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Clearlake Shipping Pte Ltd. v. O.W. Bunker Switzerland SA

United States District Court, S.D. New York

March 3, 2017

CLEARLAKE SHIPPING PTE LTD, Plaintiff,
v.
O.W. BUNKER SWITZERLAND SA, O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., O.W. BUNKER HOLDING NORTH AMERICA INC., NUSTAR ENERGY SERVICES INC., ING BANK N.V., Defendants. NIPPON KAISHA LINE LIMITED, individually and on behalf of M/V RIGEL LEADER IMO
v.
O.W. BUNKER USA INC., NUSTAR ENERGY SERVICES, INC., KIRBY INLAND MARINE LP ING BANK N.V., Defendants. HAPAG-LLOYD AKTIENGESELLSCHAFT, Plaintiff,
v.
U.S. OIL TRADING L.L.C., O.W. BUNKER GERMANY GMBH, O.W. BUNKER & TRADING A/S, ING BANK N.V. AND CREDIT AGRICOLE S.A., Defendants. U.S. OIL TRADING LLC, Plaintiff,
v.
M/V VIENNA EXPRESS, her tackle, boilers, apparel, furniture, engines, appurtenances, etc., in rem, and M/V SOFIA EXPRESS, her tackle, boilers, apparel, furniture, engines, appurtenances, etc., in rem, and HAPAG-LLOYD AKTIENGESELLSCHAFT, as claimant to the in rem defendant M/V VIENNA EXPRESS, Defendants. HAPAG-LLOYD AKTIENGESELLSCHAFT, as claimant to the in rem defendant M/V VIENNA EXPRESS, Counter-Claimant and Third-Party Plaintiff,
v.
U.S. OIL TRADING LLC, Counter-Defendant, and O.W. BUNKER GERMANY GMBH, O.W. BUNKER & TRADING A/S, ING BANK N.V., CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, a division or arm of CREDIT AGRICOLE S.A., Third-Party Defendants.

          AMENDED ORDER AND OPINION[1]

          VALERIE CAPRONI, United States District Judge.

         Before 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).[2] 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 since.

         After 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.[3] 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.

         BACKGROUND

         1. O.W.'s Collapse and the Interpleader Actions

         It is 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 business.

         The 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.

         The 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 themselves.

         This 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.

         2. The Test Cases

         The 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 been paid.[4]

         A. 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., No. 14-CV-10091

         Two of 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.

         The 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.

         The 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 note.

Clearlake, Dkt. 168 (NuStar's Rule 56.1 Statement) ¶ 17; Nippon, Dkt. 134 (NuStar's Rule 56.1 Statement) ¶ 18.

         NuStar 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.

         B. Hapag-Lloyd Aktiengesellschaft v. U.S. Oil Trading, LLC, No. 14-CV-9949[5]

         The third test case concerns bunkers provided by USOT to four vessels at the Port of Tacoma.[6] 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.

         All 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.

         Delivery 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.

Id.

         USOT 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) ...


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