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Transfield ER Cape Ltd. v. STX Pan Ocean Co. Ltd.

March 17, 2009

TRANSFIELD ER CAPE LTD., PLAINTIFF,
v.
STX PAN OCEAN CO. LTD., DEFENDANT.



The opinion of the court was delivered by: John G. Koeltl, District Judge

MEMORANDUM OPINION AND ORDER

Defendant STX Pan Ocean Co. Ltd. ("STX") moves pursuant to Rule E(4)(f) of the Supplemental Rules for Admiralty or Maritime Claims to vacate an order of maritime attachment issued by this Court on February 13, 2009. On February 11, 2009, the plaintiff, Transfield ER Cape Ltd. ("Transfield"), filed a verified complaint against STX, alleging a claim for breach of a charter party in the amount of $2,743,269.99, and seeking an ex parte order of attachment in aid of a London arbitration (the "Verified Complaint"). The Court reviewed the Verified Complaint and attorney affidavit and, after determining that the conditions of Supplemental Rule B appeared to exist, entered an order authorizing process of maritime attachment and garnishment against the assets of STX (the "Attachment Order"). On February 24, 2009, Transfield filed an amended verified complaint (the "Amended Verified Complaint") seeking damages in the amount of $4,568,046.96, representing the amount of damages plus attorneys' fees and costs. On the same day, the Court issued an amended order of attachment (the "Amended Attachment Order"). However, due to a clerical error in the application for the attachment, the Amended Attachment Order authorized attachment and garnishment for only $3,395,207.94, corresponding to the amount of damages without attorneys' fees and costs. Transfield has accordingly requested that the Court issue a revised order of attachment for the full $4,568,046.96 requested in its Amended Verified Complaint.

For the reasons discussed below, the defendant's motion to vacate the order of attachment is granted. The plaintiff's request to issue an amended order of attachment is denied as moot.

I.

Rule E(4)(f) provides that "[w]henever property is arrested or attached, any person claiming an interest in it shall be entitled to a prompt hearing at which the plaintiff shall be required to show why the arrest or attachment should not be vacated or other relief granted consistent with these rules." In order to obtain an attachment, apart from satisfying the filing and service requirements of Rules B and E, the plaintiff bears the burden of showing that "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 be found within the district; and 4) there is no statutory or maritime law bar to the attachment." Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 445 (2d Cir. 2006); Wajilam Exports (Singapore) Pte. Ltd. v. ATL Shipping Ltd., 475 F. Supp. 2d 275, 278 (S.D.N.Y. 2006). The Court must vacate an attachment if the plaintiff fails to sustain its burden of demonstrating that the requirements of Rules B and E are satisfied. Aqua Stoli, 460 F.3d at 445. In determining whether the plaintiff has met this burden, a district court may consider evidence outside of the pleadings. SPL Shipping Ltd. v. Gujarat Cheminex Ltd., No. 06 Civ. 15375, 2008 WL 4900770, at *1 (S.D.N.Y. Sept. 10, 2008) (citing Williamson v. Recovery Ltd. P'ship, 542 F.3d 43, 53 (2d Cir. 2008); Wajilam Exports, 475 F. Supp. 2d at 278-79.

II.

In the Amended Verified Complaint, Transfield asserts the following facts. Transfield is a foreign business entity organized under the laws of the British Virgin Islands. (Am. Compl. ¶ 2.) STX is a foreign business entity with its principal place of business in Seoul, Korea. (Am. Compl. ¶ 3.)

On or about October 18, 2007, Transfield entered into a charter party agreement with STX to charter the M/V Heng Shan to STX (the "Agreement"). (Am. Compl. ¶ 4.) Under the Agreement, the parties agreed to the arbitration of disputes arising out of the Agreement in London with English law to apply. (Am. Compl. ¶ 6.) On February 4, 2009, STX's thirty-third hire payment of $2,015.073.21 became due and payable to Transfield, but STX failed to remit any payment. (Am. Compl. ¶ 8.) On February 20, 2009, STX's thirty-fourth hire payment became due and payable. (Am. Compl. ¶ 9.) STX remitted partial payment of $633,563.86, leaving an outstanding balance of $1,380,134.73. (Am. Compl. ¶ 9.) Together with the outstanding balance from the unpaid thirty-third hire payment, STX failed to pay a total of $3,395,207.94 to Transfield. (Am. Compl. ¶ 10.)

STX readily concedes that it did not pay the alleged amounts to Transfield and that it therefore owes those amounts to Transfield. In an attorney affidavit submitted in connection with its motion to vacate, however, STX explains that it did not remit payment to Transfield in order to comply with a Korean court order which prohibited it from making those payments to Transfield. On or about January 29, 2009, a creditor of Transfield, Hanjin Shipping Co., Ltd. ("Hanjin"), obtained a provisional attachment order from the Seoul Central District Court (the "Korean Attachment Order"). (Magali Decl. ¶ 4.) The Korean Attachment Order lists Transfield as the "Debtor" and STX as the "3rd Debtor," and states that "[i]t is not allowed for the third debtor to pay the above debts to the debtor." (Magali Decl. Ex. C.) The claimed amount of the debt is listed as $3,395,216, (Magali Decl. Ex. C), which is roughly the same amount that STX failed to pay Transfield on the thirty-third and thirty-fourth hire payments. The Korean Attachment Order specifically allowed Transfield to apply for suspension of the execution or its cancellation by placing $3,395,216 in escrow. (Magali Decl. Ex. C.)

STX attaches emails showing that it advised Transfield on both February 4 and 6 that it had received the Korean Attachment Order and informing Transfield that the Korean Attachment Order prohibited any payment by STX to Transfield of up to $3,395,216. (See Magali Decl. Ex. D.) On February 6, STX also offered to enter into a three-way escrow agreement with Transfield and Hanjin, pursuant to which STX would pay into the escrow account the $2,015,073.21 due on the thirty-third hire payment, but Transfield rejected that offer. (Magali Decl. ¶¶ 7-8.) Transfield did not mention the existence of the Korean Attachment Order or STX's offer to enter into an escrow agreement in any of its papers at the time it filed its Verified Complaint on February 11, 2009, or at the time it filed its Amended Verified Complaint on February 24, 2009.

III.

Defendant STX moves to vacate the order of attachment on three alternative grounds. First, STX argues that the Transfield has no valid prima facie admiralty claim against it because STX was barred by a court order from making the hire payments at issue to Transfield. Second, it urges that the attachment be vacated for equitable reasons. Third, it asks the Court to exercise its discretion to vacate the attachment in the interest of international comity.

A.

STX first argues that Transfield does not have a valid prima facie maritime claim against STX, reasoning that because STX was prohibited by a court order from making the said hire payments to Transfield, those funds are not "due and owing" to Transfield. In support of this position, STX cites Lowenschuss v. Kane, 520 F.2d 255, 265 (2d Cir. 1975), which holds that impossibility caused by a judicial order prohibiting performance on a contract can excuse a party's performance if the fault of the party owing the performance did not contribute to the judicial order. Transfield does not clearly respond to this ...


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