United States District Court, D. Delaware
CHRISTOPHER J. BURKE, Magistrate Judge.
Pending before the Court in this case, one arising within the admiralty jurisdiction of the federal courts, is a motion (the "Motion") by Plaintiff Cargo-Levant Schiffahrtsgesellschaft MbH ("Cargo-Levant") filed pursuant to Rule B of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions ("Rule B") that are a part of the Federal Rules of Civil Procedure. The Motion requests that the Court issue an order requiring Garnishees PSL USA, Inc. ("PSL-USA") and PSL North America, LLC ("PSL-NA") to deposit certain monies into the registry of the Court. (D.I. 20) PSL-USA and PSL-NA (collectively, "Garnishees") oppose Cargo-Levant's Motion.
For the reasons discussed below, the Court GRANTS-IN-PART and DENIES-IN-PART Cargo-Levant's Motion, and ORDERS Garnishee PSL-NA to deposit $800, 000 into the Court's registry.
A. Facts Regarding the Parties
Cargo-Levant is a German company that is "engaged in the business of the carriage of merchandise by sea for hire[, ]" with its principal place of business in Bremen, Germany. (D.I. 1 at ¶ 2) PSL Limited is an Indian company that manufactures rolled steel pipe for a variety of industrial uses, with its principal place of business in Mumbai, India. ( Id. at ¶ 3; D.I. 23 at 3-4) PSL-USA and PSL-NA are both companies incorporated in Delaware. (D.I. 1 at ¶¶ 4-5) PSL-USA is a holding company that is wholly-owned by PSL Limited. (Affidavit of Mike Lockey ("Lockey Affidavit"), D.I. 23, ex. A at ¶ 2; D.I. 23 at 5) PSL-USA's only asset is PSL-NA, and it is a majority owner of PSL-NA. (Lockey Affidavit at ¶ 2; Sworn Declaration of K. Ramanathan ("Ramanathan Declaration"), D.I. 39, ex. 1 at ¶ 3) Like PSL Limited, PSL-NA manufactures rolled steel pipe for a variety of industrial uses. (D.I. 23 at 3-4; Lockey Affidavit at ¶¶ 2-3) PSL-NA, however, has its principal place of business in Hancock County, Mississippi. (Lockey Affidavit at ¶ 2)
B. Additional Factual Background and Procedural History
1. Events Prior to the Filing of the Instant Suit
This case arises from an agreement between Cargo-Levant and PSL Limited, dated June 26, 2009. (D.I. 1 at ¶ 7) According to Cargo-Levant, pursuant to that agreement, PSL Limited contracted with it for the carriage of steel pipes aboard the M/V SUNRISE from India to another location; when a later dispute between Cargo-Levant and PSL Limited arose, the agreed-upon shipment did not take place. ( Id. at ¶¶ 7-8) Cargo-Levant thereafter commenced an arbitration in London, England, asserting that it was due payment of monies pursuant to the agreement. ( Id. at ¶¶ 9-10) An arbitration hearing was held in London on March 12, 2012, ( id. at ¶ 11), and an arbitrator issued a Final Arbitration Award on April 30, 2012-finding in favor of Cargo-Levant and awarding it the principal sum of $421, 031.90 plus certain interest and fees (collectively, the "London Arbitration Award" or "the Award"). ( Id. at ¶ 12 & ex. B at 11-12)
2. The Instant Suit, its Allegations, and the Motion at Issue
After Cargo-Levant did not receive payment from PSL Limited with regard to the London Arbitration Award, it filed suit against PSL Limited in this Court on October 25, 2012. The instant suit seeks aid of recognition and enforcement of the Award. ( Id. at ¶¶ 1, 13) Cargo-Levant's Complaint, brought under this Court's admiralty and maritime jurisdiction, also named PSL-USA and PSL-NA as Garnishees, based upon: (1) Cargo-Levant's understanding that PSL Limited cannot be found within this District under the meaning of Rule B, and (2) Cargo-Levant's belief that Garnishees have, within this District, certain "tangible or intangible goods, chattels, credits, freights, effects, debts, obligations, assets and/or funds belonging to, owed to, claimed by or being held for... PSL Limited" in their custody, possession or control. ( Id. at ¶¶ 14, 16)
With its Complaint, Cargo-Levant sought an Order from this Court for the Issuance of Process of Maritime Attachment and Garnishment, attaching any property of PSL Limited held by Garnishees "for the purpose of obtaining personal jurisdiction over PSL Limited, and to secure Cargo Levant's claims[.]" ( Id. at ¶ 17) On October 26, 2012, Judge Richard G. Andrews issued such an Order "in an amount up to and including $504, 424.21, plus interest from August 30, 2012, and costs yet to be determined[.]" (D.I. 10 at 2) That same day, pursuant to Judge Andrews' Order, this Court's Clerk issued a Process of Maritime Attachment and Garnishment, directing the attachment of Garnishees' property held for the benefit of PSL Limited. (D.I. 12) On January 9, 2013, Judge Andrews referred this case to the Court to hear and resolve all pretrial matters, up to and including the resolution of case-dispositive motions.
Thereafter, on January 16, 2013, Cargo-Levant filed the instant Motion. (D.I. 20) In the Motion, Cargo-Levant requested, pursuant to Rule B(3)(a), that the Court enter an Order requiring Garnishees to deposit $750, 000 into the Court's registry, in order to satisfy the amount of its anticipated judgment in this Court based on the London Arbitration Award. ( Id. at 1-2) In a more recent supplemental memorandum, Cargo-Levant modified that request and asked that the amount of security be increased to $800, 000. (D.I. 43 at 2)
The parties completed their initial briefing on the Motion on February 26, 2013, (D.I. 27), and, at the parties' joint request, (D.I. 28), the Court held oral argument on September 13, 2013, (D.I. 37, ex. E (hereinafter "Tr.")). At oral argument, both parties agreed that it was necessary for them to supplement the record with additional evidence, generated during discovery, that bore on the Motion's merits. ( Id. at 9-11, 83-84) The Court thereafter allowed the parties to provide this evidence along with supplemental briefing. ( Id. at 84) The parties competed supplemental briefing on October 25, 2013. (D.I. 40)
3. Facts Relating to the Debts and Alleged Debts Owed to PSL Limited and the Parties' Description of the Nature of Those Debts
The debts owed and alleged to be owed to PSL Limited, which are the subject of the Motion, were allegedly incurred by both PSL-NA and PSL-USA. ( See D.I. 21 at 3)
a. PSL-NA's Debts
In attempting to establish that PSL-NA owes attachable debts to PSL Limited, Cargo-Levant points to a number of portions of the record. First, it cites to PSL-NA's answers to certain of Cargo-Levant's interrogatories, propounded in the instant litigation. In those answers, PSL-NA stated that PSL Limited "has provided equipment and parts to PSL-NA without cash payment and without any security interest[, and that] PSL-NA carries the costs of this equipment as a payable to PSL[Limited]" but that the "accrued amounts are not subject to repayment on a regular and definite basis" and there is "no date by which the obligation must be satisfied." (D.I. 21, ex. C at 5)
PSL-NA attached "an accounting of [its] debt [to PSL Limited] and an exemplar invoice" to these interrogatory answers. ( Id. ) PSL-NA's "accounting of [its] debt"- provided in a document titled "AP Aging Report"-indicates that from September 2009 through June 2012, PSL Limited submitted more than 100 invoices (collectively, the "shipment invoices") to PSL-NA seeking payment for equipment provided by PSL Limited. ( Id., ex. C at "AP Aging Report") These shipment invoices total more than $4, 500, 000. ( Id. ) According to the "Due Date" that is listed at the top of each page of the AP Aging Report, all of these invoices are now past due (and became due at varying points between July 2010 and June 2012). ( Id. ) The "exemplar invoice, " for its part, is a January 23, 2012 invoice-one that Garnishees admit is typical of the invoices routinely provided in these transactions. ( Id., ex. C at "Commercial Invoice"; id., ex. C at 5) It states that the "Payment Terms" regarding the shipped goods referenced in the invoice are "100% Payment Against Presentation of Documents[.]" ( Id. at "Commercial Invoice")
Cargo-Levant also cites to a PSL-NA Financial Statement (dated August 27, 2012) and a PSL-USA Financial Statement (dated September 10, 2012), in order to establish the debts at issue. Both of these financial statements list an amount exceeding $4, 500, 000 in the category "Accounts payable - affiliate"; they note that this amount is owed as of March 31, 2012. (D.I. 37, ex. A at 2 & ex. B at 2) These financial statements both explain that these "[a]ccounts payable" represent costs relating to PSL-NA's "purchases [of] certain parts and equipment for its pipe manufacturing facility from PSL Limited" that remain "unpaid[.]" (D.I. 37 at 4; id., ex. A at 17 & ex. B at 18; see also Deposition of Michael L. Lockey ("Lockey Dep."), D.I. 37, ex. C at 9, 90 (PSL-NA's Chief Financial Officer agreeing that the "Accounts payable - affiliate" notation is "the amount which is owed to PSL Limited"))
Garnishees, for their part, also describe the monies at issue as debts. ( See Tr. at 49) According to Garnishees, however, these are contingent debts that are not subject to attachment. In support, Garnishees submit, inter alia, two sworn statements that seek to clarify the nature of PSL-NA's obligations to PSL Limited. The statements are intended to bolster Garnishees' assertion that subsequent to the submission of the shipment invoices. PSL Limited and PSL-NA orally modified the payment terms found on those invoices. ( See D.I. 23 at 3-5; D.I. 27 at 2; D.I. 39 at 2)
The first of these sworn statements is an affidavit from Michael Lockey, PSL-NA's Chief Financial Officer. (Lockey Affidavit at ¶ 1) In this affidavit, Mr. Lockey asserts that PSL-NA and PSL Limited "have never followed the [shipment invoices'] payment terms as written" because the two entities "agreed no payments are due until PSL-NA is financially able." ( Id. at ¶ 4) Mr. Lockey then states that in exchange for continued delivery of equipment from PSL Limited, PSL-NA has not provided and need not provide "any prepayment, security, note or specific date  for repayment." ( Id. at ¶ 5) As a result of this agreement, Mr. Lockey states that PSL-NA "does not presently owe any payment to PSLLimited, and for the same reason, has not made any payment since at least the beginning of 2009." ( Id. at ¶ 7) According to Mr. Lockey, the agreement was first entered into (between him, PSL-NA's Chief Executive Officer Brian Vaill, and PSL Limited's Chairman Ashok Punj) "around [the] 2010 time frame" and has thereafter been "regularly" re-confirmed. (Lockey Dep. at 8, 32-36) However, according to Mr. Lockey, this consistently renewed agreement is exclusively verbal-it has never been reduced to writing, nor even referenced in any correspondence or other documents. ( Id. at 33, 37)
Garnishees also submitted the Sworn Declaration of K. Ramanathan, the Senior Vice President of PSL Limited. (Ramanathan Dec. at ¶ 2) Mr. Ramanathan "confirm[s] the accuracy" of Mr. Lockey's affidavit and states that "PSL Limited has agreed no payment on the outstanding balances is due until such time as PSL-[NA]'s fiscal situation improves." ( Id. at ¶ 4) Though Mr. Ramanathan noted that he did not interact with Mr. Lockey after each shipment, he asserts that the consistently-renewed oral agreement ...