OS Shipping Co. Ltd. v. Global Maritime Trust(s) Private Limited et al
Opinion and Order. The Court DENIES JSL's Motion 21 to Vacate Maritime Attachment and DENIES Plaintiffs' request for costs and attorneys' fees incurred to respond to JSL's Motion. The Court also GRANTS in part and DENIES in par t Plaintiffs' Motion to Strike as set out herein. The Court directes the parties to confer as to a case-management plan for the Court to adopt for this case pursuant to Federal Rule of Civil Procedure 16 and to file no later than 5/20/2011, a Joint Case-Management proposal. Signed on 05/06/2011 by Judge Anna J. Brown. See 31 page Opinion and Order for full text. (bb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
OS SHIPPING CO. LTD. and
(GJENSIDIG) as subrogee of OS
Shipping Co. Ltd.,
GLOBAL MARITIME TRUST(S)
PRIVATE LIMITED, JS LINE SA,
and HONG JAE HYUNG a/k/a Jay
GEORGE M. CHALOS
Chalos & Co., P.C.
123 South Street, Suite 105
Oyster Bay, NY 11771
ROBERT I. SANDERS
TODD A. ZILBERT
6915 S.W. Macadam, Suite 115
Portland, OR 97219
Attorneys for Plaintiffs
1 - OPINION AND ORDER
OPINION AND ORDER
C. KENT ROBERTS
CATHERINE B. BRINKMAN
Schwabe Williamson & Wyatt, PC
1600-1900 Pacwest Center
1211 S.W. Fifth Avenue
Portland, OR 97204
OWEN F. DUFFY, III
Law Office of Owen F. Duffy
5 Penn Plaza
New York, NY 10001
Attorneys for Defendant JS LINE SA
This matter comes before the Court on the Motion (#21) of
Defendant JS Line SA (JSL) to Dismiss Verified Complaint and
Vacate Maritime Attachment and Plaintiffs’ Motion (#66) to Strike
JSL’s Supplemental Declaration of Owen F. Duffy.
For the reasons
that follow, the Court DENIES JSL's Motion to Vacate and DENIES
Plaintiffs’ request for costs and attorneys’ fees incurred to
respond to JSL’s Motion.
The Court also GRANTS in part and
DENIES in part Plaintiffs’ Motion to Strike as specified herein.
On March 28, 2011, Plaintiff OS Shipping (OSS), a South
Korean business, filed its Verified Complaint in Admiralty that
2 - OPINION AND ORDER
includes an Application for Attachment under Supplemental
Admiralty Rule B.
OSS sought to attach the M/V GMT Venus while
it was present in the District of Oregon as security for OSS’s
rights to recover under a certain Declaratory Award issued by a
London Arbitration Tribunal.1
OSS asserted JSL, a Panamanian
business that owns the Venus, is the alter ego of GMT; JSL,
therefore, is liable for the debts of GMT; and, accordingly,
JSL’s asset, the Venus, is subject to attachment in Oregon.
Based on the ex parte application of OSS, the Honorable Garr
M. King ordered and the Clerk issued a Writ of Attachment for the
Venus on March 28, 2011.
On March 31, 2011, JSL filed its Motion
to Dismiss Verified Complaint and Vacate Maritime Attachment.
support of the Motion, JSL offered the Declarations of H.S. Oh,
Lee Jin Tai (Lee), Yang Woo Mun (Yang), Hong Jae Hyung (Hong),
and Yoon Ji Yi (Yoon) to support its assertion that there is not
any basis to conclude that JSL is GMT’s alter ego, and,
therefore, there is not any basis for the Venus to be held in the
District of Oregon.
On April 6, 2011, the Court initially heard argument on
JSL's Motion, and the Court granted OSS's request for leave to
file an amended complaint to set out with more specific detail
the facts supporting OSS's alter-ego allegations against JSL.
The Declaratory Award arises from OSS’s claim for breach
of maritime contract by Defendant Global Maritime Trust (GMT), a
3 - OPINION AND ORDER
Accordingly, the Court denied as moot that part of JSL's Motion
in which it sought dismissal of the original Complaint for
failure to state a claim.
The Court also deferred resolution of JSL’s Motion to Vacate
and granted OSS’s request for expedited jurisdictional discovery
as to the facts relating to OSS’s alter-ego claim.
advised it would reconvene the hearing on JSL’s Motion to Vacate
following this limited discovery to determine whether there is
sufficient evidence to uphold the attachment of JSL's vessel as
security for an obligation that GMT purportedly owes OSS, which
is the sole basis for jurisdiction in Oregon.
After OSS deposed JSL’s witnesses Hong, Yoon, and Lee in
Seoul, Korea, OSS filed its Amended Complaint (#57) on April 19,
In the Amended Complaint, OSS added Plaintiff
Assuranceforenigen Skuld (Gjensidig) "on its own behalf and as
subrogee of its Member OSS, and others."
OSS also added "Hong
Jae Hyung a/k/a Jay H. Hong” as a defendant and asserts he is
personally liable for the Declaratory Award in Plaintiffs’ favor.
In their Amended Complaint, Plaintiffs provide twelve
additional pages of factual allegations to support their alterego claim against both JSL and Hong.
Am. Compl. ¶¶ 38-136.
support of their contention that the Writ of Attachment should
not be vacated, Plaintiffs filed a Supplemental Memorandum (#59)
and roughly 400 pages of Exhibits (#58) with the Declaration of
4 - OPINION AND ORDER
George M. Chalos.
In turn, JSL filed its responsive brief and
roughly 300 pages of exhibits on April 22, 2011.
The Court heard continued argument on JSL’s Motion to Vacate
Maritime Attachment on April 25, 2011, and took the Motion under
advisement at the conclusion of the hearing.2
PLAINTIFFS’ MOTION (#66) TO STRIKE
On April 27, 2011, without leave of court or conferral with
Plaintiffs, JSL filed the Supplemental Declaration (#63) of Owen
F. Duffy with multiple attachments to supplement the record as to
the Motion to Vacate, which, as noted, the Court had already
taken under advisement.
On April 29, 2011, Plaintiffs filed
their Motion (#66) to Strike the Supplemental Declaration.
Plaintiffs request the Court to strike JSL’s Supplemental
Declaration on the grounds that JSL’s submission violates Local
Rule 7.1 for lack of conferral, was submitted without leave of
Court after the Motion to Vacate was taken under advisement, and
contains materials that are beyond the scope of the Motion to
Plaintiffs also seek the imposition of sanctions against
JSL’s counsel, including attorneys’ fees and costs, for the time
expended in responding to JSL’s Supplemental Declaration.
To date, neither GMT nor Hong have appeared in this
5 - OPINION AND ORDER
Motion to Strike.
The Court has the inherent power to manage and to control
its docket, which includes the discretion to strike documents.
See Ready Transp., Inc. v. AAR Mfg., Inc., 627 F.3d 402, 404 (9th
Cir. 2010)(“The inherent powers are mechanisms for ‘control
necessarily vested in courts to manage their own affairs so as to
achieve the orderly and expeditious disposition of
cases.’”)(citing Chambers v. NASCO, Inc., 501 U.S. 32, 55
The Ninth Circuit elaborated on the extent of a
district court’s authority:
Indeed, the inherent powers permit a district
court to go as far as to dismiss entire
actions to rein in abusive conduct. See
Atchison, 146 F.3d at 1074 (recognizing
inherent power to dismiss an action to
sanction abusive conduct such as judgeshopping or failure to prosecute). It
necessarily follows that, as part of its
power to “manage [its] own affairs,”
Chambers, 501 U.S. at 43, 111 S. Ct. 2123, a
district court can use less drastic measures
such as striking documents from the docket to
address litigation conduct that does not
warrant outright dismissal.
Ready Transp., 627 F.3d at 404.
These powers differ from the
Court’s authority to strike a pleading under Federal Rule of
Civil Procedure 12(f), which permits a court to strike all or
part of a pleading (such as a complaint, an answer, or a reply,
but not a motion) under certain conditions.
JSL contends it “felt that it was a matter of urgency to
present certain materials to the Court as the Plaintiffs had
6 - OPINION AND ORDER
promised to do.”
JSL, however, did not make any request to file
supplemental materials during or following the hearing, did not
confer with Plaintiffs’ counsel about the issue in the two days
between the conclusion of the hearing and the filing of JSL’s
Supplemental Declaration, and did not seek leave of Court to
supplement the record after the Court had taken the Motion under
The Court notes that, at the April 6, 2011, hearing, it
explicitly admonished the parties to comply with the Local Rules
of Court, and, in particular, the Court noted the obligation of
local counsel to ensure that compliance.
Other than a response
and a reply to a motion, Local Rule 7-1(e)(3) provides “no
further briefing is allowed” unless by leave of Court.
Notwithstanding that JSL had ample and fair opportunity to make
its record in support of its Motion to Vacate before the
conclusion of the hearing on April 25, 2011, JSL’s counsel filed
Duffy’s Supplemental Declaration without leave of Court or even
any notice to (not to mention conferral with) Plaintiffs’
The Court finds this inexplicable tactic analogous to a
party knocking on the jury-room door during deliberations to add
to the record.
This conduct is particularly egregious in light
of the fact that it occurred after the Court’s admonishment of
the parties for making filings that were out of order,
unauthorized, and not in accordance with the Local Rules.
7 - OPINION AND ORDER
Nevertheless, the Court has reviewed the content of JSL’s
Supplemental Declaration and finds the materials are either
irrelevant or redundant and, therefore, should be stricken.
Exhibits A, B, C, and E concern proceedings that are taking place
in jurisdictions other than the District Court of Oregon.
Although JSL contends these materials are relevant to “issues
raised during the oral argument,” the Court finds those documents
do not relate in any way to the limited analysis of Plaintiffs’
alter-ego claim, which is currently the only issue before the
Exhibit D is a Third Declaration of Mr. Yang Woo Mun of
GMT Korea Co. Ltd. in which Yang reiterates statements already in
the record and offers irrelevant commentary on the actions of
Chalos, Plaintiffs’ counsel.
For these reasons, the Court grants Plaintiffs’ Motion to
Strike the Supplemental Declaration (#63) of Owen F. Duffy.
Because the Court has stricken the Supplemental Declaration, the
Plaintiffs’ requests in their Reply for additional documentary
discovery and for an opportunity to respond to JSL’s supplemental
materials are moot.
Plaintiffs also request the Court to sanction JSL’s conduct
for willful disobedience of the Local Rules and this Court’s
As a sanction, Plaintiffs seek an award of the
attorneys’ fees and costs they incurred in filing the Motion to
8 - OPINION AND ORDER
The Court notes that if JSL had conferred (as required) and
filed a motion for leave to supplement the record (also
required), Plaintiffs would have likely spent the same amount of
time in considering and responding to JSL’s request.
Court concludes Plaintiffs were not prejudiced by JSL’s
unauthorized and noncompliant filing, and, therefore, the Court
denies Plaintiffs’ request for sanctions in the form of
attorneys’ fees and costs.
Nevertheless, the Court remains quite concerned with the
disturbing pattern of counsel’s conduct to date in repeatedly
ignoring conferral rules and making unauthorized supplemental or
The Court notes the filing that prompted
Plaintiffs’ Motion to Strike significantly distracted the
responding parties and delayed the Court in “promptly” resolving
JSL’s Motion to Vacate as required by Rule E(4)(f) of the
Supplemental Admiralty Rules to the Federal Rules of Civil
The Court, therefore, insists the parties abide by the
federal and Local Rules and this Court’s directives.
the Court denies Plaintiffs’ request for sanctions in the form of
attorneys’ fees and costs at this time, any noncompliant conduct
by counsel in the future is not likely to be treated as
9 - OPINION AND ORDER
JSL’s MOTION (#21) TO VACATE
JSL moves to vacate the Writ of Attachment on the ground
that Plaintiffs have not met their burden to show they are
reasonably likely to prove facts sufficient to support their
claim that JSL is the alter ego of GMT, and, accordingly, the
Venus should not be held as security for the debt that GMT
allegedly owes to Plaintiffs.
Plaintiffs, in turn, contend they
have provided sufficient evidence at this stage of the
proceedings to sustain the Writ of Attachment.
Pursuant to the Supplemental Admiralty Rules to the Federal
Rules of Civil Procedure, the parties agree Plaintiffs bear the
burden to show why the Court should not vacate the Writ of
The Ninth Circuit has recently held a plaintiff must
meet four conditions to sustain an attachment under Admiralty
Under Rule B of the Supplemental Admiralty
Rules, plaintiff may attach a defendant's
property if four conditions are met:
(1) Plaintiff has a valid prima facie
admiralty claim against the defendant;
(2) defendant cannot be found within the
district; (3) property of the defendant can
be found within the district; and (4) there
is no statutory or maritime law bar to the
attachment. Aqua Stoli Shipping Ltd. v.
Gardner Smith Pty Ltd., 460 F.3d 434, 445 (2d
10 - OPINION AND ORDER
Cir. 2006); see Fed. R. Civ. P., Supp. R. B.
After receiving notice of the attachment,
defendant may contest it under Supplemental
Rule E(4)(f). Fed. R. Civ. P., Supp. R.
E(4)(f). At a Rule E hearing, defendant may
argue that the attachment should be vacated
because plaintiff failed to meet one of the
four conditions for attachment. Aqua Stoli,
460 F.3d at 445; see also Fed. R. Civ. P.,
Supp. R.E. advisory committee's note (1985
amends.)(explaining that at a Rule E hearing,
defendant “can attack the complaint, the
arrest, the security demanded, or any other
alleged deficiency in the proceedings”).
Plaintiff has the burden of justifying a
continued attachment. Fed. R. Civ. P., Supp.
Equatorial Marine Fuel Mgmt. Servs. Pte Ltd. v. MISC Berhad, 591
F.3d 1208, 1210 (9th Cir. 2010).
Here the parties only dispute
whether Plaintiffs have met their burden under the first
condition; that is, whether Plaintiffs have shown a valid prima
facie claim of alter-ego liability against JSL.
Although there does not appear to be any binding precedent
in the Ninth Circuit as to the specific nature of Plaintiffs’
burden to show that the Writ should not be vacated, the
prevailing test appears to be a “probable cause” standard that
requires Plaintiffs to demonstrate the evidence shows a fair or
reasonable probability that Plaintiffs will prevail on their
Numerous unpublished district court decisions
support that standard.
In Sea Prestigio, LLC v. M/Y/ Triton,
2010 WL 5376255, No. 10CV2412-BTM AJB (S.D. Cal. Dec. 22, 2010),
the Court noted:
11 - OPINION AND ORDER
The purpose of this hearing is not “to
resolve definitively the dispute between the
parties, but only to make a preliminary
determination whether there were reasonable
grounds for issuing the arrest warrant.”
Lion de Mer v. M/V Loretta V, No. L-98-921,
1998 U.S. Dist. LEXIS 10182, at *5, 1998 WL
307077 (D. Md. Apr. 3, 1998). “At this stage
in the proceedings, plaintiff merely needs to
show ‘probable cause’ for the issuance of the
warrant and writ.” Del Mar Seafoods Inc. v.
Cohen, No. C 07-02952, 2007 U.S. Dist. LEXIS
64426, at *7-8, 2007 WL 2890614 (N.D. Cal.
August 16, 2007).
2010 WL 5376255, at *1.
Although the test for satisfying Plaintiffs’ burden has not
been specifically addressed by the Ninth Circuit, the Court
concludes the “probable cause” standard is consistent with
Admiralty Rule E(2)’s heightened pleading standard for in rem
actions that requires “the complaint shall state the circumstances from which the claim arises with such particularity that
the defendant or claimant will be able, without moving for a more
definite statement, to commence an investigation of the facts and
to frame a responsive pleading.”
Fed. R. Civ. P., Supp. R. E(2).
See also Puerto Rico Ports Auth. v. BARGE KATY-B, 427 F.3d 93,
105 (1st Cir. 2007)(“This heightened pleading standard is not
some pettifogging technicality meant to trap the unwary, but,
rather, a legal rule designed to counterbalance the unique and
drastic remedies that are available in in rem admiralty
The Court also finds the probable-cause standard
is consistent with Rule E’s placement of the burden on the
12 - OPINION AND ORDER
plaintiff to show “why the writ should not be vacated” in light
of the minimal showing on which the writ may be initially
Fed. R. Civ. P., Supp. R. E(4)(f).
Accordingly, the Court does not make findings of fact as to
the ultimate merits of Plaintiffs alter-ego claim against JSL.
Instead the Court, based on the record to date, will only
determine whether Plaintiffs satisfy the probable-cause standard
by showing they are reasonably likely to prevail on their alterego claim against JSL.
See, e.g., Wajilam Exports (Singapore)
Pte. Ltd. v. ATL Shipping, Ltd., 475 F. Supp. 2d 275, 280
Federal common law applies in admiralty cases.
The test for
alter-ego liability is summarized by the Ninth Circuit as
Admiralty courts may pierce the corporate
veil in order to reach the “alter egos” of a
corporate defendant. See Swift & Co. Packers
v. Compania Colombiana Del Caribe, S A, 339
U.S. 684, 689 n. 4, 70 S. Ct. 861, 865 n. 4,
94 L. Ed. 1206 (1950); see also Talen's
Landing, Inc. v. M/V Venture, 656 F.2d 1157,
1160 (5th Cir. 1981). Federal courts sitting
in admiralty generally apply federal common
law when examining corporate identity. See
In re Holborn Oil Trading Ltd., 774 F.Supp.
840, 844 (S.D.N.Y.1991). “Corporate
separateness is respected unless doing so
would work injustice upon an innocent third
party.” Kilkenny v. Arco Marine Inc., 800
F.2d 853, 859 (9th Cir.1986).
We have held that disregard of corporate
13 - OPINION AND ORDER
separateness “requires that the controlling
corporate entity exercise total domination of
the subservient corporation, to the extent
that the subservient corporation manifests no
separate corporate interests of its own.”
Id. (internal quotations omitted). As
formulated by the Second Circuit, federal
common law allows piercing of the corporate
veil where a corporation uses its alter ego
to perpetrate a fraud or where it so
dominates and disregards its alter ego's
corporate form that the alter ego was
actually carrying on the controlling
corporation's business instead of its own.
See Kirno Hill Corp. v. Holt, 618 F.2d 982,
985 (2d Cir. 1980).
Chan v. Soc’y Expeditions, Inc., 123 F.3d 1287, 1294 (9th Cir.
The Court concludes the Ninth Circuit’s test in Chan permits
a finding of alter-ego liability either when the corporate form
is used to perpetuate a fraud or when one corporate entity
exhibits “total domination of the subservient entity.”
Although JSL disputes the Court’s disjunctive reading
of the Chan test and contends Plaintiffs must prove both elements
of control and fraud, JSL has not provided any authority to
undermine the test set out in Chan.
Indeed, JSL’s reliance on
Doe v. Unocal Corporation is misplaced because, as JSL conceded
at the hearing on April 25, 2011, Doe was based on California
state law rather than federal common law.
(9th Cir. 2001).
248 F.3d 915, 925-28
On that basis, the Court does not find any
ground to veer from the Chan test.
JSL also relies on this Court’s decision in Seiko Epson
14 - OPINION AND ORDER
Corporation v. Print-Rite Holdings, Ltd., No. CV 01-500-BR, 2002
WL 32513403 (D. Or. Apr. 30, 2002).
In Seiko the Court reviewed
situations under federal common law in which federal courts had
pierced the corporate veil for purposes of asserting jurisdiction
over an entity that was beyond the jurisdiction of the Court on
the basis of that entity’s close corporate relationship with
another entity that was within the Court’s jurisdiction.
The Court, however, did not state in Seiko any rule of
law that contradicted Chan and, in fact, declined to offer any
opinion “regarding the appropriate test for alter-ego liability
in this matter.”
Id., at *13 n.7.
Pertinent Factual Background.
The following facts are undisputed unless otherwise noted:
GMT, a time-charterer of vessels delivering bulk goods in
international shipping, was incorporated in Singapore in 2001 by
At the time of incorporation, Hong and his wife, Yoon,
were listed as directors and shareholders of GMT.
President and Managing Director of GMT.
Hong was the
He held 99.8% of the
shares, and Yoon held .2%.
Hong also incorporated JSL.
At the time of its
incorporation in Panama in May 2008, Hong was the President and
Managing Director of JSL and held one-third of the shares in the
Yoon was also a director and held one-third of the
Hong and Yoon’s son, Hong Sung Won (Won), was appointed
15 - OPINION AND ORDER
Treasurer of JSL and held one-third of the shares.
JSL did not conduct any business until it purchased the
Venus in March 2010.
In June 2010 GMT and JSL entered into an
agreement under which GMT time-chartered the Venus from JSL and
GMT agreed to pay $7,950 per day to JSL for use of the Venus.
the same day, GMT time-chartered the Venus to Glovis Co. Ltd.
Korea for $8,500 per day.
At all relevant times, JSL has paid a
fee to a ship manager to manage the daily operations of the
Currently Doriko Limited, a Korean company, manages the
GMT had a pre-existing time-charter agreement with OSS for a
vessel named MIPO BONANZA.
In August 2010 a dispute arose
between GMT and OSS regarding GMT’s liability for a shipment of
goods bound for Libya carried by the MIPO that were allegedly
damaged and/or missing.
This is the dispute that was arbitrated
by an Arbitration Tribunal in London, England, in accordance with
the time-charter agreement.
After considering the parties’
briefs submitted in November 2010, the Tribunal issued a decision
in January 2011 in favor of OSS that GMT was responsible for
providing security for the cargo bound for Libya in 2010 as well
as for costs and interest.
After the dispute over the cargo on the MIPO arose and while
it was being arbitrated before the Tribunal, GMT and JSL each
made changes in their corporate governance.
16 - OPINION AND ORDER
December 2010 Hong resigned from his positions with JSL and
allegedly transferred his shares to his son, Won.
resigned her positions with GMT near the end of 2010 and
allegedly transferred her shares to Hong.
Hong’s mother, Lee,
was appointed as a director of JSL in March 2011.
In November 2010 while the arbitration was pending, GMT and
Glovis negotiated an addendum to the GMT-Glovis time-charter
agreement in which GMT assigned to JSL the entire $8,500 per-day
amount due from Glovis; i.e., $550 per day in excess of the
amount that GMT owes JSL under their time-charter agreement.
Hong signed the addendum as “Hong Jae Hyung,” President of JSL,
and as “Jay H. Hong,” Managing Director of GMT.
As noted, JSL challenges in its Motion to Vacate whether its
vessel, the Venus, may be held by this Court as security for the
adverse ruling by the Tribunal against GMT by virtue of
Plaintiffs’ claim that JSL is GMT’s alter ego.
contend they have met their burden to show they are reasonably
likely to prove their alter-ego claim under either or both prongs
of the Chan test; i.e., that GMT dominated and controlled JSL and
that GMT has fraudulently used the corporate form of JSL to avoid
In addition, Plaintiffs contend the evidence
submitted by JSL is not relaible and does not undermine
17 - OPINION AND ORDER
Declarations of Lee and Yoon submitted by JSL.
As an initial matter, Plaintiffs assert in their
Supplemental Memorandum in Opposition to JSL’s Motion that JSL
submitted the Declarations of Lee and Yoon in bad faith.
particular, Plaintiffs contend the deposition testimony of Lee
and Yoon demonstrates that JSL’s counsel knowingly submitted
false Declarations by Lee and Yoon in support of their Motion.
As a consequence, Plaintiffs, as clarified at the oral argument
on April 25, 2011, are requesting the Court to disregard JSL’s
evidence in support of its Motion.
Lee Declaration and Deposition Testimony.
In her Declaration submitted in support of JSL’s
Motion, Lee attests under penalty of perjury as to the details of
the formation of JSL in Panama, the ownership and management of
the Venus, the insurance for the Venus, the various pertinent
time-charter agreements, the corporate form of and separateness
between the business operations of GMT and JSL, and the impact on
JSL of the arrest of the Venus.
In her deposition testimony, however, Lee stated she
cannot read English, does not know where JSL was incorporated,
had never previously seen the Venus ship registration (attached
as Exhibit 1 to her Declaration), had not previously heard of the
term “P&I” (an insurance certificate attached as Exhibit 4 to her
Declaration), was unfamiliar with the term “time-charter,” had
18 - OPINION AND ORDER
never heard of a company called “Global Maritime Trust Pte.
Ltd.,” had never heard of OS Shipping, was unaware whether JSL
had a bank account, had never been to a meeting on behalf of JSL,
had never reviewed the corporate books or records for JSL, and
had not done anything on behalf of JSL.
Lee also testified with regard to the Declaration
itself that she was not asked to submit any papers to this Court
nor did she make any statements or sign any papers for the
purpose of submitting them to this Court.
Although Lee testified
she signed a document as Yoon asked her to do, Lee did not
understand its contents because it was in English and was not
translated for her.
In her Declaration submitted in support of JSL’s
Motion, Yoon attests she knows Lee and considers her to be
competent, agrees with the statements set out in Lee’s
Declaration, describes the time-charters between JSL and GMT and
GMT and Glovis, notes the Venus is managed by Doriko Limited, and
explains in detail her belief that the attachment of the Venus
Although Yoon testified at her deposition that she
understood English and that she read her Declaration in English,
her deposition testimony indicates she has some difficulty
19 - OPINION AND ORDER
Yoon also testified she did not prepare
her Declaration, that Hong gave her the Declaration to review and
to sign, and that she did not assist in preparing responsive
documents on behalf of JSL.
Yoon also attested she does not have
any experience in the shipping industry, has not performed any
work in any capacity for GMT, and relies on help from Hong to
perform her roles as President and Managing Director of JSL.
Yoon testified Lee became a Director of JSL on March 1,
2011, and Lee gave her Declaration less than a month later.
testified even though Lee had little, if any, knowledge of JSL’s
business, JSL’s lawyer in Portland suggested Lee would be a good
As noted, Plaintiffs contend JSL offered the
Declarations of Yoon and Lee with the knowledge that they were
In particular, Plaintiffs note JSL’s counsel informed the
Court at the hearing on April 6, 2011, that he exchanged emails
with Lee and prepared the Declaration with her via email, but
Lee’s testimony reflects she did not exchange emails with
JSL, nevertheless, maintains it did not knowingly offer
any false evidence to this Court.
JSL asserts there were a
number of factors that led to submission of the Lee Declaration
despite Lee’s apparent lack of knowledge about JSL, including the
speed with which JSL had to act to have the Writ vacated, the
fact that JSL and its corporate representatives reside in
20 - OPINION AND ORDER
Southeast Asia, the language barrier, and the fact that Yoon was
unavailable at the time.
In addition, JSL notes there were accidental, latenight telephone conversations between Chalos, counsel for OSS,
and Yang, GMT Korea representative.
Although the parties have
filed several declarations from Yang and Chalos with conflicting
details about the content of their telephone conversations that
remain unresolved at this stage, it appears from Yang’s
Declaration (#41) that Yang saw Chalos’s telephone number on
correspondence between JSL’s counsel and Chalos and then
contacted Chalos twice in close succession in the middle of the
Yang attests he mistakenly believed Chalos was the United
States counsel for JSL.
According to Yang, he expressed his
concerns to Chalos about whether Lee, age 79, should give a
declaration because she was not willing travel to the United
States to testify.
According to Yang, Chalos stated Lee could
give a declaration notwithstanding her desire to avoid travel to
the United States.
Although Chalos asserts Yang raised other
concerns about Lee’s competence, age, and lack of personal
knowledge, Yang disputes Chalos’s characterization of the
In any event, JSL contends the confusion under
the tight time constraints contributed to its offering of Lee’s
For purposes of the current Motion only, the Court
21 - OPINION AND ORDER
accepts JSL’s explanation of the circumstances that led to
submission of the Lee Declaration and finds on this record that
JSL’s counsel did not act in bad faith.
The Court, however,
finds the Lee and Yoon Declarations are not entitled to much
weight when considered in light of the deposition testimony of
Lee and Yoon.
Finally, Plaintiffs request an award of costs and
attorneys’ fees incurred to respond to what Plaintiffs
characterizes as a meritless Motion to Vacate based on perjured
testimony by Lee and Yoon.
As noted, the Court declines to find
JSL’s counsel acted in bad faith when submitting the Lee and Yoon
Thus, the Court denies Plaintiffs’ request for
attorneys’ fees and costs on this basis with leave to renew their
requests in the future if there is a basis to do so.
As noted, Plaintiffs contend they have proffered sufficient
evidence that JSL is the alter ego of GMT and that JSL’s vessel,
the Venus, should continue to be held as security for the debt
allegedly owed by GMT to OSS.
Specifically, Plaintiffs contend
GMT totally dominated and controlled the operations of JSL to the
point that JSL did not have any separate interests of its own.
In addition, Plaintiffs contend JSL’s corporate form was used by
GMT to perpetuate a fraud by attempting to make GMT “judgment
22 - OPINION AND ORDER
The sole issue before the Court at this stage of the
proceedings is whether Plaintiffs have met their burden to show
there is probable cause (that is, a reasonable likelihood) that
they ultimately will prove their alter-ego claim against JSL on
As noted, the Court does not make binding factual
findings on the merits of the alter-ego claim.
Dominion and Control.
After carefully considering the evidence submitted by
the parties and the arguments submitted in briefing and at the
hearings, the Court concludes Plaintiffs have shown there is
probable cause to believe Plaintiffs can prove the following
facts with respect to the domination and control prong of the
alter-ego test set out in Chan:
Hong incorporated GMT in Singapore in
November 2001 and JSL on May 7, 2008, in Panama.
Until about November 2010 when Hong became
the sole shareholder in GMT, only Hong's wife, Yoon, held a
nominal stake (0.2%).
GMT added Yoon to satisfy the formalities
of Singapore corporate law, which apparently required two
Singapore nationals or citizens in order to incorporate there.
Yoon admitted in her deposition that she was a director, officer,
and shareholder for GMT in name only and did not perform any work
Hong began as the President and Managing
23 - OPINION AND ORDER
Director of JSL and named only Yoon and his son, Won, as officers
Neither Yoon nor Won had any experience with
shipping at the time, and Won was then a high-school student.
Hong, Yoon, and Won each held a third of the shares in JSL.
Under the articles of incorporation for JSL, Hong had full powers
to conduct the business of JSL without regard to the Board of
Directors or shareholders.
JSL’s Panamanian incorporation required it to
be capitalized with $10,000, but it was not.
JSL also did not
issue stock; did not maintain a stock registry; did not hire
employees; and did not maintain a telephone listing, a website,
or an email address.
JSL did not do any business from the time of
its incorporation in 2008 to March 2010 when it purchased the GMT
JSL time-chartered the Venus to GMT In June 2010.
Venus is JSL’s sole asset, and JSL does not conduct any other
JSL has one bank account opened by Hong at
Hana Bank in Singapore.
Hong was the sole and exclusive
signatory until he resigned from JSL in approximately December
GMT has a separate bank account at Hana Bank as well, and
Hong is the sole and exclusive signatory.
Board of Directors.
JSL has not held regular meetings of the
Yoon stated two Board meetings were held at
24 - OPINION AND ORDER
the offices of GMT.
Despite Yoon’s official role as secretary,
Hong prepared at least some of the minutes from the meetings.
Hong also prepared minutes for a JSL meeting in 2011 after he had
resigned from JSL.
Neither Hong nor Yoon could recall their son
Won attending those meetings despite the fact that Won’s
signature appears on the Board minutes as "present at the meeting
Yoon attested she traveled to visit her son at least
once while he was in the Korean Army to have him sign the minutes
after the meeting had taken place.
It does not appear Won
performed any work in his role as Treasurer.
In approximately November 2010 after the
dispute arose with OSS, Yoon resigned her position as a director
of GMT and relinquished her nominal shareholding.
approximately December 2010, Hong resigned as President and
Managing Director of JSL and turned over his roles to Yoon and
his shares to Won.
In March 2011 Hong's mother, Lee, was
appointed as a director of JSL.
Since Hong's resignation from JSL, Yoon
testified she consults Hong on some decisions because she cannot
make decisions on behalf of JSL based on her own experience in
the shipping industry.
GMT exercised complete control over JSL
during the relevant period and appears to use JSL’s sole asset,
the Venus, as GMT’s own.
25 - OPINION AND ORDER
Hong admitted at deposition that he was
in total control of both JSL and GMT when he signed the
time-charter agreement between GMT and JSL, which is exemplified
in part by the addendum to the time-charter agreement with Glovis
that Hong signed for both GMT and JSL (but with different forms
of his name).
Furthermore, communications from Doriko, manager
of the Venus, were emailed to GMT rather than to JSL, and many of
those communications refer to GMT as the “owner” of the vessel.
Indeed, the Venus bears the letters “GMT” on its hull.
however, points out the fact that corporations have common owners
and directors does not mean one of those entities has per se
control over the other.
JSL also notes the reference to GMT as
“owner” and the appearance of GMT in the vessel’s name are not
uncommon practices for long-term time charterers.
Court agrees such facts alone would not be sufficient to sustain
Plaintiffs’ burden, these facts are relevant to the Court’s
consideration of the totality of the circumstances.
When GMT assigned to JSL the payments due
under the Glovis time-charter agreement ($8,500 per day), that
sum exceeded by $550 per day the amount due to JSL under the
time-charter agreement with GMT ($7,950).
In effect, GMT created
a no-interest loan to JSL of $550 per day totaling in excess of
$200,000 per year.
JSL did not produce any documents that
accounted for or indicated an intent to repay this amount.
Yoon and Lee did not gather any documents on
26 - OPINION AND ORDER
behalf of JSL in response to production requests made by
Plaintiffs, and Hong admitted all important JSL documents were
kept at his home.
GMT, through Yang (GMT Korea) and Hong (GMT
Singapore), was involved in providing the Declarations of Lee and
Yoon on behalf of JSL, and a GMT representative insisted on
attending the depositions of JSL directors Lee and Yoon.
The Court concludes this record is sufficient to support a
probable cause finding that JSL is the alter ego of GMT because
GMT totally dominated and controlled JSL during the relevant
period to such an extent that JSL did not have a separate
identity or separate interests of its own.
Even if Plaintiffs could not establish GMT totally
dominated and controlled JSL, Plaintiffs contend JSL’s corporate
form has been fraudulently used by GMT to avoid obligations
allegedly owed by GMT to OSS.
In particular, Plaintiffs note it
can meet its burden by showing either fraud in the incorporation
of JSL or fraud in the use of its corporate form.
See Bd. Of
Trustees of Mill Cabinet Pension Trust Fund for N. Cal. v. Valley
Cabinet and Mfg. Co., 877 F.2d 769, 774 (9th Cir. 1989).
The Court finds Plaintiffs have demonstrated they are
reasonably likely to prove the following in support of their
alter-ego claim based on fraud:
27 - OPINION AND ORDER
Yoon was appointed as an officer,
shareholder, and director of GMT only to meet the formal
requirement of Singapore corporate law.
Yoon admitted she never
performed any work for GMT.
Although JSL was supposed to be capitalized
initially with the minimal sum of $10,000, it was not and it did
not issue stock.
Yoon testified the amount of stock disclosed in
the incorporation of JSL in Panama did not matter, and they were
able to “just make up” the initial stock distribution to satisfy
the formal requirements under Panamanian corporate law.
Yoon and her son, Won, were included merely to
create the appearance that corporate formalities were being
Neither had shipping experience nor fulfilled much, if
any, functional role in JSL before the dispute with Plaintiffs
The timing of the actions of GMT and JSL
after the dispute arose with Plaintiffs in late August 2010
suggests GMT sought to create distance between itself and JSL
despite retaining functional control of both entities with Hong’s
family members in proxy positions with JSL:
November 2010, Yoon resigned from GMT; in November 2010 GMT also
assigned its right to payment under the Glovis time-charter
agreement to JSL; and in approximately December 2010, Hong
resigned from JSL and Yoon took over as President and Managing
28 - OPINION AND ORDER
Yoon admitted she still seeks Hong's advice on JSL
business, and her testimony reflects she has only a slight
familiarity with the operations of the company.
Lee's deposition reflects her appointment as a director of JSL in
March 2011 was not based on any specific shipping knowledge or
The actions of JSL and GMT in producing Lee’s
Declaration and the documents responsive to Plaintiffs’
production requests suggest (1) Hong and GMT were in control of
the information provided about JSL rather than Yoon and Lee as
acting directors and (2) Hong and GMT were working to create the
impression that GMT and JSL were separate entities.
GMT Korea director Yang worked with JSL’s representatives to
determine whether Lee should offer a declaration, and Hong
delivered to Yoon the declaration that she ultimately signed in
support of JSL’s Motion.
Both Declarations appear to state facts
beyond the personal knowledge of Lee and Yoon.
GMT has commingled its assets with JSL by
assigning to JSL funds due to GMT in excess of the amount that
GMT owed to JSL under their time-charter agreement.
GMT did this
despite Hong’s testimony that GMT has debts and does not have any
Hong executed the November 2010 addendum to
the Glovis time-charter agreement on behalf of GMT and JSL and
29 - OPINION AND ORDER
signed as “Hong Jae Hyung,” President of JSL, and as “Jay H.
Hong,” Managing Director of GMT.
Hong has incorporated other companies such as
Link Ocean Shipping SA (owner of the GMT Polaris) and LS Maritime
SA in Panama for which he served as President and Managing
Yoon admitted she assumed the same roles as
shareholder and director in Link Ocean Shipping as she did in GMT
and did not perform any functional role in the management of that
With respect to LS Maritime, Yoon could not recall
whether she was a director, officer, or shareholder.
2010 under the direction of Hong, GMT transferred its
time-charter for the vessel M/V SB Queen to LS Maritime SA.
The Court concludes this record is also sufficient to
support a probable cause finding that JSL is the alter ego of GMT
because JSL was fraudulently incorporated and its corporate form
has been fraudulently used to avoid GMT’s obligations.
In summary, the Court concludes Plaintiffs have met their
probable-cause burden to show it is reasonably likely they will
prevail on their alter-ego claim under either or both prongs of
the federal common-law test for alter-ego liability as set out in
For these reasons, the Court DENIES JSL’s Motion (#21) to
30 - OPINION AND ORDER
Vacate Maritime Attachment and DENIES Plaintiffs’ request for
costs and attorneys’ fees incurred to respond to JSL’s Motion.
The Court also GRANTS in part and DENIES in part Plaintiffs’
Motion to Strike as set out herein.
The Court directs the parties to confer as to a casemanagement plan for the Court to adopt for this case pursuant to
Federal Rule of Civil Procedure 16 and to file no later than
May 20, 2011, a Joint Case-Management Proposal.
IT IS SO ORDERED.
DATED this 6th day of May 2011.
/s/ Anna J. Brown
ANNA J. BROWN
United States District Judge
31 - OPINION AND ORDER