Marisco, Ltd. v. Sailele, The Tug Boat et al

Filing 139

ORDER GRANTING MARISCO LTD.'S EX PARTE REQUEST FOR ORDER DIRECTING DISBURSEMENT OF FUNDS FROM GARNISHEE BANK OF HAWAI'I 117 AND GRANTING IN PART AND DENYING IN PART BANK OF HAWAII'S MOTION FOR INSTRUCTIONS 131 . Signed by JUDGE LESL IE E. KOBAYASHI on 8/23/2012. [Order follows hearing held 8/16/2012 on Motion for Instructions. Minutes: 138 ] (afc)CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications will be served by first class mail on August 24, 2012.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
MARISCO, LTD., a Hawaii
corporation,

)
)
)
)
Plaintiff,
)
vs.
)
)
AMERICAN SAMOA GOVERNMENT,
)
)
)
Defendant and
)
Third-Party
)
Plaintiff,
)
)
vs.
)
)
TERRY R. CONDEN,
)
)
Third-Party
)
Defendant.
_____________________________ )

CIVIL NO. 10-00137 LEK-BMK

ORDER GRANTING MARISCO LTD.’S EX PARTE
REQUEST FOR ORDER DIRECTING DISBURSEMENT OF FUNDS
FROM GARNISHEE BANK OF HAWAI`I AND GRANTING IN PART AND
DENYING IN PART BANK OF HAWAII’S MOTION FOR INSTRUCTIONS
Before the Court are Plaintiff/Counterclaim Defendant
Marisco, Limited’s (“Marisco”) Ex Parte Request for Order
Directing Disbursement of Funds from Garnishee Bank of Hawai`i
(“Disbursement Motion”), filed on June 26, 2012, and Garnishee
Bank of Hawaii’s (“BOH”) Motion for Instructions, filed July 31,
2012.

[Dkt. nos. 117, 131.]

Defendant/Counter Claimant/Third

Party Plaintiff American Samoa Government (“ASG”) filed its
memorandum in opposition to the Disbursement Motion on June 28,
2012, and Marisco filed its reply on July 3, 2012.

[Dkt. nos.

118, 122.]

Pursuant to this Court’s order, ASG submitted a

supplemental brief regarding jurisdiction on July 27, 2012, and
Marisco submitted its supplemental brief on August 2, 2012.
[Dkt. nos. 129, 135.]

Neither of the parties opposed BOH’s

Motion for Instructions.
The Court finds Marisco’s Disbursement Motion suitable
for disposition without a hearing pursuant to Rule LR7.2(d) of
the Local Rules of Practice of the United States District Court
for the District of Hawai`i (“Local Rules”).

BOH’s Motion for

Instructions came on for hearing on August 16, 2012.

Appearing

on behalf of BOH was Robert Marks, Esq.; appearing on behalf of
Marisco was Mark Desmarais, Esq.; and appearing on behalf of ASG
was Michael Nakano, Esq.

After careful consideration of the

motions, supporting and opposing documents, and the arguments of
counsel, Marisco’s Disbursement Motion is HEREBY GRANTED and
BOH’s Motion for Instructions is HEREBY GRANTED IN PART AND
DENIED WITHOUT PREJUDICE as to BOH’s request for legal fees,
costs, and any other appropriate relief.
BACKGROUND
On March 10, 2010, pursuant to this district court’s
admiralty and maritime jurisdiction, Marisco filed its Verified
Complaint In Rem and In Personam against ASG for breach of

2

contract.1

According to Marisco, from July 2008 to the filing of

this action, Marisco performed numerous repair services on three
vessels owned by ASG: the tug “Sailele” and two barges, the “Spud
Barge” and the “Fence Barge” (collectively “the Vessels”).
Marisco alleges that ASG failed to make full payment for
Marisco’s work on the Vessels.
On April 29, 2010, ASG filed its Answer to the First
Amended Complaint, as well as a Counterclaim and a Third Party
Complaint against Terry R. Conden.

[Dkt. nos. 22, 23, 25.]

Conden is an engineer with ASG’s Department of Port
Administration who “was assigned to assist with and/or oversee
the purchase, repair and retrofitting of the Vessels.”

[Third

Party Complaint at ¶ 7.]
The parties ultimately agreed to enter into a binding
arbitration for all of the claims at issue in this case.

[Motion

to Confirm Arbitration Award, filed 3/5/12 (dkt. no. 108), Decl.
of Mark B. Desmarais (“Desmarais Confirmation Decl.”), Exh. 1
(Agreement to Arbitrate Dispute (“Arbitration Agreement”)).]

The

arbitration hearings took place from August 8, 2011 to August 11,
2011, in Honolulu, Hawai`i.

[Desmarais Confirmation Decl., Exh.

2 (Arbitration Decision and Award (“Arbitration Award”)) at 1.]
The arbitrator concluded that “Marisco is entitled under the

1

Marisco filed a First Amended Complaint on March 31, 2010,
and a Second Amended Complaint on November 8, 2010. [Dkt. nos.
15, 61.]
3

doctrine of quantum meruit to recover from the ASG for the
reasonable value of the repair work that Marisco performed on the
Vessels.”

[Id. at 2.]

The arbitrator awarded Marisco a total of

$811,631.87 as a reasonable value for quantum meruit purposes.
[Id. at 5.]

The arbitrator also ruled that: Conden is not liable

to ASG; each party is to bear its own attorneys’ fees; Marisco
and Conden are entitled to their costs of suit; and Marisco is
entitled to interest of 0.43% per year (not compounded) from
September 1, 2009 to the date the award is paid.

[Id. at 5-6.]

Marisco filed a Motion to Confirm Arbitration Award on
March 5, 2012, and none of the parties opposed the motion.

After

a hearing on April 16, 2012, this Court issued its order granting
Marisco’s motion.
May 1, 2012.

[Dkt. no. 110, 112.]

[Dkt. no. 113.]

Judgment was issued on

No appeal was taken.

On June 13, 2012, this Court granted Marisco’s Ex Parte
Motion for Order Granting Issuance of Writ of Execution, and the
Clerk’s Office issued the Writ of Execution.

[Dkt. no. 115.]

On

June 20, 2012, the United States Marshals Service served the Writ
of Execution on BOH at 130 South King Street, Honolulu, Hawai`i
96813.

[Process Receipt and Return, filed 6/27/12 (dkt. no.

119).]
BOH’s Legal and Custody Department in Honolulu filed
its Answer and Disclosure of Bank of Hawaii on June 25, 2012.
[Dkt. no. 116.]

BOH states that

4

at the time and place of service upon it of said
Writ of Execution, . . . there were funds on
deposit with said Bank of Hawaii to the credit of
AMERICAN SAMOA GOVERNMENT the sum of $824,166.15
and that a charge of $95.00 has been assessed for
service of legal process, leaving a balance of
Eight Hundred Twenty Four Thousand Seventy One
Dollars and Fifteen Cents, ($824,071.15).
[Id. at 1-2.]
I.

The Garnishment Motion followed.

Garnishment Motion
In response to the Garnishment Motion, ASG states that

“[s]uch a request is probably valid as against an individual or a
corporation.”

[Mem. in Opp. to Garnishment Motion at 2.]

ASG,

however, argues that Marisco has not complied with American
Samoa’s statutes governing the garnishment of ASG’s funds and
that Marisco has not addressed the conflict of law issue.

ASG

notes that it applied to the High Court of American Samoa (“High
Court”) for a temporary restraining order and a preliminary
injunction against BOH.

In addition, ASG argues that Marisco has

not established that this district court has jurisdiction over
ASG’s BOH account domiciled in American Samoa.
In its reply in support of the Garnishment Motion,
Marisco argues that, in the Arbitration Agreement, ASG “waived
any immunity to or restrictions concerning the enforcement of
this judgment.”

[Reply in Supp. of Garnishment Motion at 3

(citing 28 U.S.C. § 1605).]

Further, Marisco argues that ASG has

clearly availed itself of both the jurisdiction of this district
court and the binding arbitration proceeding, and ASG agreed that
5

any award or judgment resulting therefrom would be fully binding
in American Samoa or Hawai`i.

Marisco asserts that ASG would be

able to withdraw its money from its BOH account at any BOH branch
in Hawai`i or around the Pacific.

Thus, Marisco argues that

ASG’s creditors should also have access to those funds.

As to

the argument that ASG’s BOH account is only domiciled in American
Samoa, Marisco argues that bank branches are no longer considered
separate entities because they are connected to their main
offices by high speed computers and management from the main
offices.
In its supplemental brief regarding jurisdiction, ASG
urges the court to follow the “separate entity rule” - the rule
that foreign branches of a bank are not subject to execution
through process on an in-state office or branch of the bank.
[ASG’s Suppl. Br. at 1-2 (citing Reibor Int’l Ltd. v. Cargo
Carriers (KACZ-CO) Ltd., 759 F.2d 262, 264 (2d Cir. 1985); Det
Bergenske Dampskibsselskab v. Sabre Shipping Corp., 341 F.2d 50,
52-54 (2d Cir. 1965); Shaheen Sports, Inc. v. Asia Ins. Co., No.
98–CV–5951 LAP, 11–CV–920 LAP, 2012 WL 919664 (S.D.N.Y. Mar. 14,
2012); Woodlands, Ltd. v. Westwood Ins. Co., 965 F. Supp. 12, 1415 (D. Md. 1997)).]

ASG also notes that, pursuant to Fed. R.

Civ. P. 64, state law governs the garnishment of property to
satisfy a judgment.

ASG argues that, although there is no case

law directly on point, Hawaii’s Uniform Commercial Code suggests

6

that the State of Hawai`i treats bank branches as separate
entities.

[Id. at 2-4 (citing Haw. Rev. Stat. §§ 490:4-102(b),

490:4-107).]

ASG also argues that the situs of intangible

property varies depending on the context and, under a common
sense approach, the situs of a debt obligation is the situs of
the debtor.

[Id. at 4-5 (citing Office Depot, Inc. v. Zuccarini,

596 F.3d 696, 702 (9th Cir. 2010); Af-Cap Inc. v. Republic of
Congo, 383 F.3d 361, 371-72 (5th Cir. 2004); Tabacalera Severiano
Jorge, S.A. v. Standard Cigar Co., 392 F.2d 706, 714-15 (5th Cir.
1968)).]
In its supplemental brief, Marisco responds that the
separate entity rule has been widely criticized and is
inapplicable in post-judgment proceedings.

[Marisco’s Suppl. Br.

at 1-3 (some citations omitted) (citing Eitzen Bulk A/S v. Bank
of India, 827 F. Supp. 2d 234, 240 (S.D.N.Y. 2011); J.W. Oilfield
Equip., LLC v. Commerzbank AG, 764 F. Supp. 2d 587, 595 (S.D.N.Y.
2011); Koehler v. Bank of Bermuda, Ltd., 12 N.Y.3d 533, 541 (N.Y.
2009)).]

Marisco also argues that this district court has

personal jurisdiction over ASG, which waived its sovereign
immunity and agreed to sue and be sued in this district court.
Further, in the Arbitration Agreement, ASG agreed to be bound by
this district court’s jurisdiction and to allow enforcement of
any arbitration award or judgment in American Samoa, Hawai`i, or
any other jurisdiction necessary.

7

Finally, Marisco contends that this district court has
personal jurisdiction over BOH and can therefore order BOH to
freeze property that BOH controls, even if the property is
outside of the United States.

[Id. at 2 (citing United States v.

First Nat’l City Bank, 379 U.S. 378 (1965); Decl. of Mark B.
Desmarais (“Desmarais Jurisdiction Decl.”), Exh. A (7/5/12 Hrg.
Trans. in Am. Samoa Gov’t v. Bank of Hawaii, et al., High Court
of Am. Samoa (“ASG v. BOH”)), at 13-15).]
II.

Motion for Instructions
In the Motion for Instructions, BOH notes that the High

Court has issued an order requiring BOH to release the funds that
it has frozen pursuant to the Writ of Execution.

[Motion for

Instructions, Exh. A (Order Granting Motion for Prelim.
Injunctive Relief in ASG v. BOH, filed July 11, 2012).]

BOH

seeks instructions on how it should proceed in light of the
conflict between the Writ of Execution and the High Court’s
order.

BOH states that, upon the filing of the Motion for

Instructions, it also filed a motion seeking a stay of the
enforcement of the High Court’s order.
at 2.]

[Motion for Instructions

BOH has also filed a motion for reconsideration of the

High Court’s order.

[Id., Exh. B (BOH’s motion for

reconsideration), Exh. C (errata to BOH’s motion for
reconsideration).]

8

BOH also filed notices of the following filings in ASG
v. BOH: ASG’s Motion to Enforce Preliminary Injunction; BOH’s
Motion for Stay of Injunction; BOH’s Supplement to Its Motion for
Stay.

[BOH’s Notice of Filing of Pleadings in the High Court of

Am. Samoa in Related Litig., filed 8/1/12 (dkt. no. 134), Exhs.
A, B; BOH’s Notice of Filing of Pleadings in the High Court of
Am. Samoa in Related Litig., filed 8/3/12 (dkt. no. 136), Exh.
A.]
DISCUSSION
First, although Marisco contends that ASG is not immune
from suit pursuant to 28 U.S.C. § 1605, the Court notes that
“American Samoa is not a ‘foreign state’ within the meaning of
[the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330,
1602–1611], but rather an unincorporated territory of the United
States.”

Meaamaile v. Am. Samoa, 550 F. Supp. 1227, 1231 (D.

Haw. 1982) (noting that the Foreign Sovereign Immunities Act did
not apply).

Regardless of ASG’s political status, it is beyond

dispute that ASG has submitted itself to the personal
jurisdiction of this district court by filing its Answer and
failing to raise the lack of personal jurisdiction in a Rule 12
motion.

2

See Fed. R. Civ. P. 12(h)(1).2

Fed. R. Civ. P. 12 states, in pertinent part:
(b) How to Present Defenses. Every defense to a
claim for relief in any pleading must be asserted
(continued...)
9

Further, during the course of this case, ASG, though
Fepulea`i Arthur Ripley Jr., who was the Attorney General at the
time, entered into the Arbitration Agreement.
Agreement at 5.]

[Arbitration

The Arbitration Agreement states, in pertinent

part, that the Parties:
hereby voluntarily agree and stipulate to enter
into Binding Arbitration regarding the abovecaptioned matter and,

2

(...continued)
in the responsive pleading if one is required.
But a party may assert the following defenses by
motion:
. . . .
(2) lack of personal jurisdiction;
(3) improper venue;
(4) insufficient process; [and]
(5) insufficient service of process[.]
. . . .
(h) Waiving and Preserving Certain Defenses.
(1) When Some Are Waived. A party waives any
defense listed in Rule 12(b)(2)-(5) by:
(A) omitting it from a motion in the
circumstances described in Rule 12(g)(2); or
(B) failing to either:
(i) make it by motion under this
rule; or
(ii) include it in a responsive
pleading or in an amendment allowed by
Rule 15(a)(1) as a matter of course.
10

. . . .
WHEREAS, the Parties voluntarily agree that
the United States District Court for the District
of Hawai`i shall stay trial proceedings pending
arbitration but shall maintain jurisdiction until
any Arbitration Award is rendered and/or confirmed
in order to, among other things, resolve discovery
disputes and, conduct settlement conferences, etc.
and,
WHEREAS, the Parties voluntarily agree that
any award by the Arbitrator shall be considered
valid, irrevocable and enforceable in each
respective jurisdiction or any other necessary
jurisdiction[.]
[Arbitration Agreement at 2-3 (emphases added).]

ASG did not

contest Marisco’s Motion to Confirm Arbitration Award, nor did
ASG appeal the final judgment entered after this Court confirmed
the Arbitration Award.3

Thus, ASG has not presented any valid

argument to dispute Marisco’s right to collect the amount ordered
in the Arbitration Award.

The only issue before this Court is

whether Marisco can collect that amount by serving the Writ of
Execution on BOH through its main legal department in Honolulu.
As previously noted, ASG urges the Court to apply the
“separate entity rule.”

The Second Circuit has described the

rule as follows:

3

The Court is aware that BOH has received an order from the
High Court requiring it to release funds frozen pursuant to the
Writ of Execution and, although the Court has the utmost respect
for and goodwill towards the High Court, the Arbitration
Agreement plainly sets forth the parties’ intent to vest
exclusive jurisdiction in this matter, including over any award,
in the United States District Court for the District of Hawai`i.
11

Under New York law, the “separate entity
rule” dictates that “‘each branch of a bank [be]
treated as a separate entity for attachment
purposes.’” Sabre Shipping Corp., 341 F.2d at 53
(quoting Cronan v. Schilling, 100 N.Y.S.2d 474,
476 (Sup. Ct., N.Y. Cnty. 1950)); see McCloskey v.
Chase Manhattan Bank, 11 N.Y.2d 936, 937, 228
N.Y.S.2d 825, 183 N.E.2d 227 (1962) (assets in a
foreign branch cannot be attached in New York).
As a result, “the debt owed by a branch finds its
situs within the territorial jurisdiction of
[that] branch.” Id. (internal quotation marks
omitted). Put differently, “the mere fact that a
bank may have a branch within New York is
insufficient to render accounts outside of New
York subject to attachment.” John Wiley & Sons,
Inc. v. Kirtsaeng, No. 08 Civ. 7834, 2009 WL
3003242, at *3 (S.D.N.Y. Sept. 15, 2009) (internal
quotation marks omitted). . . .
Allied Maritime, Inc. v. Descatrade SA, 620 F.3d 70, 74 (2d Cir.
2010) (some alterations in Allied Maritime) (footnote omitted).
As ASG acknowledges, pursuant to Fed. R. Civ. P. 64,
Hawai`i law applies to issues of attachment.

There is, however,

no case law from the Hawai`i appellate courts, or from federal
courts interpreting Hawai`i law, adopting the separate entity
rule.

ASG argues that sections of the Hawai`i Uniform Commercial

Code suggest that Hawai`i courts would treat bank branches as
separate entities.

[ASG’s Suppl. Br. at 2-4 (citing Haw. Rev.

Stat. §§ 490:4-102(b), 490:4-107).]

Section 490:4-102(b) states:

The liability of a bank for action or nonaction
with respect to an item handled by it for purposes
of presentment, payment, or collection is governed
by the law of the place where the bank is located.
In the case of action or nonaction by or at a
branch or separate office of a bank, its liability
is governed by the law of the place where the
branch or separate office is located.
12

An “item” is defined as “an instrument or a promise or order to
pay money handled by a bank for collection or payment.

The term

does not include a payment order governed by article 4A or a
credit or debit card slip[.]”

Haw. Rev. Stat § 490:4-104(a)(9).

Thus, § 490:4-102(b) does not address the post-judgment
garnishment of accounts pursuant to court order.

Section 490:4-

107 states: “A branch or separate office of a bank is a separate
bank for the purpose of computing the time within which and
determining the place at or to which action may be taken or
notices or orders must be given under this article and under
article 3.”

There is, however, no Hawai`i case law extending the

principles § 490:4-107 outside the context of the Uniform
Commercial Code.
Insofar as the Hawai`i Supreme Court has never
addressed whether to adopt the separate entity rule, this Court’s
task is to predict how the supreme court would decide the issue.
Cf. Air-Sea Forwarders, Inc. v. Air Asia Co., 880 F.2d 176, 186
(9th Cir. 1989) (diversity jurisdiction).

This Court predicts

that, if the Hawai`i Supreme Court were to rule upon the issue,
the supreme court would consider case law criticizing the
separate entity rule as being: “a somewhat dated and seldom-cited
legal doctrine,” Tribie v. United Dev. Grp. Int’l LLC, No.
07-22135-CIV., 2008 WL 5120769, at *3 (S.D. Fla. Dec. 2, 2008)
(noting that the separate entity rule is not the law in Florida);

13

and “rather ancient” and “entirely obsolete in today’s world of
highly sophisticated and centralized banking operations” Acme
Contracting, Ltd. v. Toltest, Inc., No. 07-10950, 2008 WL
4534175, at *6-7 (E.D. Mich. Oct. 3, 2008) (noting lack of
Michigan case law adopting the separate entity rule).

Further,

this Court predicts that the Hawai`i Supreme Court would consider
the fact that even courts applying New York law have noted that
the separate entity rule is inapplicable to post-judgment
enforcement proceedings.

In J.W. Oilfield, the district court

noted that:
The New York Court of Appeals . . . distinguished
postjudgment enforcement from a prejudgment
attachment, which is based on a court’s
jurisdiction over the property being attached. It
concluded that postjudgment enforcement (such as a
proceeding under N.Y. CPLR article 52) requires
only jurisdiction over persons. “In short,
article 52 postjudgment enforcement involves a
proceeding against a person—its purpose is to
demand that a person convert property to money for
payment to a creditor—whereas article 62
attachment operates solely on property, keeping it
out of a debtor’s hands for a time.” [Koehler, 12
N.Y.3d] at 538, 883 N.Y.S.2d 763, 911 N.E.2d 825.
The New York Court of Appeals reasoned that
when a judgment debtor is subject to a New York
court’s personal jurisdiction, “that court has
jurisdiction to order the judgment debtor to bring
property into the state, because the court’s
authority is based on its personal jurisdiction
over the judgment debtor.” Id. at 540, 883
N.Y.S.2d 763, 911 N.E.2d 825. The authority of
the court to order a garnishee to bring property
into the state is likewise based on personal
jurisdiction over that garnishee. . . .
764 F. Supp. 2d at 592.
14

This Court also predicts that the Hawai`i Supreme Court
would consider the following testimony in ASG v. BOH by
James McDougall Lowson, III, BOH’s Vice President and District
Manager for American Samoa:
Q.
. . . do you know whether the American
Samoa branch is a separate legal entity or whether
it’s part of the corporation that is filed in the
State of Hawaii?
A.
We are a branch of our bank-holding
corporation, which is headquartered in Hawaii.
Q.
. . . do you know whether the A.S.G.
opened up its bank account in the American Samoa
branch?
A.
That would be the case.
Q.
And do you know whether, when the
American Samoa Government wants access to its
funds, can authorize users to withdraw funds both
here [in American Samoa] and in the State of
Hawaii?
A.
They can.
[Desmarais Jurisdiction Decl., Exh. A (7/5/12 Hrg. Trans. in ASG
v. BOH) at 13-14.]
In light of the factual background in this case and the
persuasive authority from other jurisdictions, this Court
predicts that the Hawai`i Supreme Court would decline to adopt
the separate entity rule in this case.

This Court therefore

CONCLUDES that Marisco’s service of the Writ of Execution on the
vice-president and manager of BOH’s Legal and Custody Department
in Honolulu, [id. at 15,] was sufficient to garnish ASG’s funds
in the account ASG opened at the BOH branch in American Samoa.
CONCLUSION
On the basis of the foregoing, Plaintiff Marisco Ltd.’s
15

Ex Parte Request for Order Directing Disbursement of Funds from
Garnishee Bank of Hawai`i, filed June 26, 2012, is HEREBY
GRANTED, and Garnishee Bank of Hawaii’s Motion for Instructions,
filed July 31, 2012, is HEREBY GRANTED IN PART AND DENIED IN
PART.

The Court ORDERS that Bank of Hawaii tender and disburse

the amount of $824,017.15 to Marisco, Ltd. pursuant to the Writ
of Execution, filed June 13, 2012.

BOH’s Motion for Instructions

is DENIED WITHOUT PREJUDICE as to BOH’s request for legal fees,
costs, and any other appropriate relief.

The denial is without

prejudice to the re-filing of a separate motion, supported by the
relevant authority, seeking fees and costs, or other relief.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, August 23, 2012.

/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

MARISCO, LTD. V. AMERICAN SAMOA GOVERNMENT, ETC.; CIVIL NO. 1000137 LEK-BMK; ORDER GRANTING MARISCO LTD.’S EX PARTE REQUEST FOR
ORDER DIRECTING DISBURSEMENT OF FUNDS FROM GARNISHEE BANK OF
HAWAI`I AND GRANTING IN PART AND DENYING IN PART BANK OF HAWAII’S
MOTION FOR INSTRUCTIONS

16