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Shipping v. Polar Shipping

August 27, 2008

EXMAR SHIPPING, N.V. PLAINTIFF,
v.
POLAR SHIPPING, S.A. AND POLAR SHIPPING CO., LTD., DEFENDANTS.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., United States District Judge*fn1

OPINION & ORDER

On November 7, 2006, Plaintiff Exmar Shipping N.V. ("Exmar"), a Belgian entity, filed a Rule B attachment against Defendants Polar Shipping Co., Ltd. Inc., a Japanese entity, and Polar Shipping S.A., a Panamanian entity, (collectively "Polar") to secure $1,604,540.14*fn2 of Defendants' assets in New York in connection with the sale of two ships, and breaches of charter parties including speed claims and a cargo damage claim. Defendants move now to vacate Plaintiff's Rule B attachment because they argue that the underlying sale and charter claims arise out of contracts between Exmar and a third party, Eitzen/Sigas, and they are still unresolved; thus Exmar's claims against Defendants are only contingent indemnities and not valid prima facie admiralty claims under Rule B. For the reasons stated below, the motion to vacate the attachment is granted in part and denied in part.

I. FACTS

Contracts for the Sale of Ships

On September 12, 2006, Plaintiff entered into Memorandum of Agreements ("MOAs") to purchase three ships from Defendants-the Polar Belgica, the Polar Discovery and the Polar Endurance. (Second Amended Verified Complaint ("Sec. Am. Compl.") ¶¶ 7, 17; Burgess FRCP 44.1 Decl. Ex. 3, J. Ross Dec. 20, 2007 Status Letter Update to J. Baer ("Dec. 2007 Status Letter").) On the same date, Plaintiff entered into identical agreements to sell the three ships to a third party, Sigas Pte. Ltd. ("Sigas"), an entity related to Eitzen Gas, A.S. ("Eitzen"), a sub-charterer of the three ships. (Sec. Am. Compl. ¶¶ 8, 18.) Polar chartered all three ships to Exmar, and then Exmar sub-chartered them to Eitzen on April 20, 2004. (Sec. Am. Compl. ¶¶ 27, 34; Dec. 20, 2007 Status Letter.) On the same date, Plaintiff, Defendant and Eitzen, entered into three Tripartite Termination Agreements, under which the existing charter parties would terminate and Eitzen would pay the final amount owed to Plaintiff when the ships were delivered to Sigas. (Sec. Am. Compl. ¶¶ 11, 21; Dec. 20, 2007 Status Letter.)

Upon delivery, Sigas' Class Surveyors found "several deficiencies" in the Polar Belgica and Polar Discovery. (Sec. Am. Compl. ¶¶ 12, 22.) Sigas deducted $275,000 from the price of the Belgica and claimed a deduction of $475,408.45*fn3 from the price of the Discovery. (Id. ¶¶ 12, 13, 15, 23.) Though it originally claimed the same amounts in damages against Polar that Eitzen claimed against Exmar, Exmar increased its Belgica claim against Polar to $362,947.31. (Id. ¶¶13, 15.)

Cargo Damage Claim

Plaintiff sub-chartered the Polar Endurance to an unnamed third party. (Id. ¶ 28.) During a voyage between June 16 and July 2, 2004, the ship's cooling system allegedly malfunctioned and the cargo on board was damaged. (Id. ¶ 28.) The third party deducted $179,528.45 from the sum owed to Plaintiff for the charter. (Id. ¶ 29.) Exmar alleges that Polar breached the Exmar-Polar charter party because of the defective compressor and cooling system and claimed damages against Polar in the same amount. (Id. ¶ 31.) Further, while arbitration clauses are in each agreement, this Endurance sub-charterer is unnamed and there has been no effort, at least to my knowledge, to initiate arbitration. (See Hrg. Tr. 23:5-12.)

Speed Claims

Plaintiff alleges that under the charter party agreements, Defendants warranted that all three ships would achieve a guaranteed speed of "about 15 knots." (Sec. Am. Compl. ¶ 34.) Plaintiff guaranteed the same to Eitzen. (Id. ¶ 35.) Eitzen presented speed claims to Exmar, which, when translated into dollars, amounts to $286,850 and Exmar has alleged that two additional speed claims totaling $87,000 were about to be filed by Eitzen for a total of $373,850.

(Id. ¶¶ 37, 38.)*fn4 In the first Amended Complaint, Plaintiff claimed the same amount of damages against Polar under the underlying charter parties. (First Am. Compl. ¶ 40.) Plaintiff amended again, deleted Eitzen's speed claim damages and alleged Exmar's speed claim damages against Polar in the amount of $1,039,649, for a difference of $665,799.*fn5 (Sec. Am. Compl. ¶ 39.)

The Plaintiff filed its initial complaint on November 7, 2006 and the Plaintiff secured an attachment in the amount of $1,157,558.29. A supplemental order of attachment was entered on November 9, 2006 securing a total amount of $1,604,540.14. On February 28, 2007, the parties agreed to release $275,000 of the funds pursuant to a Letter of Undertaking by Defendant's P&I Club for the cargo claim.*fn6 (Ross Aff., Ex. G.) I endorsed the LOU and the case was placed in suspense while the claims were to be arbitrated in London. (See Order, Mar. 6, 2007, Doc. #15.)

Defendants moved to vacate the entire attachment February 25, 2008, or almost one and one-half years after the initial Rule B complaint was filed and simultaneously filed an Answer to assert a counter-claim for counter-security in the amount of $400,000 plus $172,000 in interest, attorney fees and costs for "its own claims that it has asserted in London arbitration against Exmar under the Three Charters." (Answer ¶15.) Plaintiff amended its complaint for the second time, on March 18, 2008. Oral argument was held on May 1, 2008.

All the agreements call for arbitration in London and application of English law. (Sec. Am. Compl. ΒΆΒΆ 16, 26, 33.) Plaintiff reported that there were two sets of arbitrations scheduled to be underway: Exmar v. Eitzen/Sigas and Polar v. Exmar. (See Dec. 20, 2007 Status Report.) Two of three arbitrators had been appointed in the ...


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