October 18, 2010

Johnson v. Del Monte and Network Shipping

Response in Opposition to Motion to Vacate Attachment

In this Memorandum of law Plaintiff opposes Defendants’ attempt to escape a garnishment which the Plaintiff brought under Supplemental Rule B and Local Admiralty Rule 2.  This attachment garnished funds being held for the Defendant in order to compensate a longshoremen killed while unloading a vessel in Costa Rica.

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
IN ADMIRALTY
CASE NO. 10-22909-CV-Graham/Torres

SYLVIA NELSON JOHNSON as
PERSONAL REPRESENTATIVE OF THE
ESTATE OF EDWIN ALEXANDER COOK, deceased,
Plaintiff,

vs.

LUZON STRAIT SCHIFFFAHRTSGESELLSCHAFT
MBH.& CO. KG., and Seatrade Group N.V.
Defendants.
__________________________/

SYLVIA NELSON JOHNSON as
PERSONAL REPRESENTATIVE OF THE
ESTATE OF EDWIN ALEXANDER COOK, deceased,
Garnishor,

vs.

DEL MONTE FRESH PRODUCE COMPANY and,
Network Shipping Ltd. Inc.
Garnishees.
__________________________/

PLAINTIFF’S RESPONSE IN OPPOSITION TO DEFENDANTS’ LUZON STRAIT AND SEATRADE GROUP’S MOTION TO VACATE PROCESS OF MARITIME ATTACHMENT AND GARNISHMENT.  D.E. 19

COMES NOW, the Plaintiff, and hereby files her Response in opposition to Defendants’ Motion to Vacate Process of Maritime Attachment and Garnishment [D.E. 19], and for good cause relies on the following Memorandum of Law.

MEMORANDUM OF LAW

I. DEFENDANTS’ MOTION TO VACATE THE RULE B ATTACHMENT IS MERITLESS AS THERE IS INDISPUTABLE EVIDENCE THAT GARNISHEE NETWORK SHIPPING MADE PAYMENTS OF ROUGHLY $20,000 PER DAY TO DEFENDANT SEATRADE AT THE TIME OF SERVICE.  AND ALL OF THE ARGUMENTS RAISED BY DEFENDANTS ARE NOT SUPPORTED BY THE LAW AND/OR ARE DIRECTLY CONTRARY TO THE LAW. 

A. OVERVIEW

This matter arises out of the wrongful death of decedent Edwin Cook, who died as a result of the alleged negligence of the Defendants.  On or about December 8, 2008, while performing his cargo-related duties onboard the vessel M/V Luzon Strait, Edwin Cook was crushed to death by an elevator while the vessel was being loaded with cargo.

On August 17, 2009, Plaintiff filed a wrongful death action alleging causes of action under the Jones Act, the Death on the High Seas Act, and for Unseaworthiness; and filed an Amended Complaint on October 19, 2009.  Amended Complaint attached as Exhibit 1.  The initial action was against four defendants:  DEL MONTE FRESH PRODUCE COMPANY, Network Shipping Ltd. Inc., LUZON STRAIT SCHIFFAHRTSGESELLSCHAFT MBH. & CO. KG. (“Luzon Strait”) and SEATRADE GROUP N.V. (“Seatrade”).

Thereafter, all four Defendants filed Motions to Dismiss for, inter alia, failure to state a claim, lack of personal jurisdiction and/or forum non conveniens. On July 29, 2010, Defendants Luzon Strait and Seatrade were dismissed for lack of personal jurisdiction. Copy of Order attached as Exhibit 2.  And Defendants Network Shipping and Del Monte Fresh Produce’s Motions to Dismiss were denied.  Exhibit 2.  On August 27, 2010, Plaintiff voluntarily dismissed her claims without prejudice against Del Monte.  Copy attached as Exhibit 3.  This case [Case No. 09-22425-CIV UNGARO] remains pending as against only Defendant Network Shipping Ltd., Inc.  A motion to consolidate that action with the instant action is pending.

On August 11, 2010, Plaintiff filed the instant Seamen’s Verified Complaint praying for attachment pursuant to Supplement Rule B and Local Admiralty Rule 2 (hereinafter referred to as the “Rule B action”). D.E. 1. On September 7, 2010, Plaintiff served the Process of Attachment and Garnishment on Garnishees Del Monte and Network Shipping, which attached and/or garnished the following:

the past, present and future proceeds from the chartering of vessels owned and/or operated by LUZON STRAIT SCHIFFFAHRTSGESELLSCHAFT MBH.& CO. KG., and/or Seatrade Group N.V. by Garnishees DEL MONTE FRESH PRODUCE COMPANY and/or Network Shipping Ltd., Inc., up to the amount sued for, to-wit: $1,000,000. More particularly, the Defendants’ belongings located within this judicial district are the past, present and future proceeds from the charter of the vessel M/V Luzon Strait, as well as other vessels owned and/or operated by Del Monte Fresh Produce Company and Network Shipping Ltd. Inc.  This includes, but is not limited to, all moneys owing under the charter agreement between Seatrade Group, N.V. and Network Shipping Ltd., either directly or indirectly from any Del Monte entity, affiliate or agent, including but not limited to, Network Shipping Limited, Inc. and/or  Del Monte Fresh Produce, to either Luzon Strait Schifffahrtsgesellschaft MBH and Co. KG. or Seatrade Group N.V., acting as agent and/or collecting moneys for Luzon Strait Schifffahrtsgesellschaft MBH and Co. KG.

Copy of Process attached as Exhibit 4.

On September 28, 2010, the Garnishees filed their Answers and (incorrectly) stated that neither was in possession of any past, present and future charter hire proceeds either on the date of service of the Process or on the date the Answers were filed.  D.E. 14, 15.

And on October 6, 2010, Defendants Luzon Strait and Seatrade filed a Motion to Vacate the Process of Maritime Attachment and Garnishment. D.E. 19. Therein, Luzon Strait and Seatrade argue that the Rule B Attachment should be vacated because there was no property of the defendants in the hands of the garnishees at the time of service, and that Plaintiff’s Rule B attachment is “improper” and “malicious.”  As the following memorandum makes clear, Defendant’s Motion to Vacate is without merit as the instant Rule B action follows the plain language of the rule and has undeniably attached property belonging to the defendants that is in the hands of the garnishees.  In other words, the plaintiffs have done exactly what Rule B was intended to do.  And Defendants claims of malice and bad faith are unfounded.

II. RULE B WAS CREATED FOR THIS EXACT SCENARIO, AND THERE IS PRIMA FACIE EVIDENCE THAT GARNISHEE NETWORK SHIPPING WAS MAKING PAYMENTS TO DEFENDANT SEATRADE AND OWED SEATRADE SUBSTANTIAL MONEY AT THE TIME OF SERVICE OF THE RULE B ATTACHMENT.

A.THE BASICS OF RUL
E B

Supplemental Admiralty Rule B states, in relevant part:

Rule B.  In Personam Actions: Attachment and Garnishment
(1) When Available; Complaint, Affidavit, Judicial Authorization, and Process.  In an in personam action:
(a) If a defendant is not found within the district when a verifie d complaint praying for attachment and the affidavit required by Rule B(1)(b) are filed, a verified complaint may contain a prayer for process to attach the defendant’s tangible or intangible personal property–up to the amount sued for–in the hands of garnishees named in the process.

Maritime attachment is centuries old.  It is a feature of admiralty jurisprudence that antedates both the congressional grant of admiralty jurisdiction to the federal district courts and the promulgation of the first Supreme Court Admiralty Rules in 1844.  Aurora Maritime Co. v. Abdullah Mohamed Fahem & Co., 1996 AMC 1755, 1758 (2 Cir. 1996).  Maritime law deals with transitory items, “[t]hus, the traditional policy underlying maritime attachment has been to permit the attachment 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.” Aqua Stoli Shipping Ltd., v. Gardner Smith Pty Ltd., 460 F.3d 434, 443 (2nd Cir. 2006).

An attachment under Supplemental Admiralty Rule B is a quasi in rem proceeding which permits the assertion of jurisdiction over a defendant’s property located within the district even though the court has no in personam jurisdiction over the defendant.

B. GARNISHEE NETWORK SHIPPING HAD THE DEFENDANTS’ PROPERTY IN ITS HANDS AT THE TIME OF SERVICE OF PROCESS OF ATTACHMENT.

Defendants argue that at the time of service, Garnishee Network Shipping did not hold any tangible or intangible property of Defendants. This is simply untrue and Defendants’ arguments to the contrary are founded in misstatements of the law.

It is important to understand the relationship between the garnishees and the defendants in order to see that this attachment was valid.  Garnishee Del Monte Fresh Produce Company is a wholly owned subsidiary of one of the “largest and most well-known producers, distributors and markets of premium quality, branded food and pet products for the U.S. retail market, generating more than $3.6 billion in net sales in fiscal 2009.”  See Webpage from delmonte.com, attached as Exhibit 5.

As Del Monte’s website states:

“Del Monte Fresh Produce Company truly does it all.  We grow, pack, ship and distribute our products ourselves which enables us to respond quickly to changing market conditions.  Our “vertically integrated” structure allows us to control the quality and consistency of our products, facilitating “just in time” delivery at the very peak of freshness.  The close control and management of our products journey from field to kitchen ensures that we meet the needs of our customers quickly and maintain the quality standards for which the name Del Monte® brand has earned global recognition.”  See Exhibit 6, webpage from delmonte.com.

Part of this vertically integrated structure includes Del Monte’s Ocean Shipping operations, which include a fleet of 16 owned and 16 chartered refrigerated vessels (which includes the subject vessel the M/V Luzon Strait).  These ocean shipping operations are arranged and monitor by Garnishee Network Shipping Ltd., which is another wholly owned subsidiary of Del Monte.  Garnishees Del Monte and Network Shipping both have their headquarters and principal places of business in Miami, Florida.

As part of Del Monte’s Ocean shipping operations, Garnishee Network Shipping entered into a charter party agreement with Defendant Seatrade for the vessel M/V Luzon Strait.  Copy attached as Exhibit 7.  Defendant Luzon Strait is the owner of the subject vessel, the M/V Luzon Strait, and Defendant Seatrade is the operator of the vessel and disponent owner.[1]

This charter party agreement was entered into in June of 2007, and since then the vessel has been on a continuous route.  The M/V Luzon Strait spends roughly three (3) days in port in New Jersey, and then sails to ports in Central America including Costa Rica, and then returns to port in Camden, New Jersey, roughly eleven (11) days later, and so on.  This route has continued uninterrupted through the date of the incident in December of 2008, and continues into the present and foreseeable future.  The M/V Luzon Strait transports Del Monte products from Costa Rica to the United States.

Pursuant to the charter party agreement, Network Shipping pays Seatrade $600,000.00 every thirty (30) days in advance commencing from delivery of the vessel.  D.E. 19-1, ¶ 15.  Or as explained dramatically differently by Network Shipping, Network Shipping pays roughly $20,000 per day to Seatrade.  See Network Shipping’s Answers to Interrogatories, attached as Exhibit 8.   It is these monies due and owing, pursuant to the charter party agreement, that were properly attached by the Plaintiff according to Rule B.

C. DEFENDANTS’ ARGUMENTS AGAINST ATTACHMENT ARE CONTRARY TO CASE LAW.   AND EVEN IF ADVANCE PAYMENTS WERE BEING MADE, SUCH PAYMENTS ARE SUBJECT TO ATTACHMENT!

Defendants argue that this attachment should be vacated because there was no property located in the district at the time of service because under the charter agreement, payments were made 30 days in advance, and the next payment was scheduled to be made on October 1, 2010.  D.E. 19, p. 8.  Thus, defendants argue that from the date of service of the Rule B attachment, September 7, 2010, through the date of the Garnishee’s Answer, September 28, 2010, there was no charter hire currently due from Network to Seatrade. Id. Notably, Garnishee Network Shipping’s Answers to Interrogatories state that at the time of service of the Rule B attachment, payments of roughly $20,000 per day were made via electronic transfer from Network Shipping to Seatrade.  Thus, there is a significant inconsistency between what the defendants and what the garnishees attest to.  Fortunately, this inconsistency is irrelevant (other than for its bearing on the credibility of defendants and/or garnishees) because in either case these payments are subject to attachment.  If payments of $20,000 per day are being made from Network Shipping to Seatrade, then each of these payments was entirely capable of attachment because it was money in the hands of the garnishee Network Shipping that belonged to Defendant Seatrade and/or Luzon Strait.

Conversely, even if payments were made in advance, such payments are still subject to Rule B garnishment because future payments on an executed contract are capable of garnishment.  The case of law of the Second, Third, Fourth and Ninth Circuit Courts of Appeals hold that even unmatured debts are subject to attachment and/or garnishment.

First, the Ninth Circuit held that debts capable of attachment include unmatured debts, but it does not include rights under a still executory contract.  See Schirmer Stevedoring Co. v. Seaboard Stevedoring Corp., 306 F.2d 188, 193 (9th Cir. 1962). Next, the Third Circuit held that attachable property includes contractual liabilities owing from the garnishee to the Defendant, which, at the time of attachment, could have supported a present or future action by the defendant against the garnishee. See Robinson v. O.F. Shearer & Sons, Inc., 429 F.2d 83, 85 (3d Cir. 1970).  Then, in Iran Express Lines v. Sumatrop, AG, 563 F.2d. 648, 650 (4th Cir. 1977) (Hall, J. Concurring), criticized on another point, Clipper Shipping Co., Ltd. v. Unimarine Bulk Transp., Inc., 790 F. Supp. 56, 61 (D. Conn 1992), the Fourth Circuit held that maturity of a debt is not a prerequisite for garnishment, provided that the unmatured debt arises from an executed contract.  As the Fourth Circuit made clear in Iran Express, “the time at which the freight became due and payable according to the terms of the charter party does not determine the validity of the garnishment, because maturity of the debt is not a prerequisite for garnishment.” Id.  Emphasis added.  Finally, the Second Circuit noted that an unmatured debt may be subject to Rule B attachment if the unmatured debt arises from an executed contract.” Reibor Int’l, Ltd., v. Cargo Carriers (KACZ-CO.), Ltd., 759 F.2d 262, 265 (2nd Cir. 1985), citing, Schirmer Stevedoring Co. v. Seaboard Stevedoring Corp., 306 F.2d 188, 193 (9th Cir. 1962). Accordingly, the law is clear that an advance payment and/or unmatured debt is capable of attachment where it arises out of an executed contract.

Herein, the money owed from Network Shipping to Seatrade arose from an executed contract because Network and Seatrade had a longstanding, continuous and uninterrupted charter of the vessel dating back to 2007.  For the nearly three years prior to the date of garnishment, payments were made on this contract and Network Shipping had the continuous and uninterrupted use and possession of the vessel.  And Network Shipping’s use and possession of the vessel remains uninterrupted to date and the charter has been renewed and payments are scheduled to continue until December 30, 2013. See Exhibit 8, Interrogatory 3. The continuous, uninterrupted performance of this charter party shows this was an executed contract and thereby even “advance payments” are subject to Rule B garnishment.

Further to this point, all of the case law relied on by defendants is quickly distinguishable as it involved third party garnishees (i.e. a bank), rather than a first party garnishee.  For example, Defendants’ reliance on Oceanfocus Shipping v. Humboldt, S.A., 962 F. Supp. 1481 (S.D. Fla 1996) is misplaced, as the case solely dealt with whether a line of credit was attachable.  This fundamental distinction is ignored by the defendants, but nonetheless, it is fatal to their arguments.[2]

Furthermore, Defendants argue that the Defendant’s property was not located in the district because the money was transferred from a bank account in New York to Seatrade’s bank account in the Netherlands.  D.E. 19, p 8.  In other words, Defendants argue that the money was not in the hands of the Garnishee because it was transferred from a bank in New York.  Tellingly, this argument is not supported by any case law.  This is because it is contrary to common sense, and would require holding that where a Florida corporation has money held in a bank account in New York, that money is not “in the hands of” that corporation.[3] In today’s digital age, the location of the actual asset is all but irrelevant because regardless of whether a person or a corporation’s bank account is in Zimbabwe or New York, the account owner has complete and total use of all the funds at all times.  And so requiring a Rule B attachment to be of an actual bank account itself would lead to absurd results and effectively defeat the purpose of Rule B.  Accordingly, Defendant’s argument is untenable.

In sum, no matter how you view these payments:  whether they are advance payments, unmatured debts or debts due and owing, the result is the same.  Network Shipping owed this money to Seatrade, and thus it was capable of attachment.  p>

III. DEFENDANTS’ ARGUMENTS OF BAD FAITH ARE UNFOUNDED.

Defendants also make several unavailing arguments that Plaintiff’s Rule B attachment was improper and in bad faith.  First, Defendants argue that the attachment should be vacated because Plaintiff is “abusing the rule as a vehicle to obtain jurisdiction over the defendants where this Court has already determined that none exists.” D.E. 19, p. 11.  This argument fails because the explicit purpose of Rule B is to gain jurisdiction over a transitory maritime defendant where none exists.

Next, Defendants argue that the Rule B attachment is improper because Plaintiff is taking inconsistent positions.  Plaintiff is presently appealing this Honorable Court’s Order granting Defendants’ Motion to Dismiss for lack of personal jurisdiction in the related matter [Case No. 09-22425, Order attached as Exhibit 2], and therein Plaintiff argues there should be personal jurisdiction over these defendants.  And the instant Rule B action is predicated on this Honorable Court’s finding that the defendants are not located within the jurisdiction.  There is nothing inconsistent about the positions.  It is plaintiff’s position that the defendants should be subject to personal jurisdiction, but this Honorable Court found that there was no jurisdiction over these defendants.  And it was this explicit finding that allowed for the filing of the instant Rule B action.  Quite simply, there is nothing improper about this course of conduct.

Defendants use the term “judicial estoppel” to argue that Plaintiff should not be allowed to argue for personal jurisdiction on appeal, while concurrently bringing the instant Rule B action.  Tellingly, the only cited by Defendants is Gonzalez v. M/V Destiny, 2002 AMC 2524 (S.D. Fla 2002), a case litigated by counsel for defendants, where the Plaintiff initially argued for seamen’s status in order to gain the protection of the Jones Act, but then argued the Plaintiff was not a seamen to obtain additional damages.  This type of inconsistent position has nothing to do with the facts herein.  Herein, the Plaintiff lost on the issue of personal jurisdiction and thus the remedy under Rule B became available.  And as the Honorable Judge Adalberto Jordan made clear in Gonzalez, “judicial estoppel generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.”  Id. at 2527.  That is simply not the case herein.

IV. DEFENDANTS SUBMITTED TO THIS HONORABLE COURT’S JURISDICTION BY SEEKING AFFIRMATIVE RELIEF.

Finally, Defendants filed a counterclaim for wrongful attachment.  Thereby, Defendants sought affirmative relief from this Honorable Court and submitted themselves to the jurisdiction of this Court.  Defendants’ Counterclaim states that they are not conceding to the jurisdiction of this Court, but rather that they are seeking an equitable remedy pursuant to Local Admiralty Rule 2(e)(2).  This caveat is insufficient and ineffective because the Defendants could have simply asked for fees and damages if they had won on the motion.  Instead, the defendants invoked the jurisdiction of this Honorable Court in a positive/affirmative fashion and seeking such affirmative relief from the court submits Defendants to the jurisdiction of this Honorable Court and/or waives the jurisdictional challenge.  See, e.g. Continental Bank, N.A. v. Meyer, 10 F.3d 1293, 1297 (7th Cir. 1993)(“defenses referred to in Rule 12(h)(1) may be waived by formal submission in a cause, or by submission through conduct); Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 168, 84 L. Ed. 167, 60 S. Ct. 153 (1939); Yeldell v. Tutt, 913 F.2d 533, 539 (8th Cir. 1990); Burton v. Northern Dutchess Hosp., 106 F.R.D. 477, 481 (S.D.N.Y. 1985).  This argument is strengthened because this was not a mandatory counterclaim, but instead, was a discretionary or permissive counterclaim.  Furthermore, if this Honorable Court finds that the defendants waived their personal jurisdiction challenge, then the Plaintiffs agree to dismissal of the Rule B action.

And to briefly respond to the merits of this counterclaim, for the reasons set forth above, there is nothing wrongful about this attachment.  Defendants argue that “Plaintiff is employing harassment tactics to try to force her claims to be heard by this court, where it has already determined that Plaintiff’s claims do not belong in this District.” [D.E. 19, p. 15] But this argument is devoid of merit.  Defendants fail to recognize (or more likely, ignore the fact) that it is precisely because this Honorable Court found there was no personal jurisdiction over the defendants that Rule B was implicated.  Plaintiff’s conduct is entirely proper under the rules and in fact, this is the precise scenario that Rule B was created and intended for.  Thus, Defendants arguments are meritless.

V.  To the extent this Honorable Court requires, Plaintiff requests limited discovery.

Additionally and/or Alternatively, should this Honorable Court require, Plaintiff respectfully requests limited discovery into the issues raised herein.  Namely, to discover evidence regarding when, how and where the payments pursuant to the charter party agreement actually occurred.

WHEREFORE, the Plaintiff respectfully requests the entry denying Defendants Motion to Vacate and any other relief deemed necessary and proper.

[1] A “disponent owner” is the party who originally charters the ship. A “charter agreement” is a contract by which a ship’s owner leases all or a principal part of the ship, often to a merchant, for conveying goods on a predetermined voyage (“voyage charter”) or for a predetermined period of time (“time charter”).

[2] Notably, Defendants cite to Florida law regarding this point, but it is too well settled that federal law governs questions regarding Rule B attachments.  Winter Storm Shipping, Ltd. v. TPI, 310 F.3d 263, 275 (2nd Cir. 2002), citing Reibor Int’l, Ltd., v. Cargo Carriers (KACZ-CO.), Ltd., 759 F. 2d 262, 265 (2nd Cir. 1985).  Thus, Florida Law is immaterial.