VALERIE CAPRONI, District Judge.
On November 7, 2014, one of the world's largest suppliers of shipping fuel, O.W. Bunker & Trading A/S, and certain of its Danish subsidiaries and affiliates filed for bankruptcy in Denmark following significant risk management losses and the revelation of internal fraud. That filing set off a cascading series of other bankruptcies across the globe by other O.W. Bunker & Trading A/S subsidiaries and affiliates (together with O.W. Bunker & Trading A/S, the "O.W. Entities"). On November 13, 2014, O.W. Bunker USA, Inc., O.W. Bunker Holding North America Inc., and O.W. Bunker North America Inc. (the "U.S. Debtors") filed voluntary petitions for Chapter 11 relief in the United States Bankruptcy Court for the District of Connecticut (the "Bankruptcy Court"). Those cases are jointly administered under the caption In re O.W. Bunker Holding North America Inc., Case No. 14-51720 (AHWS) (Bankr. D. Conn. filed Nov. 13, 2014). On November 20, 2014, UPT Pool Ltd. v. Dynamic Oil Trading (Singapore) Pte. Ltd. et al., 14-CV-9262 (VEC), an interpleader action arising out of payments owed for fuel bunkers purchased through the U.S. Debtors prior to November 13, 2014, was filed in this Court. Since then, twenty-five (and counting) other interpleader actions involving fuel bunker transactions made through an O.W. Bunker Entity (the "Interpleader Actions") have been filed in or transferred to the Southern District of New York and referred to this Court as related to the UPT Pool Ltd. action.
Together, the Interpleader Actions present interesting and apparently novel questions regarding the interplay among United States bankruptcy law, maritime law and the federal interpleader statutes. While each case involves different parties, slightly different facts, and, to some extent, unique legal issues, an overarching question presented in all of the cases is whether this Court has subject matter jurisdiction over the Interpleader Actions. After reviewing the various submissions addressing this issue, the Court finds that it has subject matter jurisdiction over the Interpleader Actions.
The Plaintiffs in the Interpleader Actions
Further complicating matters, pursuant to an Omnibus Security Agreement dated December 19, 2013 (the "2013 Security Agreement"), certain O.W. Entities allegedly assigned their rights in respect of certain supply contracts, including many of the fuel supply contracts at issue here, as security to ING Bank N.V. ("ING"). As a result, ING claims that, rather than paying the O.W. Entities with whom the Plaintiffs (or their brokers) contracted, Plaintiffs should remit payments owed for the provision of shipping fuel directly to ING. Plaintiffs have, in many cases, received competing demands for payment from the O.W. Entities, Fuel Suppliers and ING, thereby potentially exposing them to triple liability. In other cases, Plaintiffs have received multiple demands for payment of the same invoice from different O.W. Entities based on intercompany debts and claims that have yet to be resolved.
While it might make perfect sense to a U.S. bankruptcy practitioner to advise the creditors of a bankrupt company to wait in line with the other creditors for the Chapter 11 case to proceed, certain Fuel Suppliers believe that their rights under maritime law do not relegate them to standing patiently in line with all of O.W. Bunker's other unsecured creditors in the U.S. bankruptcy proceedings. As the providers of "necessaries" to maritime Vessels, the Fuel Suppliers believe that they have maritime liens that can be enforced directly against the Vessels, including by arrest, in order to collect the sums due, regardless of whether Plaintiffs have already paid the contractually-owed amounts to the O.W. Entities with whom they or their brokers contracted. Because the O.W. Entities also believe that they have maritime liens protecting their right to payment, the Plaintiffs' quandary is clear: they are more than happy to pay for the fuel bunkers they received, but they do not want—and this seems imminently reasonable—to be required to pay more than 100% of the value of the bunkers as their Vessels are arrested seriatim by each claimant that is owed money for the bunkers.
To avoid a "Sophie's Choice" between, on the one hand, having their Vessels arrested or, on the other hand, being forced to pay or post bonds to secure double or triple the amounts for which they originally contracted, Plaintiffs have sought relief from this Court under the federal interpleader statutes, which are specifically designed to protect stakeholders facing multiple claims for a single obligation. In most cases, the Court has granted Plaintiffs leave to deposit into the Court's Registry a bond or cash deposit equal to the full amount owed on their fuel supply contracts, plus 6% interest for the first year. See, e.g., Order, SHV Gas Supply & Risk Management SAS et al. v. O.W. Bunker USA, Inc. et al., 14-CV-9720 (VEC) ("SHV Gas") (S.D.N.Y. Dec. 11, 2014), Dkt. 11.
In conjunction with the deposit orders, the Court has, in most cases, granted Plaintiffs' motions for the entry of restraining orders pursuant to 28 U.S.C. § 2361, which generally enjoin Defendants from:
See, e.g., Order, SHV Gas, (S.D.N.Y. Dec. 11, 2014), Dkt. 12. The restraining orders further provide that "any claimant may, upon proper motion allowing adequate time for briefing, request that this Order be set aside or modified." Id.
In responding to the Interpleader Actions, the O.W. Entities, Fuel Suppliers and ING have asserted various arguments and defenses. Following an omnibus conference on December 18, 2014, during which counsel for various parties raised issues relating to, inter alia, this Court's jurisidiction, the Court directed the parties to brief "whether it is proper for the Court to permit [the Vessel Interests] to initiate interpleader actions with injunctive relief under circumstances where the vessel at issue has not yet arrived, and is not scheduled to imminently arrive, at a port in the district." Order, SHV Gas, (S.D.N.Y. Dec. 19, 2014), Dkt. 21 (the "December 19 Order").
Because no party was able to find a case raising the unique issues presented here (i.e., an interpleader action where one or more claimants are in bankruptcy, and the bankrupt entities and other claimants are asserting maritime lien claims for the same supply of goods to a vessel), on February 20, 2015, the Court directed the parties to brief further the question of whether the Court has subject matter jurisdiction over these actions. Order, SHV Gas, (S.D.N.Y. Feb. 20, 2015), Dkt. 77. On February 27, 2015, Nustar Energy Services Inc. and U.S. Oil Trading LLC (the "Objecting Claimants") submitted a joint brief arguing that the Court lacks subject matter jurisdiction because the requirements of 28 U.S.C. § 1335 have not been met. Mem. of Law By Nustar Energy Services and U.S. Oil Trading LLC Pursuant to the Court's Feb. 20, 2015 Order, SHV Gas, (S.D.N.Y. Feb. 27, 2015), Dkt. 80 (the "Objecting Claimants' Brief"). Based on that premise, they argue that 28 U.S.C. § 2361 does not authorize the Court to enjoin Defendants from enforcing their maritime lien claims. Id. On March 6, 2015, the Vessel Interests and U.S. Debtors filed separate briefs arguing that this Court does have subject matter jurisdiction. Plaintiffs' Joint Mem. of Law Pursuant to the Court's Order Dated Feb. 20, 2015 Concerning This Court's Subject Matter Jurisdiction, SHV Gas, (S.D.N.Y. Mar. 6, 2015), Dkt. 82; Mem. of Law by O.W. Bunker Holding N. Am. Inc. et al. Pursuant to the Court's Order Dated Feb. 20, 2015, SHV Gas, (S.D.N.Y. Mar. 6, 2015), Dkt. 83 (the "U.S. Debtors' Brief").
Four federal statutes are critical to the analysis of this Court's subject matter jurisdiction: 28 U.S.C. § 1333, 28 U.S.C. § 1335, 28 U.S.C. § 2361 and 46 U.S.C. § 31341.
Section 1333 of Title 28 provides the statutory basis for the Court's admiralty and maritime jurisdiction.
Section 1335 of Title 28, the statutory basis for interpleader, is "remedial and to be liberally construed." State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 533 (1967). A district court has subject matter jurisdiction over an interpleader action under 28 U.S.C. § 1335 when an interpleading party is "under any obligation written or unwritten to the amount of $500 or more," if there is minimal diversity of citizenship among adverse claimants who "are claiming or may claim to be entitled to such money or property." 28 U.S.C. § 1335(a). The "action may be entertained although the titles or claims of the conflicting claimants do not have a common origin, or are not identical, but are adverse to and independent of one another." 28 U.S.C. § 1335(b). An interpleader action is proper even when the interpleading party is not "wholly disinterested" or faces independent claims that "aris[e] out of distinct and unrelated legal obligations" and potentially exceed the value of the fund. Ashton v. Josephine Bay Paul and C. Michael Paul Foundation, Inc., 918 F.2d 1065, 1069 (2d Cir. 1990) (citations omitted). To commence an interpleader, the interpleading party must deposit the property, money or amount due under the obligation that is the subject matter of the action into the registry of the court (or provide a bond for the same). 28 U.S.C. § 1335(a). The "effect of interpleader is to confine the total litigation to a single forum and proceeding." State Farm Fire & Casualty Co., 386 U.S. at 534.
In order to ensure the litigation is actually confined to a single forum, 28 U.S.C. § 2361 authorizes a district court to restrain all claimants in the interpleader action from "instituting or prosecuting any proceeding in any State or United States court affecting the property, instrument or obligation involved in the interpleader action until final order of the court." See Treinies v. Sunshine Mining Co., 308 U.S. 66, 74 (1939) (an anti-suit injunction is "essential to the protection of the interpleader jurisdiction"). The Court may enjoin claimants from litigating claims based on independent legal theories (whether or not actions have been commenced in other forums) and thereafter can enjoin permanently the interpleader defendants' prosecution of those claims. Ashton, 918 F.2d at 1069-70 (quoting New York Life Ins. Co. v. Connecticut Development Auth., 700 F.2d 91, 96 (2d Cir. 1983)).
Finally, under 46 U.S.C. § 31342, any entity that supplies a vessel with "necessaries," such as shipping fuel, "on the order of the owner or a person authorized by the owner" has a maritime lien on the vessel and is entitled to bring a civil action in rem to enforce that lien. "Unlike other security arrangements, the maritime lien is for the benefit of both the ship and its creditors." Itel Containers Int'l Corp. v. Atlanttrafik Express Serv. Ltd., 982 F.2d 765, 768 (2d Cir. 1992). "On the one hand, it enables ships to obtain repairs and supplies on its own account that might not otherwise be available." Id. (citing Piedmont & George's Creek Coal C. v. Seaboard Fisheries Co., 254 U.S. 1, 9 (1920)). "On the other hand, it gives the creditor a special property in the ship, which subsists from the moment the debt arises, and it gives him a right to have the ship sold so that his debt may be paid out of the proceeds of the sale. It is a right in the vessel, a jus in re." Id. (citations and internal quotations omitted).
Because the claims raised in the Interpleader Actions relate to the provision of necessaries to Vessels resulting in the purported creation of maritime lien claims and potential in personam claims based on maritime contracts, no party disputes that the Interpleader Actions are properly brought pursuant to the Court's admiralty and maritime jurisdiction.
The Objecting Claimants argue that the Court lacks subject matter jurisdiction to adjudicate their statutory in rem claims against the Vessels under 28 U.S.C. § 1335 and that the Court lacks authority under 28 U.S.C. § 2361 to enjoin them from enforcing their in rem claims against the Vessels. Obj. Claimants' Br. at 2. The fulcrum of their argument is that their in rem claims against the Vessels are "separate and distinct" from any in personam claims against the Vessel Interests and therefore are not amenable to resolution as part of an interpleader, which requires adverse claims arising out of a single obligation. Id. Because (they argue) only the Vessel Interests' in personam obligations are the proper subject of the Interpleader Actions, the Court lacks authority to enjoin the commencement of in rem proceedings in other jurisdictions. Id. In support of this position, the Objecting Claimants argue that the funds or bonds deposited in the Court's registry satisfy only the Vessel Interests' in personam obligations but not the Vessels' in rem obligations, which can only be satisfied by the Vessels themselves "or the amount due under the [V]essels' separate and distinct obligations in rem to pay defendants for the bunker fuel delivered to the [V]essels." Id. at 3. In addition, the Objecting Claimants argue that the Court could not adjudicate the in rem claims against the Vessels in any event because, in many cases, the Vessels were never arrested or present in this jurisdiction and the Objecting Claimants did not consent to substitute the amounts on deposit for the res that are the subjects of their maritime liens. Id. at 2. Finally, the Objecting Claimants argue that because their in rem claims against the Vessels are not the "obligations" involved in the Interpleader Actions and the Vessels are not parties to the Interpleader Actions, an injunction preventing them from enforcing their in rem claims by arresting Vessels in other jurisdictions exceeds the Court's authority under 28 U.S.C. § 2361.
The Objecting Claimants' argument that their in rem claims against the Vessels are "separate and distinct" from the in personam claims against the Vessel Interests is without merit. Both the Objecting Claimants' in rem claims against the Vessels as well as any in personam claims that they or others may ultimately choose to assert against the Vessel Owners spring from a single event: the Objecting Claimants' provision of fuel to the Vessels pursuant to a contract, or series of contracts, between or among the Objecting Claimants, O.W. Entities, Vessel Interests and, in some cases, other third-party brokers. When the O.W. Entities commenced bankruptcy proceedings and the Objecting Claimants found themselves in a sea of unsecured creditors, the Objecting Claimants looked for a better solution. While they are unsecured creditors of the O.W. Entities, they are effectively secured creditors of the non-bankrupt Vessel and, therefore, in a position to exert tremendous leverage against the Vessel Interests, whose only mistake was to purchase fuel through an O.W. Entity in the weeks preceeding the company's unexpected and rapid demise. It did not take a brilliant legal strategist to figure out that, in lieu of standing in line in the Chapter 11 proceeding, the Objecting Claimants could jump that line by proceeding directly against the Vessel, in rem, pursuant to 46 U.S.C. § 31342 to collect the amounts due.
But because there is only one underlying debt, any interpleaded in personam claims against the Vessel Interests are merely alternative procedural devices to obtain the same relief as would be obtained by arresting the Vessel. See Rule C of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions ("Rule C")(1)(b). "Under the admiralty law of the United States, in personam and in rem actions may arise from the same claim, and may be brought separately or in the same suit." Belcher Co. of Alabama, Inc. v. M/V Maratha Mariner, 724 F.2d 1161, 1164 (5th Cir. 1984) (citing Rule C(1)(b)). Cf. Burns Bros. v. the Central R.R. of New Jersey, 202 F.2d 910, 912-13 (2d Cir. 1953) (Hand, J.) (even if a plaintiff has a right to bring an admiralty action in rem or a suit in personam as "alternative remedies" against different defendants, there is only one "cause of action" when there is a single "interest invaded" (internal quotations omitted)).
Indeed, the Complaints filed in these actions note the existence of both competing in personam and in rem claims arising out of the fuel transactions at issue; the restraining orders likewise recognize that interpleader relief is necessary to protect the Vessel Interests from "multiple litigation against [the Vessel Interests] for the same [in personam] claim and against the Vessel in rem for payment of the same fuel bunker delivery." See, e.g., Order, SHV Gas, (S.D.N.Y. Dec. 11, 2014), Dkt. 12. And significantly, the Objecting Claimants and other Fuel Suppliers are not the only entities asserting that the unpaid fuel bunker invoices give rise to maritime lien claims against the Vessels in rem. The U.S. Debtors have also asserted maritime lien claims against the Vessels,
The Objecting Claimants contend that the "obligations" of the Vessels are distinct from the "obligations" of the Vessel Interests. Obj. Claimants' Br. at 5. That argument fails for the same reasons. "The in rem liability of a ship is a fiction; the reality is that the owner, not the vessel, pays the judgment." Insurance Co. of N. America v. S/S American Argosy, 732 F.2d 299, 302 (2d Cir. 1984). The source of the obligations owed by the Vessel Interests and the Vessels,
The Objecting Claimants cite S.E.L. Maduro (Florida), Inc. v. M/V Antonio de Gastaneta, 833 F.2d 1477 (11th Cir. 1987), to illustrate the distinction between the obligations of a vessel in rem and a vessel owner in personam. Obj. Claimants' Br. at 3-5. The distinct obligations of the vessel and vessel owner in that case are of a completely different nature than those of the Vessels and Vessel Interests alleged here. In S.E.L. Maduro, the plaintiff ("Maduro") had brought contractual claims in personam against the vessel owner ("Naviera Gorbea") in a prior suit: one claim alleged breach of an agreement to pay the debt of a charterparty for the supply of necessaries and the other alleged fraudulent inducement to the agreement. 833 F.2d at 1481-82. The jury found for Naviera Gorbea on the breach of contract claim. Id. The Eleventh Circuit held that res judicata did not bar a subsequent action in rem against the vessel to enforce a maritime lien because the "primary right at stake" in the breach of contract claim was "not the same as the primary right at stake" in the in rem claim. Id. at 1482. The court explained that "an action on a shipowner's promise to pay the debt of the vessel is different from an action against the vessel to recover the value of services rendered" because "the lien attaches to the vessel even if the vessel owner has not personally contracted." Id.
Here, there were no contractual agreements to pay the debts of the Vessels separate and apart from the underlying fuel supply contracts that give rise to the maritime liens and, by extension, the in rem claims against the Vessels and the in personam claims against the Vessel Interests. See Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 107 (2d Cir. 2002) (where in personam claim against vessel owner failed in arbitration, plaintiff could not proceed in rem against the vessel on the same underlying claim because the "[t]he in rem claim serves as a way of making sure that a plaintiff can recover"); accord Continental Grain Co. v. The FBL-585, 364 U.S. 19, 25-26 (1960) (noting in dicta that courts often ignore the fiction of in rem liability in applying the doctrine of res judicata as between an in personam action against an owner and an in rem action against his ship) (citations omitted); Burns Bros., 202 F.2d at 913 ("a decree in rem is a bar to a suit in personam," and the rule "work[s] both ways" because "[d]isputes arise between human beings, not inanimate things; and it would be absurd to give the beaten party another chance because on second trial he appears as the claimant to a vessel that is, and can be, nothing but the measure of his stake in the controversy."). Cf. Central Hudson Gas and Electric Corp. v. Empresa Naviera Santa, S.A., 845 F.Supp. 150, 152-53 (S.D.N.Y. 1994) (holding that res judicata did not bar an in personam suit against a charterer to collect unpaid portions of an in rem judgment against the vessel for which the charterer was responsible).
The in rem nature of the claims against the Vessels does not affect the Court's subject matter jurisdiction under Section 1335. "It is well-settled that subject matter jurisdiction and in rem jurisdiction are distinct." Kristensons-Petroleum, Inc. v. Sealock Tanker Co., Ltd., 304 F.Supp.2d 584, 589 (S.D.N.Y. 2004) (citation omitted). "Accordingly, any purported absence of in rem jurisdiction would not vitiate subject matter jurisdiction" if it otherwise existed. Id. On this point, Kristensons-Petroelum is instructive. In Kristensons-Petroleum, the plaintiff Kristens-Petroleum, Inc. ("KPI") supplied fuel bunkers to the vessel M/T Blanc pursuant to fuel supply contracts with Sealock Tanker Co., Ltd. ("Sealock"), the charterer of M/T Blanc. Id. at 586. When Sealock failed to pay for the bunkers, KPI initiated in rem proceedings against the M/T Blanc in Belgium by obtaining an order from a Belgian court authorizing the arrest of the vessel to enforce a maritime lien pursuant to United States general maritime law. Id. The vessel was arrested, and Blanc Navigation ("Blanc"), the owner of the M/T Blanc, issued a bank guarantee to obtain the release of the vessel and challenged KPI's claim in proceedings in Belgium. Id. at 586-87.
Meanwhile, KPI initiated an in personam proceeding in this district against Sealock for breach of contract. Id. at 587. When Sealock failed to answer or appear, the court granted Blanc's motion to intervene. Id. Blanc answered and counterclaimed for a declaration that KPI did not posses a maritime lien under the fuel supply contracts and had no right to proceed in rem against the M/T Blanc by arrest in Belgium. Id. KPI moved to dismiss the counterclaim, in part because the court lacked in rem jurisdiction over the vessel. Id. The court explained that the counterclaim did not "rely on the existence of in rem jurisdiction and that "the in rem jurisdictional requirements [were] inapplicable" because:
Id. at 589-90. The same is true here. In the context of the Interpleader Actions, the Interpleader Actions are not actions to "enforce" maritime liens against the Vessels, although it is certainly within the Court's admiralty jurisdiction to determine, in the context of the Interpleader Actions, whether such liens are valid. In rem jurisdiction over the Vessels is irrelevant in actions to declare the validity and priority of competing maritime liens brought by the vessel owner or charterer.
Because all of the requirements of 28 U.S.C. § 1335 are satisfied, the Court has subject matter jurisdiction to adjudicate the claims in each of the Interpleader Actions.
If interpleader jurisdiction is proper under Section 1335, then the Court may restrain all "claimants" from instituting or prosecuting any proceeding that may "affect" the subject matter of the interpleader to "protect the stakeholder from vexatious and multiple litigation." State Farm Fire & Casualty Co., 386 U.S. at 534; 28 U.S.C. § 2361. The Objecting Claimants argue that the injunction against arresting vessels in other jurisdictions exceeds the Court's authority under Section 2361 because the in rem claims against the vessels are not the "obligations involved in the interpleader actions as a matter of law." Obj. Claimants' Br. at 1. As the Court has already explained, this argument is a non-starter. To the extent that the obligations are distinct, however, the Court has broad discretion under Section 2361 to enjoin the prosecution of claims that arise out of the same dispute as the in personam claims and claims that may exceed the value of the interpleaded fund to accomplish "the needs of orderly contest with respect to the fund." State Farm Fire & Casualty Co., 386 U.S. at 534; Ashton, 918 F.2d at 1069-70. The Objecting Claimants' in rem claims against the Vessels fit squarely within this description.
The Objecting Claimants' argument that it is not equitable to "force" them to litigate their in rem claims in this forum ignores the fact that Section 2361's anti-suit injunction is specifically designed for this purpose. Obj. Claimants' Br. at 6.
For the foregoing reasons, the Court finds that subject matter jurisdiction over the Interpleader Actions is proper. The Court's findings as stated herein are limited solely to its inquiry regarding subject matter jurisdiction and shall not be construed to address any other argument or defense raised in respect of these cases, including, inter alia, as to venue and personal jurisdiction.
