United States District Court,

S.D. New York.

A. ELEPHANT CORP., Plaintiff,

v.

HiFOCUS GROUP LIMITED, Wirana Pte. Ltd, and Wirana Worldwide, Defendants.

No. 08cv9969 (HB).

 

March 11, 2009.

 

OPINION & ORDER

 

Hon. HAROLD BAER, JR., District Judge.

 

On November 20, 2008 this Court granted Plaintiff A. Elephant Corp.’s (“AEC”) application for an ex parte Order of Maritime Attachment and Garnishment (the “Order of Attachment”) pursuant to Rule B of the Supplemental Rules for Certain Admiralty and Maritime Claims of the Fed.R.Civ.P. (the “Supplemental Rules”). Defendant HiFocus Group Limited (“HiFocus”) now moves pursuant to Rule E of the Supplemental Rules for vacatur of the Order of Attachment and, pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(6), for dismissal of the Verified Complaint. For the foregoing reasons, HiFocus’ motion is GRANTED.

 

I. FACTUAL BACKGROUND

 

This case concerns an alleged breach of a Memorandum of Agreement dated August 19, 2008 (the “MOA”) for the purchase and sale of the ocean-going vessel the M/T A Elephant (the “Vessel”), registered under the flag of Liberia. (Verified Compl. filed November 18, 2008 (“Compl.”) at ¶ 5, Ex. 2 at ¶ 1.) Pursuant to the terms of the MOA, HiFocus agreed to buy the Vessel from AEC for the sum of $24,231,375.00.(Compl. at ¶¶ 5-8.) Under the terms of the MOA, the sale of the Vessel included “all her outfit, equipment, anchors and chains … provisions, bunkers, and lubrication oil” and the Vessel was to be delivered in Chittagong, Bangladesh “under her own power, safely afloat, substantially intact” and with her “Main Engine and Generators under working condition.”(Compl. at Ex. 2 ¶¶ 1, 3.) Pursuant to the MOA, the Vessel was to be “sold for demolition only,” and AEC, as seller, was obligated to “assist the Buyers in beaching the vessel at Buyers’ designated breaking up plot in Chittagong.”(Id. at ¶¶ 3, 11.)

 

The Verified Complaint filed by AEC alleges that Defendants Wirana Worldwide and Wirana Pte. Ltd. are alter egos of HiFocus. (Compl.¶ 30.)

 

AEC alleges that HiFocus breached the MOA by failing to make payment of a deposit of 20% of the purchase price, or $4,846,275, on or before August 21, 2008. (Id. at ¶ 9.) Pursuant to Clause 4 of the MOA, upon HiFocus’ breach AEC was “at liberty (but not bound) to resell the vessel” and recover losses from HiFocus. AEC sold the Vessel on September 3, 2008, for $22,172,500.00, or $2,058,875 less than the purchase price under the MOA.

 

On November 20, 2008, AEC applied to this Court for and was granted an ex parte Order of Attachment in the amount of $2,787,390.67, the amount of AEC’s alleged losses plus estimated interest and attorneys’ fees. HiFocus moved to vacate the Order of Attachment and dismiss this action on January 15, 2009.

 

II. LEGAL STANDARD

 

“The power to grant attachments in admiralty is an inherent component of the admiralty jurisdiction given to the federal courts under Article III of the Constitution. U.S. Const. art. III, § 2.” Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd., 460 F.3d 434, 437 (2d Cir.2006). Supplemental Rules B and E govern attachment of assets in maritime actions. Pursuant to Rule B, a plaintiff who files a verified complaint and an affidavit which states the defendant cannot be found in the district is entitled to an attachment of a defendant’s assets up to the amount in dispute. Fed.R.Civ.P. Supp. R. B(1). Rule E entitles a defendant whose assets have been attached to a “prompt hearing at which the plaintiff shall be required to show why the arrest or attachment should not be vacated.”Fed.R.Civ.P. Supp. R. E(4)(f).

 

Faced with a motion for vacatur under Rule E(4)(f), the plaintiff bears the burden to establish compliance with the filing and service requirements of Rules B and E and that “1) it has a valid prima facie admiralty claim against the defendant; 2) the defendant cannot be found within the district; 3) the defendant’s property may be found within the district; and 4) there is no statutory or maritime law bar to the attachment.” Aqua Stoli 460 F.3d at 445. If the plaintiff cannot establish that it has a valid prima facie admiralty claim against the defendant, the attachment must be vacated and the action dismissed for lack of subject matter jurisdiction. See Primera Maritime (Hellas) Ltd. v. Jiangsu Eastern Heavy Industry Co. Ltd., No. 08 Civ. 11299(JGK), 2009 WL 249249,(S.D.N.Y. Feb. 2, 2009).

 

III. DISCUSSSION

 

Both HiFocus’ entitlement to vacatur of the Order of Attachment as well as this Court’s subject matter jurisdiction turn on whether this dispute lies within the Court’s admiralty jurisdiction. “For almost a century, it has been considered ‘elementary hornbook law’ that a contract for the sale of a vessel does not come within the federal courts’ admiralty jurisdiction.” Smith v. Mitlof, 198 F.Supp.2d 492, 499 (S.D.N.Y.2002) (quoting International Shipping Co., S.A. v. Hydra Offshore, Inc., 675 F.Supp. 146, 150 (S.D.N.Y.1987). In the Second Circuit, this rule is often cited with reference to the 1918 case The Ada, 250 F. 194, 198 (2d Cir .1918) (Rogers, J., concurring) (“The rule is settled that contracts for … selling a ship, are not maritime contracts and within the jurisdiction of the admiralty.”)

 

Plaintiff contends, however, that the Supreme Court’s decision in Norfolk Southern Ry. Co. v. Kirby, 543 U.S. 14 (2004)(“Kirby” ) and the Second Circuit’s subsequent decision in Folksamerica Reinsurance Co. v. Clean Water of New York, 413 F.3d 307 (2d Cir.2005) have loosened the boundaries of federal admiralty jurisdiction and thereby called into question the rule of The Ada.The Supreme Court has noted that “the trend in modern admiralty case law … is to focus the jurisdictional inquiry upon whether the nature of the transaction was maritime.” Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603, 611 (1991). In Kirby, a “maritime case about a train wreck,” the Supreme Court found that bills of lading for transport of cargo from Australia to an inland U.S. city were “maritime contracts because their primary objective [was] to accomplish the transportation of goods by sea.” 543 U.S. at 24. After Kirby, the answer to the jurisdictional question ‘ “depends upon … the nature and character of the contract,’ and the true criterion is whether it has ‘reference to maritime service or maritime transactions.’ “ Kirby, 543 U.S. at 23-24 (quoting North Pacific S.S. Co. v. Hall Brothers Marine Railway & Shipbuilding Co., 249 U.S. 119, 125(1919)).

 

The Second Circuit has acknowledged that “there are ‘few clean lines between maritime and non-maritime contracts,’ “ Folksamericana, 413 F.3d at 311 (quoting Kirby, 543 U.S. at 23), but clarified that the boundaries of admiralty jurisdiction over contracts are “defined by the purpose of the jurisdictional grant-to protect maritime commerce.” Id. (citing Exxon, 500 U.S. at 608). In Folksamerica, the Circuit reiterated that a two-step inquiry is required to determine if a dispute lies within a district court’s admiralty jurisdiction. First, the court must answer the threshold question of whether the “subject matter of the dispute” implicates the “concerns underlying admiralty and maritime jurisdiction.” Folksamerica, 413 F.3d at 312. Second, if the dispute implicates such concerns, the district court must ask whether the “primary objective” of the contract in question concerns maritime commerce. Id. at 315.(citing Kirby 543 U.S. at 25).

 

In Kalafrana Shipping Ltd. v. Sea Gull Shipping Co., Ltd., 591 F.Supp.2d 505 (S.D.N.Y.2008) Judge Scheindlin concluded that the “broad language” of Kirby and Folksamerica“support the demise of the holding in The Ada.”In Kalafrana the dispute arose from a memorandum of agreement for the sale of an operational vessel and concerned the responsibility for the cost of certain necessary repairs. Id. at 506.In concluding that the dispute sounded in admiralty, Judge Scheindlin wrote “a contract for the purchase of a launched ship that has been plying the seas for some time … has a distinctly ‘salty flavor,’ for the sole purpose of a ship is to sail.”Id. at 509.

 

Judge Scheindlin further reasoned that the contract at issue was a “maritime contract” even if the holdings of Kirby and Folksamerica apply only to cases that involve “mixed contracts” because the contract had two purposes: sale of the vessel and making any necessary repairs thereto. Kalafrana, 591 F.Supp.2d at 510.

 

Several other judges of this Court, however, have reaffirmed the validity of the rule of The Ada in the wake of Kirby and Folksamerica.See Unicorn Bulk Traders Ltd. v. Fortune Maritime Enterprises, Inc., No. 08 Civ. 9710(PGG), 2009 WL 125751 (S.D.N.Y. January 20, 2009) (“There is a controlling Second Circuit decision-The Ada-holding that a contract to purchase a vessel at a fixed price is not justiciable in admiralty”); Great Eastern Shipping Co. Ltd. v. Maritime Tankers and Shipping Co. Intl. Ltd., No. 09 Civ. 502(PKL) (S.D.N.Y. January 21, 2009) (breach of contract for sale of existing vessel in navigation is not maritime claim); Primera Maritime (Hellas) Limited v. Jiangsu Eastern Heavy Industry Co. Ltd., No. 08 Civ. 11299(JGK), 2009 WL 249249 (S.D.N.Y. January 30, 2009) (breach of contract for construction and sale of ship not within court’s admiralty jurisdiction); Aggelikos Prostatis Corp. v. Shun Da Shipping Group Ltd., No. 08 Civ. 9094(JGK), 2009 WL 249241 (S.D.N.Y. February 2, 2009) (contract solely for sale of a vessel not within court’s admiralty jurisdiction). Notwithstanding the broad language of Kirby and Folksamerica, unless and until the Circuit overrules or reverses its earlier precedents, this Court is obliged to follow the well-established and we think reasonable rule that a breach of a contract for the sale of a vessel is not cognizable in admiralty

 

Moreover, even if Kirby and Folksamerica are read to implicitly overrule The Ada, the principles articulated in those decisions, when juxtaposed with the facts here, do not alter the conclusion that this Court lacks jurisdiction over the instant dispute. Unlike the vessel at issue in Kalfrana which was to continue to ply the seas after consummation of the sale, the MOA at issue here makes clear that the “[t]he vessel is sold for demolition only.”(Compl. Ex. 2 at ¶¶ 3, 11.) A contract for the sale of a vessel that is to be beached and demolished does not have maritime commerce as its “primary objective,” Folksamerica, 413 F.3d at 315, even if the contract required the vessel to be delivered to her “designated breaking up plot in Chittagong” under her own power. Here, the primary objective of the MOA was to retire a vessel from navigation to be dismantled and sold for scrap after she was beached in Chittagong. As a consequence, the contract is clearly more “sandy” than “salty.”

 

The Court is cognizant of the somewhat incongruous results that flow from application of the rule of The Ada, including that contracts for the sale or provision of parts, equipment, fuel or other necessaries for a ship will be considered maritime contracts while a contract for the sale of the vessel itself will not. See, e.g., CTI-Container Leasing Corp. v. Oceanic Operations Corp. 682 F.2d 377, 381 (2d Cir.1982) (lease of shipping containers is maritime contract); Kristensons-Petroleum, Inc. v. Sealock Tanker Co., Ltd. 304 F.Supp.2d 584, 587 (S.D.N.Y.2004) (“A contract for supply of marine fuel is “maritime” in nature.”) However, this Court is without authority to ignore clear precedents of the Circuit and, in any event, the contract at issue here did not have maritime commerce as its “principal objective.” Consequently, AEC has not established a prima facie admiralty claim, the Order of Attachment must be vacated and the Verified Complaint must be dismissed for lack of subject matter jurisdiction.

 

IV. CONCLUSION

 

For the foregoing reasons, HiFocus’ motion is GRANTED. The Order of Attachment is hereby VACATED and this case is dismissed without prejudice The Clerk of the Court is instructed to close this case and remove it from my docket.

 

SO ORDERED.

 

S.D.N.Y.,2009.

A. Elephant Corp. v. HiFocus Group Ltd.

Slip Copy, 2009 WL 648893 (S.D.N.Y.)

 

END OF DOCUMENT

United States District Court,

M.D. Alabama,

Northern Division.

Joan Foye WYNN, as Personal Representative of the Estate of John Henry Foye, deceased, Plaintiff,

v.

LEWIS TRUCKING COMPANY, et al., Defendants.

No. 2:08-CV-990-WKW.

Feb. 27, 2009.

MEMORANDUM OPINION AND ORDER

W. KEITH WATKINS, District Judge.

Defendants Swift Transportation Co. (“Swift Transportation”) and John E. Nunez (“Nunez”) removed this case from the Circuit Court of Montgomery County, Alabama, on December 15, 2008. (Doc. # 4.) Defendants Lewis Trucking Company, Andrew David Carter Jr., American Timber and Steel Co. Inc., and Midwest Wood Products, Inc., later joined and consented to removal. (Docs.# 6, 8, 13.) Defendants removed on the basis of diversity jurisdiction, 28 U.S.C. § 1332. (Pet. Removal 2.) They claim, as the ground for removal, that Defendants Kenneth Jones (“Jones”) and Defendant Leeposey Daniels (“Daniels”) were fraudulently joined to the action and that without them, complete diversity of citizenship exists.(Pet. Removal 3.) Plaintiff Joan Foye Wynn (“Wynn”) filed a timely motion to remand for lack of subject matter jurisdiction, with an accompanying brief. (Docs. # 18 & 19.) Swift Transportation and Mr. Nunez responded to the motion (Doc. # 27). American Timber and Steel Co. Inc. filed a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure, and a supporting brief. (Docs. # 24 & 25.)

Defendants’ amendment (Doc. # 21) to their petition for removal does not affect the outcome of this ruling.

Lewis Trucking Company adopted their response. (Doc. # 28.)

Ms. Wynn is one of seven plaintiffs who have removed lawsuits to this district from state court stemming from this accident. Judge Thompson remanded the three cases before him for failure to prove fraudulent joinder or fraudulent misjoinder. (Docket No. 2:08cv986 (Doc. # 37); Docket No. 2:08cv989 (Doc. # 28); Docket No. 2:08cv992 (Doc. # 26).)

Ms. Wynn’s Motion to Remand challenges jurisdiction on two grounds. It opposes Defendants’ assertion of fraudulent joinder, and denies that the requisite amount in controversy has been met. (Mot. Remand Br. 1.) If non-diverse parties are fraudulently joined to an action, their citizenship will not be considered for purposes of determining diversity jurisdiction. Tedder v. F.M.C. Corp., 590 F.2d 115, 117 (5th Cir.1979) (per curiam). The Eleventh Circuit recognizes three forms of fraudulent joinder. Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir.1998) (citing Coker v. Amoco Oil Co., 709 F.2d 1433, 1440 (11th Cir.1983), superseded by statute on other grounds as stated in Georgetown Manor, Inc. v. Ethan Allen, Inc., 991 F.2d 1533 (11th Cir.1993)). The one relevant to this case is fraudulent joinder “when there is no possibility that the plaintiff can prove a cause of action against the resident (non-diverse) defendant.”Id.

In Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), the Eleventh Circuit adopted as binding precedent all decisions handed down by the former Fifth Circuit prior to October 1, 1981.

The removing party bears the burden of proving fraudulent joinder, and the burden is “heavy.” Crowe v. Coleman, 113 F.3d 1536, 1538 (11th Cir.1997) (internal quotation marks and citation omitted).“[A]ll factual issues and questions of controlling substantive law” must be viewed in the light most favorable to the plaintiff, and “[i]f there is even a possibility that a state court would find that the complaint states a cause of action against any one of the resident defendants, the federal court must find that the joinder was proper and remand the case to the state court.” Coker, 709 F.2d at 1440-41;accord Pacheco de Perez v. AT & T Co., 139 F.3d 1368, 1380 (11th Cir.1998). Although for purposes of determining fraudulent joinder, courts may consider affidavits and deposition transcripts submitted by either party, in addition to the plaintiff’s pleadings at the time of removal, Legg v. Wyeth, 428 F.3d 1317, 1322 (11th Cir.2005), “the jurisdictional inquiry must not subsume substantive determination,” Crowe, 113 F.3d at 1538 (internal quotation marks and citation omitted). Courts must be “certain” of their jurisdiction and “are not to weigh the merits of a plaintiff’s claim beyond determining whether it is an arguable one under state law.”Id. (internal quotation marks and citation omitted).

Defendants here have not proven fraudulent joinder. The Complaint alleges negligence against Mr. Jones and Mr. Daniels, and alleges specifically that they “acted willfully and beyond their authority” and acted in violation of agency policy. (Compl. ¶¶ 32-35 (Pet. Removal Ex. 1).) Ms. Wynn’s brother John Henry Wynn died in a vehicle accident on October 3, 2008. (Compl.¶¶ 1, 11-26.) Mr. Wynn and other job applicants for employment with the Alabama Department of Corrections (“ADOC”) were riding to another location for employment evaluations in a van used to transport prisoners, when a truck allegedly hit the van head-on while on the highway. (Compl.¶¶ 11-24.) The van caught fire, and the passengers burned to death because they were allegedly unable to escape; the van had been modified to remove inside door handles, the rear section was set off from the front section by a metal cage, and the windows were screened to prevent escape. (Compl.¶¶ 14, 25-26.) Mr. Daniels was the warden of the facility from which the applicants were traveling (Compl.¶¶ 8, 12), and “was responsible to oversee the modification of the van used to transport the applicants and had a duty to ensure the safe travel of those applicants” (Compl.¶ 15). Mr. Jones was the warden of the facility from which the van departed (Compl.¶¶ 7, 12), and had “instructed other ADOC employees that applicants be transported in a prisoner van from which escape was not possible in case of an emergency,” and “had full knowledge of the extreme danger to those applicants being transported in a prisoner van which prohibited escape from the van in case of an emergency” (Compl.¶¶ 16-17).

Defendants argue on removal that Ms. Wynn “cannot establish any set of facts that would show either Mr. Daniels or Mr. Jones ‘had a duty to oversee the modification of the van.’ “ (Pet. Removal 6.) Defendants’ factual basis is that the van modifications were made at Draper Fleet Services, which had no connection to Mr. Daniels’s facility. (Pet. Removal 6.) First, the allegation related to the van modification applies to Mr. Daniels; it is unclear how Defendants’ point is relevant to the fraudulent joinder claim against Mr. Jones. Second, even if Defendants’ factual assertion is true, it does not speak to whether Mr. Daniels had a duty to oversee the van modifications or to ensure safe travel, and does not preclude the possibility that the development of other facts could show a duty and breach.

The more developed theory for fraudulent joinder is Defendants’ state-agent immunity argument. Defendants contend that, because Mr. Daniels and Mr. Jones are entitled to immunity as state agents, Ms. Wynn cannot state a viable claim against them. (Pet. Removal 7-9; Remand Resp. 3-5.) Defendants acknowledge that there are exceptions to the application of state-agent immunity, but state that the motions and affidavits show that Mr. Daniels and Mr. Jones are not entitled to those exceptions. (Pet. Removal 8.) Ms. Wynn’s response accurately recognizes, however, that the state of the law in Alabama on state-agent immunity “is anything but settled” and “depends on the specific facts.” (Mot. Remand Br. 13.) State agents are not entitled to immunity if they “failed to discharge duties pursuant to detailed rules or regulations, such as those stated on a checklist, or acted willfully, maliciously, fraudulently, in bad faith, beyond [ ] authority, or under a mistaken interpretation of the law.”Ex parte Ala. Dep’t of Mental Health & Retardation, 837 So.2d 808, 814 (Ala.2002) (quoting Ex parte Butts, 775 So.2d 173, 178 (Ala.2000)). Factual development is crucial to determining whether state agents fall into these exceptions to immunity.

There has not been enough factual development at this stage to find that there is no possibility that Ms. Wynn can prove a claim against Mr. Daniels and Mr. Jones. Although negligence falls below the standard of malicious, willful, or fraudulent behavior, a claim of negligence does not preclude proving facts that support a higher level of culpability. Furthermore, the possibility that Mr. Daniels or Mr. Jones acted outside of his authority or failed to discharge duties pursuant to rules and regulations is not foreclosed by an assertion of negligence. Indeed, Ms. Wynn asserts in her negligence count that Mr. Daniels and Mr. Jones “acted willfully and beyond their authority,” and additionally alleges that they acted in violation of ADOC policy. Only further factual development can determine whether Mr. Daniels or Mr. Jones can successfully assert state-agent immunity.

Viewing the facts and applicable law in the light most favorable to Ms. Wynn, Defendants have not supported their burden of establishing that the non-diverse parties, Mr. Daniels and Mr. Jones, were fraudulently joined in this action. The issue on fraudulent joinder is whether it can be definitely stated at this stage that the claims are foreclosed. It quite simply cannot. Because remand is justified for lack of diversity of citizenship (see Compl. ¶¶ 1, 7-8), it is not necessary to address whether the amount in controversy has been satisfied.

It is also unnecessary to resolve the motion to dismiss for lack of personal jurisdiction. “[A] federal court has leeway ‘to choose among threshold grounds for denying audience to a case on the merits.’ “ Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 432 (2007) (quoting Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 585 (1999)).

Accordingly, it is ORDERED that:

(1) Ms. Wynn’s Motion to Remand (Doc. # 18) is GRANTED;

(2) This case is REMANDED to the Circuit Court for Montgomery County, Alabama; and

(3) The Clerk of the Court is DIRECTED to take appropriate steps to effect the remand.

M.D.Ala.,2009.

Wynn v. Lewis Trucking Co.

Slip Copy, 2009 WL 499457 (M.D.Ala.)

END OF DOCUMENT