World Wide Supply Ou v. Quail Cruises Ship Mgmt.

• Decision Date: 30 September 2015
• Docket Number: No. 14–14838,14–14838
• Citation: 802 F.3d 1255
• Parties: WORLD WIDE SUPPLY OU, Plaintiff–Appellant, v. QUAIL CRUISES SHIP MANAGEMENT, f.k.a. Happy Cruises, S.A., Jewel Owner Ltd., International Shipping Partners, Defendants–Appellees, Hainan Cruise Enterprise, S.A., Interested Parties–Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

802 F.3d 1255

WORLD WIDE SUPPLY OU, Plaintiff–Appellant

v.QUAIL CRUISES SHIP MANAGEMENT, f.k.a. Happy Cruises, S.A., Jewel Owner Ltd., International Shipping Partners, Defendants–Appellees

Hainan Cruise Enterprise, S.A., Interested Parties–Appellees.

No. 14–14838

United States Court of Appeals, Eleventh Circuit.

Sept. 30, 2015.

Scott Andrew Wagner, Andres Benjamin Chiriboga, Moore & Company, PA, Coral Gables, FL, for Plaintiff–Appellant.

William R. Boeringer, William B. Milliken, Fowler Rodriguez LLP, Coral Gables, FL, for Defendants–Appellees.

Patrick E. Novak, Stephanie H. Wylie, Horr Novak & Skipp, PA, Miami, FL, for Interested Parties–Appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before TJOFLAT, WILSON and JULIE CARNES, Circuit Judges.

Opinion

PER CURIAM:

This appeal concerns an attachment of property made pursuant to Supplemental Admiralty Rule B. The money at issue arose from the legal settlement of a dispute over the purchase of a cruise ship featured on ABC Television Network's long-running series, The Love Boat. The plaintiff below, and appellant here, has advanced a novel interpretation of Rule B. The district court was unpersuaded, as are we. Accordingly, we affirm the court's order vacating the attachment.

I. BACKGROUND

This appeal has a complicated background, involving multiple lawsuits in federal district courts, Florida state court, and a Spanish bankruptcy court. The common denominator of these suits is Quail Cruises Ship Management (“Quail”), from which multiple parties, including participants in this appeal, have tried to collect money that they believe Quail owes them.

Plaintiff—Appellant World Wide Supply O U (“Plaintiff”) entered into a contract with Quail for Plaintiff to supply provisions for the M/V Gemini, a vessel owned by Jewel Owner Ltd. (“Jewel”). When Quail stopped making payments to Plaintiff for those provisions, Plaintiff sought a prejudgment attachment of Quail's property to recover the unpaid €123,122.28 balance. Specifically, on January 29, 2014, Plaintiff filed in the district court below an emergency motion for a Rule B attachment of what it contended to be Quail property: a sum of money Quail was to receive from Agencia de Viagens CVC Turlimitada (“Viagens”), pursuant to a settlement agreement between the two. It is that attachment, and its subsequent vacation by the district court below, that gives rise to the present appeal.

Years before, Quail had sued Viagens in the Southern District of Florida “for fraud based on the purchase of what was, at one point, the boat ... that appeared in the show, The Love Boat.” In an unrelated lawsuit, ongoing at the time of the Quail–Viagens suit, Quail and Jewel agreed to a settlement under which any recovery, up to €3,395,519.45, from Quail's suit against Viagens would be paid to Jewel to settle its unrelated claim. Despite this agreement with Jewel, on November 30, 2011, Quail finalized with Viagens a secret settlement agreement whereby Viagens would pay $5,000,000 to Quail's parent corporation, Quail Travel, which was then in bankruptcy proceedings in Spain. Of course, if kept undisclosed, this would mean that Jewel would be cheated out of the approximate €3.4 million to which it was entitled under its own settlement with Quail. But learning of the secret agreement between Quail and Viagens, Jewel filed a motion to intervene in the Quail—Viagens suit and also filed a petition in the Circuit Court of Miami–Dade County against Quail and Viagens to prevent any transfer of the settlement proceeds, asserting theories of constructive trust and equitable lien.

Meanwhile, Hainan Cruise Enterprise, S.A. (“Hainan”), which had prevailed against Quail in yet another lawsuit in the Southern District of Florida, obtained a writ of garnishment against Viagens under Rule B, seeking to recover its own judgment from this same, now not-so-secret, $5,000,000 settlement agreement.

At this point, Quail Travel filed for Chapter 15 bankruptcy in the Southern District of Florida and claimed, as its own property, this same $5,000,000 “secret” settlement fund that Quail had promised to Jewel and that Hainan now claimed. Thus, there were three parties with claims to the settlement funds that Viagens was to pay to Quail: Jewel, Hainan, and Quail Travel. The district court overseeing Quail Travel's bankruptcy proceedings determined that Quail and Quail Travel each held an undivided 50% interest in the settlement proceeds. Quail's $2,500,000 portion, the district court ruled, was subject to Jewel's constructive trust and Hainan's Rule B attachment.

In compliance with that order, Quail, Jewel, Hainan, and Viagens verbally agreed to a settlement, under which Viagens would transfer Quail's $2,500,000 share of the settlement to a trust fund account held by Quail's counsel, Holland & Knight. Holland & Knight would, in turn, disburse $1,500,000 to Hainan and $1,000,000 to Jewel. Viagens' transfer to Holland & Knight was to be made in two equal installments made 30 days apart; Holland & Knight was to distribute each installment to Hainan and Jewel after it had been received.

On January 3, 2014, the first installment was made, with Viagens transferring $1,250,000 to Holland & Knight, after which Holland & Knight distributed $500,000 to Jewel and $750,000 to Hainan. However, just before the second transfer by Viagens, on January 29, 2014, Plaintiff filed the above-referenced emergency motion to attach and garnish the funds that were about to be transferred in the second distribution. Representing Plaintiff in this action was Moore & Company, P.A., which had also represented Viagens in the Quail—Viagens lawsuit and had represented Viagens in the distribution of the settlement funds as recently as one week before filing the emergency motion on behalf of Plaintiff. In Plaintiff's view, once Holland & Knight received the funds that had been attached in Hainan's Rule B motion, the funds were no longer protected by the Rule B attachment because, under Rule B(3)(a), the funds had to either remain “in the garnishee's hands or [be] paid into the registry of the court.” Having left Viagens' hands, Plaintiff argued, the funds would become subject to Plaintiff's own new Rule B attachment.

In opposition to Plaintiff's motion, Jewel and Hainan (“Appellees”) and Holland & Knight raised various arguments. First, they argued that the funds Plaintiff was attempting to attach were still subject to Hainan's prior Rule B attachment and Jewel's constructive trust. Second, they argued that Plaintiff's “emergency” motion represented no emergency at all because Plaintiff's counsel had served as counsel for Viagens during the negotiations leading to the verbal settlement, and therefore was well aware of when and how the funds would be transferred. Plaintiff therefore had been dishonest in its representations to the district court in support of its Rule B attachment. They similarly argued that Plaintiff, because of this knowledge, should have intervened earlier in the proceedings, rather than wait until the eleventh hour to manufacture an emergency. Finally, Appellees argued that Quail's interest was only in receiving the $2,500,000 owed to it from Viagens, and it had no claim on any funds that had already been transferred to third parties, including the funds being held by Holland & Knight.

After hearing from the parties, a magistrate judge issued a report and recommendation suggesting that Plaintiff's Rule B attachment should be vacated. The district court adopted the magistrate judge's report and recommendation, giving three key reasons in support of its decision to vacate Plaintiff's attachment. First, the court held, Plaintiff was relying on a narrow, unpersuasive reading of Rule B(3)(a), under which an attachment was lost as soon as the res left the hands of the garnishee or the court's registry. Second, the motion was not an “emergency,” as Plaintiff had characterized it, because Moore & Company had just represented Viagens in the secret settlement negotiations and therefore knew exactly what was planned and when the distributions would take place. Third, the language in the settlement agreement pertaining to the transfer and disbursement of the funds did not leave those funds open to attachment. Quite simply, the funds were no longer the property of Quail at the time Plaintiff sought to attach them. Thus, Plaintiff's attachment was invalid and must be vacated.

Plaintiff had argued in its objections to the magistrate judge's report and recommendation that its interpretation of Rule B(3)(a) was not too broad. For the most part, Plaintiff admitted that money does not become subject to a new attachment simply because it has left the garnishee's hands. Nonetheless, Plaintiff argued, the money does become available for a new attachment if it is sent to “a third party non-garnishee found in this District and the property remains that of the debtor.” But, as the district court noted, Plaintiff failed to object to the magistrate judge's finding that the money was no longer the property of debtor Quail at the time that Plaintiff sought to attach the funds. Because Plaintiff failed to contest that finding in its objections to the report and recommendations, and it was not clearly erroneous, the district court accepted the findings and rejected Plaintiff's argument.

The district court issued its order vacating Plaintiff's Rule B attachment on September 23, 2014, and Plaintiff filed this appeal from that order.

II. MOTION TO DISMISS AS MOOT

After the filing of this appeal, Jewel and Hainan filed a joint motion to dismiss Plaintiff's appeal as moot, asserting that once the district court vacated Plaintiff's Rule B attachment of the funds, Holland & Knight distributed those funds to Jewel and Hainan, who then transferred them out of the district through their ordinary course of business. Plaintiff had made no request that the funds be held pending the outcome of the appeal, and...