Wajilam Exports (Singapore) v. Atl Shipping

• Decision Date: 23 October 2006
• Docket Number: No. 05 Civ. 7955(GEL).,05 Civ. 7955(GEL).
• Citation: 475 F.Supp.2d 275
• Parties: WAJILAM EXPORTS (SINGAPORE) PTE. LTD., Plaintiff, v. ATL SHIPPING LIMITED and Sistina Shipping Ltd., Defendants.
• Court: U.S. District Court — Southern District of New York

Page 275

475 F.Supp.2d 275

WAJILAM EXPORTS (SINGAPORE) PTE. LTD., Plaintiff, v. ATL SHIPPING LIMITED and Sistina Shipping Ltd., Defendants.

No. 05 Civ. 7955(GEL).

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

October 23, 2006.

James P. Rau, Cardillo & Corbett, New York, NY, for Plaintiff Wajilam Exports (Singapore) Pte. Ltd.

Keith W. Heard, Burke & Parsons, New York, NY, for Defendants Via Sistina Shipping, Ltd.

OPINION AND ORDER

LYNCH, District Judge.

Defendant Via Sistina Shipping, Ltd. ("Via Sistina")¹ seeks to vacate maritime attachments and to dismiss the Amended Verified Complaint ("the Complaint") pursuant to Federal Rules of Civil Procedure 12(b)(6), for failure to state a claim, and 12(b)(2), for lack of personal jurisdiction. The motions will be denied.

BACKGROUND

This is a maritime action between plaintiff Wajilam Exports (Singapore) Pte. Ltd. ("plaintiff') and defendants ATL Shipping Limited, a company based in the British Virgin Islands ("ATL-BVI"), and Via Sistina. Plaintiff claims that ATL-BVI failed to pay $540,844.50 in freight² and other charges it owed plaintiff pursuant to a charter party under which plaintiff chartered to ATL-BVI a vessel known as the M/V Qing Ann for a voyage from Myanmar to China with a cargo of logs. (Compl.¶¶ 6, 17.) Plaintiff further alleges that there exists "such unity of ownership and interest between [ATL-BVI] and [Via Sistina] that no separation exists between them," and that ATL-BVI's corporate veil should be pierced and Via Sistina held liable under the charter party. (Compl.¶¶ 19-20.)

On March 14, 2006, plaintiff sought and obtained from this Court an ex parte Order for Process of Maritime Attachment and Garnishment pursuant to Admiralty Supplemental Rule B(1), directed to a number of New York banks including garnishee J.P. Morgan Chase Manhattan Bank ("J.P. Morgan"). See Fed.R.Civ.P., Supp. Adm. R. B(1). Later that month, funds belonging to Via Sistina and worth $277,638.68 were attached while temporarily in the possession of J.P. Morgan during electronic fund transfers ("EFTs"). (D. Br. at 2.) See Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 436 (2d Cir.2006) ("Under the law of this circuit, EFTs to or from a party are attachable by a court as they pass through banks located in that court's jurisdiction.").

On June 20, 2006, Via Sistina moved the Court by Order to Show Cause to (1) vacate the attachment of Via Sistina's property and (2) dismiss the Complaint as to Via Sistina for failure to state a claim and lack of personal jurisdiction pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(2). On June 29, 2006, both parties appeared at a hearing pursuant to Admiralty Supplemental Rule E(4)(f). See Fed.R.Civ.P., Adm. Supp. R. E(4)(f).

DISCUSSION

I. Standards for Motions to Dismiss

Via Sistina's motions to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6), 12(b)(2), and 9(b) will be treated as a motion for judgment on the pleadings pursuant to Rule 12(c) because Via Sistina filed its Verified Answer prior to making these motions.³ See Fed.R.Civ.P. 12(b) ("A motion making any of these defenses shall be made before pleading if a further pleading is permitted."); Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir.2001) ("[A] motion to dismiss for failure to state a claim (or one of the other non-waivable defenses under Rule 12(h)) that is styled as arising under Rule 12(b) but is filed after the close of pleadings, should be construed by the district court as a motion for judgment on the pleadings under Rule 12(c).").⁴

In light of Via Sistina's submissions of various supporting documents, plaintiff asks the Court to convert the motion to one for summary judgment. See Fed.R.Civ.P. 12(c) (requiring that where "matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment"). Although conversion to a summary judgment motion is necessary where a court elects to consider matters outside the pleadings, the decision whether to convert is a matter for the court's discretion. See Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir.1988). That discretion will not be exercised here. Discovery has not begun yet, as plaintiff itself complains. (P. Mem. at 2, 8.) There would be little point in considering a summary judgment motion when significant relevant facts may yet be discovered.

Accordingly, the motion for judgment on the pleadings will be considered under the familiar standards of review, disregarding material submitted by Via Sistina that is extraneous to the Complaint, accepting the allegations contained in the Complaint as true and drawing all reasonable inferences in favor of the plaintiff. See Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360, 363 (2d Cir.2005). The complaint will not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts that would entitle it to relief. Id.

II. Standards for Vacatur of Attachments

Rule E hearings are potentially broad in scope. "Rule E(4)(f) is designed to satisfy the constitutional requirement of due process by guaranteeing to the ship-owner a prompt post-seizure hearing at which he can attack the complaint, the arrest, the security demanded, or any other alleged deficiency in the proceedings." Fed.R.Civ.P., Adm. Supp. R. E(4)(f), Advisory Committee's Note. Rule E thus allows challenges not only to the complaint itself, but to the adequacy of service, the amount of security, and other related matters. The Second Circuit has recently clarified the Rule E(4)(f) inquiry, holding that the burden is on the plaintiff to make four basic showings:

[A]n attachment should issue if the plaintiff shows that 1) 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.

Aqua Stoli, 460 F.3d at 445.

In this case, Via Sistina does not argue that it can be found within the district, and essentially concedes that it cannot be found by arguing that jurisdiction rests entirely on the attachment. (D. Mem. at 17-18.) Its property has been found (and attached) in the district, and Via Sistina raises no statutory or maritime law bar to the attachment other than the comity argument addressed below. The only issue that remains is whether plaintiff has shown a "valid prima facie admiralty claim" against Via Sistina.

The standard generally applied in a Rule E(4)(f) analysis is that the plaintiff must demonstrate that "reasonable grounds" exist for the attachment. Ullises Shipping Corp. v. FAL Shipping Co., 415 F.Supp.2d 318, 322-23 (S.D.N.Y.2006), overruled on other grounds by Aqua Stoli, 460 F.3d at 445.⁵ The "reasonable grounds" standard involves review not only of the adequacy of the allegations in the complaint, but also of any evidence submitted by the parties. "When determining whether ... reasonable grounds exist, `Supplemental Rule E does not restrict review to the adequacy of the allegations in the complaint.' A court also may consider any allegations or evidence offered in the parties' papers or at the post-attachment hearing." Maersk, Inc. v. Neewra, Inc., 443 F.Supp.2d 519, 527 (S.D.N.Y.2006), quoting Linea Navira De Cabotaje, CA. v. Mar Caribe De Navegacion, C.A., 169 F.Supp.2d 1341, 1358 (M.D.Fla.2001).

Although review of extraneous evidence is appropriate, plaintiffs in a Rule E(4)(f) proceeding should not be required to prove their case.⁶ Discovery has not yet been had, and it would defeat the purpose of attachment — preserving defendants' assets in case plaintiff is able to prevail at trial or on summary judgment — to require at this stage that plaintiffs asserting a "valid prima facie maritime claim" prove that the facts in the complaint are true. See Japan Line, Ltd. v. Willco Oil Ltd., 424 F.Supp. 1092, 1094 (D.Conn.1976) (Newman, J.) (holding that where attachment is based on a fraud theory of veil-piercing, plaintiff should not be required to allege fraud with particularity before discovery); Sea-Terminals, Inc. v. Independent Container Line, Ltd., 1989 WL 222634, at *2 (D.Del.1989) (holding that whether the defendant "is a totally separate and unrelated company" from the company directly liable to plaintiff should not be decided "until the facts are fully fleshed out after discovery"). "A rule E(4)(f) hearing is not intended to definitely resolve the dispute between the parties, but only to make a preliminary determination of whether there are reasonable grounds for issuance of the arrest warrant." North of England Protecting and Indem. Ass'n v. M/V Nara, 1999 WL 33116416, at *2 (E.D.La.1999).

Accordingly, courts have compared the showing required in a "reasonable grounds" analysis to the more familiar standard of probable cause. See, e.g., Amstar Corp. v. S/S ALEXANDROS T., 664 F.2d 904, 912 (4th Cir.1981) ("A ship-owner challenging the validity of an arrest is constitutionally entitled to a prompt post-arrest hearing in which the plaintiff has the burden of showing probable cause for the arrest"). The Supreme Court, interpreting the phrase "reasonable grounds" as used in a criminal statute, has said that "[t]he terms "probable cause" as used in the Fourth Amendment and `reasonable grounds' ... are substantial equivalents of the same meaning." Draper v. United States, 358 U.S. 307, 311, 79 S.Ct. 329, 3 L.Ed.2d 327 (1959). Probable cause is less than a preponderance of the evidence; in the criminal context, it has been described as a "fair probability" that the asserted fact is true. Illinois v. Gates, 462 U.S. 213, 214, 103 S.Ct. 2317, 76 L.Ed.2d 527 (1983). With this standard in mind courts in Rule E(4)(f) hearings have emphasized that their conclusions are "merely holding that it is likely" that alleged facts are true. See North...