DHL Project & Chartering Limited v. Newlead Holding LTD et al, No. 4:2016cv00123 - Document 24 (S.D. Ga. 2016)

Court Description: ORDER granting 16 Motion to Vacate; denying 17 Motion to Strike. DHL shall show cause by no later than December 5, 2016 why the present case should not be dismissed for lack of jurisdiction. Signed by Judge J. Randal Hall on 11/18/2016. (thb)

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DHL Project & Chartering Limited v. Newlead Holding LTD et al IN THE UNITED FOR THE Doc. 24 STATES DISTRICT COURT SOUTHERN DISTRICT OF GEORGIA SAVANNAH DIVISION IN ADMIRALTY DHL PROJECT & CHARTERING * LIMITED, * Plaintiff, * * v. * NEWLEAD HOLDINGS LTD.; * NEWLEAD SHIPPING S.A.; * NEWLEAD BULKERS S.A.; NEWLEAD CASTELLANO LTD.; CV 416-123 * * GRAND VENETICO INC.; and * NEWLEAD VENETICO LTD., * * Defendants. * ORDER Before Ltd., the Cheyenne Court is "Interested Attachment. (Doc. 16.) filings for motion (doc. 16) Capital Holdings Ltd., (collectively, and Ray the Inc., and Labroy Parties") Oppenheim Capital Shiptrade Limited's Motion to Vacate After a careful review of the parties' reasons below, the Interested Parties' is GRANTED. I. BACKGROUND On May 25, 2016, upon the filing of Plaintiff DHL Project & Chartering Limited's ("DHL") verified complaint in the present action, the Court entered an order directing the issuance of process for maritime attachment and garnishment of the M/V Dockets.Justia.com Newlead Castellano, Through their present vacate DHL's attachment Supplemental Rules IMO No. 9686338 motion, ("Vessel"). the Interested pursuant to (Docs. 1, 2.) seek E(4)(f) Rule Parties of to the for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure. (Doc. 16.) The pertinent facts underlying the motion are as follows. On or Shipping use of 13.) about S.A. the entered shipping 27, into vessel 2011, a DHL charter M/V party Defendant contract Newlead Venetico. and Grand Venetico, Newlead for (Doc. DHL's 1, St Defendants Newlead Inc. were obligated to, inter exercise due diligence to ensure the aforementioned vessel was seaworthy and properly maintained. 8, 2011, Materials Charterer") St (Id. St 14.) On December DHL sub-chartered the M/V Newlead Venetico to non-party Zheijiang (Id. and Pursuant to the charter party contract, Shipping S.A. alia, October for 15.) a Industry shipment Fuel of Shortly after Group cargo Co., from loading of the Ltd. Australia by the Australian Maritime various alleged deficiencies. resumed on or about March 3, (Id. to Safety St 16.) "SubChina. Sub-Charter's onto the M/V Newlead Venetico on January 4, 2012, detained (the cargo the vessel was Authority due to Loading eventually 2012, and the M/V Newlead Venetico commenced her voyage to the discharge port in China on or about March 5, initiated 2012. (Id.) arbitration DHL and the in Hong Kong, Sub-Charterer wherein the subsequently Sub-Charterer alleges that it incurred delivery of its cargo. has provided no significant (Id. further losses SISt 18-19; information from the see also Doc. or evidence delayed 1-3.) DHL regarding the status of the aforementioned Hong Kong arbitration other than an unsubstantiated (Doc. 21, On at statement that it "is nearing 9.) April 19, 2016, the Interested Parties otherwise-unrelated matter of Ray Capital Newlead 093 Castellano, (S.D. resolution." Ga.) complaint with IMO No. (the this 9686338, "Ray Court et Action"), alleging a instituted Inc., al., by the et M/V Case of 1.) The issuance of Court a warrant subsequently for the entered maritime orders arrest - 4:16-CV- a verified claims the Vessel and Defendant Newlead Castellano Ltd.1 Doc. v. No. filing number al. against (Ray Action, directing as well as issuance of process of maritime attachment and garnishment the Vessel. (Ray Action, On May 25, 2016, Docs. the of 8, 10.) DHL instituted the present action against Defendant Newlead Castellano Ltd. Holdings Ltd., 1 The Interested Action such that the Newlead Shipping Parties subsequently they now assert the as well S.A., as Defendants Newlead Newlead Bulkers S.A., amended their complaint in the Ray following claims: (1) a foreclosure claim pursuant to Ray Capital's promissory note and the Maritime Lien Act and the Ship Mortgage Act, 46 U.S.C. § 31301, et seq. ("Act") ; (2) a foreclosure claim pursuant to the Interested Parties' preferred mortgages and the Act; (3) and a foreclosure claim pursuant to Ray Capital's payment of seamen's wages; (4) a breach preferred mortgages. of contract claim pursuant (Ray Action, Doc. 18.) to the Interested Parties' Grand Venetico Inc., and Newlead Venetico Ltd.2 (Doc. 1, fl 21- 69.) in The Court subsequently action directing the entered issuance of process and garnishment of the Vessel.3 On Ray July 14, Action, 2016, the an order of maritime entered an order interlocutory admiralty sale of the Vessel. 48, as present attachment (Doc. 2.) on the Interested Parties' Court the motion in the directing the (Ray Action, Doc. subsequently amended in part by the Court's Order dated August 4, 2016, on August 8, Doc. 2016, 65.) The Vessel was sold to a third party and the Court entered an order confirming the sale on August 16, 2016.4 (Ray Action, Docs. 65, 75.) 2 DHL's complaint in this case alleges: (1) a breach of contract claim against Newlead Shipping S.A., Newlead Bulkers S.A., and Grand Venetico Inc.; and (2) an alter ego claim against Newlead Holdings Ltd. for its control of Newlead Shipping S.A., Newlead Bulkers S.A., Defendant Newlead Castellano Limited, Grand Venetico Inc., and Newlead Venetico Ltd. (Doc. 1, II 21-69.) Notably, DHL did not name the Vessel as a defendant in this Action, but sought to attach the Vessel pursuant to Federal Rule of Procedure, Supplemental Admiralty Rule B as security for its claims against Defendants. DHL states that the underlying dispute here "is based on an indemnity claim for an arbitration award which may be issued against DHL in Hong Kong arbitration. Thereafter, DHL will pursue recovery against Newlead Shipping and/or Grand Venetico Inc. in London. [DHL] brings this action solely to obtain quasi in rem jurisdiction over [Defendants] and security for its claims." (Doc. 1, 1 71.) 3 Despite obtaining the Court's Order for Issuance of Process of Maritime Attachment and Garnishment on May 25, 2016, the DHL did not serve this Order (or related Process of Maritime Attachment and Garnishment) 2016. (Doc. 14, 15 2-4.) until August 5, Notably, DHL has not claimed to have served the aforementioned papers on the United States Marshal or the Defendants, but rather has only alleged to have served them to the then-substitute custodian for the Vessel, National Maritime Services of Fort Lauderdale, Florida. (Id.) 4 The Vessel was sold to non-party Strategic Shipping, Inc. for a sale price of $7,400,000.00 USD plus the current market price of any fuel or gas oil remaining on board the Vessel at the time of its delivery to Strategic Shipping, Inc. (Ray Action, Doc. 75.) The proceeds from the sale of the Vessel are presently deposited in the Court's registry for safe-keeping. On DHL July filed present denied 28, a 2016, motion action. shortly before to consolidate (Doc. DHL's motion to 11.) the of the Action 25, 2016, on the consolidate Ray August On the sale grounds Vessel, with the that at 3-4.) On intervene in the Procedure Rule September 8, 2016, Ray Action pursuant 24(a). (Ray Action, DHL to filed Federal Doc. 80.) a Court the actions did not present common questions of law or fact. 13, the (Doc. motion Rule On two of to Civil October 5, 2016, the Court denied DHL's motion to intervene on the grounds that DHL had failed to demonstrate a sufficient interest relating to the property or transaction which is the subject of the Ray Action. DHL filed its (Ray Action, Notice of Doc. 94.) Interlocutory Appeal the Court's Order dated October 5, 2016.5 On present (Doc. October 14, motion to 16.) 2016, the vacate On October 19, 2016, Rule 12(f). (Doc. 2016, seeking review of (Doc. 98.) Interested DHL's strike the Interested Parties' to On October 11, Parties attachment and filed their garnishment. DHL filed a motion seeking to present motion to vacate pursuant 17.) On October 28, 2016, the Court ordered DHL to show cause by no later than October 31, 2016 as to why DHL's attachment and garnishment of the Vessel (and any 5 DHL also filed an Emergency Motion for Stay Pending Appeal seeking an order staying the Ray Action (or in the alternative an order enjoining the distribution of the proceeds from the sale of the Vessel) during the pendency of DHL's appeal of denial of its motion to intervene. On November 1, 2016, Stay Pending Appeal. (Ray Action, Doc. 99.) the Eleventh Circuit denied DHL's Emergency Motion for (Ray Action, Doc. 107.) res substitute October Parties' 31, 2016, should not DHL filed Interested its Parties their motion to vacate. Parties' be motion to (Doc. (Doc. to 21.) the their 23.) Accordingly, DHL's reply attachment 20.) On Interested On November 10, filed (Doc. vacate vacated. opposition present motion to vacate. the 2016, thereof) and in support of the Interested garnishment is ripe for consideration. II. DISCUSSION Supplemental Admiralty Rule B governs the process by which a party may attach another party's assets in admiralty.6 Stoli Shipping Ltd. (2d Cir. India 2006), Ltd. 2009) . v. v. Gardner Smith Pty Ltd., Aqua 460 F.3d 434, 438 overruled on other grounds by Shipping Corp. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d "If a defendant is not found within the district, of Cir. . . . a verified complaint may contain a prayer for process to attach the defendant's the amount process tangible or for—in the sued .... The intangible hands court of must personal garnishees review the property-up named to in the complaint and affidavit and, if the conditions of this Rule B appear to exist, enter an order so stating and authorizing process of attachment and garnishment." Fed. R. Civ. P. Supp. Rule B(l). "To begin the process, a plaintiff must file a verified complaint praying for 6 The historical purposes of maritime attachment have been: (a) to gain jurisdiction over an absent defendant; and (b) to assure satisfaction of a judgment. Aqua Stoli Shipping Ltd., 460 F.3d at 437-38 (citing Swift & Co. Packers v. Compania Colombiana Del Caribe, S.A., 339 U.S. 684, 693 (1950)). an attachment and an affidavit stating that, plaintiff's knowledge, judicial district." (citation attachment, Aqua Stoli board a defendant's If the Shipping Ltd., plaintiff's the plaintiff may vessel) or property Rule B(l). granted any located defendant The parte, ex found within the 460 F.3d at 438 filings comply with then serve on the United (if the property is a vessel or tangible property persons within tangible or intangible property) . Supp. the the court must enter an order authorizing the which States Marshal on the defendant cannot be omitted). these conditions, to the best of via in the possession district appropriate (all the other Id. ; see also Fed. R. Civ. P. order of attachment may be though of notice of service the is requested and attachment required. to Aqua the Stoli Shipping Ltd. , 460 F.3d at 438, see also Fed. R. Civ. P. Supp. Rules B(2), E(3) . Under Supplemental Admiralty Rule E, however, "any person claiming an interest in [arrested or attached property] shall be entitled to a prompt hearing at which the plaintiff required to show why the arrest vacated or other Fed. Civ. R. P. or attachment relief granted consistent Supp. Rule E(4)(f); see ("Whenever there is an arrest in rem, attached, with also shall be should not be these LAdR rules." 9(d), SDGa or whenever property is the party arrested or any person having a right to intervene in respect of the thing attached, may, upon evidence showing any improper practice the part of the libellant, libellant to show cause to resolve parties, but only to a manifest want of equity on be entitled to an order requiring the instanter why should not be vacated."). intended or the arrest or attachment This post-attachment hearing "is not definitively make a the dispute preliminary between determination there were reasonable grounds for issuing the the whether [attachment], and if so, to fix an appropriate bond" and the scope of this hearing "is left Atl. to Sun, the of F.2d 881 discretion 79-80 73, the district (3d court." Cir. Salazar 1989) v. ("Generally speaking, an exhaustive adversarial hearing is not necessary for resolution of [whether the attachment]. informal Thus, proceeding, reasonable grounds existed for issuing in many instances we would expect that an perhaps before the district court, in the nature of a conference supplemented by affidavits and legal memoranda as directed by the court might be sufficient."). The party having obtained the maritime attachment bears the burden of showing that the attachment Fed. R. Civ. P. Supp. Rule E(4)(f); Eagle Exp., To do so, evidence 2012 WL 3068791, should not LAdR 9(d), SDGa; James v. M/V 2012). the plaintiff must prove by a preponderance of the the "reasonable grounds." arrest or James, Ala. vacated. July 27, that at *3 (S.D. be attachment was 2012 WL 3068791, supported at *3. by This requires the party who obtained the attachment to demonstrate: 8 (1) it has defendant; a valid (2) prima that the facie admiralty defendant cannot claim be against the within the found district; (3) that the defendant's property may be found in the district; and (4) that there is no statutory or maritime bar to attachment. Zambrano at Fla. *2 Ltd. , (S.D. 460 F.3d v. Vivir Sept. at 20, 445). Seguros, 2016) In C.A., (citing whether determining Stoli an "the court's inquiry must known of M/Y the True time Dream, 146 the F. (citing W. F. Supp. Bulk Carriers Ltd., 762 plaintiff Supp. fails to meet 1307 its Pty. (S.D. Federal courts also the AS Fla. v. P.S. 1991)). district v. 2001) Int'l, If court the must (citing 460 F.3d at 445.) has have Ltd. facts Rederi (S.D. Ohio failed to demonstrate facie admiralty claim against Defendants. 7 1311 attachment on the Dannebrog 1307, burden, focus Shipping Zambrano, 2016 WL 5076185, at *2 Aqua Stoli Shipping Ltd., Plaintiff 2d (Australia), 1302, vacate the attachment.7 Here, attachment." WL 5076185, Aqua should be vacated, at 2016 the discretion to a valid prima As set forth in DHL's vacate an attachment where required by the equities. Zambrano, 2016 WL 5076185, at *2 Gulf Operating Co. v. Con-Dive, LLC, 371 F. App'x 67, 68-70 ProShipLine, Inc. v. Aspen Infrastructures, Ltd., 585 F.3d 2009)). Equitable vacatur may be appropriate where: (a) (citing McDermott (11th Cir. 2010); 105, 113 (2d Cir. the defendant is subject to suit in a convenient adjacent jurisdiction; (b) the plaintiff could obtain in personam jurisdiction over the defendant in the district where the plaintiff is located; or (c) the plaintiff has already obtained sufficient security for the potential judgment, by attachment or otherwise. Id. (citing Aqua Stoli Shipping Ltd., 460 F.3d at 445; Williamson v. Recovery Ltd. Pfship, 542 F.3d 43, 52 (2d Cir. 2008)). The party seeking to vacate the attachment bears the burden to establish any equitable grounds for vacatur. Id^ (citing Aqua Stoli Shipping Ltd., 460 F.3d at 445 n.5). As vacatur is appropriate based on DHL's failure to state a valid prima facie admiralty claim, the Court has not concerned itself with determining whether equitable vacatur would also be appropriate. complaint, in rem jurisdiction claims."8 claims (Id. DHL filed the present action "solely to obtain quasi over Defendants (Doc. 1, 1 71.) against 1 21 and security for DHL itself admits, however, that its Defendants are (emphasis added).) "contingent As indemnity claim[s]." DHL concedes in its complaint, "the underlying dispute arising from the charter party DHL and Defendant Newlead Shipping S.A. vessel M/V Newlead Venetico] an arbitration Kong award arbitration." which (Id. its 1 [between concerning the shipping is based on an indemnity claim for may be 71 issued (emphasis against DHL added).) in Hong Indeed, DHL states that "[u]pon a finding by the Hong Kong arbitration panel that there was a personal want of due diligence on the part of [Defendants] make the Newlead [M/V] responsible, thereafter Newlead and/or Venetico pursue its Venetico, for Newlead to DHL which [the Sub-Charterer] against Inc. is and will Shipping and/or in London Arbitration for indemnity pursuant to the time charter." fatal claim Grand seaworthy, DHL will be liable to Grand Venetico Inc. 8 While not Shipping (Id. 1 20 to its claims, (emphasis added).) the Court notes that DHL willingly admits that it does not intend to pursue direct adjudication of its claims against Defendants in this Court. (Doc. 1, 1 71.) Rather, DHL intends to pursue its claims against Defendants in arbitration to be instituted in London, England. (Id. ) As an aside, the Court notes that DHL has put forth no basis for how it intends to compel Defendant Newlead Castellano Ltd., the (now-former) owner of the Vessel, to engage in arbitration on an alter-ego claim given that the aforementioned defendant is not a named party containing the arbitration clause upon which DHL relies. 13; Doc. 1-1, at 8-9, 39.) 10 to the contract (See Doc. 1, II 8, While DHL asserts that the "Hong Kong arbitration with Sub-Charterer] (doc. 21, at has 9), been it commenced" has and provided no "is nearing evidence the aforementioned arbitration proceedings of [the resolution" the status of other than attaching to its present complaint a copy of the Sub-Charterer's "Defence and Counterclaim Submission (See Doc. 1-3; see also Doc. information from arbitration between this which DHL's present other than that indeed been Hong Kong that there (Amendment)" dated August and claims has not the Implicit is been Defendants in nearing a status the are arbitration DHL's Moreover, of of is the result of contingent, process statement completion determination settlement in that proceeding. the Sub-Charterer, against 2015. The Court can glean no regarding aforementioned initiated. arbitration St 19.) document DHL the 1, 26, the has that the admission liability or a while DHL has titled its cause of action against Defendants as a "breach of contract" claim, it has not alleged that Defendants have actually breached their agreement with DHL.9 initiated arbitration Finally, while DHL alleges to have proceedings Defendants Newlead Shipping S.A. in London, England against and Grand Venetico Inc. as of 9 See Doc. 1, I 24 ("If there is a finding in the sub-charter arbitration [between DHL and the Sub-Charterer in Hong Kong] that there was a personal want of due diligence to make the vessel seaworthy on the part of Owners for which DHL is responsible, Newlead Shipping, Newlead Bulkers, and Grand Venetico Inc. will have breached their obligations to DHL with respect to seaworthiness and maintenance, which caused the detention of the vessel [M/V Newlead Venetico] in Australia, the delays in the delivery of cargo, and the losses claimed by [the Sub-Charterer]." (emphasis added)). 11 September 2, 2016 pursuant Kingdom's Arbitration Act initiated after until importantly, this to 1996, DHL Section 14(4) of the this London arbitration was not attached the arbitration proceeding Vessel does not and, (See Doc. 100, SI 4; more include party thereto the actual owner of the attached Vessel, Newlead Castellano Ltd. United as a Defendant see also Doc. 100- 1.) Fatal is not to DHL's available attachment to obtain is that attachment security for under prospective indemnity claims. 36, 293 F. App'x 37 (2d Cir. 2008). This B contingent Bottiglieri Pi Navigazione SPA v. LLC, Rule Tradeline is because a cause of action for indemnity is not ripe until there has been either a determination of liability settlement that establishes the purported indemnitor's obligation to pay. See Armstrong v. Alabama Power Co., 1982) and (citations omitted) indemnification as or a 667 F.2d 1385, (dismissing claims premature where there 1388 for (11th Cir. contribution was neither a determination of liability nor a settlement in the underlying litigation sought) (citing Const. Co., Pi for which contribution A/S J. SPA, 293 indemnification Ludwig Mowinckles Rederi v. 559 F.2d 928, Navigazione and 932-33 (4th Cir. F. App'x at 36 was Tidewater 1977)); Bottiglieri (vacatur of Rule B attachment on contingent indemnity claim was proper claim was not ripe under English law because 12 the plaintiff had not actually made a Durango-Georgia Ga. payment Paper Co., to the third 2007 WL Sept. 21, 2007) ("[A] cause indemnity is not ripe until determination of party) ; 7023837, of at action see for there has also *7 In (Bankr. S.D. contribution been re either or a liability or a settlement that establishes the plaintifffs obligation to pay." (citations omitted)). Here, against whether liability Defendants for damages are obligated allegedly to indemnify suffered by the DHL Sub- Charterer depends in the first place upon whether DHL is found liable to the Sub-Charterer in the Hong Kong arbitration. The claims of the Sub-Charterer against DHL - upon which Defendants' alleged obligation to indemnify DHL rest - are still in dispute. Further, DHL has not alleged that the Defendants have actually breached their agreement and, while DHL has allegedly initiated arbitration against Defendants Newlead Shipping S.A. and Grand Venetico Inc. directly, it has not initiated proceedings against the Ltd. actual As owner such, of DHL's the Vessel, indemnity Defendant claims Newlead against Castellano Defendants are presently unripe for adjudication, and therefore DHL has failed to establish a prima facie admiralty claim. Thus, DHL was not entitled to attach the Vessel (and any substitute res thereof) under Rule B at the time it filed its claim. Nevertheless, DHL requests that - even if its claims are deemed premature - the Court exercise its equitable discretion 13 to uphold the attachment. Second Circuit that have such discretion. Cammell (" [A] See, Laird Holdings district DHL several cases suggested that district e.g., U.K., may court cites Patricia 339 in F.3d some Hayes 76, from the courts possess Assocs., 82-83 Inc. (2d Cir. circumstances v. 2003) disregard the prematurity of a plaintiff's claim as a matter of discretion." (emphasis original)); 339 F.2d (2d S.S. Alexandra, 1965) (M[S]ome district judges have been willing under certain circumstances to ignore the prematurity of a claim."). DHL has in 905 Inc. v. Cir. sitting 901, Greenwich Marine, admiralty failed, however, to cite any binding precedent from the Eleventh Circuit that would allow this Court to ignore DHL's failure to carry its burden to demonstrate a valid prima facie admiralty claim. See Zambrano, 2016 WL 5076185, at *2 ("If the plaintiff fails to meet attachment." 445)). its burden, (citing Moreover, Aqua it contemplated in the the district court must is cases Stoli unclear Ltd., whether cited by DHL Circuit's decision in Aqua Stoli. 460 F.3d at 445 ("[A] Shipping vacate 460 the the F.3d at discretion survived the Second See Aqua Stoli Shipping Ltd., district court must vacate an attachment if the plaintiff fails to sustain his burden of showing that he has satisfied the requirements of Rule B and E." (emphasis added) ); see also Sonito Shipping Co. v. Sun United Mar. Ltd., 478 F. Supp. 2d 532, 544 (S.D.N.Y. 14 2007). Even if such equitable discretion does exist, however, exercised under compelling circumstances." 478 F. Supp. 2d at circumstances do not 544 (citations exist here, it "should only be Sonito Shipping Co., omitted) . particularly Such in compelling light of the uncertain nature of DHL's claims against Defendants. III. Upon Vacate the foregoing, Attachment (doc. 16) CONCLUSION the Interested is GRANTED Parties' and the the issuance of process of maritime attachment Motion order and directing garnishment of the Vessel granted to DHL (doc. 2) is VACATED.10 this present vacatur, to Based on the Court has serious concerns regarding its jurisdiction over the present case. Accordingly, show cause by no later than December 5, 2016 DHL shall why the present case should not be dismissed for lack of jurisdiction. ORDER ENTERED at Augusta, November, Georgia, this /K^ day of 2016. ^L STATES IN 10 Because attachment Parties in See Fed. R. HAI DISTRICT JUDGE DISTRICT OF GEORGIA the Interested Parties are entitled to seek a vacatur of DHL's of the Vessel based on the interest claimed by the Interested the Vessel itself, DHL's Motion to Strike (doc. 17) is DENIED. Civ. P. Supp. Rule E(4)(f); LAdR 9(d), SDGa; see also Doc. 2, at 2. 15

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