United Rope Distributors, Inc. v. Kimberly Line

Citations: 770 F. Supp. 128; 1992 A.M.C. 351; 1991 U.S. Dist. LEXIS 9245; 1991 WL 125136Docket: 89 Civ. 1166 (MGC)

Court: District Court, S.D. New York; July 8, 1991; Federal District Court

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United Rope Distributors, Inc. filed an admiralty action against Kim-Sail Ltd. for damages related to the loss of cargo when the M.V. Katia sank. Kim-Sail, having subchartered the vessel from Copenship A/S, subsequently impleaded Seatriumph Marine Corp., the owner of the Katia, seeking indemnity or contribution. Seatriumph moved to dismiss the third-party complaint, claiming lack of personal jurisdiction. 

Kim-Sail argued that Seatriumph was subject to jurisdiction under CPLR 301 due to its business activities in New York. Evidence included the Katia's previous calls at New York ports and a loan agreement with Bank of America that required payments to be made in U.S. dollars via its New York branch, along with a mortgage recorded in New York. However, Seatriumph's president asserted that the corporation did not maintain a bank account in New York and that a designated bank account for charter hire was held by Richmond Investments Ltd., not Seatriumph directly. The court was tasked with determining whether these facts established sufficient grounds for personal jurisdiction over Seatriumph.

Richmond is described as not a collection agent for Seatriumph but as an account holder in New York that was authorized to receive funds intermittently. Petropoulos clarified that not all payments related to Seatriumph’s hire and freight were made via wire transfer to Richmond’s New York account; Seatriumph also utilized accounts at Continental Bank in Pireaus, Greece, and Global's account there. A significant portion of the Katia's charter hire and freight was deposited into Richmond’s New York account. Petropoulos acknowledged signing the account's signature card, indicating his involvement in its operation.

There is overlapping ownership and control among Richmond, Seatriumph, and Global Ship Management, with Michael Petropoulos, his mother C. Petropoulos, and D. Petropoulos serving as directors of Richmond, while the same individuals, along with A. Dousladzi, are directors of Seatriumph, with C. Petropoulos also acting as Seatriumph's Vice-President. Seatriumph utilized the Richmond account for both receiving charter hire and paying expenses, with Michael Petropoulos signing checks for various expenses related to the Katia between December 17, 1987, and December 19, 1988. During this period, Richmond issued 107 checks and made 47 wire transfers on behalf of Seatriumph without receiving any compensation for the account's use. 

The Richmond account was last used by Seatriumph on February 22, 1989, and closed on March 20, 1989, shortly after a third-party complaint was filed, with remaining funds transferred to another account under Med Investments, another entity associated with Petropoulos. Additionally, a New York broker named Kersten negotiated charters for the Katia in 1987 and collected hire payments, which were sent to the Richmond account, although Seatriumph contends that Kersten was not its agent but merely an intermediary.

The document discusses personal jurisdiction in the context of a legal case, referencing the Supreme Court's decision in Omni Capital Int'l v. Rudolf Wolff. Co., which highlights the necessity of adhering to the forum state's long-arm statutes for service of process. Although the case is in admiralty jurisdiction, similar principles apply regarding personal jurisdiction over Seatriumph, with Kim-Sail asserting that the court can establish this under specific sections of the New York Civil Practice Law and Rules. The burden of proof for establishing personal jurisdiction lies with Kim-Sail.

Kim-Sail only needs to demonstrate a prima facie case of jurisdiction since no evidentiary hearing has been held. All pleadings and affidavits must be interpreted favorably for Kim-Sail. Under CPLR 301, a non-resident defendant must engage in a continuous and systematic course of business in New York to establish personal jurisdiction. A foreign corporation can be subject to jurisdiction if a separate entity, authorized by it and for its substantial benefit, conducts significant activities in New York. Kim-Sail has shown that Richmond's financial activities in New York, performed on behalf of Seatriumph, were crucial enough that Seatriumph's officials would have undertaken similar tasks if Richmond had not been available. 

The case of Ivanhoe Trading Co. v. M/S Bornholm exemplifies sufficient New York contacts for establishing jurisdiction, where a Finnish shipowner was found to be doing business in New York due to the activities of its time charterer. Seatriumph's sole business involved operating the Katia, which was under a time charter to Copenship at the time of its sinking. Seatriumph's operations included paying expenses and receiving hire in New York, with all charter payments mandated to be made in New York City through Richmond’s account. This arrangement, along with the use of Richmond’s account for Katia’s expenses, constitutes sufficient activity to establish Seatriumph as doing business in New York and subject to personal jurisdiction.

Furthermore, the case Arpad Szabo v. Smedvig Tankrederi supports this position, where a Norwegian shipowner was found subject to jurisdiction due to services performed by a New York broker. Seatriumph contends that merely having a New York bank account does not amount to doing business, which is a valid point.

Seatriumph's reliance on prior cases is misplaced, as those cases did not concern bank accounts that received most of a foreign corporation's income. Seatriumph exercised control over funds in Richmond's New York account and deliberately selected New York to accept hire payments. Even if Seatriumph claims its New York operations ceased by March 15, 1989, evidence shows that hire payments were last deposited on November 10, 1988, and disbursements occurred until February 22, 1989, shortly before the third-party complaint was filed. Richmond retained the account until March 20, 1989, and transferred it to Med Investments, linked to Seatriumph's principal, Petropoulos, shortly thereafter. Consequently, Seatriumph maintained sufficient ties to New York at the time of the complaint's filing. The court concluded that requiring Seatriumph to defend itself in New York aligns with conventional standards of fair play and substantial justice. Thus, Seatriumph's motion to dismiss the complaint for lack of personal jurisdiction is denied. Additional notes clarify that Kimberly Line, a defendant, is a trade name without independent existence, and that loan agreements were negotiated in Greece, with payments made to a Greek bank office rather than New York.