Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_13-cv-01833/USCOURTS-caed-2_13-cv-01833-0/pdf.json

Parties Involved:
Schilling Robotics, LLC
Counter Claimant
Subsea Robotics, LP
Plaintiff

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

SUBSEA ROBOTICS, LP,

Plaintiff,

v.

SCHILLING ROBOTICS, LLC,

Defendant.

No. 2:13-cv-01833-MCE-EFB

MEMORANDUM AND ORDER

Plaintiff Subsea Robotics, LP (“Subsea”), a New Zealand limited partnership,

brought this action in state court petitioning for the court to compel Defendant Schilling 

Robotics, LLC (“Schilling”), to arbitrate a contract dispute. Subsea also applied for 

certain prejudgment remedies including a writ of attachment against Schilling’s assets. 

Thereafter, Defendant Schilling removed the action to this Court on the basis of this 

Court’s diversity jurisdiction pursuant to 28 U.S.C. § 1441. ECF No. 1. Presently before 

the Court are the parties’ cross-motions for Prejudgment Writs of Attachment. ECF Nos. 

12, 17. For the reasons set forth below, the Court DENIES both motions.1

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 1 Finding that oral argument would not be of material assistance, the Court previously ordered this 

matter submitted on the briefs. E.D. Cal. L.R. 230(g).

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BACKGROUND

Subsea is a provider of underwater robotic services, Decl. Wander Luiz Ferreira 

del Almedia (“Decl. Ferreira”) ¶¶ 1–3, ECF No. 13-9, and Schilling is a manufacturer of 

underwater robotic machines, also known as remotely operated vehicles (“ROVs”), Decl. 

Paul Whalen ¶¶ 1–4, ECF No. 18. In 2011, Subsea bid on a contract involving a 

subcontractor of Petrobras (a Brazilian semi-public multinational energy corporation), 

and later on a contract with Petrobras directly. See Decl. Matthew T. Peters, Ex. C, at 

4:19–5:5, ECF No. 8-3. If either bid materialized into an agreement, Subsea would have 

provided either Petrobras or its subcontractor deep-sea robotic services. Id. Because 

Subsea was not itself an ROV manufacturer, it entered into an agreement with Schilling 

in which Schilling agreed to manufacture two heavy-duty ROVs and two 9.5 ton launch 

and recovery systems (“LARS”) (to deploy and retrieve the ROVS), for a total price of 

$7,884,421. Id. at 5:5–6:15.

Ultimately Subsea lost out on its bids for agreements involving Petrobras. Id. at

6:18–21. After Subsea had paid Schilling nearly seven million dollars but before Subsea 

received the two ROVs, Schilling became concerned about Subsea’s solvency and its

ability to pay the remaining balance. See Decl. Whalen ¶ 16, ECF No. 18. Schilling

demanded immediate payment or else it would deem the contract terminated because of 

Subsea’s insolvency. Decl. Jeffrey D. Palmer, Ex. A, ECF No. 6-2. On September 5, 

2013, Schilling notified Subsea that it was terminating the agreement. Id., Ex. B, ECF

No. 6-2.

Subsea filed a petition to compel arbitration in state court under the terms of the 

ROV agreement, and Schilling removed. ECF No. 1.

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STANDARD

Federal Rule of Civil Procedure 64 codifies the “long-settled federal law providing 

that in all cases in federal court, whether or not removed from state court, state law is 

incorporated to determine the availability of prejudgment remedies for the seizure of 

person or property to secure satisfaction of the judgment ultimately entered.” Granny 

Goose Foods, Inc. v. Bhd. of Teamsters & Auto Truck Drivers Local No. 70 of Alameda 

Cnty., 415 U.S. 423, 436 n.10 (1974).

Under California law, “[a]ttachment is an ancillary or provisional remedy to aid in 

the collection of a money demand by seizure of property in advance of trial and 

judgment.” Kemp Bros. Constr., Inc. v. Titan Elec. Corp., 146 Cal.App.4th 1474, 1476 

(2007) (citations and internal quotation marks omitted). “Attachment is a harsh remedy 

because it causes the defendant to lose control of his property before the plaintiff's claim 

is adjudicated.” Martin v. Aboyan, 148 Cal. App. 3d 826, 831 (1983). “Since California’s 

attachment law is purely statutory, it must be strictly construed.” VFS Fin., Inc. v. CHF 

Express, LLC, 620 F. Supp. 2d 1092, 1095 (C.D. Cal. 2009). Moreover, “[t]he moving 

party has the burden of establishing grounds for an attachment order.” Id.

ANALYSIS

Both parties move for prejudgment attachment of the other’s assets in this case in 

which Plaintiff seeks an order compelling Defendant to arbitrate a contract dispute. In 

the arbitration context in addition to the usual requirements for provisional remedies, the 

petitioner must also show the arbitration “award to which the [petitioner] may be entitled 

may be rendered ineffectual without provisional relief,” such as a prejudgment writ of 

attachment. Cal. Civ. Proc. Code § 12981.8(b).

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California courts have held that the ineffectual-relief requirement is “‘similar to irreparable 

harm’” as these terms are used in the injunction context. Cal. Retail Portfolio Fund 

GmbH & Co. KG v. Hopkins Real Estate Grp. (California Retail), 193 Cal. App. 4th 849, 

857 (2011) (quoting Sen. Com. on Judiciary, Analysis of Sen. Bill No. 1394 (1989–1990 

Reg. Sess.) May 16, 1989, p. 2). Accordingly, the ineffectual-relief requirement may be 

met if the petitioner shows there is a danger the respondent is insolvent. Id. at 859. 

Insolvency can be shown if the writ applicant can prove by a preponderance of the 

evidence that the respondent “is unable to meet [its] obligations as they mature in the 

ordinary course of business.” Id. at 859-60.

Unequivocal statements from a company’s manager that the company is unable 

to meet current obligations can support a finding that the business is insolvent, and meet 

the “ineffectual relief” requirement, to warrant a prejudgment writ of attachment. In 

California Retail, the trial court granted the petitioner’s application for writ of attachment 

in connection with an arbitration proceeding, and the California Court of Appeal for the 

Second District affirmed. Id. at 852. In its application for writ of attachment, the 

petitioner argued an arbitration award “may be rendered ineffectual without provisional 

relief” because the respondent was insolvent as evinced by a print-out of an email from 

the respondent’s chief financial officer that the petitioner attached to its application. Id.

at 854. In that email, the respondent company’s manager stated unequivocally that “he 

wanted to speak . . . about ‘some concerns I have regarding [the respondent company’s] 

overall liquidity, and other matters,’” and expressed his concerns about respondent’s 

ability to meet current obligations. Id. On appeal, the court found these statements 

constituted “compelling evidence that the [respondent company] was running out of 

money and, if it was not already there, would soon be unable to pay its debts,” even 

though it “had never declared bankruptcy.” Id. at 860. The Court of Appeal therefore

affirmed the trial court’s issuance of the writ of attachment. Id. at 863.

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Here, neither party has produced sufficient competent evidence, let alone the 

“compelling evidence” that existed in California Retail, that an arbitration award “may be 

rendered ineffectual without” a writ of attachment. Cal. Civ. Proc. Code § 12981.8(b). 

First, Subsea has offered neither argument nor evidence that it will suffer irreparable 

injury without a writ of attachment, and irreparable injury is an essential element under 

California law to issue a writ of attachment in the arbitration context. California Retail, 

193 Cal. App. 4th at 860-63. Accordingly, Subsea has not met its burden and its motion 

for a writ of attachment is therefore denied. 

Second, even though Schilling supports its application for a writ of attachment 

with argument and evidence of irreparable injury, this evidence does not meet Schilling’s 

burden to establish grounds for an attachment order. See VFS Fin., Inc., LLC, 620 F. 

Supp. 2d at 1095. Unlike California Retail, Schilling has not offered an unequivocal 

statement from a Subsea manager that amounts to “compelling evidence that [Subsea] 

was running out of money and, if it was not already there, would soon be unable to pay 

its debts.” 193 Cal. App. 4th at 860. Schilling’s evidence of Subsea’s insolvency 

includes a declaration from Paul Whalen, Schilling’s Vice President, in which he 

declares: “Subsea advised Schilling that Subsea was laying off staff because of delays 

in finalizing [an underwater services] contract,” Decl. Paul Whalen ¶ 16, ECF No. 18, and 

that two employees of Subsea—Wander Almedia and Jose Duarte, Jr.—told Whalen 

that the “assets of Subsea/RRC would be sold and that Wander and Jose would no 

longer work for Subsea/RRC as of June 30, 2013.” Id. ¶ 17. Subsea objects to this 

evidence as speculation and hearsay. ECF No. 25. Further, Schilling attached to its writ 

application a few grainy photographs and asserts these photographs evince that 

Subsea’s offices in Macae, Brazil have been closed and are listed for sale. Decl. 

Whalen, Ex. F., ECF No. 18-2, at 26–29.

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Even assuming Schilling’s proffered evidence of Subsea’s alleged insolvency is 

admissible,2 at most, Schillings submission amounts to some evidence that Subsea may 

have been insolvent—insufficient for Schilling to meet its burden. Moreover, Subsea 

submits declarations contradicting Schilling’s evidence and tending to establish that 

Subsea is in fact solvent. 

Specifically, Wander Luiz Ferreira de Almedia, Subsea’s Director, contradicts 

Whalen’s declaration: 

Mr. Wahlen’s statement is inaccurate. When I spoke to Mr. 

Whalen in May of this year, I advised him that Mr. Duarte and 

I would no longer be serving as officers of Subsea. I, 

however, still remain a member of [Subsea’s] Board of 

Directors. Additionally Mr. Duarte and I are both 

shareholders . . . . Schilling’s claims about the risk of 

insolvency are inaccurate and unfounded. [Subsea] remains 

fully operational, as it always has.

Decl. Wander Luiz Ferriera de Almedia ¶¶ 1, 7–8, ECF No. 24. Director Ferreira goes 

on to detail Subsea’s assets and avers “there is no basis for believing that Subsea . . . 

will become or has become insolvent.” Id. ¶ 8. Further, regarding Schilling’s 

photographs purportedly evincing that Subsea has “closed its doors,” Ferreira declares 

Subsea has indeed closed one of its operational bases in Brazil because it “had no 

further need for that particular location”; however, he explains, the “listing for sale of this 

location does not demonstrate that [Subsea] is ceasing operation.” Id. ¶ 9.

In light of the lack of compelling evidence of Subsea’s insolvency, considered 

together with Subsea’s proffered evidence which tends to show Subsea remains solvent, 

the Court finds that Schilling’s evidence is insufficient to meet its burden to show an 

arbitration award would “be rendered ineffectual” unless the Court issues a prejudgment 

writ of attachment. Cal. Civ. Proc. Code § 12981.8(b). Accordingly, Schilling’s motion 

for a writ of attachment is denied.

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 2 “[I]n light of the . . . resolution of” Schilling’s motion for writ of attachment below, Subsea’s

evidentiary objections “need not and will not [be] address[ed].” Gibson v. Cnty. of Riverside, 181 F. Supp. 

2d 1057, 1080 n.20 (C.D. Cal. 2002).

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CONCLUSION

Therefore, IT IS HEREBY ORDERED that the parties’ cross-motions for 

Prejudgment Writs of Attachment (ECF Nos. 12, 17) are DENIED.

IT IS SO ORDERED.

Dated: December 6, 2013

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