AGCS Marine Ins. Co. v. World Fuel Servs., Inc., 14 Civ. 5902 (PAE)
| Decision Date | 17 May 2016 |
| Docket Number | 14 Civ. 5902 (PAE) |
| Citation | 187 F.Supp.3d 428 |
| Parties | AGCS Marine Insurance Company, Plaintiff, v. World Fuel Services, Inc. and World Fuel Services Europe, Ltd., Defendants. |
| Court | U.S. District Court — Southern District of New York |
John Anthony Vincent Nicoletti, Kevin John Byron O'Malley, Nooshin Namazi, Nicoletti Hornig & Sweeney, New York, NY, for Plaintiff.
Marienna H. Murch, Martin H. Myers, Covington & Burling, San Francisco, CA, Mari Kristine Bonthuis, Covington & Burling LLP, New York, NY, for Defendants.
This case involves an insurance dispute arising from a sophisticated fraud carried out on the high seas. Defendants World Fuel Services, Inc. ("World Fuel Inc.") and World Fuel Services Europe, Ltd. ("WFSE Ltd.") (together, "World Fuel") are suppliers of fuel oil. They were the victims of an impostor purporting to work for the U.S. Government, who contracted with them to purchase a supply of marine gasoil ("MGO") worth about $17 million. After receiving the fuel via a ship-to-ship transfer, the impostor absconded with it. World Fuel, upon realizing that it had been duped, filed a claim with its insurer, plaintiff AGCS Marine Insurance Company ("AGCS"), seeking to recover under, inter alia, an "all-risk" clause in its policy. AGCS denied the claim. It then filed this action seeking a declaratory judgment that the loss was not covered.
After discovery, the parties cross-moved for summary judgment—World Fuel seeking a declaratory judgment that its loss was covered, AGCS seeking a declaratory judgment that it was not. For the following reasons, the Court grants summary judgment for World Fuel.
The material facts are undisputed. See Tr. 2.
AGCS is an insurer organized under the laws of the state of Illinois with its principal place of business in Illinois. JSF ¶ 11. World Fuel Inc. is a company organized under the laws of the state of Texas with its principal place of business in Miami, Florida. Id. ¶ 1. WFSE Ltd. is a company organized under the laws of England and Wales with its principal place of business in London, England. Id. ¶ 2. World Fuel is an international supplier of fuel oil. Id. ¶ 7.
On October 28, 2013, a World Fuel representative received an email solicitation from an individual identifying himself as "James Battell," seeking to purchase significant quantities of MGO. Id. ¶ 38; JSF Ex. 7. "Battell" represented that he was employed by the Defense Logistics Agency ("DLA"), which supplies the U.S. Government with fuel and is a regular customer of World Fuel. See JSF ¶¶ 39, 31. "Battell," however, was an impostor and, ultimately, a thief. Id. ¶ 40.
Unaware of the fraud, World Fuel reached out to its suppliers, including Monjasa A/S ("Monjasa"). Id. ¶ 44. On November 18, 2013, Monjasa sent World Fuel an offer to sell 17,000 metric tons of MGO (in other words, to supply MGO to World Fuel's customer). Id. ¶ 47. The same day, World Fuel submitted a corresponding offer to "Battell." Id. ¶ 49. "Battell," still posing as a DLA representative, accepted World Fuel's offer to sell 17,000 metric tons of MGO. Id. ¶ 50. Ultimately, on November 21, 2013, World Fuel signed a contract to provide this quantity of MGO, worth an estimated $17,284,750, to "Battell"/ "DLA." See JSF Ex. 13 ("Contract"); JSF ¶ 56. The payment terms were net 30 days (i.e. , payment was due within 30 days after delivery). See Contract. The delivery terms were "F.O.B. destination" (i.e. , the buyer would take title only upon delivery).2 World Fuel, effectively acting as a broker while Monjasa physically supplied the MGO, would have title to the cargo on a "flash title" basis.3 AGCS 56.1 ¶ 4; World Fuel 56.1 ¶ 18; World Fuel 56.1 Response ¶ 4.
On November 22, 2013, the day after executing the Contract with "Battell," World Fuel accepted Monjasa's offer to sell approximately 17,000 metric tons of MGO. JSF ¶ 57. Delivery was to be effected by ship-to-ship transfers from two Monjasa supply vessels, the "Marida Marigold" and the "Montauk," although ultimately the "African Leader" was substituted for the "Montauk." Id. ¶¶ 48, 51, 60. "Battell" nominated, supposedly on behalf of the DLA, the "Ocean Pearl" as the receiving vessel for the MGO. Id. ¶ 58.
Between December 7 and 9, 2013, off the coast of Lome, Togo, the Marida Marigold transferred approximately 11,756 metric tons of MGO to the Ocean Pearl. Id. ¶¶ 59, 61. On December 10, 2013, Monjasa sent World Fuel a Bunker Delivery Receipt ("BDR"), documenting this delivery and bearing the signature of the Ocean Pearl's Captain. Id. ¶ 62; JSF Ex. 18. Between December 10 and 11, 2013, the African Leader transferred an additional approximately 5,262 metric tons of MGO to the Ocean Pearl. JSF ¶ 63. On December 12, 2013, Monjasa sent World Fuel the BDR for this transfer. Id. ¶ 64; JSF Ex. 19.
On December 20, 2013, World Fuel sent "Battell" an invoice for $17,910,833.28 via email. Id. ¶ 68; JSF Ex. 21. On January 6, 2014, World Fuel wired Monjasa the sum of $17,061,968.73 in satisfaction of their contract. JSF ¶ 67; JSF Ex. 20. During about a two-week period in January 2014, World Fuel communicated with various (legitimate) DLA personnel regarding the status of its invoice. See JSF ¶¶ 69-70. On or about January 28, 2014, a World Fuel employee spoke with an FBI agent, who informed her that "James Battell" was not a DLA employee and that World Fuel had been defrauded. Id. ¶ 71. This was the first time World Fuel learned that "Battell" was an impostor. Id. ¶ 72. To date, the World Fuel invoice to "Battell" has not been paid; none of the MGO has been recovered; and the location of the MGO remains unknown. Id. ¶ 75-77.
Shortly after the FBI contacted World Fuel in early 2014, World Fuel submitted a claim to its insurer, AGCS. See id. ¶ 80. On or about July 17, 2014, AGCS denied the claim. Id. ¶ 82.
AGCS issued an insurance policy to World Fuel effective October 1, 2013—less than a month before "Battell" contacted World Fuel. Id. ¶ 26; see JSF Ex. 6 ("Policy"). The Policy contains three provisions relevant to this dispute. These are described in turn.
The Policy's default coverage for all "bulk liquid vessel" shipments protects World Fuel "[a]gainst all risks of physical loss or damage from any external cause ... from time of leaving tanks at port of shipment and while in transit and/or awaiting transit and until safely delivered in tanks at destination." Policy ¶ 11(D) ("All-Risk Clause"). As to any particular shipment, coverage attaches under the All-Risk Clause at the time the cargo commences transit and ends upon delivery. Id. ¶ 14. The parties agree that, in light of these provisions, the Policy is an "all-risk" insurance policy. See AGCS 56.1 Response ¶ 10.
Another provision covers physical loss incurred "through the acceptance by [World Fuel], its Agents or the shipper of fraudulent bills of lading, shipping receipts, messenger receipts, warehouse receipts or other shipping documents." Policy ¶ 37 ("F.B.O.L. Clause"). The Policy does not define the term "shipping documents."
The Policy also covers goods "sold by [World Fuel] on F.O.B., F.A.S., Cost and Freight or similar terms whereby [World Fuel] is not obligated to furnish marine insurance." Policy ¶ 69 ("F.O.B. Clause"). The F.O.B. Clause "attaches subject to its terms and conditions and continues until the goods ... are loaded onto the primary conveyance or until [World Fuel's] interest ceases." Id.
On July 30, 2014, AGCS filed the Complaint, seeking a declaratory judgment that the MGO loss is not covered under the Policy. Dkt. 1 ("Compl."). On November 26, 2014, World Fuel Inc. answered and raised two counterclaims, one for a declaratory judgment of coverage and another for breach of contract. Dkt. 4 ("Ans.").4
After discovery, the Court set a briefing schedule for the parties' summary judgment cross-motions. Dkt. 55. On November 23, 2015, at the Court's suggestion, the parties submitted a Joint Stipulation of Facts. See JSF. On December 18, 2015, World Fuel moved for summary judgment on its claim for declaratory relief, Dkt. 64, filing a memorandum of law, Dkt. 70 ("World Fuel Br."), the World Fuel 56.1, and the Bonthuis Declaration and attached exhibits. On January 15, 2016, AGCS filed a memorandum of law in opposition to World Fuel's motion and in support of its cross-motion for summary judgment, Dkt. 76 ("AGCS Br."), along with the AGCS 56.1, the AGCS 56.1 Response, and the Namazi Declaration and attached exhibits. On January 29, 2016, World Fuel filed a memorandum of law in reply, Dkt. 82 ("World Fuel Reply Br."), along with the World Fuel 56.1 Reply, the World Fuel 56.1 Response, the Bonthuis Supplemental Declaration, and attached exhibits. On February 12, 2016, AGCS filed a reply memorandum of law, Dkt. 91 ("AGCS Reply Br."), and the Namazi Supplemental Declaration and attached exhibits. On March 10, 2016, the Court heard argument.
To prevail on a motion for summary judgment, the movant must "show [ ] 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). The movant bears the burden of demonstrating the absence of a question of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
When the movant has properly supported its motion with evidentiary materials, the opposing party must establish a genuine issue of fact by "citing to particular parts of materials in the record." Fed. R. Civ. P. 56(c)(1) ; see also Wright v. Goord , 554 F.3d 255, 266 (2d Cir.2009). An issue of fact is "genuine" if the evidence is such that a reasonable jury could return a verdict for the non-moving party. SCR Joint Venture L.P. v. Warshawsky , 559 F.3d 133, 137 (2d Cir.2009). "[A...
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