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SCL Basilisk AG v. Agribusiness United Savannah Logistics LLC

United States Court of Appeals, Eleventh Circuit

November 14, 2017

SCL BASILISK AG, THORCO SHIPPING A/S, Plaintiffs - Appellants,
v.
AGRIBUSINESS UNITED SAVANNAH LOGISTICS LLC, AGRIBUSINESS UNITED INC., AGRIBUSINESS UNITED DMCC INC., AGRIBUSINESS UNITED DMCC (DUBAI) LLC, SONADA AGRO LIMITED (UK) LLC, Defendants - Appellees.

         Appeal from the United States District Court for the Southern District of Georgia D.C. Docket No. 4:16-cv-00162-WTM-GRS

          Before WILLIAM PRYOR, JORDAN, and RIPPLE, [*] Circuit Judges.

          RIPPLE, Circuit Judge

         Invoking the district court's maritime jurisdiction, the plaintiffs SCL Basilisk AG ("SCL Basilisk") and Thorco Shipping A/S ("Thorco") brought this action for an order requiring the posting of security by Agribusiness United Savannah Logistics LLC ("Agribusiness Savannah"), Agribusiness United Inc., Agribusiness United DMCC, Inc., and Sonada Agro Limited (UK) LLC ("Sonada"), in aid of a pending international arbitration in London, United Kingdom. After a hearing, the district court denied relief, and the plaintiffs timely appealed. We now affirm the district court's judgment. The relief sought by the plaintiffs is not authorized by Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions ("Supplemental Rules"), Georgia law, or principles of maritime law.

         I

         The underlying petition arose out of a commercial dispute between the plaintiffs, SCL Basilisk and Thorco, and defendants Agribusiness Savannah and Sonada, [1] over the performance of a charter agreement. On December 30, 2015, SCL Basilisk executed a voyage charter party with Agribusiness Savannah for the carriage of grain from New Orleans to Portugal and Morocco. Agribusiness Savannah later requested that the charterer be changed to Sonada for insurance coverage reasons.[2] On March 4, 2016, a letter of indemnity was issued by Sonada as charterer and Agribusiness Savannah as guarantor. The letter required the posting of security if the SCL Basilisk were arrested or detained, and provided for indemnification against liability, loss, and damage.

         The M/V SCL BASILISK was detained pursuant to a writ of attachment issued in the Eastern District of Louisiana at the request of a nonparty on a claim unrelated to the present dispute. There was a delay by Sonada and Agribusiness Savannah in posting security, and, as a result, SCL Basilisk incurred damages in the amount of $452, 528.86. In February 2016, SCL Basilisk instituted arbitration proceedings against Sonada and Agribusiness Savannah in a London arbitration as required by the charter agreement.

         On June 24, 2016, SCL Basilisk filed a "Petition and Application for an Order for Security in Aid of Foreign Arbitration Pursuant to O.C.G.A. § 9-9-30" in the federal district court in Savannah, Georgia.[3] In its petition, SCL Basilisk identified Sonada as a foreign entity having an office and registered agent in Savannah, Georgia, and a registered agent in Roswell, Georgia; Agribusiness United Inc. as a Georgia corporation with a principal office and registered agent in Savannah, Georgia; Agribusiness Savannah as a Florida corporation with a principal office address in Savannah, Georgia; and the other Agribusiness entities as foreign companies, but registered to do business, and with registered agents for service of process, in either Atlanta or Savannah, Georgia.[4] The petition sought $667, 528.86[5] to secure a possible judgment in the pending arbitration in London. It asserted that the requested relief was authorized by section 9-9-30 of the Georgia Code.

         The district court expedited the matter and held a hearing on July 11, 2016. One week later, it issued an order denying the requested relief. In its order, the district court first noted that the relief that the plaintiffs sought was not available under maritime law. The court explained that Supplemental Rule B allows entities to sue in personam and attach property as security for a claim.[6] Supplemental Rule B requires, however, that the plaintiff or the plaintiff's attorney sign and file an affidavit stating that the defendant cannot be found within the district. The plaintiffs could not meet this requirement because, "according to their filings, all Defendants are present in some fashion in this district."[7] Rule C of the Supplemental Rules[8] also was not available to the plaintiffs. The district court explained that Supplemental Rule C allowed a party to sue a ship directly in rem.Because the plaintiffs are the owners of the M/V SCL BASILISK, pursuing attachment under Supplemental Rule C would result in a suit against themselves.

         The district court then evaluated whether the plaintiffs could recover under section 9-9-30 of the Georgia Code. That provision states: "Before or during arbitral proceedings, a party may request from a court an interim measure of protection, and a court may grant such measure, and such request shall not be deemed to be incompatible with an arbitration agreement." Ga. Code Ann. § 9-9-30. According to the plaintiffs, section 9-9-30 grants courts the authority to award petitioners "a broad range of provisional or interim relief."[9] In evaluating this request, the district court noted that it could apply state law to supplement maritime law if the result did not "frustrate national interests in having uniformity in admiralty law."[10] The court looked to the test set forth in Misener Marine Construction, Inc. v. Norfolk Dredging Co., 594 F.3d 832, 839 (11th Cir. 2010): "State law may be applied to issues of a maritime nature if: (1) there is not an act of Congress that speaks to the issue; (2) the state law does not contravene a characteristic feature of the general maritime law; and (3) the state law does not interfere with the proper harmony and uniformity of maritime law." The district court then determined that, if section 9-9-30 had the broad scope that the plaintiffs imputed to it, the provision would run afoul of all three requirements.

         First, the court observed that federal law already spoke to the intersection of maritime law, arbitration, and security pending arbitration. Section 8 of Title 9 of the United States Code allowed a party to begin a proceeding "hereunder by libel and seizure of the vessel or other property of the other party according to the usual course of admiralty proceedings, " and still proceed to arbitration. "The usual course of admiralty proceedings, " the court continued, involves "libel or seizure pursuant to Rule B or Rule C."[11] "Because there is an act of Congress that speaks to the issue, and because the application of § 9-9-30 would contravene the application of this act, " the court concluded that it could not "grant the relief Plaintiffs seek."[12]

         The court further expressed the concern that the state statute "contravenes a characteristic feature of general maritime law and interferes with its harmony and uniformity."[13] In its view, "[m]aritime attachment is by any test a characteristic feature of the general maritime law."[14] Plaintiffs, however, were seeking a remedy under state law because they were unable to meet the requirements of attachment under the Supplemental Rules. According to the district court, allowing plaintiffs to seek attachment outside of the rules would not only subject entities to varying security and attachment requirements, it also would allow them to bypass the procedural requirements of the Supplemental Rules.

         Finally, the court observed, even if there were no impediments to invoking the state statute, it could not "discern what relief would be applicable."[15] In the district court's view, section 9-9-30 did not have the expansive scope that the plaintiffs attributed to it. Instead, it simply permitted the court to grant remedies otherwise available under federal and Georgia law. It did not create new remedies.

         Accordingly, the district court denied the plaintiffs' request for an order of security. The plaintiffs timely appealed.

          II

         "Maritime parties are peripatetic, and their assets are often transitory." Aqua Stoli Shipping Ltd. v. Gardner Smith Party Ltd., 460 F.3d 434, 443 (2d Cir. 2006), overruled on other grounds by Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58, 61 (2d Cir. 2009). Thus, "it is frequently, but not always, more difficult to find property of parties to a maritime dispute than of parties to a traditional civil action." Id. As plaintiffs acknowledge, "[t]he standard procedural mechanism . . . to address this problem is maritime attachment, which allows a plaintiff to secure its claim against a defendant's property found within a district and simultaneously to subject the defendant to the personal jurisdiction of the corresponding district court up to the value of the property attached."[16]

         A.

         "Typically actions for attachment are brought under Rule B(1)(a) [of the] Supplemental Rules . . . ." Everspeed Enters. Ltd. v. Skaarup Shipping Int'l, 754 F.Supp.2d 395, 400 (D. Conn. 2010). Rule B states in relevant part:

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

         Fed. R. Civ. P. Supp. B (emphasis added). "[T]here are two reasons for the procedure authorized in Supplemental Rule B: to assure a respondent's appearance, and to assure satisfaction in case the suit is successful." Nehring v. Steamship M/V Point Vail, 901 F.2d 1044, 1051 (11th Cir. 1990) (alteration in original) (quoting Polar Shipping Ltd. v. Oriental Shipping Corp., 680 F.2d 627, 637 (9th Cir. 1982)). "Supplemental Rule B, however, cannot be used purely for the purpose of obtaining security: 'The two purposes may not be separated, however, for security cannot be obtained except as an adjunct to obtaining jurisdiction.'" Id. (quoting Seawind Compania, S.A. v. Crescent Line, Inc., 320 F.2d 580, 582 (2d Cir. 1963)).

         Here, SCL Basilisk and Thorco cannot meet the requirements for invoking Rule B(1)(a). Specifically, all of the defendants can be found in the district.[17]Thus, at least in these circumstances, the plaintiffs' purpose in invoking Rule B is not "to gain jurisdiction over an absent defendant, " Aqua Stoli Shipping Ltd., 460 F.3d at 437, and Rule B(1)(a) is inapplicable. See Everspeed Enters. Ltd., 754 F.Supp.2d at 400 (holding that "Rule B(1)(a) is inapplicable" where each of the defendants resides or has a principal place of business in the district in which the action is brought). Indeed, the plaintiffs admit that such is the case: "When a defendant appears by registration within a district, attachment under Rule B(1)(a) is no longer available."[18]

         B.

         Rule B, however, also allows plaintiffs to employ state measures of protection. Supplemental Rule B(1)(e) provides that a "plaintiff may invoke state-law remedies under Rule 64 for seizure of person or property for the purpose of securing satisfaction of the judgment." Fed.R.Civ.P. Supp. B(1)(e). For its part, Federal Rule of Civil Procedure 64 provides:

(a) Remedies Under State Law-In General. At the commencement of and throughout an action, every remedy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgment. But a federal statute governs to the extent it applies.
(b) Specific Kinds of Remedies. The remedies available under this rule include the following-however designated and regardless of whether state procedure requires an independent action:
•arrest;
•attachment;
•garnishment;
•replevin;
•sequestration; and
•other corresponding or equivalent remedies.

Fed. R. Civ. P. 64.

         Although at least some of these specifically enumerated remedies are available under Georgia law, see Ga. Code Ann. § 18-3-1 (identifying grounds of attachment); id. § 18-4-1 et seq. (setting forth garnishment procedures), the plaintiffs have not pursued them. Instead, they have petitioned for "an order requiring the posting of security pursuant to Georgia Code . . . § 9-9-30."[19]According to the plaintiffs, section 9-9-30 provides a remedy that "correspond[s]" or is "equivalent" to those enumerated in Rule 64(b).[20] In their view, the provision is a grant of authority empowering courts to create interim measures of protection. We cannot accept this argument.

         1. Language and history of section 9-9-30

         Section 9-9-30 of the Georgia Code is a provision within Georgia's relatively recently enacted International Commercial Arbitration Code.[21] The provision states, "Before or during arbitral proceedings, a party may request from a court an interim measure of protection, and a court may grant such measure, and such request shall not be deemed to be incompatible with an arbitration agreement." Ga. Code Ann. § 9-9-30. On its face, the language of section 9-9-30 reflects the policy that a party's resort to a court for an order to preserve assets (in the event of arbitral victory) or to protect trade secrets (in the course of arbitral discovery) is compatible with having the merits of a dispute determined in an arbitral forum. The provision therefore serves an important function in fostering a legal climate conducive to international arbitration[22]: it guarantees that a party's resort to a court for interim measures cannot be interpreted as a waiver of his or her right to arbitrate the merits of the underlying dispute.

         This plain meaning is confirmed by the notes to the working drafts and the final report of the United Nations Commission on International Trade Law regarding the Model Law on International Commercial Arbitration ("UNCITRAL Model Law"), on which Georgia's International Commercial Arbitration Code is based. See Stephen L. Wright & Shelby S. Guilbert Jr., Recent Advances in International Arbitration in Georgia: Winning the Race to the Top, 18 Ga. B.J., June 2013, at 18-19 ("The ICA Code itself is based primarily upon the 1985 UNCITRAL Model Law on International Commercial Arbitration . . ., as amended in 2006.").[23] In the notes to the Fourth Draft, the drafters observe:

20. Article 9 expresses the principle of compatibility of an arbitration agreement with a request to a court for an interim measure. There are two aspects of this principle.
21. One aspect is that it applies to courts of the State of the model law requested to grant an interim measure and provides that a court shall not refuse to grant such a measure on the ground that there is an arbitration agreement.
22. The other aspect is that the rule expresses the principle according to which a request by a party for an interim measure should not be construed as a waiver of the arbitration agreement. This principle should apply irrespective of whether such a request is made to a court in the State of the model law or to a court in any other State.

         Howard M. Holtzmann & Joseph E. Neuhaus, A Guide to the UNCITRAL ModelLaw on International Commercial Arbitration 341 (1989) ("Holtzmann & Neuhaus") (quoting Fifth Secretariat Note Territorial Scope of Application and Related Issues A/CN.9/WG.II/WP.49 (21 December 1983)) (bracketed references omitted). Moreover, the Commission's final report confirms that Article 9 was not meant to expand ...


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