Summary
asserting that there would be subject matter jurisdiction if the action proceeded as a separate action against the alter ego, but not specifying the separate jurisdictional basis
Summary of this case from GE Transp. (Shenyang) Co. v. A-Power Energy Generation Sys., Ltd.Opinion
No. 02 Civ. 475 (TPG)
September 18, 2002
OPINION
Overseas Private Investment Corporation ("OPIC") petitions this court to confirm an arbitration award in its favor and to enter judgment against the other party to the arbitration, respondent Marine Shipping Corporation ("MSC"). Although respondent Joseph Kell was not party to the arbitration, the petition requests that judgment also be entered against Kell, holding him liable in addition to MSC.
Kell has moved to dismiss the claim against him under Fed.R.Civ.P. 12(b)(6), asserting that the petition fails to state a claim against Kell upon which relief could be granted.
MSC did not answer the petition or file any motion against it. Consequently, OPIC has moved for a default judgment against MSC. MSC has made no objection to the entry of a default judgment, but, through counsel for Kell, has voiced an objection to the amount of the judgment sought.
The court rules that OPIC is entitled to have the arbitration award confirmed and is entitled to judgment against MSC, although not in the full amount requested. Kell's motion to dismiss the petition against him is denied. The court will proceed with the litigation of the issues involving Kell.
Facts
OPIC is an agency of the United States. OPIC issued a policy insuring MSC with respect to certain risks associated with an investment by MSC in a grain discharge and handling facility in Port Said, Egypt. Joseph Kell is the principal of MSC. He signed the insurance agreement on behalf of MSC, and has acted for MSC in all respects. The insurance policy became effective as of September 30, 1987 and covered various risks including confiscation. On September 14, 1993 MSC filed a claim for alleged confiscation of MSC's insured assets by the Egyptian Government. OPIC denied MSC's claim on July 13, 1999.
MSC's status as a Delaware corporation was declared void on March 1, 1995 as a result of non-payment of taxes. However, Kell has continued to act in the name of MSC, as will be described. Kell's attorney advised the court that steps are now being taken to reinstate MSC's existence as a corporation.
On August 13, 1999 MSC filed a demand for arbitration under the arbitration clause of the insurance policy, challenging OPIC's denial of MSC's claim. The arbitration clause states:
Any controversy relating to this policy shall be settled by arbitration in Washington, D.C. according to the then prevailing Commercial Arbitration Rules of the American Arbitration Association. Unless the Insured initiates arbitration, OPIC's liability shall expire one year after OPIC notifies the Insured of its determination concerning an application for compensation. A decision by arbitrators shall be final and binding, and any court having jurisdiction may enter judgment on it.
Kell acted for MSC in all respects of the arbitration.
A panel of three arbitrators was appointed by the American Arbitration Association. After receiving documentary evidence and written argument from the parties and holding hearings on October 11, 2000, and May 1, 2, 3, 4 and 7, 2001, the arbitration panel unanimously ruled on September 10, 2001 to dismiss MSC's claim against OPIC in its entirety. The panel found in substance that Kell had voluntarily sold the assets of MSC in question and that they had not been confiscated. The panel also awarded OPIC costs and attorneys' fees, ruling as follows:
1. The compensation and expenses of the arbitrators totaling $159,361.41 shall be borne by MSC. Therefore, MSC shall pay to OPIC the sum of $79,680.71 for its share of compensation and expenses of the arbitrators previously advanced by OPIC.
2. The administrative fees and expenses of the American Arbitration Association totaling $9,426.18 shall be borne by MSC. Therefore, MSC shall pay OPIC the sum of $1,213.08 for its share of the administrative fees and expenses of the Association previously advanced by OPIC.
3. The attorneys' fees and costs of each Party shall be borne by each party respectively, with the exception that MSC shall pay $5,000 of the costs of OPIC.
4. The interpreter's fees and costs shall be borne by MSC.
5. The court reporter's fees and transcript costs shall be borne equally between MSC and OPIC.
It has now been determined that the interpreter's fees and costs to be awarded are $1,050, and that OPIC's half of the court reporter's fees and transcript costs is $2,391.07. The total of all the items is $89,334.86.
The Current Petition
On January 18, 2002 OPIC filed its petition to confirm the arbitration award and to have judgment entered thereon. OPIC requests judgment for the $89,334.86, together with interest at the rate of 6% per annum from September 10, 2001. OPIC also seeks to recover its attorneys' fees and costs incurred in connection with the present petition. OPIC seeks to have judgment not only against MSC but also against Kell. OPIC alleges that MSC is entirely the creature of Kell and that Kell should be held liable for the amount awarded against MSC by the arbitrators. Kell has moved to dismiss the petition as against him.
MSC has filed no answer or motion in response to petition. OPIC has moved for a default judgment against MSC.
OPIC filed an affidavit dated March 14, 2002 specifying the amounts for which it seeks judgment. In addition to the $89,334.86 based on the arbitration award, OPIC calculated that $2,702.69 in interest was due for the period September 10, 2001 to March 13, 2002. OPIC also requests attorneys' fees and disbursements in the amounts of $22,946.50 and $1,342.80 respectively. The total amount of the judgment requested is $116,326.85.
In a letter dated March 20, 2002 the attorney for Kell contends that OPIC's request for attorneys' fees and disbursements should be denied. The letter concedes that the judgment may include interest on the $89,334.86.
Discussion
Attorneys Fees and Disbursements
The only contested issue about the confirmation of the arbitration award and the judgment against MSC is whether the amount of the judgment should include the attorneys' fees and disbursements incurred by OPIC in connection with the present petition. In this regard, reference must be made to Fed.R.Civ.P. 54(d), which provides:
(1) Costs Other than Attorneys' Fees.
Except when express provision therefore is made either in a statute of the United States or in these rules, costs other than attorneys' fees shall be allowed as of course to the prevailing party unless the court otherwise directs;
(2) Attorneys' Fees.
(A) Claims for attorneys' fees and related nontaxable expenses shall be made by motion unless the substantive law governing the action provides for the recovery of such fees as an element of damages to be proved at trial.
(B) Unless otherwise provided by statute or order of the court, the motion must be filed and served no later than 14 days after entry of judgment; must specify the judgment and the statute, rule, or other grounds entitling the moving party to the award; and must state the amount or provide a fair estimate of the amount sought.
It should be noted that the amount of $1,342.80, although described as "costs" by OPIC, does not constitute "costs" within the meaning of Rule 54(d)(1), but comes under the category of "nontaxable expenses" referred to in Rule 54(d)(2). Consequently, the issue is whether the attorneys' fees of $22,946.50 and the disbursements (nontaxable expenses) of $1,342.80 can be recovered. The problem is that OPIC has not specified the "statute, rule, or other grounds" entitling it to the award of attorneys' fees and disbursements. Consequently, the court declines to award these amounts.
OPIC is entitled to judgment against MSC in the amount of $89,334.86 plus $2,702.69, representing interest from September 10, 2001 to March 13, 2002, plus additional interest at 6% per annum from March 14, 2002 until the date of judgment.
Judgment should be entered forthwith against MSC under Fed.R.Civ.P. 54(b).
Personal Liability of Joseph Kell
As already indicated, OPIC also seeks to have judgment entered against Joseph Kell, who is the principal of MSC. OPIC seeks to "pierce the corporate veil."
In Orion Shipping Trading Co. v. Eastern States Petroleum Corp. of Panama, S.A., 312 F.2d 299 (2d Cir. 1963), the Second Circuit indicated that a proceeding to confirm an arbitration against a corporation is not an appropriate occasion to determine whether another party is liable under an alter ego theory. However, in Sea Eagle Maritime Ltd. v. Hanan International, Inc., No. 84 Civ. 3210, 1985 WL 3828, at *2 (S.D.N.Y. Nov. 14, 1985), Judge Leval (then a District Judge) stated that a claim to pierce the corporate veil could be construed as a separate action. In District 15, Int'l Ass'n of Machinists and Aerospace Workers, AFL-CIO v. Numberall Stamp and Tool Co., Inc., No. 85 Civ. 8561, 1987 WL 19285 (S.D.N.Y. Oct. 28, 1987), Judge Kram indicated that a claim of piercing the corporate veil could be entertained if it would not unduly complicate the action of the court with respect to the arbitration award.
It would appear to be entirely reasonable in the present case to allow OPIC to proceed with its claim against Kell. The petition to confirm the arbitration award against MSC has already been decided and judgment will be entered forthwith. The cause of action against Kell will proceed in effect as a separate action. The parties will be able to assert all relevant claims and defenses as they would in a separate action. It should be noted that, if this were considered to be a separate action by OPIC against Kell, there would be subject matter jurisdiction and venue would properly lie in this district. No purpose would be served by dismissing this case as against Kell and forcing OPIC to go through the formality of bringing a new action.
Kell's motion to dismiss the claim against him is denied.
Conclusion
OPIC's motion for default judgment against MSC is granted. OPIC's arbitration award against MSC is confirmed and judgment will be entered forthwith in accordance with this opinion. Kell's motion to dismiss is denied.
Settle judgment.
SO ORDERED.