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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 No. 9604940), Plaintiff,
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.

          ORDER AND OPINION

          VALERIE CAPRONI, United States District Judge

         This is the third chapter of the litigation before this Court arising out of the collapse and bankruptcy in November 2014 of O.W. Bunker & Trading A/S and its subsidiaries (collectively, “O.W.”). O.W. was one of the world's largest suppliers of maritime fuel or “bunkers.” See Hapag-Lloyd, Dkt. 232 (O.W. Germany Mem.) at 2.[1] In the months and years following O.W.'s collapse, more than two dozen interpleader actions were instituted by vessel owners and charterers (the “Vessel Interests”) who had purchased fuel from O.W. in the weeks immediately prior to its collapse but had not yet paid for the fuel. The purpose of the interpleaders is to resolve competing claims to payment on O.W.'s invoices from O.W.'s primary lender, ING Bank, O.W. itself, and O.W.'s physical suppliers.

         On January 9, 2017, the Court took a significant step in that direction. The Court held that O.W., and not its physical suppliers, held maritime liens for “necessaries” in respect of the bunker deliveries. See Clearlake Shipping PTE Ltd. v. O.W. Bunker (Switzerland) SA, No. 14-CV-9287 (VEC) et al., 2017 WL 78514 (S.D.N.Y. Jan. 9, 2017) (“O.W. II”). Because O.W.'s suppliers did not assert any other claim to the interpleader stake, the Court's maritime liens decision largely resolves which party is entitled to payment.[2]

         What was initially a three- or four-sided dispute is now primarily bilateral: remaining for decision are the Vessel Interests' motions to be discharged from liability; and in personam claims and counterclaims asserted by ING, O.W. Germany, and O.W. USA against the Vessel Interests. ING and the O.W. entities asserted contractual, in personam claims to the interpleader stake and counterclaims for breach of contract against the Vessel Interests for their failure to pay for the bunkers. They moved for summary judgment on their in personam claims in three test cases: Case Nos. 14-CV-9287, 14-CV-9949, and 14-CV-10091. For the reasons that follow, the Court GRANTS ING's and the O.W. entities' motions for summary judgment.

         The Vessel Interests contend that they are entitled to be discharged from further liability in each of the test cases before the Court because the Court has already found that subject matter jurisdiction is proper and accepted the interpleader stake as an adequate substitute res. Subject to the conditions described further in this Opinion and Order, the Court agrees. Accordingly, the Court GRANTS Clearlake's motion for discharge in Case No. 14-CV-9287 and CONDITIONALLY GRANTS Nippon Yusen's motion for discharge in Case No. 14-CV-10091. The Court DENIES WITHOUT PREJUDICE Hapag-Lloyd's motion for discharge in Case No. 14-CV-9949.

         BACKGROUND

         1. Institution of the Interpleaders

         The history of these cases is described at length in the Court's opinion on subject matter jurisdiction, UPT Pool Ltd. v. Dynamic Oil Trading (Singapore) PTE. Ltd., No. 14-CV-9262 (VEC) et al., 2015 WL 4005527 (S.D.N.Y. July 1, 2015) (“O.W. I”), and its opinion on maritime liens, O.W. II, 2017 WL 78514. In brief, following O.W.'s collapse, the Vessel Interests were subject to competing demands for payment from various O.W. entities, ING, and the Physical Suppliers. O.W. I, 2015 WL 4005527, at *2. In several instances, the Physical Suppliers attempted (or threatened) to arrest the vessels in order to get paid and, in at least one instance, a vessel was actually arrested. Id.; see Chemoil Latin Am. Inc. v. M/V Birch 6, 15-CV-880 (VEC) (S.D.N.Y.). Faced with the risk of multiple liability on the same debt and seriatim vessel arrests, the Vessel Interests instituted interpleader actions pursuant to 28 U.S.C. § 1335(a) and sought injunctive protection from further attempts to arrest the vessels pursuant to 28 U.S.C. § 2361. See, e.g., Clearlake, Dkt. 1 (Compl.) ¶¶ 8-11. In most cases the Vessel Interests deposited into the Court's registry a bond or cash deposit equal to what was alleged to be the full amount owed on the O.W. invoices, plus 6% interest for the first year.[3] O.W. I, 2015 WL 4005527, at *2; see also Fed. R. Civ. P. Supp. Rule E(5)(a).

         In O.W. I, the Court concluded that subject-matter jurisdiction over these interpleaders was proper under the interpleader statute, 28 U.S.C. § 1335, and the Court's admiralty and maritime jurisdiction, 28 U.S.C. § 1333. The Court held that the claimants'-O.W., the Physical Suppliers, and ING-in personam claims against the Vessel Interests and their statutory in rem claims to a lien are two sides of the same coin. See O.W. I, 2015 WL 4005527, at *6 (“Both the [Physical Suppliers'] in rem claims against the [v]essels as well as any in personam claims that they . . . may ultimately choose to assert against the [Vessel Interests] spring from a single event: the [Physical Suppliers'] provision of fuel to the Vessels.”). Because “there is only one underlying debt, ” arising out of “a single obligation for the purchase of fuel, ” the Court concluded that the in rem rights of the claimants and their in personam rights against the Vessel Interests are “inextricably interrelated” and properly the subject of the interpleaders. Id.

         2. The Test Cases

         At the Court's direction, the parties identified three cases that would serve as “test cases” to litigate the parties' competing claims to the interpleader stakes. See O.W. II, 2017 WL 78514, at *2. The Physical Suppliers and, in certain cases, the O.W. entities and ING, asserted in rem rights to the interpleader funds under the Commercial Instruments & Maritime Liens Act (CIMLA), 46 U.S.C. § 31342. O.W. Germany, ING, and O.W. USA also moved for summary judgment on their in personam claims, each in a different test case.[4] At the same time, the Vessel Interests moved for a discharge from further liability for the bunker deliveries.

         In O.W. II, the Court held that O.W., and not the Physical Suppliers, held maritime liens on the interpleader funds. Under CIMLA, a party that provides “necessaries” to a vessel “on the order of the owner of such vessel or a person authorized by the owner” is entitled to a lien for the value of the necessaries. O.W. II, 2017 WL 78514, at *6 (quoting Integral Control Sys. Corp. v. Consol. Edison Co. of N.Y., 990 F.Supp. 295, 298 (S.D.N.Y. 1998)). The Physical Suppliers, which contracted with O.W. but which had no contractual relationship to the Vessel Interests, did not provide necessaries “on the order” of the Vessel Interests. Id. at *10. O.W., on the other hand, contracted directly with the Vessel Interests and “provided” necessaries to the vessels- albeit by subcontracting for delivery by the Physical Suppliers. Id. at *12.

         Now before the Court are the Vessel Interests' motions to be discharged from further liability and ING and the O.W. entities' motions for summary judgment on their in personam claims.[5] These issues are related: ING and the O.W. entities oppose discharging the Vessel Interests on the grounds that the stake in each of the test cases is insufficient to cover the interest and fees to which they assert they are entitled on their in personam claims.[6] The Vessel Interests oppose ING's and the O.W. entities' motions for summary judgment on their in personam claims to the extent they seek to recover for interest and fees in excess of the value of the stake.[7]Despite the significant overlap in legal issues, each of the test cases presents these arguments in a slightly different posture and on slightly different facts.

         A. The Hapag-Lloyd Test Case

         The Hapag-Lloyd test case arises out of bunker deliveries to four vessels at the Port of Tacoma in mid- and late-October 2014. Hapag-Lloyd instituted interpleaders in respect of three of the vessels, the M/V Santa Roberta, M/V Seaspan Hamburg, and the M/V Sofia Express. In accordance with the Court's order, Hapag-Lloyd posted a bond “reflecting the full invoiced amount for the applicable fuel bunkers plus interest.” Hapag-Lloyd, Dkt. 217 (May 6, 2016 Order) at 2. The Hapag-Lloyd case was joined with a related arrest action that was transferred to this Court from the Western District of Washington involving the M/V Vienna Express, No. 15-CV-6718. Hapag-Lloyd has provided a LOU to cover the cost of the bunkers provided to the M/V Vienna Express and offered to post substitute security. No. 15-CV-6718, Dkt. 23 (Hapag-Lloyd Answer) ¶ 33; see also Hapag-Lloyd, Dkt 285 (Hapag-Lloyd Reply Mem.) at 10.

         O.W. Germany moved for summary judgment on its in personam claims and counterclaims in respect of three of the vessels. Hapag-Lloyd, Dkt. 232 (O.W. Germany Mem.) at 1-2, 22. O.W. Germany argues that, in addition to the principal amount due under the relevant bunker supply contracts, it is entitled to recover fees and interest at the contract-rate of 12% per annum. See Id. at 22. Hapag-Lloyd opposes O.W. Germany's claims to the extent that it seeks fees and interest in excess of the value of the bonds and LOU. Hapag-Lloyd, Dkt. 249 (Hapag-Lloyd Opp.) at 6; Hapag-Lloyd, Dkt. 285 (Hapag-Lloyd Reply Mem.) at 8. Both O.W. Germany and ING oppose Hapag-Lloyd's motion for discharge. Hapag-Lloyd, Dkts. 259 (ING Opp.), 269 (O.W. Germany Opp.). ING argues that Hapag-Lloyd should not be discharged unless and until the Court rules on the in personam claims of the parties. Hapag-Lloyd, Dkt. 259 (ING Opp.) at 10-12. O.W. opposes discharge on the grounds that the bond and LOU are inadequate and that Hapag-Lloyd has not satisfied the statutory requirements to be discharged. Hapag-Lloyd, Dkt. 269 (O.W. Germany Opp.) at 2-6.

         B. The Nippon Test Case

         The Nippon test case arises out of a delivery of bunkers to the M/V Riegel Leader at the Port of Houston on October 16, 2016. O.W. II, 2017 WL 78514 at *3. The Riegel Leader was chartered by Nippon Yusen Kabushiki Kaisha (“Nippon Yusen”). The bunkers were ordered by an affiliated company, Nippon Yusen Kaisha Trading Corporation (“NYKTC”), which acted as Nippon Yusen's agent. See id., 2017 WL 78514 at *11 n.16. Nippon Yusen instituted this interpleader on behalf of itself and NYKTC. Nippon, Dkt. 164 (Nippon Yusen Reply Mem.) at 2-3. Unlike in the Hapag-Lloyd test case, Nippon Yusen deposited into the Court's registry cash in the amount of the disputed invoice plus 6% interest. O.W. USA answered asserting an in rem right to the stake and asserted an in personam breach-of-contract claim against both Nippon Yusen and NYKTC. See Nippon, Dkt. 98 (O.W. USA Am. Answer) at 9-13.

         O.W. USA moved for summary judgment on its in rem and in personam counterclaims. Nippon, Dkt. 143 (O.W. USA Mem.) at 5. O.W. USA contends that it is entitled to recover interest at the contract rate and fees on its in personam claim, in addition to the principal amount of the invoice. Id. at 15. On the same basis, O.W. USA opposes Nippon Yusen's motion to be discharged. Nippon, Dkt. 157 (O.W. USA Opp.) at 3-4. Nippon Yusen opposes O.W. USA's motion to the extent O.W. USA claims an entitlement to fees and interest in excess of the interpleader stake. Nippon, Dkt. 156 (Nippon Yusen Opp.) at 4.

         C. The Clearlake Test Case

         The third test case relates to bunkers delivered on O.W.'s behalf to the M/V Hellas Glory and M/V Venus Glory at the Port of Houston. O.W. II, 2017 WL 78514 at *3. The vessels' charterer, plaintiff Clearlake Shipping PTE Ltd., instituted the interpleader. Id. As in the Nippon case, Clearlake deposited into the Court's registry cash in the amount of the bunker invoices and interest at 6% per annum. Id. at *2.

         ING filed an in rem claim to the stake and an in personam counterclaim against Clearlake for breach of contract. Clearlake, Dkt. 125 (ING Am. Answer) ¶¶ 10, 13, 25-26. ING moved for summary judgment on its entitlement to the stake without specifying whether it was moving on both or just its in rem claims; its memorandum of law asserts a right to recover under both theories. Compare Clearlake, Dkt. 171 (ING Mot.) at 1 and Clearlake, Dkt. 173 (ING Mem.) at 19-21. ING also opposes Clearlake's motion for discharge on the grounds that Clearlake might be independently liable in excess of the stake on an in personam basis. Clearlake, Dkt. 195 (ING Opp.) at 10-12.

         DISCUSSION

         Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “‘Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.'” Scott v. Harris, 550 U.S. 372, 380 (2007) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986) (internal quotation marks omitted)). Courts “‘construe the facts in the light most favorable to the non-moving party and resolve all ambiguities and draw all reasonable inferences against the movant.'” Delaney v. Bank of Am. Corp., 766 F.3d 163, 167 (2d Cir. 2014) (per curiam) (quoting Aulicino v. N.Y.C. Dep't of Homeless Servs., 580 F.3d 73, 79-80 (2d Cir. 2009) (alteration omitted)).

         1. Discharge of the Vessel Interests

         Section 2361 authorizes the Court to discharge the Vessel Interests from further liability. An interpleader plaintiff may be discharged if the Court concludes that the jurisdictional requirements of Section 1335 are satisfied and that the plaintiff is “disinterested”-meaning it has renounced any claim to the stake. See Mendez v. Teachers Ins. & Annuity Assurance Ass'n & College Retirement Equities Fund, 982 F.2d 783, 787 (2d Cir. 1992). Ordinarily, a disinterested plaintiff is discharged early in the litigation. See Citigroup Glob. Mkts., Inc. v. KLCC Invs., LLC, No. 06-CV-5466 (LBS), 2007 WL 102128, at *8 (S.D.N.Y. Jan. 11, 2007). Whether to discharge the plaintiff before resolving the competing claims to the stake is within the discretion of the Court, however. Id.; see also Royal School Labs., Inc. v. Town of Watertown, 358 F.2d 813, 817 (2d Cir. 1966). When an interpleader plaintiff disputes the extent of its liability, the Court may determine the rights of the parties before addressing discharge. See Bankers Trust Co. of W. N.Y. v. Crawford, 559 F.Supp. 1359, 1364-65 (W.D.N.Y. 1983); John Hancock Mut. Life Ins. Co. v. Yarrow, 95 F.Supp. 185, 187 (E.D. Pa. 1951); 7 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1714 (3d ed. 2016).[8]

         Here the Vessel Interests have maintained throughout the proceedings that they cannot be held liable both to the O.W. entities (or ING as their assignee) and to the Physical Suppliers, and they dispute the O.W. entities' and ING's claims that they are entitled to interest at the contract rate and fees.[9] The Court's opinion in O.W. II resolves the risk that the Vessel Interests will be liable to both O.W. or ING and the Physical Suppliers on the same debt. Because the Physical Suppliers do not claim a contractual entitlement to the stake and do not have a maritime lien, there is no potential for double-liability in these cases.

         This opinion resolves the remaining points of contention between the Vessel Interests and O.W. USA and ING in the Clearlake and Nippon test cases. Because the Vessel Interests are clearly no longer “interested” in those two test cases, and because the Court has already concluded that the jurisdictional requirements of Section 1335 are met in those cases, see O.W. I, 2015 WL 4005527, at *9, there is no reason to delay further the discharge of Nippon Yusen and Clearlake. The Hapag-Lloyd test case, however, requires further proceedings in order to determine whether the stake is adequate in that case. Accordingly, the Court GRANTS Clearlake's and Nippon Yusen's motions for discharge[10] and DENIES WITHOUT PREJUDICE Hapag-Lloyd's motion for discharge.

         A. In ...


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