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Ancile Investment Company Limited v. Archer Daniels Midland Company

March 8, 2011

ANCILE INVESTMENT COMPANY LIMITED, PLAINTIFF,
v.
ARCHER DANIELS MIDLAND COMPANY, DEFENDANT.



The opinion of the court was delivered by: Wood, U.S.D.J.:

OPINION AND ORDER

Plaintiff, Ancile Investment Company Limited ("Plaintiff"), brings this action against Archer Daniels Midland Company ("Defendant"), alleging one claim under the laws of Brazil, and claims under New York state law for (1) breach of duty of bailment; (2) breach of contract; and (3) conversion. Plaintiff's claims are based on Defendant's alleged failure to endorse and deliver certain bills of lading in connection with Plaintiff's financing of sales of fertilizer materials shipped to Brazil.

Defendant moves to dismiss the three claims under New York law pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim for which relief can be granted.

For the reasons stated below, the Court GRANTS Defendant's motion to dismiss Plaintiff's New York claims.

I. Background

The following facts are drawn from Plaintiff's Complaint, and are taken as true for the purposes of Defendant's Rule 12(b)(6) motion. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

A. Parties

1. Plaintiff

Plaintiff is a foreign corporation organized and operating under the laws of the Cayman Islands, with its principal place of business in the Cayman Islands. Plaintiff entered into a Credit Facility Agreement with non-party, Solo Vivo Industria E Commercio De Fertilizantes LTDA ("Solo Vivo") under which Plaintiff agreed to make short term loans to Solo Vivo for the purpose of financing Solo Vivo's import and export of goods by ocean vessels. See Amended Complaint (hereinafter "Compl.") ¶¶ 7-8.

2. Defendant

Defendant is a domestic corporation organized under the laws of the State of Delaware. Defendant maintains places of business within the Southern District of New York. Defendant entered into a series of contracts with Solo Vivo (hereinafter the "Fertilizer Contracts") to sell to Solo Vivo certain raw materials for the purpose of manufacturing fertilizer. Compl. ¶¶ 14, 23,

33. These transactions were financed by Plaintiff. Id. ¶¶ 15, 24, 38.

B. Facts

Plaintiff's Complaint boils down to the following basic allegation: In exchange for Plaintiff's financing of Solo Vivo's purchases of fertilizer materials from Defendant, Solo Vivo "instructed" Defendant to deliver to Plaintiff the bills of lading for each shipment of goods as security for the financing.*fn1 Those bills of lading served as the documents of title to the goods shipped. When Defendant failed to do this, and Solo Vivo defaulted on its payment obligations, Plaintiff was left unpaid, with no way to enforce its security interest in the goods. Compl. ¶ 55.

The financing relationship between Plaintiff and Solo Vivo is set forth in a Credit Facility Agreement (hereinafter the "CFA") entered into in June 2007. Id. ¶ 7. Under the terms of the CFA, Plaintiff agreed to make short-term loans to Solo Vivo to finance Solo Vivo's importation by ocean vessel of raw materials to manufacture fertilizer. Id. ¶¶ 8-9. Plaintiff agreed to advance approximately 83.33% of the invoice amounts, and Solo Vivo would be responsible for paying the remaining 16.67% on such invoices. Id. ¶ 10.

Solo Vivo agreed to provide Plaintiff with security interests in the fertilizer materials pending repayment of the short-term loans. In particular, according to the Complaint, Solo Vivo "agreed to pledge to [Plaintiff] various forms of collateral and guarantees as security . . ., including all Bills of Lading and other documents of title for the goods being financed." Id. ¶ 11.

Plaintiff claims that the basic operation of the CFA in the transactions at issue in this lawsuit was informed by its "prior course of dealing" with Solo Vivo and Defendant. See id. ¶¶ 14-32. As alleged in the Complaint, this prior course of dealing was as follows. In June 2007, Solo Vivo contracted with Defendant to purchase fertilizer materials carried on the ship African Falcon. Id. ¶ 14. The bill of lading for this shipment bore the designation "Bill of Lading No. 4." Id. Plaintiff agreed to finance Solo Vivo's purchase. Solo Vivo instructed Defendant to, upon receipt of payment on the invoices from Plaintiff, endorse Bill of Lading No. 4 to the order of Plaintiff, and deliver the endorsed bill of lading to Plaintiff. Id. ¶¶ 16-17. The bill of lading would then serve as security for Plaintiff's loan. Id. Defendant amended the commercial invoice for the shipment to include identification of Plaintiff's bank account as the source for payment of the invoice. Id. ¶ 19.

At the time Defendant received the instruction, Defendant had previously endorsed the originals of Bill of Lading No. 4 "in blank." Id. ¶ 18. This meant that whoever physically held the bill of lading itself had title to the goods. Defendant delivered the blank endorsed bill of lading to its agent at the port to facilitate unloading of the ship. Id. After receiving payment from Plaintiff, Defendant delivered the blank-endorsed Bill of Lading No. 4 to Solo Vivo. Id. ¶ 21. Plaintiff's representative was informed of the transfer and so was able to immediately obtain from Solo Vivo the original counterparts of Bill of Lading No. 4, whereupon they were endorsed "to the order of Ancile Investment Company Limited." Id. ¶ 22.

Also in June 2007, Solo Vivo contracted with Defendant to purchase additional fertilizer materials carried on the ship Jullieta under "Bill of Lading No. 1." Id. ¶ 23. The same basic pattern of events that occurred with the African Falcon and Bill of Lading No. 4 occurred with the Julietta and Bill of Lading No. 1. Id. ¶¶ 23-31.

In August 2007, following the signing of the CFA, Solo Vivo contracted with Defendant for two further shipments of fertilizer materials to Brazil. Id. ¶ 33. The first was a shipment of muriate of potash, carried from Russia aboard the Calypso, under "Bill of Lading No. 10." Id. ¶ 34. The second was a shipment of monoammonium phosphate from China, shipped on the Abkhazia under "Bill of Lading No. PGU-04." Id. ¶ 35.

On or about October 10, 2007, Solo Vivo signed a Letter of Undertaking (the "Letter of Undertaking") with Plaintiff, pursuant to which Solo Vivo, in exchange for financing, "agreed and undertook to notify and instruct" Defendant to endorse and deliver Bill of Lading No. 10 and Bill of Lading No. PGU-04 (the "Bills of Lading") to Plaintiff. Id. ¶ 38.

In October 2007, pursuant to the CFA and the Letter of Undertaking, Solo Vivo instructed Defendant to deliver Bill of Lading No. 10, duly endorsed, to Plaintiff's representative in Brazil, upon Defendant's receipt of payment under the invoice for that shipment. Id. ¶ 39. Plaintiff subsequently made a payment, via wire transfer, of $1,606,545.11 to a bank account of Defendant's in New York. Id. ¶ 41.*fn2 After receiving Plaintiff's payment, Defendant did not endorse and deliver Bill of Lading No. 10 to Plaintiff, and instead delivered the endorsed original counterparts of Bill of Lading No. 10 to Solo Vivo. Id. ¶¶ 48-50.

A similar situation developed with respect to the August 2007 shipment of monoammonium phosphate under Bill of Lading No. PGU-04. Id. ¶¶ 40, 44, 51-54. In October 2007, Solo Vivo instructed Defendant to deliver Bill of Lading No. PGU-04 to Plaintiff. Id. ¶ 40. Plaintiff then paid 83.33% of the invoice amount to Defendant's bank account in New York. Id. ¶ 44. Defendant, however, did not endorse Bill of Lading No. PGU-04 to Plaintiff. Id. ¶ 51. Instead, Defendant permitted Solo Vivo to take possession of 3,320 of the 4000 metric tons of the monoammonium phosphate (83% of the total amount shipped). Id. ¶ 52. The remaining 680 metric tons of monoammonium phosphate were placed in a warehouse in Brazil controlled by Defendant. Id. ¶ 53.

Solo Vivo subsequently sold or otherwise disposed of the goods carried under the Bills of Lading, but failed to repay Plaintiff on its loans under the CFA. Id. ¶¶ 49, 52. Because Plaintiff was not in possession of the Bills of Lading, it was not able to control the underlying goods to enforce its security interest, and was left unpaid. Id. ¶ 55.

C. Procedural History

Plaintiff filed suit in November 2008, alleging eight claims: two claims under Brazilian law, and six claims under New York law.*fn3 In March 2009, Defendant moved to dismiss the complaint on forum non conveniens grounds. Plaintiff opposed the motion and cross-moved for summary judgment on five of its eight claims. The Court denied both motions, with leave to renew the motion for summary judgment after the parties engaged in discovery.

After the close of discovery, Defendant moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). Plaintiff opposed, and cross-moved for leave to file an amended complaint to conform the complaint to facts learned during discovery. In the briefing on that motion, Plaintiff conceded that it had failed to state a claim for conspiracy to defraud. The Court granted Plaintiff's motion for leave to amend the complaint, and denied Defendant's motion for judgment on the pleadings as moot, with leave to renew. On June 18, 2010, Plaintiff filed an Amended Complaint (hereinafter, the "Complaint"), alleging one claim under Brazilian law, and ...


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