Psara Energy Limited v. Space Shipping Ltd. et al
RULING and ORDER On Motion To Vacate Maritime Attachment. Given this ruling and the Court's granting of ST Shipping's Motion, ECF No. 41 , Defendants' 42 Motion to Reduce and 42 Motion to Vacate is dismissed as moot. Signed by Judge Victor A. Bolden on 11/20/2017. (Giammatteo, J.)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
PSARA ENERGY, LTD,
SPACE SHIPPING, LTD,
GEDEN HOLDINGS, LTD
Ruling and Order On Motion To Vacate Maritime Attachment
PSARA Energy, LTD (“Plaintiff”) filed a Verified Complaint on October 30, 2017,
seeking attachment of SPACE Shipping and Geden Holdings’s (“Defendants” or “SPACE”)
property located within the District of Connecticut. See Compl., ECF No. 1. Specifically,
Plaintiff sought attachment of a debt owed by a third-party, ST Shipping and Trading Pte. Ltd.
(“ST Shipping”), to SPACE arising from an arbitration proceeding in London.
Currently pending before the Court is ST Shipping’s motion to release the maritime
attachment under Rule E(f)(4) of the Supplement Rules. Because the Court holds that it lacks
personal jurisdiction over ST Shipping and, therefore, the debt is not within the District of
Connecticut, ST Shipping’s motion is GRANTED. The attachment will be VACATED.
Factual and Procedural History
PSARA is a corporation organized under the laws of the Republic of the Marshall
Islands. Compl. ¶ 3. SPACE Shipping, one of the defendants in this matter, is a foreign company
organized under the laws of Malta. Id. at ¶ 4.1
On February 23, 2010, the parties entered into an agreement for the Defendants to charter
Plaintiff’s crude oil tanker, the CV STEALTH. Id. Plaintiff alleges that Defendants sub-chartered
the vessel to a third party, who sailed it to Venezuela with the intention of loading the tanker
with crude oil. Id. at ¶¶ 9, 10. Upon arrival in the Venezuelan port of Puerto La Cruz, Plaintiff
alleges that the “Vessel was detained . . . purportedly for being unauthorized to lift a cargo of
crude oil from Venezuela and being employed to lift a cargo stolen” from the Venezuelan state
oil company. Id. at ¶ 14-16.
Venezuelan authorities released the vessel on October 3, 2017. Plaintiff alleges, however,
“due to her forced idleness” for several years without maintenance, “the vessel has suffered
extensive damages and deterioration . . . .” Id. at ¶ 24. Plaintiff alleges that the vessel is “out of
class, uninsurable” and will require numerous repairs that “will exceed the sum of $15,000,000.”
Id. at ¶ 25.
Plaintiff alleges that delivery of the vessel “in such a deteriorated state of extensive
disrepair” is a material breach of the bareboat charter that the parties signed. Id. at ¶ 27. In
addition to the cost of repairs, Plaintiff alleges that Defendants failed to make payments owed for
the hire of the vessel, owe attorney’s fees for an arbitration brought in London as well as interest,
and owe damages for the time it will take to repair the vessel. Id. at ¶¶ 26-31. The total claim
equals $19,604,297.00. Id. at ¶ 39.
The parties entered into arbitration in London for the unpaid hire amount of
$5,272,100.90. Id. at ¶ 17. Following the arbitration award, the parties pursued a settlement
agreement addressing enforcement of that award. Id. at ¶¶ 18-22. Plaintiff alleges that the
Defendants failed to make payments under the settlement agreement and therefore the Plaintiff is
“about to submit a claim in the London arbitration, which has continual jurisdiction over the
claims for the January through June 2017 unpaid hires, interest, legal costs, and costs of the
London arbitration, and any other claims arising under the bareboat charter.” Id. at ¶ 22.
Plaintiff then filed a Verified Complaint in this Court on October 30, 2017 and sought the
attachment of an arbitration award between the Defendants and a third party: ST Shipping.
Plaintiff alleged that the debt owed by ST Shipping to SPACE in relation to the award was
intangible property within the meaning of Rule B and — based on a lawsuit filed by SPACE in
this District to enforce the award against ST Shipping — that property existed within the District
of Connecticut’s jurisdiction.
On November 1, 2017, this Court held that “Plaintiff has met its initial burden in seeking
attachment under Rule B, and the Court will authorize process of attachment and garnishment.”
Ruling On Attachment, ECF No. 15. The Court subsequently issued a writ of garnishment.
ST Shipping filed a motion seeking to vacate the garnishment under Rule(E)(4)(f) of the
Supplement Rules and sought a hearing. See Motion to Release Maritime Attachment, ECF No.
18. The Court then scheduled and held a hearing on November 17, 2017, at which SPACE
Shipping appeared for the first time. SPACE maintained that Plaintiff failed to inform the Court
about developments in the London arbitration and therefore argued the Verified Complaint
should be dismissed or, alternatively, reduced to account for those developments. ST Shipping
argued that this Court lacked jurisdiction over the debt because this Court lacked personal
jurisdiction over ST Shipping. Alternatively, it sought Court approval to transfer the funds it
owed to an escrow account in London.
Following the November 17th hearing, the Court issued an order permitting the parties to
submit any supplemental briefing on any issue. See Order, ECF No. 33. ST Shipping filed a
supplement brief in which it argued that a debt is only found within this District only if a creditor
— here, SPACE — could enforce that debt here. Garnishee’s Supplemental Br., ECF No. 37 at
1-4. Additionally, ST Shipping argued that, in order for SPACE to enforce a debt in the District,
there must be personal jurisdiction over ST Shipping and, as a foreign corporation, ST Shipping
argues SPACE would be unable to do so. Id. at 4-5.
SPACE adopted ST Shipping’s jurisdictional arguments in their filing. See Defs.
Objection 3, ECF No. 36. Additionally, they argued that the award should be vacated or reduced
based on developments in the London arbitration between PSARA and SPACE. Id. at 1-2.
Specifically, SPACE argued that the arbitrators found many of the losses related to the condition
of the vessel not yet ripe, and that PSARA should have notified the Court of this decision when
filing the Verified Complaint. Id. at 2-3. They argue that, by not informing the Court, “Plaintiff
has thus breached the heightened duty of disclosure imposed in rule B attachment actions.” Id. at
3. Alternatively, they argue that the arbitration decision requires substantial reduction in the
amount of the attachment: from $19,604,197 to $436,376.00. Id. at 3-5.
PSARA argued that ST Shipping’s debt has its situs in Connecticut because ST Shipping
has maintained an office in Stamford, Connecticut. Pl. Supplemental Br., ECF No. 38 at 1-4.
Additionally, they argue that the arbitration decision highlighted by SPACE “does not contain
findings of fact or conclusion of law” and represented “how things appeared when the claim
submission of Plaintiff was made” several weeks prior to the filing of the Verified Complaint in
this case. Id. at 4. PSARA also submitted two declarations with several exhibits attached in
further support their damage calculations. Decl. of Adamantios Adriotis, ECF No. 39 (detailing
estimated costs of repairs and other figures regarding vessel’s deterioration); Decl. of Jeremy
Biggs, ECF No. 40 (detailing current posture of London arbitration).
Standard of Review
Attachment in maritime or admiralty actions is governed by Rules B and E of the Federal
Rules of Civil Procedure, Supplemental Rules for Admiralty or Maritime Claims and Asset
Forfeiture Actions. The Second Circuit has “interpreted Rule B to permit a plaintiff to obtain an
order of attachment if it can show that: 1) it has a valid prima facie admiralty claim against the
defendant; 2) the defendant cannot be found within the district; 3) the defendant's property may
be found within the district; and 4) there is no statutory or maritime law bar to the attachment.”
Blue Whale Corp. v. Grand China Shipping Dev. Co., 722 F.3d 488, 493 (2d Cir. 2013) (internal
citations and quotations omitted).
Once a writ of garnishment has been issued, “any person claiming an interest in it shall
be entitled to a prompt hearing at which the plaintiff shall be required to show why the arrest or
attachment should not be vacated or other relief granted consistent with these rules.” Fed. R. Civ.
P. Supp. R. E(4)(f). The plaintiff bears the burden of proving that each of the four requirements
are met to justify attachment. Sinoying Logistics Pte Ltd. v. Yi Da Xin Trading Corp., 619 F.3d
207, 212 (2d Cir. 2010).
When there is no federal maritime law to guide our decision, we generally look to state
law to determine property rights. Shipping Corp. of India v. Jaldhi Overseas Pte Ltd., 585 F.3d
58, 70 (2d Cir. 2009).
This case presents the question of whether a debt, owed by a foreign third party to a
foreign defendant, is within the jurisdictional reach of the Court for the purposes of maritime
attachment, merely because the third party maintains an office in Connecticut.
The parties do not appear to dispute that Plaintiff has a valid prima facie admiralty claim
against Defendants.1 Nor do they debate that the third and fourth prongs are met: Defendants are
not present in the District, and the parties have not raised any clear bars to the attachment. ST
Shipping, however, challenges this Court’s jurisdiction to enter the garnishment. While it does
not dispute they owe some sum of money to SPACE, ST Shipping argues that it is not subject to
the in personem jurisdiction of this Court. Therefore, it essentially argues that PSARA has not
proved the second prong necessary to justify garnishment: that Defendants’ property — here, the
debt owed SPACE by ST Shipping — is within the District. The Court agrees.
Property Within the District
Maritime attachment has a long and storied history, and is used by admiralty courts to
“first, gain jurisdiction over an absent defendant; and second, to assure satisfaction of a
judgment.” Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 437 (2d Cir. 2006)
(describing the history of maritime attachment). “One of the primary grounds for the historical
development of Rule B attachments was that “[a] ship may be here today and gone tomorrow.”
Jaldhi, 585 F.3d at 70 (quoting Polar Shipping Ltd. v. Oriental Shipping Corp., 680 F.2d 627,
637 (9th Cir.1982)). The purpose of attachment was to allow admiralty courts to extend
jurisdiction to this inherently fleeting property, while the property was within the court’s
jurisdiction. Aqua Stoli Shipping, 460 F.3d at 443 (“Maritime parties are peripatetic, and their
assets are often transitory. Thus, the traditional policy underlying maritime attachment has been
to permit the attachments of assets wherever they can be found and not to require the plaintiff to
Defendants contest the amount claimed by Plaintiffs, arguing that at least part of that amount is
the result of putative damage to the tanker which the arbitration panel in London found was not
yet ripe. Defs. Objection at 1-3. Because the Court holds that the property is not found within the
District of Connecticut, it does not address Defendants’ argument regarding the amount of that
scour the globe to find a proper forum for suit or property of the defendant sufficient to satisfy a
Rule B codifies the longstanding practice in this Circuit of maritime attachment. Aqua
Stoli, 460 F.3d at 437. It also extends the property that might be subject to maritime attachment
to both tangible and intangible property. Jaldhi, 585 F.3d at 67. The Court, however, must still
have jurisdiction over the property it seeks to attach. As the Second Circuit has noted: “The
‘jurisdiction’ at issue in a Rule B attachment proceeding is quasi in rem, rather than in personam
or in rem. In Rule B attachment proceedings, jurisdiction is predicated on the presence within the
court’s territorial reach of property in which the Rule B defendant has an interest.” Id. at 69 n.12.
Therefore, the Court must determine whether the property at issue —the debt owed by ST
Shipping to SPACE — is within this Court’s territorial reach. The situs of intangible property
has traditionally be seen as “fictional,” but “where the debtor and creditor are within the
jurisdiction of a court, that court has constitutional power to deal with the debt.” Standard Oil
Co. v. State of New Jersey, 341 U.S. 428, 439 (1951); see also Dorr-Oliver, Inc. v. Willett
Associates, 219 A.2d 718, 722 (Conn. 1966) (“In garnishment, it is the in personam jurisdiction
over the garnishee which constitutes the seizure of the indebtedness insofar as there is, or can be,
any seizure of such an intangible.”).
Beginning with Jaldhi, the Second Circuit has recognized that maritime law should not
be any different and held that Electronic Fund Transfers (“EFTs”) were not attachable property
within the meaning of Rule B, even if they passed through intermediary accounts in New York
City. 585 F.3d at 71. The court concluded that EFTs are “in the temporary possession of an
intermediary bank” and could be deemed defendant’s property. Id. If they were not the
defendant’s property, then it followed that they were not within the reach of Rule B. Id.
Following Jaldhi, the Second Circuit affirmed this principle again in Allied Maritime,
Inc. v. Descatrade SA, 620 F.3d 70 (2d Cir. 2010), where a district court had attached funds
before the Second Circuit’s decision in Jaldhi prohibited the practice. 620 F.3d. at 73 (noting that
plaintiff served process on eleven different banks through which it believed defendants might
transfer funds). When the defendant sought transfer of the money, the bank then placed the funds
in a “suspense account” in New York or Paris. Id. After Jaldhi was decided, the district court
vacated the attachment, and the plaintiff appealed. Id.
The plaintiff argued that the fact that the bank operated a branch in New York was
“sufficient to permit the District Court to exercise jurisdiction” over the defendant’s account. Id.
at 74. The Second Circuit rejected this approach. It applied New York law, which under the
“separate entity rule” requires that “each branch of a bank be treated as a separate entity for
attachment purposes.” Id. at 74 (internal citations and quotations omitted). Under New York law,
the “mere fact” that the bank had an office in New York did not mean that all the accounts
outside of New York could be attached under Rule B. Id. (quoting John Wiley & Sons, Inc. v.
Kirtsaeng, No. 08 Civ. 7834, 2009 WL 3003242, at *3 (S.D.N.Y. Sept. 15, 2009)) Therefore, the
property was not within the jurisdiction of the court. Id.
Here, PSARA argues that defendants’ intangible property is within the district because
ST Shipping maintains an office in the State of Connecticut and therefore the debt owed to
SPACE is present there. Allied Maritime, however, suggests two important requirements. First, it
is not enough to merely operate an office within the jurisdiction of the Court. See Allied
Maritime, 620 F.3d. at 74. Instead, the court must have jurisdiction over the third-party where the
account is held. Id. Second, the Court should determine whether state law allows the Court to
exercise that jurisdiction. See China Nat. Chartering Corp. v. Pactrans Air & Sea, Inc., 882 F.
Supp. 2d 579, 604 (S.D.N.Y. 2012) (noting that personal jurisdiction over third-party garnishee
was “essential element” for attachment); Cf. Day v. Temple Drilling Co., 613 F. Supp. 194, 197
(S.D. Miss. 1985) (“This Court concludes that since it has personal jurisdiction over the
garnishee/defendants, Gulf, Shell and Chevron, it also has jurisdiction over any indebtedness
owed by the garnishee/defendants to Temple.”).
PSARA argues that courts have rejected jurisdictional arguments like those raised by ST
Shipping. It cites to Engineering Equipment Co. v. SS SELENE, 446 F. Supp. 706 (S.D.N.Y.
1978), to argue that “the jurisdiction of the court in Rule B cases does not depend on state law”
and that, even after the Supreme Court’s decision in Shaffer v. Heitner, 433 U.S. 186 (1977),
"the presence of defendants’ property can provide a basis for jurisdiction.” Pl. Supplemental Br.
at 2-3 (quoting SS SELENE, 446 F. Supp. at 709).
However, it is not the Court’s in personam jurisdiction over Defendants in this case that
is at issue. Rather, it is whether the Court has jurisdiction over the third-party garnishees and,
therefore, over the debt the garnishees owe Defendants. The Court in SS Selene, in language
quoted by Plaintiff, explicitly noted that “[s]ince the Holt Defendants (the garnishees) are subject
to our in personam jurisdiction, the debts are deemed to their situs within the district.” Pl.
Supplemental Br. at 2 (quoting SS SELENE, 446 F. Supp. at 708-09). Plaintiff points to no case
where the Court lacked personal jurisdiction over a garnishee, nor does Plaintiff wrestle with the
relevant Second Circuit caselaw addressed above that suggests merely operating an office within
the district is not sufficient to locate property within the district.
As a result, the Court must determine whether it has personal jurisdiction over ST
Shipping and must resolve that issue under Connecticut law. Jaldhi, 585 F.3d at 69-71 (applying
New York law where no maritime law existed); Allied Maritime, 620 F.3d at 74 (applying New
York law to conclude that separate entity rule prevented attachment).
Personal Jurisdiction Under Connecticut Law
According to the Complaint, ST Shipping is a foreign corporation, headquartered in
Singapore, but registered to do business as a foreign corporation in Connecticut. Compl. ¶ 34.
Therefore, jurisdiction over ST Shipping must be appropriate under Connecticut law, which
requires a two-step inquiry: “federal courts must look to the forum state's long-arm statute to
determine if personal jurisdiction may be obtained over a nonresident defendant. . . . If
jurisdiction is appropriate under the relevant statute, the court must then decide whether exercise
of jurisdiction comports with due process.” Savin v. Ranier, 898 F.2d 304, 306 (2d Cir. 1990)
(interpreting CONN. GEN. STAT. ANN. § 52-59b); see also Estate of Nunez-Polanco v. Boch
Toyota, Inc., 339 F. Supp. 2d 381, 383 (D. Conn. 2004) (same); Hamann v. Carpenter, No. 3:16CV-00501-VAB, 2017 WL 421646, at *1 (D. Conn. Jan. 31, 2017) (“The Court will address the
question of whether it would offend due process to assert jurisdiction only after determining that
jurisdiction is statutorily permissible.”).
Connecticut law allows foreign corporations to register with the Secretary of State.
CONN. GEN. STAT. ANN. § 33-929(f). Under this statute:
Every foreign corporation shall be subject to suit in this state, by a resident of this
state or by a person having a usual place of business in this state, whether or not
such foreign corporation is transacting or has transacted business in this state and
whether or not it is engaged exclusively in interstate or foreign commerce, on any
cause of action arising as follows: (1) out of any contract made in this state or to be
performed in this state; (2) out of any business solicited in this state by mail or
otherwise if the corporation has repeatedly so solicited business, whether the orders
or offers relating thereto were accepted within or without the state; (3) out of the
production, manufacture or distribution of goods by such corporation with the
reasonable expectation that such goods are to be used or consumed in this state and
are so used or consumed, regardless of how or where the goods were produced,
manufactured, marketed or sold or whether or not through the medium of
independent contractors or dealers; or (4) out of tortious conduct in this state,
whether arising out of repeated activity or single acts, and whether arising out of
misfeasance or nonfeasance.
“[T]he Connecticut long-arm statutes do not confer jurisdiction over actions committed by a
nonresident party against another nonresident.” Estate of Nunez-Polanco v. Boch Toyota, Inc.,
339 F. Supp. 2d 381, 383 (D. Conn. 2004) (quoting Pomazi v. Health Indus. of Am., 869 F.Supp.
102, 104 (D.Conn.1994)); see also Kun Shan Ge Rui Te Tool Co. v. Mayhew Steel Prod., Inc.,
821 F. Supp. 2d 498, 502 (D. Conn. 2010) (“To establish jurisdiction over a foreign corporation
pursuant to section 33–929(f), a plaintiff must be ‘a resident of this state’ or ‘a person having a
usual place of business in this state.’”).
None of the parties in this action are residents of Connecticut. SPACE Shipping is a
foreign company organized under the laws of Malta. Compl. ¶ 4. As addressed above, while ST
Shipping may maintain an office in Stamford, it is a foreign company headquartered in
Singapore with its principal place of business abroad. PSARA is a corporation organized under
the laws of the Republic of the Marshall Islands. Compl. ¶ 3.
Plaintiff has not addressed why Connecticut’s foreign corporation long-arm statute would
give this Court personal jurisdiction over ST Shipping for this case, instead merely arguing that
ST Shipping’s office in Stamford establishes personal jurisdiction. Even assuming, however, that
a foreign corporation could be sued by a foreign plaintiff under CONN. GEN. STAT. ANN. § 33929(f), the Plaintiff points to no contract that has ties to the State of Connecticut, nor do they
allege that the debt owed by ST Shipping arises from the solicitation of business by mail, the
production and manufacture or distribution of goods within Connecticut, or from any tortious
conduct by ST. Shipping. In fact, Plaintiff has not addressed the satisfaction of any of the
requisites of the Court’s jurisdiction over ST Shipping at all under § 33-929(f).
The Court therefore may not exercise personal jurisdiction over ST Shipping. It follows
that any of SPACE’s intangible property held by ST Shipping is outside the jurisdiction of this
Court. Given these considerations, the Court holds that the debt owed to SPACE Shipping based
on the arbitration in London is not within the District.
ST Shipping’s Motion to Release Maritime Garnishment is GRANTED. The attachment
previously ordered is VACATED under Rule(E)(4)(f) of the Supplement Rules of Civil
SO ORDERED at Bridgeport, Connecticut, this 20th day of November 2017.
/s/ Victor A. Bolden
Victor A. Bolden
United States District Judge
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