United States District Court, E.D. Virginia, Norfolk Division
FLAME S.A., Plaintiff, GLORY WEALTH SHIPPING PTE LTD., Consolidated Plaintiff, VITOL S.A., Intervening Plaintiff, NOBLE CHARTERING, INC., Intervening Plaintiff,
INDUSTRIAL CARRIERS, INC., VISTA SHIPPING, INC., and FREIGHT BULK PTE. LTD., Defendants
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
For FLAME S.A., Plaintiff: Steven Michael Stancliff, LEAD ATTORNEY, Crenshaw Ware & Martin PLC, Norfolk, VA; Lauren Brooke Wilgus, William Robert Bennett, III, PRO HAC VICE, Blank Rome LLP (NY-NA), New York, NY.
For FREIGHT BULK PTE. LTD., Defendant: Patrick Michael Brogan, LEAD ATTORNEY, Davey & Brogan PC, Norfolk, VA; George Michael Chalos, PRO HAC VICE, Chalos & Co, P. C., Oyster Bay, NY.
For Glory Wealth Shipping Pte Ltd., Consolidated Plaintiff: Michelle Theresa Hess, LEAD ATTORNEY, Holland & Knight LLP, New York, NY.
OPINION & ORDER
Robert G. Doumar, Senior United States District Judge.
These matters come before the Court on two of Freight Bulk PTE, Ltd.'s (" Defendant" or " FBP" ) Motions. The first is its Motion to Vacate, Motion to Dismiss Flame S.A.'s (" Plaintiff' or " Flame" ) Amended Complaint, ECF No. 103, the second, FBP's Motion to Vacate, Motion to Dismiss Glory Wealth Shipping Pte. Ltd.'s (" Glory Wealth" ) Amended Complaint. ECF No. 105. Flame responded on March 27, 2014, ECF No. 123, and FBP replied to Flame on April 3, 2014. ECF No. 134. Glory Wealth responded March 24, 2014, and FBP replied on March 31, 2014. ECF No. 126. Both matters are ripe, a hearing was held on May 12, 2014, and the Court has considered all of the parties' arguments. To the extent not specifically addressed they are either moot or without merit. For the reasons herein, the Court DENIES the Motions. ECF Nos. 103 & 105.
I. PROCEDURAL AND FACTUAL HISTORY
Although the parties and Court are very familiar with this case's procedural history, the Court will discuss the pertinent portions of that history as well as the factual foundation of the case in addressing the instant motions.
A. Flame's Attachment
In 2008 Flame entered into four Forward Freight (Swap) Agreements (" FFA's" ) with Defendant International Carriers, Inc. (" ICI" ). The FFA's concerned certain shipping routes defined by the Baltic Exchange. ICI breached those agreements and Flame subsequently brought a successful suit in the High Court of England, obtaining a judgment for $19,907, 118.36 against ICI.
On December 23, 2010, Flame filed a complaint in the Southern District of New York to enforce the English judgment. The district court entered a default judgment on October 4, 2011, in favor of Flame. Flame registered that judgment in the Eastern District of Virginia on October 11, 2013, becoming effective October 17, 2013.
On November 22, 2013, Flame brought the instant suit against ICI and co-Defendants Vista Shipping, Inc. (" Vista" ) and FBP. Flame alleges that Vista and FBP are alter egos of ICI and are therefore jointly liable with ICI. Flame moved this Court to issue an order for the attachment of the M/V CAPE VIEWER (" CAPE VIEWER" or " Vessel" ) pursuant to its verified complaint. The Court granted the attachment in its November 22, 2013 order. FBP subsequently moved to vacate that order and to have the entire matter dismissed on two grounds: first, that the Court did not have subject matter jurisdiction over Flame's claim and second, that Flame had failed to plead a prima facie claim that FBP was the alter ego of ICI. The Court permitted limited discovery for jurisdictional purposes, including the depositions of Viktor Baranskiy (" Mr. Baranskiy" or " Baranskiy" ) and Alessandro Ballerini (" Mr Ballerini" or " Ballerini" ). After three hearings, Flame filed an Amended Complaint on January 9, 2014. The Court entered an Opinion and
Order on January 10, 2014, determining that admiralty jurisdiction did exist, certifying that question for expedited appeal to the Fourth Circuit, and reserving judgment on the alter ego question until the appeals process completed. ECF No. 57. The circuit court accelerated its briefing schedule and heard oral argument on May 14, 2014. FBP filed this Motion to Vacate Flame's Amended Complaint in mid-March. ECF No. 103.
B. Glory Wealth's Attachment
On October 29, 2009, Plaintiff Glory Wealth received an arbitration award in England against ICI for $38,528,753.18 plus interest for breach of a charter party agreement. It attempted to intervene in this matter in order to enforce that award on December 17, 2013. After initially denying Glory Wealth's motion to intervene, the Court, entered an order of attachment on December 19, and consolidated Glory Wealth's claim with Flame's on December 20, 2013. FBP filed its motion to vacate that order on the ground that Glory Wealth had failed to adequately plead that FBP was the alter ego of ICI. After hearing argument on all motions before the Court in this case on January 7, 2014, Glory Wealth was directed to file an Amended Complaint by January 9 incorporating elements of the Baranskiy deposition, which it did. Finally, after much prodding, Glory Wealth attached the CAPE VIEWER just before the February 27, 2014 teleconference hearing.
C. Factual History
At the May 12, 2014 hearing, where the parties were abundantly represented, the Court ruled that the factual allegations of Flame and Glory Wealth would be combined by each so that the Amended Complaints of each would be the factual allegations of both as to the facts concerning the alleged alter ego question leading to the piercing of company veils. The Baranskiy deposition is considered for both plaintiffs Flame and Glory Wealth.
While only Defendant FBP has made an appearance at this point in the proceedings, it is necessary to discuss the connections between FBP and co-defendants ICI and Vista. The following facts are not in dispute, unless noted, and are drawn largely from the declaration or deposition testimony of FBP's own Viktor Baranskiy. The deposition is filed in this case. ECF No. 51.
ICI was a shipping company based in and largely operated from Ukraine. It operated profitably and successfully until 2008 when, along with the rest of the shipping industry, it was struck by the global recession. ICI subsequently defaulted on many of its obligations, including obligations to Plaintiffs Flame and Glory Wealth. ICI filed for bankruptcy in October 2008. At the time of its filing for bankruptcy Victor Baranskiy had an 18% ownership interest in ICI that had been awarded to him in January or February of that year as a bonus for his good work. Mr. Baranskiy disputes that he ever saw the shares or received them. If Viktor Baranskiy received the shares as alleged, he and his father, who owned 33% of ICI, would have a controlling 51% ownership interest during the relevant time period, control which Mr. Baranskiy admitted having in his deposition. Dep. of Viktor Baranskiy Tr. at 34.
Vista was incorporated on June 24, 2008. However, it did not begin operations until
sometime around October 2008. It was during that period, at the end of 2008, that Baranskiy, along with several ICI-affiliated employees, left ICI and began working for Vista. Mr. Baranskiy subsequently relinquished his 18% holding in ICI sometime between September and November, 2008, Decl. of Viktor Baranskiy at 2, ¶ 11, while still retaining control of Vista. Vista soon began to operate many of the same routes with many of the same clients as ICI formerly had. Vista also formed several subsidiary companies, creating a highly interconnected web of entities. Some of these companies, such as FBP, were formed for the purpose of purchasing one or two vessels. It was ICI's practice to form such entities to shield itself from significant exposure to Rule B attachments.
To demonstrate the interconnectedness of the companies, it is useful to set forth how FBP obtained the funds to purchase the CAPE VIEWER, which is the object of the attachment order in question. FBP owns the CAPE VIEWER. FBP is 100% owned by Freight Bulk Ltd., which is in turn owned by HACHI. It appears HACHI is a holding company, and Mr. Baranskiy is the ultimate beneficial owner of it. FBP was established in September 2012 solely to purchase and be the registered owner of the CAPE VIEWER and another vessel, the M/V CAPE CLIMBER. FBP received the approximately $9 million for the purchase of the Vessel  from Sea Traffic (which is controlled by Baranskiy), which in turn received funds from Vista (which is also controlled by Baranskiy). Vista and FBP have a " commercial management agreement" whereby Vista essentially acts as (and on certain charter documents is listed as) the owner of the CAPE VIEWER. Therefore, FBP is ultimately controlled by Baranskiy via HACHI; Vista ultimately provided the capital funding for FBP; Vista ultimately controls and manages the CAPE VIEWER (which is one-half of FBP's entire portfolio);  and Vista is ultimately controlled by Baranskiy.
Baranskiy testified at his deposition that the funds to start up Vista were derived from a loan of " a couple of hundred thousand dollars" from a friend's company, a loan of approximately $1,000,000 from his mother that was delivered in cash in a briefcase, and his own personal savings of an indeterminate amount. From this initial
position Vista was able to, over the course of approximately four years, amass a fleet of ships worth over $100,000,000. The ships were purchased with cash and unencumbered by mortgages. Vista accomplished this feat despite the worst economic downturn in recent memory.
II. THE INSTANT MOTIONS
As the Court turns to the instant motions, it makes an observation. The personal and overblown attacks the parties have leveled at one another throughout this matter are unnecessary. Having observed counsel behave with civility before and after hearings but lambaste one another during oral argument and in their written submissions, the Court expresses its disappointment at the lack of courtesy counsel for all parties (even after the substitution of Defendant's counsel) show one another. The Court also notes that hyperbole is not legal argument and asks the parties to refrain from hyperbolic rhetoric.
The Court summarizes the parties' arguments immediately below and addresses them in more detail in its analysis.
A. FBP's Motion to Vacate Flame's Attachment
FBP argues that laches and relevant statutes of limitations bar Flame's Attachment. FBP also contends that Flame cannot meet the pleading standard regarding its alter ego claim. FBP puts forth many factual representations, which FBP contends do not permit the inference of an alter ego claim against itself vis-à-vis ICI.
Flame's Response would have this Court consider FBP's Motion as a Motion for Reconsideration under Federal Rule of Civil Procedure 54(b) or an untimely Rule 12 Motion to Dismiss. Under these standards, Flame argues FBP's Motion should be denied and its representations ignored by the Court as improperly before it at the pleading stage. Flame also argues that it has met its Rule B burden and that its claim is not time barred. Flame asks for attorney's fees for having to respond.
In its Reply, FBP disputes Flame's Rule 54 and Rule 12 contentions and argues for: a probable cause standard to apply in its challenge to the attachment. It also contends that its evidence is properly before the Court.
B. FBP's Motion to Vacate Glory Wealth's Attachment
In addition to the arguments made to vacate Flame's attachment, which FBP repeats in its Motion to Vacate Glory Wealth's attachment, FBP also argues that the doctrine of equitable vacatur compels this Court to vacate Glory Wealth's attachment, as FBP is subject to in personam jurisdiction in Singapore, where Glory Wealth is also incorporated.
Glory Wealth responds by asking for sanctions regarding FBP's time bar claims; that the doctrine of equitable vacatur should not be invoked here because FBP is no more than a paper company in Singapore and equitable vacatur would thus effectively end its claim; and that their earlier brief comprehensively covered the alter ego pleading question.
FBP replies that Glory Wealth's alter ego pleadings are insufficient and reasserts its time bar claim against Glory Wealth's attachment. Finally, FBP argues that if its Motions are granted, the matter must be dismissed, as the attached vessel is the sole method by ...