Contichem Lpg v. Parsons Shipping Ltd.
| Decision Date | 24 October 2001 |
| Docket Number | No. 99 CIV 10493.,99 CIV 10493. |
| Citation | 170 F.Supp.2d 416 |
| Parties | In the Matter of the ARBITRATION BETWEEN CONTICHEM LPG, a division of Contigroup Companies, Inc., Petitioner, and PARSONS SHIPPING LTD., Respondent. |
| Court | U.S. District Court — Southern District of New York |
Anthony J. Mavronicolas, Hill, Rivkins & Hayden, L.L.P., New York City, for petitioner.
Leo T. Crowley, Winthrop, Stimson, Putnam & Roberts, New York City, for intervenor-plaintiff.
DECISION AND ORDER
Respondent Parsons Shipping Ltd. ("Parsons") moves for reimbursement of the costs it sustained following a temporary restraining order (the "TRO") improperly sought and granted on behalf of petitioner Contichem LPG ("Contichem"). Contichem opposes the motion on several grounds discussed below. For the reasons indicated, the motion is granted.
Contichem unknowingly chartered from Parsons an apparently unseaworthy ship, the M/V World Rainbow (the "Rainbow"). Because of delays in shipping caused by Rainbow's technical and maintenance deficiencies, Contichem incurred damages that it estimates at approximately $3 million. While the underlying merits of Contichem's claims against Parsons were submitted to an arbitration panel in London by the High Court of London (the "High Court"), Contichem sought injunctive relief in various locales throughout the world. One such venue was in this Court.
On October 13, 1999, Judge McKenna of this Court issued Contichem's application for a TRO and order of attachment against Parsons pursuant to New York Civil Practice Law and Rules ("CPLR") §§ 6201, 6210 and 7502(c). The TRO was meant to preclude certain entities, among them Unibank S.A. ("Unibank") and Den Norske Bank ASA ("DNB"), from transferring any of Parsons's funds or assets, pending an order of maritime attachment and garnishment. The TRO was granted on an ex parte basis and conditioned on Contichem's posting a $100,000.00 undertaking.
Contichem served Unibank the following day with notice of the TRO, but it restrained no property because Parsons's Unibank account in question had no fund balance at the time. After such service, however, Contichem transmitted to Unibank certain money it then owed Parsons, which became subject to the TRO.
On October 27, 1999, and following a hearing, Judge McKenna issued a decision (the "Decision") denying Contichem's motion for a preliminary injunction and order of attachment and granting Parsons's motion to vacate the TRO which the Court characterized as "invalidly" obtained. See In re Contichem LPG, No. 99 Civ. 10493, 1999 WL 977364, at *2 (S.D.N.Y. Oct. 27, 1999). On appeal taken by Contichem, the Second Circuit upheld the Decision, concluding that the TRO was an attempt by Contichem to avoid maritime law doctrine which holds that an attachment can only reach funds already held by a garnishee at the time of its granting. See ContiChem LPG v. Parsons Shipping Co., Ltd., 229 F.3d 426 (2d Cir.2000).
More recently, on April 5, 2001, the London arbitration panel decided in favor of Contichem on some of its claims, while rejecting others. The panel held that Contichem did not act "wrongfully, maliciously, [or] in bad faith" in attempting "to secure their claim", and the panel denied demurrage for Parsons. Letter to the Court from Petitioner's Counsel, dated Apr. 18, 2001, Ex. A at 3.
Parsons now claims to have incurred a total of $119,576.13 in costs and damages as a result of the issuance of the TRO, outlined as follows: (1) litigation costs in moving to vacate the TRO paid to Parsons's counsel totaling $68,759.76; (2) estimated further litigation costs of approximately $5,000.00 in connection with this motion; (3) $45,441.37 in attorney's fees paid on behalf of DNB, the intended recipient of Parsons's restrained funds, which Parsons was required to pay in accordance with a loan agreement signed with DNB (DNB's counsel in London and New York intervened in the matter on DNB's behalf); and (4) $375.00 in court fees related to the current litigation.
Parsons argues that an undertaking set by a court for granting a TRO is governed by CPLR § 6313(c), which in turn cites to section 6312(b). Section 6313(c) provides that "[p]rior to the granting of a temporary restraining order the court may, in its discretion, require the plaintiff to give an undertaking in an amount to be fixed by the court, containing terms similar to those set forth in subdivision (b) of rule 6312, and subject to the exception set forth therein." CPLR § 6313(c). Section 6312(b) states, in relevant part, that "prior to the granting of a preliminary injunction, the plaintiff shall give an undertaking in an amount to be fixed by the court, that the plaintiff, if it is finally determined that he or she was not entitled to an injunction, will pay to the defendant all damages and costs which may be sustained by reason of the injunction...." CPLR § 6312(b).
Parsons notes that these CPLR provisions do not require a finding of malice on the part of the party obtaining the TRO, only that that party was not entitled to it. Parsons also claims that since there is only a broad mention of damages sustained on account of the improperly issued TRO, such damages should include attorney's fees. In opposition, Contichem argues that Parsons is subject to a restraining order issued by the High Court which bars Parsons from further proceedings in New York. According to Contichem, the claims asserted by Parsons for damages were filed as a counterclaim in the London arbitration, and this Court should reserve judgment.
The London arbitrators have released their decision which does not even address the issue of reimbursement for attorney's fees related to the improper issuance of a TRO. Therefore, assuming this Court was precluded from addressing this issue because of the High Court's injunction, or inhibited by any issues of comity in this decision, it is no longer so constrained.
Contichem asserts that the funds restrained in Parsons's account at Unibank actually belonged to DNB and not to Parsons and that Parsons has no standing to sue for damages herein. Contichem cites Koreag, Controle et Revision S.A. v. Refco F/X Assocs., Inc. (In re Koreag, Controle et Revision S.A.), 961 F.2d 341 (2d Cir.), cert. denied, 506 U.S. 865, 113 S.Ct. 188, 121 L.Ed.2d 132 (1992) and Rashi Textiles, U.S.A., Inc. v. Rhomberg Textil Gesellschaft M.B.H. of Austria, 857 F.Supp. 1051 (S.D.N.Y.1994) to support the proposition that Parsons cannot claim damages for the improper restraint of another party's property. Both of these cases, however, deal with bankruptcy law and stand for the principle that "attached funds should not be turned over to the bankruptcy estate prior to a finding that the funds were in fact the debtor's property." Rashi, 857 F.Supp. at 1056 n. 6.
The situation now before the Court is not analogous, and Contichem has cited no authority to establish that Parsons cannot claim damages even if the restrained property was, in fact, DNB's property. This is particularly true when, as here, Parsons was contractually liable to DNB for the costs DNB incurred in obtaining release of its assets. Moreover, while DNB may have had a valid contractual claim to the funds, the proceeds — at the time they were restrained — were still held in a bank account that belonged to Parsons. Theoretically, until the funds were actually transferred out of the account on Parsons's authority, they remained in Parsons's possession and control, and Parsons retained a possessory interest in the property that was effectively curtailed by the TRO.
Contichem cites Cross Props., Inc., v. Brook Realty Co., 76 A.D.2d 445, 430 N.Y.S.2d 820 (App.Div.2d Dept.1980), contending the case holds that "the remedy under CPLR 6315 ... is for the party wrongfully enjoined." Contichem Brief in Opposition, dated Feb. 23, 2001 ("Contichem Brief"), at 4. Parsons, however, was one of the parties wrongfully enjoined. The fact that the funds affected were merely held in Parsons's bank account in custody for DNB, as Contichem notes, is inapposite.
The very passage cited by Contichem from Cross tends to disprove Contichem's contention, as it allows a party wrongfully enjoined to "recover only damages and costs `which may be sustained by reason of the injunction.'" Cross, 430 N.Y.S.2d at 828 (citing CPLR § 6312(b)). Furthermore, the Cross court explicitly sustained the recovery of attorney's fees, stating that "counsel fees are recoverable as one element ... as it relates to the preliminary injunction...." Id. at 828. Here, damages and costs, including attorney's fees, sustained on account of the injunction are in fact all that Parsons seeks in its motion.
Judge McKenna refused to "decide any other issues" and concluded that the Decision was "without prejudice to any appropriate attempts by petitioner to obtain security." In re Contichem LPG, 1999 WL 977364, at *3. Contichem interprets, as res judicata, the Court's refusal to address the request for damages, fees or any other issues raised by Parsons and DNB grounded on the granting of the TRO and argues that Parsons is now precluded from bringing the instant motion.
Even assuming that this motion centers on the same transaction discussed in the Decision, res judicata takes effect only "when a final judgment has been entered on the merits of a case." Interoceanica Corp. v. Sound Pilots, Inc., 107 F.3d 86, 90 (2d. Cir.1997) (citing Securities and Exch. Comm'n v. First Jersey Secs., Inc., 101 F.3d 1450, 1463 (2d Cir. 1996)). Here, the proceeding before Judge McKenna did not consider the merits of Parsons's claim in connection with damages eligible to be paid out of the security Contichem had posted. As that issue was not litigated, there is no final adjudication on the merits entitled to res judicata effect as between the parties here that would bar Parsons's claim.
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