CAI International Inc v. South Atlantic Container Lines Ltd et al

Filing 43

ORDER by Judge Claudia Wilken granting 29 Motion to Set Aside Default and denying 27 30 Motions to Dismiss (cwlc2, COURT STAFF) (Filed on 7/5/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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CAI INTERNATIONAL, INC.,

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Plaintiff,
v.
SOUTH ATLANTIC CONTAINER LINES,
LTD.; MARUBA S.C.A. EMPRESA DE
NAVEGACIO MARITIMA; and EMPRESA
DE NAVEGACION MARUBA S.A.,

United States District Court
For the Northern District of California

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________________________________/
Defendant South Atlantic Container Lines, Ltd. (SACL) moves
to set aside the default entered against it.

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Plaintiff CAI

International, Inc. has filed a statement of non-opposition to
SACL’s motion.

SACL and Defendant Empresa de Navegacion Maruba

S.A. (Maruba SA) also move to dismiss CAI’s complaint for improper
venue pursuant to Federal of Civil Procedure 12(b)(3).1
opposes their motions.

CAI

Having considered the papers filed by the

parties and their arguments at the hearing, the Court GRANTS
SACL’s unopposed motion to set aside the default and DENIES the
motions to dismiss.
BACKGROUND

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ORDER GRANTING
MOTION TO SET
ASIDE DEFAULT
(Docket No. 29)
AND DENYING
MOTIONS TO DISMISS
(Docket Nos. 27
and 30)

Defendants.

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No. C 11-2403 CW

Except where noted, the facts material to the resolution of
these motions are not in dispute.

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Defendant Maruba S.C.A. Empresa De Navegacion Maritima, now
known as Maritima Maruba, S.A. (Maritima Maruba), did not
participate in either motion to dismiss.

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CAI and SACL entered into three agreements whereby CAI leased
shipping containers to SACL.

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The first two lease agreements, dated May 1, 2005 and

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November 1, 2008, amended December 15, 2008, contain identical

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venue selection clauses.

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United States District Court
For the Northern District of California

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These clauses state in relevant part,

With respect to any claim or controversy arising out of
or relating to this agreement, the parties consent to
the jurisdiction of State and Federal Courts located in
San Francisco, California, U.S.A.
Declaration of Nadine Teixeira in Supp. of Pl.’s Opp. to Def.
Maruba SA’s Mot. to Dismiss (Teixeira Maruba SA Decl.) ¶ 4, Ex. E
at 10, General Terms and Conditions ¶ 11(a); id. at ¶ 4, Ex. F at
10, General Terms and Conditions ¶ 11(a).
The third lease agreement, dated August 8, 2009, states,
With respect to any claim or controversy arising out of
or relating to this agreement, Lessor may require that
any dispute or proceeding arising out of or relating to
this Agreement, shall, at Lessor’s sole option and
discretion, be brought only in state or federal courts
having jurisdiction over the City and County of San
Francisco or before the American Arbitration Association
in San Francisco under its Commercial Arbitration Rules.
Lessee consents to jurisdiction and venue in those
courts. Lessor may opt to commence or allow proceedings
in any other jurisdiction.
Teixeira Maruba SA Decl. ¶ 4, Ex. G at 8, General Terms and
Conditions ¶ 11(a).
On August 10, 2009, CAI entered into an amended and restated
guaranty agreement with Maruba SA and Maritima Maruba, in which
Maruba SA and Maritima Maruba guaranteed SACL’s performance and
payment under the lease agreements.

Id. ¶ 5, Ex. A at 1.

The

guaranty agreement contained a forum selection clause stating,
CAI may require that any dispute or proceeding arising
out of or relating to this Guaranty shall, at CAI’s sole
option and discretion, be brought only in state or
federal courts having jurisdiction over the City and
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County of San Francisco or before the American
Arbitration Association in San Francisco under its
Commercial Arbitration Rules. Each of the Guarantors
consents to jurisdiction and venue in those courts. CAI
may opt to commence or allow proceedings in any other
jurisdiction.
Id. at 6 ¶ 12.
On September 30, 2010, CAI entered into a Creditors Agreement
with multiple parties, including Maruba SA and SACL, but not

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Maritima Maruba.

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was to restructure debt that various debtors, including Maruba SA

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and others, owed to creditors, including CAI and others, to allow

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United States District Court
For the Northern District of California

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the debtors to resolve assorted debts, including that owed under

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the guaranty and lease agreements described above, with the

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assistance of a new investor.

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Agreement incorporated the lease agreements between CAI and SACL

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by reference in the schedule of “Charter Party Agreements /

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Leasing Contracts.”

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that, after certain payments of the outstanding debt amounts were

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made, forty percent of the total overdue debt would be waived.

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Id. at 7.

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would pay, effective June 30, 2010, the original lease amounts in

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the leasing contracts.

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“for the duration of the Creditors Agreement, not to take any

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legal actions against the Company (including but not limited to a

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demand for payment, filing for insolvency, enforcement action or

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any other similar proceedings).”

Id. ¶ 6, Ex. B.

The purpose of this agreement

Id. at 3-4.

Id. at 16.

The Creditors

The Creditors Agreement provided

The Creditors Agreement also provided that the Company2

Id. at 7 ¶ 2.6.

The creditors agreed,

Id. at 7 ¶ 4.

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The “Company” was defined to include Maruba SA, SACL and
four other companies. Teixeira Maruba SA Decl. ¶ 6, Ex. B, at 3.
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The Creditors Agreement included clauses addressing events of

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default that allowed CAI and the other creditors to cancel the

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agreement.

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outstanding debt required to any creditor within specified amounts

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of time, the default “shall be deemed to be a repudiatory breach

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of the Creditors Agreement insofar as it relates to that

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Creditor.”

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“shall be entitled to cancel the Creditors Agreement insofar as it

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relates to that Creditor” and to start proceedings to recover the

If the Company failed to make the payments of

Id. at 8-9 ¶¶ 7.1-7.3.

In such an event, the creditor

United States District Court
For the Northern District of California

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total overdue amount, including any amount that would have been

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waived had the Creditors Agreement remained in effect.

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Further, if ongoing lease payments were not made within a certain

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time period, the affected creditor could also cancel the Creditors

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Agreement.

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all of their rights to commence any action or proceeding against

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the relevant counterparty under the relevant Container Lease

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Agreements / Leasing Contracts and/or Charter Party Agreements to

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which they are party.

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shall not replace or amend any existing rights, terms or

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conditions contained in the Container Lease Agreements / Leasing

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Contracts and/or Charter Party Agreements.”

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Id. at 9 ¶ 7.4.1.

Id.

In addition, “the Creditors reserve

This right shall be in addition to and

Id. at 9-10 ¶ 7.4.2.

The Creditors Agreement also included clauses establishing a
condition precedent:
9.1

The restructuring shall be subject to the Condition
Precedent that the Company provides evidence of the
undertaking from the New Investor, in which the New
Investor guarantees:
(a)

the New Investor’s investment and capital
injection into the Company;

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(b)

that a minimum of USD 30,000,000 (United
States Dollars Thirty Million only) of the New
Investor’s investment and capital injection
will be invested in the bulker business of the
Company; and

(c)

that the New Investor unconditionally and
irrevocably agrees and acknowledges that its
investment and capital injection into the
Company shall always be subordinated to the
Total Overdue Amount, less the amount already
paid by the Company to the Creditors pursuant
to this Creditors Agreement.

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. . .
9.3

The Creditors Agreement will be effective as from
the Effective Date, which shall be evidenced by
confirmation in writing by Roland Berger Strategy
Consultants addressed to all Parties.

9.4

Notwithstanding any provision in this Creditors
Agreement to the contrary, the Creditors Agreement
shall not become effective unless and until the
Conditions Precedent set out in clause 9.1 has been
satisfied.

United States District Court
For the Northern District of California

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Id. at 10 ¶¶ 9.1, 9.3, 9.4.
Like the earlier agreement, the Creditors Agreement included
a venue selection clause:
The parties irrevocably agree that the Courts of England
and Wales shall have exclusive jurisdiction to determine
any dispute or claim (including non-contractual disputes
or claims) arising under or in connection with the
Creditors Agreement.
Id. at 13 ¶ 19.2.

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The Creditors Agreement also stated,

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In the event of any conflict between this Agreement and
(i) any amendment to the Charter Party and / or Leasing
Contracts, according to which the terms of this
Agreement are implemented, or (ii) any other agreement,
which is concluded for the purpose of the implementation
of the terms of this Agreement, the terms of this
Agreement shall prevail.

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Id. at 13 ¶ 18.2.

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Also on September 30, 2010, CAI entered into a Letter

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Agreement with multiple parties, again including Maruba SA and

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SACL but not Maritima Maruba.

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Agreement was drafted by counsel for Maruba SA and SACL.

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¶ 7.

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Agreement, Maruba SA agreed to pay the overdue amount that CAI

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agreed to waive in the Creditors Agreement and to return the

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containers to CAI.

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Agreement provided,

United States District Court
For the Northern District of California

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Id. at ¶ 7, Ex. C.

The Letter
Id. at

In consideration for CAI entering into the Creditors

Id. at ¶ 7, Ex. C at 1-2.

The Letter

In the event that Maruba fails to make payment to CAI on
the terms set forth above, the Creditors Agreement may
be immediately cancelled by CAI and the respective full
current Outstanding Debt shall fall automatically due
and payable to CAI without further notice.
2 ¶ 3.

It also contained a forum selection clause:

CAI may require that any dispute or proceeding arising
out of or relating to this Letter Agreement shall, at
CAI’s sole option and discretion be brought only in
state or federal courts having jurisdiction over the
City and County of San Francisco or before the American
Arbitration Association in San Francisco under its
Commercial Arbitration Rules. Each of the Maruba
Companies consents to jurisdiction and venue in those
courts. CAI may opt to commence or allow proceedings in
any other jurisdiction.
3 ¶ 9.
The parties dispute whether the conditions precendent to the
Creditors Agreement were ever met, and thus whether that agreement
became effective.

With their replies, SACL and Maruba SA

submitted a letter dated October 18, 2010 and purportedly written
by Nils R. Kuhlwein von Rathenow of Roland Berger Strategy
Consultants.

Swenson Maruba SA Reply Decl. ¶ 2, Ex. 1.

The

letter is addressed to “all creditors of Maruba S.A.” and bears
the subject line “Conditions for effectiveness of the creditor
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agreement MARUBA.”

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signed a confirmation letter fulfilling the conditions precedent

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set forth in clause 9.1 of the Creditors Agreement and that

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“Roland Berger Strategy Consultants (RBSC) hereby confirms, that

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the conditions for the effectiveness of the creditors agreement

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. . . are fulfilled.”

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other evidence of the undertaking from the new investor as

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required by paragraph 9.1 of the Creditors Agreement, and disputes

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its authenticity.

Id.

It states that the new investor had

Id.

CAI never received this letter, or any

Teixeira Maruba SA Decl. ¶ 8; Declaration of

United States District Court
For the Northern District of California

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Nadine Teixeira in Supp. of Pl.’s Opp. to Def. SACL’s Mot. to

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Dismiss (Teixeira SACL Decl.) ¶ 6-8.

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operational director of Maruba SA, attests that he received a copy

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of this letter by email from von Rathenow on October 20, 2012, but

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does not provide a copy of the email to which the letter was

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attached, or attest that the other parties to the Creditors

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Agreement were included on the email.

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Marcelo Sibione, the

Sibione Decl. ¶ 6.3

The debtors, including SACL, made only a small initial

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payment in late 2010, of less than the amount that would have been

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required under the Creditors Agreement and not on the deadline set

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Because the Court concludes that, even if the Creditors
Agreement came into effect, CAI validly cancelled it, and that its
venue selection clause does not apply, the Court need not resolve
the admissibility of the Roland Berger letter or whether the
conditions precedent were met. The Court notes, however, that
that Sibione, as a representative of Maruba SA and not the
creditors of Maruba SA, was not among the parties to whom the
letter was purportedly addressed. Further, the letter was not
addressed to “all Parties” to the Creditors Agreement, as required
by paragraph 9.4 of the Creditors Agreement. Finally, even if the
letter were properly authenticated, it would amount to
inadmissible hearsay to the extent that Maruba SA and SACL seek to
use it to establish that Defendants provided proof of the new
investor’s undertaking as required by paragraph 9.1 of the
Creditors Agreement.
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forth in the Creditors Agreement.

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Maruba SA also never made payment to CAI according to the payment

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schedule set forth in the Letter Agreement and never returned any

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containers to CAI pursuant to the Letter Agreement.

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Teixeira SACL Decl. ¶ 10.

Id.

On December 21, 2010, the parties to the Creditors Agreement

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executed an addendum to that agreement.

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¶ 6, Ex. B, 22-27.

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Creditors Agreement, the Company agreed that it would “within 30

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days after the Effective Date pay to the Creditors the Payable

Teixiera Maruba SA Decl.

The addendum stated that, in the original

United States District Court
For the Northern District of California

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Overdue Amount in full,” but that for “several reasons it was not

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possible for the Company to comply with their obligations under

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the Creditors Agreement and to pay to the Creditors the Payable

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Overdue Amount accordingly.”

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parties agreed to change the due dates for certain payments of the

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overdue debt, but that “all other terms and conditions of the

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Creditors Agreement shall remain in full force and effect and be

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unaffected hereby.”

Id. at 1-2.

In the addendum, the

Id. at 1.1-2.

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On March 14, 2011, CAI sent Defendants a letter titled,

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“Termination for Default of all Lease Agreements between CAI

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International, Inc, as Lessor (‘CAI’), and South Atlantic

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Container Lines Ltd. (‘Lessee’).”

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Ex. D.

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immediate effect the default” of the three lease agreements

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between itself and SACL.

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Teixiera Maruba SA Decl. ¶ 10,

In the letter, CAI stated that it “formally declares with

Id.

On May 17, 2011, CAI initiated this action.

Docket No. 1.

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In the complaint, CAI alleges that Defendants breached the lease

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and guaranty agreements, and seeks compensation from Defendants

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for outstanding leasing charges, the replacement value of
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containers that were not returned, the cost of repairs to

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containers that were returned and liquidated damages.

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not refer to the Creditors Agreement or Letter Agreement in the

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complaint.

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CAI does

On November 18, 2011, upon CAI’s motion, the clerk entered
default as to SACL.

Docket No. 13.

On May 14, 2012, after Maruba SA filed its reply in support
of its motion to dismiss, CAI sent Defendants a letter stating

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that it cancelled the Creditors Agreement because they had not

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United States District Court
For the Northern District of California

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made the required payments or returned the leased containers.

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Teixeira SACL Decl. ¶ 12, Ex. F.

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arguments that the Creditors Agreement had not come into effect or

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was already cancelled.

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In the letter, CAI reserved its

Id.
LEGAL STANDARD

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A defendant may raise a Rule 12(b)(3) motion to dismiss for

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improper venue in its first responsive pleading or by a separate

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pre-answer motion.

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Once the defendant challenges venue, the plaintiff bears the

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burden of establishing that venue is proper.

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v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir. 1979).

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When considering a Rule 12(b)(3) motion to dismiss, “the

See Federal Rule of Civil Procedure 12(h)(1).

Piedmont Label Co.

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pleadings need not be accepted as true, . . . and the court may

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consider facts outside of the pleadings.”

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Nat’l, Inc., 362 F.3d 1133, 1137 (9th Cir. 2004) (internal

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quotations and citations omitted).

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issues in genuine dispute, it is “within the sound discretion of

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the district court” to elect to hold an evidentiary hearing on the

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disputed facts, in order to weigh evidence, assess credibility and
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Murphy v. Schneider

If there are material factual

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make factual findings necessary to resolve the motion.

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1139-40.

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granting leave to refile it if further development of the record

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eliminates any genuine factual issue.”

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does not hold an evidentiary hearing, it “must draw all reasonable

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inferences in favor of the non-moving party and resolve all

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factual conflicts in favor of the non-moving party.”

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1138-40.

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United States District Court
For the Northern District of California

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Id. at

Alternatively, the court may deny the motion “while

Id. at 1139.

If the court

Id. at

DISCUSSION
SACL and Maruba SA move to dismiss this action.

They argue

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that, although CAI’s complaint did not mention the Creditors

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Agreement, its claims necessarily implicate that agreement, which

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restructured the debt between the parties.

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action is thus subject to the forum selection clause in the

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Creditors Agreement, which specifies England and Wales as the

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forum.

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They contend that the

The Court does not reach the parties’ arguments regarding

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whether the conditions precedent for the Creditors Agreement were

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met and thus whether it was ever effective, because the Court

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concludes that CAI’s undisputed valid termination of the agreement

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precludes the application of forum selection clause to the instant

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dispute.4

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SACL and Maruba SA argue that their breach of the substantive
obligations of the Creditors Agreement should not excuse the

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While Maruba SA suggested in a footnote in its reply brief
that the March 14, 2011 letter was not an effective cancellation
of the Creditors Agreement, neither Defendant contested in its
papers or at the hearing that the May 14, 2012 letter was an
effective cancellation.
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requirement that CAI comply with the forum selection clause.

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However, SACL and Maruba SA do not acknowledge that a termination

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or cancellation of a contract may have a different effect than the

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breach of a contract.

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in itself cancel the contract.”

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Associates, 553 F.3d 1277, 1289 (9th Cir. 2009).5

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of a contract occurs when either party puts an end to the contract

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for breach by the other.”

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“Termination occurs when either party pursuant to a power created

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United States District Court
For the Northern District of California

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by agreement or law puts an end to the contract otherwise than for

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its breach.”

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“A breach by a party to a contract does not
Comedy Club, Inc. v. Improv W.
“Cancellation

Id. (internal quotations omitted).

Id. at 1289 n.13.

Here, CAI’s valid cancellation of the Creditors Agreement,

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pursuant to the power granted to it in that contract, put an end

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to the obligations of either party to continue performing

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thereunder in the future.

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the parties, set up by the lease and guaranty agreements, was no

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longer subject to the restructuring of debt created by the

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Creditors Agreement.

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connection with the Creditors Agreement,” as SACL and Maruba SA

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argue, and are not subject to the forum selection clause therein.

As a result, the relationship between

Thus, CAI’s claims do not arise “under or in

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In their replies, Maruba SA and SACL raise for the first
time an argument that the Creditors Agreement contains a choice of
law provision stating, “The Creditors Agreement and any dispute or
claim (including non-contractual disputes or claims) arising out
of or in connection with it or its subject matter or formation
shall be governed by and construed with [sic] in accordance with
the laws of England and Wales.” Teixeira SACL Decl., Ex. D, 13
¶ 19.1. However, they do not cite any authority from England and
Wales or suggest any way in which such law would materially differ
from federal or California law regarding the enforcement of forum
selection clauses or any other issue relevant to the resolution of
this motion.
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The parties do not dispute that CAI has the right to commence

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an action to enforce the obligations under the lease and guaranty

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agreements.

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to CAI the right to commence any action or proceeding against

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Defendants under the relevant lease agreements, and noted that

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CAI’s existing rights in the lease agreements were not replaced or

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amended.

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Indeed, the Creditors Agreement specifically reserved

Texiera Maruba SA Decl., Ex. B, at 9-10 ¶ 7.4.2.

Because CAI is seeking to enforce its rights in the original
agreements, and is not suing for damages for Defendants’ failure

United States District Court
For the Northern District of California

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to perform their obligations under the Creditors Agreement itself,

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this case is distinguishable from those in which the plaintiff is

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suing based on the terminated or cancelled agreement.

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contract is terminated or cancelled, parties retain the right to

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sue at least on past breaches.

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Contracts § 925.

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claims are based on a breach of the terminated or cancelled

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contract, a forum selection clause in that contract may survive

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the termination or cancellation.

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Servs. v. Dunavant, 2011 U.S. Dist. LEXIS 39768, at *9 (E.D. La.)

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(applying forum selection clause where the claims arose out of a

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terminated contract); TriState HVAC Equip., LLP v. Big Belly

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Solar, Inc., 752 F. Supp. 2d 517, 535-37 (E.D. Pa. 2010) (same).

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For this reason as well, SACL and Maruba SA’s argument that the

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forum selection clause would be rendered meaningless if it were

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not applied to this case is incorrect; the clause might be

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applicable to an action brought by CAI for Defendants’ past breach

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of the Creditors Agreement itself.

When a

See, e.g., 1 Witkin Sum. Cal. Law

In those situations, where the plaintiff’s

See, e.g., Modern Am. Recycling

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SACL also argues that, even if the forum selection clause in

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the Creditors Agreement is not applied, this action should be

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dismissed or transferred because the assigned judge is currently

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located in the Oakland Division of the Northern District of

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California and the first two lease agreements provide that “the

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parties consent to the jurisdiction of State and Federal Courts

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located in San Francisco, California, U.S.A.”

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Decl. ¶ 4, Ex. E at ¶ 11(a), Ex. F at ¶ 11(a).6

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Teixeira Maruba SA

The forum selection clauses in the first two lease agreements

United States District Court
For the Northern District of California

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are not mandatory, and are instead permissive.

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Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d

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1034, 1037 (9th Cir. 1995) (“To be mandatory, a clause must

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contain language that clearly designates a forum as the exclusive

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one.”).

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F.2d 75 (9th Cir. 1987) (concluding that a forum selection clause

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that stated that a particular court “shall have jurisdiction over

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the parties in any action” was permissive and not mandatory).

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Here, the relevant clauses do not state that the action may be

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litigated only San Francisco.

California Dist.

See also Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817

Accordingly, the clauses do not

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SACL acknowledges that CAI did everything within its power
to have the case assigned to a judge located the San Francisco
courthouse. CAI filed this action in San Francisco, requested in
the complaint that the case “be assigned to the San Francisco
Division,” and checked the only box on the Court’s civil cover
sheet that would allow such an assignment. See Compl. ¶ 2; Docket
1-1 (checking the box for “San Francisco/Oakland”).
For its own administrative purposes, the Court has decided
that all actions that “arise in the counties of Alameda, Contra
Costa, Del Norte, Humboldt, Lake, Marin, Mendocino, Napa, San
Francisco, San Mateo or Sonoma shall be assigned to the San
Francisco Division or the Oakland Division,” and does not permit
the parties themselves to choose between those two divisions.
Civil Local Rule 3-2(d). See also General Order No. 44.
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provide an exclusive venue of San Francisco and the Court need not

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reach whether venue would nevertheless be appropriate if the

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clauses did create exclusive jurisdiction in San Francisco.

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CONCLUSION

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For the reasons set forth above, the Court GRANTS SACL’s

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motion to set aside default (Docket No. 29) and denies Maruba SA

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and SACL’s motions to dismiss for improper venue (Docket Nos. 27

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and 30).

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IT IS SO ORDERED.

United States District Court
For the Northern District of California

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Dated: July 5, 2012

CLAUDIA WILKEN
United States District Judge

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