In re McLean Industries, Inc.

Decision Date29 December 1986
Docket NumberBankruptcy No. 86 B 12238 through 86 B 12241 (HCB).
Citation68 BR 690
PartiesIn re McLEAN INDUSTRIES, INC., First Colony Farms, Inc., United States Lines, Inc. and United States Lines (S.A.), Inc., Debtors. UNITED STATES LINES, INC., Plaintiff, v. GAC MARINE FUELS LTD., Defendant.
CourtU.S. Bankruptcy Court — Southern District of New York

Milbank, Tweed, Hadley & McCloy, New York City, for debtors; by Richard D. Cleary.

Philip V. Moyles, New York City, for defendant.

DECISION AND ORDER

HOWARD C. BUSCHMAN, III, Bankruptcy Judge.

United States Lines, Inc., a debtor herein (the "debtor") seeks from this Court a preliminary injunction restraining defendant GAC Marine Fuels Ltd. ("GAC Marine") from taking any action to arrest or interfere with vessels and other property of this estate. It further seeks an order holding GAC Marine in civil contempt for violating both the automatic stay applicable to this proceeding by the filing of the petition, 11 U.S.C. § 362, and the restraining order issued by this Court.1 GAC Marine, although essentially admitting the underlying facts, opposes these motions, declaring that it, as a non-domiciliary corporation organized under the laws of the United Kingdom and with a principal place of business in London, is not subject to the in personam jurisdiction of this Court. The Debtor disputes this assertion and thus, the principal issue to be resolved by this Court is whether GAC Marine is subject to in personam jurisdiction before this Court. An evidentiary hearing was held on December 22, 1986.

I

The debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. (1984) (the "Code") on November 24, 1986. On that date, this Court issued an order, which restated the automatic stay provided by § 362(a) of the Code and not excepted by § 362(b) of the Code. The Debtor has remained in possession and continues to operate its trans-Pacific and western hemisphere cargo shipping services. It is in the process of terminating its around the world and North Atlantic services.

The facts are not in dispute. On December 4, 1986, ten days after the petition was filed, GAC Marine commenced an in rem admiralty action in the Supreme Court of Hong Kong against the debtor, pursuant to a Writ of Summons (Debtor's Exhibit 4), for the payment of $173,750 allegedly owed it for fuel oil delivered on board the AMERICAN UTAH, a vessel owned by the debtor, in October 1986 in Khorfakkan Port, United Arab Emirates. On December 9, 1986, upon application of GAC Marine, the Hong Kong court issued a warrant of arrest against the AMERICAN CALIFORNIA, also owned by the debtor. As a result, this vessel has since been restrained from leaving Hong Kong harbor.

On December 8, 1986, GAC Marine commenced an admiralty proceeding in the High Court of the Republic of Singapore against the debtor as the owner of the AMERICAN OKLAHOMA. This proceeding was commenced to recover $69,500 allegedly owed by the debtor to GAC Marine for fuel oil delivered on the vessel AMERICAN WASHINGTON on November 5, 1986, also in Khorfakkan Port. The Singapore court issued, on December 8, 1986, a warrant of arrest directed at the AMERICAN OKLAHOMA (Debtor's Exhibit 5), also owned by the debtor.

GAC Marine took these actions with knowledge of the debtor's filing of its reorganization petition and the resultant automatic stay provided by § 362 of the Code, and, after being informed by the debtor that such actions would be improper (Tr. at 34),2 carried out a threat contained in a telex from GAC Marine to the debtor dated November 28, 1986. That telex stated:

As outlined below, our invoices nos. AG86/10/010 and AG86/10/011 fell due for payment on the 27th November 1986. On request by agents for payment of these invoices, we have been informed of your refusal to settle all outstandings as your company has filed for bankruptcy under Chapter 11 of the U.S. Law.
Accordingly, all invoices as set out hereunder and and sic applicable to the following ships must be settled immediately.
                Ship                    Inv. No.           Amount
                GULF PIONEER          AG86/10/011        USD  48,190
                AMERICAN UTAH         AG86/10/010        USD 173,750
                AMERICAN WASHINGTON   AG86/10/013        USD  69,500
                
Chapter 11 procedure in the USA is not enforceable in foreign jurisdictions. Therefore we are entitled to arrest any U.S. Lines ship abroad and unless prompt settlement is made to us, we will have no recourse other than to take such action as is deemed necessary by our lawyers for the protection of our interests. We will therefore arrest your ships one-by-one unless settlement is made immediately.

(Exhibit 3(D)).

The debtor commenced this adversary proceeding on December 16, 1986. In its complaint, it recites the issuance of the Hong Kong warrant and the Singapore arrest, asserts that they are attempts to recover pre-petition debts and constitute seizures of its property in violation of the automatic stay and this Court's order of November 24, 1986, and claims damages and irreparable injury through being unable to utilize the two vessels in the course of its reorganization. Judgment is sought adjudging the defendant in violation of the automatic stay and the November 24 order, decreeing the defendant to be in civil contempt, certifying the Court's findings of fact to the district court pursuant to Bankruptcy Rule 9020 for criminal contempt proceedings, enjoining further violations by the defendant and requiring the defendant to take appropriate steps to dissolve any writs, warrants or other process that have been issued against any U.S. Lines vessels at the defendant's request, and awarding the plaintiff compensatory and punitive damages.

On notice to the defendant and after hearing its counsel on December 16, 1986, this Court issued a temporary restraining order against GAC Marine preventing interference with property of this estate in an effort to collect on prepetition debts.

GAC Marine is, we are told by its counsel, a subsidiary of a Liechtenstein corporation (R. at 27) (Exhibit 2(2)), apparently known as Gulf Agency Company ("GAC") which has its central office in Athens, Greece (Exhibit 2(1)). GAC Marine's principal offices are located in London, England but its invoices state that it also has offices in Hong Kong, Norway, United Arab Emirates and Basking Ridge, New Jersey (Exhibit 2(2)). The New Jersey office is apparently located in the same office as that of G.A.C. Shipping (North America) Ltd. ("GAC Shipping"), another GAC subsidiary. That office is staffed by one Norman Schmidt, Georgianne Temple and Marilyn Taylor, who are paid by GAC Shipping with funds supplied by GAC (Tr. at 55). But Schmidt styles himself as manager of GAC's U.S. office (Tr. at 4) and his business card is under the name of the defendant GAC Marine (Exhibit 8(D)). GAC and GAC Marine, according to Schmidt, "apparently are run by the same people." (Tr. at 11-12).

Schmidt describes his duties for GAC Marine as "sales and contact and follow through." (Tr. at 52). As this description implies, he and his fellow workers do more than merely solicit business from potential American customers seeking to purchase marine fuel (bunkers) for delivery overseas. With respect to the seven to fifteen transactions per month he and his staff work on for GAC Marine (Tr. at 16), once the potential customer's needs are identified, the New Jersey office telexes them to the London office, with a copy to the local Sharjah office in the United Arab Emirates, since marine fuels are often purchased in the lower Persian Gulf. Schmidt or one of the other employees at the New Jersey office would then receive price quotes and availability of fuel statements from both those offices for the date the vessel would require its supply. That information would then be relayed by the New Jersey office to the prospective purchaser. If the prospective purchaser accepted the terms, the New Jersey office would telex back to the London and Sharjah offices. At this point, the agreement would usually be completed, confirmation from the foreign offices not normally being expected or required (Tr. at 14-15). After delivery of bunkers overseas, Temple or Taylor would transmit GAC Marine invoices and delivery receipts to the purchaser or its agents (Tr. at 23; Exhibits 2(3), 2(4)). The two instances of such transmission in evidence here were by cover letter on the letterhead of GAC Marine. The letterhead states the address and telephone and telex numbers for GAC Marine in the locations noted above, including the Basking Ridge, New Jersey office.

These general practices and procedures were followed with respect to the 30 transactions between GAC Marine and the debtor through its agent Secor Energy Inc. in the past year (Tr. at 28, 43-44; Exhibits 2(3)-2(7)). Although the debtor generally made payment in London, its last three payments were made to the New Jersey office which transmitted the funds to London. In addition, the New Jersey office played an active role in the month prior to the filing of the petition by initiating possible protections for GAC Marine's interest and reducing GAC Marine's exposure. With respect to the sale of bunkers to the debtor to be supplied to the AMERICAN WASHINGTON, it suggested that the debtor obtain a bank guarantee and that an outstanding invoice be accelerated (Exhibit 2(5)). It told the London office that "we will have to make a decision" in light of rumors of a possible bankruptcy filing, and repeated that it had thought out the best way "to improve our position." (Id.). It thereupon received a check for $139,000 on another invoice before agreeing to supply the AMERICAN WASHINGTON with $69,500 of bunkers, and another check for $330,000 before agreeing to supply the AMERICAN UTAH with $173,000 of bunkers (Id.).

II

In this case we need not pause to consider the oft-noted standard for the issuance of a preliminary injunction in this...

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