Floral Shipping, Ltd. v. Egyptian Bulk Carriers

Filing 42

ORDER & REASONS denying 32 Motion to Compel Deposit of Funds into Registry. Signed by Chief Judge Sarah S. Vance on 8/13/2015. (mmm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
FLORAL SHIPPING LTD.

CIVIL ACTION

VERSUS

NO: 14-879

EGYPTIAN BULK CARRIERS

SECTION: R
ORDER AND REASONS

Plaintiff Floral Shipping Ltd. moves for an order compelling
garnishee Cargill, Inc. to deposit the sum of $162,286.15, or in
the alternative, $353,399.05, into the registry of the Court.1

For

the following reasons, the Court denies the motion.

I. BACKGROUND
This dispute arises out of a charter party between plaintiff
Floral Shipping Ltd. and defendant Egyptian Bulk Carriers (EBC).
On April 16, 2014, Floral Shipping filed a Verified Complaint
against EBC, in which it alleged that EBC chartered the M/V OKIALOS
under a charter party dated January 16, 2014 (made retroactive to
January 11, 2014), and further that EBC breached the charter by
failing to pay charter hire and other amounts owed under the
charter party.2

Floral Shipping alleged damages in the amount of

$1,259,539.08.3 The damages allegedly arise from EBC’s non-payment
of the Second and Third Hire Statements issued by Floral Shipping

1

R. Doc. 32.

2

R. Doc. 1.

3

Id. at 5.

to EBC ($304,687.50);4 EBC’s breach of the charter party by failing
to pay for bunkers delivered to the vessel at Prince Rupert, Canada
($454,950.00);5 and future damages reflecting the anticipated cost
of replenishing bunkers onboard the vessel upon redelivery to
Floral Shipping ($409,525.60), and additional charter hire and
related costs due on the vessel’s redelivery on April 30, 2014
($90,375.98).6
At the time Floral Shipping filed the Verified Complaint, EBC
was a foreign entity not within the Eastern District of Louisiana
within the meaning of Rule B of the Supplemental Rules for Certain
Admiralty Claims of the Federal Rules of Civil Procedure. See Fed.
R. Civ. P. Adm. Supp. R. B Adv. Comm. N. (“The time for determining
whether a defendant is ‘found’ in the district is set at the time
of filing the verified complaint that prays for attachment and the
affidavit

required

by

Rule

B(1)(b).”).

Accordingly,

Floral

Shipping moved this Court for an order authorizing the issuance of
writs of attachment under Rule B seeking the attachment and
garnishment

of

all

property

of

EBC

within

the

territorial

jurisdiction of the United States District Court for the Eastern
District of Louisiana.7

The Court granted the Motion for Order

4

R. Doc. 1, Exs. 4 & 5.

5

R. Doc. 1, Ex. 2.

6

R. Doc. 1, Ex. 6.

7

R. Doc. 2.
2

Authorizing the Issuance of a Writ of Attachment on April 16,
2014.8

The Clerk of Court issued a Writ of Foreign Attachment

commanding the attachment of all property of EBC in the hands of
Cargill, Inc., and/or Southport Agencies, Inc., as garnishees.9
Because the property to be attached was neither a vessel nor
tangible property on board a vessel, Floral Shipping moved under
Rule

B(1)(d)(ii)(B)

server.10

that

Mark

Henry

be

appointed

as

process

The Court granted this motion on April 16, 2014.11

On

April 17, 2014, Mr. Henry served the Writ of Attachment, together
with Floral Shipping’s Verified Complaint, a summons, and copies of
all

motions

and

orders

filed

as

of

that

date

on

garnishees

Southport Agencies and Cargill.12
Cargill responded initially that it did not have any property
of EBC in its possession at the time the writ was served.13

After

various clarifications, Cargill admitted that it had recently
chartered four vessels from EBC--the M/V NOVO MESTO, M/V HERMANN S,
M/V OCEAN PRELATE, and M/V BULK HONDURAS--through a charter party

8

R. Doc. 5.

9

R. Doc. 6.

10

R. Doc. 4.

11

R. Doc. 7.

12

See R. Docs. 10 (Cargill) & 11 (Southport Agencies).

13

See R. Doc. 32, Ex. A at 1.
3

between EBC and Cargill entered into on August 13, 2013.14

Cargill

further admitted that considering both predicted demurrage and
despatch resulting from the voyages of those four vessels, Cargill
still owed a net payment to EBC totaling $305,907.43.15

Cargill

later revised this amount, after receiving finalized demurrage and
dispatch costs, to $62,170.06.16

This amount reflects a credit in

favor of EBC of $28,472.22 for the NOVO MESTO, a credit in favor of
EBC of $27,109.36 for the OCEAN PRELATE, a net credit in favor of
EBC of $36,158.93 for the BULK HONDURAS (reflecting $83,312.50 in
demurrage owed to EBC and $47,153.57 despatch owed to Cargill), and
a debt owed to Cargill of $29,570.31 for the HERMANN S.17

While

admitting to holding this credit, Cargill contended that it was
entitled to set off this credit in favor of EBC by a debt EBC owed
to Cargill in the amount of $353,598.43.18

Considering this set

off, Cargill represented that it possessed no credits, debts, or
effects of EBC.

14

Id. at 2.

15

Id. The amounts are as follows: $390.63 owed to
Cargill for the NOVO MESTO; $9,941.55 due to EBC for the HERMANN
S; $105,625 due to EBC for the OCEAN PRELATE; and $190,731.51 due
to EBC for the BULK HONDURAS.
16

R. Doc. 32, Ex. B at ¶ 11.

17

R. Doc. 32, Ex. B at ¶ 7.

18

Id.
4

According to Cargill, its right of set off derives from a
agreement entered into between itself, Cargill International SA
(“CISA”), an affiliate of Cargill, and EBC.

Cargill represents

that, in January 2014, EBC began defaulting on its obligations to
the owners of the vessels that it had sub-chartered to Cargill and
CISA.

To assure uninterrupted passage of the chartered vessels,

CISA paid certain voyage expenses that were incurred by vessels
that EBC chartered to Cargill and CISA, and that were EBC’s
obligation to pay.

As of March 19, 2014, CISA’s payments of EBC’s

obligations totaled $1,513,598.43 (the “Debt”). On March 19, 2014,
as consideration for these payments, EBC entered into a debt
agreement with Cargill and CISA that obligated EBC to repay the
Debt, and granted CISA, Cargill, and any other Cargill-affiliated
entity a right to set off any amounts that they owe to EBC under
any of the charter parties or otherwise against the Debt. The debt
agreement acknowledged the Debt as “due and owing[.]”19

The setoff

provision of the debt agreement stated:
We [EBC] agree that any freight, demurrage, or any other
amounts owed by CISA, Cargill, Incorporated, or any other
Cargill affiliated entity to EBC under the Charterparties
(or any one of them) or otherwise may be set off against
the Debt.
In a letter dated April 23, 2014, Cargill and CISA sought repayment
of the Debt in full from EBC.20

19

R. Doc. 32, Ex. O at 1.

20

R. Doc. 32, Ex. O.
5

Floral Shipping asserts that Cargill, for the purposes of this
dispute, cannot set off any credit it held in favor of EBC on April
17, 2014 against the Debt because it had not yet exercised its
right of set off.

According to Floral Shipping, this is evidenced

by Cargill and CISA’s April 23, 2014 letter requesting full payment
of the debt from EBC, rather than a reduced amount reflecting a set
off.21

Cargill asserts that it is entitled to set off the credit.

Floral Shipping also offers evidence that it contends shows
that Cargill has admitted holding a credit of at least $161,244.74
in favor of EBC on April 17, 2014.

First, Floral Shipping points

to Cargill’s admission that it owed a $28,472.22 credit to EBC for
demurrage arising from the NOVO MESTO.22

Second, as to the HERMANN

S, Floral Shipping claims Cargill owes EBC $23,392.07.

Floral

Shipping points to Cargill’s initial admission, on May 30, 2014,
that it owed a $9,941.55 credit to EBC for demurrage arising from
the HERMANN S. On August 5, 2014, Cargill stated that this initial
estimate was wrong and that, instead, EBC owed Cargill $29,750.31
for despatch arising from the HERMANN S.

On September 17, 2014,

however, Cargill issued an invoice to EBC reflecting that Cargill
owed EBC $23,392.07 arising from the HERMANN S.23

21

Id.

22

R. Doc. 32, Ex. B at ¶ 11.

23

R. Doc. 32, Ex. H.
6

Third, as to the OCEAN PRELATE, Cargill initially admitted it
owed EBC a debt of $105,625,24 but later revised the amount to
$27,109.36 based on a credit EBC owed to Cargill.25 Floral Shipping
requests that the Court recognize the $27,109.36 amount, or the
$105,625

amount

if

Cargill

lacks

sufficient

documentation

to

support the lesser amount, as what Cargill owed.
Finally, as to the BULK HONDURAS, Floral Shipping points to a
freight invoice dated September 17, 2014, showing that Cargill owed
EBC a credit of $82,271.09. Cargill originally represented that it
possessed a credit in EBC’s favor in the amount of $190,731.51, and
Floral Shipping urges the Court to adopt this as the amount Cargill
owed EBC if Cargill is unable to demonstrate why it owed Cargill
only $82,271.09.
In sum, Floral Shipping contends that Cargill possessed a
credit of at least $161,244.74 on April 17, 2014 in favor of EBC,
and that, because Cargill failed to exercise its right of set off
by this time, Cargill is not entitled to set off this amount under
the debt agreement between Cargill/CISA and EBC.

Because Cargill

initially admitted to possessing a $305,907.43 credit in favor of
EBC, Floral Shipping moves, in the alternative, for the Court to
recognize this as the amount Cargill owed EBC should Cargill fail
to

produce

supporting

documentation

24

R. Doc. 32, Ex. A at 2.

25

R. Doc. 32, Ex. B at 6.
7

suggesting

why

the

later

reduction in this amount is appropriate.26
contends

that

it

possessed

a

credit

In opposition, Cargill

only

in

the

amount

of

$62,170.06 in favor of EBC, and that, regardless, it is entitled to
set off this credit under the debt agreement.

II. ANALYSIS
Admiralty Rule B(1)(a) provides that in an in personam action:
If a defendant is not found within the district when a
verified complaint praying for attachment and the
affidavit required by Rule B(1)(b) are filed, a verified
complaint may contain a prayer for process to attach the
defendant’s tangible or intangible personal property--up
to the amount sued for--in the hands of garnishees named
in the process.
Rule B(3)(a) provides in relevant part: “If the garnishee admits
any debts, credits, or effects [of the defendant in the garnishee’s
hands], they shall be held in the garnishee’s hands or paid into
the registry of the court, and shall be held in either case subject
to the further order of the court.”
A. Cargill’s Admission of Credit in Favor of EBC
The Court first addresses Cargill’s admission of credit it
holds in favor of EBC.
establish

a

right

Floral Shipping bears the burden to
to

attachment.

26

See

Cargo-Levant

In its motion, Floral Shipping refers to $353,399.04 as
the amount the Court should recognize, but this is the amount of
set off EBC now claims, not the credit Cargill once admitted is
possessed in favor of EBC. Accordingly, the Court construes
Floral Shipping’s reference to the $353,399.04 figure as a
mistake and substitutes the $305,907.43 figure.
8

Schiffahrtsgesellschaft v. PSL Lim., Civ. A. No. 12-1363-RGA-CJB,
2014 WL 2452744, at *6 (D. Del. May 30, 2014) (“It is a plaintiff’s
burden to establish a right to attachment.”). Courts applying Rule
B(3)(a) deem a debt or credit admitted if the record presents no
factual dispute.

See id.; Fla. Conference Ass’n of Seventh-Day

Adventists v. Kyriakides, 151 F. Supp. 2d 1223, 1226 (C.D. Cal.
2001).
As stated, on May 30, 2014, Cargill admitted to possessing a
credit in favor of EBC in the amount of $305,907.43 relating to
Cargill’s use of the NOVO MESTO, HERMANN S, OCEAN PRELATE, and BULK
HONDURAS.27

At the time, Cargill had not received from EBC its

calculation of laytime or any invoices for demurrage or dispatch,
so this amount represented an estimate.28 EBC submitted its laytime
calculations to Cargill on July 31, 2014.

Using these figures,

Cargill submitted a new statement on August 5, 2014 indicating that
it owed only $62,170.06 in favor of EBC.29

In support, Cargill

attached an e-mail from EBC setting forth its demurrage and
dispatch figures.30

Cargill provided an accounting as follows:

27

R. Doc. 32, Ex. A at 2.

28

R. Doc. 32, Ex. B at 4-5.

29

Id. at 6.

30

Id. at 7-8.
9

Vessel

Description

Amount

NOVO MESTO

Demurrage to EBC

$28,472.22

OCEAN PRELATE

Demurrage to EBC

$27,109.36

BULK HONDURAS

Demurrage to EBC

$83,312.50

HERMANN S

Despatch to Cargill

-$29,570.31

BULK HONDURAS

Despatch to Cargill

-$47,153.57

Net Demurrage to EBC $62,170.06
Floral

Shipping’s

account

is

consistent

with

Cargill’s

assessment regarding the NOVO MESTO, in the amount of $28,472.22,
and regarding the OCEAN PRELATE, in the amount of $27,109.36.
These amounts are therefore undisputed and the Court accepts them
as representing the amount Cargill owed to EBC notwithstanding any
right of set off.
Floral Shipping, however, presents evidence contradicting
Cargill’s estimates related to the BULK HONDURAS and HERMANN S.
Regarding the BULK HONDURAS, Cargill represented on August 4, 2014,
that it held a net credit in favor of EBC of $36,158.93.

On

September 17, 2014, however, Cargill issued a freight invoice to
EBC showing that Cargill owed EBC $82,271.09.

In its opposition,

Cargill does not challenge Floral Shipping’s reliance on this
invoice and makes no effort to show that this is not the amount
Cargill owed to EBC for the BULK HONDURAS. Accordingly, given that
there is no factual dispute, the Court accepts the $82,271.09
10

figure as the amount Cargill owed to EBC related to the BULK
HONDURAS.
As to the HERMANN S, Cargill represented on August 4, 2014,
that EBC owed it $29,570.31.

On September 17, 2014, however,

Cargill issued an invoice to EBC indicating that Cargill held a
credit in favor of EBC of $23,392.07.

Again, Cargill does not

challenge Floral Shipping’s reliance on this invoice and makes no
effort to show that this is not the amount Cargill owed to EBC
related to the HERMANN S.

Accordingly, given that there is no

factual dispute, the Court accepts the $23,392.07 figure as the
amount owed by Cargill to EBC related to the HERMANN S.
In sum, the Court finds that Cargill has admitted to holding
a

credit

in

favor

of

EBC

in

the

amount

of

$161,244.74

notwithstanding any right of set off. The Court does not find that
Cargill

has

admitted

owing

the

higher

amounts

suggested

in

Cargill’s initial responses ($105,624 for the OCEAN PRELATE and
$190,731.51 for the BULK HONDURAS), as Floral Shipping urges in the
alternative, because Floral Shipping has not presented evidence,
that these figures are accurate.
B. Cargill’s Right of Set Off
Accepting that Cargill possesses a credit in favor of EBC in
the amount of $161,244.74, the Court examines whether Cargill’s
right of set off negates the credit. Floral Shipping contends that

11

if Cargill did not exercise its set-off right before Floral
Shipping’s attachment on April 17, 2014, it cannot do so now.
In Wilhelmsens Dampskibaktiesselskab v. Canadian Venezuelan
Ore Co., 224 F. 881 (2d Cir. 1915), the Second Circuit held that a
garnishee under attachment in admiralty may set off a claim in his
favor against the defendant.

Id. at 885-86 (citing Schuler v.

Israel, 120 U.S. 506 (1887); North Chicago Rolling Mill v. St.
Louis Ore Co., 152 U.S. 596 (1894); Thebideau v. Cairns, 171 F. 233
(D. Me. 1909)).

More recently, the Ninth Circuit stated that “it

seems clear that a garnishee may set-off matured obligations at the
date of garnishment . . . .”

Schirmer Stevedoring Co. Ltd. v.

Seaboard Stevedoring Corp., 306 F.2d 188, 194 (9th Cir. 1962); see
also Am. Smelting & Refining Co. v. Naviera Andes Peruana, S.A. 208
F. Supp. 164, 170-71 (N.D. Cal. 1962), aff’d sub nom. San Rafael
Compania Naviera, S.A. v. American Smelting & Refining Co., 327
F.2d 581 (9th Cir. 1964) (holding that garnishee is entitled to set
off “before the creditors of the insolvent corporation can take any
of the fund”); W. Bulk Carriers (Australia), Pty. Ltd. v. P.S.
Intern., Ltd., 762 F. Supp. 1302, 1306 n.3 (S.D. Ohio 1991) (“The
garnishee . . . may set off against any of the defendant’s assets
in its possession claims it has against the defendant.” (quoting 7A
Moore’s Federal Practice ¶ B.11, at B-501 (2d ed. 1988)).
Citing this line of cases, this same rule is expressed in
several authoritative treatises.
12

For instance, 29 F. Joseph

Bersch, III, et al., Moore’s Federal Practice § 705.04 (3d ed.
2012) provides that under Rule B(3)(a):
If the garnishee admits that he holds property of the
defendant, he may either hold it subject to the court’s
jurisdiction, or else simply turn it over to the court.
The garnishee is entitled to assert a right to setoff for
any claim that it may have against the defendant.
Id.

(citing

San

Rafael

Compania

Naviera,

327

F.2d

Wilhelmsens Dampskibaktiesselskab, 224 F. at 881).

at

581;

Likewise, 2

Thomas J. Schoenbaum, Admiralty & Mar. Law § 21-2 (5th ed. 2014),
states that under Rule B(3)(a), “[t]he garnishee is entitled to a
set-off of any claim it may have against the defendant.” (citing
San Rafael Compania Naviera, 327 F.2d at 581).
Here, the debt agreement executed between Cargill/CISA and EBC
on March 19, 2014, acknowledges $1,513,598.43 as “due and owing” to
Cargill and CISA (or to any other Cargill entity designated).31
With regard to the HERMANN S and the NOVO MESTO, the agreement
acknowledges a debt owed by EBC of $46,922 and $224,274.43,
respectively, totaling $353,598.43.32 The agreement also provides,
“We agree that any freight, demurrage, or any other amounts owed by
CISA, Cargill, Incorporated, or any other Cargill affiliated entity
to EBC under the Charterparties (or any one of them) or otherwise
may be set off against the Debt.”33

31

R. Doc. 32, Ex. O at 1.

32

Id.

33

Id. at 2.
13

Thus, as of March 19, 2014,

almost one month before Floral Shipping’s service of the writ of
attachment on Cargill, EBC had acknowledged this debt as “due and
owing” and had given Cargill the right to set off any amounts it
owed EBC against the debt.
Cargill now claims a right of set off in the amount of
$353,598.43.

Under the authorities cited, Cargill is entitled to

set off the credit it holds in EBC’s favor against the debt even if
it had not exercised this right at the time of attachment.

The

debt was “due and owing,” and the right of set off was in existence
well before Floral Shipping served the writ of attachment. Because
Cargill holds a credit of only $161,244.74, Cargill’s right to set
off the $353,598.43 debt negates the credit.

Accordingly, Cargill

holds no credits, debts, or effects to which Floral Shipping could
have attached.
Floral Shipping cites Aurora Mar. Co. v. Abdullah Mohamed
Fahem & Co., 85 F.3d 44 (2d Cir. 1996), for the principle that a
maritime

garnishee

may

not

exercise

a

attachment, but this case is inapposite.

set-off

right

after

At issue in Aurora was

whether a garnishee-bank could exercise a statutory right of set
off provided by New York state law after plaintiffs had obtained
Rule B attachments.

The district court held that plaintiffs’

“first-in-time

B

Rule

attachments

had

priority

over

[the

garnishee’s] later-executed set-off right.” Id. at 47. The Second
Circuit, however, rejected this reasoning and held that Rule B

14

preempted the state law providing debtors a right of set off after
the issuance of a warrant of attachment under Rule B.

Id. at 47-49

(relying on American Dredging Co. v. Miller, 510 U.S. 443 (1994)).
Because the set-off right derived from New York state law, the
court

expressed

concern

that

the

law

would

“undermine

consistent nationwide application of Rule B . . . .”

the

Id. at 48.

The court emphasized that “leaving the functional usefulness of
Rule B attachments to the vagaries of fifty states would create a
measure of anarchy in a federal scheme designed to insure that
maritime actors may be sued where their property is found.”

Id. at

48-49.
Here, Aurora does not advance Floral Shipping’s position for
two reasons. First, the court in Aurora rejected the first-in-time
rule, as espoused by the district court, for which Floral Shipping
cites it. Had the Second Circuit simply recognized a first-in-time
rule, it would not have reached the issue of preemption.

Second,

the court’s concerns that “the vagaries of the laws of fifty
states” would jeopardize uniform enforcement of maritime law are
not present here.

Cargill’s right of set off derives from a

private contract between itself and EBC executed almost a full
month

before

Floral

Shipping’s

attempted

garnishment.

See

Oceanfocus Shipping Ltd. v. Naviera Humbolt, S.A., 962 F. Supp.
1481, 1485 (S.D. Fla. 1996) (“While Aurora concerned a statutorilydefined set-off right that the bank invoked only after an otherwise

15

lawful attachment had been made, the case at bar involves a private
contractual

borrowing

privilege

created

well

in

advance

of

[plaintiff’s] attempt to perfect service.”).
Floral Shipping also points to the April 23, 2014 letter from
CISA/Cargill to EBC requesting full payment of the $1,513,598.43
debt as evidence that Cargill sought full repayment of the debt and
not to exercise its right of set off.

But that Cargill and CISA

requested full payment of the debt does not preclude Cargill from
exercising its set-off right. EBC’s satisfaction of the debt would
preclude exercise of Cargill’s right of set off, but there is no
evidence

that

EBC

paid

Cargill

any

of

the

requested

funds.

Therefore, absent a showing that the debt has been satisfied in
full, Cargill is entitled to set off the credit it holds in favor
of EBC against the debt EBC owes Cargill.
Accordingly,

Floral

Shipping

has

not

met

its

burden

to

establish a right of attachment to any funds held by Cargill.
Floral Shipping’s motion is denied.

III. CONCLUSION
For the foregoing reasons, Floral Shipping’s motion is DENIED.

New Orleans, Louisiana, this 13th day of August, 2015.
__
_________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE
16