Filed: Nov. 24, 2015
Latest Update: Mar. 02, 2020
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 14-2267 FLAME S.A.; GLORY WEALTH SHIPPING PTE LTD., Plaintiffs - Appellees, and VITOL, S.A., Party-in-Interest, NOBLE CHARTERING INCORPORATED, Intervenor/Plaintiff, v. FREIGHT BULK PTE. LTD., Defendant - Appellant, and INDUSTRIAL CARRIERS, INC.; VISTA SHIPPING, INC.; VIKTOR BARANSKIY, Defendants. No. 15-1120 FLAME S.A.; GLORY WEALTH SHIPPING PTE LTD., Plaintiffs - Appellees, and VITOL, S.A., Party-in-Interest, NOBLE CHARTERING
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 14-2267 FLAME S.A.; GLORY WEALTH SHIPPING PTE LTD., Plaintiffs - Appellees, and VITOL, S.A., Party-in-Interest, NOBLE CHARTERING INCORPORATED, Intervenor/Plaintiff, v. FREIGHT BULK PTE. LTD., Defendant - Appellant, and INDUSTRIAL CARRIERS, INC.; VISTA SHIPPING, INC.; VIKTOR BARANSKIY, Defendants. No. 15-1120 FLAME S.A.; GLORY WEALTH SHIPPING PTE LTD., Plaintiffs - Appellees, and VITOL, S.A., Party-in-Interest, NOBLE CHARTERING I..
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-2267
FLAME S.A.; GLORY WEALTH SHIPPING PTE LTD.,
Plaintiffs - Appellees,
and
VITOL, S.A.,
Party-in-Interest,
NOBLE CHARTERING INCORPORATED,
Intervenor/Plaintiff,
v.
FREIGHT BULK PTE. LTD.,
Defendant - Appellant,
and
INDUSTRIAL CARRIERS, INC.; VISTA SHIPPING, INC.; VIKTOR
BARANSKIY,
Defendants.
No. 15-1120
FLAME S.A.; GLORY WEALTH SHIPPING PTE LTD.,
Plaintiffs - Appellees,
and
VITOL, S.A.,
Party-in-Interest,
NOBLE CHARTERING INCORPORATED,
Intervenor/Plaintiff,
v.
FREIGHT BULK PTE. LTD.,
Defendant - Appellant,
and
INDUSTRIAL CARRIERS, INC.; VISTA SHIPPING, INC.; VIKTOR
BARANSKIY,
Defendants.
Appeals from the United States District Court for the Eastern
District of Virginia, at Norfolk. Robert G. Doumar, Senior
District Judge. (2:13-cv-00658-RGD-LRL; 2:13-cv-00704-RGD-LRL)
Argued: September 17, 2015 Decided: November 24, 2015
Before WILKINSON, AGEE, and HARRIS, Circuit Judges.
Affirmed by published opinion. Judge Agee wrote the opinion, in
which Judge Wilkinson and Judge Harris joined.
ARGUED: Anthony J. Franze, ARNOLD & PORTER LLP, Washington,
D.C., for Appellant. William Robert Bennett, III, BLANK ROME
LLP, New York, New York; James H. Power, HOLLAND & KNIGHT LLP,
New York, New York, for Appellees. ON BRIEF: Andrew G. McBride,
WILEY REIN LLP, Washington, D.C.; John N. Nassikas III, R.
Stanton Jones, Daniel F. Jacobson, ARNOLD & PORTER LLP,
Washington, D.C., for Appellant. Thomas H. Belknap, Jr., Alan
M. Weigel, Lauren B. Wilgus, Nicholas R. Tambone, BLANK ROME
LLP, New York, New York, for Appellee Flame S.A. Robert T.
2
Hicks, Samuel Spital, Michael J. Frevola, Marie E. Larsen, Stosh
Silivos, HOLLAND & KNIGHT LLP, New York, New York, for Appellee
Glory Wealth Shipping PTE LTD.
3
AGEE, Circuit Judge:
Industrial Carriers, Inc., (“ICI”), a defunct maritime
shipping company, breached numerous contracts in the final
months of its operation. Among ICI’s creditors were FLAME S.A.
(“Flame”), who obtained a foreign judgment against ICI for
breach of four Forward Freight Swap Agreements ("FFAs"), and
Glory Wealth Shipping Pte. Ltd. (“Glory Wealth”), who obtained a
foreign arbitration award against ICI based on the breach of a
charter party.
Both Flame and Glory Wealth sought a writ of maritime
attachment under Supplemental Rule B of the Federal Rules of
Civil Procedure to attach the vessel M/V CAPE VIEWER when it
docked in Norfolk, Virginia. Freight Bulk Pte. Ltd. (“Freight
Bulk”) is the registered owner of the vessel, but Flame and
Glory Wealth asserted that Freight Bulk was the alter ego of
ICI, and that ICI had fraudulently conveyed its assets to
Freight Bulk in order to evade its creditors. For that reason,
they argued that the U.S. District Court for the Eastern
District of Virginia could enforce their claims against ICI
through Freight Bulk. Following a bench trial, the district
court awarded judgment to Flame and Glory Wealth, ordered the
sale of the M/V CAPE VIEWER, and confirmed the distribution of
the sale proceeds to Flame and Glory Wealth.
4
Freight Bulk now appeals. Finding no merit to its claims,
we affirm the judgment of the district court.
I.
A.
In 2008, Flame entered into four FFAs with ICI. After ICI
defaulted on those contracts, Flame sued ICI in the High Court
of Justice, Queen’s Bench Division, Commercial Court, in London,
England, alleging the breach and seeking monetary damages. The
English court awarded judgment to Flame in the amount of
$19,907,118.36 (“Flame’s English judgment”).
Flame had the English judgment recognized in the U.S.
District Court for the Southern District of New York, and later
registered the judgment in the U.S. District Court for the
Eastern District of Virginia. It then sought and obtained the
order of attachment against the M/V CAPE VIEWER.
Freight Bulk moved to vacate the order of attachment,
contending the district court lacked subject matter jurisdiction
because under either United States (federal) or English law, the
FFAs were not maritime contracts. The district court denied
Freight Bulk’s motion and concluded it had admiralty
jurisdiction, but certified the issue for interlocutory appeal.
We granted Freight Bulk permission to file an interlocutory
appeal.
5
We then held that federal law governed our jurisdictional
inquiry, and that the FFAs were maritime contracts under federal
admiralty law. Flame S.A. v. Freight Bulk Pte. Ltd., 762 F.3d
352 (4th Cir. 2014) (the “Interlocutory Appeal”). Because the
FFAs were maritime contracts, we concluded that “the district
court had subject matter jurisdiction to adjudicate the matter
before it.”
Id. at 363. We remanded the case to the district
court for further proceedings.
B.
Separately, but also in 2008, Glory Wealth contracted for
ICI to charter a vessel. After three installments, ICI stopped
making payments under this agreement. Glory Wealth pursued
arbitration against ICI in England and won an arbitration award
(Glory Wealth’s “English arbitration award”). Subsequently,
Glory Wealth sought and obtained recognition of the arbitration
award in the Southern District of New York. It did not register
that judgment in the Eastern District of Virginia. Instead,
Glory Wealth filed a complaint in the Eastern District of
Virginia alleging that it was an ICI creditor who could maintain
a maritime claim against ICI for breach of a charter party, as
established by its English arbitration award. 1 It then sought
1 Glory Wealth represented to the district court that it was
in the process of having its English arbitration award reduced
to a judgment in England.
6
and obtained an attachment order for the M/V CAPE VIEWER
pursuant to Supplemental Rule B.
C.
While the Interlocutory Appeal in Flame’s case was pending,
the district court consolidated the Flame and Glory Wealth cases
based on the common questions of law and fact. Both complaints
named other defendants in addition to Freight Bulk and ICI. One
such co-defendant was the beneficial owner of Freight Bulk,
Viktor Baranskiy, who is the son of ICI’s final Chairman of the
Board of Directors. Baranskiy is also the sole, beneficial
owner of co-defendant Vista Shipping Ltd. (“Vista”). In fact,
Baranskiy is the sole owner of numerous maritime companies —
now, collectively known as the Palmira Group — of which Freight
Bulk and Vista are just two.
The basic theory underlying both complaints was that
Baranskiy aided ICI in evading its creditors by funneling money
and other assets into multiple entities he controlled, including
Vista and Freight Bulk. Vista was formed in late 2008, around
the same time as ICI’s failure. Freight Bulk, on the other
hand, was not formed until several years later. Consequently,
the complaints relied on the interconnectedness of ICI with
Vista and Vista with Freight Bulk to establish the requisite
link showing Freight Bulk's responsibility as an alter ego for
ICI’s debts. The complaints alleged that Vista and Freight Bulk
7
were both formed with funds that originated from ICI and that
ICI fraudulently transferred those funds and other assets in
order to avoid its creditors.
The district court, with the assistance of a magistrate
judge, oversaw “many, many” motions during discovery. Flame
S.A. v. Indus. Carriers, Inc., 39 F. Supp. 3d 769, 771 (E.D. Va.
2014). Freight Bulk repeatedly sought to delay the proceedings
by obfuscation, often challenging the meaning and scope of
discovery orders with meritless claims. As a result of Freight
Bulk’s noncompliance, Flame and Glory Wealth obtained sanctions
in the form of certain presumptions to be applied at trial.
The evidence adduced at trial and the district court’s
factual findings are discussed below in the context of Freight
Bulk’s sufficiency challenge. But as background to our review,
we note that things did not bode well for Freight Bulk when, by
the end of the first day of his testimony, Baranskiy had
provided inconsistent and evasive explanations for many of the
key relationships and transactions at issue in the case. Even
so, the district court expressed its surprise when Baranskiy and
Freight Bulk’s lead trial attorney “abandoned the case on the
second morning of his testimony by not appearing” and instead
left the country. Id. at 776. Local counsel notified the court
of Baranskiy and lead counsel’s decision and did not present any
further evidence.
8
Flame and Glory Wealth subsequently moved for judgment in
their favor, which the district court granted. Id. at 790. In
so doing, the court concluded that the evidence demonstrated
that ICI, Vista, Freight Bulk, and Baranskiy were alter egos of
one another. In addition, it found that ICI fraudulently
transferred assets to Vista and related Palmira Group entities
to avoid creditors, and that these latter entities had also
fraudulently transferred funds to Freight Bulk. Accordingly, it
held the defendants jointly and severally liable for ICI’s
debts, up to the value of the M/V CAPE VIEWER. 2 The court
ordered the sale of the vessel, and later confirmed the sale and
ordered distribution of the sale proceeds between Flame and
Glory Wealth under a formula to which they had agreed.
Freight Bulk noted a timely appeal and we exercise
jurisdiction pursuant to 28 U.S.C. § 1291.
The liability finding was limited in this manner because
2
attachment proceedings under Supplemental Rule B confers only
quasi in rem jurisdiction, which limits personal jurisdiction
over the defendants in the case to the value of the attached
vessel. See Supplemental Rule B(1)(a); Vitol, S.A. v. Primerose
Shipping Co. Ltd., 708 F.3d 527, 540 (4th Cir. 2013). Flame and
Glory Wealth had also sought to hold the defendants liable for
the entire amount of their judgments against ICI, but the
district court rejected that argument. Since they did not file
a cross-appeal challenging that determination, it is not at
issue in this appeal.
9
II.
On appeal, Freight Bulk raises six discrete issues and
multiple sub-arguments. While we have reviewed its arguments in
detail, we will only address its primary contentions of error.
Those are: (1) that under Fourth Circuit precedent, United
States substantive law does not apply to this dispute, which
means the district court lacked subject matter jurisdiction; (2)
that under Supreme Court precedent, actions to shift liability
do not state an independent cause of action to establish subject
matter jurisdiction, nor can a plaintiff rely on a prior
lawsuit’s basis for the court’s jurisdiction in a subsequent
suit to shift liability; (3) that the district court erred in
distributing proceeds of the M/V CAPE VIEWER’s sale to Glory
Wealth because Glory Wealth failed to register its New York
default judgment against ICI in the U.S. District Court for the
Eastern District of Virginia; (4) that the district court abused
its discretion by imposing certain discovery sanctions; (5) that
the evidence was insufficient to support the judgment as to both
alter ego liability and fraudulent conveyance; and (6) that the
district court judge exhibited personal bias against the
defendants’ Ukrainian nationality, which tainted the entire
proceeding and requires a new trial. We address each issue in
turn.
10
A. Subject Matter Jurisdiction
Freight Bulk raises two new challenges to the district
court’s subject matter jurisdiction. Although the Court
previously determined in the Interlocutory Appeal that the
district court possessed admiralty jurisdiction over Flame’s
claims, the substantive questions we analyzed there are
different from the arguments Freight Bulk now presents. Flame
and Glory Wealth urge us to hold that the mandate rule precludes
our reconsideration of the district court’s subject matter
jurisdiction.
We have reservations about whether a party can bring
serial, piecemeal challenges to the district court’s subject
matter jurisdiction, and it is certainly a practice we do not
encourage. However, we will address the merits of Freight
Bulk’s new arguments for two reasons. First, neither the
Supreme Court nor we have directly opined on how to reconcile
the mandate rule with subsequent distinct challenges to the
Court’s subject matter jurisdiction, a challenge that could
ordinarily be raised at any time and even sua sponte. Second,
Glory Wealth was not a party to the Interlocutory Appeal.
We review de novo whether the district court had subject
matter jurisdiction. See Vitol, 708 F.3d at 533.
11
1.
Relying on Dracos v. Hellenic Lines, Ltd., 762 F.2d 348
(4th Cir. 1985) (en banc), Freight Bulk contends that the
district court lacked jurisdiction because the factors governing
choice of law set out in Lauritzen v. Larsen,
345 U.S. 571
(1953), point against applying federal law to the parties’
dispute. Because neither the parties nor the alleged wrongful
conduct had any connection to the United States, Freight Bulk
asserts that Dracos requires us to conclude that the district
court lacked subject matter jurisdiction.
Many of Freight Bulk’s arguments conflate questions of
choice of law with questions of subject matter jurisdiction, but
our overriding impression is that Freight Bulk simply
misunderstands our holding in Dracos. There, the plaintiff
brought a negligence claim under the Jones Act and an
unseaworthiness claim under general “American Maritime law.”
762 F.2d at 350. The plaintiff asserted both tort claims
against her deceased husband’s employer, the owner of the ship
upon which he had died. The plaintiff, her husband, and the
defendant were all Greek individuals or corporations. The only
connection to the United States was that the plaintiff’s husband
died while the ship was docked in Norfolk, Virginia.
Id. at
350-51.
12
Applying Lauritzen’s choice-of-law analysis, the district
court found that federal tort law should not apply to the case,
and without a federal claim to decide, the court dismissed the
case for lack of jurisdiction. Id. at 351. We held that the
district court’s findings that the defendant’s operations and
connections to the United States were insufficient to require
application of United States law to the plaintiff’s claims were
not clearly erroneous.
Id. at 352. As a consequence, we agreed
that federal tort law did not govern the plaintiff’s claims and
that the district court lacked jurisdiction to consider the
case.
Id. at 353.
Dracos thus held that when federal law does not provide the
basis for a plaintiff’s claims against the defendant, the
district court is without subject matter jurisdiction. The
court relied on the Lauritzen choice-of-law analysis to
determine what law would govern the maritime tort action at
issue, which in turn determined whether a federal tort claim
existed. 3 Here, in contrast, Flame and Glory Wealth do not need
to look to Lauritzen’s choice-of-law analysis to pursue a claim
under federal law. Instead, their claims rest on the long-
3Glory Wealth argues that Dracos’s reference to
“jurisdiction” was imprecise and that recent Supreme Court
precedent calls into question whether that analysis implicates
the district court’s subject matter jurisdiction. We need not
address that argument because even a straightforward reading of
Dracos does not support Freight Bulk’s position.
13
standing recognition that district courts have subject matter
jurisdiction in admiralty both to enforce the judgments of
foreign admiralty courts, see Vitol, 708 F.3d at 533, 538, and
to consider the issues of alter ego and fraudulent transfer as
part of an attachment proceeding pursuant to Supplemental Rule
B, see
id. at 537-38.
In the Interlocutory Appeal, we held that the FFAs between
Flame and ICI were maritime contracts, which meant that Flame’s
claim to enforce its English Judgment by means of a Supplemental
Rule B attachment was cognizable under the district court’s
admiralty jurisdiction. Flame, 762 F.3d at 354-63. None of
Freight Bulk’s arguments in this appeal challenge that holding,
nor would it be able to do so as that holding is the law of the
case. Everett v. Pitt Cty. Bd. of Educ.,
788 F.3d 132, 142 (4th
Cir. 2015) (observing that with limited exceptions, once a court
has established the law of the case, “it must be followed in all
subsequent proceedings in the same case” 4). Although Glory
Wealth seeks to enforce its English arbitration award, its claim
against ICI also arose from the breach of an indisputably
maritime contract, namely, a charter party. E.g., Kossick v.
United Fruit Co.,
365 U.S. 731, 735 (1961) (“Without doubt a
Here and throughout the opinion, internal quotation marks,
4
citations, alterations, or footnotes have been omitted in
citations.
14
contract for hire either of a ship or of the sailors and
officers to man her is within the admiralty jurisdiction.”).
Accordingly, Flame and Glory Wealth have claims arising squarely
within federal admiralty jurisdiction. See 28 U.S.C. § 1333.
At bottom, neither Dracos nor the Lauritzen choice-of-law
analysis have any bearing on Flame and Glory Wealth’s ability to
bring the type of federal action they assert, nor in
establishing the district court’s admiralty jurisdiction over
this case.
2.
Freight Bulk’s second jurisdictional challenge is that
Peacock v. Thomas, 516 U.S. 349 (1996), “precludes federal
jurisdiction over alter ego and fraudulent conveyance claims
that seek to shift liability for an existing judgment—including
a maritime judgment—onto a non-party to that judgment.”
(Opening Br. 15.) Freight Bulk contends that Flame and Glory
Wealth’s allegations of alter ego and fraudulent concealment
liability did not independently provide the district court
subject matter jurisdiction. In addition, it asserts that the
district court could not exercise ancillary, or supplemental,
jurisdiction because Peacock prohibits a plaintiff relying on
the court’s jurisdiction in an earlier lawsuit to establish
jurisdiction in a subsequent lawsuit to enforce a judgment.
15
We disagree. Freight Bulk fails to grasp key substantive
distinctions between federal question jurisdiction and admiralty
jurisdiction when bringing suit to enforce a judgment. In
Peacock, the Supreme Court held that the district court lacked
jurisdiction to consider a “new action[] in which a federal
judgment creditor [sought] to impose liability for a money
judgment on a person not otherwise liable for the judgment.”
516 U.S. at 351. Because the second action did not allege a new
violation of any federal law, the district court did not have
original jurisdiction in the second lawsuit pursuant to 28
U.S.C. § 1331 (federal question jurisdiction).
Id. at 353-54.
The Supreme Court also held that the district court did not have
supplemental jurisdiction. 5 This was so, the Court concluded,
because “[i]n a subsequent lawsuit involving claims with no
independent basis for jurisdiction, a federal court lacks that
threshold jurisdictional power that exists when ancillary claims
are asserted in the same proceeding as the claims conferring
federal jurisdiction.”
Id. at 355.
While the plaintiff in Peacock sought to enforce a judgment
arising from the court’s federal question jurisdiction, Flame
5 Supplemental jurisdiction, which is sometimes referred to
as ancillary jurisdiction, “permit[s] disposition by a single
court of claims that are, in varying respects and degrees,
factually interdependent” and “enable[s] a court to function
successfully, that is, to manage its proceedings, vindicate its
authority, and effectuate its decrees.” Id. at 354.
16
and Glory Wealth sought to enforce a foreign judgment and
arbitration award through the attachment of a vessel by invoking
the district court’s admiralty jurisdiction. This distinction
matters because under long-standing Supreme Court jurisprudence,
a district court’s admiralty jurisdiction extends to claims to
enforce foreign admiralty judgments. See Pennhallow v. Doane
Adm’rs, 3 U.S. (3 Dall.) 54, 97 (1795) (opinion of Iredell, J.);
see also Vitol, 708 F.3d at 538 (stating “centuries of settled
hornbook admiralty law establish that ‘admiralty jurisdiction in
the United States may be broadly stated as extending to . . .
any claim to enforce a judgment of a foreign admiralty court’”);
Ost-West-Handel Bruno Bischoff GmbH v. Project Asia Line, Inc.,
160 F.3d 170, 174 (4th Cir. 1998); 1-VII Benedict on Admiralty §
106.
This recognition of subject matter jurisdiction in the
admiralty context “differs substantially from the law governing
jurisdiction to enforce judgments rendered by federal courts
exercising federal question jurisdiction under 28 U.S.C. §
1331.” D’Amico Dry Ltd. v. Primera Mar. (Hellas) Ltd., 756 F.3d
151, 155 (2d Cir. 2014). While an enforcement action brought
under § 1331 must demonstrate the existence of federal
jurisdiction independent of the judgment to be enforced, a
district court’s ability to enforce foreign admiralty judgments
has not been so limited.
Id. at 155-56 (collecting cases on
17
point). Similarly, as we reiterated in Vitol, the district
court’s admiralty jurisdiction includes the inherent authority
to grant attachments, including an attachment of assets pursuant
to Supplemental Rule B. See 708 F.3d at 537-38.
Peacock only discussed the requirements of federal question
jurisdiction under § 1331 and was unrelated to the scope of a
district court’s admiralty jurisdiction. As we have previously
recognized in another context, “Peacock does not prohibit a
federal court from taking jurisdiction over a postjudgment alter
ego claim where an independent basis for jurisdiction exists.”
C.F. Trust, Inc. v. First Flight Ltd. P’ship, 306 F.3d 126, 133
(4th Cir. 2002). Here, that “independent basis” is the court’s
admiralty jurisdiction.
The Supreme Court’s decision in Swift & Co. Packers v.
Compania Colombiana Del Caribe, S.A., 339 U.S. 684 (1950),
confirms our conclusion that because the district court was
properly exercising its admiralty jurisdiction, it could also
consider the issues of alter ego and fraudulent conveyance. In
Swift, the plaintiff filed suit against a defendant for
nondelivery of cargo and attached the defendant’s vessel. The
plaintiff later sought to amend its allegations to include a
second named defendant, which it argued was either the original
defendant’s alter ego or an entity to whom the original
defendant had fraudulently transferred assets.
Id. at 686.
18
Although the Supreme Court ultimately rejected plaintiff’s alter
ego claim, it first reiterated that “[t]he jurisdiction of a
court of admiralty to determine the question of alter ego is
undoubted.” Id. at 689 n.4. Thus, under Swift, that
“undoubted” authority exists in this case as well.
Swift reached the same conclusion on the issue of
fraudulent conveyance. The district court had held (and the
Fifth Circuit affirmed) that it could not consider the
plaintiff’s fraudulent conveyance claim because it ran too far
afield from the admiralty claim that provided the basis for the
court’s jurisdiction. Id. at 689-90. The Supreme Court
disagreed, observing that although there are restraints on the
exercise of admiralty jurisdiction,
[The plaintiffs, as creditors of the defendant] went
into admiralty on a claim arising upon . . . matters
obviously within admiralty jurisdiction. As an
incident to that claim, in order to secure
respondents’ appearance and to insure the fruits of a
decree in [their] favor, they made an attachment . . .
. The issue of fraud [arose] in connection with the
attachment as a means of effectuating a claim
incontestably in admiralty. To deny an admiralty
court jurisdiction over this subsidiary or derivative
issue in a litigation clearly maritime would require
an absolute rule that admiralty is rigorously excluded
from all contact with nonmaritime transactions and
from all equitable relief . . . . It would be strange
indeed thus to hobble a legal system that has been so
responsive to the practicalities of maritime commerce
and so inventive in adapting its jurisdiction to the
needs of that commerce.
Id. at 691.
19
These principles govern this case as well: Flame and Glory
Wealth filed enforcement claims that were “obviously within
admiralty jurisdiction.” Attendant to these claims was the
Supplemental Rule B attachment. The issue of fraudulent
conveyance arose in connection with those claims. And because
the district court’s admiralty jurisdiction had been invoked by
the Supplemental Rule B attachment, it could also consider the
latter.
Freight Bulk points to two cases where circuit courts have
applied Peacock in a maritime context. See Nat’l Mar. Servs.,
Inc. v. Straub, 776 F.3d 783 (11th Cir. 2015); Zamora v. Bodden,
395 F. App’x 118 (5th Cir. 2010) (per curiam) (limiting its
analysis to whether federal question jurisdiction exists).
Neither is binding, of course, but we also find them
unpersuasive to Freight Bulk’s position. 6 Significantly, neither
6 In fact, Straub cuts against Freight Bulk’s argument with
respect to the fraudulent transfer claim because the Eleventh
Circuit distinguished Peacock, and concluded it could exercise
ancillary jurisdiction in a supplementary proceeding to avoid a
fraudulent transfer by a judgment debtor where jurisdiction in
the original proceeding had been based in admiralty. See
Straub, 776 F.3d at 786-88. This was so because the suit
“sought to disgorge [the defendant] of a fraudulently
transferred asset, not to impose liability for a judgment on a
third party,” and liability would be limited to “the proceeds
that [the judgment debtor] fraudulently transferred to [the
defendant].”
Id. at 787. While we need not reach that analysis
here since admiralty jurisdiction otherwise exists, Freight
Bulk’s attempt to distinguish Straub in its favor
mischaracterizes that case’s holding.
20
case considers whether Peacock applies to an action where an
independent basis for establishing the district court’s
admiralty jurisdiction exists (apart from the fraud or alter ego
theories). Nor does either case challenge that the district
court’s admiralty jurisdiction extends to enforcing foreign
admiralty judgments in attachment proceedings.
To reiterate, then, unlike Peacock and the other cases
Freight Bulk relies on, Flame and Glory Wealth brought
proceedings in the district court to enforce an admiralty
judgment and attach a vessel under Supplemental Rule B. The
district court had admiralty jurisdiction under § 1333 to
determine those claims, and as part of considering those claims,
the court also had authority to consider the questions of alter
ego and fraudulent conveyance. See 28 U.S.C. § 1367; Vitol, 708
F.3d at 537-39.
Peacock’s analysis thus has no bearing on the district
court’s subject matter jurisdiction over Flame and Glory
Wealth’s claims. For these reasons, the district court properly
exercised jurisdiction over the parties’ dispute. 7
7 Freight Bulk also contends that even if the district court
possessed subject matter jurisdiction, the district court erred
by adopting Virginia’s fraudulent conveyance framework because
it is an outlier among state-law provisions. Freight Bulk has
not preserved this issue for appeal because it failed to raise
it in the district court. As such, we will not consider it for
(Continued)
21
B. Glory Wealth’s Judgment Against ICI
Next, Freight Bulk contends the district court should not
have permitted Glory Wealth to receive a share of the proceeds
from the sale of the M/V CAPE VIEWER because Glory Wealth failed
to register its New York judgment in the Eastern District of
Virginia, “a perquisite to enforce[ment] . . . under 28 U.S.C. §
1963.” (Opening Br. 38.) Freight Bulk raises various arguments
flowing from this main premise, all of which it asserts require
“this Court [to] render judgment for Freight Bulk.” (Opening
Br. 40.) We need not consider the substance of Freight Bulk’s
arguments in light of two threshold considerations: waiver and
harmlessness.
To start, Freight Bulk never argued to the district court
that Glory Wealth’s failure to formally submit the judgment it
sought to be enforced precluded it from receiving a share of the
proceeds from the sale of the M/V CAPE VIEWER. As such, Freight
Bulk did not put the district court “on notice as to the
substance of the issue” now raised on appeal, as required to
preserve it for review. Nelson v. Adams USA, Inc., 529 U.S.
460, 469 (2000).
the first time on appeal. In re Under Seal,
749 F.3d 276, 285-
86 (4th Cir. 2014).
22
In addition, the record shows that between the district
court’s order holding Freight Bulk liable and the sale of the
M/V CAPE VIEWER, Freight Bulk never argued that Glory Wealth’s
failure to formally introduce a judgment against ICI precluded
it from recovering a portion of the proceeds. This was so even
though the district court explicitly asked Freight Bulk if it
had any objections to the distribution. At that time, Freight
Bulk only expressed a somewhat indifferent concern that it did
not know the basis for the agreed-upon allocation between Glory
Wealth and Flame. We have refused to consider newly raised
arguments absent “exceptional circumstances,” that is to say, a
“‘fundamental error’ or a denial of fundamental justice.” In re
Under Seal, 749 F.3d at 285-86. No exceptional circumstances
exist in this case.
Another consideration demonstrates the absence of any such
fundamental injustice and stands as an alternative basis to
reject Freight Bulk’s argument. Even assuming error, Freight
Bulk would not be entitled to any relief as a consequence of
Glory Wealth’s failure to formally file its judgment. This is
so because Flame registered an enforceable judgment in the
district court against Freight Bulk in the amount of
$19,907,118.36. That judgment far exceeds the approximately
$8.3 million in proceeds arising from the sale of the M/V CAPE
VIEWER. Flame’s claim thus precluded Freight Bulk from any
23
portion of the proceeds from the sale. Prior to distribution of
the proceeds, however, Flame and Glory Wealth mutually agreed
how to divide the proceeds between themselves, and the district
court entered judgment based on that agreement. Freight Bulk
thus has no interest in how they resolved their competing
claims. It has not been harmed by the alleged error, nor has it
shown that it would be entitled to any relief as a result. See
28 U.S.C. § 2111 (stating the court will not consider harmless
errors); Fed. R. Civ. P. 61 (same). Accordingly, we decline to
consider the substance of Freight Bulk’s argument. 8
C. Discovery Sanctions
After finding that Freight Bulk had violated several of the
court’s discovery orders, the magistrate judge issued certain
sanctions. Freight Bulk challenges only one of the findings and
resulting sanctions: the failure to produce responsive ICI
documents. 9 As a consequence of that violation, the magistrate
In light of our conclusion, we deny Glory Wealth’s motion
8
to supplement the record with the English judgment enforcing the
arbitration award that it obtained after final judgment had been
obtained in this proceeding.
9 The district court also found that Freight Bulk had
violated discovery orders by failing to produce (1) employee
workbooks, (2) responsive emails from Baranskiy’s account, (3)
documents relating to a loan agreement between Sea Traffic and
Freight Bulk, and (4) responsive email attachments. As a
consequence, it authorized a sanction in the form of deeming the
following facts established for purposes of the case: (1)
Freight Bulk and Vista were alter egos of each other, and (2)
the loan from Sea Traffic to Freight Bulk was a sham transaction
(Continued)
24
judge deemed “as established for purposes of” the proceedings,
that “had any [ICI] documents been produced by [Freight Bulk] in
compliance with the Court’s discovery orders, those documents
would have been favorable to [Flame and Glory Wealth] and
harmful to [Freight Bulk].” (J.A. 1323.) The district court
overruled Freight Bulk’s objections, agreeing that Freight Bulk
controlled responsive ICI documents and yet had failed to
produce them, and that the sanction was appropriate. (J.A.
1762-66, 1778-79.)
Freight Bulk contends this discovery sanction was improper
because it did not possess, control, or have custody of
responsive ICI documents and thus should not have been compelled
to produce them. It also attacks the scope of the discovery
order as being too broad. Freight Bulk further asserts that the
sanctions “were overwhelmingly prejudicial” given that the
district court repeatedly referred to the sanctions to “fill
wide gaps” in the trial evidence. (Opening Br. 46.) 10
and Freight Bulk was prohibited from offering evidence of
repayment. In addition, the court held Freight Bulk and its
counsel jointly and severally liable for attorneys’ fees and
expenses in pursuing the motions for sanctions.
10 Freight Bulk’s Opening Brief mentions one other discovery
sanction in passing (deeming Freight Bulk and Vista to be alter
egos). (Opening Br. 41.) Since the alter ego sanction was
approved due to “the magnitude of [Freight Bulk’s discovery]
violations,” (J.A. 1777), it was arguably based, at least in
part, on Freight Bulk’s failure to produce ICI documents. But
(Continued)
25
We typically review the substance of a district court’s
decision to impose discovery sanctions for abuse of discretion.
Hoyle v. Freightliner, LLC, 650 F.3d 321, 329 (4th Cir. 2011).
We are also obligated, however, to “disregard all errors and
defects that do not affect any party’s substantial rights.”
Fed. R. Civ. P. 61; see also McNanama v. Lukhard,
616 F.2d 727,
730 (4th Cir. 1980) (concluding error in compelling discovery
was harmless); Tagupa v. Bd. of Dirs.,
633 F.2d 1309, 1312 (9th
Cir. 1980) (“The harmless error doctrine applies to discovery
orders.”).
We need not wade into the nuances of Freight Bulk’s
arguments because we readily conclude on this record that even
if the district court abused its discretion on this issue, its
error was harmless. Freight Bulk markedly overstates the impact
that this discovery order and resulting sanction had on the
district court’s consideration of the case as a whole. Although
since the failure to produce ICI documents was just one of five
discrete categories of discovery violations leading to this
sanction, it likely would have still been an appropriate
exercise of the district court’s discretion to have imposed it
based on the other violations. In addition, Freight Bulk has
failed to develop any argument in its opening brief discussing
the propriety of this particular sanction. Its analysis solely
involves the ICI documents. As such, Freight Bulk has not
adequately developed any additional issues related to the
propriety of the alter ego sanction for us to review on appeal.
See Fed. R. App. P. 28(a)(8)(A); see also Edwards v. City of
Goldsboro, 178 F.3d 231, 241 n.6 (4th Cir. 1999).
26
the negative inference from the ICI documents informed some of
the factual findings underpinning the district court’s analysis,
each factual finding that noted the negative inference was
supported by more than one piece of additional evidence that had
been admitted at trial. 11 Moreover, by the time the court
explained its legal conclusions as to each of the claims, it had
so cabined the negative inference about the ICI documents that
this evidence was only one of many facts supporting its
analysis. See Flame, 39 F. Supp. 3d at 787-89.
More problematic, Freight Bulk’s argument disregards the
effect of the other negative inferences the district court
relied on throughout its opinion and which arose from a key
aspect of the trial: Baranskiy and his lead counsel’s decision
to abandon their case mid-trial. The district court identified
that event as “[p]erhaps [the] most important in [the] case,”
observing that Baranskiy’s testimony to that point had been “at
times false, inaccurate, contradictory, and untruthful.” Id. at
776. The district court concluded that Baranskiy’s “desertion”
prejudiced Flame and Glory Wealth, and found that had Baranskiy
For example, although the district court noted the non-
11
production of ICI documents showing when it became insolvent,
testimony at trial supported an insolvency “as early as June 30,
2008” and “no later than mid-September,” which also allowed the
district court to make its ultimate finding “that ICI’s
insolvency began in July 2008 and continued through October 2008
and thereafter.” Flame, 39 F. Supp. 3d at 777.
27
continued to testify, “his testimony would have been
substantially against his own interests in relation to” Vista,
Freight Bulk, and ICI. Id. The district court then relied on
that negative inference throughout its factual findings and
legal analysis. E.g.,
id. at 778, 779, 787-88, and 789. By the
district court’s own indication, these negative inferences were
considerably more damaging to Freight Bulk than the negative
inference created by the document discovery violation contested
on appeal.
Based on the totality of the record, even if we assume that
the district court erred in sanctioning Freight Bulk for failing
to produce ICI documents, that error did not substantially
affect the judgment. See Taylor v. Va. Union Univ., 193 F.3d
219, 235 (4th Cir. 1999) (en banc) (“In order to conclude the
district court’s assumed evidentiary errors did not affect [the
judgment], and therefore were harmless, ‘we need only be able to
say with fair assurance, after pondering all that happened
without stripping the erroneous action from the whole, that the
judgment was not substantially swayed by the error[s].’”),
abrogated on other grounds by, Desert Palace Inc. v. Costa,
539
U.S. 90 (2003). Accordingly, we reject Freight Bulk’s claim of
error.
28
D. Sufficiency of the Evidence
Freight Bulk next claims the evidence is insufficient to
support the judgment in favor of Flame and Glory Wealth. It
contends that the hallmarks for establishing alter ego liability
are missing as between ICI, Vista, and Freight Bulk. 12 Freight
Bulk further posits that the evidence did not establish the
requisite fraud to support the fraudulent conveyance claim, but
rather reflected legitimate business transactions. Neither
argument has merit.
When evaluating the sufficiency of the evidence after a
bench trial, we review the district court’s factual findings for
clear error and its legal conclusions de novo. Universal
Furniture Int’l, Inc. v. Collezione Europa USA, Inc., 618 F.3d
417, 427 (4th Cir. 2010).
1. Alter Ego
Although the corporate form ordinarily prohibits one entity
from being liable for the acts of a separate, though related,
entity, courts will pierce the corporate veil in “extraordinary
circumstances,” such as when the corporate form is being used
for wrongful purposes. Vitol, 708 F.3d at 543-44. The standard
for piercing the corporate veil is high, but its purpose is to
12As noted above, the alter ego analysis here is a two-step
process showing Vista operated as an alter ego of ICI and that
Freight Bulk is an alter ego of Vista.
29
“achieve an equitable result” by “focus[ing] on reality and not
form, on how the corporation operated and the individual
defendant’s relationship to that operation.” Id. 13
Freight Bulk first contends that the district court erred
in holding that ICI and Vista were alter egos. It points to the
alter ego analysis in Vitol – wherein we concluded the evidence
was insufficient to allege an alter ego claim – and maintains
that certain allegations here were identical to, and in some
cases less than, the allegations in Vitol. However, because
numerous factors can support the conclusion that corporations
are alter egos, the inquiry is fact-intensive and specific facts
may be relevant in one case and irrelevant in another. See Ost-
West-Handel, 160 F.3d at 174 (“Such a determination is to be
made on a case-by-case basis.”). To that end, Freight Bulk’s
focus on how the factors in this case align with those in Vitol
is misplaced. The relevant inquiry is not whether any
particular factor was present, but whether the totality of the
evidence established during the trial demonstrated that ICI and
Vista were alter egos of each other.
13 The parties do not dispute that federal common law
applies to this analysis. See Ost-West-Handel, 160 F.3d at 174
(“[I]n an admiralty case, a court applies federal common law and
can look to state law in situations where there is no admiralty
rule on point.”).
30
On that point, the district court applied the proper legal
standards, relied on factors we have previously identified as
relevant, and concluded that the evidence supported an alter ego
finding. The factors considered by the district court included
ICI’s insolvency; Baranskiy’s siphoning of funds; the failure of
ICI, Vista, and Palmira Group companies to observe corporate
formalities and maintain corporate records; that Baranskiy
controlled the acts of specific Vista officers as well as Vista
and Palmira Group companies as a whole; and that ICI and Vista
had some shared ownership and employees. See Vitol, 708 F.3d at
544 (listing these factors as indicative of alter ego
corporations).
Freight Bulk does not dispute most of these factual
findings, and the few it does challenge were not clearly
erroneous. For example, Freight Bulk points to Baranskiy’s
trial testimony to assert that ICI and Vista had only a
negligible overlap in employees. But the district court did not
find Baranskiy’s testimony to be credible. Flame, 39 F. Supp.
3d at 776. Moreover, the district court’s finding that ICI and
Vista “shared the same employees performing substantially the
same tasks” relied on four named management employees plus
unnamed “others.”
Id. at 780. As the court’s analysis
reflects, the significant factor underpinning its finding on
this point was not the percentage of overall shared employees,
31
but rather their roles and fluidity between ICI, Vista, and the
other Palmira Group affiliates (including Freight Bulk). Id.
This finding was an appropriate one to make under the record
evidence and to be considered as part of the district court’s
alter ego analysis.
Similarly, Freight Bulk asserts the district court errantly
found that Baranskiy’s “working at [his] father’s company [made
him ICI’s] alter ego.” (Opening Br. 49.) Yet again, Freight
Bulk mischaracterizes the basis for the district court’s
finding, which was not based on Baranskiy’s status as an
employee of both ICI and Vista. Instead, the court’s conclusion
followed a detailed explanation of Baranskiy’s specific conduct
as a conduit for cash between ICI and Vista. See Flame, 39 F.
Supp. 3d at 776-83.
Freight Bulk also challenges the second step of the
district court’s analysis – i.e., its conclusion that Freight
Bulk and Vista were alter egos. Freight Bulk contends that “as
a matter of law” they are not. (Opening Br. 50.) We reject
this argument for two reasons, either of which would be
sufficient on its own. First, one of the sanctions for Freight
Bulk’s cumulative discovery violations was the finding that
Freight Bulk and Vista are “alter egos of one another.” Id. at
773. For the reasons discussed in footnote 10, that sanction
stands. As such, the district court could properly rely on it
32
at trial. See Fed. R. Civ. P. 37(b)(2)(A)(i) (stating that a
proper sanction for discovery violations is “directing that . .
. designated facts be taken as established for purposes of the
action”).
Second, and quite apart from the sanction-based finding,
the evidence fully supports the district court’s conclusion.
The trial record established, among other things, Baranskiy’s
ownership and control of both entities; that officers do as
Baranskiy directs rather than exercising independent decision
making; that Freight Bulk is undercapitalized; that funds
between Freight Bulk and Vista are intermingled amongst
themselves and other Palmira Group entities; that Baranskiy’s
companies fail to observe corporate formalities and maintain
proper records; that they share office space; and that dealings
are not conducted at arm’s length.
Freight Bulk’s limited challenges to these findings again
minimize Baranskiy’s conduct and attack the court’s findings as
being based solely on his ownership of both Freight Bulk and
Vista. Certainly not all corporations with a common owner are
alter egos, but neither can a corporation escape alter ego
liability solely on the basis of being a separate, formal entity
sharing the same owner. Where, as here, the evidence shows a
common owner who fails to observe corporate formalities and
often comingles funds to avoid legal obligations, it is not
33
error to treat the entities as one. E.g., De Witt Truck
Brokers, Inc. v. W. Ray Flemming Fruit Co., 540 F.2d 681, 685
(4th Cir. 1976) (“[T]he mere fact that all or almost all of the
corporate stock is owned by one individual . . . will not afford
sufficient grounds for disregarding corporateness. But when
substantial ownership of all the stock of a corporation in a
single individual is combined with other factors clearly
supporting disregard of the corporate fiction on grounds of
fundamental equity and fairness, courts have experienced ‘little
difficulty’ and have shown no hesitancy in applying what is
described as the ‘alter ego’ or ‘instrumentality’ theory in
order to cast aside the corporate shield[.]”).
Freight Bulk also mistakenly asserts that it cannot, as a
matter of law, have been ICI’s alter ego because it was
established years after ICI’s demise. This argument overlooks
the requisite causal link between the entities through Vista.
Freight Bulk does not deny that ICI and Vista were in existence
at the same time. Since those two entities were alter egos,
they are liable for each other’s debts. See Keffer v. H.K.
Porter Co., Inc., 872 F.2d 60, 65 (4th Cir. 1989) (describing
the effect of piercing the corporate veil). Similarly, because
Vista and Freight Bulk are alter egos, they can be responsible
34
for each other’s debts. 14 In short, Freight Bulk is liable for
ICI’s liabilities through Vista.
The district court properly applied our case law regarding
alter ego liability to the facts presented. Our conclusion in a
prior case applies equally here: “[T]his case patently presents
a blending of the very factors which courts have regarded as
justifying a disregard of the corporate entity in furtherance of
basic and fundamental fairness.” Keffer, 872 F.2d at 65.
2. Fraudulent Conveyance
Freight Bulk also raises multiple challenges to the
district court’s conclusion that ICI fraudulently conveyed
assets to the defendants and related entities to avoid its
creditors. Given no federal admiralty rules govern such a
claim, the district court appropriately looked to Virginia law.
See Ost-West-Handel, 160 F.3d at 174; see
also supra n.7
(observing that Freight Bulk failed to preserve any argument
that the district court should not have looked to Virginia
As part of its argument, Freight Bulk selectively
14
characterizes the Supreme Court’s statement in Swift that the
plaintiff could not pursue alter ego liability against a
particular defendant since it came into existence after the
underlying cause of action accrued. Significantly, however, the
Supreme Court noted that “apart from any transfer of assets by
[the originating defendant to an alleged alter ego company], the
latter company could not be held personally liable on an alter
ego theory.” Swift, 339 U.S. at 689 n.4 (emphasis added).
Here, Flame and Glory Wealth alleged a transfer of assets, so
that principle does not apply.
35
fraudulent transfer principles). The applicable Virginia
statute treats as void any transfer of property “given with
intent to delay, hinder or defraud creditors, purchasers or
other persons of or from what they are or may be lawfully
entitled to[.]” Va. Code § 55-80.
“In a suit to set aside a fraudulent conveyance, proof of
the fraudulent intent must be ‘clear, cogent and convincing.’”
Fox Rest Assocs., L.P. v. Little, 717 S.E.2d 126, 132 (Va.
2011). However, because of the difficulty of establishing
fraudulent intent, Virginia courts have traditionally relied on
certain presumptions, known as “badges of fraud.”
Id. These
“badges of fraud” include: the relationship of the parties, the
grantor’s insolvency, pursuit of the grantor by creditors at the
time of the transfer, want of consideration, retention of the
property by the grantor, fraudulent incurrence of indebtedness
after the conveyance, gross inadequacy of price, and lack of
security.
Id. at 131-32; 9A Michie’s Jurisprudence of Virginia
& West Virginia §§ 12, 15 (2015). “Once a party has introduced
evidence to establish a badge of fraud, a prima facie case of
fraudulent conveyance is established[, and] the burden shifts
[so that] the defendant must establish the bona fides of the
transaction.” Fox Rest
Assocs., 717 S.E.2d at 132.
At the outset, Freight Bulk asserts the district court
inappropriately relied on adverse inferences in the absence of
36
evidence supporting Flame and Glory Wealth’s claim. While
Freight Bulk refers to “adverse inferences” in the plural, we
note again that its prior challenge was only to the negative
inference drawn from the failure to produce ICI documents, not
from the district court’s additional inferences arising from
Baranskiy’s trial conduct. Plus, we have already held that any
error on this front was harmless. As to the inference arising
from trial, the district court acted within its discretion in
finding that any additional testimony from Baranskiy “would have
been detrimental to [Freight Bulk’s] positions.” Flame, 39 F.
Supp. 3d at 789; see also Baxter v. Palmigiano, 425 U.S. 308,
318 (1976) (noting, in the context of the Fifth Amendment’s
privilege against self-incrimination, that a court may draw
“adverse inferences against parties to civil actions when they
refuse to testify in response to probative evidence offered
against them”); Brice v. Nkaru,
220 F.3d 233, 240 & n.9 (4th
Cir. 2000) (discussing limitations on when an adverse inference
can be made in a civil trial as a result of an opposing party’s
failure to testify or missing testimony, none of which are
applicable here); Streber v. Comm’r,
138 F.3d 216, 221-22 (5th
Cir. 1998) (“In general, a court may draw a negative inference
from a party’s failure to produce a witness ‘whose testimony
would elucidate the transaction.’” (quoting Graves v. United
States,
150 U.S. 118, 121 (1893)).
37
Next, Freight Bulk contends the evidence did not show that
ICI transferred the charter for the M/V HARMONY FALCON to Vista,
but rather that Vista simply entered into its own charter after
ICI went bankrupt. The district court ably described the record
evidence supporting its finding to the contrary. That evidence
included proof that ICI and Vista both hid Vista’s assumption of
the charter; that Vista “paid [the] same charter rate for the
same ship and route and cargo [as ICI had contracted for]
despite the drop in shipping rates which [had] occurred”; that a
subsidiary of ICI paid bunker rates for the charter Vista
fulfilled; that Vista did not give ICI any consideration for the
transaction; and that Vista “made about $1.7 million profit for
the charter of the HARMONY FALCON, which sum ICI would have been
entitled” to collect and apply to its debts. Flame, 39 F. Supp.
3d at 777-78. As the district court concluded, these facts are
the very badges of fraud Virginia courts have indicated give
rise to a prima facie case of fraudulent transfer.
Id. at 785,
789. And Freight Bulk failed to rebut that presumption with
evidence establishing the bona fides of the transaction.
Freight Bulk also contends Flame and Glory Wealth failed to
establish fraud with respect to $1.58 million in payments ICI
made to Baranskiy that it claims were commissions. The document
Freight Bulk points to as proof for this position is an
untitled, undated sheet of paper containing columns listing
38
clients and corresponding numbers without any context. We
cannot say on the basis of this document that the district court
clearly erred in rejecting Freight Bulk’s assertion as to its
meaning, particularly given the lack of credible corroborating
testimony. Indeed, Baranskiy’s testimony was contradictory
throughout the duration of the case, including with respect to
explaining money he received from ICI and money he used to
capitalize Vista. As such, the district court did not clearly
err in finding that these payments were actually payments ICI
made to capitalize Vista.
As a final argument, Freight Bulk asserts that, at most,
Flame and Glory Wealth established two discrete fraudulent
transfers (the M/V HARMONY FALCON charter and $1.58 million
cash) totaling only $3.28 million. As such, it contends the
district court erred in holding that Freight Bulk was liable for
the total amount of Flame and Glory Wealth’s judgments against
ICI, which were in the neighborhood of $60 million. Relatedly,
Freight Bulk asserts that the district court should have capped
Flame and Glory Wealth’s recovery at $3.28 million rather than
distributing the entire $8.3 million obtained from the sale of
the M/V CAPE VIEWER.
This argument fails for two reasons. First, alter ego
liability made Freight Bulk jointly and severally liable for the
entirety of Flame and Glory Wealth’s judgments against ICI.
39
Thus, even if Freight Bulk were correct as to the fraudulent
conveyance claim, it would still not be entitled to a different
result because of the district court’s judgment on that issue.
Swift, 339 U.S. at 689 n.4 (observing that if plaintiffs
succeeded on a theory of alter ego, then the issue of fraudulent
transfer would be irrelevant because they would be afforded
relief under those standards). Second, the premise of Freight
Bulk’s argument - that the district court only found two
fraudulent conveyances - is incorrect. To the contrary, the
district court found multiple fraudulent conveyances between
ICI’s alter egos, making Freight Bulk liable for the entire
fraud perpetrated by ICI through Baranskiy and his compatriots.
While its holding identified the charter of the M/V HARMONY
FALCON in particular, it also identified the transfer of other
“assets,” “substantial funds,” and “ostensible ‘loans,’ which
are in reality security—and interest-free transfers of funds[.]”
Flame,
39 F. Supp. 3d at 789. In addition, the district court
relied on the discovery sanction – unchallenged on appeal – that
Vista provided funds to Sea Traffic, which were “then
transferred to [Freight Bulk] for the purchase of the CAPE
VIEWER,” in a “sham transaction used to avoid creditors.”
Id.
at 781.
40
For these reasons, we conclude sufficient evidence supports
the judgment against Freight Bulk on the fraudulent conveyance
claim.
E. Judicial Bias
Lastly, Freight Bulk contends the district court
demonstrated a personal bias against Ukrainians, which tainted
the entire proceeding and requires reversal. 15 In support,
Freight Bulk points to nine statements by the district court
that purportedly show this prejudice.
To be sure, “[a] fair trial in a fair tribunal is a basic
requirement of due process.” Caperton v. A.T. Massey Coal Co.,
556 U.S. 868, 876 (2009). To protect the right to be heard by
an impartial jurist, Congress has authorized parties to timely
file an “affidavit that the judge before whom the matter is
pending has a personal bias or prejudice either against him or
in favor of any adverse party,” and upon such a showing, “such
judge shall proceed no further therein, but another judge shall
be assigned to hear such proceeding.” 28 U.S.C. § 144. This
is, of course, in addition to the judge’s own duty to consider
whether he must disqualify himself “in any proceeding in which
15Alternatively, Freight Bulk asserts the district court’s
bias requires reassignment to a different judge in the event of
a remand. Because we have not found any other reversible error,
we only consider the remaining portion of Freight Bulk’s
argument.
41
his impartiality might reasonably be questioned.” 28 U.S.C. §
455(a).
At no time in the proceedings below did Freight Bulk
challenge the district court judge’s impartiality to hear the
case. Accordingly, it has failed to preserve this claim for
appellate review. See In re Under Seal, 749 F.3d at 285-86
(discussing the consequences of failing to preserve a claim for
appeal); see also Corti v. Storage Tech. Corp.,
304 F.3d 336,
343 (4th Cir. 2002) (Niemeyer, J., concurring) (“[I]t remains
the law of this circuit that when a party to a civil action
fails to raise a point at trial, that party waives review of the
issue unless there are exceptional or extraordinary
circumstances justifying review.”). Having reviewed Freight
Bulk’s arguments and paid particular attention to the exemplars
it provided in the transcripts, we discern no exceptional or
extraordinary circumstances in this case that would justify
reviewing it on the merits. 16
16 Freight Bulk cites an out-of-circuit case to support its
view that this Court should not deem its argument waived. See
United States v. Kaba, 480 F.3d 152 (2d Cir. 2007). This
criminal sentencing case did not involve an allegation of
evidence of a judge’s personal bias or prejudice, but rather a
claim that the judge considered the defendant’s nationality in
deciding an appropriate sentence.
Id. at 156-58. As such, it
is inapposite.
Moreover, even assuming Freight Bulk preserved its
argument, we find no error. We have reviewed the statements
cited by Freight Bulk and conclude it has selectively quoted
(Continued)
42
III.
For the reasons detailed above, the judgment of the
district court in favor of Flame and Glory Wealth is
AFFIRMED.
only parts of the record and taken the comments far out of
context. Viewed in full, there is nothing in the district
court’s commentary to support such a claim.
43
