Kanaway Seafoods, Inc. v. Pac. Predator

• Court: U.S. District Court — District of Alaska
• Writing for the Court: KYLE F. REARDON UNITED STATES MAGISTRATE JUDGE
• Docket Number: 3:22-cv-00027-JMK-KFR
• Decision Date: 24 January 2023
• Citation: Kanaway Seafoods, Inc. v. Pac. Predator, 3:22-cv-00027-JMK-KFR (D. Alaska Jan 24, 2023)
• Parties: KANAWAY SEAFOODS, INC., et al., Plaintiffs, v. PACIFIC PREDATOR, et al. Defendants.

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KANAWAY SEAFOODS, INC., et al., Plaintiffs, v. PACIFIC PREDATOR, et al. Defendants.

No. 3:22-cv-00027-JMK-KFR

United States District Court, D. Alaska

January 24, 2023

FINDINGS AND RECOMMENDATIONS ON MOTIONS TO DISMISS UNDER 12(b)(1)

KYLE F. REARDON UNITED STATES MAGISTRATE JUDGE

The Court recommends Defendants' Motions to Dismiss at Dockets 66 and 76, each seeking dismissal of portions of Plaintiffs' Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) be denied. Plaintiffs' Amended Complaint contains allegations that on their face are sufficient to invoke federal jurisdiction. Specifically, as it relates to money advanced by Plaintiffs for Defendants' purchase of three limited entry fishing permits, maritime jurisdiction under 46 U.S.C. § 31342 exists as these permits can properly be considered necessaries essential for the operation of Defendants commercial fishing enterprise. In addition, Plaintiffs' action for possession of the Pacific Predator is a proper basis for jurisdiction pursuant to Supplemental Admiralty Rule D.

I. Relevant Proffered Facts and Allegations^[1]

Starting in 2019, Defendants Dana and Bryan Howey entered into a series of agreements with Plaintiffs Liberty Packing, LLC (“Liberty”), and Kanaway Seafoods Inc. (“Kanaway”), doing business as Alaska General Seafoods (“AGS”). On or about April 17, 2019, Defendants Dana and Bryan Howey entered into a Loan and Security Agreement with Liberty (“the Loan Agreement”).^[2] Under the Loan Agreement, Liberty loaned Defendants $800,000 to pay off Defendants' outstanding loan to a third party.^[3] In exchange for this loan from Liberty Defendants Bryan and Dana Howey agreed to enter into a Fishing Agreement with AGS to deliver and sell seafood products to AGS for a fixed period.^[4] The Liberty loan was further documented by a Promissory Note dated April 17, 2019, reciting the applicable loan terms (“the Liberty Note”).^[5]

On or about June 30, 2019, Defendant Bryan Howey entered into a Promissory Note with AGS for $23,949.32 (“the AGS Note”), documenting a loan from AGS to Howey in that amount.^[6] On or about July 12, 2019, Howey purchased a limited entry fishing permit for the 2019 season in the amount of the AGS Note.^[7] Howey could repay the loan personally no later than September 30, 2019, or repayment could be made by that date through the “deliver[y of] sufficient product to [AGS].”^[8]

In addition to the AGS Note, AGS loaned Defendant Bryan Howey additional sums on an “open account” between 2019 and 2021 to be repaid under AGS's standard terms and conditions, which included interest on the open amounts at 10% per annum (“AGS Open Account Loan”). These funds were loaned on the credit of Defendant Howeys' fishing vessel, the Pacific Predator (“the Vessel”), and some of these funds were used by Defendants for necessaries for the Vessel, including vessel permits for the 2020 and 2021 fishing seasons.^[9] As to each of these loans, Plaintiffs' Amended Complaint alleges that Defendants have failed to comply with their terms. According to Plaintiffs, Defendants Bryan and Dana Howey, individually and through their company AWE, defaulted on the obligations in the Liberty Loan Agreement and Liberty Note by failing to make agreed principal and interest payments, and failing to register the Vessel in Washington and provide documentation of that registration to Liberty.^[10]Plaintiffs contend that these, and other acts and omissions of Defendants, constitute default under both the Loan Agreement and Note.^[11] Plaintiffs state that as of January 14, 2022, the principal due on the Liberty Loan was $746,666.67 and the accrued interest as of February 1, 2022, was $113,166.62, with interest continuing to accrue at a rate of $368.22 per day.^[12]

With regard to the AGS matters, Plaintiffs allege that Defendant Bryan Howey never repaid the AGS Note nor fully repaid the AGS Open Account Loan. Plaintiffs claim that Howey failed to repay the sums loaned to him under the AGS Note by September 30, 2019, and that the $23,949.32 balance on the note remains unpaid with interest continuing to accrue.^[13] In addition, Plaintiffs state that by making deliveries of fish to AGS, Howey repaid a total of $326,644.13 that had been advanced to him by AGS.^[14] The result Plaintiffs allege is that the unpaid balance on these two AGS loans stood at $115,953.48, with interest accruing.^[15] Plaintiffs further state that AGS advanced additional sums after 2021.^[16] According to Plaintiffs' Amended Complaint, Plaintiffs Kanaway and AGS are affiliated corporations organized under the laws of the State of Delaware.^[17] Plaintiff Liberty is a limited liability company operating under the laws of the State of Washington.^[18] Defendants Bryan and Dana Howey are residents of the State of Alaska.^[19] Defendant AWE is a limited liability company organized under the laws of the State of Alaska, and Defendant Bryan Howey is the governing person and authorized agent of AWE.^[20] At all times material herein, in rem Defendant Vessel was registered in the State of Alaska and is within the District of Alaska during the pendency of this action and subject to the jurisdiction of this Court.^[21] The Vessel is owned by Defendant Bryan Howey and/or Defendant AWE.^[22]

Plaintiffs' Amended Complaint raises three causes of action. In their first cause of action, Plaintiffs allege a breach of contract and promissory note. Specifically, Plaintiffs allege that Defendants Bryan and Dana Howey breached the terms of the Liberty Loan and Liberty Note by failing to make principal and interest payments on the loan and note, and by failing to register the vessel in Washington State and provide documentation of that registration.^[23] Plaintiffs' second cause of action seeks to foreclose on their maritime and state lien rights as a result of Defendants' failure to repay money advanced to Defendants under the AGS Note and AGS Open Account Loan for “the maintenance and operation of the [V]essel as necessaries.”^[24] Plaintiffs also seek to foreclose on the Vessel pursuant to Supplemental Admiralty Rule D as a result of Defendants' alleged default on the Liberty Loan.^[25] Plaintiffs' third cause of action alleges corporate disregard, and seeks to have the Court disregard AWE as an entity.^[26]

Plaintiffs seek declaratory and monetary judgment against Defendants over the $75,000 threshold for diversity jurisdiction.^[27] On the face of the amended complaint, Plaintiffs assert jurisdiction under 46 U.S.C. § 31322, § 31325, and § 31342; under Supplemental Admiralty Rules C and D; and within the meaning of Fed.R.Civ.P. 9(h). Plaintiffs further state that venue is proper because the Court has personal jurisdiction over the parties to this matter since the Vessel is currently located in this District, and Defendants are located and do business in the State of Alaska.

II. Procedural History and Motions Presented

On February 23, 2022, Plaintiffs filed a complaint, in rem and in personam, against Defendants for breach of contract and promissory note, corporate disregard, to foreclose maritime liens, and for a warrant to arrest the Vessel, pursuant to Rule C(3) of the Supplemental Rules for Certain Admiralty and Maritime Claims (hereinafter “Admiralty Rule or Rules”).^[28]

This Court issued a warrant for the arrest of the Vessel on March 16, 2022.^[29]Upon the execution of the arrest warrant, Defendants filed a motion for a hearing to either vacate the arrest pursuant to Admiralty Rule E(4)(f), or set the amount of a special bond to secure the release of the Vessel under Admiralty Rule E(4)-(5).^[30] The Court heard argument on the motion on May 3, 2022^[31] and directed additional briefing on the matter, which the parties provided.

On July 29, 2022, the Court denied the motion to vacate the arrest, and granted the motion to set a special bond to secure the release of the Vessel in the amount of $148,500. In that order, the Court found that maritime liens existed, thus creating subject matter jurisdiction over Plaintiffs' claims. The Court declined to issue a ruling on the strength of Defendants' argument that a “maritime lien cannot attach to a limited entry permit,” and whether $46,964.32 of the unpaid balance, plus interest, must be discounted from the bond amount.^[32]

Plaintiffs filed an Amended Complaint on September 7, 2022.^[33]

On September 25, 2022, Defendants filed a motion to dismiss a portion of the Amended Complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of admiralty jurisdiction (hereinafter “Fed. R. Civ. P.” or “Rule”). The portion of the Amended Complaint Defendants sought to have dismissed involved a claim relating to money loaned by AGS to Defendants that was used by Defendants to pay for the temporary emergency transfer of Alaska State limited entry fishing permits.^[34] The motion also sought to reduce the Court's previously-ordered special bond under Admiralty Rule E(6) by the amount of the money advanced for the permits.^[35]Plaintiffs responded in opposition, and Defendants replied.^[36]

Shortly after, Defendants filed a second motion to dismiss the Amended Complaint under Rule 12(b)(6) for failure to state a claim regarding the AGS Note and for an award of attorney's fees and costs, along with another Admiralty Rule E(6) motion to reduce security and costs, to which Plaintiffs responded in opposition and Defendants replied.^[37]

Defendants then filed a third motion to dismiss the Amended Complaint under Rule 12(b)(1) for lack of admiralty jurisdiction regarding Rule D “Petitory Action” and under the Preferred Ship Mortgage Act. Plaintiffs opposed the motion to dismiss.^[38]

In this Order, the Court considers all filings related to both motions to dismiss the Amended...