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Ray Capital Inc. v. M/V Newlead Castellano

United States District Court, S.D. Georgia, Savannah Division, Admiralty

September 13, 2017

RAY CAPITAL INC.; OPPENHEIM CAPITAL LTD.; CHEYENNE HOLDINGS LTD.; and LABROY SHIPTRADE LIMITED, Plaintiffs,
v.
M/V NEWLEAD CASTELLANO, IMO NO. 9686338, her engines, tackle, equipment, furniture, appurtenances, etc., in rem, and NEWLEAD CASTELLANO LTD., Defendants.

          ORDER

          J. RANDAL HALL CHIEF JUDGE UNITED STATES DISTRICT COURT.

         "Unless sharks come, " he said aloud. "If sharks come, God pity him and me."[1]

         On March 20, 2017, the Court entered summary judgment in favor of Plaintiffs against Defendants (the "Summary Judgment Order"). (See Doc. 116.) Before entering final judgment in Plaintiffs' favor, however, the Court ordered Plaintiffs to "perfect the record with admissible evidence with regards to the balance of their claims against Defendants through [March 20, 2017], including an itemization of the principal, interest, and costs and expenses each Plaintiff claims under its respective instruments" by no later than March 30, 2017. (Id. at 17.) The Court also ordered Defendants to show cause, by no later than March 30, 2017, as to why their counterclaim for wrongful arrest against Plaintiffs should not be dismissed with prejudice and this case closed. (Id. at 18.) On March 21, 2017, Plaintiffs filed a supplemental brief outlining the balance of their claims against Defendants and evidence in support thereof. (Doc. 117.) On March 30, 2017, non-party DHL Project & Chartering Limited ("DHL") filed a motion wherein it: (i) renews its prior attempts to intervene in the present action; (ii) seeks reconsideration of the grant of summary judgment in favor of Plaintiffs; and (iii) purports to respond to the Court's order to show cause directed towards Defendants.[2] (Doc. 118.)

         I. BACKGROUND

         A. Plaintiffs' Underlying Claims

         Plaintiffs each hold a promissory note executed by nonparty Newlead Holdings Ltd. in favor of the respective Plaintiffs (each, a "Note"). (PSMF, Doc. 44, ¶ 1; Tsouvelekakis 05/25/2016 Decl., Doc. 28-2, ¶ 11; see also Docs. 18-1 through 18-4.) Each Note is secured by a guarantee and indemnity agreement executed by Newlead Holdings Ltd.'s wholly-owned subsidiary, Defendant Newlead Castellano Ltd. ("NCL"), in favor of the respective Plaintiff creditor (each, a "Guaranty"). (PSMF ¶ 6; Doc. 18-5.) Each Guaranty, in turn, was secured by a mortgage over Defendant M/V Newlead Castellano, IMO No. 9686338 (the "Vessel") executed by NCL in favor of the respective Plaintiff creditor (each, a "Mortgage").[3] (PSMF ¶ 7; Doc. 18-6; see also Doc. 18-7.)

         Newlead Holdings Ltd. subsequently defaulted on Plaintiff Ray Capital's Note by failing to tender payments due thereunder by the maturity date, which entitled Ray Capital to call on NCL's Guaranty. (PSMF ¶¶ 9-10; Livanos Decl., Doc. 15-1, ¶ 23; Doc. 18-5, at 59-80, ¶ 3.) Despite Ray Capital having sent notices of default to Newlead Holdings Ltd. and NCL, these entities failed to cure their respective defaults within the requisite cure period. (PSMF ¶ 11; Tsouvelekakis 05/25/2016 Decl. ¶ 32; Livanos Decl. ¶ 25; compare Am. Compl. ¶¶ 53, 56, with Answer, Doc. 31, ¶¶ 53, 56.) NCL also breached the terms of the Mortgages by, inter alia: (a) allowing significant debt to accumulate against the Vessel; (b) failing to pay the Vessel's crew in a timely manner; (c) failing to maintain insurance coverage on the Vessel; (d) failing to provide audited financial statements to Plaintiffs where required; and (e) failing to maintain the Vessel in a complete state of repair. (PSMF ¶ 13; Swimmer 05/25/2016 Decl., Doc. 28-1, ¶¶ 8-9, 18-27; Tsouvelekakis 05/25/2016 Decl. ¶¶ 37-38; Tsouvelekakis 07/08/2016 Decl., Doc. 43-2, ¶¶ 6-7, 10-12 & Ex. 1; see also Doc. 18-6, at 2-30, 64-93, 122-53, 157-85.) NCL failed to cure these additional breaches. (PSMF ¶¶ 15-24.) Based upon Newlead Holdings Ltd. and NCL's failure to cure their respective defaults and/or breaches under the Notes, Guaranties, and/or Mortgages, Plaintiffs initiated the instant action on April 19, 2016.[4] (Doc. 1.)

         B. DHL's Underlying Claims

         On or about October 27, 2011, DHL and non-party Newlead Shipping S.A. entered into a charter party contract for DHL's use of the non-party shipping vessel M/V Newlead Venetico (the "Venetico"). (DHL Project & Chartering Limited v. Newlead Holdings Ltd., et al., Case No. 4:16-CV-123 (S.D. Ga.) (the "DHL Action''), Doc. 1, ¶ 13.) On December 8, 2011, DHL sub-chartered the Venetico to non-party Zheijiang Materials Industry Fuel Group Co., Ltd. (the "Sub-Charterer") for a shipment of cargo from Australia to China. (Id. ¶ 15.) Shortly after loading of the Sub-Charter's cargo onto the Venetico on January 4, 2012, the Venetico was detained by the Australian Maritime Safety Authority due to various alleged deficiencies. (Id. ¶ 16.) Loading eventually resumed on or about March 3, 2012, and the Venetico commenced her voyage to the discharge port in China on or about March 5, 2012. (Id.) DHL and the Sub-Charterer subsequently initiated arbitration in Hong Kong, wherein the Sub-Charterer alleged that it incurred significant losses from the delayed delivery of its cargo. (Id. ¶¶ 18-19; see also DHL Action, Doc. 1-3.) On May 25, 2016, DHL instituted the DHL Action against NCL and non-parties Newlead Holdings Ltd., Newlead Shipping S.A., Newlead Bulkers S.A., Grand Venetico Inc., and Newlead Venetico Ltd.[5] (DHL Action, Doc. 1.)

         C. Plaintiffs' Arrest and Attachment & Interlocutory Sale of Vessel

         Upon the filing of Plaintiffs' verified complaint on April 19, 2016 in this case, the Court entered orders directing the issuance of a warrant for the maritime arrest - and process for maritime attachment and garnishment - of the Vessel pursuant to Rules B & C of the Supplemental Rules for Admiralty or Maritime Claims. (Docs. 1, 8, and 10.) On May 3, 2016, NCL filed a Motion to Vacate Plaintiff's arrest and attachment of the Vessel in which NCL also sought damages resulting from this allegedly wrongful arrest. (Doc. 15.) On July 14, 2016, the Court entered an order vacating Plaintiffs' Rule C arrest of the Vessel, but denied vacatur of Plaintiffs' Rule B attachment of the Vessel; the Court also denied NCL's request for damages related to Plaintiffs' arrest of the Vessel.[6] (Doc. 47.) On July 15, 2016, Plaintiffs filed an Emergency Motion for Reconsideration seeking to reinstate their arrest of the Vessel, while Defendants subsequently filed a Cross-Motion for Reconsideration seeking the grant of its original Motion to Vacate in its entirety. (Docs. 49, 59.) On August 4, 2016, the Court vacated that part of its Order dated July 14, 2016 addressing the arrest of the Vessel and reinstated Plaintiffs' initial arrest of the Vessel.[7] (Doc. 64.) The Vessel was subsequently sold to non-party Strategic Shipping, Inc. ("Strategic") via interlocutory admiralty sale, with that sale being confirmed by this Court on August 16, 2016 and the sales proceeds (i.e., the Vessel's substitute res) (the "Proceeds") being deposited in the registry of this Court.[8]'[9] (Docs. 73, 75; see also Docs. 48, 65, 66, 68, 70, 79.)

         D. DHL's Attachment, Vacatur, and Settlement in the DHL Action

         Upon the filing of DHL's verified complaint in the DHL Action on May 25, 2016, the Court entered orders directing the issuance of process for maritime attachment and garnishment of the Vessel pursuant to Rule B. (DHL Action, Doc. 2.) . On October 14, 2016, however, Plaintiffs moved to vacate DHL's attachment of the Vessel in the DHL Action. (DHL Action, Doc. 16.) Upon concluding that DHL had failed to demonstrate a prima facie admiralty claim as required under Rule B, the Court granted Plaintiffs' motion and vacated DHL's attachment and garnishment of the Vessel and its substitute res (i.e., the Proceeds) on November 18, 2016. (DHL Action, Doc. 24.) On December 5, 2016, DHL moved for reconsideration of the Order vacating its attachment in the DHL Action, which this Court recently denied.[10] (DHL Action, Docs. 27, 42.)

         On February 22, 2017, DHL filed a "Motion for Entry of Final Judgment" in the DHL Action, wherein it states that it has entered into a settlement agreement dated February 17, 2017 (the "Settlement Agreement") with NCL with regards to the claims made by DHL in the DHL Action, whereby, inter alia, NCL: (a) is obligated to DHL in the amount of $2, 371, 491.15; (b) has assigned to DHL all of NCL's rights, defenses, and counterclaims with respect to the claims against it by Plaintiffs; and (c) has assigned its ownership interest in the Proceeds to DHL (up to the amount of $2, 371, 491.15 plus any costs and fees incurred by DHL in the present action and the DHL Action).[11] (DHL Action, Doc. 33; see also Settlement Agreement, Doc. 118-1 at 4-14, ¶¶ 2 & 2(C); Power Decl., Doc. 118-1 at 1-2, ¶ 2.) DHL also stated in its Motion for Entry of Final Judgment that it and NCL executed a "Consent for Entry of Judgment" which "has not been styled as a Stipulation due to the fact that [NCL] is not represented by U.S. counsel who is admitted to this Court." (DHL Action, Doc. 33, at 2; see also Consent for Entry of Judgment, DHL Action, Doc. 33 at 3-5.) Finally, DHL requested that "Final Judgment be entered against [NCL] ... in the amount of $2, 371, 491.15 in the form of the proposed Final Judgment" which DHL attached as an exhibit to its motion (the "Proposed Final Judgment") . (DHL Action, Doc. 33, at 2; see also Proposed Final Judgment, DHL Action, Doc. 33-1.) The Court recently denied DHL's request to enter the Proposed Final Judgment or otherwise enshrine the Settlement Agreement and Consent for Entry of Judgment in a judicial decree. (See DHL Action, Doc. 43.)

         E. DHL's Attempts to Consolidate & Intervene

         On July 28, 2016, shortly before the interlocutory sale of the Vessel, DHL filed a motion to consolidate the DHL Action with the instant action. (DHL Action, Doc. 11.) On August 25, 2016, the Court denied DHL's motion to consolidate on the grounds that the two actions did not present common questions of law or fact. (DHL Action, Doc. 13, at 3-4.) On September 8, 2016, DHL filed a motion to intervene in this case pursuant to Federal Rule of Civil Procedure 24(a). (Doc. 80.) On October 4, 2016, the Court denied DHL's motion to intervene on the grounds that DHL had failed to demonstrate a sufficient interest relating to the property or transaction which is the subject of this action. (Doc. 94.) On October 11, 2016, DHL filed its Notice of Interlocutory Appeal and a motion to stay this action pending the resolution of that appeal. (Docs. 98, 99.) On November 2, 2016, the United States Court of Appeals for the Eleventh Circuit entered an Order denying DHL's "Emergency Motion to Stay Pending Appeal and for an Interim Order Pending the Decision on the Stay Application. "[12] (Doc. 107.) On November 18, 2016, this Court also denied DHL's motion to stay pending appeal. (Doc. 109.) On July 6, 2017, the Eleventh Circuit issued its mandate vacating this Court's Order dated October 5, 2016 denying DHL's intervention and "remand[ed] the case to [this Court] to proceed as it sees fit in light of the current status of the case."[13] (Doc. 126, at 3; Doc. 127.)

         F. Plaintiffs' Motion for Summary Judgment

         On July 8, 2016, Plaintiffs filed their motion for summary judgment.[14] (Doc. 43.) On July 21, 2016, so as to allow Defendants to conduct factual discovery, Defendants were granted until October 14, 2016 to respond to Plaintiffs' motion for summary judgment. (Doc. 55, at 2.) On September 16, 2016, Defendants' counsel filed their motion to withdraw as counsel of record after having provided Defendants with their intent to withdraw on August 30, 2016. (Doc. 83.) On October 5, 2016, the Court granted counsel for Defendants' motion to withdraw; in its Order, the Court specifically noted that upon their counsels' withdrawal, they would be left unrepresented and therefore unable to proceed.[15] (Doc. 95.) To allow Defendants sufficient time to secure new counsel and respond to Plaintiffs' motion for summary judgment, the Court granted Defendants until November 4, 2016 to respond to Plaintiffs' motion for summary judgment.[16] (Id. at 2.) Nonetheless, Defendants failed to: (a) have new counsel enter a notice of appearance in this case; or (b) respond to or otherwise defend against Plaintiffs' motion for summary judgment.

         On March 20, 2017, after a thorough consideration of the merits of Plaintiffs' motion for summary judgment and the evidence submitted in support thereof, the Court entered the Summary Judgment Order granting summary judgment in favor of Plaintiffs on all of their claims. (Doc. 116.) In the conclusion of the Summary Judgment Order, the Court ordered Plaintiffs to "perfect the record . . . with regards to the balance of their claims against Defendants" through March 20, 2017. (Id. at 17.) The Court also noted that - in light of the entry of summary judgment in favor of Plaintiffs and the Orders denying damages for Plaintiffs' alleged wrongful arrest of the Vessel and reinstating Plaintiffs' arrest of the Vessel - it had "serious concerns regarding the viability of Defendants' counterclaim for wrongful arrest" and therefore ordered them to show cause as to why: (a) such claim should not be dismissed with prejudice; and (b) this case closed. (Id. at 18.)

         On March 21, 2017, Plaintiffs filed their supplemental briefing and evidence demonstrating the balance of their claims against Defendants as directed by the Court. (Doc. 117.) Defendants, however, failed to respond to the Court's order to show cause. Rather, on March 30, 2017, DHL, purporting to be the "assignee of the defenses and counterclaims of [NCL] in this action" filed a motion wherein it: (i) renews its prior attempts to intervene in this action; (ii) seeks reconsideration of the grant of summary judgment in favor of Plaintiffs against Defendants; and (iii) purports to respond to the Court's order to show cause directed towards Defendants. (Doc. 118.)

         II. DISCUSSION

         A. DHL's (Renewed) ...


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