United States District Court, S.D. New York
AMENDED ORDER AND OPINION
VALERIE CAPRONI, United States District Judge.
the Court are motions for summary judgment filed in each of
the above-captioned interpleader actions. The cases arise out
of the collapse and insolvency of O.W. Bunker & Trading
A/S (“O.W. Denmark”) and its international
subsidiaries (collectively, “O.W.”). O.W.
Denmark's United States subsidiary, O.W. Bunker USA Inc.
(“O.W. USA”), filed a petition for relief under
Chapter 11 of the Bankruptcy Code on November 13, 2014, in
the District of Connecticut. In re O.W. Bunker Holding N.
Am. Inc., No. 14-51720 (AHWS) (Bankr. D. Conn. filed
Nov. 13, 2014). O.W.'s primary line of business was
the supply of marine fuel, also known as
“bunkers.” In the aftermath of O.W.'s
insolvency, its customers were uncertain whom to pay and were
concerned about subjecting their vessels to multiple arrests
while the issue was being sorted out. They initiated these
interpleaders to resolve the competing claims to payment
asserted by O.W., its lender, and suppliers in December 2014.
The parties have been marooned in the Southern District ever
discovery, which was conducted on a consolidated basis in the
24 interpleader cases that were pending before this judge as
of June 30, 2015, the Court asked the parties to identify
“test cases” that would efficiently present for
decision the significant legal issues that needed to be
decided. Thereafter, motions for summary judgment were filed
by the claimants to the interpleader funds-O.W., its lender,
and suppliers-and motions for discharge were filed by the
vessel owners and charterers (the “Vessel
Interests”) in the three “test cases”
designated by the Court. O.W., its secured lender, and its
suppliers each moved for summary judgment on their asserted
in rem claims to the interpleader
funds. O.W. and its secured lender also assert
in personam breach of contract claims against the
Vessel Interests. This Opinion resolves the competing in
rem rights of O.W. and two of its suppliers. For the
reasons that follow, the Court DENIES the suppliers'
motions for summary judgment in Case Nos. 14-CV-10091,
14-CV-9949, and 14-CV-9287, GRANTS IN PART O.W. USA's
motion for summary judgment in Case No. 14-CV-10091, and
GRANTS IN PART ING Bank's motion for summary judgment in
Case No. 14-CV-9287.
O.W.'s Collapse and the Interpleader Actions
an understatement to say that O.W.'s collapse caused a
significant disruption in the world of maritime bunkers. As a
bunker supplier and trader, O.W. both directly supplied
bunkers to maritime vessels and acted as a bunker broker,
arranging bunker deliveries by third-parties all over the
world on behalf of O.W.'s customers.
Hapag-Lloyd, Dkt. 258 (Maloney Decl.) Ex. 35
(PriceWaterhouseCoopers Press Release, dated July 20, 2015).
O.W.'s trading business operated through a series of
back-to-back contracts: between O.W. and the time-charterer
or owner of the vessel; internally, between one O.W. entity
and another; and finally, between a local O.W. entity-here
O.W. USA-and a local supplier. Payments for many of these
transactions were outstanding at the time O.W. went out of
parties to these cases are the counterparties to several of
O.W.'s trading contracts and O.W.'s primary secured
lender, ING Bank, N.V. (“ING”). O.W.'s
insolvency put the Vessel Interests in what this Court has
described as a “Sophie's Choice.” O.W.
I, 2015 WL 4005527, at *2. Both O.W. and some of its
third-party suppliers (collectively, the “Physical
Suppliers”) demanded payment from the Vessel Interests
for fuel that had been supplied in the days leading up to
O.W.'s collapse and threatened to arrest the vessels in
order to obtain payment. Id. Facing the potential
risk of double, and in some cases triple, liability, and the
disruption to business that would have been caused by
multiple arrests of their vessels, Vessel Interests
instituted more than 30 interpleader actions in this and
other districts across the country. Id. Through the
interpleaders, the Vessel Interests sought to resolve
competing claims to payment in respect of the bunkers that
had been delivered by the physical suppliers at the direction
of O.W. In connection with each interpleader action, the
Vessel Interests deposited into the Court's register an
amount equal to the value of the bunkers supplied plus 6% per
annum. See, e.g., Hapag-Lloyd, Dkt. 5;
Nippon Kaisha Line Ltd. v. O.W. Bunker USA Inc. et
al. (Nippon) No. 14-CV-10091 (VEC), Dkt. 4.
parties identified the three test cases presently before the
Court, and the Court set a briefing schedule. See
Hapag-Lloyd, Dkt. 207. Summary judgment motions were
filed on an array of issues by several of the O.W. entities;
two of the Physical Suppliers, NuStar Energy Services, Inc.
(“NuStar”) and U.S. Oil Trading, LLC
(“USOT”); ING; and the vessel charterers
Opinion addresses a threshold issue in the interpleader
actions. The Physical Suppliers, O.W. entities, and ING each
assert an in rem right to the interpleader funds
under the Commercial Instruments & Maritime Lien Act
(CIMLA), 46 U.S.C. § 31342. CIMLA codifies the
common-law maritime lien for
“necessaries”-essential supplies and services
provided to a vessel. To the extent any party has a maritime
lien, the interpleader funds stand as a substitute
res for that lien, giving that party a priority
interest in the interpleader stake. See Hapag-Lloyd,
Dkt. 5 ¶ 2. The parties' in personam
contract claims to the interpleader funds, as well as the
Vessel Interests' motions to be discharged, will not be
resolved here; they will be addressed separately to the
extent they are not mooted by this Opinion.
The Test Cases
test cases concern fuel delivered on O.W.'s behalf in
mid-October 2014, shortly before O.W. USA filed for
bankruptcy. To give every party an opportunity to be heard,
the test cases each involve either a different Physical
Supplier or Vessel Interest. Nonetheless, as is set forth in
more detail below, the facts of the transactions at issue are
materially similar: each case involves a time-charterer that
arranged either directly or through an intermediary for O.W.
to deliver bunkers at a U.S. port. In each case, O.W.,
through its U.S. affiliate, O.W. USA, entered into a separate
contract with a Physical Supplier, either NuStar or USOT.
None of the cases involves a direct contractual link between
the Vessel Interests and the Physical Suppliers, although
after the bunkers were ordered, the Physical Suppliers did
coordinate delivery directly with the vessels and their local
agents. There is no dispute that the bunkers were provided,
that the vessels signed delivery receipts, and that in all
but one instance neither the Physical Suppliers nor O.W. has
The NuStar Test Cases: Clearlake Shipping Pte Ltd. v.
O.W. Bunker (Switzerland) SA, No. 14-CV-9287 and
Nippon Kaisha Line Ltd. v. O.W. Bunker USA, Inc.,
the test cases relate to bunkers arranged by O.W. to be
supplied at the Port of Houston. In the first transaction, on
October 14, 2014, Clearlake Shipping PTE Ltd.
(“Clearlake”) ordered bunkers from O.W.
Switzerland for two vessels, the M/V Hellas Glory
and the M/V Venus Glory. Clearlake Shipping PTE
Ltd. v. O.W. Bunker (Switzerland) SA et al.
(Clearlake), No 14-CV-9287 (VEC), Dkt. 172
(ING's Rule 56.1 Statement) at ¶¶ 2, 5. The
Clearlake-O.W. Switzerland transactions are memorialized in a
pair of substantially similar sales order confirmations.
Clearlake, Dkt. 170 (Belknap Decl.) Exs. 4, 5. Both
confirmations identify the vessel (the M/V Venus
Glory or M/V Hellas Glory), O.W. Switzerland as
“seller, ” and NuStar as “supplier.”
Id., Dkt. 170 (Belknap Decl.) Exs. 4, 5. The
confirmations also specify the bunker fuel to be delivered,
as well as the quantity, price, and date of delivery.
Id., Dkt. 170 (Belknap Decl.) Exs. 4, 5. O.W.
Switzerland referred the orders to its affiliate, O.W. USA.
Id. Exs. 6-9. O.W. USA confirmed the orders to
NuStar the same day. Id., Dkt. 170 (Belknap Decl.)
Exs. 10-13. NuStar's sales confirmations identify O.W.
USA as the buyer of the bunkers and NuStar as the seller.
Id., Dkt. 170 (Belknap Decl.) Exs. 11, 13.
second transaction at the Port of Houston involves a similar
series of back-to-back contracts. On October 7, 2014, Nippon
Yusen Kabushiki Kaisha (“Nippon Yusen”), a
company associated with the Nippon Yusen Kaisha Line family
of companies (“NYK”), entered into an agreement
with its sister company, Nippon Yusen Kaisha Trading
Corporation (“NYKTC”) for delivery of bunkers to
the M/V Riegel Leader. Nippon, Dkt. 141
(O.W. USA's Rule 56.1 Statement) ¶¶ 4-6. NYKTC
and Nippon Yusen operated pursuant to a purchase and sale
agreement that was renewed quarterly and that required NYKTC
to provide bunkers from one of several well-established
physical suppliers, one of which was NuStar. Id.,
Dkt. 136 (Belknap Decl.) Ex. 2; Dkt. 134 (NuStar's Rule
56.1 Statement) ¶ 6. NYKTC, in turn, contracted with
O.W. USA to supply the bunkers to the Riegel Leader.
Id., Dkt. 141 (O.W. USA's Rule 56.1 Statement)
¶¶ 11-12. The confirmation between Nippon Yusen and
O.W. USA is substantially the same as that between O.W.
Switzerland and Clearlake. It identifies the vessel interest,
Nippon Yusen, as the buyer, and it identifies O.W. USA as the
Seller. NuStar is identified as the supplier. Id.,
Dkt. 142 (O'Connor Decl.) Ex. E. O.W. USA then entered
into a separate agreement with NuStar to provide the bunkers
at the Port of Houston. Id., Dkt. 142 (O'Connor
Decl.) Ex I. The O.W. USA-NuStar agreement identifies NuStar
as the seller and O.W. USA as the buyer of the bunkers.
Id., Dkt. 142 (O'Connor Decl.) Ex I. In both
cases, O.W. acted as the contractual counterparty for NuStar
and the Vessel Interests. NuStar did not contract directly
with either Nippon Yusen or Clearlake.
bunkers were delivered or “stemmed” to the M/V
Riegel Leader on October 16, 2016, and to the M/V
Hellas Glory and M/V Venus Glory on October
20 and 26, 2014. Clearlake, Dkt. 168 (NuStar's
Rule 56.1 Statement) ¶ 15; Nippon, Dkt. 134
(NuStar's Rule 56.1 Statement) ¶ 17. In all cases,
delivery was coordinated between agents for NuStar and the
local agents for the vessels. Clearlake, Dkt. 168
(NuStar's Rule 56.1 Statement) ¶ 14;
Nippon, Dkt. 141 (O.W. USA's Rule 56.1
Statement) ¶ 21. While the significance of these
interactions is disputed hotly, the facts are not: NuStar and
its agents communicated with the port agents for the vessels
to “lock down the delivery time and location.”
Clearlake, Dkt. 175 (Maloney Decl.) Ex. 22 (Thompson
Tr.) at 17:23-18:14, 76:19-77:8; Nippon, Dkt. 142
(O'Connor Decl.) Ex. K (Thompson Tr.) at 17:12-18:14,
33:4-34:4, 76:19-77:8. Among other things, the local agents
arranged a time for the bunkering operation and the logistics
of delivery. Id. Delivery of the bunkers was
accepted by the chief engineer or master of each vessel, who
executed a “delivery note” or receipt.
Clearlake, Dkt. 168 (NuStar's Rule 56.1
Statement) ¶¶ 15-17; Nippon, Dkt. 134
(NuStar's Rule 56.1 Statement) ¶¶ 17-19. The
delivery notes each provide that
Any disclaimer by the purchaser of the marine fuels covered
by this note will have no force or effect. . . . Without
limiting the foregoing, no disclaimer by the purchaser of
marine fuels covered by this note will alter or waive: the
information contained in this note; the seller's maritime
lien against the receiving vessel or the cost of the marine
fuels covered by this note; or the receiving vessel's
liability for the cost of the marine fuels covered by this
Clearlake, Dkt. 168 (NuStar's Rule 56.1
Statement) ¶ 17; Nippon, Dkt. 134 (NuStar's
Rule 56.1 Statement) ¶ 18.
billed O.W. USA for all three bunkering transactions pursuant
to a “bulk contract” or “pricing
agreement” between O.W. USA and NuStar.
Clearlake, Dkt. 172 (ING's Rule 56.1 Statement)
¶¶ 18-21; Nippon, Dkt. 141 (O.W. USA's
Rule 56.1 Statement) ¶ 25. The bulk contract identifies
O.W. as the purchaser of the bunkers and provides for a
monthly true-up of the price of bunkers provided by NuStar.
Clearlake, Dkt. 175 (Maloney Decl.) Ex. 20;
Nippon, Dkt. 142 (O'Connor Decl.) Ex.
O. Under the contract, payments were due from O.W.
within 30 days of delivery. Clearlake, Dkt. 175
(Maloney Decl.) Ex. 20; Nippon, Dkt. 142
(O'Connor Decl.) Ex. O. Based on a credit
review, NuStar had previously extended O.W. USA a $40 million
line of credit; the line of credit was in effect at the time
of these events. Clearlake, Dkt. 172 (ING's Rule
56.1 Statement) ¶¶ 22-25. After O.W.'s
financial distress became known to NuStar, it sent an invoice
directly to Clearlake. Id., Dkt. 168 (NuStar's
Rule 56.1 Statement) ¶ 19.
Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading,
LLC, No. 14-CV-9949
third test case concerns bunkers provided by USOT to four
vessels at the Port of Tacoma. The orders for those bunkers
originated with time-charterer Hapag-Lloyd Aktiengesellschaft
(“Hapag-Lloyd”). In all four instances,
Hapag-Lloyd solicited bids from several bunker traders to
supply bunkers to the vessels somewhere on the West Coast of
the United States in mid-October 2014. Hapag-Lloyd,
Dkt. 227 (USOT's Rule 56.1 Statement) ¶¶ 29,
63, 92, 124. O.W. Germany offered Hapag-Lloyd several options
for delivery at Tacoma, Oakland, or Los Angeles.
Id., Dkt. 258 (Maloney Decl.) Exs. 53-56. In each
case, O.W. included pricing information for Tacoma from USOT
and identified USOT as one of several possible suppliers at
the port. Id. Personnel at Hapag-Lloyd included this
information in internal spreadsheets used to analyze the
competing bids, and in all four cases selected O.W. Germany
to provide the bunkers. Id., Dkt. 258 (Maloney
Decl.) Exs. 47-50.
four transactions were documented in a series of back-to-back
contracts between Hapag-Lloyd and O.W. Germany, O.W. Germany
and O.W. USA, and O.W. USA and USOT. Hapag-Lloyd,
Dkt. 258 (Maloney Decl.) Exs. 4, 8, 12 (M/V Santa
Roberta), Exs. 5, 9, 13 (M/V Seaspan Hamburg),
Exs. 6, 10, 14 (M/V Sofia Express), Exs. 7, 11, 15
(M/V Vienna Express). The agreements between
Hapag-Lloyd and O.W. Germany identify O.W. Germany as the
seller, Hapag-Lloyd as buyer, and USOT as supplier.
Id., Dkt. 258 (Maloney Decl.) Exs. 4-7. The
agreements between O.W. USA and USOT, in turn, identify O.W.
USA as buyer and USOT as seller. Id., Dkt. 258
(Maloney Decl.) Exs. 12-15. USOT disputes whether its
counterparty was O.W. USA or its parent, O.W. Denmark, but it
concedes that it had no contractual agreement with
Hapag-Lloyd relative to these bunkers. See id., Dkt.
261 (USOT's Resp. to ING's Rule 56.1 Statement)
¶ 10. According to USOT, its customer for the bunkers
was O.W. Id., Dkt. 227 (USOT's Rule 56.1
Statement) ¶¶ 7-8.
of the bunkers was arranged by USOT and local agents for
Hapag-Lloyd. In advance of delivery, the local agent
confirmed the orders with USOT. Hapag-Lloyd, Dkt.
227 (USOT's Rule 56.1 Statement) ¶¶ 12-13,
48-51 (M/V Santa Roberta), 80-82 (M/V Vienna
Express), 111-113 (M/V Seaspan Hamburg),
141-146 (M/V Sofia Express). USOT and the local
agent then arranged the logistics of delivery. Id.
The bunkers were delivered in mid and late October.
Id. Dkt. 227 (USOT's Rule 56.1 Statement)
¶¶ 53 (M/V Santa Roberta), 84 (M/V
Vienna Express), 116 (M/V Seaspan Hamburg),
149 (M/V Vienna Express). In each case, the chief
engineer or master of the vessel signed a bunker delivery
note or receipt, including the volume and quantity of the
fuel received. Id. Dkt. 227 (USOT's Rule 56.1
Statement) ¶¶ 55 (M/V Santa Roberta), 86
(M/V Vienna Express), 118 (M/V Seaspan
Hamburg), 151 (M/V Vienna Express). The
delivery receipts provide that:
No disclaimer stamp of any type or form will be accepted on
this bunker certificate, nor should any such stamp . . .
alter, change or waive U.S. Oil's Maritime Lien against
the vessel or waive the vessel's ultimate responsibility
and liability for the debt incurred through this transaction.
initially billed O.W., Hapag-Lloyd, Dkt. 261
(USOT's Resp. to ING's Rule 56.1 Statement) ¶ 7,
with payment due from O.W. within 30 days of delivery.
Id., Dkt. 258 (Maloney Decl.) Exs. 18, 21, 24, 27.
Previously, based on a review of O.W. Denmark's credit
history, USOT had provided O.W. a $10 million line of credit;
the line of credit was in effect at the time of these events.
Id., Dkt. 231 (ING's Rule 56.1 Statement)