China Nat'l Chartering Corp. v. Pactrans Air & Sea, Inc.

• Decision Date: 31 July 2012
• Docket Number: No. 06 Civ. 13107(LAK).,06 Civ. 13107(LAK).
• Citation: 882 F.Supp.2d 579
• Parties: CHINA NATIONAL CHARTERING CORP. n/k/a China National Chartering Co., Ltd., Plaintiff, v. PACTRANS AIR & SEA, INC., Defendant, Pactrans Air & Sea, Inc., Third–Party Plaintiff, v. Devon International Trading Inc., Devon Safety Products Inc., and Devon International Inc., Third–Party Defendants.
• Court: U.S. District Court — Southern District of New York

882 F.Supp.2d 579

CHINA NATIONAL CHARTERING CORP. n/k/a China National Chartering Co., Ltd., Plaintiff,

v.PACTRANS AIR & SEA, INC., Defendant,Pactrans Air & Sea, Inc., Third–Party Plaintiff,

v.Devon International Trading Inc., Devon Safety Products Inc., and Devon International Inc., Third–Party Defendants.

No. 06 Civ. 13107(LAK).

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

July 31, 2012.

Patrick F. Lennon, Nancy R. Siegel, Lennon, Murphy, Caulfield & Phillips, LLP, for Plaintiff.

James M. Maloney, for Non–Party PAC Logistics Service Co., Inc.

Bill Xian Feng Zou, for Defendant–Third–Party Plaintiff Pactrans Air & Sea, Inc.

MEMORANDUM OPINION

LEWIS A. KAPLAN, District Judge.

On February 10, 2011, the Court of Appeals remanded this case to this Court for a determination whether there was personal jurisdiction over defendant Pactrans Air & Sea, Inc. (“Pactrans”) sufficient to support an arbitration award obtained against it by China National Chartering Corp. (“CNCC”).¹ Following jurisdictional discovery and additional briefing, the Court now concludes that it lacks personal jurisdiction over Pactrans.

Facts

This action has followed a long and circuitous path.

The Original Transaction

In 2006, Devon International Trading (“Devon”) retained Pactrans as a freight forwarder to ship a cargo of gypsum wallboard from China to Pensacola, Florida. ² Acting as Devon's agent, Pactrans in turn chartered the M/V SANKO RALLY from CNCC to carry the cargo.³ Under the terms of the charter party, Devon was obliged to make all payments for charter hire and other costs and expenses relating to the shipment, including demurrage, while Pactrans was responsible for loading, stowing, and securing the cargo on board the vessel. ⁴

The cargo was loaded in Qingdao, China, in April 2006.⁵ Upon arrival in Pensacola in June 2006, “an inspection determined that much of the cargo had been damaged and/or destroyed during transport.” ⁶ The unloading of the cargo and the departure of the vessel were delayed several days as the parties sought to identify, sort, and release the sound portion of the cargo.⁷

Florida Litigation

Much litigation ensued. Shortly after the vessel's arrival in Pensacola, Devon sued the M/V SANKO RALLY, in rem, and Pactrans, in personam, in the Northern District of Florida for damage to the cargo.⁸ Pactrans counterclaimed for indemnity and contribution in the event it were found liable.⁹ It filed also a separate action against CNCC and Devon seeking, inter alia, the same relief as that requested by its counterclaim. ¹⁰

New York Litigation

Finally, in November 2006, CNCC filed this action and sought process of maritime attachment (“PMAG”) pursuant to Rule B of the Supplemental Rules for Admiralty or Maritime Claims of the Federal Rules of Civil Procedure. ¹¹ The complaint alleged that in April 2006, the parties had entered into a charter for the carriage of certain cargoes, but that “during the course of the charter party contract” disputes had arisen regarding the defendant Pactrans's “failure to pay demurrage due and owing” to CNCC under the charter party.¹² CNCC sought recovery in excess of $775,000—losses due to the alleged breach totaling $543,814.74, interest in the amount of $106,486.14, and estimated attorneys' fees and arbitration costs of $125,000.¹³ At the time the complaint was filed, the dispute was to be submitted to arbitration pursuant to the parties' contract.¹⁴

On November 13, 2006, this Court issued an order pursuant to Rule B of the Admiralty Rules directing that PMAG issue against all tangible and intangible property of Pactrans in an amount up to and including $775,300.88.¹⁵ After Pactrans filed an answer ¹⁶ and a verified third-party complaint ¹⁷ against Devon, the Court issued another order, on December 21, 2006, directing the issuance of PMAG against Devon in an amount up to andincluding $775,300.88.¹⁸

The case was referred to a magistrate judge, who issued a Report and Recommendation in October 2008 on Devon's motion to vacate the Rule B attachments.¹⁹ The Court adopted the magistrate's Report and Recommendation in a December 16, 2008, 589 F.Supp.2d 403 (S.D.N.Y.2008), order, granting Devon's motion to vacate the PMAG on the basis that Devon had established “that it [is] subject to in personam jurisdiction in another jurisdiction convenient to Pactrans,” referring to the Florida lawsuit. ²⁰ As a practical matter, Devon's participation in this matter in this Court then came to a close, although it remained—and still remains—a party.

The Arbitration

In the meantime, CNCC pursued arbitration in China, which resulted in March 2009 in an award in its favor and against Pactrans in the amount of $770,237.08 plus attorneys' fees and costs in the amount of $6,832.53.²¹ In July 2009, CNCC petitioned this Court to confirm the award. The motion was fully submitted on September 15, 2009.²²

One month later, the Second Circuit decided Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd.,²³ which overruled Winter Storm Shipping, Ltd. v. TPI,²⁴ which in turn had held that electronic fund transfers, or “EFTs,” processed at intermediary banks in New York were attachable property under Supplemental Rule B.²⁵ Under Jaldhi, however, such EFTs no longer could be attached under the maritime rules.²⁶

The property attached by CNCC at the outset of this action was EFTs. ²⁷ Not surprisingly, just three days after Jaldhi was published, Pactrans moved to vacate the attachment on the basis that the pre- Jaldhi law in this Circuit no longer controlled.²⁸ Days later, the Court issued an order to show cause “why the process of maritime attachment previously issued should not be vacated or modified and the action dismissed in light of” Jaldhi.²⁹

The ensuing month was a busy one. On November 13, 2009, 2009 WL 3805596, the Court granted CNCC's motion to confirm the Chinese arbitration award. ³⁰ Judgment was entered on November 16.³¹ Days later, on November 19, Pactrans moved this Court for reconsideration, vacatur of the order confirming the arbitration award, and dismissal of the action, arguing that the Court lacked jurisdiction over Pactrans in light of Jaldhi.³² On November 23, the Court—acting on its order to show cause ³³—vacated the attachment in light of Jaldhi and the Second Circuit's subsequent holding in Hawknet, Ltd. v. Overseas Shipping Agencies³⁴ that Jaldhi was retroactive.³⁵

At that point, Pactrans' motion for reconsideration and vacatur of the confirmationof the arbitral award remained pending in this Court. Pactrans nevertheless appealed the order confirming the Chinese arbitration award and sought a stay, making the same substantive arguments to the Circuit that it had made to this Court in moving to reconsider.³⁶ A single judge of the Second Circuit stayed the confirmation order pending a motion panel's consideration of Pactrans's request for a stay of that ruling pending appeal.³⁷ With both a motion for reconsideration of the Court's confirmation order pending before this Court and an appeal from the same order pending before the Second Circuit, a judge of the Second Circuit held a telephonic conference on December 3.³⁸ As a result of the conference, Pactrans withdrew its motion for reconsideration on December 7.³⁹

The activity did not stop there, however. On December 10, CNCC requested this Court to rule as to its personal jurisdiction over Pactrans based on the various filings going to that question.⁴⁰ The Court responded with a two-page order “declin[ing] the invitation to act in this context.” It explained that, while the Court had vacated the PMAG in accordance with Jaldhi and Hawknet, it had “declined to pass on the question of personal jurisdiction” more broadly because Pactrans had not yet had the opportunity to brief the question whatever “reasons independent of the Rule B attachment” might afford the Court personal jurisdiction over it. ⁴¹ The Court thus “decline[d] plaintiff's request that [it] decide the issue in a vacuum.” ⁴²

Finally, on January 19, 2011, the Second Circuit issued a summary order on Pactrans's appeal.⁴³ It concluded that “[i]n light of ... Jaldhi and Hawknet, ... the district court's maritime attachment could not have provided personal jurisdiction over Pactrans.” ⁴⁴ It specifically declined to rule on whether the confirmation order could stand on another jurisdictional basis, including waiver of any objection to personal jurisdiction, although the panel stated in dicta that it considered it “unlikely” that CNCC could establish personal jurisdiction absent the Rule B attachment.⁴⁵ It said also that “CNCC should have an opportunity, in the changed legal landscape, to assert that the district court has a basis for personal jurisdiction over Pactrans.” ⁴⁶ It therefore remanded the case to this Court for “determin[ation of] whether it [had] decided the personal jurisdiction issue before it entered judgment, and if not, [for] ent [ry of] an order to show cause why it should not dismiss the complaint for lack of jurisdiction.” ⁴⁷ The Circuit further called this Court's refusal to decide the personal jurisdiction issue during the pendancy of the Second Circuit appeal “appropriate, especially as [this Court] may have lacked jurisdiction over the case at that time, given that there were no pending post judgment motions and a timely notice of appeal had been filed, divesting the district court of jurisdiction.” ⁴⁸

Upon remand, the Court permitted CNCC to take jurisdictional discovery in aid of the Court's resolution of the Circuit's instructions, and permitted further briefing.⁴⁹

Discussion

I. Waiver or Forfeiture

“Personal jurisdiction, unlike subject-matter jurisdiction, can ... be purposely waived or inadvertently forfeited.” ⁵⁰ In determining whether such waiver or forfeiture of a defendant's personal jurisdiction objection has occurred, a court must “consider all of the relevant circumstances.” ⁵¹ Most crucially, the Federal Rules dictate that “a party forfeits its defense...