Sea Trade Maritime Corporation et al v. Stelios Coutsodontis

Filing 358

OPINION AND ORDER: For the foregoing reasons, Plaintiffs Sea Trade Maritime Corporation and George Peters' motion to amend the judgment entered on August 24, 2016, pursuant to Federal Rule of Civil Procedure 59 is DENIED. (As further set forth in this Opinion and Order.) (Signed by Judge Lorna G. Schofield on 4/14/2017) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------ X
:
:
SEA TRADE MARITIME CORP., et al.,
:
Plaintiffs,
:
:
-against:
:
STELIOS COUTSODONTIS,
Defendant. :
------------------------------------------------------------ X

4/14/2017

09 Civ. 488 (LGS)
OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:
This case arises from an intra-family dispute over the ownership and control of Plaintiff
Sea Trade Maritime Corporation (“Sea Trade”), which until 2009 owned the ship the M/V
ATHENA. Plaintiffs Sea Trade and George Peters (“Peters”) brought this action against
Defendant Stelios Coutsodontis (“Coutsodontis”), asserting claims for wrongful arrest of the
M/V ATHENA, breach of fiduciary duty and frustration of corporate purpose. On August 23,
2016, following a three-day bench trial, the Court issued its findings of fact and conclusions of
law (the “Opinion”), familiarity with which is presumed. As explained in the Opinion, the Court
found for Plaintiffs on the breach of fiduciary duty claim and dismissed the wrongful arrest and
frustration of corporate purpose claims. The Court ordered Coutsodontis to forfeit his Sea Trade
shares as of the date of the Opinion and referred the matter to Magistrate Judge Henry B. Pitman
for an inquest on the amount, if any, Coutsodontis is due based on the 50% interest he held in
Sea Trade from January 13, 2003, until the date of the Opinion. Judgment to this effect was
entered on August 24, 2016. Plaintiffs move to alter or amend the judgment pursuant to Federal
Rule of Civil Procedure 59. For the following reasons, Plaintiffs’ motion is denied.
STANDARD
The standard governing a motion pursuant to Rule 59(e), in effect a motion for

reconsideration, “is strict, and reconsideration will generally be denied unless the moving party
can point to controlling decisions or data that the court overlooked.” Analytical Surveys, Inc. v.
Tonga Partners, L.P., 684 F.3d 36, 52 (2d Cir. 2012), as amended (July 13, 2012). Relief is
available only if the moving party “identifies an intervening change of controlling law, the
availability of new evidence, or the need to correct a clear error or prevent manifest injustice.”
Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Tr., 729 F.3d 99, 104 (2d Cir.
2013). A motion for reconsideration is “not a vehicle for relitigating old issues, presenting the
case under new theories, securing a rehearing on the merits, or otherwise taking a second bite at
the apple.” Analytical Surveys, 684 F.3d at 52 (internal quotation marks and citation omitted).
The decision to grant or deny a motion for reconsideration, whether under Local Rule 6.3, Rule
59(e) or Rule 60(b), rests within “the sound discretion of the district court.” See Aczel v.
Labonia, 584 F.3d 52, 61 (2d Cir. 2009).
DISCUSSION
Plaintiffs seek to amend the judgment in two regards. First, Plaintiffs request removal of
the time constraint on Coutsodontis’ forfeiture of Sea Trade shares -- which otherwise is
effective as of the date of the Opinion. Second, Plaintiffs ask to eliminate the referral to Judge
Pitman for an inquest on the amount Coutsodontis is due based on his previous ownership
interest in Sea Trade. As explained below, Plaintiff’s motion is denied in both regards.
A.

Time Constraint on Coutsodontis’ Forfeiture of Sea Trade Shares

Plaintiffs’ motion to amend the judgment to eliminate the time constraint on
Coutsodontis’ forfeiture of Sea Trade shares is denied because Plaintiffs do not identify any clear
error, new evidence or manifest injustice that warrants relief under Rule 59.
The time constraint on Coutsodontis’ forfeiture of Sea Trade shares is based on the

2

Court’s finding, explained in the Opinion, that Peters has unclean hands. The doctrine of
unclean hands is based on the maxim that “he who comes into equity must come with clean
hands.” CBF Indústria De Gusa S/A v. Amci Holdings, Inc., 850 F.3d 58, 78 (2d Cir. 2017)
(quoting Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 241 (1933)). Under New
York law, “[t]he doctrine of unclean hands applies when the offending party is guilty of
immoral, unconscionable conduct directly related to the subject matter in litigation and which
conduct injured the party seeking to invoke the doctrine.” Lucia v. Goldman, 44 N.Y.S.3d 89, 91
(2d Dep’t 2016) (internal quotation marks omitted); accord Nat’l Distillers & Chem. Corp. v.
Seyopp Corp., 214 N.E.2d 361, 362 (N.Y. 1966). The doctrine is an affirmative defense, and
therefore the defendant who invokes the doctrine has the burden of proof. See Gidatex, S.r.L. v.
Campaniello Imports, Ltd., 82 F. Supp. 2d 126, 130 (S.D.N.Y. 1999); see also ING Real Estate
Fin. (USA) LLC v. Park Ave. Hotel Acquisition, LLC, 933 N.Y.S.2d 217, 217 (1st Dep’t 2011)
(affirming summary judgment for plaintiff where defendant failed to raise issue of fact as to its
unclean hands affirmative defense). “Application of the ‘unclean hands’ doctrine rests with the
discretion of the court, which is ‘not bound by formula or restrained by any limitation that tends
to trammel the free and just exercise of discretion.’” Aris-Isotoner Gloves, Inc. v. Berkshire
Fashions, Inc., 792 F. Supp. 969, 969–70 (S.D.N.Y. 1992) (quoting Keystone Driller, 290 U.S.
at 245), aff’d, 983 F.2d 1048 (2d Cir. 1992).
Coutsodontis satisfied his burden of proof regarding the unclean hands defense. He
pleaded the defense in his Answer and raised it in his proposed findings of fact and conclusions
of law, at trial and in post-trial briefing. At trial, Peters testified that he never recognized
Coutsodontis as a Sea Trade shareholder, never invited Coutsodontis to any Sea Trade
shareholder meetings and never would accept Coutsodontis as a Sea Trade shareholder. Peters

3

took those positions even though Coutsodontis was adjudged the owner of 50% of Sea Trade
shares as early as January 2009, in the Athens Shareholder Action, which Peters’ mother and
fellow Sea Trade shareholder had commenced. See Multi-Member Court of First Instance of
Athens [Pol. Pr.] [district court] 1391/2009, p. 3 (Greece). This evidence supports the Opinion’s
finding that Peters has unclean hands because he breached a fiduciary duty he owed to
Coutsodontis as a fellow shareholder in a closely held corporation. See Palatkevich v. Choupak,
No. 12 Civ. 1681, 2014 WL 1509236, at *25 (S.D.N.Y. Jan. 24, 2014) (“Under New York law,
‘Shareholders in a close corporation owe each other a duty to act in good faith.’ The failure to
do so constitutes a breach of fiduciary duty.” (internal citation omitted)); Ross v. Moyer, 730
N.Y.S.2d 318, 320 (1st Dep’t 2001) (“Where a plaintiff has committed breaches of fiduciary
duties owed to a defendant, the doctrine of unclean hands applies to bar such plaintiff from
seeking relief on his or her equitable claims.”). Also, as required for application of the unclean
hands doctrine, Peters’ refusal to treat Coutsodontis as a shareholder was directly related to the
subject matter of this action -- the ownership and control of Sea Trade -- and injured
Coutsodontis by requiring him to continue litigating the issue of whether he inherited Sea Trade
shares.
In light of Peters’ unclean hands, the time constraint imposed on Coutsodontis’ forfeiture
of Sea Trade shares was reasonable and within the Court’s authority to grant equitable relief.
“[I]n determining whether the doctrine of unclean hands bars an equitable remedy, courts are
permitted to weigh the wrongdoing of the plaintiff against the wrongdoing of the defendant.”
Dunlop-McCullen v. Local 1-S, AFL-CIO-CLC, 149 F.3d 85, 92–93 (2d Cir. 1998); accord Wells
Fargo Bank v. Hodge, 939 N.Y.S.2d 98, 100 (2d Dep’t 2012). A court sitting in equity has
power “as broad as equity and justice require,” U.S. Bank Nat. Ass’n v. Losner, 44 N.Y.S.3d 467,

4

470 (2d Dep’t 2016), and “may grant any type of relief within its jurisdiction appropriate to the
proof whether or not demanded, imposing such terms as may be just,” State v. Barone, 546
N.E.2d 398, 400 (N.Y. 1989) (quoting N.Y. C.P.L.R. § 3017(a)). Here, the relief Peters requests
is an order that Coutsodontis forfeit his shares. Coutsodontis’ breach of his fiduciary duty to Sea
Trade warrants forfeiture, but to order forfeiture without a time constraint would give Peters and
his mother, Anna Peters, a windfall -- the full proceeds from the sale of the M/V ATHENA,
which was completed shortly after the Court of First Instance in the Athens Shareholder Action
held that Coutsodontis owned 50% of Sea Trade beginning January 13, 2003, when he inherited
them from his sister. Such a windfall to Peters would be unjust, as Peters breached his fiduciary
duty to Coutsodontis by refusing to recognize him as a Sea Trade shareholder. The time
constraint on Coutsodontis’ forfeiture avoids this windfall and provides an equitable outcome by
effectively splitting Sea Trade’s net profits during the time Peters and Coutsodontis were both
owners.
None of Plaintiffs’ arguments for a different result is persuasive. Most of the factual
points that Plaintiffs raise were presented at trial and considered in the Opinion, and therefore are
not proper for a reconsideration motion. See Kolel Beth, 729 F.3d at 104 (reconsideration may
be granted based on “the availability of new evidence” (emphasis added)); Analytical Surveys,
684 F.3d at 52 (motion for reconsideration is “not a vehicle for relitigating old issues”).
Additionally, Plaintiffs’ factual points do not alter the conclusion that Peters has unclean hands.
First, Plaintiffs note that they were not parties to the Athens Shareholder Action and that
Coutsodontis never sought recognition of the decision in the Athens Shareholder Action in any
U.S. court. Neither of these facts excuses Peters’ failure to recognize Coutsodontis as a Sea
Trade shareholder. Peters was no stranger to the Athens Shareholder Action. His mother

5

commenced the Athens Shareholder Action, and Peters testified that he had a shared interest in
the outcome and communicated with his mother’s lawyers on her behalf. Peters also cited the
Athens Shareholder Action as a reason to dismiss a competing action brought by Coutsodontis in
New York, arguing that the New York court should defer to the pending litigation in the Greek
courts. Once it was determined in the Athens Shareholder Action that Coutsodontis owned 50%
of Sea Trade’s shares, there was no reason why Coutsodontis needed to seek recognition of that
judgment in a U.S. court in order to be recognized as a shareholder. Coutsodontis’ ownership is
a matter of Greek inheritance law that was adjudicated in a Greek court at the behest of Peters’
mother. Sea Trade is a Liberian corporation. The only connection to the United States is that
Peters and Coutsodontis are U.S. citizens. Although Coutsodontis would have needed to seek
recognition of the judgment in a U.S. court in order to enforce the judgment against Peters’
assets in the United States, see, e.g., N.Y. C.P.L.R. § 5303 (a foreign country judgment is
enforceable by “an action on the judgment, a motion for summary judgment in lieu of complaint,
or in a pending action by counterclaim, cross-claim or affirmative defense”), Plaintiffs cite no
authority supporting their argument that recognition of the judgment in a U.S. court is a
prerequisite to Coutsodontis being recognized as a shareholder.
Second, Plaintiffs argue that Peters would have breached his fiduciary duty to his mother,
Anna Peters, if he had recognized Coutsodontis as a shareholder. This argument is incorrect, as
Anna Peters was the Plaintiff seeking declaratory relief in the Athens Shareholder Action and is
therefore bound by the Greek court’s judgment that Coutsodontis inherited 50% of the shares of
Sea Trade.
Third, Plaintiffs point to three long-running legal actions between the parties -- this one,
the Libel Per Se Action and the State Action, which was not disclosed to the Court previously --

6

and argue that Peters’ failure to hold Sea Trade shareholder meetings or director elections should
be excused because the parties were communicating only through counsel. However, Plaintiffs
cite no authority that says a legal dispute between shareholders in a closely held corporation
excuses their fiduciary duties. Just as the parties’ disputes did not excuse Coutsodontis’ breach
based on his arrests of the M/V ATHENA, the disputes also do not excuse Peters’ breach based
on his disregard of the Athens judgment, non-recognition of Coutsodontis and failure to follow
corporate formalities.
Fourth, Plaintiffs argue that the Court “failed to consider that Sea Trade was dormant
after 2009.” Not so. The Opinion states that “[s]ince the sale of the ship, Sea Trade has been
dormant as it has not purchased another ship, and its business has ceased.” Neither this fact nor
Plaintiffs’ related argument that the formalities and operations of closely held corporations often
are more relaxed undermines the Court’s finding of unclean hands. Peters admitted at trial that
he never invited Coutsodontis to participate in Sea Trade’s affairs and never would accept
Coutsodontis as a Sea Trade shareholder. This shows that Peters was not merely operating Sea
Trade informally; he was refusing to recognize Coutsodontis’ ownership -- even after it was
confirmed by the Greek courts -- and take appropriate action. As explained above and in the
Opinion, this constituted a breach of Peters’ fiduciary duty to Coutsodontis.
Fifth, Plaintiffs contend that the Court failed to consider that Peters once held a
settlement conference with Coutsodontis, which Plaintiffs argue shows Peters’ good faith. The
Court was aware of this settlement conference, as Peters testified about it at trial, but did not
discuss it in the Opinion because it is not relevant. That Peters briefly discussed settlement with
Coutsodontis does not negate Peters’ breach of fiduciary duty to Coutsodontis. Also, the
settlement conference was in 2004 -- five years before Peters breached his fiduciary duty by

7

failing to recognize Coutsodontis as a shareholder following the decision in the Athens
Shareholder Action.
Sixth, Plaintiffs argue that one of the bases for its finding of unclean hands -- that Peters
never made the corporate books and records available for inspection -- is not supported by the
record because Peters produced these documents in this action. Producing documents under
compulsion in the course of litigation does not show good faith or compliance with fiduciary
duties.
Seventh, Plaintiffs argue that it would have been futile for Peters to observe corporate
formalities with Coutsodontis because Coutsodontis was arguing in this action that Peters was
not a shareholder and did not have power to act on behalf of Sea Trade. Again, this does not
relieve Peters of his fiduciary duties to Coutsodontis as a co-shareholder.
Finally, Plaintiffs argue that the time constraint on Coutsodontis’ forfeiture of his shares
results in manifest injustice because it allows him to receive proceeds from Sea Trade despite his
breach of fiduciary duty to Sea Trade. Both Peters and Coutsodontis breached their fiduciary
duties, as the Opinion found. The Court has broad equitable powers to achieve a just result. See
U.S. Bank, 44 N.Y.S.3d at 470. Rather than picking one side or the other to reward or punish,
the Opinion simply recognizes that each side owned half of Sea Trade beginning in 2003, as the
Athens court held. That Coutsodontis is receiving some benefit from his ownership interest only
now -- after the M/V ATHENA was sold for scrap, Sea Trade went dormant and the parties
litigated multiple actions around the world -- is a product of Peters and his mother not
recognizing Coutsodontis as a shareholder earlier.
Because Plaintiffs have not identified any clear error, new evidence or manifest injustice,
Plaintiffs’ motion to amend the judgment to eliminate the time constraint on Coutsodontis’

8

forfeiture of Sea Trade shares is denied.
B.

Inquest on the Amount Owed to Coutsodontis

Plaintiffs’ motion to amend the judgment to eliminate the referral to Judge Pitman for an
inquest on the amount due to Coutsodontis is denied.
Plaintiffs argue that the inquest is unnecessary because Coutsodontis seeks the same
relief in the pending State Action, of which the Court was unaware when it issued the Opinion.
This argument is unpersuasive. Federal courts sometimes abstain from exercising jurisdiction
when there is a parallel state court proceeding for the sake of efficiency and “wise judicial
administration.” See Colorado River Water Conservation Dist. v. United States, 424 U.S. 800,
818 (1976). Abstention would not serve those interests here, as the parties have already
submitted briefing to Judge Pitman, and collateral estoppel would preclude the parties from relitigating in the State Action any issues that were raised and decided in the Opinion. See Buechel
v. Bain, 766 N.E.2d 914, 919 (N.Y. 2001).
Also unpersuasive are Plaintiffs’ arguments that an inquest is improper because
Coutsodontis did not request affirmative relief in this action and because Plaintiffs did not have
an opportunity to assert “various defenses, including failure to state a claim and the statute of
limitations.” Although Coutsodontis did not request affirmative relief, the Court has broad
authority to craft a remedy where, as here, the claim sounds in equity. See Barone, 546 N.E.2d
at 400 (“[T]he court may grant any type of relief within its jurisdiction appropriate to the proof
whether or not demanded, imposing such terms as may be just.”) (quoting N.Y. C.P.L.R. §
3017(a)); In re Galewitz, 160 N.Y.S.2d 564, 572 (1st Dep’t 1957) (noting that where a plaintiff
invokes an equitable remedy, “he subjects himself to all of the powers of the court, and its
obligation, to assure that equity is done to all parties”). As to Plaintiffs’ defenses, Plaintiffs have

9

had notice of the unclean hands argument since 2010, when Coutsodontis raised it in his Answer,
and had many opportunities over the course of six years of litigation to respond to the argument.
In any event, the inquest is a means to implement the remedy ordered in the Opinion, not a
separate claim to which defenses such as failure to state a claim and the statute of limitations
would apply. Plaintiffs’ motion to eliminate the referral to Judge Pitman for an inquest is denied.
CONCLUSION
For the foregoing reasons, Plaintiffs Sea Trade Maritime Corporation and George Peters’
motion to amend the judgment entered on August 24, 2016, pursuant to Federal Rule of Civil
Procedure 59 is DENIED.
Dated: April 14, 2017
New York, New York

10