IN THE UNITED STATES BANKRUPTCY COURT FOR …omnimgt.com/cmsvol2/pub_46888/546415_886.pdf · FOR...

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF CONNECTICUT

BRIDGEPORT DIVISION

In re: ) Chapter 11

)

O.W. Bunker Holding North America, Inc., ) Case No. 14-51720 (AHWS)

et al.1 ) Jointly Administered

)

Debtors. ) September 2, 2015

SUPPLEMENTAL SUBMISSION IN FURTHER SUPPORT OF

AMENDED MOTION FOR AN ORDER (A) DECLARING THAT THE

AUTOMATIC STAY DOES NOT APPLY TO INTERPLEADER ACTIONS

(B) OR, IN THE ALTERNATIVE, MODIFYING THE AUTOMATIC STAY

Clearlake Shipping Pte Ltd. ("Clearlake") by and through its counsel, Cohen and Wolf,

P.C. and Holland & Knight LLP, files this supplement to its Amended Motion for Order (A)

Declaring that the Automatic Stay Does Not Apply to Interpleader Actions (B) or, in the

Alternative, Modifying the Automatic Stay (the "Motion") (Doc. No. 224), and respectfully states

as follows:

UPDATED FACTUAL BACKGROUND

1. The Court is respectfully referred to the Motion for the background of the bunker

supply transactions involving the vessels Venus Glory, Hellas Glory and Ernest N, as well as the

subsequent filing of the two interpleader actions in the District Court for the Southern District of

1 The Debtors in these chapter 11 cases, along with the last four digits of the Debtors’ taxpayer identification

numbers, are as follows: O.W. Bunker Holding North America Inc. (7474), O.W. Bunker North America Inc. (7158)

and O.W. Bunker USA Inc. (3556).

Case 14-51720 Doc 886 Filed 09/02/15 Entered 09/02/15 15:15:22 Desc Main Document Page 1 of 16

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New York (“S.D.N.Y.” or the “District Court”) which are the subject of the Motion.2 Doc. No.

224 at 2-10.3

2. As set forth in the Motion, on November 21, 2014, Clearlake filed two Ex Parte

Applications for the entry of orders directing the deposit of interpleader funds into the S.D.N.Y.

court registry and restraining the arrest of the vessels Venus Glory and Hellas Glory which are

the subject of the interpleader action. The District Court executed the proposed Orders on the

same day. 14-cv-9287, Doc. Nos. 4 and 5.4 Subsequently, on November 25, 2014, after a brief

telephone hearing, the orders were vacated by the Judge then assigned to the matter5 (14-cv-

9287, Doc. Nos. 13), based on the Court's concern that the automatic stay might apply to an

interpleader where the Debtors are named as claimants to the funds sought to be deposited.

3. After the Deposit Order and Restraining Order were vacated, Clearlake entered

into a security agreement with NuStar Energy Services, Inc. ("NuStar") to prevent the arrest of

the vessels Venus Glory and Hellas Glory in the Southern District of Texas. Indeed, the vessel

Venus Glory was due to arrive (and did) in Houston, Texas on November 26, 2014, thus the

agreement with NuStar was negotiated under the threat of imminent arrest. A copy of the

“Security Agreement” is attached hereto as Exhibit 1. The language of the Security Agreement

2 The two interpleader actions are captioned Clearlake Shipping Pte Ltd. v. O.W. Bunker (Switzerland) SA, et al.,

Case Nos. 14-cv-9286 (pertaining to the vessel Ernest N) and 14-cv-9287 (pertaining to the vessels Venus Glory and

Hellas Glory).

3 All references to “Doc. No.” are to the ECF docket entries in this case, unless indicated otherwise. The other

docket references shall be to the relevant S.D.N.Y. interpleader dockets.

4 Also on November 21, 2014, Clearlake filed a similar interpleader action pertaining to the Ernest N: in that

litigation the orders of deposit and restraint were issued and remain in place. 14-cv-9286, Doc. Nos. 3 and 4.

Subsequently, in order to conform with the scope of later-filed interpleader actions, the restraining order was

amended which also required Clearlake to add an interest component to the funds on deposit in the registry. 14-cv-

9286, Doc. 56. In accordance with the amended restraining order, the amount currently on deposit in the S.D.N.Y.

registry is $483,101.68.

5 The telephone conference was held before the Honorable William H. Pauley, III. Subsequently, this interpleader

case, along with the other interpleader cases (including the Ernest N) were assigned to the Honorable Valerie E.

Caproni. See Doc. No. 224 at 7 n. 4.


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contemplates that if Clearlake prevails by way of its motion before this Court that the automatic

stay does not apply, or in the alternative, lifting the stay, then such funds shall be transferred

from the escrow account held for NuStar's benefit into the S.D.N.Y. court registry for the benefit

of all interpleader claimants, including O.W. (Switzerland) SA ("O.W. Switzerland"), ING Bank

N.V. ("ING") and the Debtors. Ex. 1 at ¶ 7.

4. Clearlake moved this Court on December 23, 2014 for an order declaring that the

automatic stay does not apply to the interpleader action, or in the alternative, modifying or lifting

the automatic stay. Doc. No. 224. The hearing on the Motion has been delayed at the express

request of the Debtors and in deference to the developments in the bankruptcy case as well as in

the District Court with respect to the numerous related interpleader actions before it.

5. On December 18, 2014 an omnibus hearing was held before Judge Caproni with

counsel present for all the Vessel Interests to-date6 as well as the Debtors, ING, the Official

Committee of Secured Creditors (the “Creditors’ Committee”) of the Debtors, and additional

claimants.7 By order dated December 19, 2015, Judge Caproni ordered the parties to submit briefs

on the following question:

Whether it is proper for the Court to permit Plaintiff vessel owners or charterers 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 this District.

6 As of December 18, 2014, approximately 10 interpleader actions were pending before Judge Caproni. As of the

date of this filing, 24 related interpleader actions are pending before Judge Caproni, 13 of which are subject to a stay

of proceedings until September 25, 2015, and 11 of which are currently engaged in discovery, as set forth below.

(See 14-cv-9286, Doc. No. 76). Essentially the stayed actions only involve Debtors, other O.W. entities (e.g., O.W.

Switzerland), ING and barge transport vendors (such as Westoil Marine Services, Inc. ("Westoil") in the Ernest N

matter). On the other hand, the non-stayed actions involve third-party physical suppliers, such as NuStar.

7 With the exception of certain foreign O.W. Bunker defendant-claimants against whom formal service was pending.

Where possible, notice of the hearing was provided.


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14-cv-9287, Doc. No. 23.8

6. Pursuant to that order, U.S. Oil Trading LLC ("USOT") and NuStar filed a

memorandum on January 14, 2015. 14-cv-9720, Doc. No. 46. ING also filed a jurisdictional brief

on that date. 14-cv-9287, Doc. No. 33. The interpleader plaintiffs, including Clearlake, submitted a

joint brief on February 4, 2015 setting forth the bases for the District Court’s jurisdiction, including

the broad equitable powers of the court under 28 U.S.C. § 1333 (admiralty jurisdiction) and the

interpleader statute, 28 U.S.C. § 1335. 14-cv-9287, Doc. No. 37. Both sides briefed whether the

vessels are required to be present within the District for the court to enjoin in rem maritime actions

against the vessels, as well as certain other issues.

7. After briefing on the above issues, the Court ordered additional briefing on the

subject matter jurisdiction of the District Court in the interpleader actions. 14-cv-9287, Doc. No.

43. USOT and NuStar filed a second brief pursuant to this Order on February 27, 2015 (14-cv-

9287, Doc. No. 44) and the interpleader plaintiffs, again including Clearlake, submitted a joint brief

on March 6, 2015 (14-cv-9287, Doc. No. 46). The Debtors also submitted a brief in support of

subject matter jurisdiction. 14-cv-9720, Doc. No. 83.

8. On July 1, 2015, the District Court issued a Memorandum Opinion and Order

holding that it has subject matter jurisdiction over the interpleader actions before it under 28

U.S.C. § 1333 (admiralty jurisdiction) and 28 U.S.C. § 1135 (the Interpleader Act). 14-cv-9287,

Doc. No. 69 at 15-16 (attached hereto as Exhibit 2).

9. The District Court went on to note that its subject matter jurisdiction extends to

both the statutory in rem maritime lien claims against the subject Vessels as well as the

8 Also in the December 19 Order, Judge Caproni ordered the parties to brief “why these cases should not all be

transferred to, and adjudicated by, the United States District Court for the District of Connecticut upon a motion to

withdraw the reference in the bankruptcy proceedings currently pending before Judge Shiff in the United States

Bankruptcy Court District of Connecticut (the ‘Bankruptcy Court’) (Bankr. Pet. No. 14-51720).” 14-cv-9287, Doc.

No. 23. This briefing was adjourned sine die. 14-cv-9287, Doc. No. 28.


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contractual or in personam claims. As a result, the Court found that it has jurisdiction to enjoin

the arrest of vessels in other jurisdictions pursuant to 28 U.S.C. § 2361, regardless of whether

the vessels ever entered the S.D.N.Y. Id. at 16. Indeed, rather than being “separate and

distinct,” the District Court noted that there is “only one underlying debt” per fuel delivery, and

that the claims are “‘inextricably interrelated’ and therefore subject to interpleader.” Id. at 17-

19.

10. In addition to the determination of subject matter jurisdiction over the interpleader

actions, Judge Caproni has held numerous omnibus hearings and conferences, advancing the

posture of many of the interpleader cases by setting a discovery schedule, currently scheduled

through October 30, 2015, and staying certain other cases where the Debtors have suggested that

their plan for reorganization or liquidation in this Court may resolve certain competing claims

(such as between the Debtors and ING) in the interpleader actions. 14-cv-9287, Doc. No. 67

(staying thirteen of twenty-four interpleader actions (at ¶ 1), setting deadlines for discovery (at ¶

5, 8, 10), and setting deadlines for motions objecting to personal jurisdiction (at ¶ 6)).

11. On August 10, 2015, in light of the Security Agreement in place between

Clearlake and NuStar and the lack of interpleader funds on deposit in the S.D.N.Y. court registry

pursuant to the interpleader statute (28 U.S.C. § 1335), the District Court issued an Order to

Show Cause why Clearlake’s interpleader action pertaining to Venus Glory and Hellas Glory

should not be dismissed for failure to meet the requirements of interpleader. 14-cv-9287, Doc.

No. 82 (attached hereto as Exhibit 3). Because the re-deposit of the interpleader funds in that

interpleader action is dependent on the outcome of the Motion pursuant to the terms of the

Security Agreement (Ex. 1), Clearlake requested the hearing on the Motion, previously

scheduled for September 16, 2015 be re-scheduled to September 9, 2015. The hearing on the


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District Court's Order to Show Cause is scheduled for September 15, 2015, and Clearlake

submitted its response to the District Court on August 28, 2015. 14-cv-9287, Doc. No. 83

(attached hereto as Exhibit 4).

REPLY TO NUSTAR’S RESPONSE TO THE AMENDED MOTION9

I. The Automatic Stay Does Not Apply to the Interpleader Actions

12. The automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362, is a

protection for the debtor as well as creditors. In addition to providing the debtor relief from

creditors, it also protects creditors by preventing a race to judgment. “Without it, certain

creditors would be able to pursue their own remedies against the debtor’s property. Those who

acted first would obtain payment of the claims in preference to and to the detriment of other

creditors…” Assoc. of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446,

448 (3d Cir. 1982) (quoting H.R. Rep. No. 95-595, 95th

Cong., 1st Sess. 340 (1977), reprinted in

1978 U.S. Code Cong. & Ad. News 5963, 6296-97).

13. This principle regarding the protections of the automatic stay directly support why

the stay is not applicable in actions where the debtor as a defendant is indeed in the role of a

“nominal defendant” such as interpleader. As outlined in Price & Pierce Int’l, Inc. v. Spicers

Int’l Paper Sales, Inc., 50 B.R. 25 (S.D.N.Y. 1985), “the reach of the automatic stay is limited by

its purposes… the right to pursue an interpleader action is not affected by the fact that one of the

claimants has filed a petition in bankruptcy… Any broader reading of § 362 would not serve the

purposes of the section…” Id. at 26.

14. NuStar’s effort to describe the holding of Price & Pierce as limited to the ability

of a debtor to “hide behind” the automatic stay by filing for bankruptcy while an interpleader is

9 To date, the only response to the Motion has been filed by NuStar. Doc. No. 256.


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pending is incorrect and unsupported by the case NuStar cites and subsequent cases which follow

Price & Pierce. See, e.g., In re Enron Corp., 306 B.R. 465, 471 n.3 (Bankr. S.D.N.Y. 2004);

Commercial Union Ins. Co. v. John-Mansville Corp., 31 B.R. 965, 970 (S.D.N.Y. 1983) (noting

inapplicability of stay to interpleader) (citing Dakota Livestock Co. v. Keim, 552 F.2d 1302, 1305

(8th Cir. 1977) and Shell Pipeline Corp. v. West Texas Marketing Corp., 540 F. Supp. 1155,

1161-62 (S.D. Tex. 1982)).

15. The case upon which NuStar relies, NLT Computer Services Corp. v. Capital

Computer Systems, Inc., 755 F.2d 1253 (6th Cir. 1985), is inapposite to the situation underlying

the Motion. In NLT Computer, the funds deposited by the interpleader plaintiff were funds owed

to the debtor. The ostensible basis for the interpleader was the claim of others to the debtor's

funds, including the U.S. government (based on a tax levy) and judgment creditors of the debtor.

Thus, from the commencement of the interpleader, it was clear that the disputed funds were the

property of the debtor, albeit the debtor had disclaimed any interest in the funds. Id. at 1255-56.

Under the circumstances, "the interpleader court's only function was the same as that which is

vested in the bankruptcy court under the Bankruptcy Code, that is, to determine the relative

priority of competing claims to the [debtor's] fund." Id. at 1263. Thus, NLT Computer has no

relevance on the issue before the Court in the Motion.

16. The limits of NLT Computer has been recognized in other decisions. See, e.g.,

National Co-op. Refinery Ass’n v. Rouse, 60 B.R. 857, 859-60 (D. Colo. 1986) (distinguishing

facts of NLT and relying instead on Shell Pipeline Corp., supra: "[B]ecause the purpose of this

interpleader is to determine title to the res, the res is not at this point property of any 'debtor'

within the meaning of the automatic stay provision of 11 U.S.C. § 362(a).").


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17. Additionally, Price v. Pierce, the principle case in this Circuit, notes NLT

Computer as contrary, yet distinguishable, authority and correctly finds that interpleader actions

are not subject to the automatic stay where the right to the interpleaded funds is in dispute. 50

B.R. at 26. Indeed, a more thorough discussion of NLT Computer is included in a later decision

in the same case, Price & Pierce Int’l, Inc. v. Spicers Int’l Paper Sales, Inc., No. 84-3728, 1985

WL 1985 (S.D.N.Y. Jun. 28, 1985) in which the court stated:

In NLT Computer, NLT was a plaintiff in interpleader and owed certain

installment payments to the defendant-debtor. NLT asked the Court to decide

which creditors of the debtor were entitled received the fund. Although NLT was

not a claimant since it conceded debts in excess of the fund, the fund was clearly

the property of the bankrupt's estate. Thus, the Sixth Circuit's holding that § 362's

automatic stay applied was based on the fact that the interpleader action was one

which could 'affect the assets of the bankrupt.' 755 F.2d at 1288. In the instant

case, the fund is not property of [debtor] being sought by adverse parties; it is the

property of [interpleader plaintiff], being sought by [debtor] and [another claimant

in the interpleader action]. This was the basis of the Court's May 16 opinion [50

B.R. 25]. If it was argued that the fund belonged to [debtor] and was awaiting

distribution to [debtor]’s creditors, the Court would likely have followed NLT

Computer. That not being the case, NLT Computer is inapposite.

Id. at *1.

18. Interestingly, in contrast to NLT Computer, where the interpleader action was

stayed so that the priority of claims to the property (which was conceded to be the property of the

debtor) could proceed in bankruptcy, Clearlake assumes NuStar does not and would not concede

that the funds at issue are the property of the Debtors, but seeks to apply the automatic stay in

order to proceed on its lien claims in independent arrest actions around the country against the

vessels in rem.

19. Although NuStar has continually asserted that its in rem lien claims are separate

and distinct from other creditors’ in rem or in personam contractual claims, the District Court has

found otherwise.


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While they are the unsecured creditors of the O.W. Entities, they are effectively

secured creditors of the non-bankrupt Vessel… 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 [NuStar, among others] could jump that line

by proceeding directly against the Vessel, in rem, pursuant to 46 U.S.C. § 31342

to collect the amounts due.

14-cv-9287, Doc. No. 69 at 17 (Exhibit 2).

20. NuStar’s argument in favor of the stay actually illustrates why applying the

automatic stay provision to an interpleader action works against the stay’s very purpose, as noted

in Price & Pierce, because it would allow one creditor, such as NuStar, to race to collect the

amount claimed. It further demonstrates that the rationale for application of the automatic stay in

NLT Computer is inapplicable here, where the application of the stay would not result in an

orderly determination of the priority of claims in the Bankruptcy Court, but in chaotic arrest

actions around the country in which Debtors would need to intervene and participate to protect

their own competing claims.

21. Finally, NuStar’s assertion that the District Court’s issuance of restraining orders

preventing the arrest or attachment of the subject vessels, or the commencement of an in

personam action against the interpleader plaintiff is a violation of the automatic stay relies on the

distinguishable line of cases following NLT Computer. See In re Falls Bldg., Ltd., 94 B.R. 471,

480-81 n. 11 (Bankr. E.D. Tenn. 1988) (citing NLT Computer and noting Price & Pierce as

contrary authority). Moreover, while Falls Bldg. held that an interpleader action violated the

automatic stay, the finding was entirely consistent with the rationale of NLT Computer (and, of

course, inapposite to the fact pattern of Price & Pierce and its related decisions): the property at

issue were funds owed to debtor, hence property of the estate ab initio. 94 B.R. at 474-77.

22. NuStar provides no support for its assertion that a restraining order necessary to

effect the purposes of the interpleader alters the Debtors’ status as nominal defendants. The


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Debtors are not prevented from the collection of their property, but rather have been provided

with an orderly forum in the District Court interpleader actions to establish what may be their

property. The restraining order prevents duplication of actions and unfair advantage to any one

creditor in the bankruptcy proceedings, and allows the Debtors a fair chance at recovery of what

may later be determined to be property of the estate.

II. In the Alternative, if the Automatic Stay Applies, Modification of the Stay is

Warranted Under the Sonnax Factors

23. As noted in the Motion, courts in the Second Circuit consider twelve factors (the

“Sonnax Factors”) that may be relevant in deciding whether a stay should be lifted for cause:

(1) whether relief would result in a partial or complete resolution of the issues;

(2) lack of any connection with or interference with the bankruptcy case;

(3) whether the other proceeding involves the debtor as a fiduciary;

(4) whether a specialized tribunal with the necessary expertise has been established to

hear the cause of action;

(5) whether the debtor’s insurer has assumed full responsibility for defending it;

(6) whether the action primarily involves third parties;

(7) whether litigation in another forum would prejudice the interests of other

creditors;

(8) whether the judgment claim arising from the other action is subject to equitable

subordination;

(9) whether movant’s success in the other proceeding would result in a judicial lien

avoidable by the debtor;

(10) the interests of judicial economy and the expeditious and economical resolution of

litigation;


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(11) whether the parties are ready for trial in the other proceeding; and

(12) impact of the stay on the parties and the balance of harms.

Sonnax Indus., Inc. v. Tri Component Prods. Corp., 907 F.2d 1280, 1286 (2d. Cir. 1990) (citing

In re Curtis, 40 B.R. 795, 799-800 (Bankr. D. Utah 1984)).

24. A judge has considerable discretion when considering and applying the Sonnax

Factors, including which factors to apply and how much weight should be given to each. 907

F.2d at 1286. The Sonnax Factors reflect questions of law leading to the ultimate decision of

whether relief from the automatic stay is appropriate, while the facts and circumstances of the

specific case govern their application. See Lamarche v. Miles, 416 B.R. 53, 61 (E.D.N.Y. 2009)

(citing In re Mazzeo, 167 F.3d 139, 143 (2d Cir. 1999)). Here, the underlying facts as to the

District Court interpleader actions are straightforward and cannot properly be subject to dispute.

25. Clearlake respectfully refers the Court to its initial discussion of the Sonnax

Factors in the Motion (Doc. No. 224 at 16-20). Due to subsequent determinations by the District

Court and the current procedural posture of the interpleader actions, Clearlake respectfully

submits that the Sonnax Factors weigh even more favorably in support of a modification or

lifting of the automatic stay in this case.

26. Clearlake and NuStar both conclude in their previous submissions to the Court on

the Motion that Factors 5, 8, and 9, listed above, do not apply to this dispute. Doc. No. 224 at 17

n. 7; Doc. No. 256 at 5.

27. NuStar concedes that Factor 1, that relief would result in a partial or complete

resolution of the issues, favors the granting of relief from the stay. Doc. No. 256 at 6. Indeed,

NuStar’s listed reservations about Factor 1 have all become moot since its submission on the

Motion was initially filed. The District Court has now determined that it has subject matter


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jurisdiction over all in personam and in rem competing claims in the interpleaders, that all

purported liens have been perfected notwithstanding that the vessels did not arrive in the district,

and that the funds on deposit (constituting in most cases 106% of the highest invoice amount per

fuel delivery) are sufficient to secure the claims in interpleader. 14-cv-9287, Doc. No. 69

(Exhibit 2). Additionally, no party has challenged the District Court’s personal jurisdiction over

it and the deadline for such a motion has passed. 14-cv-9287, Doc. No. 67. Finally, the order for

briefing as to why the interpleader actions should be not transferred to the District of Connecticut

has been held in abeyance, and many of the interpleader actions are moving forward through the

discovery phase.10

14-cv-9287, Doc. No. 28 (see also note 5, supra). Where the District Court

is moving forward with resolving complex issues of maritime law as it relates to the maritime

liens and related in personam claims asserted by NuStar and others, Factor 1 weighs heavily in

favor of relief from the stay.

28. Factor 2 favors relief from the stay now more than ever, where the interpleaders

have been proceeding in an orderly manner for nine months without interfering with the Debtors'

bankruptcy proceedings. Where it has been suggested to the District Court that an approved plan

in this Court may resolve certain issues in interpleader, the District Court has exercised

deference to the bankruptcy proceedings, and has stayed the interpleader actions where those

claims may be resolved in bankruptcy. Resolution of the issues mentioned above within the

interpleader context will in fact assist the Bankruptcy Court, as the District Court is the proper

forum for the adjudication of maritime disputes as an Article III tribunal, and the interpleader

actions will further the goals of the Bankruptcy Court by avoiding a race by creditors to obtain

10

As discussed above, 14-cv-9826 (Ernest N) is currently stayed pending a possible resolution of competing claims

between the Debtors and ING in this Court, while 14-cv-9287 (Venus Glory and Hellas Glory) is currently

proceeding with discovery because it involves NuStar as a competing claimant.


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payment through vessel arrest actions around the country. Finally, NuStar’s assertion that the

various issues with respect to competing maritime lien claims have been litigated before this

Court in connection with the SHV Gas Supply & Risk Mgt. SAS v. O.W. Bunker USA, Inc. matter

is simply incorrect.11

29. Factor 4, whether there is a specialized tribunal with expertise to hear the cause of

action, is implicated because the District Court is an Article III court with admiralty jurisdiction

over these actions and the power to adjudicate maritime lien and related in personam claims. See

In re Burger Boys, Inc., 183 B.R. at 682, 688-89 (S.D.N.Y. 1994) (“Unable to provide relief

itself, the Bankruptcy Court lifted the stay in order to allow timely adjudication of the issues in

appropriate [state court] forums that could provide complete relief.”) Additionally, the S.D.N.Y.

is a jurisdiction which has personal jurisdiction over all defendant-claimants, such as O.W.

Switzerland, ING, NuStar, and Westoil (see also Factor 6, whether the action involves third

parties).

30. Factor 7, whether litigation in another forum will prejudice other creditors, is a

factor which weighs strongly in favor of modification of the stay. The interpleader actions will

actually allow creditors (and possibly the Debtors) to collect funds to which they establish

entitlement, while avoiding a race to collection (the very purpose of the automatic stay).12

NuStar asserts that it will be prejudiced by the continuation of interpleaders in another District,

the adjacent Southern District of New York, because it must maintain additional counsel located

11

Rather than litigating maritime lien issues in this Court, SHV was instructed to seek relief in the Southern District

of Texas in connection with an arrest action pending there. Adv. No. 12-05068 (Bankr. Dist. Conn.), Doc. No. 17 at

81-82.

12

See Memorandum Opinion and Order, 14-cv-9287, Doc. No. 69 at 24 (Exhibit 2). (“[NuStar and USOT’s]

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... An anti-suit injunction furthers the

equitable interests served by interpleader by consolidating all claims into one proceeding and preventing a claimant

from racing to judgment in another forum.” (citing State Farm Fire & Casualty Co., 386 U.S. 523, 532-33 (1967)).


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in New York. “Courts have held, however, that the increased costs of litigating in a particular

forum are not so prejudicial as to require continuance of a stay.” In re Burger Boys, Inc., 183

B.R. at 688 (citing In re Keene Corp., 171 B.R. 180, 185 (Bankr. S.D.N.Y. 1994).13

Regardless,

the alternative to the New York interpleaders would not be the orderly determination of claims in

Connecticut, but rather to force Clearlake and other interpleader plaintiffs, ING, NuStar and

other physical suppliers to hire local counsel all over the country to pursue or defend arrest

actions that could be brought wherever the vessels arrived. Additionally, the Debtors would be

prejudiced by having to appear and intervene in those jurisdictions as well, harming the Debtors’

estate, and in turn harming other creditors.

31. Factor 10 concerning judicial economy implicates similar considerations, where

the Southern District of New York has been shown to be a single forum where all parties are

subject to jurisdiction, and where the ability for the Debtors, as well as creditors, to collect

amounts owed in a series of related cases before one judge serves the interests of economy. At

this later stage of the interpleader actions, the series of omnibus court hearings and telephone

conferences before the District Court, as well as coordinated discovery schedules among the

interpleaders, have demonstrated the effectiveness and efficiency of this mode of proceeding.

32. Factor 11, whether the actions are trial-ready is a more relevant consideration at

this stage of the interpleader actions, where the non-stayed interpleader actions (including one of

the Clearlake interpleader actions, see note 5 and ¶ 10, supra) are currently engaged in discovery

which is scheduled for completion on October 30, 2015. As set forth above in ¶¶ 27 and 31,

13

In addition to the Clearlake matter involving NuStar, NuStar is a party to five other interpleader actions currently

pending in the S.D.N.Y. before Judge Caproni: 14-cv-9542, 14-cv-9720, 14-cv-10090, 14-cv-10090 and 15-cv-

2141. NuStar's New York based counsel has appeared in all these actions and has actively participated in the

proceedings before Judge Caproni. In short, to the extent this argument had any validity, it has been mooted by the

course of events.


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these actions are proceeding in an efficient manner and will soon be ripe for determination on the

merits of the competing claims.

33. Factor 12, the balance of harms effectively summarizes the considerations in

favor of lifting the automatic stay which implicate prejudice and judicial economy as set forth

above in Factors 7 and 10. Clearlake respectfully submits that all parties stand to benefit from

the continuation of the interpleaders before the S.D.N.Y. District Court. In her Memorandum

Opinion confirming subject matter jurisdiction, Judge Caproni noted the equities implicated in

these actions:

It is ironic that [NuStar and USOT] seek to rely on an equitable argument

inasmuch as their entire approach to this case rests on the inequitable premise that

if anyone should be harmed financially from the bankruptcy of O.W. Bunker, it

should be the Vessel Interests — who simply purchased fuel from a company that

went bankrupt — and not the Fuel Suppliers — who extended credit to the

company that went bankrupt, and that it is somehow more fair for the Vessel

Owners to have to pay twice for the same fuel than for the Fuel Suppliers to take

whatever haircut might be imposed upon them in the bankruptcy proceedings (if

this Court were to determine that 100% of the interpleaded funds are due to the

O.W. Entities and therefore simply become part of the bankrupt’s estate) or to

have to wait to receive their portion of the interpleaded funds, which might

ultimately lead to the full satisfaction of their claims (if this Court were to

determine that the O.W. Entities are entitled to only that portion of the

interpleaded funds that reflects their fees for the transaction).

14-cv-9267, Doc. No. 69 at 24 n. 10 (Exhibit 2). On the other hand, imposing the automatic stay

over the interpleader actions will significantly harm the interpleader plaintiffs, the Debtors and

other creditors (e.g., ING), as explained above.

34. Accordingly, based on the undisputed facts of the circumstances of the

interpleader actions, the Sonnax Factors clearly support the modification of the automatic stay (if

indeed it applies in the first place) to permit the S.D.N.Y. to proceed with the orderly

determination of competing claims to the interpleader funds, including claims of the Debtors and

creditors such as NuStar.


16 #37018047_v4

WHEREFORE, Clearlake respectfully requests the Court to enter an Order (a) declaring

that the automatic stay pursuant to § 362 of the Bankruptcy Code does not apply to the Clearlake

interpleader actions; (b) in the alternative to subsection (a), modifying the automatic stay

pursuant to § 362(d) of the Bankruptcy Code in order to permit the S.D.N.Y. to proceed with the

Clearlake interpleader actions; and (c) granting any other relief as this Court deems just and

proper.

Dated: September 2, 2015

Respectfully submitted,

CLEARLAKE SHIPPING PTE LTD. By: /s/ David B. Zabel

David B. Zabel, Esq. (ct 01382)

COHEN AND WOLF, P.C.

1115 Broad Street

Bridgeport, Connecticut 06604

Tele: (203) 368-0211

Fax: (203) 337-5555

E-mail: [email protected] Of Counsel (pro hac vice):

James H. Hohenstein, Esq.

E-mail: [email protected]

Arthur E. Rosenberg, Esq.

E-mail: [email protected]

Holland & Knight LLP

31 West 52nd Street

New York, NY 10019

Tele: (212) 513-3200

Fax: (212) 385-9010


mailto:[email protected]



EXHIBIT 1

TO

SUPPLEMENTAL SUBMISSION IN FURTHER SUPPORT OF AMENDED MOTION FOR AN ORDER (A) DECLARING THAT THE

AUTOMATIC STAY DOES NOT APPLY TO INTERPLEADER ACTIONS (B) OR. IN THE ALTERNATIVE. MODIFYING THE AUTOMATIC STAY

Case 14-51720 Doc 886-1 Filed 09/02/15 Entered 09/02/15 15:15:22 Desc Exhibit Page 1 of 4

November 26, 2014

Keith B. Letonmcau, Esq. Blank Rome LLP 700 Louisiana, Suite 4000 Houston, TX 77002-2727

Re; VENUS GLORY and HELLAS GLORY - NuStar Energy

Dear Keith:

Pursuant to our discussions, this will confirm that Clcarlake Shipping Pie Ltd ("Clearlake"), time-chartered owner of the VENUS GLORY and HELLAS GLORY, has authorized Holland & Knight LLP to accept service of process from NuStar Energy Services, Inc. ("NuStar*') for claims relating to NuStar's supply of bunkers to the VENUS GLORY and HELLAS GLORY on or about October 20, 2014, and October 22, 2014, respectively, in Houston, Texas (the "Claims"). Service of process accepted by Holland & Knight LLP, attorneys for the VENUS GLORY and HELLAS GLORY, shall be deemed to be proper service of process in the action upon the vessels.

Further, in consideration for NuStar refraining from arresting or otherwise detaining or taking any adion whatsoever against the VENUS GLORY and HELLAS GLORY, or any other property in any company, in the same or associated ownership, management, or control, on account of the Claim, Clearlake agrees:

1. To file or cause to be filed appearances on behalf of and statements of interest pertaining to the VENUS GLORY and HELLAS GLORY in the action filed or to be filed by NuStar in the United States District Court for the Southern District of Texas ("Court"), which Court shall have exclusive in rem jurisdiction and venue over the Claims. Clearlake agrees to the in rem jurisdiction of the Court, and such appearance shall be made whether the vessels are lost or not lost and irrespective of the presence or absence of the vessels within the jurisdiction of the court.

2. To deposit the amounts invoiced by NuStar for the subject bunker supplies into a Blank Rome, LLP escrow account by no later than Friday, December 5, 2014. The deposit will be in the amount of USD $1,308,597.10, which reflects the amount asserted to be due to NuStar pursuant to the Sales Agreement bearing the Contract No. 40213159 (USD $302,336.54) and Contract No. 40213160 (USD $905,696.22), as well as additional amounts claimed for interest, costs, fees, and disbursements for this action. The funds shall be treated in all respects as if deposited into the registry of the court, and held in escrow to satisfy any final judgment rendered by the court, or settlement between the parties, in relation to the Claims.

3. It is further agreed that the money deposited into escrow will stand as substitute security for NuStar's in rem Claims against the VENUS GLORY and HELLAS GLORY. It is the intent of the parties that the rights of the parties shall be, and for all purposes shall be taken to be, precisely the same as they would have been had the vessels been physically


November 26, 2014 Page 2

served and arrested by the United States Marshal and held by the United States District Court for the Southern District of Texas.

4. It is further agreed that the money will be deposited into escrow entirely without prejudice as to any rights or defenses which the VENUS GLORY, HELLAS GLORY or their owners or operators or Clearlake may have under general maritime law, statutes in effect, and/or any other applicable law, none of which is to be regarded as waived, except as may be predicated on the absence of the vessels from the jurisdiction.

5. It is further agreed that Clearlake guarantees that the monies addressed above shall be deposited into the escrow account, and that this guarantee serves as substitute security until such time as those monies are so deposited. It is agreed that NuStar's maritime liens attach to the preliminary substitute security (guarantee) and the monetary substitute security.

6. It is further agreed that if the funds are not deposited into escrow by close of business Friday, December 5, 2014, as detailed above, this letter shall be enforceable by order of the court to require said funds to be deposited into escrow forthwith.

7. The Parties further agree that if Clearlake succeeds by way of motion in obtaining an order from the Bankruptcy Court for the District of Connecticut, Case Nos. 14-51720, 14-51721, and 14-51722 ("Bankruptcy Action"), recognizing that the automatic stay does not apply or lifting the stay in such proceedings to allow monies to be deposited in the interpleader action filed by Clearlake, to wit: Clearlake Shipping Pte Ltd v. O. W. Bunker (Switzerland) SA, et a!., pending in the Southern District of New York, Civil Action No. 14 civ. 9287 (WHP) ("Interpleader Action"), NuStar will transfer the monies held in escrow pursuant to this agreement to the foregoing Court's Registry. During the pendency of Clearlake's motion in the Bankruptcy Action, the parties agree to hold proceedings in Texas in abeyance. Moreover, if Clearlake's motion in the Bankruptcy Action is successful, then the Parties agree that the adjudication of NuStar's claims herein will be in the Interpleader Action and any proceedings in Texas pertaining to NuStar's claims will be dismissed without prejudice. Additionally, in the event NuStar's claims arc adjudicated in the Interpleader Action, Clearlake agrees to file or cause to be filed appearances on behalf of and statements of interest pertaining to the VENUS GLORY and HELLAS GLORY in the Interpleader Action, which Court shall then have exclusive in rem jurisdiction and venue over the Claims, and such appearances shall be made whether the vessels are lost or not lost and irrespective of the presence or absence of the vessels within the jurisdiction of the court.


November 26, 2014 Page 3

Date: November 26, 2014

J^mes/H. Hohenstein I "HQLLAND & KNIGHT LLP Attorneys for Clearlake, the V E N E S T J E O R Y , and the HELLAS GLORY X

Agreed and /ôegpte

/

By: Keith B. Lefoiifneau"* BLANK ROME LLP Attorneys for NuStar

s,

\\i'\ 134913 v2


EXHIBIT 2

TO


AUTOMATIC STAY DOES NOT APPLY TO INTERPLEADER ACTIONS (B) OR, IN THE ALTERNATIVE, MODIFYING THE AUTOMATIC STAY

#37154218 vl


M-iV-0928"/VbC Document 69 Filod 07/OL'lb Page 1 ol ?b

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

• X

UPT POOL LTD.,

Plaintiff,

-against-

DYNAMIC OIL TRADING (SINGAPORE) PTE. LTD., O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., O.W. BUNKER HOLDING NORTH AMERICA INC., HARLEY MARINE SERVICES, INC., ING BANKN.V.,

Defendants. • X

BIRCH SHIPPING LTD.,

Plaintiff,

-against-

O.W. BUNKER CHINA LTD. (HK), O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., O.W. BUNKER HOLDING NORTH AMERICA INC., O.W. BUNKER & TRADING A/S, CHEMOIL LATIN AMERICA, INC., ING BANKN.V.,

Defendants

CLEARLAKE SHIPPING PTE LTD., •X

Plaintiffs,

-against-

O.W. BUNKER (SWITZERLAND) SA, O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., O.W. BUNKER HOLDING NORTH AMERICA INC., WESTOIL MARINE SERVICES, INC., ING BANKN.V.,

Defendants •X • X

USDC SONY DOCUMENT ELECTRONICALLY FILED DOC #: DATE FILED: 7/01/2015

14-CV-9262 (VEC)

14-CV-9282(VEC)

14-CV-9286 (VEC)


J .KO L W-cv-0928/-Vb.C Document 69 f ilcd 0//()l/lb Page ? of 25

CLEARLAKE SHIPPING PTE LTD,

Plaintiff,

-against-

O.W. BUNKER (SWITZERLAND) SA, O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., O.W. BUNKER HOLDING NORTH AMERICA INC., NUSTAR ENERGY SERVICES INC., ING BANKN.V.,

Defendants

BONNY GAS TRANSPORT LIMITED, as owner of the LNG FINIMA (IMO No. 7702401),

• X

Plaintiff,

-against-

O.W. BUNKER GERMANY GMBH, NUSTAR TERMINALS MARINE SERVICES N.V., NUSTAR ENERGY SERVICES, INC., ING BANKN.V.,

Defendants.

MT CAPE BIRD TANKSCHIFFAHRTS GMBH & CO. KG, individually and on behalf of M/T CAPE BIRD (IMO No. 9260067),

-X

Plaintiff,

-against-

O.W. USA INC., O.W. NORTH AMERICA INC., HARLEY MARINE SERVICES, INC., ING BANK N.V..

Defendants. -X

14-CV-9287 (VEC)

14-CV-9542 (VEC)

14-CV-9646 (VEC)


a v i 1 , A - 0 9 2 1 5 / V F C Document 69 I ilod 07/01/lh Paqe 3 ol ?b

SHV GAS SUPPLY & RISK MANAGEMENT SAS AND EXMAR SHIPPING BVBA, as owner of the WAREGEM (IMO No. 9659127),

-X

Plaintiffs,

-against-

O.W. BUNKER USA, INC., O.W. BUNKER HOLDING NORTH AMERICA INC., O.W. BUNKER NORTH AMERICA INC., NUSTAR ENERGY SERVICES. INC., ING BANK N.V.,

Defendants.

HAPAG-LLOYD AKTIENGESELLSCHAFT,

Plaintiff,

-against-

U.S. OIL TRADING L.L.C., O.W. BUNKER GERMANY GMBH, O.W. BUNKER & TRADING A/S, ING BANK N.V., CREDIT AGRICOLE S.A.,

Defendants.

OSG SHIP MANAGEMENT, INC., and 1372 TANKER CORPORATION as owner of the M/V OVERSEAS MULAN (IMO NO. 9230880),

Plaintiffs,

-against-

O.W. BUNKER USA INC., O.W. BUNKER MIDDLE EAST DMCC, CHEMOIL CORPORATION, CHEMOIL MIDDLE EAST DMCC, GPS CHEMOIL LLC FZC, ING BANK N.V.,

Defendants.

X

-X

14-CV-9720 (VEC)

14-CV-9949 (VEC)

14-CV-9973(VEC)

-X


v v-niVH/ VhC Decumonl 6^ i nod 0 ' 'OP IS iMue ''« ol 2b

HAPAG-LLOYD AKTIENGESELLSCHAFT, X

Plaintiff,

-against-

O'ROURKE MARINE SERVICES L.P., L.L.P., O.W. BUNKER GERMANY GMBH, O.W. BUNKER USA, INC., ING BANK N.V.,

Defendants.

CONTI 149 CONTI GUINEA, individually and on X behalf of M/T CONTI GUINEA (IMO No. 9391402).

Plaintiff,

-against-

O.W. BUNKER PANAMA S.A., O.W. BUNKER USA INC., CLEMENTI PARK SHIPPING CO. PTE LTD., ING BANKN.V.,

Defendants.

NYK BULK & PROJECT CARRIERS LTD., individually and on behalf of M/V OCEAN FRIEND (IMO No. 9401829),

X

Plaintiff,

-against-

O.W. BUNKER USA INC., NUSTAR ENERGY SERVICES, INC., HARLEY MARINE GULF, INC., ING BANKN.V.,

Defendants.

14-CV-10027 (VEC)

M-CV-10089 (VEC)

14-CV-10090(VEC)

X


1 M c.v-09287'.VhC Document 69 hied 07/01/15 Pago 5 of 2b

NIPPON KAISHA LINE LIMITED, individually X and on behalf of M/V RIGEL LEADER (IMO No.9604940),

Plaintiff,

-against-

O.W. BUNKER USA INC., NUSTAR ENERGY SERVICES, INC., KIRBY INLAND MARINE LP, ING BANKN.V.,

Defendants.

HAPAG-LLOYD AKTIENGESELLSCHAFT, X

Plaintiff,

-against-

O.W. BUNKER NORTH AMERICA, INC., O.W. BUNKER GERMANY GMBH, O.W. BUNKER USA, INC., ING BANK N.V.,

Defendants.

APL CO. PTE LTD and AMERICAN PRESIDENT LINES, LTD., individually and on behalf of M/V APL SALALAH (IMO No. 9462029), M/V APL ENGLAND (IMO No. 9218650), M/V APL OAKLAND (IMO No. 9332250), M/V APL SOUTHHAMPTON (IMO No. 9462017), M/V APL THAILAND (IMO No. 9077123), M/V APL CHINA (IMO No. 9074389), M/V APL EGYPT (IMO No. 9196905), M/V APL PHILIPPINES (IMO No. 9077276), and, M/V APL YANGSHAN (IMO No. 9462031),

Plaintiffs,

-against-

O.W. BUNKER FAR EAST (SINGAPORE) PTE. LTD, O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., WESTOIL MARINE SERVICES, INC., ING BANKN.V.,

Defendants.

14-CV-10091 (VEC)

15-CV-00190(VEC)

X

I5-CV-00620(VEC)

• X


MPPO/ Vl C Poeumem 69 i i k v O . ' O l is t\a.n o 01 2^

CANPOTEX SHIPPING SERVICES LIMITED, individually and on behalf of M/V GLOBAL PHOENIX (IMO No. 9565053), M/V CMB GIUL1A (IMO No. 9588419), and M/V ASTON fRADER II (IMO No. 9392731),

X

Plaintiffs,

-against-

O.W. BUNKERS (UK) LIMITED, O.W. SUPPLY & TRADING A/S, CHEVRON MARINE PRODUCTS LLC, ING BANKN.V.,

Defendants.

STAR TANKERS INC, individually and on behalf X of M/V SHARON SEA (IMO No. 9316232),

Plaintiff,

-against-

O.W. BUNKER PANAMA S.A., O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC.. O.W. BUNKER HOLDING NORTH AMERICA INC., ING BANKN.V.,

Defendants.

SK SHIPPING CO., LTD., and SK B&T PTE. 171 D.. individually and on behalf of M/V AZURIT (IMO No. 9551703),

Plaintiffs,

-against-

NUSTAR ENERGY SERVICES, INC., O.W. BUNKER MIDDLE EAST DMCC, O.W. BUNKER USA INC., ING BANKN.V.,

Defendants.

X

I5-CV-1351 (VEC)

15-CV-2090(VEC)

I5-CV-2141 (VEC)


o - 0 9 H i / Vf C Donimoniu^ -('m 0 'OL i s Paue • 01 2b

SIGMA TANKERS INC, individually and on behalf of M/V DUBAI ATTRACTION (IMO No. 9422536). M/V ORCHID (IMO No. 9624079),

X

Plaintiffs,

-against-

O.W. BUNKER PANAMA S.A., O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., O.W. BUNKER HOLDING NORTH AMERICA INC., ING BANKN.V.,

Defendants.

BAERE MARITIME LLC, individually and on X behalf of M/V YASA GOLDEN HORN (IMO No. 9334040),

Plaintiff,

-against-

O.W. BUNKER PANAMA S.A., O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., O.W. BUNKER HOLDING NORTH AMERICA INC., ING BANKN.V.,

Defendants.

MSC MEDITERRANEAN SHIPPING COMPANY S.A..

X

Plaintiff,

-against-

O.W. BUNKER NORTH AMERICA INC.. O.W. BUNKER USA, INC., O.W. BUNKER (SWITZERLAND) S.A., ING BANKN.V., HARLEY MARINE NY, INC.

Defendants.

X

I5-CV-2733(VEC)

15-CV-2734(VEC)

15-CV-3221 (VEC)


in 1 I r iv 09^B7A/E:C Document 69 f ilod 0/ /01/ lb Paqe 8 oi 2b

O.W. BUNKER USA INC. and O.W. BUNKER X NORTH AMERICA INC..

Plaintiffs,

-against-

COSCO PIRAEUS, I.M.O. NO. 9484364, her engines, tackle, equipment, and furnishings, in rem.

Defendant.

O.W. BUNKER USA INC. X

Plaintiff,

-against-

M/V BAKKEDAL in rem,

Defendant.

KAWASAKI KISEN KAISHA, LTD and X CATALINA SHIPPING SA, as owner of the M/V Bremen Bridge (IMO No. 9367188),

Plaintiffs,

-against-

O.W. BUNKER MIDDLE EAST DMCC, O.W. BUNKER NORTH AMERICA, INC., ING BANK N.V., HARLEY MARINE NY, INC., and PAUL DAVID COPLEY, IAN DAVID GREEN AND ANTHONY VICTOR LOMAS IN THEIR CAPACITIES AS JOINT RECEIVERS OF THE SECURITY ASSETS,

Defendants

X

I5-CV-3471 (VEC)

I5-CV-3988(VEC)

I5-CV-4138(VEC)


i .iM- I 1-. i v 0928/SVFC Document 69 [ ilod 07/0PP-, Pdiie 9 oi 7b

MEMORANDUM OPINION & ORDER

VALERIE CAPRONI, United States 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 (AH WS) (Bankr. D. Conn,

filed Nov. 13, 2014). On November 20, 2014, UPT Pool Ltd. v. Dynamic Oil Trading

(Singapore) Pte. Ltd. et ai, 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


v • < 1 -v 0'~v72-Vl C Documoin 60 h fod iPOP.b P a o o i n u ! 2 ( '

various submissions addressing this issue, the Court finds that it has subject matter jurisdiction

over the Interpleader Actions.

BACKGROUND

The Plaintiffs in the Interpleader Actions1 are owners and charterers (the "Vessel

Interests") of various shipping vessels (the "Vessels") that contracted with one or more of the

O.W. Entities, either directly or through a broker, for the supply of fuel. In most cases, an O.W.

Entitiy did not provide the fuel directly but contracted with a third party fuel supplier (the "Fuel

Supplier") that physically delivered the bunkers to the Vessel. Because of the O.W. Entities'

role as the "middle-man" in many of these transactions, even though Plaintiffs only made a

single purchase of fuel bunkers, both the O.W. Entities and the Fuel Suppliers assert that they are

entitled to payment for the provision of fuel.2 Given the bankruptcy filings, Plaintiffs fear that if

they remit payment to the O.W. Entity that is demanding payment (almost all of which are now

in bankruptcy somewhere in the world), the portion of the payment that is due to the third party

Fuel Supplier will get tied up in the bankruptcy rather than being promptly remitted to the Fuel

Supplier as would have occured in the ordinary, non-bankruptcy course of business.3 The Fuel

Suppliers share that concern.

Further complicating matters, pursuant to an Omnibus Security Agreement dated

December 19. 2013 (the "2013 Security Agreement"), certain O.W. Entities allegedly assigned

1 In a few actions, the initial Complaint was filed by a claimant against a Vessel or Vessel Interest to collect unpaid amounts for fuel, and the interpleader was asserted as a counterclaim. See. e g ,OW Bunker USA Inc et al v COALO Piraeus IMO \0 9484364, 15-CV-3471 (VEC). Regardless of the few instances in which the Vessel Interest is technically a Defendant and Counterclaim Plaintiff, the Vessel Interests will be referred to as Plaintiffs

: Additionally in several actions, barging companies that facilitated the delivery of the fuel bunkers at issue are also claimants See e g , Kawasaki Kisen Kaisha, Ltd et al v Ow Bunker Middle Last DMCC el al., 15-CV-4138 (VEC)

Money is, of course, fungible. In the ordinary course of business, the dollars that would have been paid to an O.W. Entity would have become working capital for the O.W Entity until it paid the invoice it received from the physical Fuel Supplier.

10


( w 1 M ov-09?8/-VFC DocumnmG9 Plied 0/701 lib Page 11 o! 75

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. ("TNG"). 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.4

' The arrest of a vessel can wreak havoc on the vessel owner or charter party as delays in sailing can result in significant financial penalties from other customers. That risk provides obvious leverage to whomever arrests the vessel While the availability of a maritime lien for a provider of necessaries makes perfect sense as a general policy


< use i PI ••\>AW2H7~Vi:C Documonr 69 hied OPOP'lb Pag(M2of75

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:

instituting or prosecuting any proceeding in any state court, or in any United States District Court, affecting the property and res involved in this action of interpleader, including but not limited to the arrest or attachment of the subject Vessel pursuant to Supplemental Admiralty Rule C or Rule B or other laws to enforce claimants' maritime lien claims arising from the bunker delivery until the further order of the court.

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

matter (and it certainly made sense historically), it creates obvious unfairness for the Vessel Interests in the current, and seemingly unprecedented, situation.

12


Peso ! • M-rv OOOHZ-VFC Documonr 69 f ilod 0/ /01/ tb Page 13 of ?b

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").5

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).

Briefing was also ordered on why these matters should not be transferred to the District of Connecticut where the U.S. Debtors' Chapter XI proceeding is pending. For a variety of reasons, that briefing has been stayed.

13


v> . I i ev077>8 7A?E C Doenmom 09 f tied 0//01/1P Page 1 ! o* ?b

DISCUSSION

I. The Statutory Framework

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.

14


O I * 'va)9787A/bC nocumont (>9 ( ikni Q>nnnb Paqe lb of 2b

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).

II. The District Court has Subject Matter Jurisdiction Under 28 U.S.C. § 1333

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

15


-e L S J- -v 09787 VLC Document 09 f ilou 0/70L/1b Page1 U5 of 7b

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.

III. The District Court has Subject Matter Jurisdiction Under 28 U.S.C. § 1335

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 [Vjessels' separate and distinct obligations in rem to pay defendants for

the bunker fuel delivered to the [Vjessels." 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


' «se l i 4 rv09?8/-VFC Document 69 hied 07/01/15 Pago 17 of 25

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")(l)(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 Marat ha Mariner,

724 F.2d 1161, 1164 (5th Cir. 1984) (citing Rule C(l)(b)). Cf. Burns Bros. v. the Central R.R. of

17


esc I 14--v-09?8/-VlrC Pod imen t tO f \h\i O/701/lb Page 18 of 7b

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 [inpersonam] 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,6 yet they recognize that because those claims arise out of a single

obligation for the purchase of fuel, they are all amenable to adjudication under the federal

interpleader statutes. See U.S. Debtors' Br. at 3-5.

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 m rem liability of a ship is a fiction; the reality is that the owner, not the

vessel, pays the judgment." Insurance Co ofN. America v. S/S American Argosy, Til F.2d 299,

" While the U S. Debtors have asserved maritime lien claims, in rem, arguing that a claimant need not be a physical supplier in order to have "provid[ed] necessaries" under 46 U S.C. § 31342, the parties have yet to brief, and the Court has yet to decide, questions relating to the validity or priority of competing maritime lien claims as between the O W Entities, Fuel Suppliers or any other parties.


P-ue ! PPev 09287-VEC Document 69 Piled 07/01,70) Pago 19 of 2b

302 (2d Cir. 1984). The source of the obligations owed by the Vessel Interests and the Vessels,7

whether the debt is ultimately owed to the Fuel Suppliers, O.W. Entities, ING, barging service

providers or some combination thereof, is the Vessel Interest's underlying purchase of fuel.

Because the in personam claims against the Vessel Interests and the in rem claims against the

Vessels arise out of the same debt, they are "inextricably interrelated," and therefore subject to

interpleader. See Royal School Laboratories, Inc. v. Town of Watertown, 358 F.2d 813 (2d Cir.

1966) (Friendly, J.) (interpleader jurisdiction proper when statutory materialmen lien claim and

breach of contract claim arose out of a single contract because the claims were were

"inextricably interrelated;" allowing the suits to proceed separately created the risk of "two

recoveries against [the plaintiff] for the same enrichment"); see also Active Fire Sprinkler Corp.

v. U.S. Postal Serv., 811 F.2d 747, 757-58 (2d Cir. 1987) (noting, with respect to a suit brought

by a construction subcontractor against the United States Postal Service for an unpaid balance

owed to the general contractor that: "A procedural device — interpleader — exists to protect a

party that. . . finds itself beset by competing claims to a sum of money that it holds. . . . When

USPS became aware of [the subcontractor's] claim, it was placed on notice of the possibility of a

recovery against it. It also should have recognized the risk that it faced if it paid the money out

to other parties."). It follows that a deposit into the Court's registry of an amount sufficient to

The Objecting Claimants question why the Vessel's owner and charterer would both appear as Plaintiffs, as they have in some of the Interpleader Actions, if the in personam and in rem claims were not treated separately. Obj. Claimants' Br. at 3. Rule C(l)(b) provides that a maritime lien may be enforced by proceeding in personam against any person who "may be liable" for the lien as an additional or alternative remedy to the action in rem against the vessel. If both the owner and the charterer "may be liable" for the lien — the owner through the Vessel and the charterer as the party who procured the bunkers — then it makes perfect sense for both entities to appear as plaintiffs when a single obligation is due. Accord Rainbow Line, Inc v M/V Tequila, 480 F.2d 1024, 1027-28 (2d Cir. 1973) (breach of contract by a charterer gives rise to a maritime lien on vessel and the lien exists in part to hold the charterparty responsible for the performance of the contract).

19


C M ' 1 ' M0978PVPC Documonf 09 (-ilod 0,701/1 b Page 70 of 2b

satisfy the Vessel Interests' in personam obligations is sufficient to satisfy the Vessels' in rem

obligations for purposes of the Court's subject matter jurisdiction under Section 1335.8

The Objecting Claimants cite S.E.L. Maduro (Florida), Inc. v. M/V Antonio de

Gaslaneta. 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 F4eventh 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.

I lere, 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

^ Although the Fuel Suppliers argue that their in rem claims against the Vessels must be "secure" in order for the Court to have subject matter jurisdiction under 28 U.S.C. § 1335, there is no such such requirement under this statute. Section 1335 only requires that the interpleading party pay "the amount due under such obligation into the registry of the court, there to abide the judgment of the court" or give "a bond payable to the clerk of the court in such amount and with such surety as the court or judge may deem proper." 28 U.S.C. § 1335(a)(2). The Vessel Interests either deposited funds or posted bonds measured by the amount of their "obligations" under the fuel supply contracts. That is sufficient to satisfy the requirements of Section 1335.

20


tbeo L 14 evO)928AVEC Documnnt 69 Filod ()/'/01/lb Page 71 o! 2b

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 oi 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,'1'' and the rule "work[s] both ways" because

"[disputes 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, Knstensons-Petroelum is instructive. In Kristensons-Petroleum, the plaintiff

Kristens-Petroleum, Inc. ("KPl") 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

21


> . ^ ! i-i '-- 0978/P/PC DoaimontG9 niou O/.'Ol/lb Pago 27 of 2!)

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:

An "in rem" proceeding is one in which "a vessel or thing is itself treated as the offender and made defendant by name or description in order to enforce a lien." Madruga v. Superior Court State of California in and for San Diego County, 346 U.S. 556. 560 (1954). "[I]n rem jurisdiction in admiralty exists only to enforce a maritime lien." Rainbow Line, Inc. v. M/V Tequila, 480 F.2d 1024, 1028 (2d Cir. 1973). "It is axiomatic that in rem jurisdiction exists in an action only where the subject matter of the action, or an appropriate substitute thereof, is within the jurisdiction of the court in which the action lies. Thus, where a vessel is the target of an in rem action in admiralty, it must be both within the territorial jurisdiction of the court hearing the cause and subject to the order of the court through process of arrest." In re Millenium Seacarriers, Inc., 275 B.R. 690, 698 (S.D.N.Y. 2002) (quoting American Bank of Wage Claims v. Registry of the District Court of Guam, 431 F.2d 1215, 1218 (9th Cir. 1970) (internal quotations omitted)). As opposed to actions in which parties seek to enforce maritime liens against vessels, thus requiring in rem jurisdiction, Blanc's counterclaim alleges no claim against the M/T Blanc. Rather than seeking enforcement of a lien against its vessel, Blanc seeks a determination that no such lien exists. In essence, Blanc is asserting the opposite of an in rem claim: it already owns the vessel and is arguing that KPI's lien on the vessel is invalid. Moreover, as the parties themselves are before the Court, it is irrelevant that the vessel is not in this jurisdiction.

22


( eso : 14 ev4W78/-VPC Document 69 I ilod 0/701/1 b Pago 23 of 25

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.9 As a result, neither arrest of the Vessels within the Court's jurisdiction nor the Fuel

Suppliers' consent are required to exercise subject matter jurisdiction over the in rem claims.

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.

IV. The Anti-Suit Injunction Is Within the Court's Authority Under 28 U.S.C. § 2361

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

*' In Kristensons-Petroleum, the Court had personal jurisdiction over the fuel supplier because it was the plaintiff in the underlying breach of contract action. Some of the objecting fuel suppliers dispute whether the Court has personal jurisdiction over them. That issue is a separate question from whether the Court has subject matter jurisdiction under Section 1335 and is being briefed separately by any party that is contesting personal jurisdiction.

23


v -'M* ) 1 PevP)9:->87P/PC Pooumimt 69 Piled O./Ol/lb Page 24 ol 2!)

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 6.10 An anti-suit injunction furthers the

equitable interests served by interpleader by consolidating all claims into one proceeding and

preventing a claimant from racing to judgment in another forum. See State Farm Fire &

Casually Co , 386 U.S. at 532-33 (rejecting the argument that the interpleading party must wait

until claimants have reduced their claims to judgment to commence an interpleader out of

"[cjonsiderations of judicial administration"). Again, the in rem nature of the Objecting

Claimants' maritime liens does not undermine the Court's authority. Moreover, the Supreme

Court has expressly held that an action in rem against a vessel and an action in personam against

the vessel's owner arising out of a single occurrence may be treated as "inseparable parts of one

single 'civil action.'" Continental Grain Co., 564 U.S. at 26 (interpreting the federal venue

transfer statute). In Continental Grain Co., the Supreme Court criticized overly technical

distinctions between civil actions in rem and in personam in light of "admiralty's approach to do

justice with slight regard to formal matters" — particularly when applying the legal fiction

'" It is ironic that the Objecting Claimants seek to rely on an equitable argument inasmuch as their entire approach to this case rests on the inequitable premise that if anyone should be harmed financially from the bankruptcy of O.W. Bunker, it should be the Vessel Interests — who simply purchased fuel from a company that went bankrupt — and not the Fuel Suppliers — who extended credit to the company that went bankrupt, and that it is somehow more fair for the Vessel Owners to have to pay twice for the same fuel than for the Fuel Suppliers to take whatever haircut might be imposed upon them in the bankruptcy proceedings (if this Court were to determine that 100% of the interpleaded funds are due to the O.W. Entities and therefore simply become part of the bankrupt's estate) or to have to wait to receive their portion of the interpleaded funds, which might ultimately lead to the full satisfaction of their claims (if this Court were to determine that the O.W. Entities are entitled to only that portion of the interpleaded funds that reflects their fees for the transaction).

24


! u 0»«'»>, v K ; Poii!monr{}9 hiodO/ 01,1b Pagi* 2b u! 2b

would "cut down" a federal statute. Id. at 25. One of the purposes of bringing an action in rem

against a vessel is to "bring[] the owner into the court" or "allow actions against ships where a

person owning the ship could not be reached," but the "practical economic fact of the matter is

that money paid in satisfaction of [an in rem judgment] will have to come from the [vessel]

owner's pocket." Id. at 23, 26. The Objecting Claimants seek to vindicate their interest in

receiving immediate satisfaction of the debt owed to them by the O.W. Entities, notwithstanding

the bankruptcy proceeding or the Interpleader Actions. Restricting their ability to do in order to

prevent multiple recovery against the Vessel Interests is within the scope of Section 2361 and

serves the interests of equity.

CONCLUSION

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.

SO ORDERED.

Date: July 1, 2015 New York, New York

VJ^- i

VALERIE CAPRONI United States District Judge

25


EXHIBIT 3

TO


AUTOMATIC STAY DOES NOT APPLY TO INTERPLEADER ACTIONS (B) OR, IN THE ALTERNATIVE. MODIFYING THE AUTOMATIC STAY

#37154218 vl


; > > I l-i cv-0()28V-VEC DocumofrB? l-ilod 08/10/1 'J Pago 1 of 2


X CEEARLAKE SHIPPING PTE LTD,

Plaintiff,

-against-

O.W. BUNKER (SWITZERLAND) SA, O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., O.W. BUNKER HOLDING NORTH AMERICA INC., NUSTAR ENERGY SERVICES INC.. ING BANKN.V.,

Defendants.

USDC SONY DOCUMENT ELECTRONICALLY FILED DOC #: DATE FILED: 8/10/2015

14-CV-9287(VEC)

ORDER

• X

VALERIE CAPRONI, United States District Judge:

WHEREAS on November 21, 2014, Plaintiff initiated this action by filing a Complaint

for Interpleader and Ex Parte Applications for the entry of Orders directing the deposit of

interpleader funds into the Court's Registry and restraining the arrest of the subject vessels;

WHEREAS on November 21, 2014, Judge William H, Pauley entered a Deposit Order,

permitting Plaintiff to deposit a check in the amount of $1,308,597.10 into the Court's Registry

(Dkt. 5). and a Restraining Order enjoining the Defendants from "instituting or prosecuting any

proceeding in any state court, or in any United State District Court, affecting the property and res

involved in this action of interpleader" (Dkt. 4);

WFIEREAS on November 25, 2014, following an emergency conference requested by

Defendant NuStar Energy Services Inc., Judge Pauley vacated the Deposit Order and Restraining

Order and directed that the Clerk of Court return the $1,308,597.10 on deposit in the Court's

Registry to Plaintiff (Dkt. 13);


,H i U-iv-iRW.-VrC Documon 8? 1 iloii OB/lO/lb IMijc /> of ?

WHEREAS pursuant to Order dated December 3, 2014, the $1,308,597.10 deposited into

the Court's registry was returned to Plaintiff by check made payable to "Holland & Knight LLP

as attorneys for Clearlake Shipping Pte Ltd" (Dkt. 16);

WHEREAS on July 27, 2015, Plaintiff filed a Request for Entry of Default against

Defendant O.W. Bunker (Switzerland) SA ("O.W. Switzerland"), for failure to answer or

otherwise appear in the above-captioned action (Dkts. 77-78);

WHEREAS on July 28, 2015, Defendant ING BankN.V. ("ING"), as the Security Agent

and putative assignee to O.W. Switzerland's rights in this action, objected to the entry of a

default on the basis that, because there are no funds or bond on deposit with the Court, "this

entire action is subject to dismissal because Clearlake has not complied with the requirements

of 28 U.S.C. § 1335(a)" (Dkt. 79);

IT IS HEREBY ORDERED that:

1. Plaintiff shall show cause before this Court on Tuesday, September 15, 2015 at 2:00

p.m. in Courtroom 443 of the Thurgood Marshall U.S. Courthouse, 40 Foley Square,

New York, New York why Plaintiffs Complaint should not be dismissed for failure to

meet the procedural requirements for interpleader.

2. Plaintiffs papers in opposition to the Order To Show Cause shall be due August 28,

2015. Defendants' submissions in response to Plaintiffs opposition shall be due

September 11, 2015.

3. Plaintiff shall promptly provide a copy of this Order to counsel for O.W. Switzerland.

SO ORDERED.

Date: August 10, 2015 New York, New York

V 4/

VALERIE CAPRONI United States District Judge


EXHIBIT 4

TO


AUTOMATIC STAY DOES NOT APPLY TO INTERPLEADER ACTIONS (B) OR, IN THE ALTERNATIVE. MODIFYING THE AUTOMATIC STAY

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o . I : si 0928/ VbC: Document 83 I nod 08/28/15 Pago ! of 13

James H. Hohenstein Marie E. Larsen HOLLAND & KNIGHT LLP 31 West 52nd Street New York, New York 10019 Telephone: 212-513-3200 Telefax: 212-385-9010 Email: [email protected]

[email protected]

Attorneys for Plaintiff Clearlake Shipping Pte Ltd


CLEARLAKE SHIPPING PTE LTD,

Plaintiff,

against •

O.W. BUNKER (SWITZERLAND) SA, O.W. BUNKER USA INC., O.W. BUNKER NORTH AMERICA INC., O.W. BUNKER HOLDING NORTH AMERICA INC, NUSTAR ENERGY SERVICES INC, ING BANK N.V.

Defendants

Case No. 14 Civ. 9287 (VEC)

PLAINTIFF CLEARLAKE SHIPPING PTE LTD'S RESPONSE TO THIS COURT'S ORDER TO SHOW CAUSE WHY PLAINTIFF'S COMPLAINT SHOULD NOT BE DISMISSED FOR FAILURE TO MEET REQUIREMENTS OF INTERPLEADER




v <i-v ! 14 ov 09,28/-Vf-C Document 83 f Hod 08/?8/lb Paae ? of 13

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ii

INTRODUCTION 1

BACKGROUND 2

ARGUMENT 4

POINT I STATUTORY INTERPLEADER JURISDICTION WILL BE PERFECTED UPON THE RE-DEPOSIT OF THE DISPUTED FUNDS FROM THE ESCROW ACCOUNT CURRENTLY HELD BYNUSTAR 4

POINT II IN THE ALTERNATIVE, THIS COURT CAN RETAIN JURISDICTION OVER THIS ACTION BY CONVERTING IT TO A RULE INTERPLEADER UNDER FEDERAL RULE OF CIVIL PROCEDURE 22 5

CONCLUSION 8


i *v 0 ^ 8 / V R ; PocumenUW l-.lou 08/?8/lb Pago 8 of 13

TABLE OF AUTHORITIES

Page(s)

Cases

Allied Maritime, Inc. v Descatrade SA, 620 F.3d 70 (2d Cir. 2010) 8

American Smelting & Refining Co. v. Naviera Andes Peruana, S.A., 182 F.Supp. 897 (S.D.N.Y. 1959) 4

Geler v. National Westminster Bank USA, 763 F.Supp. 722 (S.D.N.Y. 1991) 6

Glencova Inv. Co. v. Trans-Resources, Inc., 874 F. Supp. 2d 292 (S.D.N.Y. 2012) 6

Indemnity Ins. Co. of North America v. Romangnoli, No. 02-3037, 2002 WL 922170 (S.D.N.Y. May 7, 2002) 6

John Hancock Mut. Life Ins. Co. v. Yarrow, 95 F.Supp. 185 (E.D. Perm. 1951) 4

John v. Sotheby 's, Inc., 141 F.R.D. 29 (S.D.N.Y. 1992) 7

Montauk Oil Corp. v. Sonat Marine, Inc., 871 F.2d 1169 (2d Cir. 1981) 8

National Union Fire Ins. Co. v. Ambassador Group, Inc., 691 F.Supp. 618 (E.D.N.Y. 1988) 7

Nationwide Mutual Ins. Co. v. Eckman, 555 F. Supp. 775 (D. Del. 1983) 6, 7

New Jersey Sports Productions, Inc. v. Don King Productions, Inc., 15 F. Supp. 2d 534 (D. N.J. 1998) 7

Reassure America Life Ins Co. v. The Gennaro J. Perillo & Minnie Perillo Irrevocable Trust, No. 09-1878, 2011 WL 832185 (D. NJ. Mar. 2, 2011) 6

Truck-A-Tune, Inc., v. Re, 23 F.3d 60 (2d Cir. 1994) 5

Union Cent. Life Ins Co. v. Berger, No. 10-8408, 2012 WL 4217795 (S.D.N.Y. Sept. 10, 2012) 6


1 t >4MP87 VLC DoruriKHii 88 Filon 08/88/18 Paiio 1 of I )

Vanguard Fiduciary Trust Co. v. Stuart, No. 08-44, 2009 WL 2982787 (D. N.D. Sept. 15, 2009) 6

Wells Fargo Bank, Nat. Ass'n v. Davidson Kempner Capital Mgmt. LLC,

No. 13-5981, 2014 WL 89674 (S.D.N.Y. Mar. 6, 2014) 6, 7

Statutes and Rules

11 U.S.C. § 362(a) 1

28U.S.C. § 1332 6

28 U.S.C. § 1333 2, 6, 8

28 U.S.C. § 1335 1, 2, 6

28 U.S.C. § 2361 2, 6, 7

Fed. R. Civ. P. 8(f)[(e)] 6

Fed. R. Civ. P. 22 2, 5, 8

Fed. R. Civ. P. 4 6

Fed. R. Civ. P. 67 7

Other Authorities

7 Charles A. Wright & Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1717 [3d ed. updated April 2015] 7, 8

3A James W. Moore, et al., Moore's Federal Practice H 22.10 (2d ed. 1999)[now volume 4, t22.04[6][a] (3d ed. 2014)] 7

in #36999255 vl


c 'ô ! M-cv-OlW-VhC DocumontBS Filed 08/28/1 b Page b of 13

Interpleader Plaintiff Clearlake Shipping Pte Ltd ("Clearlake"), by and through its

attorneys, submits the following response to the Court's Order to Show Cause (Doc. No. 82) why

this action should not be dismissed for failure to meet the requirements of interpleader, and states

as follows:

INTRODUCTION

It is a plain requirement of an interpleader action filed pursuant to 28 U.S.C. § 1335 that

there be competing claims by two or more claimants of diverse citizenship, against property or

funds held by a disinterested stakeholder plaintiff of at least $500, and that such amount is paid

into the registry of the court.

Under the unique circumstances of this case, the relevant Deposit Order in this action was

vacated by the previously assigned Judge due to concerns regarding whether the automatic stay

pursuant to 11 U.S.C. § 362(a) applied to this action where certain U.S. chapter 11 debtors (O.W.

Bunker USA, Inc, O.W. Bunker North America, Inc, and O.W. Bunker Holding North America,

Inc, collectively, the "Debtors") were named as potential defendants-claimants. A motion seeking

a determination that the automatic stay does not apply (or alternatively, lifting the stay if it does

apply) is currently pending before the U.S. Bankruptcy Court for the District of Connecticut.1

Pending the outcome of the motion, a Security Agreement is in place holding the disputed funds

in escrow for the benefit of another claimant, NuStar Energy Services, Inc. ("NuStar"). In the

event of a finding that the stay does not apply or is modified/lifted by the Bankruptcy Court, in

1 In re: O. W. Bunker Holding N. Am. Inc.,No. 14-bk-51720, Doc. No. 224. The scope of the motion also includes the other Clearlake vessel involved in these interpleader actions, i.e., motor vessel Ernest N in the action captioned Clearlake Shipping Pte Ltd v. O. W. Bunker (Switzerland) SA, et al, 14-cv-9286 (VEC).


C a ^ 1 14 .-v 0928/-VhC Docnmoni 83 I ilod 08/38/1!) Pago G of 13

accordance with the Security Agreement the disputed funds must be redeposited into this Court's

registry, perfecting statutory interpleader jurisdiction, and this action can move forward pursuant

to 28 U.S.C. §1335.2

Despite the jurisdictional requirement of the deposit of the disputed interpleader funds

pursuant to statute, this Court can and should allow Clearlake a reasonable amount of time to

correct the current lack of deposit. The hearing on the automatic stay is currently scheduled before

the Bankruptcy Court on September 9,2015,3 and a re-deposit of the funds is sought in due course.

In the alternative, this Court may convert the present statutory interpleader action plead under 28

U.S.C. § 1335 into a "rule interpleader" pursuant to Fed. R. Civ. P. 22 ("Rule 22"), which does

not require a deposit of the interpleader funds, and pursuant to its independent jurisdiction over

this action in admiralty. 28 U.S.C. § 1333. Accordingly, this Court has subject-matter jurisdiction

over this action in admiralty, with interpleader jurisdiction existing under Rule 22, or to be restored

pursuant to the interpleader statute, and the action should not be dismissed.

BACKGROUND

This action was commenced on November 21, 2014 with the filing of a Complaint in

Interpleader. Clearlake is a disinterested stakeholder with respect to funds owed for the sale and

delivery of fuel to the vessels M/V Venus Glory and M/V Hellas Glory. Clearlake was and is

unable to determine the proper recipient of the funds, as between competing in rem and in

personam claimants O.W. Bunker (Switzerland) SA ("O.W. Switzerland"), Clearlake's contractual

2 Additionally, Clearlake will seek to reinstate the related Restraining Order against the arrest of the vessels Venus Glory and Hellas Glory pursuant to 28 U.S.C. § 2361.

3 In a letter to the Court, counsel for ING Bank N.V. ("ING") advised that the hearing on Clearlake's motion was adjourned until September 16, 2015. Doc. No. 79. Clearlake confirmed that the hearing on the motion had been continued at the request of Debtors' counsel in connection with the Debtors' settlement discussions with ING and NuStar. Doc. No. 80. As a result of the Order to Show Cause (Doc. No. 82), counsel for Clearlake arranged for the hearing to be advanced to an earlier date, i.e., September 9,2015.

#36999255 vl


uiSvM ia-rv-09?87-Vb(; Document 83 I lied 08/?8/lb Pago / of 13

counterparty, NuStar, the physical supplier of fuel to the vessels, ING, as assignee of receivables

from various O.W Bunker entities, or certain other intermediary O.W. Bunker entities such as the

Debtors.

Also on November 21, 2014, Clearlake filed two Ex Parte Applications for the entry of

orders directing the deposit of interpleader funds into the court registry and restraining the arrest

of the vessels MTV Venus Glory and M/V Hellas Glory which are the subject of the interpleader

action. This Court executed the proposed Orders on November 21, 2014. Doc. Nos. 4, 5.

Subsequently, on November 25, 2014, after a brief telephone hearing before Judge Pauley, the

orders were vacated (Doc. No. 13), based on the Court's concern that the chapter 11 automatic stay

might apply to an interpleader action where the Debtors are named as claimants to the funds sought

to be deposited.

After the Deposit Order and Restraining Order were vacated, Clearlake entered into an

agreement with NuStar to prevent the arrest of the vessels in the Southern District of Texas.

Indeed, the M/V Venus Glory was due to arrive (and did) in Houston, Texas on November 26,

2014, thus the agreement with NuStar was negotiated under the threat of an imminent arrest.

Doc. No. 20-7, (the "Security Agreement"). The language of the Security Agreement contemplates

that if Clearlake succeeds by way of its motion before the U.S. Bankruptcy Court for the District

of Connecticut that the automatic stay does not apply, or in the alternative, lifting the stay, then

such funds shall be transferred from the escrow account into the court registry for the benefit of

all interpleader claimants, including O.W. Switzerland, NuStar, ING and the Debtors. Id. at \ 1.

Clearlake moved on December 23, 2014 for an order from the Connecticut Bankruptcy

Court declaring that the automatic stay does not apply to the interpleader action, or in the

alternative, modifying or lifting the automatic stay. In re: O. W. Bunker Holding N. Am. Inc. (No.

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< ^ o , 11 "i 09?8/-VbC Document 83 rilorl 08/88/lb Page 8 of 13

t4-bk-51720) (Bankr. D. Conn.), Doc. No. 224.4 The hearing on the motion was delayed by the

express request by the Debtors and in deference to the developments in the Bankruptcy

proceedings as well as in this Court with respect to the numerous related interpleader actions before

it. The hearing on the motion is currently scheduled to take place on September 9, 2015.

ARGUMENT

POINT I

STATUTORY INTERPLEADER JURISDICTION WILL BE PERFECTED UPON THE RE-DEPOSIT OF THE DISPUTED FUNDS FROM THE

ESCROW ACCOUNT CURRENTLY HELD BY NUSTAR

As set forth above, a hearing is currently scheduled before the Connecticut Bankruptcy

Court to determine whether the automatic stay applies to this action. Upon a determination that

the automatic stay does not apply, or alternatively, lifting the automatic stay, the Security

Agreement between Clearlake and NuStar requires that NuStar deposit the $ 1,308,597.10 currently

held in its attorneys' escrow account into the S.D.N.Y. court registry and that the funds will then

stand as security for all claimants in this action. Doc. No. 20-7.

While Clearlake does not dispute that a deposit of the disputed funds is required pursuant

to the interpleader statute, courts routinely allow a reasonable period of time for an interpleader

plaintiff to correct any jurisdictional defect in the deposit. See American Smelting & Refining Co.

v. Naviera Andes Peruana, S.A., 182 F.Supp. 897, 898 (S.D.N.Y. 1959) (order on motion to

dismiss, allowing 30 days to amend complaint and deposit funds); John Hancock Mut. Life Ins.

Co. v. Yarrow, 95 F.Supp. 185, 187, 188 (E.D. Perm. 1951) (allowing 15 days from decision on

motion to dismiss to increase interpleader deposit). Accordingly, the current lack of deposit is not

4 To date, the only opposition to the motion has been filed by NuStar. Doc. No. 256.

4 #36999255 vl


^ 5^ 1 ! I 'x OcPn -VhC DocumotiT83 hlfd 08//8/tb Page 9 ot n

fatal where Clearlake seeks to correct the deposit. The key here is "reasonable" which is a term to

be applied within this Court's discretion. Given the unique circumstances of this action, Clearlake

respectfully submits that it would be most reasonable for this Court to allow time for the

Bankruptcy Court to make a decision on Clearlake's motion.

Upon receipt of the Order to Show Cause issued by this Court (Doc. No. 82), Clearlake

promptly requested that the hearing on its motion before the Bankruptcy Court be moved from

September 16, 2015 to an earlier date, which is September 9, 2015. It is possible that the deposit

of funds may even occur before the hearing on the Order to Show Cause, scheduled for September

15,2015. In the event that there is a delay in receiving a determination from the Bankruptcy Court,

however, Clearlake respectfully requests a reasonable amount of time to correct the interpleader

deposit, i.e., related to the issuance of the Bankruptcy Court's decision, and submits that this Court

may properly maintain jurisdiction over the action during that time.

POINT II

IN THE ALTERNATIVE, THIS COURT CAN RETAIN JURISDICTION OVER THIS ACTION BY CONVERTING IT TO A RULE INTERPLEADER

UNDER FEDERAL RULE OF CIVIL PROCEDURE 22

Rule 22 states that "[pjersons with claims that may expose a plaintiff to double or multiple

liability may be joined as defendants and required to interplead." Rule interpleader is a procedural

device which differs from the interpleader statute because it does not independently confer federal

jurisdiction.

Even where a plaintiff has only plead statutory interpleader, it is permissible for the Court

to convert a statutory interpleader action into a "rule interpleader" action, as long as there is an

independent basis for subject matter jurisdiction. Truck-A-Tune, Inc., v. Re, 23 F.3d 60, 62 (2d

Cir. 1994) (affirming District Court's sua sponte decision to convert the action to rule interpleader);

#36999255 vl


v u-.o ! I ]-iv-()9?tf/-VFC Documom 83 I il(jd 08/38/lb Page 10 of 13

Glencova Inv. Co. v. Trans-Resources, Inc., 874 F. Supp. 2d 292, 304-05 (S.D.N.Y. 2012) (while

the Court could convert on a statutory interpleader to a rule interpleader, it did not so as to no basis

for federal jurisdiction established); Geler v. National Westminster Bank USA, 763 F.Supp. 722,

727 (S.D.N.Y. 1991) (noting that even where pleadings refer only to the interpleader statute, such

will not be read so "narrowly and technically" and court may construe pleadings so as to do

"substantial justice" in accordance with Fed. R. Civ. P. 8(f) [now 8(e)]).5 While many rule

interpleader cases typically consider whether the Court has diversity jurisdiction (28 U.S.C. §

1332), e.g., Glencova, 874 F.Supp.2d at 304-05 and Geler, 763 F.Supp. at 726, this Court has

undoubted admiralty jurisdiction over this action pursuant to 28 U.S.C. § 1333. Doc. No. 69 at

15-16.

While minimal diversity is a requirement of statutory interpleader {see 28 U.S.C. § 1335),

in rule interpleader there is no minimal diversity requirement.6 Additionally, as opposed to

nationwide service of process provided for in 28 U.S.C. § 2361, in rule interpleader the Court must

have personal jurisdiction over the defendants and service is effected in the usual manner pursuant

to Fed. R. Civ. P. 4. In this case, personal jurisdiction exists over each of the defendants, and no

5 The Court's power to convert a statutory interpleader to a rule interpleader is well-established. See Wells Fargo Bank, Nat. Ass'n v. Davidson Kempner Capital Mgmt. LLC, No. 13-5981, 2014 WL 89674 at *1 n.l (S.D.N.Y. Mar. 6, 2014) (jurisdiction pled under § 1335 but no deposit made, however, court noted it had power to convert action to rule interpleader); Union Cent. Life Ins. Co. v. Berger, No. 10-8408, 2012 WL 4217795, at *7 n. 10 (S.D.N.Y. Sept. 10, 2012) (although properly brought as statutory interpleader, found that both statutory and rule interpleader were applicable in the action); Reassure America Life Ins. Co. v. The Gennaro J. Perillo & Minnie Perillo Irrevocable Trust, No. 09-1878, 2011 WL 832185, at *2 n. 3 (D. N.J. Mar. 2, 2011) (although no jurisdiction under § 1335, diversity jurisdiction allowed case to proceed under rule interpleader); Vanguard Fiduciary Trust Co. v. Stuart, No. 08-44,2009 WL 2982787 at *2 (D. N.D. Sept. 15,2009) at *2 (case incorrectly brought as a statutory interpleader but court converted to rule interpleader); Indemnity Ins. Co. of North America v. Romangnoli, No. 02-3037, 2002 WL 922170, at *2 (S.D.N.Y. May 7, 2002) (recognizing validity of converting statutory to rule interpleader where necessary); Nationwide Mutual Ins. Co. v. Eckman, 555 F. Supp. 775, 778 (D. Del. 1983) (to preclude jurisdictional issue related to the lack, of a deposit in a statutory interpleader action, court requested the parties stipulate to conversion of the action to rule interpleader).

6 A common defect in the statutory interpleader cases that are later converted to rule interpleaders is lack of minimal diversity.

6 #36999255 vl


Pr.MM 1M cv8)9?87 VEC Document 83 Filed 08/28/lb Pago 11 of L3

party has contested personal jurisdiction in this or any related interpleader action. Doc. No. 67 at

If 6 (setting forth July 17, 2015 as the deadline for any party to move to dismiss on the ground of

the lack of personal jurisdiction).

Unlike statutory interpleader, under rule interpleader a deposit of the asset or funds into

the court is not a jurisdictional prerequisite. See, e.g., John v. Sotheby's, Inc., 141 F.R.D. 29, 33

(S.D.N.Y. 1992) (citing National Union Fire Ins. Co. v. Ambassador Group, Inc., 691 F.Supp.

618, 621 (E.D.N.Y. 1988), Nationwide Mutual Ins. Co., 555 F.Supp. at 778 and 3A James W.

Moore, et al., Moore's Federal Practice H 22.10 (2d ed. 1989) [now volume 4, f 22.04 [6][a] (3d

ed. 2014)]; see also Wells Fargo Bank, Nat. Ass'n, 2014 WL 896741 at *1 n.l. However, the

court has discretion to order a deposit under its equitable authority and pursuant to Fed. R. Civ. P.

67. 141 F.R.D. at 33-34. Clearlake respectfully asserts that a deposit is not required at this time

in order to maintain jurisdiction, but that upon completion of motion practice in the Connecticut

Bankruptcy Court, this Court can and should order that the funds be redeposited by NuStar in

accordance with the Security Agreement.

Upon the conversion of the action to rule interpleader, this Court may re-instate the

restraining order against the arrest of the vessels Venus Glory and Hellas Glory. While 28 U.S.C.

§ 2361 is not applicable to a rule interpleader action, a court can nonetheless issue an appropriate

injunction necessary to preserve the purpose and effectiveness of the interpleader. "Under rule

interpleader, the Court retains the discretion to restrain the litigants before the Court from litigating

claims in derogation of the Court's exercise of jurisdiction." New Jersey Sports Productions, Inc.

v. Don King Productions, Inc., 15 F. Supp. 2d 534, 545 (D. N.J. 1998) (quoting 7 Charles A.

Wright & Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1717 [3d ed.

updated April 2015]: "... the mere fact that a nationwide injunction under Section 2361 is not

#36999255 vl


"• ' a iW' i i i -M- i Docnmoni 83 lHO8 08/88'ih >\û 18 ot 18

available in rule interpleader does not mean that the court does not have discretion in the latter

context to issue an order against those claimants that have been subjected to the Court's jurisdiction

in accordance with the more traditional rules of process applicable in cases under Rule 22.

Certainly if the court can assert personal jurisdiction over a claimant it has the power to issue an

order designed to effectuate the exercise of jurisdiction"). Additionally, this Court's powers under

the equitable principles in admiralty permit it to grant relief necessary to effectuate the purpose of

interpleader. See, e.g., Allied Maritime, Inc. v. Descatrade SA, 620 F.3d 70, 76 (2d Cir. 2010)

("As a court sitting in admiralty, 'we may use equitable principles where appropriate to avoid

injustice.'") (quoting Montauk Oil Corp. v. Sonat Marine, Inc., 871 F.2d 1169, 1172 (2d Cir.

1981)).

CONCLUSION

For the foregoing reasons, Clearlake respectfully submits that this Court should not dismiss

this interpleader action, but allow for the re-deposit of funds to perfect interpleader jurisdiction

under the statute, or alternatively convert this action to "rule interpleader" under Fed. R. Civ. P.

22 and this Court's independent admiralty jurisdiction pursuant to 28 U.S.C. § 1333.

Dated: August 28, 2015 New York, New York

HOLLAND & KNIGHT LLP

By: /s/ James H. Hohenstein James H. Hohenstein Marie E. Larsen 31 West 52nd Street New York, New York 10019 Telephone: 212-513-3200 Telefax: 212-385-9010 Email: [email protected]

marie. [email protected]

Attorneys for Plaintiff Clearlake Shipping Pte Ltd.

#36999255 vl




i ' . v 09887A/FC Document 83 I'llod 08/88/13 Pago 13 of 13

CERTIFICATE OF SERVICE

1 hereby certify that on August 28, 2015,1 caused the foregoing document to be

electronically filed with the Clerk of the Court using CM/ECF, which will automatically send e-

mail notification of such filing to all attorneys of record.

/s/ James H. Hohenstein James, H. Hohenstein

#36999255 vl


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