Victory Shipping Pte. Ltd. v. 50,109 Metric Tons of Cement
| Decision Date | 16 December 2022 |
| Docket Number | Civil Action 4:22-cv-03689 |
| Parties | VICTORY SHIPPING PTE. LTD., Plaintiff. v. 50,109 METRIC TONS OF CEMENT, in rem, et al., Defendants. |
| Court | U.S. District Court — Southern District of Texas |
Pending before me is a motion filed by Plaintiff Victory Shipping Pte. Ltd. (“Victory Shipping”) seeking reconsideration of my November 21, 2022 Order and Opinion (see Dkt. 28). See Dkt. 30.[1] Having considered the parties' briefing, oral arguments, the applicable law, and the record, I GRANT Victory Shipping's Motion for Reconsideration (see Dkt 30); VACATE the Court's November 21 2022 Order and Opinion (see Dkt. 28); and DENY in part and GRANT in part the Motion for Vacatur (see Dkt. 21) filed by Defendant Texcem LLC (“Texcem”). My analysis follows.
On June 6, 2022, Victory Shipping and Texcem entered into a charter party for the shipment of 50,109 metric tons of cement (“the Cargo”) from Karachi Pakistan, to Houston, Texas. Importantly, the charter party provides that any disputes are to be resolved amicably, or through arbitration in London under English law. Discharge of the Cargo in Houston was completed on October 3, 2022. Though the voyage from Karachi to Houston was uneventful, discharge of the cargo in Houston took 63 days instead of the six days warranted in the charter party. The delay resulted in $2,072,025.00 in demurrage.[2]
On October 25, 2022, Victory Shipping filed a Verified Complaint and moved pursuant to 9 U.S.C. § 8 (“Federal Arbitration Act”), and Rules B and C of the Supplemental Rules for Certain Admiralty and Maritime Claims and Asset Forfeiture Actions, to begin a proceeding against Texcem by attaching (under Rule B) and arresting (under Rule C) the Cargo as security against the $2,116,511.54 that Victory Shipping alleges is the value of this dispute. In addition to demurrage, this amount comprises $241,407.00 in port disbursement account charges, $50,397.78 in stevedore damage, $7,144.95 for the balance of freight, and $6,486.81 for Karachi PNI surveyor charges. The amount has been reduced by a $40,950.00 credit for Texcem loading the Cargo in less than the allotted time, and a $220,000.00 partial payment made during the protracted discharge.
I issued orders authorizing the Rule B attachment and the Rule C arrest on October 27, 2022. On November 4, 2022, Texcem moved pursuant to Rule E(4)(f) to vacate only the Rule B attachment. I held a Rule E(4)(f) hearing on November 8 2022, after which I ordered the parties to submit supplemental briefing on the availability of equitable vacatur in an action commenced under § 8 of the Federal Arbitration Act. On November 21, 2022, I granted Texcem's motion, but the following day I stayed my order to afford Victory Shipping the opportunity to contest it. On November 23, 2022, Victory Shipping concurrently filed objections and a motion for reconsideration. Texcem responded, and I held a status conference with the parties on December 8, 2022.
Victory Shipping moves for reconsideration pursuant to Federal Rule of Civil Procedure 59(e). “Rule 59(e) governs motions to alter or amend a final judgment; Rule 54(b) allows parties to seek reconsideration of interlocutory orders.” Austin v. Kroger Tex., L.P., 864 F.3d 326, 336 (5th Cir. 2017). The order granting vacatur was not a final judgment. Accordingly, I construe Victory Shipping's request for reconsideration under the Rule 54(b) standard. “Under Rule 54(b), the trial court is free to reconsider and reverse its decision for any reason it deems sufficient, even in the absence of new evidence or an intervening change in or clarification of the substantive law.” Id.
Victory Shipping puts forth three reasons supporting reconsideration: (1) that the “application of equitable vacatur in the context of 9 U.S.C. § 8 is wholly inappropriate, against Congressional intent, and frustrates international trade, and the use of Rule B attachments to obtain security”; (2) the balance of equities clearly favors Victory Shipping[3]; and (3) “Victory Shipping has established a prima facie maritime claim for the breach of the charter party under both English and United States law, and satisfied the probable cause standard under Rule E.” Dkt. 30 at 7, 13, 16. Having reviewed the parties' briefing and applicable law once more, I agree with Victory Shipping as to its second and third points and grant its motion for reconsideration. I will now consider anew Texcem's Motion for Vacatur.
“Whenever property is arrested or attached, any person claiming an interest in it shall be 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.” FED. R. CIV. P. SUPP. ADM. R. E(4)(f). A Rule B attachment is a quasi in rem proceeding that allows the court to assert jurisdiction over a defendant's property when that property, the res, is located with the district. See Belcher Co. of Ala. v. M/V Maratha Mariner, 724 F.2d 1161, 1163-64 (5th Cir. 1984). A Rule C arrest is an in rem action where the complaint is filed against the res. See id. at 1163. “Under the admiralty law of the United States, in personam and in rem actions may arise from the same claim, and may be brought separately or in the same suit.” Id.
In its initial motion, Texcem expressly moved to vacate only the Rule B attachment. This is procedurally problematic because liens supersede attachments. See, e.g., Heidmar, Inc. v Anomina Ravennate Di Armamento Sp.A. of Ravenna, 132 F.3d 264, 266 (5th Cir. 1998) (). In other words, it would make no difference if I vacated the attachment if the arrest were still in place. However, while appearing before me on December 8, 2022, Texcem orally moved to vacate the arrest. Texcem also submitted a letter stating why the arrest should be vacated. See Dkt. 38. The parties are now in agreement that English law applies to this dispute and that Victory Shipping does not have a valid maritime lien for demurrage that would support a Rule C arrest. See, e.g., Bominflot, Inc. v. The M/V HENRICH S, 465 F.3d 144, 147 (4th Cir. 2006) (). Accordingly, the Rule C arrest should be vacated.
Texcem has always conceded that Victory Shipping meets the requirements for a Rule B attachment. See Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 445 (2d Cir. 2006) () it has a valid prima facie admiralty claim against the defendant; 2) the defendant cannot be found within the district; 3) the defendant's property may be found within the district; and 4) there is no statutory or maritime law bar to the attachment.”), abrogated on other grounds by Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009). Rather, Texcem asks that I apply the equitable vacatur doctrine announced in Aqua Stoli and vacate the attachment.[4] Under this doctrine, there are three circumstances in which a court, using its equitable powers, “may vacate the attachment”: (1) when the defendant “would be subject to in personam jurisdiction in an adjacent district”; (2) the defendant is “located and subject to personal jurisdiction in the same district as [the plaintiff]”; or (3) the plaintiff has already obtained sufficient security. Aqua Stoli, 460 F.3d at 447. It is the defendant who bears the burden “to establish any equitable grounds for vacatur.” Id. at 445 n.5. “Notably, equitable vacatur is not required even if the defendant shows at a Rule E hearing that one of the limited grounds for equitable vacatur is present; rather, the court in its discretion must still determine whether equity weighs in favor of vacating the attachment.” Boland Marine, 2020 WL 10051743, at *11.
Texcem argues the equities weigh in its favor because it “is easily located [in the Northern District of Texas], has never failed to respond to or meet with Plaintiff, and has demonstrated financial stability by . . . paying Plaintiff millions of dollars, including excess payments over and above the full freight charges.” Dkt. 21 at 6. This argument centers on the fact that Texcem is a brick-and-mortar business in Dallas over which Victory Shipping could easily obtain in personam jurisdiction in the Northern District of Texas. Texcem also highlights that the cement “is in high demand” and that Texcem has already “had to rebuff [a] customer's request.” Id. at 11. Accordingly, Texcem contends that the attachment “hinders [its] ability to generate revenue” and “serves no purpose other than to negatively impact [its] financial health, destroy customer relations, risk market downturn, and force [it] to pay disputed amounts, such that the merits are never appropriately examined.” Id.
In support of its argument regarding the negative impact of attachment, Texcem cites Judge Tallman's concurrence in ProShipLine Inc. v. Aspen Infrastructures Ltd. for the proposition that “maritime attachments are being employed . . . for the vexatious purpose of harassing defendant in order to gain a tactical advantage in the pending commercial disputes.” Dkt. 21 at 11 n.48 (quoting 609 F.3d 960, 975 (9th Cir. 2010) (Tallman, J concurring)). The facts of ProShipLine involve a prolonged,...
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