Dolco Inv., Ltd. v. Moonriver Development, Ltd.
| Decision Date | 26 April 2007 |
| Docket Number | No. 06 Civ. 12876(RWS).,06 Civ. 12876(RWS). |
| Citation | 486 F.Supp.2d 261 |
| Parties | DOLCO INVESTMENTS, LTD., Cypress, Plaintiff, v. MOONRIVER DEVELOPMENT, LTD., GML, Ltd., and Kevin Bromley, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Lyons & Flood, LLP, by: Kirk M. Lyons, New York, NY, for Plaintiff.
Greenberg Traurig, LLP, by: Sanford M. Saunders, Jr., Washington, DC, for Defendant.
Defendants Moonriver Development, Ltd. ("Moonriver"), GML, Ltd. ("GML") and Kevin Bromley ("Bromley") (collectively, "Defendants"), have moved under Rules B and E(4)(f) of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Fed.R.Civ.P. to vacate the Court's Ex-Parte Order for Process of Maritime Attachment and Garnishment dated November 2, 2006 (the "Order") obtained by Plaintiff Dolco Investments, Ltd., Cyprus ("Dolco") and to dismiss the Verified Complaint (the "Complaint") of Dolco against them under Fed.R.Civ.P. 12(b), or alternatively to require that Plaintiff Dolco post security for the funds subject to attachment.
Dolco has moved to amend its complaint, substituting the proposed verified amended complaint (the "Amended Complaint") pursuant to F.R.Civ.P. 15(a). For the reasons set forth below, the motion to vacate the attachment is granted, the motion to dismiss is granted as to GML, and the motion to file an amended complaint is granted.
On November 2, 2006, Dolco filed its admiralty complaint seeking damages of $3,490,399.65 and an attachment. The complaint and the ex parte request for an attachment were submitted and an order of attachment was entered on November 2, 2006 (the "Order").
The Defendants' motion to vacate the attachment was marked fully submitted on January 3, 2007. In its opposition to the motion Dolco withdrew its claims against Bromley (Plaintiff's Memorandum in Opposition at 1).
Moonriver is a company formed under the laws of the British Virgin Islands and the owner of the M/V Constellation (the "Vessel"). The Vessel is a passenger ship of approximately 290 feet and 24 cabins. It is worth approximately $50,000,000. Moonriver is a wholly owned subsidiary of GML which is a company registered in Gibraltar. GML is a diversified financial holding company, established in 1997, and it owns strategic interests in a number of companies, as well as a number of financial portfolio investments in stock markets internationally.
On November 14, 2005, Moonriver executed the Operational Items Agreement ("Agreement") with Dolco under which Dolco agreed to supply operational items to Moonriver. On September 8, 2006, by letter to Dolco, Moonriver terminated the Agreement for cause pursuant to section 7 of the Agreement. The Agreement provides that defendant Moonriver is the owner of the Vessel and that plaintiff had agreed to supply to the owner the Operational Items defined therein as:
"OPERATIONAL ITEMS" means the supply of crew for the Vessel, organising the insurance, of the Vessel in all forms, repair and maintenance of the Vessel and other general expenses incurred in operating the vessel including, but not limited to, telecommunications services, staff uniforms, medical supplies, port disbursements and costs and warehousing of fuel and provisions.
Under an oral contract (the "Oral Agreement") for an additional payment every month, Dolco would provide further services such as technical support, administration, supervision, preparation, assistance and support of the vessel and to rectify the fluctuation of the U.S. dollar exchange rate.
On September 14, 2006, Dolco filed a petition for, and obtained, an arrest order of the Vessel in the Commercial; Tribunal for Menton, France in order to secure its claims against Moonriver for breach of the Agreement. Due to the bad weather conditions, the Vessel was compelled to shift along the coast out of the Menton jurisdiction. On September 16, 2006, Dolco filed a similar petition in the Commercial Court of Marseille, France, based on an alleged claim of $8,172,562.24 in damages. On September 18, 2006, the Commercial Court in Marseille issued a second arrest order and Dolco arrested the Vessel.
On October 6, 2006, the French Court issued another order whereby it reduced the requested amount of security. The court held that the Dolco's claims consisted both of maritime claims and ancillary nonmaritime claims. In reducing the attachment to the amount of the maritime claim, the court distinguished between those amounts related to expenses already incurred by Dolco for account of Moonriver in connection with the use of the Vessel, determined to be maritime claims as defined in Article 1-d of the International Convention for the Unification of Certain Rules Relating to Arrest of Sea-going Ships (Brussels, May 10, 1952), and those remaining amounts which represented expenditures unrelated to the operations of the vessel, determined not to qualify as maritime claims. In particular, in support of its petition for the arrest of the Vessel, Dolco claimed the outstanding balance for budget installments and commission fees due for August — October 2006 in the amount of $772,562.24 plus pre judgment interest, and economic damages as a result of the repudiatory breach of the agreements by Moonriver in the amount of $7,400,000.
By letter of April 2, 2007, the Defendants have advised that the Vessel is no longer restrained pursuant to the arrest order issued by the Commercial Court of Marseille an appropriate bond having been posted.
Pursuant to the. Agreement, the dispute between the parties is currently before the Bench Division Commercial Court in London.
In the courts of all three jurisdictions in which it has filed claims, Dolco has alleged losses and damages suffered as a result of Moonriver's alleged breach of the Agreement. The amount of Dolco's alleged damages has varied from $8,172,562.24 in the French Courts to $3,314,229.20 in English Court and $3,490,399.65 in this Court.
As indicated in the November 22 and December 8 Notices of Attachment, two electronic fund transfer ("EFT") payments were attached at Citibank, in the total amount of $625,861.02 at its Funds Transfer Network ("FTN") unit in Buffalo, New York. The service of the attachment Order on Citibank was made in the Eastern District of New York.
Citibank has advised Dolco that the FTN Unit was an office of Citibank, its employees were employed directly by Citibank, and the FTN Unit's role was limited to operating an "OFAC filter" which for technical reasons could not be located at Citibank's headquarters located at 399 Park Avenue in New York, New York. The EFTs captured by the FTN Unit are ultimately controlled and managed by Citibank New York. (Lyons Aff., Ex. B).
The EFTs restrained by Citibank indicate that GML was the originating party and HSBC London was the originating bank. Citibank is the recipient bank for the payees, Covington & Burling and APCO.
"[M]aritime attachment is a feature of admiralty jurisprudence that antedates both the congressional grant of admiralty jurisdiction to the federal district courts and the promulgation of the first Supreme Court Admiralty Rules in 1844." Aurora Mar. Co. v. Abdullah Mohamed Fahem & Co., 85 F.3d 44, 47 (2d Cir.1996). To begin the process by which party may attach another party's assets, a plaintiff must file a verified complaint seeking attachment and an affidavit stating that, to the best of the plaintiff's knowledge, the defendant cannot be found within the judicial district. Fed.R.Civ.P.Supp. Rule B(1). Thereafter, Rule E(4)(f) provides that any person. claiming an interest in the attached property is "entitled to a prompt hearing at which the plaintiff shall be required to show why the arrest or attachment should not be vacated or other relief granted consistent with these rules." Id. at E(4)(f). Therefore, the plaintiff has the burden to show that the attachment should not be vacated, and at the hearing the defendant can attack "the complaint, the arrest, the security demanded, or any other alleged deficiency in the proceedings." Fed.R.Civ. P.Supp. Rule E(f), advisory committee's note.
Under Aqua Stoli Shipping, Ltd. v. Gardner Smith Pty, Ltd., 460 F.3d 434 (2d Cir.2006), in a Rule E(4)(f) inquiry challenging a Rule B attachment, a plaintiff has the burden to show only that: (a) it has a prima facie admiralty claim; (b) the named defendants cannot be found within district; (c) the attached defendant's property was within the district; and (d) that there is no statutory or maritime law bar to the attachment. Aqua Stoli, 460. F.3d at 445.
It is conceded that Moonriver and GML cannot be found in this district. What is at issue is the nature and extent of Dolco's claim, the adequacy of the security obtained by Dolco, the adequacy of the complaint against GML, and the location and ownership of the property attached.
To sustain the attachments, Dolco must demonstrate that it has Winter Storm Shipping, Ltd. v. TPI, 310 F.3d 263, 268 (2d Cir. 2002) (quoting Robert M. Jarvis, An Introduction to Maritime Attachment Practice Under Rule B, 20 Journal of Maritime Law and Commerce, No 4 (October 1989) at 526 & n. 20); see also Maritima Petroleo e Engenharia Ltda. v. Ocean Rig 1 AS and Ocean Rig 2 AS, 78 F.Supp.2d 162, 166 (S.D.N.Y.1999) ().
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