Asamarbunkers Consultadoria E Participacoes Unipessoal LDA v. United States , 510 F. App'x 332 ( 2013 )


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  •        IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT United States Court of Appeals
    Fifth Circuit
    FILED
    February 1, 2013
    Nos. 12-40246 & 12-40248              Lyle W. Cayce
    Summary Calendar                         Clerk
    ASAMARBUNKERS CONSULTADORIA E PARTICIPACOES
    UNIPESSOAL LDA
    Plaintiff–Appellant
    v.
    UNITED STATES OF AMERICA
    Intervenor Plaintiff–Appellee
    v.
    New River M/V, etc., Et Al.,
    Defendants
    Consolidated with
    ENJET, L.L.C.,
    UNITED STATES OF AMERICA,
    Intervenor Plaintiff–Appellee
    v.
    ASAMARBUNKERS CONSULTADORIA E PARTICIPACOES
    UNIPESSOAL LDA; BUNKERS INTERNATIONAL CORPORATION,
    Intervenor Plaintiffs-Appellants
    v.
    Nos. 12-40246 & 12-40248
    M/V MONSEIGNEUR, Official Number 1046706, her masts, boilers, engines,
    tackle, apparel, etc; in rem, Et Al.,
    Defendants
    Appeals from the United States District Court
    for the Eastern District of Texas
    USDC Nos. 1:10-CV-223-RC & 1:10-CV-228
    Before SMITH, PRADO, and HIGGINSON, Circuit Judges.
    PER CURIAM:*
    This consolidated case centers on the arrest of two ships and their
    subsequent sale to satisfy outstanding debts. The United States successfully
    intervened in the in rem proceedings on the basis of preferred mortgage liens on
    the two vessels. Asmarbunkers Consultadoria E Paricipacoes Unipessoal LDA
    and Bunkers International Corporation (“Appellants”) challenged the United
    States’ superior claim to the proceeds of the vessels’ sale based on a fuel lien they
    possessed. The district court granted summary judgment for the United States,
    and this appeal followed. For the reasons that follow, we affirm.
    I
    The SS NEW RIVER and the SS THE MONSEIGNEUR (“the ships” or
    “the vessels”) are two ships that were reconstructed by American Heavy Lift
    Corporation (“AHL”) in 1995. The reconstruction was financed by issuing bonds.
    The bonds were in turn guarantied by the Maritime Administration (“MARAD”),
    which operates within the U.S. Department of Transportation, pursuant to its
    statutory authority. Those same statutes provide that MARAD’s mortgage on
    *
    Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
    be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
    R. 47.5.4.
    2
    Nos. 12-40246 & 12-40248
    vessels it finances receives priority over most other creditor claims in the event
    the vessel owner defaults.
    From 1995 to 2009, AHL had no problem paying the principal and interest
    due on both ships. However, during the credit crisis of 2009, AHL began to
    experience financial difficulty. AHL sought MARAD’s assistance with making
    a principal payment due in December 2009 while assuring MARAD that it would
    make the relevant interest payment and that it was only experiencing temporary
    difficulty. Before MARAD had responded to AHL’s request, however, AHL
    revised its request and asked MARAD to pay both the principal and interest due
    for December 2009.
    As knowledge of AHL’s hardships spread throughout the shipping
    industry, companies that AHL dealt with began to withdraw or modify AHL’s
    credit. One of the most significant changes AHL experienced involved fuel
    suppliers demanding payment up front, instead of allowing AHL to pay for fuel
    at the conclusion of a shipping voyage, when AHL would receive payment for its
    services. These changes challenged AHL’s ability to stay in business. In order
    to continue operating, AHL sought alternative sources of fuel and eventually
    contacted Appellants. AHL’s situation presented a new, if risky, business
    proposition for Appellants, however, since AHL had exhausted its credit with
    other suppliers and needed fuel supplied on favorable terms. Appellants made
    some inquiries to other fuel suppliers to determine whether AHL was a reliable
    company. Appellants did not, however, seek a credit report or other financial
    documentation; nor did Appellants check public records regarding outstanding
    mortgages on AHL’s vessels. Appellants, having satisfied themselves of AHL’s
    creditworthiness, began supplying fuel.
    MARAD ultimately declined to pay AHL’s principal and interest payments
    for December 2009.      As a result, AHL defaulted.         Under the relevant
    agreements, AHL’s default gave MARAD the option to immediately foreclose on
    3
    Nos. 12-40246 & 12-40248
    the mortgage. The agreements also gave AHL a grace period within which it
    could cure its default. MARAD elected against immediate foreclosure and bond
    holders decided to wait in hopes that AHL would remit the amount owed. In
    January 2010, it was determined that AHL could not cure its default. MARAD
    paid the loan guaranty accordingly.               MARAD then exercised its right to
    accelerate AHL’s debt and demand immediate payment. AHL could not remit
    the amount due, so MARAD began negotiating the surrender of the two vessels
    at issue here. MARAD eventually took control of the ships in April 2010.
    After their arrest, the ships were sued by AHL’s creditors in rem. The
    United States moved to intervene, citing its preferred mortgage lien for some $91
    million. Appellants contested the United States’ position, alleging that their lien
    for fuel took priority and that the United States’ mortgage should be equitably
    subordinated. The district court allowed the United States to intervene and
    granted summary judgment. The vessels were sold at auction for $5.7 million.
    As this satisfied only a fraction of the United States’ mortgage, AHL’s other
    creditors did not receive any of these funds.1 Appellants then filed the instant
    appeal.
    II
    We review the district court’s grant of summary judgment de novo,
    applying the same standards as the district court. Dillon v. Rogers, 
    596 F.3d 260
    , 266 (5th Cir. 2010). Summary judgment is appropriate if “there is no
    genuine dispute as to any material fact and the movant is entitled to judgment
    as a matter of law.” Fed. R. Civ. P. 56(a). A genuine issue of material fact exists
    “if the evidence is such that a reasonable jury could return a verdict for the
    nonmoving party.” Anderson v. Liberty Lobby, Inc., 
    477 U.S. 242
    , 248 (1986).
    1
    There is one exception. The crew of each ship successfully pressed claims for unpaid
    contributions to the crews’ IRAs and vacation plans. Under the applicable law, these were the
    only claims with statutory superiority to the United States’ claim.
    4
    Nos. 12-40246 & 12-40248
    However, a party asserting “that a fact cannot be or is genuinely disputed” must
    support such an assertion by citing specific parts of the record. Fed. R. Civ. P.
    56(c)(1).
    III
    Appellants claim on appeal that their lien for fuel supplied to AHL should
    take precedence over the United States’ preferred mortgage lien based on the
    principles of laches or equitable subordination. Appellants so claim because
    MARAD purportedly knew about AHL’s financial difficulties before they began
    supplying AHL with fuel.      It is Appellants’ contention that they suffered
    prejudice as a result of MARAD’s conduct. Appellants also seek reversal based
    on the district court’s failure to enforce a local rule when it considered the
    United States’ motion for summary judgment.
    A
    In order to justify equitable subordination of a valid claim, Appellants
    must show that (1) MARAD engaged in inequitable conduct; (2) the misconduct
    injured a creditor or conferred an unfair advantage on MARAD; and (3)
    equitable subordination is not inconsistent with statutory provisions.         See
    Custom Fuel Servs., Inc. v. Lombas Indus., Inc., 
    805 F.2d 561
    , 566 (5th Cir.
    1986). Showing that MARAD is in a position of control over the debtor is
    generally “[t]he prerequisite to a finding of inequitable conduct.” 
    Id. Inequitable conduct exists
    in three categories of cases: (1) “those in which a fiduciary of the
    debtor misuses his position to the disadvantage of other creditors”; (2) “those in
    which a third party, in effect, controls the debtor to the disadvantage of others”;
    and (3) “those in which a third-party defrauds other creditors.” CTS Truss, Inc.
    v. Fed. Deposit. Ins. Co., 
    868 F.2d 146
    , 148–49 (5th Cir. 1989).
    Equitable subordination is not appropriate here because, as the district
    court found, Appellants fail the first prong of the test. Appellants have neither
    alleged nor demonstrated that MARAD was in control of AHL; and Appellants
    5
    Nos. 12-40246 & 12-40248
    do not claim that MARAD defrauded other creditors or that MARAD is a
    fiduciary of AHL. See id.; Custom Fuel 
    Servs., 805 F.3d at 566
    . As a result, it
    cannot be shown that MARAD engaged in inequitable conduct for purposes of
    equitable subordination. Summary judgment was thus appropriate.
    In response, Appellants claim that a showing of control over the debtor is
    irrelevant, though they do not present persuasive precedent on point. As our
    cases makes clear, demonstrating inequitable conduct on the part of a claimant
    requires showing the claimant’s control over the debtor. 
    Id. The point is
    aptly
    illustrated by Custom Fuel Services, 
    805 F.2d 561
    (5th Cir. 1986). In that case,
    this Court encountered the sort of sham transaction against which equitable
    subordination is meant to protect creditors. A ship owner attempted to insulate
    its vessel from maritime liens by transferring title to a wholly owned subsidiary
    and taking a preferred ship mortgage equal to the ship’s value. 
    Id. at 563. When
    the parent company attempted to assert the priority of its mortgage lien
    against other creditors, this Court employed equitable subordination to avoid the
    ship owner’s sham transaction. 
    Id. at 568–69. In
    Custom Fuel Services, the
    Court required a showing of control and found such a showing given that the
    debtor company was a wholly owned subsidiary of the creditor asserting a
    preferred mortgage lien. 
    Id. at 566. Such
    is not the case here. Appellants have
    made no showing that MARAD was in a position of control over AHL. Therefore,
    we affirm on this issue.
    B
    Laches—the claim that another party’s inexcusable delay resulted in
    prejudice—has three elements: (1) delay in asserting a right; (2) the delay was
    inexcusable; and (3) undue prejudice resulted from the delay. Elvis Presley
    Enters., Inc. v. Capece, 
    141 F.3d 188
    , 205 (5th Cir. 1998). Here, Appellants claim
    that laches applies because MARAD did not foreclose on AHL’s vessels at the
    first sign of financial distress. This claim fails for two reasons. First, MARAD
    6
    Nos. 12-40246 & 12-40248
    had no obligation to foreclose on AHL’s ships when AHL first encountered
    financial difficulty. The relevant agreement gave MARAD the option, but not
    the obligation, to foreclose. Second, when MARAD opted to delay foreclosure, it
    did so for justifiable reasons: given the state of the credit market when AHL first
    exhibited signs of distress, it was in creditors’ interest to give AHL an
    opportunity to cure default. The ships’ value as collateral was minimal, and the
    interest rate on AHL’s bonds was far preferable to the alternatives available
    towards the end of 2009. It was also in the interest of the industry overall given
    the number of jobs dependent on AHL’s continued operation. Any delay was
    thus excusable. To the extent Appellants regret their decision to supply the
    ships with fuel after AHL’s default, it was not MARAD’s obligation to ensure
    AHL was creditworthy. Therefore, we affirm on this issue as well.
    C
    Appellants also cursorily claim that the district court’s summary judgment
    order should be reversed because the district court ignored a local rule requiring
    that motions for summary judgment include a statement of issues to be decided
    by the court and a statement of undisputed material facts. We review a district
    court’s application of local rules for an abuse of discretion. Victor F. v. Pasadena
    Indep. Sch. Dist., 
    793 F.2d 633
    , 635 (5th Cir. 1986).
    Here, Appellants have not demonstrated an abuse of discretion. Rather,
    Appellants rely merely on the fact that the district court considered the United
    States’ motion, despite the government’s failure to submit the required
    statements. Nevertheless, the relevant issues were fully briefed and the district
    court issued well-reasoned opinions clearly explaining the facts of this case, the
    relevant standards, and the analysis that led to the court’s decision to grant
    summary judgment. As such, the district court did not abuse its discretion. To
    the extent this local rule is intended to aid the court’s handling of motions, the
    court clearly did not believe the government’s oversight impaired that ability.
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    Nos. 12-40246 & 12-40248
    If the rule is intended to assist opposing parties in responding, Appellants have
    not claimed that their ability to respond on the merits was hampered.
    Therefore, we affirm.
    IV
    For the foregoing reasons, the summary judgment is AFFIRMED.
    8