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KOREA EXP. USA, INC. v. K.K.D. IMPORTS

June 1, 2000

KOREA EXPRESS USA, INC., PLAINTIFF,
V.
K.K.D. IMPORTS, INC. AND NATIONSBANC COMMERCIAL CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Buchwald, District Judge.

OPINION AND ORDER

Plaintiff Korea Express USA, Inc. ("Plaintiff" or "Korea Express") brings this contract action to recover unpaid freight charges. Currently pending before the Court is a motion to dismiss the complaint by defendant Nationsbanc Commercial Corporation ("Nationsbanc") on the grounds of lack of subject matter jurisdiction and improper venue.*fn1 In brief, Nationsbanc alleges that since there is no maritime contract between itself and plaintiff, there is no admiralty or maritime jurisdiction. Alternatively, Nationsbanc argues that venue is improper in the Southern District of New York because of the case's stronger connection to New Jersey. For the reasons discussed below, Nationsbanc's motion to dismiss is denied. However, we find that plaintiff has not established that venue lies in the Southern District of New York and, moreover, in the interest of justice order the case to be transferred to the District of New Jersey.

BACKGROUND

Plaintiff Korea Express is a New Jersey corporation that "operat[es] as a duly tariffed and bonded non-vessel-operating common carrier." Plaintiffs Amended Complaint ("Am.Comp.") ¶ 3. Currently, it seeks to recover $40,315.00 in freight charges from defendant KKD,*fn2 a company that contracted with Korea Express for the shipment of cargo between Asia and the United States. Nationsbanc, a Georgia corporation, is a heavily secured investor in KKD. Since KKD is apparently insolvent, Korea Express is also proceeding against Nationsbanc on the theory that Nationsbanc exercised a degree of control over KKD sufficient to confer it with the status of a presumptive owner. See Pl. Mem. at 7-15 (citing, inter alia, A/S Dampskibsselskabet Torm v. Beaumont Oil Ltd., 927 F.2d 713 (2d Cir. 1991)).

Nationsbanc provided financing to KKD through a July 3, 1996 "Letter of Credit." Pl. Mem. Ex. F. In return, KKD signed a July 3, 1996 "Factoring Agreement," which provided, in relevant part, that KKD would:

grant [Nationsbanc] a security interest in all of [KKD's] present and future accounts, instruments, contract rights, chattel, paper, documents and general intangibles, (whether arising before or after termination of this Agreement) and all returned, repossessed, and reclaimed goods, and books and records relating thereto, to secure all of [KKD's] Obligations [to Nationsbanc]. [KKD] further sell[s] and assign[s] to [Nationsbanc] all [KKD's] title and/or interest in the goods (unless released by [KKD]) represented by Receivables as well as goods returned by or repossessed from Customers, all of [KKD's] rights against third parties with respect thereto; [KKD] will cooperate with [Nationsbanc] in exercising any rights with respect to the goods.

Pl. Mem. Ex. B, ¶ 5. The Factoring Agreement grants to Nationsbanc a power of attorney to "receive, open, and dispose of all mail addressed to [KKD] pertaining to Receivables" and to endorse KKD's name on any "notes, acceptances, checks, drafts, money orders, and other evidences of payment of receivables that may come into [Nationsbanc's] possession." Id. ¶ 4.

Nationsbanc acted almost immediately to protect its interests under the Factoring Agreement. Most importantly, on July 9, 1996, Nationsbanc had KKD's president sign an additional instrument, which informed the warehouse holding its goods that it had granted to Nationsbanc "a security interest in all of our present and future inventory" and requested that the warehouse send a monthly letter to Nationsbanc confirming the amount of the inventory and honor any instructions related to the goods issued by Nationsbanc. Pl. Mem. Ex. G. Throughout 1997 and 1998, KKD apparently met part of its obligations to Nationsbanc by assigning at least some of its receivables directly to the bank. Id. Exs. H, I.

Between February 1, 1999 and March 31, 1999, KKD contracted with Korea Express to convey cargo from various ports in Asia to the United States. As is customary shipping arrangements, the terms entered into between KKD and Korea Express are included in the bills of lading for the various shipments. Pl. Mem. Ex. A. The bills clearly read:

IN ACCEPTING THIS BILL OF LADING, the Shipper, Consignee, Holder hereof, and Owner of the goods, agree to be bound by all of its stipulations, exceptions and conditions, whether written, printed or stamped on the front or back herepf [sic], as well as the provisions of the above Carrier's published Trade Rules and Regulations, as fully as if they were all signed by the Shipper, Consignee, Holder or Owner. . . .

Id. The bills listed KKD as the "Consignee" and several Asian companies as "Shipper/Exporter." Id. They in no way referred to Nationsbanc. Id.

Despite this spate of activity, KKD defaulted on its obligations to Nationsbanc in April of 1999. Defendant's Notice of Motion ("Def.Mot."), Ex. O. KKD's president, Seong D. Park ("Park"), signed a "Surrender and Abandonment of Collateral" on April 7, 1999. Id. Among other things, KKD acknowledged its debt to Nationsbanc in the amount of $27,107,572 plus interest. Id. Pursuant to Nationsbanc's secured position vis à vis KKD, the document granted to Nationsbanc "all rights of possession in and to" KKD's "inventory, accounts, equipment, general intangibles, contract rights, books and records, chattel paper, leases and other personal property." Id.

Three weeks later, on April 20, 1999, officers of Korea Express visited the offices of KKD in order to demand payment for outstanding freight charges. Affidavit of Seong D. Park, dated March 24, 2000, appended to Pl. Mem. as Ex. E. ("Park Aff."). At that time, Park "informed [them] that Korea Express would have to look to Nationsbanc for payment since Nationsbanc was the owner of the goods [that Korea Express had shipped] and because KKD did not have any control over the goods or payment." Nationsbanc's counsel subsequently provided Korea Express with copies of the relevant security agreements, confirming its rights to the goods. Aff. of Stephen C. Pascal, dated Oct. 11, 1999 ("Pascal Aff."), ¶ 4.

Korea Express filed its initial complaint ("Comp.") in this suit on July 14, 1999, alleging contract claims against both KKD and Nationsbanc. It asserted maritime jurisdiction pursuant to an "in rem lien for unpaid freight." Comp. ΒΆ 12. However, in August, Nationsbanc's attorney wrote to counsel for KKD asserting the basic proposition that since Korea Express had surrendered possession of the goods, it could "not enforce a maritime lien for freight on that cargo." Letter of Stephen C. Pascal, dated August 10, 1999, appended to Def. Mot. as Ex. C. As a result, plaintiff amended its complaint on September 27, 1999 to withdraw its claim of ...


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