d'Amico Dry d.a.c. v. McInnis Cement, Inc.

UNITED STATES DISTRICT COURT ELECTRONICALLY FILED

DOC #:

SOUTHERN DISTRICT OF NEW YORK

DATE FILED: 06/30/ 2020

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D’AMICO DRY D.A.C., :

:

Plaintiff, : 20-CV-3731(VEC)

:

-against- : MEMORANDUM

: OPINION AND ORDER

MCINNIS CEMENT INC., :

:

Defendant. :

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VALERIE CAPRONI, United States District Judge:

Defendant McInnis Cement Inc. moves pursuant to Supplemental Rule E for Admiralty

or Maritime Claims and Asset Forfeiture Actions to vacate a Rule B order of attachment on its

property in this district. Specifically, it contends that the attachment is improper because

Defendant is subject to personal jurisdiction and service of process in this district or the District

of Connecticut. Because the Court concludes that Plaintiff could not have reasonably served

Defendant with process within either jurisdiction, the motion to vacate is denied.

BACKGROUND

McInnis Cement Inc. is a Canadian entity (“McInnis Canada”) with affiliated entities that

manufacture and ship cement along the eastern seaboard of North America. Ouellet Decl. (Dkt.

21) ¶¶ 5–6. It distributes cement to its customers in the United States with the assistance of its

wholly owned subsidiary, McInnis USA, Inc. (“McInnis USA”), which is a Delaware

corporation headquartered in Connecticut. Id. ¶¶ 6–7. More precisely, McInnis Canada sells

cement to McInnis USA at a port in Canada; the subsidiary then transports the cement to a

terminal in the United States, from which it is distributed to McInnis’s customers. Id. ¶¶ 6,

12(c). Due to that arrangement, McInnis USA is the importer of record for the cement. Id. ¶

12(c).

McInnis USA owns and maintains several shipping terminals in the United States,

including one located in the Bronx. Id. ¶ 12(a)–(b). McInnis Canada financed the construction

of the Bronx terminal, which has been operational since October 2018 and is used for storing and

distributing cement to McInnis’s customers in the New York area. Id. ¶ 10. The American

subsidiary does not own the land on which the terminal sits—the two parcels are instead leased

from the landlord, Oak Point Property LLC. Ouellet Decl., Exs. 3, 4 (Dkts. 21-3, 21-4). McInnis

Canada acts as guarantor for the two Oak Point leases and, among other covenants, promises to

be liable for unpaid rent in the event of the subsidiary’s default. Id. Per the terms of the

guaranties, McInnis Canada submits to the jurisdiction of this Court for any proceeding arising

out of such agreements; service of process is to be effected by mail to McInnis Canada’s

corporate office in Montreal. Id., Ex. 3 ¶ 9; Ex. 4 ¶ 9.

In February 2017, Plaintiff d’Amico Dry d.a.c. (“D’Amico”) entered into a charter party

with McInnis Canada, for the latter to ship cement on a regular basis for approximately four

years from Quebec to Rhode Island or New York. Gross Decl. (Dkt. 4-1) ¶ 4. The agreement

was signed by d’Amico’s CEO and McInnis Canada’s vice president. Id. ¶ 5. Although McInnis

USA did not sign the agreement, it was McInnis USA, through brokers, that negotiated the

charter party with d’Amico’s representatives. Id. Plaintiff does not dispute that McInnis USA

was acting as McInnis Canada’s agent for purposes of the negotiation. Id. After the agreement

was signed, Plaintiff’s communications concerning McInnis Canada’s performance under the

contract were primarily with McInnis Canada. Id. ¶¶ 9–10.

Citing the COVID-19 pandemic, McInnis Canada declared force majeure, informing

d’Amico in April 2020 that it intended to suspend shipments until at least September 2020.

Compl., Ex. 2 (Dkt. 1-2). d’Amico rejected the invocation of force majeure, served an

arbitration demand, Compl., Ex. 3 (Dkt. 1-3), and commenced this action to attach McInnis

Canada’s property in order to satisfy any arbitral award, Compl. (Dkt. 1) ¶ 2.

On May 19, 2020, the Court granted Plaintiff’s motion for an ex parte order of

attachment pursuant to Rule B. Dkt. 9. McInnis Canada moved to vacate the attachment

pursuant to Rule E, and the Court held a hearing on the motion on June 11, 2020. Def. Proposed

Order (Dkt. 12); Hearing Tr. (June 11, 2020).

DISCUSSION

To maintain the Rule B attachment, Plaintiff bears the burden of establishing:

(1) that the plaintiff has a valid prima facie admiralty claim against the defendant;

(2) that the defendant cannot be found within the district;

(3) that the defendant’s property may be found within the district; and

(4) that there is no statutory or maritime law bar to the attachment.

Williamson v. Recovery Ltd. P’ship, 542 F.3d 43, 51 (2d Cir. 2008); see Fed. R. Civ. P., Supp.

Adm. R. E(4)(f) (“[T]he plaintiff shall be required to show why the arrest or attachment should

not be vacated.”). The parties dispute only the second factor: if McInnis Canada may be found

within this district, then the Rule B attachment would be unnecessary and improper. See Dkt. 17.

A defendant is “found” within a given district if (i) it is subject to personal jurisdiction in that

district and (ii) service of process may be effectuated with reasonable diligence within that

district’s geographical boundaries. STX Panocean (UK) Co. v. Glory Wealth Shipping Pte Ltd.,

560 F.3d 127, 130 (2d Cir. 2009).

McInnis Canada is unquestionably subject to specific personal jurisdiction in this district.

The Second Circuit has held that a single shipment of product into New York, combined with

other business activity aimed at the state, such as maintaining a website accessible to New York

consumers, offering products for sale into the state, and facilitating the sale of products into the

state, creates personal jurisdiction in New York. See Chloe v. Queen Bee of Beverly Hills, LLC,

616 F.3d 158, 165–66 (2d Cir. 2010). Here, McInnis Canada entered into a charter party to

deliver multiple loads of cement into New York, and that transaction appears to be part of a

broader pattern of business activity directed at New York, as evidenced by McInnis Canada

financing the construction of a $100 million shipping terminal in the Bronx. See Ouellet Decl. ¶

10. Finally, the Court notes that the charter party contains an arbitration clause providing that

any arbitration would occur in New York, subject to New York law. Compl., Ex. 1 (Dkt. 1-1)

¶ 35. The arbitration clause is, therefore, direct evidence of McInnis Canada’s purposeful

availment of the benefits and protections of the state’s laws. Because the present dispute relates

to McInnis Canada’s contacts with this district, it is fairly subject to specific personal jurisdiction

here.

Nevertheless, the attachment order must stand if Plaintiff could not, with reasonable

diligence, have served Defendant with process within this district at the time the action was

commenced.1 ProShipLine, Inc. v. Aspen Infrastructures, Ltd., 585 F.3d 105, 112 n. 4 (2d Cir.

2009) (“The time for determining whether a defendant is ‘found’ in the district is set at the time

of the filing of the verified complaint that prays for attachment and the affidavit required by Rule

B(1)(b).”). The attaching party prevails on the service prong if it can show that it neither knew

1 Citing Aqua Stoli Shipping Ltd. v. Garden Smith Pty Ltd., 460 F.3d 434, 444–45 (2d Cir. 2006), abrogated

on other grounds by Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir. 2009), Defendant

also argues that the attachment should be vacated if it is present and can be served in an adjacent jurisdiction, even if

the requirements of Rule B are established. Def. Br. (Dkt. 15) at 13–15. Because this alternative argument rises or

falls with the argument that McInnis USA is a general or managing agent of McInnis Canada, it will not be

discussed separately in text.

nor “ought to have known” that the attached party could have been served within the district.2

See Seawind Compania, S. A. v. Crescent Line, Inc., 320 F.2d 580, 582–83 (2d Cir. 1963).

Rule 4(h) allows for service of the complaint and summons on “an officer, a managing or

general agent, or any other agent authorized by appointment or by law to receive service of

process.” Unlike its subsidiary, McInnis Canada has no corporate office or officer in this district,

nor has it registered or designated an agent to receive process in this district. Accordingly, the

parties’ only dispute is whether McInnis USA is qualified to accept service as “a managing or

general agent” of McInnis Canada.3 See Fed. R. Civ. P 4(h).

Under both federal and New York law,4 “[t]he well-established definition of a managing

or general agent is ‘[a] person invested by the corporation with general powers involving the

exercise of judgment and discretion, as distinguished from an ordinary agent . . . , who acts in an

2 See also Andros Compania Maritima, S.A. v. Andre & Cie., S.A., 430 F. Supp. 88, 95 (S.D.N.Y. 1977)

(“[A] defendant may ‘be found within the district’ and hence immune to attachment under Rule B(1) only if ‘(1) in

personam jurisdiction can be obtained therein; and (2) he can, with due diligence, be served with process therein;

and (3) at least where the defendant is a foreign corporation, it does sufficient business within the district to

otherwise subject it to the jurisdiction of the court.’” (quoting 7A Moore, Federal Practice P B.06 at 252 (1976))

(emphasis added)); Far E. Shipping Co. v. Progress Bulk Carriers, Ltd., No. 07-CV-11375, 2008 WL 2035788, at

*1 (S.D.N.Y. Feb. 8, 2008) (“When a plaintiff claims that a defendant cannot be ‘found’ within a district, but an

appropriate inquiry would have revealed otherwise, then vacatur is appropriate.”); Siderbulk, Ltd. v. M/S Nagousena,

No. 92-CV-3923, 1992 WL 183575, at *1 (S.D.N.Y. July 23, 1992) (“[W]e must assess not only whether defendant

had an agent within the district, but whether plaintiff could reasonably have been expected to know the agent’s

identity.”).

3 McInnis USA is undoubtedly subject to service within this district because it has appointed an agent for

service of process and is registered with the New York Secretary of State. Ouellet Decl. ¶¶ 3, 8. The fact that

McInnis USA is a wholly owned subsidiary of McInnis Canada, standing alone, does not enable Plaintiff to effect

service on McInnis Canada by serving McInnis USA. See Sansui Elecs. Corp. v. Am. S. Ins. Co., No. 88-CV-6184,

1992 WL 77591, at *4 (S.D.N.Y. Mar. 26, 1992) (“It is hornbook law that service of process on a subsidiary does

not constitute service on a parent corporation, nor does service on a parent constitute service on the subsidiary.

Except in exceptional circumstances not present here, the law respects separate corporate identities even where one

corporation may wholly own another.” (citation omitted)); see also RCC Ventures, LLC v. Brandtone Holdings Ltd.,

322 F.R.D. 442, 447 (S.D.N.Y. 2017) (“[T]he parent-subsidiary relation alone ordinarily does not establish the

necessary agency for making service on one through the other if the two maintain separate identities.” (quoting 4A

Wright & Miller, Federal Practice and Procedure § 1104 (4th ed.))).

4 “[A] corporation may be served in the same manner allowed by the state in which the district court is

located or service is made—here, New York.” Oyewole v. Ora, 291 F. Supp. 3d 422, 429 (S.D.N.Y. 2018) (citing

Fed. R. Civ. P. 4(e)(1), (h)(1)(A)), aff’d, 776 F. App’x 42 (2d Cir. 2019). Other than the general or managing agent

theory, Defendant does not contend that any other means of service was available to Plaintiff.

inferior capacity and under the direction and control of a superior authority, both in regard to the

extent of his duty and the manner of executing it.” Jiao v. First Int’l Travel, Inc., No. 03-CV-

0165, 2004 WL 1737715, at *4 (S.D.N.Y. Aug. 4, 2004) (quoting Taylor v. Granite State

Provident Ass’n, 136 N.Y. 343, 346 (1893)); see also Grammenos v. Lemos, 457 F.2d 1067,

1073 (2d Cir. 1972) (“A general or managing agent must be invested with powers of discretion

and must exercise judgment in his duties, rather than being under direct superior control as to the

extent of his duty and the manner in which he executes it.”). In other words, a “managing or

general agent” is “one who operates at [the organization’s] highest levels, or . . . has overall

authority to make high-level decisions on the part of the enterprise.” Cooney v. Barry Sch. of

Law, 994 F. Supp. 2d 268, 270 (E.D.N.Y. 2014); see also Kwan v. Schlein, 441 F. Supp. 2d 491,

496 (S.D.N.Y. 2006) (“New York law . . . largely mirror[s] federal law in requiring corporate

service to be made upon an officer, director, agent, or similarly high-ranking corporate

official.”).

McInnis USA does not possess sufficient authority to act on McInnis Canada’s behalf to

qualify as its managing or general agent. While it is true that McInnis USA helped negotiate the

charter party as McInnis Canada’s agent, the record does not show that it had significant

discretion during the negotiation. See Dodco, Inc. v. Am. Bonding Co., 7 F.3d 1387, 1388 (8th

Cir. 1993) (“[W]here a salesman was not vested with discretion in establishing prices, terms, or

conditions of contracts or orders and any contracts entered into or orders taken were subject to

company approval outside the state, the salesman was not a managing agent; and therefore,

service upon that salesman would not be proper service on the foreign corporation he

represents.” (quotation marks and citation omitted)). McInnis Canada signed the agreement

directly, rather than through McInnis USA, which indicates that the parent company supervised

and approved the terms of the transaction, rather than generally empowering the subsidiary to

enter into charter parties on the parent’s behalf.5 Indeed, counsel for McInnis Canada confirmed

at the hearing that the subsidiary “really acts [at] the direction and under the control of the

principal McInnis Cement.” Hearing Tr. (June 11, 2020) at 12.

To be sure, McInnis USA is responsible for significant business activity, including

managing multiple terminals and distributing and selling cement to customers throughout the

United States. Those activities, however, are undertaken in its own name. As revealed in

McInnis Canada’s declaration and at the hearing, McInnis USA purchases cement from McInnis

Canada in Canada; thereafter, the cement is McInnis USA’s property as it is transported to the

United States and sold to the eventual customer. See Ouellet Decl. ¶ 12(c); Hearing Tr. (June 11,

2020) at 8, 12. McInnis USA’s discretion, if any, in managing the shipping terminals (which it

owns) or selling cement purchased from McInnis Canada is irrelevant to its status as a general or

managing agent of McInnis Canada; there is no indication that McInnis USA either manages the

parent’s assets or makes decisions that would bind the parent. Indeed, the record indicates the

opposite. For instance, McInnis USA, not McInnis Canada, is the tenant leasing the land for the

Bronx terminal; although McInnis Canada agreed to guarantee the leases, McInnis Canada is not

party to the leases, does not purport to be bound through agency principles, and does not own the

terminal. See Ouellet Decl. ¶ 12. McInnis USA also purports to operate using its own bank

accounts in which the parent has no interest. Id. Thus, McInnis Canada’s conclusory claim that

5 For this reason, the rule that process may be served on the agent in charge of the business activity giving

rise to personal jurisdiction over the principal does not apply. Cf. Diapulse Corp. of Am. v. Birtcher Corp., 362 F.2d

736, 741 (2d Cir. 1966) (holding that individual was de facto managing agent because he was in “complete charge”

of the entirety of the principal’s business in New York); Bomze v. Nardis Sportswear, 165 F.2d 33, 37 (2d Cir.

1948) (“[W]hatever activities make the corporation ‘present,’ the agent in charge of those activities is the ‘managing

agent’ pro hac vice.”). Here, specific personal jurisdiction is not premised on McInnis USA’s actions on behalf of

McInnis Canada but instead on the parent’s direct assent to the charter party. Additionally, while McInnis USA

facilitates the McInnis entities’ business in the United States, it does not appear to be “in charge” of that business.

“Mcinnis USA acts as a managing and general agent for [McInnis Canada’s] business activities

in the states of Connecticut, Delaware, Maine, Massachusetts, New Jersey and New York” is not

consistent with how the McInnis entities have chosen to do business. See id. ¶ 3.

Nor did Plaintiff know or have reason to know that McInnis USA was a general or

managing agent. As far as the record shows, McInnis Canada never referred to McInnis USA as

its general or managing agent during the negotiation of the charter party, nor does the charter

party describe McInnis USA as a general or managing agent. See generally Compl., Ex. 1 (Dkt.

1-1); cf. Metal Transp. Corp. v. Canadian Transp. Co., 526 F. Supp. 234, 235 (S.D.N.Y. 1981)

(“The plaintiff had dealings with the general manager . . . when he signed the charter party on

behalf of the defendant.”). And, as discussed above, the mere fact that some employees of

McInnis USA may have participated—through a third-party broker—in the negotiation of an

agreement ultimately signed by the parent company does not demonstrate that the subsidiary is

imbued with discretionary authority similar to that of a high-level corporate official. A review of

McInnis Canada’s guarantor agreements with McInnis USA’s landlord also reveals that the

parent company consented to service of process by certified or registered mail to its Canadian

headquarters, not by delivery to McInnis USA; the subsidiary, therefore, does not appear to

accept process on behalf of the parent as a matter of practice. Ouellet Decl., Ex. 3 ¶ 9; Ex. 4 ¶ 9.

Thus, McInnis Canada did not expressly designate McInnis USA as a general or managing agent,

nor were there any circumstances from which such a relationship could have been reasonably

inferred. d’Amico therefore did not know, and could not have reasonably known, that McInnis

USA was McInnis Canada’s general or managing agent and that McInnis Canada could have

been served by serving its subsidiary.6

6 The Court notes that d’Amico exercised reasonable diligence in ascertaining whether McInnis Canada

could be found within this district, and none of the reasonably available information disclosed that McInnis Canada

In sum, McInnis Canada was not amenable to service through McInnis USA and

therefore could not have been founded within this district.’ Because none of the other requisite

Rule B factors is in dispute,’ McInnis Canada’s motion to vacate the order of attachment must be

denied.

CONCLUSION

For the foregoing reasons, Defendant’s motion via order to show cause to vacate the

Court’s order of attachment is DENIED. No later than July 10, 2020, the parties must file a joint

letter explaining whether this case should be closed, and, if not, proposing next steps.

SO ORDERED. .

Date: June 30, 2020 VALERIE CAPRONI

New York, New York United States District Judge

could be found here. See Tisdale Decl. (Dkt. 5) 4] 2—8 (detailing public records search and review of McInnis

USA’s lease).

7 McInnis Canada also contends that it may be found in the District of Connecticut, but that theory also

depends on Plaintiff’s ability to effect service through McInnis USA. See Def. Br. (Dkt. 15) at 15. Defendant’s

argument as to the District of Connecticut therefore fails for the same reason: McInnis USA is not McInnis Canada’s

managing or general agent.

8 In its papers, McInnis Canada contends that one of the assets sought to be attached is a bank account

belonging to McInnis USA, not McInnis Canada. Def. Br. at 15. Having disclaimed any property interest in the

account, Defendant has since acknowledged that any complaint about the attachment of that account should be

raised by McInnis USA, the accountholder, which has yet to appear in this action. See Hearing Tr. (June 11, 2020)

at 23 (defense counsel acknowledging that “McInnis U.S.A. would be the party that would come in to contest” any

attachment of the subsidiary’s bank account). Accordingly, the Court need not decide at this juncture whether any

money in McInnis USA’s account belongs to McInnis Canada (and could therefore be attached) or whether Plaintiff

is justified in attaching the subsidiary’s assets.