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

• Citation: 239 F.Supp.3d 674
• Decision Date: 03 March 2017
• Docket Number: 15–CV–6718 (VEC),14–CV–9287 (VEC),14–CV–10091 (VEC),14–CV–9949 (VEC)
• Parties: 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.
• Court: U.S. District Court — Southern District of New York

239 F.Supp.3d 674

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,andO.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.

14–CV–9287 (VEC)

14–CV–10091 (VEC)

14–CV–9949 (VEC)

15–CV–6718 (VEC)

United States District Court, S.D. New York.

Signed March 3, 2017

James H. Hohenstein, Marie Elizabeth Larsen, Holland & Knight LLP, New York, NY, for Plaintiff.

Thomas Hunt Belknap, Jr., Kate Bea Belmont, Blank Rome LLP, Bruce G. Paulsen, Brian Paul Maloney, Seward & Kissel LLP, New York, NY, Keith Bernard Letourneau, Blank Rome LLP, Houston, TX, for 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...