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Containership Co. (TCC) A/S v. US Pac. Transp., Inc. (In re Containership Co. (TCC) A/S)

United States Bankruptcy Court for the Southern District of New York

April 28, 2016, Decided

Chapter 15, Case No. 11-12622-JLG, Adv. Proc. No. 11-02441-JLG, Adv. Proc. No. 11-02444-JLG, Adv. Proc. No. 11-02446-JLG, Adv. Proc. No. 11-02447-JLG, Adv. Proc. No. 11-02448-JLG, Adv. Proc. No. 11-02450-JLG, Adv. Proc. No. 11-02451-JLG, Adv. Proc. No. 11-02452-JLG, Adv. Proc. No. 11-02453-JLG, Adv. Proc. No. 11-02457-JLG, Adv. Proc. No. 11-02459-JLG, Adv. Proc. No. 11-02461-JLG, Adv. Proc. No. 11-02462-JLG, Adv. Proc. No. 11-02463-JLG, Adv. Proc. No. 11-02464-JLG, Adv. Proc. No. 11-02465-JLG, Adv. Proc. No. 11-02466-JLG, Adv. Proc. No. 11-02467-JLG, Adv. Proc. No. 11-02468-JLG, Adv. Proc. No. 11-02469-JLG, Adv. Proc. No. 11-02472-JLG, Adv. Proc. No. 11-02473-JLG, Adv. Proc. No. 11-02475-JLG, Adv. Proc. No. 11-02477-JLG, Adv. Proc. No. 11-02478-JLG, Adv. Proc. No. 11-02517-JLG, Adv. Proc. No. 11-02522-JLG

Opinion

FINDINGS OF FACT AND CONCLUSIONS OF LAW FOR REPORT AND RECOMMENDATION ON OMNIBUS CROSS MOTIONS FOR SUMMARY JUDGMENT

JAMES L. GARRITY, JR.

UNITED STATES BANKRUPTCY JUDGE:

Introduction

Prior to commencing its insolvency proceedings in Denmark, The Containership Company (TCC), A/S (the "Plaintiff" or "TCC") operated a trans-Pacific maritime cargo carrying service. Each of the defendants in these adversary proceedings (the "Defendants") entered into a Service Contract (defined below) with TCC in order to ship goods on TCC's vessels between ports in the United States and China. Among [*3]  other things, each of the Service Contracts specified a "minimum quantity commitment" ("MQC"), or the minimum amount of goods that each Defendant committed to shipping on the Plaintiff's vessels — at reduced rates — during the term of the Service Contracts. In April 2011, TCC cancelled the remaining four voyages under the Service Contracts. At that time, a number of shippers had not satisfied the MQC under their respective contracts. The Plaintiff filed these adversary proceedings against the shippers that failed to meet the MQCs under their Service Contracts, contending that those shippers should be held liable to TCC for liquidated damages for failing to ship the required amount of goods. The Defendants deny liability and in response, have raised a number of defenses, including claims that they were fraudulently induced to enter into the Service Contracts; that the contracts are void and unenforceable for lack of consideration; and that their performance under the contracts was excused by the existence of force majeure conditions, TCC's own breaches of the Service Contracts, and TCC's voluntary cessation of its trans-Pacific shipping service before the end of the Service Contracts' [*4]  term.

Before the Court are omnibus cross motions for summary judgment applicable to each of the above-captioned adversary proceedings. For the reasons set forth below, the Court recommends that the District Court find that the Service Contracts are not void for lack of consideration, that the Defendants' performance was not excused by the force majeure provisions of the contracts, and that the filing of these adversary proceedings by TCC did not constitute a violation of the implied covenant of good faith and fair dealing under the contracts. The Court further recommends that the District Court find that genuine issues of material fact preclude summary judgment on the Defendants' claims that TCC fraudulently induced the Defendants to enter into the Service Contracts or that TCC materially breached the contracts in the conduct of its shipping service. However, the Court agrees with the Defendants that, under the plain language of the Service Contracts, TCC's voluntary termination of its trans-Pacific service in April 2011 relieved the Defendants of their remaining MQC obligations. Accordingly, for that reason, the Court recommends that the Defendants' omnibus motion for summary judgment [*5]  in each of these adversary proceedings be GRANTED. Correspondingly, the Court recommends that the Plaintiff's omnibus motion for summary judgment be DENIED.1

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2016 Bankr. LEXIS 1916 *

In re: THE CONTAINERSHIP COMPANY (TCC) A/S, Debtor in a Foreign Proceeding.THE CONTAINERSHIP COMPANY (TCC) A/S, acting by and through Jørgen Hauschildt, solely in his capacity as Foreign Representative thereof, Plaintiff, v. US PACIFIC TRANSPORT, INC. (CASA), Defendant. THE CONTAINERSHIP COMPANY (TCC) A/S, acting by and through Jørgen Hauschildt, solely in his capacity as Foreign Representative thereof, Plaintiff, v. O.E.C. SHIPPING LOS ANGELES, INC., Defendant. THE CONTAINERSHIP COMPANY (TCC) A/S, acting by and through Jørgen Hauschildt, solely in his capacity as Foreign Representative thereof, Plaintiff, v. TRANSLINK SHIPPING, INC., Defendant .THE CONTAINERSHIP COMPANY (TCC) A/S, acting by and through Jørgen Hauschildt, solely in his capacity as Foreign Representative thereof, Plaintiff, v. APEX MARITIME, CO., INC., Defendant. THE CONTAINERSHIP COMPANY (TCC) A/S, acting by and through Jørgen Hauschildt, solely in his capacity as Foreign Representative thereof, Plaintiff, v. ARGOS FREIGHT, INC., d/b/a Agility Fragility, Inc., Defendant. THE CONTAINERSHIP COMPANY (TCC) A/S, acting by and through Jørgen Hauschildt, solely in his capacity as Foreign Representative thereof, Plaintiff, v. TOPOCEAN, Defendant. THE CONTAINERSHIP COMPANY (TCC) A/S, acting by and through Jørgen Hauschildt, solely in his capacity as Foreign Representative thereof, Plaintiff, v. PUDONG TRANS USA, INC., Defendant. THE CONTAINERSHIP COMPANY (TCC) A/S, acting by and through Jørgen Hauschildt, solely in his capacity as Foreign Representative thereof, Plaintiff, v. U.S. UNITED LOGISTICS (NINGBO) INC., Defendant. THE CONTAINERSHIP COMPANY (TCC) A/S, acting by and through Jørgen Hauschildt, solely in his capacity as Foreign Representative thereof, Plaintiff, v. UNIVERSAL SHIPPING, INC. (USI), Defendant .

Notice: NOT FOR PUBLICATION

Subsequent History: Adopted by, Summary judgment granted by, Findings of fact/conclusions of law at, Objection overruled by, Dismissed by The Containership Co. TCC A/S v. U.S. Pac. Transp., Inc. (In re The Containership Co. TCC A/S), 2019 Bankr. LEXIS 3011, 2019 WL 4439529 (Bankr. S.D.N.Y., Sept. 17, 2019)

Prior History: In re Containership Co. (TCC) A/S, 466 B.R. 219, 2012 Bankr. LEXIS 444 (Bankr. S.D.N.Y., Feb. 10, 2012)

CORE TERMS

shippers, ship, termination, majeure, cargo, Omnibus, trans-Pacific, Carrier, maritime, recommends, covenant, vessels, voyages, restructuring, quantity, destination, cancelled, notice, contractual, liquidated, port, discontinu[ed, customers, quotation, evenly, volume, fraudulently, cessation, shortfall, transport

Bankruptcy Law, Procedural Matters, Jurisdiction, Federal District Courts, Core Proceedings, Noncore Proceedings, Admiralty & Maritime Law, Maritime Contracts, Types of Contracts, Affreightment, Civil Procedure, Judgments, Summary Judgment, Entitlement as Matter of Law, Entitlement as Matter of Law, Genuine Disputes, Materiality of Facts, Evidentiary Considerations, Burdens of Proof, Movant Persuasion & Proof, Motions for Summary Judgment, Cross Motions, Maritime Contracts, Federal & State Interrelationships, Federal Common Law, Applicability, Business & Corporate Compliance, Breach, Breach of Contract Actions, Elements of Contract Claims, Contracts Law, Contract Interpretation, Contract Formation, Contracts Law, Contract Formation, Contract Conditions & Provisions, Contract Conditions & Provisions, Standards of Performance, Impossibility of Performance, Contract Interpretation, Good Faith & Fair Dealing, Torts, Fraud & Misrepresentation, Actual Fraud, Elements, Nondisclosure, Material Breach