Sea Trade Maritime Corp., Peters v. Coutsodontis

• Court: Court of Appeals for the Second Circuit
• Decided: August 7, 2018
• Docket: 16-3291(L)
• Status: Unpublished

Opinion

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.

- - - - - - - - - - - - - - - - - - - - - -X 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,

1 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

2 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

3 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

4 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

5 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

6 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

7 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.”

8 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

9 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

12 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

13 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