Golden Horn Shipping Co. Ltd. v. Volnas Shipping Company Limited et al

Filing 39

MEMORANDUM AND ORDER denying 20 Motion to Amend/Correct; denying 23 Motion to Deposit Funds: For the foregoing reasons, Golden Horn's motion to amend the complaint (Docket no. 20) and its motion for an order that certain funds be deposited into the Registry of the Court (Docket no. 23) are denied. (Signed by Magistrate Judge James C. Francis on 3/23/2015) Copies Transmitted By Chambers. (tn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
GOLDEN HORN SHIPPING CO. LTD.,
:
:
Plaintiff,
:
:
- against :
:
VOLANS SHIPPING COMPANY LIMITED
:
and NORVIK BANKA,
:
:
Defendants.
:
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE

14 Civ. 2168 (JPO) (JCF)
MEMORANDUM
AND ORDER

In this admiralty case, plaintiff Golden Horn Shipping Co.
(“Golden Horn”) seeks to amend its complaint to allege a claim for
intentional interference with contract against defendant JSC Norvik
Banka

(sued

“Norvik”).

as

“Norvik

Banka”

and

referred

to

hereafter

as

In addition, Golden Horn requests that certain Norvik

funds, currently held by garnishee Deutsche Bank Trust Company
Americas (“Deutsche Bank”) and restrained pursuant to a Writ of
Attachment and Garnishment, be deposited into the registry of the
Court.

Both motions are denied.

Background
The operative complaint1 alleges that Golden Horn, a Russian
entity,

and

Norvik,

a

Latvian

company,

1

negotiated

agreements

The allegations cited from the current complaint are also
included in Golden Horn’s proposed amended complaint, although not
always in the same numbered paragraph.
1

constituting a bareboat charter between Golden Horn and Norvik’s
subsidiary (and alleged alter ego), defendant Volans Shipping
Company (“Volans”), a Belizean entity. Golden Horn Shipping Co. v.
Volans Shipping Co., No. 14 Civ. 2168, 2014 WL 5778535, at *1
(S.D.N.Y. Nov. 6, 2014); (Complaint, ¶¶ 4-5, 7-8, 12, 15, 17). The
agreement allowed Golden Horn to use Volans’ vessel M.V. Apus (the
“Vessel”) to “transport frozen fish in the Sea of Okhotsk and the
Bering Sea.”

Golden Horn Shipping Co., 2014 WL 5778535, at *1.

But the Vessel was laid up in a port in Lithuania for mechanical
repairs, causing the defendants to miss the initial delivery date,
as well as subsequent revised deadlines.
42, 44-48).

Id.; (Complaint, ¶¶ 41-

Approximately five months after the original delivery

date, Norvik informed Golden Horn that it had delivered the Vessel
to another shipping company.
5778535, at *1.

Golden Horn Shipping Co., 2014 WL

Three months later, in March 2014, Golden Horn

filed this action alleging breach of the charter agreement, and it
served a writ of attachment in the amount of $3,960,693.20 pursuant
to Rule B of the Supplemental Rules for Admiralty or Maritime
Claims and Asset Forfeiture Actions (the “Supplemental Rules”).
Id.

In November 2014, the Honorable J. Paul Oetken, U.S.D.J.,

denied Norvik’s motion to vacate the attachment.

Golden Horn

Shipping Co., 2014 WL 5778535, at *6.
Golden Horn filed its motion to amend in January 2015.
2

The

proposed amended complaint adds allegations that, despite knowing
about the agreements between Golden Horn and Volans, Norvik induced
Volans to charter the Vessel to Novell Limited (“Novell”) and then
sell it to Juno Shipping Company (“Juno”) (with transfer to occur
after

the

Novell

charter

was

completed).

(Proposed

Amended

Verified Complaint (“Proposed Complaint”), attached as Exh. A to
Declaration of Owen F. Duffy dated Jan. 8, 2015, ¶¶ 93, 106-109).
Volans was therefore unable to deliver the Vessel to Golden Horn,
causing the plaintiff to incur damages.

(Proposed Complaint, ¶¶

110, 116-122).
Golden Horn has also filed a motion pursuant to Rule 67 of the
Federal

Rules

of

Civil

Procedure

and

Rule

E.4

of

the

Local

Admiralty and Maritime Rules for the Southern District of New York
(“Local Admiralty Rules”) to compel the deposit of the attached
funds, currently held by Deutsche Bank, into the Court’s registry.
Discussion
A.

Motion to Amend

Rule 15 of the Federal Rules of Civil Procedure provides that
courts

should

requires.”

“freely

give”

leave

to

amend

“when

justice

so

Fed. R. Civ. P. 15(a)(2); see also Foman v. Davis, 371

U.S. 178, 182 (1962); Aetna Casualty & Surety Co. v. Aniero
Concrete Co., 404 F.3d 566, 603–04 (2d Cir. 2005).

This is a

“permissive standard [] consistent with [a] strong preference for
3

resolving disputes on the merits.” Williams v. Citigroup Inc., 659
F.3d 208, 212–13 (2d Cir. 2011) (internal quotation marks omitted);
MHANY Management Inc. v. County of Nassau, 843 F. Supp. 2d 287, 340
(E.D.N.Y. 2012) (“Amendments are generally favored because they
tend to facilitate a proper decision on the merits.” (internal
quotation marks omitted)).

Motions to amend should therefore be

denied only for good reason, such as undue delay, bad faith or
dilatory motive, undue prejudice to the non-moving party, or
futility.

See McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184,

200 (2d Cir. 2007) (citing Foman, 371 U.S. at 182).
Appropriately, Norvik does not allege undue delay, bad faith,
or prejudice, as any challenge based on these factors would fail
for

the

reasons

set

out

in

Golden

Horn’s

opening

brief.

(Memorandum of Law in Support of the Plaintiff’s Motion for Leave
to File a First Amended Complaint (“Pl. Memo.”) at 4-6).
argument is that amendment would be futile.

The sole

(Memorandum of Law of

Defendant JSC Norvik Banka in Opposition to Plaintiff’s Motion for
Leave to File a First Amended Complaint (“Def. Memo.”) at 4).
Leave to amend may be denied as futile when the pleading would
not survive a motion to dismiss.

See AEP Energy Services Gas

Holding Co. v. Bank of America, N.A., 626 F.3d 699, 726 (2d Cir.
2010); Slay v. Target Corp., No. 11 Civ. 2704, 2011 WL 3278918, at
*2 (S.D.N.Y. July 20, 2011) (“Futility generally turns on whether
4

the proposed amended pleading states a viable claim.”); Penn Group,
LLC v. Slater, No. 07 Civ. 729, 2007 WL 2020099, at *4 (S.D.N.Y.
June 13, 2007).

Under this standard, the proper inquiry “is not

whether a [moving party] will ultimately prevail but whether [that
party] is entitled to offer evidence to support the claims.’” Todd
v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001) (quoting Scheuer
v. Rhodes, 416 U.S. 232, 236 (1974)).

A court must accept as true

all well-pleaded facts and draw all reasonable inferences in the
moving party’s favor.

DiFolco v. MSNBC Cable LLC, 622 F.3d 104,

110-11 (2d Cir. 2010).
Here, amendment would be futile because the tort claim is not
an

admiralty

claim,

and

therefore

the

Supplemental

Rule

B

attachment does not provide personal jurisdiction over Norvik for
the purposes of the proposed claim.
1.

Admiralty Jurisdiction

The federal courts have exclusive jurisdiction over civil
cases in admiralty. 28 U.S.C. § 1333(1); Foremost Insurance Co. v.
Richardson, 457 U.S. 668, 670 (1982).
[A]
party
seeking
to
invoke
federal
admiralty
jurisdiction . . . over a tort claim must satisfy
conditions both of location and of connection with
maritime activity. A court applying the location test
must determine whether the tort occurred on navigable
water or whether injury suffered on land was caused by a
vessel on navigable water. The connection test raises
two issues.
A court, first, must assess the general
features of the type of incident involved[] to determine
5

whether the incident has a potentially disruptive impact
on maritime commerce. Second, a court must determine
whether the general character of the activity giving rise
to the incident shows a substantial relationship to
traditional maritime activity.2
Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S.
527, 534 (1995) (“Grubart”) (internal quotation marks and citations
omitted). Here, the tort did not occur on navigable water, nor was
the claimed injury caused by a vessel on navigable water.

Rather,

the alleged tort occurred because Norvik induced Volans to charter
the Vessel to Novell and thereafter to sell it to Juno.
Golden

Horn

argues

that

the

“locality

test”

has

been

undermined in a trio of Supreme Court cases -- Executive Jet
Aviation, Inc. v. City of Cleveland, 409 U.S. 249 (1972), Foremost
Insurance, 457 U.S. 668, and Sisson v. Ruby, 497 U.S. 358 (1990) --

2

In contrast, the test for admiralty jurisdiction over a
contract claim focuses on the contract’s subject matter:
To ascertain whether a contract is a maritime one, we
cannot look to whether a ship or other vessel was
involved in the dispute, as we would in a putative
maritime tort case. Nor can we simply look to the place
of the contract’s formation or performance.
Instead,
the answer “depends upon . . . the nature and character
of the contract,” and the true criterion is whether it
has “reference to maritime service or maritime
transactions.”
Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14, 23-24 (2004)
(alteration in original) (internal citations omitted) (quoting
North Pacific Steamship Co. v. Hall Brothers Marine Railway &
Shipbuilding Co., 249 U.S. 119, 125 (1919)).
6

so that admiralty jurisdiction is appropriate in any case where the
effects of a tort are felt on navigable waters. (Memorandum of Law
in Reply to JSC Norvik Banka’s Opposition to the Motion for Leave
to File a First Amended Complaint (“Motion to Amend Reply”) at 24).

Prior to Executive Jet, the jurisdictional analysis in

admiralty cases focused almost exclusively on the “locality of the
wrong.” Executive Jet, 409 U.S. at 253. That case recognized that
“maritime

locality

alone

is

not

a

sufficient

predicate

for

Id. at 261; Foremost Insurance, 457 U.S.

admiralty jurisdiction.”

at 673-74 (noting that, although Executive Jet focused on aviation
torts, its reasoning applies outside that context).
Insurance and Sisson refined the analysis.

But they did not, as

the plaintiff contends, eviscerate the locality test.
Grubart

--

decided

five

years

after

Foremost

Sisson

--

Rather, as

demonstrates,

admiralty jurisdiction continues to require either that the tort
occur on navigable water or that the injury be caused by a vessel
on navigable water.

See Western Bulk Carriers KS v. Centauri

Shipping Ltd., No. 11 Civ. 5952, 2013 WL 1385212, at *4 (S.D.N.Y.
March 11, 2013) (“Under the Grubart test, Plaintiff’s wrongful
attachment

clearly

jurisdiction.

The

falls

outside

allegedly

misrepresentation . . .

the

tortious

scope

conduct

of
--

admiralty
Defendant’s

during the Rule B proceedings -- neither

occurred on navigable waters nor was caused by a vessel on such
7

waters.”); Novoship (UK) Ltd. v. Ruperti, 545 F. Supp. 2d 328, 332
n.1 (S.D.N.Y. 2008) (“[I]t may be noted that the ‘connection’ test
appears not to have supplanted, in whole or in part, the ‘location’
test, but rather is simply a policy-based filter that allows the
courts flexibility in screening out unusual fact situations that
are not maritime in nature, but happen to occur in navigable
waters.” (internal quotation marks omitted)); see also 1 Admiralty
& Maritime Law § 3-5 (5th ed.) (“The first aspect of the locality
test is that the incident must have occurred on ‘navigable waters’
as that term is defined for purposes of admiralty jurisdiction.”).
To be sure, the First Circuit, looking to certain cases from
this District pre-dating Executive Jet, recognizes an exception to
the locality test where the impact of a tort is felt on navigable
waters.

Carroll v. Protection Maritime Insurance Co., 512 F.2d 4,

6-9 (1st Cir. 1975) (discussing, among other cases, The Poznan, 276
F. 418 (S.D.N.Y. 1921), and Cocotos Steamship of Panama S.A. v.
Sociedad Maritima Victoria S.A. Panama, 146 F.Supp. 540 (S.D.N.Y.
1956)).

But that test has not been adopted in this jurisdiction

and, as the Ninth Circuit observed in J. Lauritzen A/S v. Dashwood
Shipping, Ltd., “[t]he strong weight of the case law . . .
[establishes] that the traditional inquiry of locality continues to
control.”

65 F.3d 139, 143 (9th Cir. 1995); see also Kuehne &

Nagel (AG & Co.) v. Geosource, Inc., 874 F.2d 283, 289 (5th Cir.
8

1989) (stating that “[a] party to a contract with strong maritime
implications still must satisfy Executive Jet’s situs requirement
when seeking to predicate jurisdiction on a maritime tort” and
rejecting Carroll’s impact test); Abbud v. City of New York, No. 96
Civ. 0521, 1997 WL 633463, at *5 (S.D.N.Y. Oct. 10, 1997) (citing
J. Lauritzen for the proposition that “if the tort did not occur on
navigable water and the injury was not caused by a vessel on
navigable water, then maritime law does not apply”); Overseas
Private Investment Corp. v. Industria de Pesca, N.A., Inc., 920 F.
Supp. 207, 212 (D.D.C. 1996) (following J. Lauritzen and rejecting
Carroll’s impact test).

Whatever the weaknesses of the locality

test, see Carroll, 512 F.2d at 6, I am not free to disregard it.
Thus, the proposed claim is not within the Court’s admiralty
jurisdiction.
3.

Personal Jurisdiction

Supplemental Rule B, which allows the attachment of property
owned by the defendant in an admiralty claim, “serve[s] the dual
purpose of obtaining personal jurisdiction over an absent defendant
and securing collateral for a potential judgment in plaintiff’s
favor.”
Ltd.,

Arctic Ocean International, Ltd. v. High Seas Shipping

622

F.

Supp.

2d

46,

49

(S.D.N.Y.

2009).

“Because,

historically, maritime parties are peripatetic and often have
transitory assets, ‘the traditional policy underlying maritime
9

attachment has been to permit the attachments of assets wherever
they can be found and not to require the plaintiff to scour the
globe to find a proper forum for suit or property of the defendant
sufficient to satisfy a judgment.’”

Id. (quoting Aqua Stoli

Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 443 (2d Cir.
2006), overruled on other grounds by Shipping Corp. of India Ltd.
v. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009)).

The

jurisdiction attained by a Supplemental Rule B attachment
is quasi in rem, rather than in personam or in rem. In
Rule B attachment proceedings, jurisdiction is predicated
on the presence within the court’s territorial reach of
property in which the Rule B defendant has an interest.
Because of the requirement that the defendant not be
“found” within the district where the action is brought,
Rule B contemplates that a court will lack in personam
jurisdiction over the defendant when it orders that a
writ of attachment be issued. In such a proceeding, the
court’s coercive authority is coterminous with the scope
of its jurisdiction, and limited to the extent of the
defendant’s interest in the attached property; that
authority does not extend to the exercise of in personam
jurisdiction over a Rule B defendant.
Shipping Corp. of India, 585 F.3d at 69 n.12 (citations omitted).
Here,

the

Supplemental

Rule

B

attachment

provides

personal

jurisdiction over Norvik for the purposes of the breach of contract
claim

because

jurisdiction.

that

claim

falls

within

the

Court’s

admiralty

See Golden Horn, 2014 WL 5778535, at *1 (“Norvik

[Banka] concedes that the [contractual alter ego] claim properly
sounds in admiralty.”).

However, because the proposed tort claim

10

does not sound in admiralty, personal jurisdiction over Norvik for
this claim must rely on a jurisdictional hook

independent of the

quasi in rem jurisdiction derived from the attachment.
Shipping Corp. of India, 585 F.3d at 69 n.12.

See, e.g.,

And, as the

attachment was proper only because the court lacked in personam
jurisdiction over Norvik, see, e.g.,

First American Bulk Carrier

Corp. v. Van Ommeren Shipping (USA) LLC, 540 F. Supp. 2d 483, 485
(S.D.N.Y. 2008) (attachment under Supplemental Rule B appropriate
only where defendant is neither subject to personal jurisdiction
nor amendable to service of process within the forum district), it
follows that the Court does not have personal jurisdiction over the
company for the purposes of the tort claim.
The

plaintiff

asserts

that

Norvik’s

argument

disposed of” by recourse to Supplemental Rule E(8).
Amend Reply at 9).

“is

easily

(Motion to

That rule

provides that “[a]n appearance to defend against an
admiralty and maritime claim with respect to which there
has issued process in rem, or process of attachment and
garnishment, may be expressly restricted to the defense
of such claim,” in which case the appearance “is not an
appearance for the purposes of any other claim with
respect to which such process is not available or has not
been served.”
China National Chartering Corp. v. Pactrans Air & Sea, Inc., 882 F.
Supp. 2d 579, 593-94 (S.D.N.Y. 2012) (quoting Supplemental Rule
E(8)).

Golden Horn argues that, because Norvik did not enter a

11

restricted appearance pursuant to the rule, it has waived its
personal jurisdiction exception.

(Motion to Amend Reply at 9).

The court in China National rejected a similar argument.

In

that case, a ship charterer, China National, had obtained a
Supplemental Rule B attachment of property belonging to Pactrans,
a freight forwarder, in aid of an arbitration award, which the
court later confirmed.

China National, 882 F. Supp. 2d at 583-86.

Because of the Second Circuit’s decisions in Shipping Corp. of
India and Hawknet, Ltd. v. Overseas Shipping Agencies, 590 F.3d 87,
91

(2d

Cir.2009),

which

ruled

that

the

attached

property

(electronic fund transfers) was not subject to attachment, the
district court vacated the attachment.
Supp. 2d at 586.

China National, 882 F.

On appeal of the confirmation of the arbitration

award, the Second Circuit remanded so that the district court could
determine whether it had personal jurisdiction over Pactrans.
China National Chartering Corp. v. Pactrans Air & Sea, Inc., 411 F.
App’x 370, 373 (2d Cir. 2011). China National argued that Pactrans
had waived its personal jurisdiction objections on a number of
grounds,

including

Pactrans’

failure

to

appearance under Supplemental Rule E(8).
Supp.

2d

at

593.

The

district

court

make

a

restricted

China National, 882 F.
called

the

argument

“incorrect,” ruling that Pactrans had preserved its objection by
asserting it in its answer.

Id. at 594.
12

Here, Norvik has asserted its objection to the proposed cause
of action prior to its answer -- indeed, at its first opportunity
to address the proposed claim.

The logic of China National

establishes that Norvik has not waived its objection to personal
jurisdiction, and that objection is well-taken.
B.

Motion to Deposit Attached Funds in the Court’s Registry

Golden Horn also moves for an order requiring that the funds
that it has attached, and which are now in the possession of
Deutsche Bank, be transferred to the Court’s registry.

Rule 67 of

the Federal Rules of Civil Procedure, under which this motion is
brought, provides:
If any part of the relief sought is a money judgment or
the disposition of a sum of money or some other
deliverable thing, a party -- on notice to every other
party and by leave of court -- may deposit with the court
all or part of the money or thing, whether or not that
party claims any of it. The depositing party must deliver
to the clerk a copy of the order permitting deposit.
Fed. R. Civ. P. 67(a).

The advisory committee’s note to the 1983

amendment states:
Rule 67 has been amended in three ways. The first change
is the addition of the clause in the first sentence.
Some courts have construed the present rule to permit
deposit only when the party making it claims no interest
in the fund or thing deposited. E.g., Blasin-Stern v.
Beech-Nut Life Savers Corp., 429 F. Supp. 533 (D. Puerto
Rico 1975); Dinkins v. General Aniline & Film Corp., 214
F. Supp. 281 (S.D.N.Y. 1963).
However, there are
situations in which a litigant may wish to be relieved of
responsibility for a sum or thing, but continue to claim
an interest in all or part of it. In these cases the
13

deposit-in-court procedure should be available; in
addition to the advantages to the party making the
deposit, the procedure gives other litigants assurance
that any judgment will be collectable. The amendment is
intended to accomplish that.
Thus, the rule invites a litigant to be “relieved of responsibility
for a sum” that is the subject of litigation.

It is not clear that

the rule provides a mechanism for a plaintiff to compel the deposit
of funds already attached under Supplemental Rule B.
Golden Horn also relies on Local Admiralty Rule E.4, but that
rule applies to property taken into the possession of the marshal
pursuant to Supplemental Rule E(4)(b), which governs “tangible
property” taken “into the marshal’s possession for safe custody.”
Supplemental Rule E(4)(b); Local Admiralty Rule E.4. By its terms,
it is irrelevant to intangible property attached pursuant to
Supplemental Rule B.
Even if there is authority to issue the order Golden Horn
seeks, I would not do so.

Golden Horn purports to be concerned

about its ultimate ability to collect a judgment against Norvik, a
Latvian company with economic ties to Russian entities, in light of
“war in Eastern Ukraine, sanctions on the Russian Federation, a
dramatic

fall

(Plaintiff’s
Opposition

to

in

oil

Memorandum
the

prices
of

and

Law

Plaintiff’s

in

devaluation
Reply

Motion

for

of

the

to

the

an

Order

Ruble.”

Defendant’s
Directing

Garnishee Deutsche Bank Trust Company Americas to Deposit Attached
14

Funds into the Registry of the Court at 4-5).
supposes
interest.

that

the

attached

funds

are

not

Golden Horn also
currently

earning

(Memorandum of Law in Support of the Plaintiff’s Motion

for an Order Directing Garnishee Deutsche Bank Trust Company
Americas to Deposit Attached Funds into the Registry of the Court
at 4). Golden Horn’s fears are entirely speculative. Not only are
the attached funds secure where they are, but Norvik also maintains
a United States Dollar correspondent account at Deutsche Bank with
a current balance of more than $56 million. (Declaration of Marija
Stepina dated Feb. 5, 2015 (“Stepina Decl.”), ¶ 12).

Transfer of

the attached funds is therefore not necessary to ensure that any
judgment can be satisfied.
On the other hand, granting Golden Horn’s application would
impose substantial hardship on Norvik.
affirmation

from

its

chief

financial

Norvik has submitted an
officer

outlining

the

liquidity and capital adequacy requirements of the Financial and
Capital Market Commission (“FCMC”) by which it is regulated.
(Stepina Decl., ¶¶ 1, 3-9).

Although the FCMC has allowed the

attached funds held by Deutsche Bank to be treated as assets for
the purposes of its regulations, depositing the funds into the
court’s registry could have serious effects on the company’s
regulatory compliance.

(Stepping Decl., ¶¶ 10-11).

15

Conclusion
For the foregoing reasons, Golden Horn's motion to amend the
complaint (Docket no. 20) and its motion for an order that certain
funds be deposited into the Registry of the Court (Docket no. 23)
are denied.
SO ORDERED.

AMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
Dated: New York, New York
March 23, 2015
Copies transmitted this date:
Owen F. Duffy, III, Esq.
Law Offices of Owen F. Duffy
5 Penn Plaza, 19th Floor
New York, NY 10001
Michael J. Frevola, Esq.
Holland & Knight LLP
31 W. 52nd St.
New York, NY 10019

16