Richardson Stevedoring & Logistics Services, Inc v. Daebo International Shipping Co. Ltd. et al

Filing 90

ORDER & REASONS denying 42 Motion to Vacate maritime attachment of the M/V DAEBO TRADER. Signed by Judge Martin L.C. Feldman on 4/20/2015. (Reference: ALL CASES)(caa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

RICHARDSON STEVEDORING
& LOGISTICS SERVICES, INC.

CIVIL ACTION

v.

NO. 15-490
c/w 15-494
15-496
15-758
15-814

DAEBO INTERNATIONAL SHIPPING CO. LTD., ET AL.

SECTION "F"

ORDER AND REASONS
Before the Court is Shinhan Capital Co. Ltd.'s motion to
vacate maritime attachment of the M/V DAEBO TRADER.

For the

reasons that follow, the motion is DENIED.
Background
This

maritime

case

features

multiple

vessel

attachments

arising out of competing claims by various creditors against Daebo
International Shipping Co., Ltd.

More particularly, in these

consolidated cases the plaintiffs insist that Daebo International
Shipping Co., Ltd. owes them millions of dollars for services
rendered to Daebo and that its fraudulent ownership scheme with
Shinhan Capital Co., Ltd. should not shield Daebo from the Rule B
attachment remedy.

For its part, Shinhan Capital Co. Ltd. urges

1

the Court to vacate the attachments of its vessel, the M/V DAEBO
TRADER, which is loaded with 57,000 metric tons of perishable
soybean cargo valued at approximately $25 million and, Shinhan
submits, at great risk of spoilage considering it has been seized
in this District since mid-February and is destined for what will
be a 40-day voyage to China.1

Notably, no bond has been posted.

For the purposes of the present motion to vacate, it is
undisputed that the plaintiffs have maritime claims against Daebo
International Shipping Co., Ltd. and that Shinhan Capital Co., Ltd.
is the DAEBO TRADER's registered owner.

But the plaintiffs allege

that the vessel's true beneficial owner is Daebo, and that Shinhan
is merely an alter ego or fraudulent transferee -- nothing more
than a financier -- with respect to Daebo, which is a debtor to
plaintiffs.

Advancing similar allegations, beginning in mid-

February 2015, five plaintiffs have filed verified complaints
against both Daebo International Shipping Co. Ltd. and Shinhan
Capital Co. Ltd. seeking attachment of the M/V DAEBO TRADER.
plaintiffs

in

their

complaints

urge

the

Court

to

The

disregard

Shinhan's registered ownership of the vessel because Shinhan is

1

To which the plaintiffs reply: "As a multi-million
dollar financial institution and purported registered owner of the
Vessel, [which has known of plaintiffs' attachment proceedings and
seizure of the vessel since February 18,] Shinhan is more than
capable of posting security for release of the Vessel. Its failure
to do so belies its alleged concerns regarding the cargo." That
on April 10, 2015 the Court granted Gavilon Grain LLC's motion to
intervene and motion to allow transloading of cargo may have
settled this dispute concerning cargo spoilage.
2

merely an alter ego of Daebo and that the two act as a single
business

entity.

Based

on

the

allegations

of

the

verified

complaints and, pursuant to Rules B of the Supplemental Rules for
Certain Admiralty and Maritime Claims of the Federal Rules of Civil
Procedure, the Court issued Rule B writs of foreign attachment, the
first of which was served on the DAEBO TRADER on or before February
18, 2015; according to the U.S. Marshals, the vessel was seized on
Friday, February 20, 2015.2
Shortly thereafter, the DAEBO TRADER's time charterer, Dana
Shipping and Trading S.A., filed Rule E(4)(f) motions to vacate the
maritime attachments on the ground that the plaintiffs' claims are
solely against Daebo and that the vessel is solely the property of
Shinhan such that the attachments are invalid.3
the motions.

The Court denied

The parties do not dispute that the background of

this case is accurately summarized in this Court's March 2, 2015

2

The first such case having been filed in this Section of
Court, the subsequently filed cases have since been transferred
here and consolidated with Richardson Stevedoring & Logistics
Services, Inc.'s case against Daebo International Shipping Co. Ltd.
and Shinhan Capital Co. Ltd.
3

Dana argued that the plaintiffs could not carry their
burden of proving that defendant Shinhan Capital Co., Ltd. is an
alter ego of defendant Daebo International Shipping Co., Ltd.,
making the attachment improper under Supplemental Rule B, and
further argued that the plaintiffs' improper attachment of the
bunkers is interfering with Dana Shipping's charter of the M/V
DAEBO TRADER.
3

Order and Reasons denying Dana's motions to vacate.4

In denying

the motions, the Court listed the evidence submitted by the
plaintiffs in support of their probable cause burden of proof to
maintain the attachment.5
Meanwhile, on March 16, 2015, Daebo International Shipping Co.
Ltd., making a restricted appearance as lessee of the M/V DAEBO
TRADER, notified the Court that it had commenced an ancillary case
under Chapter 15 in which it had applied for recognition in the
United States Bankruptcy Court for the Southern District of New
York of its foreign bankruptcy proceeding pending in the Seoul
Central District Court in the Republic of Korea.

On March 20,

2015, Daebo notified the Court that it had applied for and was
granted provisional relief pending a hearing on its petition for
recognition

as

a

"foreign

main"

bankruptcy

proceeding.

The

bankruptcy court in New York declined to grant vacatur relief
sought by Daebo regarding this Court's Rule attachments of the
DAEBO TRADER.

However, the bankruptcy judge issued an order

4

At the time the Court denied Dana's motions to vacate,
Civil Action Numbers 15-758 and 15-814 had not yet been filed, let
alone transferred to this Section of Court and consolidated with
the three first-filed cases.
Indeed, the writ of maritime
attachment requested by plaintiff Jaldhi Overseas Pte. Ltd. was
filed on March 9, 2015 and transferred to this Court on March 17,
2015; and the writ of maritime attachment requested by plaintiff
Lark Shipping S.A. was even more recently filed on March 13, 2015
and transferred to this Section of Court on March 23, 2015.
5

Since March 2, SPV, Richardson, and AMS have filed
amended verified petitions.
4

instituting a limited stay; its order granting provisional relief
pending hearing on petition for recognition as a foreign main
proceeding precludes any person or entities from
securing or executing against any asset or property of
[Daebo] or taking any actions to undertake the
enforcement in the United States of any judicial, quasijudicial,
administrative
or
regulatory
judgment,
assessment or order or arbitration award against [Daebo]
... or its property, whether owned, chartered, or leased
or the proceeds thereof within the territorial
jurisdiction of the United States....
The parties here dispute whether or to what extent the bankruptcy
stay precludes or limits or supports relief requested in these
consolidated proceedings.6
Shinhan now enters a restricted appearance as the owner of the
DAEBO TRADER, with a full reservation of all rights and defenses
pursuant to Rule E(8) of the Supplemental Rules for Certain
Admiralty and Maritime Claims of the Federal Rules of Civil
Procedure, submits additional evidence for the Court to consider,
and urges the Court to vacate the maritime attachments of the M/V
DAEBO TRADER.
I.
Where, as here, property has been attached under Supplemental
Admiralty Rule B,7 Supplemental Admiralty Rule E(4)(f) entitles any

6

In fact, Shinhan appeals to this Court's equitable
authority in suggesting that the bankruptcy proceeding and stay
supports release of the vessel on futility grounds.
7

The special remedies and procedures available to
admiralty and maritime claimants are governed by the Supplemental
5

party claiming an interest in the property to a prompt hearing at
which the attaching plaintiff bears the burden of showing that the
attachment is proper and should not be vacated.

Fed. R .Civ. P.

Supp. R. E(4)(f).8

Rules for Admiralty or Maritime Claims, as part of the Federal
Rules of Civil Procedure. Supplemental Rule B concerns the
attachment and garnishment procedure available in the context of in
personam actions:
(a) If a defendant is not found within
the district when a verified complaint praying
for attachment and the affidavit required ...
are filed, a verified complaint may contain a
prayer for process to attach the defendant’s
tangible or intangible personal property ...
in the hands of the garnishees named in the
process.
(b) The plaintiff or the plaintiff’s
attorney must sign and file with the complaint
an affidavit stating that...the defendant
cannot be found within the district.
The
court must review the complaint and affidavit
and, if the conditions of this Rule B appear
to exist, enter an order so stating and
authorizing
process
of
attachment
and
garnishment....
Fed. R .Civ. P. Supp. R. B. See also In re Murmansk Shipping Co.,
No. 00-2354, 2001 WL 699530, at *2 (E.D. La. June 18, 2001)(“[i]n
considering the propriety of an attachment, the court’s inquiry is
limited to an assessment of whether the underlying complaint
alleges an in personam action grounded in maritime law and whether
the attachment was necessary to effectuate jurisdiction”).
8

Rule E(4)(f) states:

Whenever property is arrested or attached, 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.
6

To support maritime attachment of property under this Rule, a
plaintiff must satisfy filing, notice, and service requirements,
and must also show that: (1) the plaintiff has a valid prima facie
admiralty claim against the defendants; (2) the defendants cannot
be found within the district; (3) the defendants' property may be
found within the district; and (4) there is no statutory or
maritime law bar to the attachment.

See Aqua Stoli Shipping Ltd.

v. Gardner Smith Pty. Ltd., 460 F.3d 434, 445 (2d Cir. 2006),
abrogated on other grounds by Shipping Corp. of India Ltd. v.
Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009).

Once a

defendant's property has been attached, and the defendant contests
the attachment by moving to vacate the attachment under Rule
E(4)(f), the attachment must be vacated unless the attaching party
presents

sufficient

evidence

to

show

probable

cause

for

the

attachment.

See Austral Asia Pte Ltd. v. SE Shipping Lines Pte

Ltd.,

12-1600,

No.

2012

WL

2567149

2012)(Engelhardt, J.)(citations omitted).

(E.D.La.

July

2,

However, courts are not

obliged to make binding determinations of fact during Rule E(4)(f)
hearings; rather, courts are called upon to "'merely hold[] that it
is [or is not] likely' that alleged facts are true."
(noting

that

post-attachment

hearings

are

"not

Id. at *2

intended

to

definitively resolve the dispute between the parties; instead, the

Fed. R .Civ. P. Supp. R. E. See also Williamson v. Recovery Ltd.
Partnership, 542 F.3d 43, 51 (2d Cir. 2008), cert. denied, 555 U.S.
1102 (2009).
7

district

court

makes

a

preliminary

determination

of

whether

reasonable grounds exist for the arrest").

II.
A.
The only issue presented is whether the plaintiffs have
(again) shown probable cause for the attachment of the M/V DAEBO
TRADER by pleading valid prima facie admiralty claims against Daebo
and Shinhan.
These plaintiffs make claims against Daebo on the basis of the
underlying debts pled in their verified complaints, but also
against Shinhan based on Shinhan's and Daebo's alleged fraudulent
scheme in which the defendants allegedly have defrauded Daebo's
creditors by designing a creative financial transaction in which
Shinhan is called the vessel's registered owner and Daebo is called
the lessor until the note is paid off by Daebo through various
"lease" payments of principal and interest.9

Since this Court's

prior order denying a motion to vacate attachment by the vessel's
time charterer, Shinhan now submits that it has offered conclusive
evidence,

in

the

form

of

affidavit

testimony

and

the

lease

agreement between Shinhan and Daebo, that it is the true owner of

9

Notably, the plaintiffs allege claims against both
defendants.
The Court declines to address Shinhan's estoppel
argument as to three of the plaintiffs. Even if the Court
determined that clearly inconsistent positions had been taken
(which the Court does not so determine), such a finding would not
advance the ultimate issue presented here.
8

the DAEBO TRADER.

But the plaintiffs counter that this evidence,

including the lease agreement, is at the heart of their fraudulent
transfer theory of their alter ego claims.

The Court finds that

the plaintiffs have plausibly alleged alter ego and fraudulent
transfer theories of recovery with sufficient particularity to
allow the defendants to frame responsive pleadings.

B.
In urging the Court to vacate the attachments of its vessel,
Shinhan

submits

defeating

the

allegations.

that

it

has

plaintiffs'

presented

alter

ego

"dispositve
and

sham

evidence"

transaction

Faced with this newly-submitted evidence, Shinhan

maintains that the Rule B plaintiffs' attachments are no longer
supported by the probable cause this Court found present in its
March 2, 2015 Order and Reasons.

The plaintiffs counter that the

very evidence submitted by Shinhan in support of its motion to
vacate actually bolsters the plaintiffs' submission, such that the
allegations

and

evidence

that

this

Court

previously

deemed

sufficient to satisfy their burden under Admiralty Rule E(4)(f),
coupled with Shinhan's new evidence, suffice to withstand Shinhan's
request for vacatur of the attachments.

The Court agrees.

For the purposes of the motions to vacate, it is undisputed
that the plaintiffs have maritime claims against Daebo and that
Shinhan is the DAEBO TRADER's registered owner. The Court will not

9

reiterate the evidence plaintiffs previously offered in support of
their probable cause burden when the Court visited this issue in
denying Dana Shipping's motion to vacate.
dated March 2, 2015.

See Order and Reasons

Rather, the Court will focus on whether or

not the evidence that Shinhan now submits alters the plaintiffs'
prior showing.
Shinhan adds three things to the record: the Lease Agreement
between Daebo and Shinhan concerning the M/V DAEBO TRADER, an
affidavit from Mr. Kwon Soonpil (Senior Manager of the Strategy
Financing Team of the Corporate Finance Division for Shinhan), and
an affidavit from Mr. Duk-Kyou Hyun, an attorney in the Republic
Korea and partner of DR & AJU International Law Group, located in
Seoul, South Korea.
Looking first to Mr. Soonpil's affidavit and matters of public
record, none of the traditional factors considered in determining
the existence of an alter ego relationship appear to be met here.
See A. Coker & Co. v. National Shipping Agency Corp., 1999 WL
311941 (E.D. La. May 17, 1999)(Vance, J.)(citation omitted).

To

sample

or

some

of

these

factors:

here,

there

is

no

common

overlapping stock ownership between Daebo and Shinhan; there are no
common or overlapping directors or officers between Shinhan and
Daebo;

Shinhan and Daebo maintain distinct corporate offices;

according to Shinhan Financial Group's Annual Report, Shinhan is
adequately capitalized; Shinhan does not exist solely as a holding

10

company; neither Daebo nor Shinhan caused the incorporation of the
other; and Daebo and Shinhan do not file consolidated financial
statements.

Notably, however, the plaintiffs do not dispute that

most of the traditional factors do not support their alter ego
theory.

Plaintiffs focus instead on the (allegedly fraudulent)

financing that Shinhan and Daebo have arranged for the DAEBO TRADER
in support of their fraudulent transfer and alter ego theories of
recovery; that is, plaintiffs submit that the defendants' alter ego
liability arises out of their joint participation in a fraudulent
transfer meant to conceal the DAEBO TRADER from creditors.

In

response, Shinhan submits that review of the lease terms through
the lens of Korean law shows that there is nothing fraudulent about
Daebo and Shinhan's financing arrangement.
Mr. Hyun has over 20 years of experience practicing Korean law
with an emphasis on maritime law and commercial disputes. Mr. Hyun
states that, under South Korean law, Shinhan has at all times
remained the owner of the DAEBO TRADER and there is no language in
the Lease Agreement (which he submits is fully enforceable under
South Korean law) to indicate that Shinhan was operating as a shell
entity for Daebo.

Explaining the financing arrangement and lease,

Mr. Hyun explains that Daebo was interested in purchasing the DAEBO
TRADER, but did not have sufficient funding. Daebo contributed 15%
of the value of the purchases price of the vessel while the other
85% was financed by Shinhan.

The vessel was mortgaged as security

11

for a loan and Shinhan was registered as the owner of the vessel.
Mr. Hyun explains that this financing arrangement and lease are
valid under South Korean law and, until the loan amount has been
repaid in full, the ownership of the vessel remains vested with
Shinhan.
It is this evidence that the plaintiffs characterize as
illustrative of their underlying alter ego and fraudulent transfer
claims.

That is, the plaintiffs suggest that the Lease Agreement

and Mr. Hyun's explanation of it simply bolster their alter ego and
fraudulent transfer allegations.

This new evidence shows that,

from the outset, Daebo had a 15% equity interest in the vessel,
with the title not transferring from Shinhan to Daebo until the
loan amount has been repaid.

Daebo has made 86 monthly "lease"

payments, but the plaintiffs note that these are payments of both
principal and interest on a loan, at the end of which, Daebo will
acquire at no cost the "leased property", the DAEBO TRADER.

The

plaintiffs submit that this arrangement, whereby Shinhan retains
the registered ownership of the vessel until Daebo pays down the
debt incurred when the vessel was purchased from her prior owners,
financed by Shinhan, is a fraudulent scheme intended to defraud
Daebo creditors like the plaintiffs in these consolidated cases.
But for this fraudulent scheme, the plaintiffs submit, Daebo would
be the unquestioned owner of the DAEBO TRADER.

For these reasons,

and based on Shinhan's own evidence, the plaintiffs urge the Court

12

to look beyond the nominal ownership and the "lease agreement"
(whether valid or not under Korean law), and see the Shinhan/Daebo
relationship for what it really is.10

C.
The parties' differing views of the same evidence beg a choice
of law question.

Whether or not the plaintiffs have succeeded in

alleging a prima facie case here depends, in part, upon which
substantive law controls.

"Assessing the prima facie validity of

a claim is a substantive inquiry that should be governed by the
relevant substantive law."

Blue Whale Corp. v. Grand China

Shipping Development Co., Ltd., 722 F.3d 488, 495 (2d Cir. 2013).11
Foremost, because the plaintiffs' alter ego claims are collateral

10

At least, the plaintiffs submit, the attorney affidavit
and lease agreement show that Daebo in fact has an attachable
interest in the vessel, along with Shinhan.
11

In Blue Whale, a Liberian ship owner chartered its
vessel to a Chinese charterer for a voyage from Brazil to China.
The charter party required that disputes be submitted to
arbitration in London and selected as the governing law English
law. When a dispute concerning freight payment arose, the owner
initiated arbitration in London and, thereafter, the ship owner
sought and obtained a Rule B attachment in New York against
property alleged to be an alter ego of the charterer. In vacating
the attachment, the district court agreed with the alleged alter
ego that the prima facie validity of the alter ego claim against it
should be decided under English law in accordance with the charter
party's choice of law provision.
The Second Circuit reversed,
finding that choice of law clauses in underlying contracts "are
'irrelevant' to assessing alter-ego claims."
Id. (citation
omitted)("This corporate identity inquiry is indeed distant from
the dispute over the charter party's provisions regarding the
transport of iron ore.").
13

to the "Lease Agreement", that agreement's choice of South Korean
law is irrelevant to assessing the plaintiffs' equitable alter ego
and fraudulent transfer theories of recovery.

See id.

However,

federal common law does not automatically govern an alter ego
claim.

See id. at 496.

Rather, the Court must apply the U.S.

maritime multi-factor choice-of-law test articulated in Luritzen v.
Larsen, 345 U.S. 571 (1953) and its progeny.
Unless

convinced

otherwise

at

a

Id. at 498-99.12

later

stage

of

these

proceedings,13 this Court's analysis of the plaintiffs' alter ego
and fraudulent transfer theories of recovery will be governed by
U.S. general maritime law.

Each of five plaintiffs initiated this

Rule B proceeding in the United States, where Shinhan's or Daebo's
DAEBO TRADER was passing through.

That the DAEBO TRADER is a

Korean-flagged vessel and that the shipowner (whether Daebo or
Shinhan or both) is Korean are just two more factors in the choice
of law calculus. Although three of the five plaintiffs are foreign

12

The non-exhaustive list of factors includes:

(1) the place of the wrongful act; (2) the law
of the ship's flag; (3) the domicile of the
injured party; (4) the domicile of the
shipowner; (5) the place of the contract; (6)
the inaccessibility of the foreign forum; (7)
the law of the forum; and (8) the shipowner's
base of operations.
Id. at 499 n.11 (quotations and citations omitted).
13

The Court expects it will have all of the relevant facts
to definitively determine which substantive law applies when it is
making its merits determination.
14

parties, two of them are United States parties based in Texas. The
relevant transaction is not Shinhan's purported acquisition of
registered ownership under the lease agreement in South Korea but,
rather -- at least with respect to the United States plaintiffs -contracts entered into in the United States between Daebo and the
United States, contracts which the plaintiffs allege were then
breached in the United States. As to the three foreign plaintiffs,
there are potentially three additional sources of law that could
control.14
foreign

Where, as here, the Court is faced with multi-national

parties

engaged

in

breach

of

contract

disputes

(and

additional alter ego and fraudulent transfer claims sounding in
equity), yielding more than one potential source of applicable
substantive law, the Court finds at this stage that federal common
law has the strongest points of contact with these various claims.
Invoking Interpool Limited v. Char Yigh marine (Panama) S.A.,
890 F.2d 1453 (9th Cir. 1989) and In re Lykes Bros. S.S. Co., Inc.,
196 B.R. 574 (Bankr. M.D. Fla. 1996) as elucidating federal common
law to be applied here, the plaintiffs submit that a "lease" in the
nature of Daebo's is equitably disregarded under federal common law
where it would falsely conceal ownership of a vessel in a finance
company.

The plaintiffs submit that the financing arrangement

14

Where no authority is presented by these parties about
applying their foreign law, but where these plaintiffs dispute
application of South Korean law, it is reasonable to conclude that
these plaintiffs have acquiesced in the application of federal
common law.
15

between Daebo and Shinhan is nothing more than a sale-leaseback
arrangement where Shinhan transferred a Daebo asset to itself to
protect it from Daebo creditors.
Once again, the plaintiffs submit that, in light of the
preliminary nature of these proceedings, they have offered more
than sufficient allegations and evidence that Daebo is the true,
legal, and beneficial owner of the DAEBO TRADER.

Mindful that a

Rule E(4)(f) hearing is not intended to resolve disputes on the
merits,

the

Court

finds

that

the

plaintiffs

have

submitted

sufficient allegations supporting their position that Daebo has an
attachable interest in the M/V DAEBO TRADER by virtue of the
alleged sham sale-leaseback transaction entered into between Daebo
and Shinhan.

To be sure, the plaintiffs have plausibly alleged

alter ego and fraudulent transfer claims with enough particularity
to allow the defendants to frame a responsive pleading.
this

stage

of

proceedings,

the

Court

is

satisfied

Thus, at
that

the

attachment of the DAEBO TRADER is supported by probable cause.15

15

Finally, insofar as Shinhan urges the Court to exercise
its equitable discretion to vacate the attachments and release the
vessel, the Court declines to do so.
Shinhan submits that
continued attachment of the vessel would be futile in light of the
bankruptcy stay. However, given the provisional nature of the stay
in the New York bankruptcy proceeding, and in light of the
preliminary nature of the Court's review on a Rule E(4)(f) motion,
the request is at best premature.
16

Accordingly, Shinhan's motion to vacate the attachments is
DENIED.
New Orleans, Louisiana, April 20, 2015

______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE

17