Transfield E.R. Futures Ltd. v. Deiulemar Shipping SPA

Filing 55

ORDER denying 42 Motion to Dismiss for Lack of Jurisdiction filed by Deiulemar Shipping S.p.A.; denying 46 Motion to Dismiss for Lack of Jurisdiction filed by Deiulemar Compagnia di Navigazione S.p.A.. Signed by Judge Stanwood R. Duval, Jr on 1/16/2012. (Reference: 11-99, 11-754)(blg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
TRANSFIELD ER FUTURES LTD.

CIVIL ACTION

VERSUS

NO. 11-099
c/w NO. 11-754

DEIULEMAR SHIPPING S.P.A.

SECTION “K”(5)

ORDER
Before the Court are a Motion to Dismiss filed by Deiulemar Shipping S.p.A.
(“Deiulemar”) (Doc. 42) and a Motion to Dismiss filed by Deiulemar Compagnia di Navigazione
S.p.A. (“DCDN”) (collectively “Defendants” both entities being organized and existing under
the laws of Italy) (Doc. 46). Transfield E.R. Futures Limited (“Transfield”), an entity organized
and existing under the laws of the British Virgin Islands, has opposed these motions. Having
reviewed the pleadings, memoranda, exhibits, affidavits, and the relevant law, the Court finds
both motions should be denied.

Background
During July and September 2008, Transfield as Seller and Defendants as Buyer entered
into six forward freight agreements (“FFAs”). FFAs are commitments to perform shipping
services in the future. As explained by the court in Bulk Trading S.A. v. Capex Europe S.A.M.,
2011 WL 1088762 (E.D.La. March 22, 2011) (Africk, J.)citing Armanda (Singapore) PTE Ltd. v.
North China Shipping Co. Ltd., 633 F. Supp.2d 168, 169 (S.D.N.Y. 2009):
The contractors agree to pay the difference between the price of moving freight or
hiring a ship today and the price of those same services at some future time. Id.
In the shipping industry, FFAs are negotiated with the express purpose of hedging
exposure to market risk associated with ocean freight prices. See Flame S.A. v.
Primera Maritime (Hellas) Ltd., 2010 WL 481075, at *2 (S.D.N.Y. Feb 2, 2010);

Brave Bulk Transp. Ltd. v. Spot on Shipping Ltd. 2007 WL 3455823, at *1-2
(S.D.N.Y. Oct. 30, 2007). “Ocean freight is the charge assessed for the carriage
of cargo by a vessel and is one of the most fundamental components of maritime
commerce.” Flame S.A., 2010 WL 481075, at *2.

In the subject agreements, Transfield and the Defendants agreed on the Contract Route(s),
Contract month(s), Contract Quantity, Settlement Date and Contract Rates that would govern
each particular contract. Apparently, this arrangement soured.
On June 18, 2010 Defendants commenced in London High Court proceedings against
Transfield under the terms of the FFAs alleging that Transfield owes Defendants a little more
than $16, 000,000.00, plus interest and costs for the alleged breach of these agreements.
Transfield filed its “Defence and Counterclaim” on July 19, 2010 seeking a little less than
$42,000,000.00 plus interest and costs. (Doc. 50, Exh. “B,” Standstill Agreement of February
17, 2011, p. 1, ¶1). In addition, the parties then attempted to secure their respective claims by
arresting or attaching each other’s assets and property in various jurisdictions.
To that end, Transfield filed the instant suit (C.A. No. 11-99) in New Orleans invoking
the Court’s admiralty and maritime jurisdiction pursuant to 28 U.S.C. § 1333, within the
meaning of Fed. R. Civ. P. 9(h), invoking Rule B against Deiulemar for maritime attachment of
its property, the M/V LEONARDO LEMBO. On January 19, 2011, it attached the vessel in the
Missisippi River to secure their claims. Deiulemar Shipping posted security in the sum of $26.6
million by payment of cash into this Court to secure the release of the Vessel. It then filed an
application for countersecurity in the Louisiana proceedings and sought $10,385,973 as security
for their claims in London. (Doc. 50, Exh. “B,” Standstill Agreement of February 17, 2011).

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Transfield then threatened to attach the M/V MICHELE IULIANO, another of
Defendants vessels in Norfolk, Virginia. As a result of this, all of the parties entered into a
Standstill Agreement executed on February 17, 2011 to enable the parties to negotiate security
and countersecurity without prejudice to the claims and counterclaims being pursued in the
London High Court Proceedings. The parties were unable to reach agreement on security within
requisite agreed-upon28 days. So, in order to avoid the further arrest and/or attachment of its
vessels in other jurisdictions, the Defendants posted additional security in this Court on April 8,
2011 and Transfield posted countersecurity for the Defendants claims rendering moot a Motion
for Countersecurity (Doc. 17) previously filed by the Defendants with this Court.
The Standstill Agreement provides that if the parties could not reach agreement within
the 28 days on suitable security for their respective claims, the Deiulemar Shipping S.p.A.
waived its right to contest the validity of the attachment of the M/V LEONARDO LEMBO in
the Louisiana proceedings and DCDN agreed to appear in a suit filed in this Court for the
attachment of the M/V MICHELE IULIANO and post security as if the ship had actually been
attached. Doc. 50, Exh, “B,” Standstill Agreement of February 17, 2011, Clause 2.2.4). That
suit was filed, Transfield ER Futures Limited v. Deiulemar Compagnia di Navigazione S.P.A., C.
A. No. 11-794, and was consolidated with the original Transfield suit, C. A. No. 11-99.
In addition clause 7.1 of the Standstill Agreement states unequivocally:
This Agreement and any matters and disputes relating to it or to its subject matter
are subject to General Maritime Law of the United States and the exclusive
jurisdiction of the United states District Court for the Eastern District of Virginia
and/or United States District Court for the Eastern District of Louisiana.
Standstill Agreement, Clause 7.1.

With that as background, the Court now turns to the issue at

hand.
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Legal Analysis
In spite of the aforementioned Standstill Agreement, Defendants filed the two instant
motions contending that the FAAs are not maritime contracts, that as such this Court has no
admiralty subject matter jurisdiction, and that all claims by Transfield against Defendant should
be dismissed with prejudice at Transfield’s cost. Specifically, Defendants contend that because
FFAs are not maritime contracts, the Rule B attachments which are the subject of both lawsuits
must be vacated and the Rule 9(h) complaints must be dismissed.
It is beyond peradventure that 28 U.S.C. § 1331(1) affords Court original jurisdiction in
any civil case of admiralty of maritime jurisdiction, and that a party may only seek Rule B
attachment if the underlying claim satisfies admiralty jurisdiction thereunder. Alphamate
Commodity GMBH v. CHS Europe SA, 627 F.3d 183 (5th Cir. 2010). As stated by the United
States Court of Appeals for the Fifth Circuit:
In order to be considered maritime, there must be a direct and substantial link
between the contract and the operation of the ship, its navigation or its
management afloat, taking into account the needs of the shipping industry, for the
very basis of the constitutional grant of admiralty jurisdiction was to ensure a
national uniformity of approach to world shipping.
Id. citing 1 Benedict on Admiralty §182 (2010) (emphasis added).
As noted above, the very essence of these FAAs concerns commitments to perform
shipping services in the future. The subject FAAs contained agreements concerning the contract
routes, contract months, contract quantity, the date upon which payment was due for such
services and contract rates that would govern each particular contract. Indeed, it was the
calculation of the payment that was due and by whom thereunder that is at issue. Clearly, these
Forward Freight Agreements can fairly be said to be maritime contracts. Indeed, this Court is

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not alone is so finding. Flame S.A. v. Primera Maritime (Hellas) Limited, 2010 WL 481075
(S.D.N.Y. Feb. 2, 2010) (financial nature of Forward Freight “Swap” Agreement does not
change its maritime status). Federal Practice and Procedure, § 675, n. 4; Brave Bulk Transport
Ltd. v. Spot on Shipping Ltd., 2007 WL 3255823, at *2 (S.D.N.Y. Oct. 30 2007) and cases cited
therein; Bulk Trading S.A. v. Capex Europe S.A.M. , 2011 WL 1088762 (E.D.La. March 22,
2011). As such this Court properly has exercised jurisdiction over these Rule B attachment
actions. Accordingly,
IT IS ORDERED Deiulemar Shipping S.p.A. (“Deiulemar”) (Doc. 42) and a Motion to
Dismiss filed by Deiulemar Compagnia di Navigazione S.p.A. (“DCDN”) (collectively
“Defendants” (Doc. 46) are DENIED.
New Orleans, Louisiana, this 16th day of January of 2012.

STANWOOD R. DUVAL, JR.
UNITED STATES DISTRICT COURT JUDGE

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