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Swaidan Trading Co. LLC v. M/V Donousa

United States District Court, D. Oregon

July 13, 2018

SWAIDAN TRADING CO., LLC, Plaintiff,
v.
M/V DONOUSA, her engines, tackle, etc., in rem, and DILETON MARITIME, S.A., ANDROUSSA SHIPPING, S.A., ARETOUSSA SHIPPING, S.A., and ERIKOUSSA MARITIME, S.A., in personam, Defendants.

          Kent Roberts Daivd R. Boyajian SCHWABE, WILLIAMSON & WYATT, P.C. Attorneys for Plaintiff

          Molly J. Henry Valerie I. Holder KEESAL, YOUNG & LOGAN Attorneys for Defendant Aretoussa Shipping S.A.

          OPINION & ORDER

          MARCO A. HERNÁNDEZ UNITED STATES DISTRICT JUDGE.

         Plaintiff Swaidan Shipping Co., LLC brings this admiralty action against Defendants M/V DONOUSA in rem and Dileton Maritime, S.A., Androussa Shipping, S.A., Aretoussa Shipping, S.A., and Erikoussa Maritime, S.A., in personam. Specially appearing Defendant Aretoussa Shipping, S.A. moves for security for costs and damages on its counterclaim for wrongful attachment. Plaintiff posted $500 as security for costs as required by Supplemental Admiralty Rule E(2)(b) and Local Admiralty Rule 1020-1. Plaintiff otherwise opposes Defendant's motion. For the reasons that follow, the Court denies Defendant's Motion for Security for Damages.

         BACKGROUND

         In early 2017, Defendant Androussa, the registered owner of the vessel M/T ANDROUSSA, issued a clean bill of lading for a shipment of gas oil purchased by Plaintiff. Compl. ¶¶ 9-10, ECF 1. While in transit, the vessel was stopped and boarded by Coalition Forces led by the Kingdom of Saudi Arabia and directed to Jeddah for inspection. Id. at ¶ 11. Plaintiff alleges that its cargo was confiscated after the Coalition and Saudi Arabian forces determined that the ship was likely used for smuggling illegal weapons. Id. at ¶¶ 13-14.

         On March 7, 2018, Plaintiff filed this ancillary admiralty and maritime action against Defendants-alleging breach of contract, negligence, fraud, implied warranty of workmanlike performance, and alter ego liability-in order to obtain security for Plaintiff's claims currently proceeding in arbitration in London. Id. at ¶ 89. Plaintiff also moved ex parte to attach the M/V DONOUSA, the vessel owned by Defendant Aretoussa, pursuant to Admiralty Rule B on the grounds that Defendant Aretoussa is the alter ego of Defendant Androussa and Defendant Dileton, the manager of both the M/T ANDROUSSA and the M/V DONOUSA. Pl. Ex Parte Mot., ECF 6.

         Plaintiff's motion was granted by this Court on March 8, 2018, and the M/V DONOUSA was attached on March 25, 2018.[1] Order, ECF 11. On April 12, 2018, Defendant Aretoussa filed a restricted appearance and answer to Plaintiff's Complaint.[2] Answer, ECF 43. Defendant Aretoussa also brought a counterclaim against Plaintiff for wrongful attachment. Id. at 11. Defendant alleges that Plaintiff knew that Defendant was not the alter ego of Androussa or Dileton and acted in bad faith, with malice, or with gross negligence in filing its verified complaint. Id. at 10-11. As a result of the seizure of the M/V DONOUSA, Defendant alleges that it has suffered damages totaling in excess of $5, 165, 210.50. Id. at 12. Defendant's present motion seeks counter-security for its claim for wrongful attachment. Def. Mot., ECF 44.

         STANDARDS

         Supplemental Admiralty Rule E(7)(a) of the Federal Rules of Civil Procedure governs security on counterclaims in admiralty actions:

When a person who has given security for damages in the original action asserts a counterclaim that arises from the transaction or occurrence that is the subject of the original action, a plaintiff for whose benefit the security has been given must give security for damages demanded in the counterclaim unless the court, for cause shown, directs otherwise. Proceedings on the original claim must be stayed until this security is given unless the court directs otherwise.

Fed. R. Civ. P. Supp. Admiralty R. E(7)(a). “The purpose of Supplemental Rule E(7) is to ‘place the parties on a basis of equality as regards security.'” Whitney-Fidalgo Seafoods, Inc. v. Miss Tammy, 542 F.Supp. 1302, 1305 (W.D. Wash. 1982) (citing Vic Frank's Boat Co. v. Yacht SUNCHASER III, 508 F.Supp. 609, 610 (W.D. Wash. 1981)). “Although the language of this rule is automatic, a district court has discretion to excuse a plaintiff from posting counter-security ‘for cause shown.'” Seaworthy Serv. Inc. v. NANEA, No. 09-5062BHS, 2009 WL 1174654, at *2 (W.D. Wash. April 28, 2009) (citing Fed.R.Civ.P. Supp. Admiralty R. E(7)(a) and Whitney-Fidalgo S542 F.Supp. at 1302). The burden is on the plaintiff to show that “good cause exists to relieve the plaintiff of its obligation to provide counter-security.” Id.

         Courts have looked to two different factors in determining whether to grant counter-security. Some courts focus on the plaintiff's ability to satisfy a judgment. Seaworthy Serv., 2009 WL 1174654, at *2; see also Whitney-Fidalgo, 542 F.Supp. at 1305 (“It is intended only as a means by which to remedy a defendant's insecurity in respect to the likelihood of satisfying a judgment awarded by the court.”). Others look to the ability of the plaintiff to post counter-security. Seaworthy Serv., 2009 WL 1174654, at *2; see also MMI Int'l, Inc. v. M/V SKYROS, 1991 A.M.C. 1264, 1273 (N.D. Cal. 1991) (“Given that the Rule assumes security will usually be ...


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