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Classic Maritime Inc. v. Limbungan Makmur SDN BHD

April 16, 2009

CLASSIC MARITIME INC., PLAINTIFF,
v.
LIMBUNGAN MAKMUR SDN BHD, LION DIVERSIFIED HOLDINGS BERHAD, AND LION DRI SDN BHD, DEFENDANTS.



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

OPINION AND ORDER

Two of the named defendants, Lion Diversified Holdings Berhad ("Lion") and Lion DRI SDN BHD ("Lion DRI"), move pursuant to Rule E(4)(f) of the Supplemental Rules of Certain Admiralty and Maritime Claims to vacate an order of maritime attachment issued by this Court on January 30, 2009. On January 29, 2009, the plaintiff, Classic Maritime Inc. ("Classic"), filed an amended verified complaint against Limbungan Makmur SDN BHD ("Limbungan"), Lion, and Lion DRI (collectively, the "defendants"), seeking an ex parte order of attachment in the amount of $20,457,047.72 in aid of a civil action filed in the Commercial Court of England for Limbungan's alleged breach of a contract of affreightment (the "Amended Complaint"). In the Amended Complaint, the plaintiff alleged that Lion agreed to guarantee Limbungan's performance under that contract and that Lion DRI is Limbungan's alter ago. The Court reviewed the Amended Complaint and the supporting papers 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 Limbungan, Lion, and Lion DRI (the "Attachment Order"). On or about February 19, 2009, a garnishee bank restrained funds of Lion DRI in the amount of $12,904,631.81.

For the reasons discussed below, the defendants' motion to vacate the Attachment Order is denied.

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.

Under the heightened pleading standard of Supplemental Rule E(2)(a), conclusory allegations are insufficient to support a claim of alter ego liability. Dolco Invs., Ltd. v. Moonriver Dev., Ltd., 486 F. Supp. 2d 261, 272 (S.D.N.Y. 2007). However, a plaintiff need not prove that the facts alleged in the complaint are true, but rather need only "demonstrate that 'reasonable grounds' exist for the attachment." Wajilam Exports, 475 F. Supp. 2d at 278-79. 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.

The following facts, taken from the Amended Complaint and the affidavits and other submitted papers, are undisputed unless otherwise indicated.

Classic is a business entity organized and existing under the laws of Monaco with its principal place of business in Monaco. (Am. Compl. ¶ 2.) Limbungan, Lion, and Lion DRI are business entities organized and existing under the laws of Malaysia and share a place of business at a single address in Kuala Lumpur, Malaysia. (Am. Compl. ¶¶ 3-5.) Lion DRI acquired Limbungan in May 2008 for a nominal cash consideration and, according to its 2008 Annual Report, has a 100% equity interest in Limbungan. (Am. Compl. ¶¶ 39, 45.)

In the Amended Complaint, Classic alleged that Limbungan was "drastically inadequately capitalized" in that its total capital as of January 23, 2009 was $0.55. (Am. Compl. ¶¶ 40, 49.) It also alleged that Lion DRI and Limbungan shared two officers and one director. (Am. Compl. ¶ 48.) Classic also submitted documentation from the Companies Commission of Malaysia showing that Lion DRI and Limbungan share the same registered address. (Am. Compl. ¶ 47.) Classic also submitted a remittance confirmation indicating that, on November 24, 2008, DRI made a payment on behalf of Limbungan on the first contract of affreightment (the "First COA") at issue in this case. (Am. Compl. ¶ 42 & Ex. 7.)

On or about July 29, 2008, Classic, as disponent owner, and Limbungan, as charterer, entered into the First COA for the carriage of certain cargos of iron ore pellets from Brazil to Malaysia. (Am. Compl. ¶ 7.) This contract was memorialized in a fixture recap,*fn1 which stated: "The performance of Limbungan Makmur to be fully guaranteed by Lion Industries Corporation Berhad and a performance guarantee notarized and signed by an authorized signatory to be issued." (Am. Compl. ¶ 30 & Ex. 1.)

On or about August 13, 2008, Classic and Limbungan entered into a second contract of affreightment (the "Second COA") whose terms were essentially identical to those of the First COA, except for different freight rates and loading dates. (Am. Compl. ¶¶ 8-9.) This contract was also memorialized in a fixture recap, which provided specific freight rates and loading dates for the Second COA, but which otherwise stated: "All further terms/details as per Classic Maritime/ Limbungan C/P Dated 29/07/2008." (Am. Compl. ¶ 10 & Ex. 2.)

Lion entered into two guarantees drafted by Classic, both dated August 28, 2008, "[i]n order to induce [Classic] to enter into" the First and Second COAs. (Am. Compl. Ex. 5; Decl. of Ee Beng Guan ("Guan Decl.") Exs. A, B.) The two guarantees are virtually identical, except for the references to the two different COAs. (Guan Decl. Exs. A, B.) Under both guarantees, Lion guaranteed and promised "to pay [Classic], on demand, any and all amounts (the "Obligations") that [Limbungan] becomes obligated to pay to [Classic] as a result of [Limbungan's] failure to perform its obligations or otherwise under the Charterparty when each of the Obligations becomes due . . . ." (Guan Decl. Exs. A, B.) Both guarantees also state that each guarantee "is . . . a guarantee of payment and not of collection . . . ." (Guan Decl. Exs. A, B.) The guarantees further state: "The Guarantor's obligations under this guarantee are independent of [Limbungan's] obligations under the Charterparty. The Counterparty may bring and prosecute separate actions against [Classic] and the Guarantor or may join the Guarantor and [Limbungan] in one action." (Guan Decl. Exs. A, B.)

On or about September 30, 2008, Limbungan notified Classic that it wanted to postpone two of the four 2008 shipments due under the Second COA until 2009, and that it nominated the loading dates for the remaining 2008 shipments for November 15-24, 2008 and November 26-December 5, 2008. (Am. Compl. ΒΆ 19.) Classic agreed to the postponements under the condition that the two ...


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