The opinion of the court was delivered by: Robert P. Patterson, Jr., United States District Judge
On Appeal from the United States Bankruptcy Court for the Southern District of New York.
Appellant-Adversary Plaintiff, Assuranceforeningen Skuld (Gjensidig)-Den Danske Afdeling ("Skuld"), appeals pursuant to 28 U.S.C. § 158 from an order entered on August 1, 2002, by Honorable Cornelius Blackshear, United States Bankruptcy Judge, which denied Skuld's motion for summary judgment and granted summary judgment against Skuld to Appellees-Adversary Defendants, Allfirst Bank ("Allfirst") and Wayland Investment Funds, L.L.C. ("Wayland"), collectively "Foreign Mortgagees."*fn1
This matter arises from the Chapter 11 filing on January 15, 2002, of Millenium Seacarriers, Inc. ("Millenium") and its wholly-owned subsidiary companies (the "Subsidiaries"), the owners of nineteen ocean-going merchant vessels. Each of the vessels was owned by one of the subsidiaries and was subject to a foreign preferred ship mortgage in favor of the Foreign Mortgagees from whom Millenium had received financing. Skuld is a Norwegian protection and indemnity insurance club, which provides its vessel-owning members with protection and indemnity ("P&I") insurance against third party liabilities arising in connection with the operation of vessels entered with the insurance club.
On March 15, 2002, Skuld filed a Notice of Preferred Maritime Liens for Necessaries pursuant to the Federal Maritime Lien Act, 46 U.S.C. § 31342 for unpaid insurance premiums and calls for the year, February 20, 2001 to February 20, 2002, against ten of Millenium's nineteen vessels, totaling $984,759.53. (Declaration of Peter A. lunge dated May 21, 2002 ("Junge Decl)") Exh. F, Declaration of Jan Katkjaer dated March 14, 2002 ("Katkjaer Decl.") at ¶ 5.) Millenium Management, Inc. ("Management") was the sole owner of Millenium. Management, Millenium and the Subsidiaries were all holding companies without functioning offices or employees. The operations of these entities were conducted through the sub-managing companies, Millenium Maritime Services, Inc. ("Millenium New York")*fn2 and Millenium Maritime Services, Ltd. ("Millenium Piraeus").*fn3 (Junge Decl., Exh. C, Deposition of Vassilios Livanos ("Livanos Dep.") at 6-7, 13; Exh. D, Deposition of Sunil Damodar ("Damodar Dep.") at 15-16.)
Millenium's sole source of income was hire money generated from time chartering and spot chartering the fleet of nineteen vessels, all of which called at United States ports. (Junge Decl., Exh. D at 34, Exh. E at 28.) The chartering department for the entire Millenium fleet, which was responsible for finding and negotiating all vessel charters, was located only at Millenium New York. (Junge Decl., Exh. C at 20-21.) All wire moneys generated by the Millenium vessels were paid to Millenium's bank accounts at Bank of New York in New York City. (Junge Decl., Exh. D at 20-36.) Management and Millenium New York also maintained their bank accounts at the Bank of New York in Manhattan. (Junge Decl., Exh. D at 33.)
Sunil Damodar, the Treasurer of Management, Millenium, Millenium New York, and all the Subsidiaries, was responsible for transferring "99 percent" of Millenium's funds and for paying all the Subsidiaries' expenses, including insurance premiums. (Junge Decl., Exh. D at 19.) His office was at Millenium New York in Manhattan. (Junge Decl., Exh. D at 5, 13, 18-20, 37.)
Insurance and risk management functions for the entire Millenium fleet were conducted exclusively by Abraham Kravitz at Millenium New York in Manhattan. (Junge Decl., Exh. E at 5.) Mr. Kravitz was employed by Millenium New York and was responsible for negotiating and placing Protection and Indemnity ("P&I") insurance coverage and handling claims for all nineteen Millenium vessels. (Junge Decl., Exh. E at 8-10.) Mr. Kravitz's duties were critical to the operation of the Millenium fleet since he was responsible for obtaining $1 billion (Junge Decl., Exh. A at 94; Katsjaer Dep. at "00511") in pollution insurance for each vessel through P&I underwriters, including Skuld. (Junge Decl., Exh. E at 13-18, 28-29.) Millenium was required to have P&I pollution coverage in order to obtain a Certificate of Financial Responsibility ("COFR") for each Millenium vessel from the U.S. Coast Guard. Millenium vessels could only trade in the United States with valid COFR documentation. (Junge Decl., Exh. E at 28-29.)
Skuld issued COFR letters to Millenium for $500 million of basic coverage and sent them to Kravitz's office in New York. Mr. Kravitz then provided the COFR letters to the guarantor who provided the additional $500 million in coverage and guaranteed the COFR. (Junge Decl., Exh. B at 28-31, 81.) Through Mr. Kravitz, Millenium New York insured ten of Millenium's nineteen vessels with Skuld (Junge Decl., Exh. B at 15-16), which allowed all ten vessels to trade in American ports. (Junge Decl., Exh. B at 28.)
A premium for each vessel entered with Skuld was separately negotiated and fixed, depending on the vessel's age and gross tonnage. A separate Certificate of Entry, evidencing P&I coverage, was issued by Skuld for each vessel. (Junge Decl., Exh. E at 17-19.) All of Mr. Kravitz's negotiations for P&I coverage with Skuld were conducted from Millenium New York's office. All of Skuld's Certificates of Entry and COFR letters, which were the initial layer of insurance required for issuance of the COFRs, were sent by Skuld to Kravitz's office in Manhattan. (Junge Decl., Exh. E at 21, 30-31.)*fn4 The insurance was issued from Skuld's office in Copenhagen, Denmark, as shown by the Certificates of Entry. (Affidavit of James H. Hohenstein, dated May 30, 2002 ("Hohenstein Aff. I"), Exh. D.) The vessels insured were foreign flagged, owned by Greek and Cayman Island corporations, and traded worldwide. (Junge Decl., Exh. C at 32.) Millenium's negotiations concerning the insurance contract were conducted on the telephone with Mr. Katkjaer in Copenhagen. (Junge Decl., Exh. D at 21.) Confirmation of P&I coverage for 2001-2002 was made with Millenium by Mr. Katkjaer from Copenhagen. (Affidavit of James H. Hohenstein dated June 7, 2002 ("Hohenstein Aff. II"), Exh. A; Junge Decl., Exh. E at 62.)
The Decision of the Bankruptcy Court
The decision of the Bankruptcy Court found that there were no material facts in dispute, denied Skuld's motion for summary judgment claiming a priority of its insurance premium liens over the lien of the Foreign Mortgagees and granted the cross motion of the Foreign Mortgagees. The decision noted that Skuld's Statutes and Rules, drafted by Skuld, provide that any disputes between the parties shall be determined by arbitration in Oslo pursuant to Norwegian law, and that the first line of Skuld's Certificates of Entry reads: "This insurance is subject to Norwegian Law and Arbitration in accordance with Skuld's Statutes and Rules."
The Bankruptcy Court determined that since the transactions in question were international in character, Skuld's forum selection and choice of law clause are presumed valid and should control, citing The Bremen, et al. v. Zapata Offshore Co., 407 U.S. 1 (1972); Roby, et al. v. Corporation of Lloyd's et al., 996 F.2d 1353, 1362 (2d Cir. 1993), cert. denied, 510 U.S. 945 (1993); Sembawang Shipyard Ltd. v. M/V Charger, 955 F.2d 983 (5th Cir. 1992). It also noted that such clauses applied not only to in personam actions but to in rem ...