Milestone Shipping, S.A. v. Estech Trading LLC

811 F. Supp. 2d 915, 2011 A.M.C. 2450, 2011 U.S. Dist. LEXIS 102032, 2011 WL 4344098
Procedural entryThis page is a short order in Milestone Shipping, S.A. v. Estech Trading LLC. Read the opinion of the Court — 764 F. Supp. 2d 632
District Court, S.D. New York·Decided September 8, 2011·No. 11 Civ. 0014(VM)·Published

Opinion

DECISION AND ORDER

VICTOR MARRERO, District Judge.

This action arises out of a maritime dispute between plaintiff Milestone Shipping, S.A. (“Milestone”) and defendants Estech Trading, LLC (“Estech”) and American Energy Services, Inc. (“AES,” and together with Estech, “Defendants”). Milestone alleges breach by Estech of two maritime contracts, a charter party agreement for the shipping of iron ore from Mexico to China (the “Charter Party”) and a related escrow agreement (“Escrow Agreement”).

On January 3, 2011, the Court granted Milestone’s ex parte motion for the issuance of a maritime attachment and garnishment order (“Attachment Order”) with regard to certain funds (the “Attached Funds”) alleged to be held pursuant to the Escrow Agreement and under the control of garnishee Mahoney & Keane, LLP (“M & K”). By Decision and Order dated February 7, 2011, 764 F.Supp.2d 632 (S.D.N.Y.2011), the Court denied a motion filed by AES to vacate the Attachment Order. The Court also found that proposed cross-motions by Milestone and AES for return of the Attached Funds to their respective possession were not ripe for review on the limited record then before the Court. The parties have now completed a significant portion of discovery, 1 and Milestone moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure (“Rule 56”) on its claims relating to its entitlement to the Attached Funds. AES cross-moves for summary judgment on all of Milestone’s causes of action. 2

For the reasons discussed below, the Court DENIES Milestone’s motion and GRANTS AES’s motion in part.

I. BACKGROUND 3

In late 2010, defendant Estech, a recently formed — and possibly now defunct — en *918 tity created by two Ohio businessmen, hoped to become an international broker of iron ore. In order to execute its vision, Estech entered into a variety of contracts. Indeed, it entered into multiple contracts with multiple parties across multiple international borders. There was a contract to buy the iron ore in Mexico and a contract to resell it in China. There was a contract to charter a ship to transport the iron ore (i.e., the Charter Party), and another to provide financial security for the ship owner, plaintiff Milestone, in the event that Estech failed to obtain cargo for the ship (i.e., the Escrow Agreement). There were also three separate agreements for financing, furnished by defendant AES and documented in three separate promissory notes. The first financing contract provided funds for a performance bond required by the Chinese buyer. Another financing contract (executed third in time) was used to cover what appears to have been a last minute demand for additional payment by the Mexican seller. The third financing contract (executed second in time) was envisioned, ultimately, to fund the Escrow Agreement that Milestone required of Es-tech. This last resulted in yet another contract, a trust agreement (“Trust Letter”), between financier AES and the New York law firm designated as escrow agent by the Escrow Agreement (ie., M & KL). And then there was one final contract entered into on December 10, 2010 (the “December 10 Agreement”), whereby Estech’s founders and AES specified terms for repayment of AES’s loans, and agreed that, if the instant iron ore brokering enterprise became profitable, they would all go into the iron ore business together.

It seems that the venture failed spectacularly, a result that may derive from the elaborateness of the business arrangements described above and Estech’s apparent inexperience in the world of iron ore brokering. Not surprisingly, Estech is now nowhere to be found, and has not appeared in this litigation (although its founders did appear for deposition).

The instant dispute between Milestone and AES, concerning which of the entities involved is entitled to receive the $500,000 posted by AES and required under the Escrow Agreement, hinges on the import of four of the agreements described above: the Charter Party and Escrow Agreement, the Trust Letter and the December 10 Agreement. The Court provides a fuller description of the parties and transactions below for context.

A. THE PARTIES

Milestone is a foreign corporation operated by Chaika Agency Co. (“Chaika”), a Ukrainian company, and possessing an office and place of business in Panama. Milestone owns the vessel M/V SANTA BARBARA (“Vessel”), which was chartered by Estech pursuant to the Charter Party.

Estech is an Ohio limited liability company formed in 2010 by Ohio businessmen Jan Michalek (“Michalek”) and Daniel M. Slane (“Slane”). 4 Michalek is the sole member of Estech, which has no other officers, directors or employees. Estech was created to engage initially in a single brokerage transaction (the “Iron Ore Deal”), namely, to purchase iron ore from a Mexican seller, Group Martinez Hipólito *919 S.A. de C.V. (“Hipolito”), and resell it to a Chinese buyer, Tianjan Materials and Equipments (Group) Corporation (“Tianjan”). Esteeh then entered into negotiations with Milestone to arrange for the transport of the iron ore from Mexico to China.

AES is an Ohio corporation formed in 1976 by its current President, Gerald S. Jacobs (“Jacobs”), to invest primarily in oil and gas transactions in Ohio, Pennsylvania, West Virginia and Kentucky. From time to time, however, AES makes loans to a variety of businesses which present opportunities for profit. AES employs only two individuals, General Counsel Thomas Moloney (“Moloney”) and a financial officer/administrator. Jacobs’s wife is AES’s sole shareholder.

B. THE DISPUTED TRANSACTIONS

1. The Tianjan Loan

In November 2010, Esteeh entered into a sales contract with Tianjan to sell iron ore to Tianjan over a twelve-month installment period. The agreement required Es-tech to post a performance bond to Tianjan (“Tianjan Bond”) in the amount of $344,000. On November 19, 2010, Slane approached AES on behalf of Esteeh seeking financing for the Tianjan Bond. AES agreed, and a loan from AES to Esteeh in the amount of $344,190 was subsequently memorialized in a promissory note dated December 6, 2010.

2. Th e Charter Party and Escroto Agreement

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Milestone Shipping, S.A. v. Estech Trading LLC, 811 F. Supp. 2d 915, 2011 A.M.C. 2450, 2011 U.S. Dist. LEXIS 102032, 2011 WL 4344098 (S.D.N.Y. 2011).

811 F. Supp. 2d 915 (Milestone Shipping, S.A. v. Estech Trading LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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