Armada (Singapore) PTE Limited v. Amcol International Corp. et al
Filing
301
MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 10/10/2019. Mailed notice. (mgh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Armada (Singapore) PTE Limited
Plaintiff,
v.
Amcol International
Corporation, American Colloid
Company, Volclay International
Corporation, n/k/a Volclay
International LLC, Ashapura
Minechem Limited,
Defendants.
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No. 13 C 3455
MEMORANDUM OPINION AND ORDER
Since
2008,
the
shipping
company
Armada
(Singapore)
PTE
Limited has been pursuing recovery for losses it suffered when the
Indian company Ashapura Minechem Limited failed to perform under
a contract of affreightment requiring Ashapura to provide cargos
of bauxite for Armada to carry in its vessels. In early 2010,
Armada obtained arbitral awards totaling about $70 million against
Ashapura in proceedings conducted in London. See Mem. Op. and Order
of 03/21/17 at 3; Def.’s Summary Judgment Appendix, Tab 1 (arbitral
awards). Later that year, Armada sought to enforce those awards in
this court, filing a maritime action for attachment and garnishment
pursuant to Rule B of the Supplemental Rules for Certain Admiralty
and Maritime Claims of the Federal Rules of Civil Procedure. See
Armada (Singapore) PTE Limited v. Ashapura Minechem Limited, et
al., 10-CV-5509 (N.D. Ill.) (the “Rule B Proceedings”).
Rule B proceedings allow plaintiffs to obtain jurisdiction
over, and to enforce a judgment against, a party not found within
the district but whose property is present in the district. See
Western Bulk Carriers (Australia), Pty. Ltd. v. P.S. Intern., Ltd.,
762 F. Supp. 1302, 1306 (S.D. Ohio 1991) (citing cases). Armada
named defendants Amcol International Corp. (“Amcol”), American
Colloid
Company
(“ACC”),
and
Volclay
International
Corp.
(“Volclay”) (collectively, the “Amcol Defendants”) as garnishees
in the Rule B Proceedings and sought the turnover of assets that
Armada claimed belonged to Ashapura and were held by the Amcol
Defendants in this district. Armada largely prevailed in the Rule
B Proceedings, which culminated in an order directing the Amcol
Defendants to pay to Armada the $687,356.52 that I concluded they
owed to Ashapura in unpaid stock proceeds and open invoices. See
Rule B Proceedings, Mem. Op. and Order of 08/29/2011 at 8-9.
In
the
Defendants
present
engaged
in
action,
fraud
Armada
in
the
alleges
Rule
B
that
the
Amcol
Proceedings
by
orchestrating a complex series of corporate transactions among
related entities, the purpose of which was to shield additional
assets belonging to Ashapura from turnover. I dismissed Armada’s
claims
pursuant
to
the
Racketeer
2
Influenced
and
Corrupt
Organizations Act (“RICO”) and the Illinois Uniform Fraudulent
Transfer Act on the pleadings, see 244 F. Supp. 3d, 750 (N.D. Ill.
2017), aff’d 885 F.3d 1090 (7th Cir. 2018), but I allowed its claim
for maritime fraudulent transfer to proceed. The Amcol Defendants
now seek summary judgment of that claim, arguing that Armada has
not come forward with sufficient evidence to establish: 1) that
the assets it faults the Amcol Defendants for failing to disclose
and turn over belonged to Ashapura; 2) that the Amcol Defendants
controlled those assets; or 3) that the assets were within this
district. For the reasons that follow, the motion is granted with
respect plaintiff’s claim against ACC and Volclay but denied with
respect to its claim against Amcol.
At all relevant times, Amcol was the parent company in a
global group of related entities, several of which were involved
in the constellation of transactions that Armada calls the “2011
Restructuring Transaction.” Distilled to its essence, Armada’s
fraudulent
involved
transfer
in
the
theory
2011
is
that
Restructuring
the
corporate
Transaction
operations
created
an
intangible asset belonging to Ashapura and controlled by Amcol,
which
Amcol
camouflaged
in
a
multitude
of
transactions
it
puppeteered among its controlled entities. Specifically, Armada
3
claims that through its UK affiliate, AME,1 Amcol extended a loan
to Ashapura to fund a Belgian joint-venture called AANV; and that
rather than call in the loan (which it knew the insolvent Ashapura
was unable to repay), Amcol converted the debt into a credit by
forgiving repayment and using the debt relief as consideration for
the transfer of certain assets from AVL (an entity Ashapura coowned with defendant Volclay) to Cetco India, an entity Amcol would
then
control.
Armada
argues
that
by
choreographing
these
transactions from its corporate headquarters in Hoffman Estates,
Illinois, Amcol created and controlled an intangible asset—the
credit used to purchase AVL’s assets—in this district. And because
that asset belonged to Ashapura, Armada contends, it was subject
to attachment and turnover in the Rule B Proceedings.
There is evidence to support Armada’s theory. All agree that
AME and Ashapura were fifty-fifty co-venturers in AANV, and that
through an undocumented loan transaction, an Amcol entity (the
parties dispute which) funded “the entire amount” of both sides’
initial investment in AANV. Def.’s 30(b)(6) Dep., Pl.’s Exh. A at
140:20-21. The Amcol Defendants insist that it was AME, acting
independently from its UK headquarters, that extended the loan,
For readability and following the parties’ conventions, I refer
to entities involved in the transactions by their acronyms.
Wherever used in this opinion, “AME” stands for Amcol Minerals
Europe, “AANV” stands for Ashapura Amcol N.V., and “AVL” stands
for Ashapura Volclay Limited.
1
4
and that AANV, not Ashapura, was the loan recipient. But a jury
could conclude that Amcol itself was the source of the loan, with
AME acting only as an “intermediary.” Pearson Dep., Pl.’s Exh. D,
at 93:16-18 (“The loan was made essentially from AMCOL via an
intermediary, AME, and to fund AANV, for both parties”). Moreover,
while the loan proceeds were undisputedly disbursed to AANV, a
fact-finder could also conclude that it was Ashapura who owed the
obligation to repay the loan. See, e.g., Def.’s 30(b)(6) Dep.,
Pl.’s Exh. A at 139:15-17, 140:16-19 (invoices sent to Ashapura
for interest on the loan “to establish that Ashapura ultimately
needed to pay out for the money ultimately that they were supposed
to be putting into the entity”); Kodosky Dep., Pl.’s Exh. E at 7778.
The Amcol Defendants deride Armada’s theory as “contrived,”
Reply at 3, and insist that it “ignore[s] corporate form.” Br. at
14. But having failed to document the € 7 million loan transaction
to fund AANV at any point prior to AME’s divestment from that
entity in the 2011 Restructuring Transaction, Amcol is ill-placed
to rely upon corporate formalities to establish which entities
were the real parties in interest with respect to the intracorporate movement of assets. Moreover, there is evidence in the
record that raises doubts about the independence of the Amcol
affiliates involved. For example, Amcol’s CEO Ryan McKendrick
5
directed AME’s accountant, Phil Mealor, to “prepare an invoice for
Ashapura that includes interest and the full amount of the advance
we made on their behalf” and confirmed that Mealor should not
“book” the loan because the invoice—while ostensibly from AME—was
“outside of [AME’s] system.” Pl.’s Exh. W. The Amcol Defendants
insist that McKendrick’s directives cannot be taken as evidence of
Amcol’s control over AME because McKendrick was also “a member of
the AME board and acted in his capacity as an AME board member
when he negotiated the AANV Loan Agreement.” Reply at 9. But a
jury need not accept that interpretation and could conclude that
McKendrick was acting in Amcol’s interest rather than AME’s. In
addition,
testimony
by
Amcol’s
Comptroller
and
by
the
Amcol
Defendants’ Rule 30(b)(6) witness offers additional grounds for
questioning AME’s independence with respect to its role in the
transactions at issue and its observance of corporate formalities
in general. See Def.’s Rule 30(b)(6) Dep., Pl.'s Exh. A at 94
(“[u]ltimately all transactions of this nature, investments, have
to be approved by the board of directors of AMCOL International”);
Kodosky Dep., Pl.’s Exh. E at 51:3 (“[u]ltimately, at the end of
the day, it’s all owned by AMCOL International Corporation”).
Nor am I persuaded that documents memorializing the 2011
Restructuring Transaction establish beyond dispute that Ashapura
and Amcol exchanged nothing of value. The Amcol Defendants make
6
much of provisions in the “Cetco India Share Subscription &
Shareholders Agreement” stating the amount Amcol paid for its
eighty-percent interest in that entity and confirming that payment
of that amount constitutes “full, final and complete discharge” of
Amcol’s payment obligation. But nothing about these provisions
indicates how Amcol valued its stake in Cetco India or excludes
the possibility that Amcol’s cash payment reflected a discount
commensurate with the value of the credit it received in exchange
for AANV-related loan. Indeed, there is evidence that once it
became clear that Ashapura would be unable to repay the loan, Amcol
began considering other ways to extract value from the company in
the 2011 Restructuring Transaction. See Interoffice Memorandum
from
Kodosky
to
Pearson,
Pl.’s
Exh.
F,
at
1-2
(“From
our
perspective, the loan had a zero book value and more importantly
a zero economic value since the business is bankrupt... We do not
believe AME will ever collect any amounts due under the loan.
However, we could use the loan as leverage in other areas of
negotiation...”).
And there is evidence that Amcol did, in fact, “leverage” the
AANV-related
loan
in
the
course
of
the
2011
Restructuring
Transaction. Amcol’s corporate representative, Gary Castagna, and
its Chief Financial Officer, Don Pearson, both testified that the
forgiveness of Ashapura’s portion of the loan was part of the
7
consideration it used to increase its stake in CETCO India. See
Def.’s 30(b)(6) Dep., Pl.’s Exh. A at 125:9-14 (“we were going to
apply that asset that we had, which was the form of a loan to the
joint venture in AANV, as part of the consideration to pay – to
fund, again the ultimate purchase of the remaining shares of CETCO
India”); id. at 147:9-16 (“Q: Are you saying, sir, that the debt
in AANV was reduced by 50 percent so that AMCOL could acquire or
hold 80 percent of the shares in CETCO India? A: Yes.”); Pearson
Dep., Pl.’s Exh. D at 84:20-85:1 (“Q: What was the consideration
received by the AMCOL Defendants in exchange for reducing that
debt by approximately 50 percent? A: As I recall, we received 30
percent interest or 80 percent of the new CETCO India operation.”).
The Amcol Defendants’ invocation of the parol evidence rule as a
basis for ignoring this testimony is misplaced. “[F]raud is a tort,
and the parol evidence rule is not a doctrine of tort law and so
an integration clause does not bar a claim of fraud based on
statements not contained in the contract[s].” Vigortone AG Prod.,
Inc. v. PM AG Prod., Inc., 316 F.3d 641, 644 (7th Cir. 2002); W.W.
Vincent & Co. v. First Colony Life Ins. Co., 814 N.E.2d 960, 968
(Ill. App. Ct. 1st Dist. 2004) (same).
For the foregoing reasons, I conclude that Armada is entitled
to try its claim that Amcol—acting from its headquarters in this
district—effectuated a fraudulent transfer of assets that belonged
8
to Ashapura and that should have been disclosed in the Rule B
Proceedings. I agree with the Amcol Defendants, however, that the
record does not reasonably support its claim against ACC or
Volclay. Accordingly, the motion for summary judgment is granted
in part.
ENTER ORDER:
__________________________
Elaine E. Bucklo
United States District Judge
Dated: October 10, 2019
9
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