lauritzen, a Danish seaman brought suit in the 2 Southern District of New York under the Jones Act, 46 U.S.C. 3 § 688, alleging that he was negligently injured aboard a 4 ship of Danish flag and registry while in Havana harbor. 5 345 U.S. at 573. 6 and the injured seaman had signed the ship s articles 7 providing that disputes would be governed by Danish law. 8 Id. 9 Id. 10 The ship was owned by a Danish citizen, Nevertheless, he sought to invoke United States law. Recognizing that [m]aritime law . . . has attempted to 11 avoid or resolve conflicts between competing laws by 12 ascertaining and valuing points of contact between the 13 transaction and the states or governments whose competing 14 laws are involved, id. at 582, the Supreme Court laid out a 15 multi-factor choice-of-law test,11 [t]he purpose of [which] 11 Supplemented by subsequent case law, the non-exhaustive list of factors includes: (1) the place of the wrongful act; (2) the law of the ship s flag; (3) the domicile of the injured party; (4) the domicile of the shipowner; (5) the place of the contract; (6) the inaccessibility of the foreign forum; (7) the law of the forum; and (8) the shipowner s base of operations. Carbotrade S.p.A. v. Bureau Veritas, 99 F.3d 86, 90 (2d Cir. 1996) (citing Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306, 309 (1970); Romero v. Int l Terminal Operating Co., 358 U.S. 354, 382 (1959); Lauritzen, 345 U.S. at 583-92). Though the Lauritzen factors speak more directly to tort claims, a modified framework may be invoked in contract actions. See Rainbow Line, Inc. v. M/V Tequila, 480 F.2d 1024, 1026-27 (2d Cir. 1973); see also Itel Containers, 1988 WL 75262, at *2. 24 1 is to assure that a case will be treated n [sic] the same 2 way under the appropriate law regardless of the fortuitous 3 circumstances which often determine the forum, id. at 591. 4 In Lauritzen, the balance of factors clearly pointed to 5 application of Danish law: the injured seaman had minimal 6 contacts with the United States beyond the intangible his 7 desire to invoke this nation s more favorable maritime tort 8 law. 9 Id. at 592. Here, by contrast, Blue Whale initiated this proceeding 10 in the United States, and specifically in the Southern 11 District of New York, because that is where HNA owns 12 property. 13 of New York s admiralty jurisdiction by serendipity the 14 presence of HNA s property enabled this action and, along 15 with it, the application of federal maritime law. 16 Furthermore, the basic tenet upon which Lauritzen is 17 premised will be satisfied here by using federal common law 18 because its application reflects an implicit resol[ution 19 of] conflicts between competing laws by ascertaining and 20 valuing points of contact between the transaction and the 21 states or governments whose competing laws are involved. 22 Id. at 582. Blue Whale did not invoke the Southern District 23 25 1 As is often the case in admiralty, we deal here with 2 multi-national foreign parties locked in dispute as the 3 result of an alleged breach of an international shipping 4 contract. 5 attachment is the peripatetic nature of maritime parties, 6 the transitory status of their assets, Aqua Stoli, 460 7 F.3d at 443, and the need for parties to obtain security 8 [i]n a world of shifting assets, numerous 9 thinly-capitalized subsidiaries, flags of convenience and Indeed, part of the reason we authorize maritime 10 flows of currencies, Navalmar (U.K.) Ltd. v. Welspun 11 Gujarat Stahl Rohren, Ltd., 485 F. Supp. 2d 399, 404 12 (S.D.N.Y. 2007) (citing Aurora Maritime v. Abdullah Mohamed 13 Fahem & Co., 84 F.3d 44 (2d Cir. 1996)). 14 This particular case arose from a charter party between 15 a Chinese company, Development, and another foreign company, 16 Blue Whale, to ship iron ore from Brazil to China on a 17 Liberian vessel. 18 sources of law; none have a particularly strong connection 19 to the transaction. 20 the facts in Lauritzen, where all parties, the ship, and the 21 contract itself exhibited strong ties to Denmark. 22 at 573. This narrative yields several potential The facts here contrast strongly with 23 26 345 U.S. 1 Importantly, however, the relevant transaction in 2 this case is not Development s alleged failure to comply 3 with the charter party it is Blue Whale s claim to pierce 4 the corporate veil. 5 action is charged only with determining whether Blue Whale 6 stated a prima facie valid alter-ego claim against HNA in 7 furtherance of its motion to attach HNA s property in New 8 York. 9 points of contact with this claim by virtue of the The district court in this Rule B Accordingly, United States law has the strongest 10 location of HNA s property, Blue Whale s corresponding 11 choice of forum and the unavailability of an alternative 12 forum, and the absence of a dominant foreign choice of law. 13 On a final note, we recognize the value of simplifying 14 the judicial process required for Rule B attachments and 15 Rule E motions to vacate when feasible. 16 Stoli, 460 F.3d at 443-44. 17 does not excise the judicial obligation to apply the 18 governing substantive law to assess the prima facie validity 19 of a Rule B admiralty claim when challenged in a Rule E 20 proceeding. 21 identify federal common law as the proper substantive body 22 of law to govern Blue Whale s alter-ego claim against HNA. 23 This follows from the ideas underpinning the Lauritzen See generally Aqua As we have articulated, this But here, for the reasons discussed, we 27 1 choice-of-law analysis and from our aim of ensuring 2 uniformity in admiralty law whenever possible. 3 we vacate the district court s order and remand for 4 reconsideration of the prima facie validity of Blue Whale s 5 Rule B alter-ego claim under federal common law. 6 Williamson, 542 F.3d at 53; Clipper, 851 F. Supp. 2d at 509- 7 10. 8 9 10 Accordingly, See Conclusion For the foregoing reasons, the order of the district court is hereby VACATED and REMANDED. 28
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