Opinion
96 Civ. 2166 (RPP)
August 30, 2001
OPINION AND ORDER
Plaintiffs Thypin Steel Company ("Thypin") and Donbakraft, Ltd. ("Donbakraft") move to increase the amount of bond posted by Defendant Asoma Corporation ("Asoma") from $700,000 to $1,052,969, plus an amount sufficient to cover interest and costs on the grounds that an increase in the amount of the bond is authorized by Rule E(6) of the Supplemental Rules for Certain Admiralty and Maritime Claims ("Supplemental Rules"). Alternatively, Thypin moves to increase the amount of the posted bond on the grounds that the current security has become inadequate and therefore an increase is required under the equitable doctrine of unjust enrichment. Asoma opposes Plaintiffs motion on the grounds that it is baseless and contrary to established case law, which holds that the amount of the bond may be increased only in extraordinary circumstances of fraud or misrepresentation. In a separate motion, Thypin moves for partial summary judgment against Asoma's counterclaim for wrongful arrest of the bills of lading. Additionally, Thypin moves the Court to release it from its $30,000 bond securing Asoma for costs. For the reasons that follow, Plaintiffs' motion to increase Asoma's bond is denied; Thypin's motion for summary judgment is granted; and Thypin's motion to be released from its bond is granted.
This case has a long and complicated procedural history. The following is a brief summary of the facts underlying this ease as set forth in earlier opinions and orders of this Court and the Second Circuit. See Thypin Steel Co. v. Asoma Corp., 215 F.3d 273 (2d Cir. 2000); Thypin Steel Co. v. Asoma Corp., 113 F.3d 1230 (2d Cir. 1997);Thypin Steel Co. v. Certain Bills of Lading, No. 96 Civ. 2166 (RPP), 1999 WL 108728 (S.D.N.Y. Mar. 3, 1999); Thytin Steel Co. v. Certain Bills of Lading, No. 96 Civ. 2166 (RPP), 1998 WL 912100 (S.D.N.Y. Dec. 28, 1998);Thypin Steel Co. v. Certain Bills of Lading, No. 96 Civ. 2166 (RPP), 1996 WL 223896 (S.D.N.Y. May 1, 1997).
By a verified admiralty complaint dated March 25, 1996, Thypin brought an in rem action in this Court under Supplemental Rule D claiming ownership of bills of lading covering a cargo of 3017 metric tons of steel plate en route from Ukraine to Houston. Thypin alleged that it had contracted with Donbakraft to purchase 20, 000 metric tons of steel plate conforming to certain specifications, and that Donbakraft had contracted with J.V. Fistag-Victoriya ("Fistag"), whereby Donbakraft was to be supplied with the steel called for in its contract with Thypin. Thypin further alleged that Donbakraft had assigned the contract with Fistag to Thypin and that an advanced payment of over two million dollars had been made by Thypin, together with Donbakraft, to Fistag for the steel. Thypin claimed that 3017 tons of steel matching the specifications it had contracted for was delivered by an affiliate of Fistag to the master of the M/V Geroi Panfilovsky, the vessel chartered by Metall and Rohstoff, A.G. ("Metall"), a Swiss trading company, to transport the steel and that a bill of lading was issued by the master of the vessel naming Fistag as shipper and Metall "to order of Donbakraft" as consignee. The bill of lading was never endorsed by Donbakraft, but instead by Metall to Asoma, which held the bill at the commencement of this action.
On March 26, 1996, this Court issued an ex parte order authorizing a warrant for the arrest of the bill of lading. On March 28, April 4 and 11, 1996, the Court held post-arrest evidentiary hearings pursuant to Rule E(4)(f) of the Supplemental Rules. At the post-arrest hearing, Asoma produced a purported release by Donbakraft of its interest in the bill. However, this Court found that there was a serious question whether the release was genuine. In an opinion and order dated May 1, 1996, this Court found that admiralty jurisdiction existed, that the arrest of the bill of lading was supported by reasonable grounds, and that Thypin was entitled to discovery before a final determination of its claim. Thypin Steel Co. v. Certain Bills of Lading, No. 96 Civ. 2166 (RPP), 1996 WL 223896 (S.D.N.Y. May 1, 1997).
On April 3, 1996, Asoma filed its formal claim to the bill of lading, an answer denying Thypin's allegations, and a counterclaim, which is the subject of Thypin's motion for partial summary judgment. The counterclaim alleges the wrongful arrest of the bill of lading and requests damages in the amount of $868,692.99 for the cost of cargo plus interest, costs and attorney's fees. (See Pl.'s Stint. of Facts Pursuant to Local Rule 56.1 ("Pl.'s 56.1") Ex. B ¶ 5-6.) On April 18, 1996, Thypin filed its answer to Asoma's counterclaim, denying the allegations and setting forth affirmative defenses.
On May 2, 1996, a conference was held to determine the amount that Aoma would post as a bond to secure the release of the bill of lading. The parties agreed without any input from the Court that the bond price should be based on Thypin's purchase price less transportation costs. (Pl.'s Mem. in Supp. of Motion to Increase the Amount of the Bond at 2.) They agreed that the net cost for the cargo was $700,000, after subtracting $141,000 in transportation costs from the $840,000 purchase price. (Id.) In an order dated May 2, 1996, this Court accepted the parties stipulated amount of the bond and ordered that: (1) Asoma Corporation shall post a release bond in the amount of $700,000 plus interest and costs; (2) the United States Marshal shall release the Bill of Lading to Asoma Corporation upon filing of the aforementioned bond; and (3) Thypin Steel Company shall post a surety bond in the amount of $30,000 plus interest to secure Asoma Corporation for costs. (Pl.'s 56.1 Ex. D.) Thypin posted its bond on May 10, 1996. Asoma secured the release of the bill of lading on May 21, 1996. In late May 1996, the vessel M/V Geroi Panfilovsky arrived in Houston and discharged the cargo of steel. Asoma subsequently delivered the cargo to two non-party customers, Sunbelt Trading Company and Intsel Southwest, for a total price of $1,052,969.
On May 30, 1997, Thypin filed an amended complaint, adding Donbakraft as a plaintiff and adding several in personam claims. Defendants moved to dismiss the complaint and on December 28, 1998, this Court dismissed allin personam claims, leaving only the in rem claim. This Court also certified for immediate appeal the issue of whether admiralty jurisdiction existed in the in rem claim.
On May 25, 2000, the Second Circuit affirmed this Court's finding of admiralty jurisdiction. Thypin Steel Co. v. Asoma Corp., 215 F.3d 273 (2d Cir. 2000). Additionally, in response to Asoma's appeal of the attachment of the bills of lading, the Court of Appeals found that the bills had been properly attached under Supplemental Rule D.Id. at 282-83.
On April 10, 2001, Thypin moved for summary judgment on Asoma's counterclaim and further moved to release Thypin from its bond previously filed to secure Asoma's costs on the counterclaim. On June 4, 2001, Plaintiffs moved for an increase in the amount of Asoma's release bond.
Plaintiffs' Notice of Motion for Summary Judgment indicates that both Thypin and Donbakraft are moving for summary judgment against Asoma's counterclaim for the release of the $30,000 bond. However, as Asoma only names Thypin in its counterclaim and since only Thypin was ordered to post a bond, both motions will be construed as being brought by Thypin alone.
Discussion
I. Motion to Increase the Amount of the Release Bond
Thypin and Donbakraft move to increase the amount of the bond posted by claimant Asoma Corporation in connection with the release of the bill of lading that was arrested pursuant to Rule E of the Supplemental Rules. Plaintiffs contend that they did not know the true market value of the cargo until discovery subsequent to the fixing of the bond price revealed that Asoma sold the cargo for $1,052,969. (Kuffler Aff. ¶ 4.) Plaintiffs also contend that had they known the true market value of the cargo, they would not have agreed to the $700,000 bond price that was based on Plaintiffs' purchase price of the cargo, less the transportation costs. Plaintiffs therefore suggest that Asoma acted improperly in withholding this information because it was available to Asoma at the time the parties negotiated the price of the bond. It is clear however that Plaintiffs and Plaintiffs' counsel knew that Asoma, a metals trader, had arranged for the sale of the cargo and had ample opportunity to ask Asoma about the sales price. (Kingsley Decl. ¶ 3.) Asoma points out that Plaintiffs had an opportunity at the post-arrest hearing on March 28, 1996 to cross examine John Farkas, Senior Vice President of Asoma Corporation ("Farkas"). Asoma also states that Plaintiffs requested that the amount of the bond be based on Plaintiffs' purchase price of the cargo, less transportation costs. (Kingsley Decl. ¶ 2.)
Under Supplemental Rule E(6), "[w]henever security is taken, the court may, on motion and hearing, for good cause shown, reduce the amount of security given; and if surety shall be or become insufficient, new or additional sureties may be required on motion and hearing." Although Supplemental Rule E(6) gives no clear guidance as to what constitutes the insufficiency required in order for a court to order new or additional sureties, courts that have looked at this question have held that the grounds needed for an increase in the bond amount are "fraud, misrepresentation or mistakes sufficient to justify the [vessel's] rearrest . . . . A mistake sufficient to justify rearrest requires that it be tinged with fraud or misrepresentation or that it be the mistake of the court and not that of the claimant." Industria Nacional Del Papel. CA. v. M/V Albert F., 730 F.2d 622, 626 (11th Cir. 1984) (quoting Moore's Federal Practice, § E.14 at E| 710-11 n. 30 (2d ed. 1983)); see also Maritima Antares. S.A. v. Vessel ESSI Camilla, 633 F. Supp. 694, 695-96 (E.D. Va. 1986) (plaintiff, who had accepted a letter of undertaking ("LOU"), which is equivalent to the payment of security, in exchange for not arresting defendant's vessel, could not later seek arrest of vessel on the ground that the LOU was insufficient security absent showing of fraud or misrepresentation); L L Marine Transp., Inc. v. M/V Hokuetsu Hope, 895 F. Supp. 297, 301 (S.D. Ala. 1995) (Plaintiffs motion for new or additional security was denied where there was no evidence of fraud or misrepresentation and the mistake was that of the Plaintiff in underestimating the severity of the damage to the M/V AMY ANN and not a mistake of the court); J.K. Welding Co. v. Gotham Marine Corp., 47 F.2d 332, 335 (S.D.N.Y. 1931) ("A stipulation for value cannot, therefore, be lightly set aside. Fraud, which is not here involved, is, of course, a reason for so doing, but a unilateral mistake, such as a statement of the libelant's claim at too small a figure, is not such a reason.").
Plaintiffs assert that existing case law from other circuits is not binding on this Court and that the Eleventh Circuit's interpretation of Supplemental Rule E(6) as requiring fraud or misrepresentation is incorrect. However, this Court should look to other circuits for persuasive authority Additionally, in Cent. Hudson Gas Electric Corp. v. The M/V Lunamar II, a judge in this Court denied a motion to increase security under Supplemental Rule E(6) where there was a negotiated contract between the parties that the Court played no role in and there was no allegation of fraud, misrepresentation or mistake of the court. Cent. Hudson Gas, No. 88 Civ. 0359, 1991 AMC 1667, 1668 (S.D.N.Y. 1991). The plaintiffs argument was that in January of 1998 it was in no position to make a bottom-line assessment of what its damages ultimately would be, but this was something "it knew in January of 1988 when it was negotiating, and presumably it could have negotiated for more of a cushion in the letter of undertaking." Id.
Lang v. Elm City Const. Co., 217 F. Supp. 873, 877 (D. Conn. 1963) ("While the decision of the Third Circuit in Corabi is not controlling on this Court, it is persuasive and will be followed, absent a decision on the question by the Supreme Court or the Second Circuit."); Hardy v. Rossell. 135 F. Supp. 260, 266 (S.D.N.Y. 1955) ("[W]e are confronted with the contrary view of a higher authority, namely that of the Court of Appeals for the First Circuit. In the absence of an opposing view from our own Court of Appeals we feel obliged to abide by the conclusion reached in the First Circuit. (footnote omitted)).
Since the parties in this case agreed on the bond amount without the Court's intervention and since there is no evidence of fraud or misrepresentation on Asoma's part, the Court denies Plaintiffs' motion for an increase in the amount of the bond based on Supplemental Rule E(6).
Plaintiffs' alternative argument that the Court has power to increase the bond under the theory of unjust enrichment is equally flawed. Unjust enrichment is a form of equitable relief based on the general principle that "one person should not be permitted unjustly to enrich himself at the expense of another, but should be required to make restitution of or for property or benefits received, retained or appropriated, where it is just and equitable that such restitution be made." Allstate Ins. Co. v. Administratia Asigurarilor De Stat, 948 F. Supp. 285, 312 (S.D.N.Y. 1996) (quoting Black's Law Dictionary 1377 (5th ed. 1979)). Unjust enrichment is generally applicable "where there is no contract between the parties . . . and where the party sought to be charged for contribution, has money which it should not retain, but should under equitable principles turn over to another." Md. Cas. Co. v. W.R. Grace Co., 218 F.3d 204, 212 (2nd Cir. 2000).
In this case, Plaintiffs received the benefit of the bargain for which they negotiated. Thypin and Asoma agreed that the amount of the cargo should reflect Thypin's purchase price less transportation costs that Thypin would have paid regardless. After Thypin calculated this amount and agreed to the bond price of $700,000, Asoma secured the bond per the parties' agreement. Plaintiffs have cited no cases in which the amount of a bond under Supplemental Rule E(6) has been increased absent fraud, misrepresentation or mistake of the court. Additionally, the parties have contracted on this very issue, and "a claim for unjust enrichment cannot be predicated on conduct that is governed by a contractual relationship between the parties." Boule v. Hutton, 138 F. Supp.2d 491, 510 (S.D.N.Y. 2001) (citing Md. Cas.Co., 218 F.3d at 212). Therefore, this is not an appropriate case to grant equitable relief.
Plaintiffs have not provided evidence of fraud or misrepresentation to satisfy Supplemental Rule E(6) in this case. In addition, Plaintiffs have not presented evidence of unjust enrichment that would justify this Court's granting of equitable relief. Therefore, the Court denies Plaintiffs' motion to increase the amount of the bond.
II. Motion for Summary Judgment as to Asoma's Counterclaim for Wrongful Arrest
Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). "[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
For a claim of wrongful arrest, the burden is on the party pressing the claim to demonstrate that the arresting party acted with bad faith, malice, or gross negligence. See Result Shipping Co. v. Ferruzzi Trading USA. Inc., 56 F.3d 394, 402 n. 5 (2d Cir. 1995); Furness Withy (Chartering), Inc. v. World Energy Sys. Assoc., 854 F.2d 410, 411 (11th Cir. 1988); Frontera Fruit Co. v. Dowling, 91 F.2d 293, 297 (5th Cir. 1937). This showing of bad faith, malice, or gross negligence is an essential element to a claim for wrongful arrest. See, e.g., Parsons. Inc. v. Wales Shipping Co., 1986 WL 10282, at 3 (S.D.N.Y. Sept. 9, 1986) (dismissing a counterclaim for wrongful attachment due to counterclaimant's failure to demonstrate bad faith); see also Frontera Fruit Co., 91 F.2d at 297 ("The gravamen of the right to recover damages for wrongful seizure or detention of vessels is the bad faith, malice, or gross negligence of the offending party.").
In moving for summary judgment, Thypin argues that this Court's conclusion that "the arrest of the Bill of Lading ordered on March 26, 1996 has been supported by reasonable grounds," Thypin Steel Co. v. Certain Bills of Lading, 96 Civ. 2166 (RPP), 1996 WL 223896, at 5 (S.D.N.Y. May 2, 1996), and the Second Circuit's holding that "we see no error in [Thypin's] arrest of the bill of lading pursuant to Rule D,"Thypin Steel Co. v. Asoma Corn., 215 F.3d 273, 283 (2d Cir. 2000), necessarily establish that Thypin did not act in bad faith, or with malice or gross negligence, and that Asoma's counterclaim should therefore be dismissed. (Pl.'s Br. at 3| 5.) In response, Asoma argues that these are only preliminary findings that in no way precludes Asoma from making a showing that Plaintiffs acted with "bad faith, malice, or gross negligence" in obtaining the arrest. (Def.'s Br. at 1-2). However, these arguments are unnecessary. As Asoma has now completed discovery, and has offered no proof of its allegation that Thypin acted with bad faith, malice or gross negligence, or any evidence that it could prove these allegations, it has made no showing sufficient to overcome the motion for summary judgment.
Asoma's argument in resisting summary judgment rests on a request for more time to conduct discovery. Asoma claims that it believes "it could very well be in a position to show that [Thypin] knew at the time of the arrest that Asoma was properly in possession of the bill of lading." (Asoma Br. at 4.) However, Asoma has not submitted any evidence it may have already found tending to support such a claim at trial and Asoma does not identify any witness who might provide such evidence. A full and fair opportunity for discovery has been provided and Asoma has not set forth any reasonable basis for additional discovery. Under these circumstances the Court will not order additional discovery. See Demery v. Extebank Deferred Compensation Plan (B), 216 F.3d 283, 286 (2d Cir. 2000) (holding that a district court did not abuse discretion by granting summary judgment without granting additional discovery where nonmoving party failed to delineate what discovery they needed to pursue and how it would raise an issue of material fact). Since the nonmoving party has failed to make a sufficient showing on an essential element of their case, the moving party is entitled to summary judgment. Thypin's motion to dismiss the counterclaim is granted.
III. Motion to Release Thypin's Security Bond
Thypin argues that as Asoma cannot prevail on the counterclaim for wrongful arrest, such that Thypin is entitled to summary judgment on that claim, then there is no longer any need for Thypin to post a bond to secure Asoma's costs on the counterclaim. Asoma argues in response that Thypin is not entitled to summary judgment dismissing Asoma's counterclaim, and therefore there is no basis for granting its motion to release the bond. As summary judgment has been granted, and both parties agree the bond was security for Asoma's counterclaim, Plaintiffs motion to release the bond is also granted.
Conclusion
For the reasons stated above, Thypin's motion to increase the amount of the bond is DENIED; Thypin's motion for summary judgment against Asoma's counterclaim is GRANTED; and Thypin's motion for release of the bond securing Asoma for costs is GRANTED.