In re Med-Atlantic Petroleum Corp., Bankruptcy No. 94B43809 TLB

• Decision Date: 28 April 1999
• Docket Number: 95/8093A,Adversary No. 94/8842A,Bankruptcy No. 94B43809 TLB,96/9830A.
• Parties: In re MED-ATLANTIC PETROLEUM CORPORATION, Debtor. Nationsbank, N.A., Plaintiff, v. Macoil, Incorporated, et al., Defendants. Aurin Primack, as Chapter 11 Trustee of Med-Atlantic Petroleum Corporation, Plaintiff, v. Macoil Incorporated, et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

233 B.R. 644 (1999)

In re MED-ATLANTIC PETROLEUM CORPORATION, Debtor.

Nationsbank, N.A., Plaintiff, v. Macoil, Incorporated, et al., Defendants.

Aurin Primack, as Chapter 11 Trustee of Med-Atlantic Petroleum Corporation, Plaintiff, v. Macoil Incorporated, et al., Defendants.

Bankruptcy No. 94B43809 TLB, Adversary Nos. 94/8842A, 95/8093A, 96/9830A.

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

April 28, 1999.

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Tisdale & Associates, by Thomas L. Tisdale, New York City, for John Chandris.

Dickstein Shapiro Morin & Oshinsky, L.L.P., by Daniel M. Litt, Washington, D.C., for NationsBank, N.A.

Squadron, Ellenoff, Plesent & Sheinfeld, L.L.P., by David Posner, New York City, for Aurin Primack, Chapter 11 Trustee.

OPINION ON MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION

TINA L. BROZMAN, Chief Judge.

Introduction

Lack of personal jurisdiction is said to be grounds for dismissing these consolidated¹ adversary proceedings against John Chandris, a Greek national who is domiciled and resides in Greece. Chandris seeks to terminate the adversary proceeding commenced by the chapter 11 trustee of Med-Atlantic Petroleum Corporation and as well as those commenced by NationsBank, N.A. ("NationsBank"). Alleging that the trustee's service did not comply with the internal laws of Greece as required by the Hague Convention On the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, Nov. 15, 1965² (the "Hague Convention"), Chandris also moves to dismiss the trustee's complaint on the alternative grounds of improper service of process. NationsBank's second amended complaint³ alleges, among other things, that Chandris intentionally engaged in fraud and co-conspired with Jacqueline J. Plecas and others to defraud NationsBank and the United States Government (the "Government") from 1990 through 1994. The trustee's complaint seeks to recover from Chandris certain fraudulent conveyances and unauthorized transfers. Chandris responded to the second amended complaint by filing an answer challenging personal jurisdiction, cross-claims and a counterclaim denying the allegations against him, challenging personal jurisdiction and seeking damages from the plaintiffs for having instituted such ill-considered litigation. In response, the trustee and NationsBank contend that this court has personal jurisdiction over Chandris and request that sanctions be awarded to them for having to respond to this motion.

I.

Both Med-Atlantic Petroleum Corporation, a Delaware corporation ("MAPCO"), and Med-Atlantic Petroleum Corporation, a New York Corporation ("MAPCO-NY") were petroleum traders in the business of supplying marine fuel oil pursuant to contracts on which they had bid. According to Plecas' testimony, MAPCO-NY and MAPCO were formed in 1988 and 1989, respectively, however, MAPCO did not transact any business until September 1989. Although MAPCO-NY transacted all of the commercial business and bid contracts with the Government, they were performed by MAPCO. Since 1989, MAPCO either maintained an office in New York or, as Plecas testified, a "New York presence in an office" when she moved to Washington, D.C. MAPCO is a chapter 11 debtor whose affairs are administered by a chapter 11 trustee, Aurin Primack.

According to Chandris, at all relevant times, he was the principal of Macoil, Incorporated ("Macoil"), a Liberian corporation with its office in Greece, and was not involved in any capacity in the daily management of MAPCO. Contrary to NationsBank's and the trustee's allegation and Plecas' testimony that Chandris consented to be a director of MAPCO, Chandris contends that he never agreed to serve as a director nor did he hold himself out as one. Although he says that Plecas was the former president and owner of MAPCO who ran its affairs, Plecas testified that Chandris in effect controlled MAPCO by extending credit as needed and that she could not make a financial decision without his agreement. Notwithstanding Chandris' assertions, there having been no evidentiary hearing on personal jurisdiction, we look at plaintiffs' averments, it being their burden at this stage to make only a prima facie showing which is factually supported. See section IV infra.

Chandris asserts that he has been to the United States only twice, most recently during a vacation to New York City in early July 1991 for Fleet Week during which he attended a few social business meetings in his capacity as representative of Macoil. He and his wife also attended several of the Fleet Week functions as guests of Plecas. Chandris maintains that he never had any contact individually or in his capacity as a representative of Macoil with NationsBank other than with a former bank officer during Fleet Week. He also insists that he has never conducted personal business, owned real property, possessed bank accounts, or taken any affirmative act to purposefully avail himself of the benefits and protections of United States law.

Macoil was in the business of supplying fuel on the spot market to ships at ports which were primarily located in the Eastern Hemisphere. According to Chandris, during the years in question, Macoil sold oil to MAPCO on the open market, neither possessing a contract with MAPCO to supply fuel at a price certain nor holding itself out as having purchased fuel from MAPCO. Rather, he says, MAPCO was free at any time to purchase fuel from any other supplier. Although neither Macoil nor Chandris had a contractual relationship with the Government or with Med-Atlantic, MAPCO was obligated to sell to the Government at a price certain, regardless of the purchase price on the open market or from Macoil.

NationsBank alleges that Macoil and Chandris participated in a fraudulent scheme by falsely representing to NationsBank sales made by MAPCO to Macoil. NationsBank avers that MAPCO fraudulently created invoices showing fuel sales to Macoil, thereby generating fraudulent accounts receivable from Macoil against which NationsBank lent funds. These fraudulent accounts receivable were allegedly offset by MAPCO's fraudulent accounts payable to a third supplier. Plecas admitted the falsity of the invoices at her deposition and testified that she, Chandris and John Santana, a co-conspirator, had agreed to overcharge the Government by, among other schemes, rigging the bids submitted to the Mar Ship Operators ("M.S.O"), which was owned by the same parent company as MAPCO. She has pled guilty to intentionally overcharging the Government as well as to numerous other criminal charges, such as tax evasion, perjury and bribery. (Santana has also pled guilty to charges arising out of the parties' activities.)

Chandris argues that he did not, either individually or as principal of Macoil, make any representations to NationsBank in 1991 or at any subsequent time, fraudulent or otherwise. He further argues that neither he nor Macoil knew that MAPCO and Plecas were creating fictitious invoices showing sales to Macoil or that Med-Atlantic was using Macoil's name in the perpetration of its fraud against NationsBank. Further, he says, neither Macoil nor Chandris ever made any representations of any sort to NationsBank regarding the existence of alleged sales from MAPCO to Macoil or had a credit relationship with NationsBank. According to Chandris, after Macoil first appeared through its counsel in April 1995, it advised NationsBank that MAPCO's purported setoff was false and that Macoil never purchased fuel from MAPCO. According to Chandris, documents from the files of MAPCO show that MAPCO and Plecas fraudulently reversed sales from Macoil to MAPCO without the knowledge, participation or involvement of Macoil or Chandris, in order to show purported sales from MAPCO to Macoil. Chandris asserts that MAPCO and Plecas, not he, created the invoices to maintain the company's borrowing ability. Moreover, Chandris contends, neither he nor Macoil ever signed, reviewed or participated in the preparation and presentation of the inflated borrowing base certificates to NationsBank. Chandris also maintains that the borrowing base certificates which allegedly contained these misrepresentations did not show the status of MAPCO's accounts payable, which would have reflected the purchases from Macoil, because they merely showed the levels of MAPCO's accounts receivable from government or commercial sources for purposes of evaluating MAPCO's borrowing availability under its line of credit.

Notwithstanding Chandris' assertions that Plecas has wrongly implicated him, NationsBank argues that the testimony of Plecas and Chandris, combined with other evidence, establish that Chandris, Plecas and others:

(i) engaged in a conspiracy to defraud the Government by rigging bids for fuel oil sales so as to inflate the sales price of fuel to MSO which was passed on by MSO to the Government;

(ii) engaged in a conspiracy to defraud NationsBank of loan proceeds by presenting fraudulent invoices, accounts receivable and other documents to NationsBank;

(iii) engaged in a conspiracy to defraud the Government by charging the Government prices for fuel oil in excess of MAPCO\'s contract price, notwithstanding MAPCO\'s contractual agreement with the Government to charge it the correct amount;

(iv) engaged in a conspiracy to defraud NationsBank by submitting borrowing base certificates to NationsBank which, inter alia, certified that bona fide accounts receivable were due from the Government, notwithstanding that the borrowing base certificates included accounts receivable from the Government based on the overcharges;

(v) engaged in a conspiracy to defraud NationsBank by submitting borrowing base certificates to NationsBank which certified, as bona fide, fraudulent accounts receivables from Macoil, as well as other fraudulent representations;

(vi) prepared and delivered to MAPCO inflated invoices from Macoil so

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