Sea Trade Maritime Corp., Peters v. Coutsodontis ( 2018 )

16-3291(L)
Sea Trade Maritime Corp., Peters v. Coutsodontis, et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST
CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals
for the Second Circuit, held at the Thurgood Marshall
United States Courthouse, 40 Foley Square, in the City of
New York, on the 7th day of August, two thousand eighteen.
PRESENT: DENNIS JACOBS,
REENA RAGGI,
PETER W. HALL,
Circuit Judges.
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SEA TRADE MARITIME CORPORTATION, GEORGE
PETERS,
Plaintiffs-Appellants-Cross-
Appellees,
-v.- 16-3291(L),
17-1573(CON),
STELIOS COUTSODONTIS, 17-1572(XAP)
Defendant-Cross-Defendant-
Cross-Claimant-Appellee-
Cross-Appellant,
FRANCESA ELENI COUTSODONTIS, GENERAL
MARITIME ENTERPRISES CORPORATION,
Defendants-Cross-
Defendants-Cross-Claimants,
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and
IASON SHIPPING LTD., ATTIKA
INTERNATIONAL NAVIGATION S.A.,
Defendants-Cross-
Defendants.
- - - - - - - - - - - - - - - - - - - - - -X
FOR PLAINTIFFS-APPELLANTS- NADER MOBARGHA (Joshua
CROSS-APPELLEES: Liston, on the brief), Beys
Liston & Mobargha LLP; New
York, NY.
FOR DEFENDANT-CROSS- MARK A. BERMAN (Kelly A.
DEFENDANT-CROSS-CLAIMANT- Zampino, on the brief),
APPELLEE-CROSS-APPELLANT: Hartmann Doherty Rosa
Berman & Bulbulia, LLC; New
York, NY.
Appeal from a judgment of the United States District
Court for the Southern District of New York (Schofield,
J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
AND DECREED that the judgment of the district court is
AFFIRMED in part and REVERSED in part.
This appeal arises from a judgment of the United States
District Court for the Southern District of New York
(Schofield, J.) following a three-day bench trial in a
dispute over the ownership and control of Sea Trade
Maritime Corporation (“Sea Trade”), whose sole asset until
2009 was the ocean-going ship “M/V Athena.” We assume the
parties’ familiarity with the underlying facts, the
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procedural history, and the issues presented for review.
Elias Eliades and his wife, Athena Eliades, formed Sea
Trade in July 1992, purchasing the M/V Athena for $9.1
million later that year. Athena had two siblings:
Defendant Stelios Coutsodontis and Anna Peters, the mother
of Plaintiff George Peters. During their lifetimes, Elias
and Athena were the Directors of Sea Trade and George
Peters managed day-to-day operations.
Sea Trade’s Certificate of Incorporation provides for
500 authorized shares. Upon Sea Trade’s formation, Elias
had 475 shares and George Peters received 25 shares. In
July 1994, Elias transferred a further 25 of his shares to
George Peters and 150 shares to Anna Peters. When Elias
died in September 1996, Athena inherited his 300 remaining
shares. When Athena died in January 2003, she left 250
shares to Coutsodontis and 50 shares to Anna Peters
(bringing her total shares to 200), while George Peters
continued to own 50 shares. Thus, Coutsodontis and the
Peters family each held a 50 percent ownership interest in
Sea Trade.
Since 2005, multiple litigations have been conducted
between Coutsodontis on the one hand and Sea Trade and
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George Peters (“Peters”) on the other. Peters argued that
Athena’s bequest of shares to Coutsodontis violated a no-
alienation clause of Sea Trade’s Articles of Incorporation
and was therefore null and void. In 2009, the Court of
First Instance of Athens held that Coutsodontis was the
owner of the 250 shares of Sea Trade he inherited from
Athena; the ruling was upheld by the Greek appellate court
in 2011 and by the Supreme Court of Greece in 2014 (the
“Greek shareholder litigation”). Peters does not contest
the giving of preclusive effect to the Greek courts’
decision. See J. App’x 243-46.
In July 2008, while the Greek shareholder litigation
was pending, Coutsodontis caused the M/V Athena to be
arrested in Spain in order to obtain security against his
ownership interest. In August 2008, after the arrest was
vacated, Coutsodontis again caused the M/V Athena to be
arrested, in New Orleans. That arrest was also vacated.
Peters brought the present case, asserting (inter alia)
claims for wrongful arrest and breach of fiduciary duty: on
the wrongful arrest claim, Peters seeks money damages for
the asserted lost opportunity to sell the M/V Athena on
favorable terms in the summer of 2008; on the breach of
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fiduciary duty claim, Peters seeks the equitable remedy of
forfeiture of Coutsodontis’ shares in Sea Trade.
1. Peters challenges the denial of relief on his
wrongful arrest claim, arguing that the district court
erred in concluding that any consequential damages for lost
profits from the sale of the M/V Athena are too
speculative.
“After a bench trial, . . . we review the district
court’s findings of fact for clear error and conclusions of
law and mixed questions de novo.” Connors v. Conn. Gen.
Life Ins. Co., 272 F.3d 127, 135 (2d Cir. 2001).
First, Peters argues that the district court applied
the wrong legal standard by requiring proof of “damages for
the inability to sell to a specific buyer.” Br. of
Appellants 34. But the district court cited the correct
legal standard: that Appellants bore the burden of proving
consequential damages (including lost profits) “with
reasonable certainty.” J. App’x 240 (quoting Int’l
Minerals & Res., S.A. v. Pappas, 96 F.3d 586, 597 (2d Cir.
1996)). The district court also relied on precedent that a
plaintiff cannot recover damages if “it is uncertain
whether such damages resulted necessarily and immediately
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from the breach complained of,” that is, if the damages are
not the “certain result of the wrong.” Id. (quoting Story
Parchment Co. v. Paterson Parchment Paper Co., 282 U.S.
555, 562–63 (1931)). Although Peters asserted that arrests
of the vessel frustrated sale of the vessel on favorable
terms that are no longer available, the district court
observed that Peters “had not hired a broker,” “had not
begun to market the ship,” and “did not have a contract for
the purchase of the ship,” and concluded therefore that
Peters’ intention to sell the M/V Athena was too
speculative to support an award for consequential damages.
Id. at 241. The district court did not (as Peters
contends) require proof of a sale to a specific buyer; it
cited that fact (among others) as evidence in reaching its
determination.
Second, Peters challenges the district court’s factual
finding that Peters had no certain intention to sell the
M/V Athena in July 2008. Peters emphasizes his own
assertions on direct testimony that he began to collect
information on recent sales and ship brokers, and that he
contacted Sea Trade’s lawyers about a possible sale.
Peters further cites the frenetic market for ships in the
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summer of 2008 and the fact that the M/V Athena was nearing
the end of its operating life. Finally, Peters points to
Coutsodontis’ asserted motivation for arresting the ship:
he heard rumors that it was up for sale.
But even if the Court were to agree with Peters’
characterization of the facts, “[t]he fact that there may
have been evidence to support an inference contrary to that
drawn by the trial court does not mean that the findings
made are clearly erroneous.” Diesel Props S.R.L. v.
Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir.
2011). Moreover, “[w]here there are two permissible views
of the evidence, the factfinder’s choice between them
cannot be clearly erroneous.” Anderson v. City of Bessemer
City, N.C., 470 U.S. 564, 574 (1985). The district court
heard Peters’ trial testimony, assessed his demeanor, and
considered his various admissions “that he did not have any
documentary evidence to corroborate his oral testimony,”
“that he had no contract of sale, no contract with a broker
to sell the vessel, no letter of intent to sell, and no
survey of the ship by any prospective buyer,” and “that the
ship was not yet on the market” in the summer of 2008. J.
App’x 236-37. The district court therefore concluded that
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Peters failed to sustain his burden to prove that the M/V
Athena would have been sold but for Coutsodontis’ arrest
campaign. We will not “second-guess [a] bench-trial
court’s credibility assessments.” Krist v. Kolombos Rest.
Inc., 688 F.3d 89, 95 (2d Cir. 2012). We identify no
error, clear or otherwise, in the district court’s analysis
or in its conclusion to deny relief on the wrongful arrest
claim.
2. Peters argues that the district court erred in
finding that his refusal to recognize Coutsodontis’
ownership in Sea Trade breached his fiduciary duty to
Coutsodontis and impaired any entitlement to equitable
relief for Coutsodontis’ own breach of fiduciary duty.
We do not reach the district court’s unclean hands
determination as to Peters because we conclude that Peters
failed in the first instance to prove his breach of
fiduciary duty claim against Coutsodontis, without which
there is no basis for equitable relief.
The elements of a breach of fiduciary duty claim under
New York law are (1) the existence of a fiduciary
relationship, (2) misconduct by the defendant, and (3)
“damages directly caused by [the defendant’s] misconduct.”
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Pokoik v. Pokoik, 115 A.D.3d 428, 429, 982 N.Y.S.2d 67, 70
(1st Dep’t 2014); see R.M. Newell Co. v. Rice, 236 A.D.2d
843, 844, 653 N.Y.S.2d 1004, 1005 (4th Dep’t 1997)
(identifying damages as “essential element” of breach of
fiduciary duty claim). Breach of fiduciary duty is a tort,
see Sergeants Benev. Ass’n Annuity Fund v. Renck, 19 A.D.3d
107, 110, 796 N.Y.S.2d 77, 80 (1st Dep’t 2005), and “[a]s
with other torts in which damage is an essential element,
the claim is not enforceable until damages are sustained,”
IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d
132, 140, 879 N.Y.S.2d 355, 360 (2009) (internal quotation
marks omitted). Accordingly, to succeed on his breach of
fiduciary duty claim, Peters had to prove damages
regardless of the relief ultimately sought.
Peters acknowledges that the wrongful arrests in July
and August 2008 “are the bases for Coutsodontis’s breach of
fiduciary duty.” Br. of Appellants 43. In holding
Coutsodontis liable for breach, the district court
determined that the arrests damaged Sea Trade by causing it
“to lose business, incur expenses[,] and harm its
reputation in garnering future business.” J. App’x 248.
That damages assessment, however, cannot be reconciled with
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Peters’ own theory of relief or with other portions of the
district court’s decision. After the bench trial but
before the district court issued its findings of fact and
conclusions of law, Peters clarified that he did not seek
damages for lost charters due to the res judicata effect of
prior litigation and, instead, sought only “damages from
the lost opportunity to sell the M/V Athena in the summer
of 2008, as well as any and all injunctive relief,
including . . . Coutsodontis’s forfeiture of shares in Sea
Trade.” Dist. Ct. Dkt. No. 272 at 1. As discussed in the
preceding point, the district court specifically found that
Peters failed to prove with reasonable certainty any
damages from the alleged lost sale opportunity attributed
to Coutsodontis’ 2008 arrests. Thus, assuming arguendo
that Peters satisfied the first two elements of his breach
of fiduciary duty claim against Coutsodontis, that claim
necessarily fails at the third step for the same reason as
the wrongful arrest claim: the failure to prove non-
speculative damages.
Accordingly, because the district court could not,
consistent with its rejection of the wrongful arrest claim,
hold Coutsodontis liable for breach of fiduciary duty, we
10
reverse the award of relief on that claim, including the
order requiring forfeiture of Coutsodontis’ shares in Sea
Trade.1 Insofar as Peters challenges the unclean hands
finding delaying the date of that forfeiture, we reject
that argument as moot.
3. Peters argues that the district court exceeded its
equitable powers in awarding damages to Coutsodontis
because Coutsodontis failed to assert a claim for
affirmative relief and because he is seeking the same
relief in state court.
“The district court’s . . . fashioning of equitable
relief [is] reviewed for abuse of discretion.” United
States v. Apple, Inc., 791 F.3d 290, 313 (2d Cir. 2015).
“District courts have broad authority in crafting equitable
remedies . . . . [and] appellate review is correspondingly
narrow.” Conn. Office of Protection & Advocacy for Persons
with Disabilities v. Hartford Bd. of Educ., 464 F.3d 229,
245 (2d Cir. 2006) (internal citation and quotation marks
omitted).
1 The reversal may have no practical effect in that it
affords Coutsodontis no larger share of the sale assets in
escrow, and Sea Trade has no other assets or ongoing
business operations.
11
The district court did not exceed its equitable powers
in ordering an inquest, despite the fact that Coutsodontis
did not assert an affirmative claim for relief. Once
parties invoke a court’s equity jurisdiction, the court
“has the power to decide all relevant matters in dispute
and to award complete relief,” F.T.C. v. Bronson Partners,
LLC, 654 F.3d 359, 366 (2d Cir. 2011) (quoting Porter v.
Warner Holding Co., 328 U.S. 395, 399 (1946)), and “to
assure that equity is done to all parties,” In re Galewitz,
3 A.D.2d 280, 286, 160 N.Y.S.2d 564, 572 (1st Dep’t 1957).
Indeed, a court sitting in equity “may grant any type of
relief within its jurisdiction appropriate to the proof
whether or not demanded, imposing such terms as may be
just.” State of New York v. Barone, 74 N.Y.2d 332, 336,
547 N.Y.S.2d 269, 271 (1989) (quoting NY CPLR § 3017(a));
see Soviero v. United States, 967 F.2d 791, 793 (2d Cir.
1992) (“When a court possessing equitable powers has
jurisdiction over a complaint that seeks equitable relief,
it has authority to award whatever damages are incident to
the complaint.”). In resolving the breach of fiduciary
duty claim here, the district court first recognized
Coutsodontis’ 50 percent ownership interest in Sea Trade by
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giving preclusive effect to the 2014 ruling of the Supreme
Court of Greece in the related Greek shareholder
litigation. Even if the district court ultimately erred in
finding Coutsodontis liable for breach of his attendant
fiduciary duties and, thus, in ordering forfeiture of his
shares, the district court nonetheless possessed authority
to recognize the parties’ relative ownership interests in
the course of its analysis and to order an inquest into
amounts owed retroactively to them based on those
interests.
Peters further argues that the inquest is improper
because Coutsodontis has filed an action in state court
seeking the same relief: $26 million in compensatory
damages for Sea Trade’s lost profits. While “the pendency
of an action in the state court is no bar to proceedings
concerning the same matter in the Federal court having
jurisdiction, exceptional circumstances may on occasion
permit the dismissal of a federal suit due to the presence
of a concurrent state proceeding for reasons of wise
judicial administration.” Zemsky v. City of New York, 821
F.2d 148, 152 (2d Cir. 1987) (internal quotation marks and
alterations omitted). The district court explained that
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abstention was unwarranted because the parties had already
submitted briefing in magistrate court and collateral
estoppel would preclude the parties from relitigating in
state court any issues resolved in federal court.
Appellants offer no reason why the district court’s
decision was an abuse of discretion.
We have considered Appellants’ remaining arguments and
conclude that they are without any merit. The judgment of
the district court is REVERSED as to the breach of
fiduciary duty claim and AFFIRMED in all other respects.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, CLERK
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