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Stemcor UK Ltd. v. Sesa International Ltd.

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK


May 18, 2009

STEMCOR UK LTD., PLAINTIFF,
v.
SESA INTERNATIONAL LTD., DEFENDANT.

The opinion of the court was delivered by: Sand, J

OPINION

On February 10, 2009, upon the application of Plaintiff Stemcor UK Ltd., the Court issued an order of attachment pursuant to Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure ("Supplemental Rules"). The order authorized the attachment of up to $3,033,037.20 of the assets of Defendant Sesa International Ltd. Defendant subsequently moved to vacate the attachment, alleging a lack of maritime jurisdiction. For the reasons stated below, the motion to vacate is denied.

I. Background

Plaintiff Stemcor is a foreign business entity with its principal place of business in London, England. Defendant Sesa is a foreign business entity with its principal place of business in Kolkata, India.*fn1 Between November and December of 2008, Plaintiff entered into multiple contracts with Defendant for the purchase, sale, and delivery of numerous containers of scrap steel from Europe to an eastern Indian sea port. Plaintiff alleges that Defendant failed to perform its contractual obligations, including payment of port charges, ocean freight, and demurrage costs. The contracts at issue provide for arbitration of disputes under the auspices of the London Maritime Arbitrators Association (LMAA). Plaintiff alleges that it commenced arbitration on February 3, 2009 by notifying Defendant that it had nominated an arbitrator. (Pl.'s May 4, 2009 Letter Br.) Defendant subsequently brought a motion to vacate the attachment order, contending that the contracts at issue are merely for the sale of goods and thus not maritime in nature. The question before the Court is whether the parties' contracts have a sufficient link to maritime commerce to permit the exercise of maritime jurisdiction. See, e.g., Aston Agro-Industrial AG v. Star Grain, Ltd., No. 06 Civ. 2805, 2006 U.S. Dist. LEXIS 91636, at *12 (S.D.N.Y. Dec. 20, 2006).

II. Analysis

Rule E(4)(f) of the Supplemental Rules entitles any person claiming an interest in attached property to a prompt hearing to contest the Rule B attachment. Plaintiff bears the burden of showing that the attachment was properly ordered and complied with the Supplemental Rules. Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 445 n.5 (2d Cir. 2006). However, Plaintiff is not required to prove its case at this stage of proceedings. Chiquita Int'l, Ltd. v. MV Bosse, 518 F. Supp. 2d 589, 597 (S.D.N.Y. 2007). In evaluating the vacatur motion, we look to the allegations in the complaint, as well as any allegations or evidence offered in the parties' papers or at the post-attachment hearing. Wajilam Exp. (Singapore) Pte, Ltd. v. ATL Shipping Ltd., 475 F. Supp. 2d 275, 279 (S.D.N.Y. 2006).

In determining whether the contracts fall within admiralty jurisdiction, the Court evaluates "whether the subject matter of the dispute is so attenuated from the business of maritime commerce that it does not implicate the concerns underlying admiralty and maritime jurisdiction." Folksamerica Reinsurance Co. v. Clean Water of N.Y., Inc., 413 F.3d 307, 312 (2d Cir. 2005). We also consider the contracts' "nature and character" to determine "whether [they] ha[ve] reference to maritime service or maritime transactions." Norfolk S. Ry. v. James N. Kirby, Pty Ltd., 543 U.S. 14, 23 (2004) (describing the dispute as a "maritime case about a train wreck"). Additionally, in the context of Rule B attachments, we consider the intent of the parties at the time the contract was created. "Parties to a contract must be able to know at the outset, or at least predict with relative certainty, whether they are exposing themselves" to the possibility of Rule B attachment. Glencore AG v. Bharat Aluminum Co., No. 08 Civ. 9765, 2008 U.S. Dist. LEXIS 107063, at *15 (S.D.N.Y. Dec. 15, 2008).

In evaluating the specific contracts in this case, we begin by noting that a claim need not assert a breach of charter party to be maritime in nature. See Crossbow Cement SA v. Mohamed Ali Saleh Al-Hashedi & Bros., No. 08 Civ. 5074, 2008 U.S. Dist. LEXIS 98319, at *9 (S.D.N.Y. Dec. 4, 2008). While courts have found an absence of admiralty jurisdiction over contracts for sale of goods in certain contexts,*fn2 we find that maritime jurisdiction over the contracts in this case is appropriate. When evaluated as a whole, the contracts at issue have more than a merely "speculative and attenuated" connection to maritime commerce such that this Court may properly exercise maritime jurisdiction. Folksamerica Reinsurance, 413 F.3d at 312.

Maritime jurisdiction is appropriate in this case, first, because elements of maritime transportation and commerce were integral to the contracts. These contractual elements demonstrate that the dispute implicates the business of maritime commerce, which forms the basis for federal admiralty jurisdiction. Norfolk S. Ry., 543 U.S. at 24 (defining as maritime a contract that "has reference to maritime services or maritime transactions"); accord Folksamerica, 413 F.3d at 312. The parties in this case contracted for the purchase and shipment of scrap steel from Europe to a sea port in Eastern India. These contracts were not simply for the sale and purchase of goods; rather, they dictated the terms of ocean transportation. The contracts specified the port of discharge, permitted Defendant to change the discharge port from Haldia (a major port near Kolkata) to Nhava Sheva (near Mumbai), provided that Defendant would pay terminal handling costs at the discharge port, and provided for ten days of free discharge time at the port. (Ex. A to Bennett Decl., Contract No. RMS0099, at 1--2; Mem. Law Opp'n Order to Show Cause, at 2--3.)

In finding maritime transportation central to the jurisdictional analysis, we are in agreement with Judge Preska's opinion in Noble Resources S.A. v. Yugtranzitservis Ltd., No. 08 Civ. 3876 (LAP) (Tr. of July 23, 2008). The contract at issue in Noble Resources concerned the sale of wheat. Similar to the contracts before this Court, the contract in Noble Resources set forth conditions for ocean transportation and delivery, including designation of ports and provisions for laytime and demurrage. No. 08 Civ. 3876 (Tr. at 2). The court in Noble Resources found that specific contractual provisions regarding ocean transportation implicated the fundamental interest of maritime jurisdiction, which is to protect maritime commerce. Id. We concur.

Second, maritime jurisdiction is appropriate because Plaintiff seeks demurrage costs, which are traditional maritime claims. See, e.g., C. Transp. Panamax, Ltd. v. Kremikovtzi Trade E.O.O.D., 2008 U.S. Dist. LEXIS 48688, at *7--*8 (S.D.N.Y. June 19, 2008) (finding maritime jurisdiction because the settlement agreement created obligations concerning the payment of demurrage). Defendant's alleged breach of its contractual obligations to pay for goods and to clear containers from the shipping company warehouse has allegedly resulted in Plaintiff's loss of over $3 million in demurrage charges, including port costs and warehousing charges. (Compl. ¶¶ 7--11; Tr. of Oral Argument on Apr. 22, 2009, at 14; Ex. C to Bennett Decl., Demurrage Invoices.)

Finally, jurisdiction is appropriate because the contracts at issue specifically provide for arbitration of disputes under the auspices of the London Maritime Arbitrators Association.*fn3

Agreement to arbitrate before a maritime tribunal is instructive as to "the intent of the parties at the time the contract was created." Glencore AG, 2008 U.S. Dist. LEXIS 107063, at *15. (Ex. A to Bennett Decl., Stemcor Contract No. RMS0110, at 3.) LMAA designation suggests that the parties "kn[ew] at the outset, or at least [could] predict with relative certainty," that the contracts were maritime in nature and that they were exposing themselves to the possibility of Rule B attachment. Glencore AG, 2008 U.S. Dist. LEXIS 107063, at *15; cf. James Richardson & Sons, Ltd. v. Conners Marine Co., 141 F.2d 226, 227--28 (2d Cir. 1944) (finding admiralty jurisdiction over contracts to store grain on barges because "the intent of the parties" was "further transportation of the cargoes at an uncertain date in the future," even if transportation was not to be undertaken by the defendant).

Other cases have highlighted the significance of this choice of arbitral body. For example, in Aston Agro-Industrial AG, the court found that maritime jurisdiction was not appropriate where the parties contracted for arbitration before the Grain and Feed Trade Association and not the LMAA. The court reasoned that it "would have been customary" to choose maritime arbitrators "had the contracts truly been maritime in nature." 2006 U.S. Dist. LEXIS 91636, at *13 n.5. Similarly, in finding maritime jurisdiction and upholding the attachment order in Crossbow Cement, the court emphasized that the parties chose to arbitrate the dispute in front of a member of the LMAA. 2008 U.S. Dist. LEXIS 91636, at *16. We agree that the designation of LMAA arbitration suggests that the parties viewed the contract as one pertaining to maritime commerce and that they knew or could have predicted the possibility of being subject to Rule B attachment.*fn4 (Cf. Ex. C to Pl.'s May 6, 2009 Letter Br., Letter of J. Tsatsa, President, London Maritime Arbitrators Ass'n.)

III. Conclusion

The contractual provisions specifying the terms of maritime transportation, Plaintiff's claim for demurrage damages, and the parties' agreement to submit disputes to a specialized maritime arbitral body, together underscore this dispute's close connection with maritime commerce. For the reasons set forth above, we find maritime jurisdiction to be appropriate and deny Defendant's motion to vacate the attachment.

So ordered.


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