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1 UNITED STATES DISTRICT COURT

1 SOUTHERN DISTRICT OF NEW YORK

2 x

2

3 WILHELMSEN PREMIER MARINE

3 FUELS AS,

4

4 Plaintiff,

5

5 v. 07 CV 5798 (CM)

6

6 UBS PROVEDORES PTY LTD. AND

7 RAE CORP. INTERNATIONAL PTY

7 LTD.,

8

8 Defendants.

9

9 x

10 New York, N.Y.

10 September 7, 2007

11 11:27 a.m.

11

12 Before:

12

13 HON. COLLEEN MCMAHON,

13

14 District Judge

14

15 APPEARANCES

15

16 HOLLAND & KNIGHT

16 Attorney for Plaintiff

17 BY: MICHAEL J. FREVOLA

17

18 BETANCOURT, VAN HEMMEN, GRECO & KENYON

18 Attorney for Defendants

19 BY: JEANNE-MARIE D. VAN HEMMEN

19

20

21

22

23

24

25

SOUTHERN DISTRICT REPORTERS, P.C.

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1 (case called)

2 THE DEPUTY CLERK: Your appearances please.

3 MR. FREVOLA: Michael Frevola, Holland & Knight, for

4 the plaintiff.

5 THE COURT: Good morning, Mr. Frevola.

6 MS. VAN HEMMEN: Jeanne-Marie van Hemmen from the firm

7 of Betancourt, van Hemmen, Greco & Kenyon for defendants UBS

8 and Rae Corp.

9 THE COURT: I don't have any defendant except UBS on

10 this caption.

11 MS. VAN HEMMEN: Yesterday, your Honor, I was only

12 counsel for UBS. And then I learned that there had been an

13 amended complaint filed by plaintiffs that added in Rae Corp.

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14 Late last night I was appointed by Rae Corp. as well.

15 MR. FREVOLA: I don't have a copy of it but actually I

16 believe you may have signed it while you were away.

17 THE COURT: Somebody else signed it while I was away.

18 I see there's an order with a Rae Corp. listed as a defendant.

19 There is an amended complaint. Okay.

20 MS. VAN HEMMEN: Your Honor, may I proceed?

21 THE COURT: Can I talk to plaintiff's counsel first.

22 I read the original complaint, what is Rae Corp. and why has

23 it been added in?

24 MR. FREVOLA: Your Honor, it's a member of the same

25 corporate family. And while originally we didn't include it,

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1 after a few weeks of seeing other indicia, we have common

2 address, common telephone numbers, advertisements which refer

3 to their terms and conditions. And they say please see Rae

4 Corp.'s and then in parentheses UBS, USS's terms and

5 conditions. Emails from Mr. Rae come -- for dealing with UBS

6 matters, come from Bill Rae at raecorpinternational.com.

7 in other words, this Rae Corp. entity was set up on

8 March 22 of this year, your Honor, while this dispute was

9 unfolding. And with all these similarities, it would appear

10 that there's an alter ego issue here playing out.

11 In part, we think that may have been borne out also by

12 something that happened the last week, which I believe my --

13 defendants' counsel is going to mention, we actually

14 intercepted what we believe is a retainer payment being made to

15 defense counsel the other day in the amount of about ten

16 thousand d9llars, just short of ten thousand dollars. And it

17 was a retainer payment being made by Rae Corp. to counsel.

18 And so those facts we think at least support the alter

19 ego allegations that we have made in the complaint. That's why

20 we amended as opposed to doing it at first.

21 THE COURT: okay. Thank you.

22 Ms. Van Hemmen.

23 MS. VAN HEMMEN: Your Honor, as I said I am counsel

24 for UBS and Rae Corp. as of late last night, and I want t9 make

25 clear, starting out here, that my appearance is for the limited

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1 purpose of objecting to this court's jurisdiction over this

2 matter. It is purely --

3 THE COURT: I object to it too, but I'm stuck with

4 this odd maritime jurisprudence.

5 MS. VAN HEMMEN: I understand that that's the

6 allegation made. It's our position that there's not maritime

7 jurisdiction over the underlying dispute or over the alter ego

8 claims that were brought against Rae C9rp.

9 I just want to make it clear in the record I am aware,

10 as of a telephone conversation I had yesterday with

11 Mr. Frevola, that there was also a scheduling conference in

12 this matter scheduled today. And I --

13 THE COURT: That is the conference that's scheduled

14 today. This is the Rule 16 conference in this case.

15 MS. VAN HEMMEN: Pardon me?

16 THE COURT: This is the Rule 16 conference in this

17 case.

18 MS. VAN HEMMEN: And I understand that. And I learned

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19 that this conferences was going forward last night at the same

20 time that I learned other facts that I'm going to explain to

21 you compelled me to get to the court as soon as possible. So

22 it made sense, rather than to adjourn the conference because

23 there had been no appearance, to use this opportunity to

24 appear. But again, I want to make it clear, not pursuant to

25 that court's order, our position is the court does not have

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1 jurisdiction over the dispute.

2 THE COURT: Got it. You're making that special

3 appearance, so specially appear.

4 MS. VAN HEMMEN: In this case, I represent the

5 supplier of fuel oil to a number of U.S. Navy affiliated

6 vessels pursuant to a requirements contract.

7 THE COURT: who is that?

8 MS. VAN HEMMEN: That's UBS.

9 THE COURT: is a supplier of fuel to the U.S. Navy

10 pursuant to various contracts.

11 MS. VAN HEMMEN: wilhhelmsen entered into contracts

12 with UBS in -- from UBS's perspectiye, in an effort to comply

13 with its obligations under the requirement contract to supply

14 the Navy.

15 THE COURT: I've missed a step. Okay. UBS supplies

16 fuels to the Navy pursuant to various requirements contracts.

17 MS. VAN HEMMEN: Pursuant to one requirements

18 contract, UBS has been providing fuel oil to Navy ships.

19 THE COURT: Forgive me because I don't know a lot

20 about naval fuel contracts. It's a requirements contract in

21 what sense?

22 MS. VAN HEMMEN: in that it was understood that over a

23 particular period of time UBS would provide bunker fuels to a

24 number of vessels at a number of ports, all of which remains to

25 be determined into the future so that they weren't, each one

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1 specifically delineated in a contract in and of themselves.

2 THE COURT: So it wasn't the contract for a specific

3 amount of fuel to a specific vessel, it was a contract for

4 fuel to be supplied from time to time as required.

5 MS. VAN HEMMEN: Correct.

6 THE COURT: Okay.

7 MS. VAN HEMMEN: UBS, in order to fulfill its

8 obligations under the requirements contract went out into the

9 market to find the bunker fuel. That's where its relationship

10 with wilhhelmsen arose.

11 Wilhelmsen is a trader of bunker fuels. That, your

12 Honor, is a very different function than a supplier of bunker

13 fuels.

14 UBS is supplying fuels to ships. Wilhelmsen is

15 trading bunker fuels as a commodity. They are people at desks

16 with cell phones, with a knowledge of the market around the

17 world, without an infrastructure to bring about the physical

18 supply of fuel oil.

19 However, with that knowledge, they are in a position

20 to purchase fuel around the world and simultaneously sell it to

21 people who are contractually obligated to supply ships. That

22 is the service that Wilhelmsen offered to UBS under a series of

23 bunker-related transactions that are at the heart of this

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24 dispute.

25 It's our position, your Honor, that that is not a

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1 maritime contract. Instead, that is what's known in the

2 industry or known in maritime law as a preliminary contract.

3 Maritime law does not extend to preliminary contracts.

4 Back 19 the facts of this case, a whole number of

5 specific provisions of fuel, wilhelmsen went to the various

6 ports, f9und physical suppliers, and in a simultaneous

7 transaction bought the fuel from the physical supplier, sold

8 the fuel to UBS. UBS thereafter arranged with the physical

9 supplier for the physical supplier to deliver the fuel to the

10 vessels.

11 That physical supplier in these cases is Sumitomo

12 Corporation.

13 THE COURT: So when you say wilhelmsen went to P9rts,

14 you mean Wilhelmsen placed a telephone call from its trading

15 floor --

16 MS. VAN HEMMEN: Precisely.

17 THE COURT: --i n New York or where --

18 MS. VAN HEMMEN: In Scandinavia; Norway, I believe.

19 THE COURT: So, it bought fuel to supply to UBS,

20 sold -- immediately resold the fuel to UBS, and wilhelmsen did

21 not make arrangements for the carrier to the fuel but UBS made

22 arrangements.

23 MS. VAN HEMMEN: UBS and Sumitomo would then be put in

24 touch with each other and the U.S. Navy, and a three-way

25 exchange of information that resulted in a barge being brought

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1 alongside the Navy ship and the provision of bunkers on the

2 specific instances occurred.

3 THE COURT: what's a bunker?

4 MS. VAN HEMMEN: I'm sorry. A bunker is a word used

5 interchangeably for marine fuel oil.

6 MR. FREVOLA: In the context, your Honor, of it being

7 consumed by the vessel as opposed to it being carried as cargo.

8 Bunkers are the ones that are in the fuel tank.

9 THE COURT: So, on the Exxon valdez, the bunkers are

10 the fuel in the fuel tank. And the stuff that spilled all over

11 the place that was being carried was cargo.

12 MR. FREVOLA: The term bunkers refers back to, back

13 when they had coal as a mode of propulsion, and the coal

14 bunkers.

15 THE COURT: Thank you. I'm learning this maritime

16 stuff much more quickly than I thought I would have to, but I

17 am starting to learn, and it does have its own interesting

18 1i ngo.

19 MS. VAN HEMMEN: In this specific case, your Honor,

20 when wilhelmsen quoted a price to UBS for the bunkers that it

21 was going to sell to trade to it, it included in that price a

22 barge carrying cost, a charge, an upcharge, supposedly equal to

23 the cost of a barge carrying the cargo -- the bunkers, excuse

24 me, alongside the ship, wherever it was going to be delivered.

25 When Wilhelmsen sent its invoices to UBS and

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1 thereafter UBS invoiced the U.S. Navy in order to recover the

2 charge and its profit, the U.S. Navy rejected the invoices

3 because it found that the bunker charge that was built into the

4 cost of the bunker fuel was inadequately supported by support

5 documentation.

6 UBS has gone back to wilhelmsen and has requested

7 supplemental documentation, wilhelmsen has been unable to

8 provide it. And to date, the U.S. Navy is refusing to pay

9 those invoices to wilhelmsen -- excuse me to UBS. UBS,

10 therefore, doesn't have the money to pay Wilhelmsen's invoices,

11 and that's the dispute.

12 Again, as I mentioned earlier, it's our view that the

13 underlying contract is a preliminary services contract.

14 THE COURT: Fine. How fast can you brief it?

15 MS. VAN HEMMEN: well, if you will allow me, the plot

16 thickens. And there's a number of other issues that I need to

17 address first. And I do think it will make this whole process

18 quicker if I give you the whole context, if we can go into

19 that.

20 THE COURT: okay.

21 MS. VAN HEMMEN: in addition, all of the attachments

22 that have occurred against UBS were the attachments of

23 electronic fund transfers. I'm not sure if the court is versed

24 on this issue --

25 THE COURT: Unfortunately, I'm versed on this issue.

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1 Believe me, if I had been deciding the case, it would have come

2 out the other way.

3 MS. VAN HEMMEN: In our review, your Honor, there is a

4 good faith basis for a split, given the Aqua Stoli decision.

5 THE COURT: There is no split. Electronic fund

6 transfers in this circuit are attachable under Winter Storm,

7 and Aqua Stoli does not change that. And I read an opinion

8 into the record two days ago on this.

9 if you can bring yourself within one of the three Aqua

10 Stoli exceptions, I'm happy to vacate the attachment;

11 otherwise, the answer is no. So don't bother going down that

12 road.

13 MS. VAN HEMMEN: A third issue, we believe there is no

14 maritime contract, which is a requirement for the vacation.

15 THE COURT: Correct. So I want to know how fast we

16 can decide that.

17 MS. VAN HEMMEN: A third issue, your Honor, is

18 arbitration.

19 As the complaint is drafted, it has sought these

20 attachments in furtherance of an arbitration in London, it

21 alleges that there was a contractual undertaking to arbitrate.

22 in fact, the arbitration provision that's referred to by

23 wilhelmsen is an arbitration provision in Sumitomo's terms and

24 conditions which is the contract that governs the sale between

25 wilhelmsen and Sumitomo.

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1 So there isn't an arbitration provision between -- in

2 the contract between Wilhelmsen and UBS and that part of the --

3 that part of the remedy sought by Wilhelmsen just falls apart.

4 NO arbitration has been started. There is not a

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5 contractual obligation to arbitrate. So seizing funds here for

6 an arbitration that there is no obligation to undertake is

7 Draconian.

8 THE COURT: And has not been undertaken yet.

9 MS. VAN HEMMEN: And has not been undertaken yet.

10 THE COURT: unlike all of the other cases that I've

11 had where there's been a pending arbitration.

12 MS. VAN HEMMEN: That's right, your Honor.

13 Another issue is countersecurity. one of the

14 provisions of bunkers involved contaminated fuel that was

15 subsequently offloaded off the Navy vessel to great expense to

16 UBS. The value of that claim is about six hundred thousand.

17 UBS wants countersecurity for its claim which it's entitled to

18 under supplemental Rule F. However, we make this request

19 without prejudice to our primary position --

20 THE COURT: well, let's get your primary position

21 resolved. Then we can worry about your request under maritime

22 law for countersecurity.

23 MS. VAN HEMMEN: I'm wrapping up but I do have to

24 explain further what's going on here.

25 Yesterday I learned -- I had an intention as of

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1 yesterday, your Honor, to bring all of these issues that I've

2 just outlined to you before the court in the form of an order

3 to show cause where it would be fully briefed and you'd be in a

4 better position to rule on it.

5 THE COURT: After I got a response.

6 MS. VAN HEMMEN: Well maybe not.

7 THE COURT: No. After I got a response.

8 I never rule on ultimate issues without getting a

9 responses.

10 MS. VAN HEMMEN: Understood, understood.

11 Mr. Frevola called me yesterday and told me that a

12 wire transfer from Rae Corp. coming to my office had been

13 seized.

14 THE COURT: Right.

15 MS. VAN HEMMEN: And also that they had amended the

16 complaint and alleged alter ego claims against Rae Corp.

17 THE COURT: So, let's -- your problem is that you need

18 an immediate decision on whether this is a maritime contract.

19 MS. VAN HEMMEN: No, your Honor. My problem is right

20 now I'm working pro se.

21 THE COURT: That's correct. I hear that. So you need

22 an immediate decision. Your client needs an immediate decision

23 on whether -- on that issue.

24 And if you and your client between y9u can't figure

25 out a way to get the ten thousand dollar retainer to you

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1 without going through the city of New York, then you're less

2 creative than I thought.

3 MS. VAN HEMMEN: I think -- well, as I told you, Rae

4 Corp. has a similar attachment in place. Rae Corp. is an

5 affiliated company. They've alleged alter ego.

6 THE COURT: I can't rule on anything without papers.

7 I'm sorry. You can stand there and say: Judge, I don't really

8 want to work for nothing. Well put something on a plane to go

9 over to Europe and pick up a check.

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10 MS. VAN HEMMEN: In light of the Rae Corp. attachment,

11 your Honor, there aren't even alternative sources of funds as

12 of this moment in time, as of last night.

13 THE COURT: All I can tell you is this. I am happy to

14 entertain, on an emergency basis, a motion to vacate. I am

15 happy to put down for a hearing next Friday afternoon, with

16 witnesses, argument, and a decision from the bench, a motion to

17 vacate. You get me papers by Monday morning.

18 But if you're saying you're not going to get me

19 papers, then I'm sorry. There's nothing I can do. I am not

20 prepared to rule on an oral application. I won't do it.

21 MS. VAN HEMMEN: I understand, your Honor. I guess my

22 goal here is two-fold.

23 THE COURT: And I will not vacate the attachment

24 against Rae Corp. without a written application.

25 No, I'm not going to get you the ten thousand dollars.

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1 I appreciate the problem.

2 MS. VAN HEMMEN: Well, my issue I guess is two-fold.

3 One is in light of the fact that there's a possibility there

4 will be no further funds coming, because the company, as of

5 last night, was in such a state they didn't know that they

6 would be able to. And it's not a question of creatively

7 getting the money here, it's a question of cash flow because

8 it has already been in --

9 THE COURT: if it's a question of cash flow, there's

10 nothing I can do about that.

11 I don't believe that it's impossible for you to get

12 money from Rae Corp.

13 MS. VAN HEMMEN: Well, sitting here right now, I don't

14 even know the answer one way or the other.

15 THE COURT: okay, obviously, the easiest way to get

16 money from Rae C9rp. is through an electronic funds transfer

17 that would come into your account in New York, but there are

18 other ways to get money from Rae Corp.

19 MS. VAN HEMMEN: if Rae Corp. has money.

20 THE COURT: But if Rae Corp. doesn't have money,

21 that's not my problem.

22 MS. VAN HEMMEN: It isn't, your Honor. But it does

23 create a due process problem. The reason Rae Corp. and UBS

24 don't have any money is because of the attachments in place.

25 And therefore -- and a corporation can't come in and do this

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1 pro se. Therefore, they do need counsel. And if they don't

2 nave funds for counsel, then they are not in a position to seek

3 justice in this court.

4 THE COURT: Then you need to make a presentation to me

5 that's more than standing up saying they don't have money. I

6 need something under oath from someone telling me: I am going

7 to be deprived of my due process rights under Maritime Rule B

8 because I don't have any money in the whole world anywhere. I

9 have no money. Okay.

10 I can't do it because you stand up and say my client's

11 being deprived. That's not enough for me.

12 MS. VAN HEMMEN: well, I did feel, in light of the

13 developments last night that it was important to come in here

14 and at least make a record to the best of my ability at this

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15 time, based on the work that's already been done.

16 The ten thousand was not money that was going to be

17 used to brief these issues, your Honor. The ten thousand was

18 already long outstanding and overdue to just analyze the

19 situation.

20 THE COURT: I hear you. You need to be paid -- you

21 raise -- now you have raised an interesting issue, a due

22 process issue that's analogous to the issue that arises in

23 criminal cases when the government attaches for forfeiture

24 purposes money belonging to a defendant that was going to be

25 used to pay counsel. This is not a criminal context, but I

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1 hear your due process argument.

2 Either your firm can make some new law and enhance its

3 reputation at some potential financial risk. Or, you don't

4 want to handle this matter.

5 But I cannot make a ruling on an intriguing, novel to

6 me, due process argument. I can't get any money for a lawyer.

7 I can't appear without a lawyer. I can't appear pro se. I

8 can't get money into New York to a lawyer because I have this

9 attachment. I have a due process right to vacate the

10 attachment.

11 I'm not going to do the research from scratch. That's

12 not my job.

13 MS. VAN HEMMEN: if I may, your Honor, I understand

14 the court's position perfectly clearly, but I also feel

15 compelled to just make a record here this morning, if you'll

16 just let me proceed so that it has been said on the record, the

17 position of my client.

18 I really don't know where this is going. There's

19 payoffs in Australia. And I'm trying to do my best with the

20 facts in front of me. So I would just like to say my piece so

21 that I get to report back I have made the applications that my

22 client has instructed me.

23 THE COURT: You haven't made the applications. I will

24 not accept them otherwise than in writing.

25 These are serious, significant, intriguing issues;

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1 complicated issues of law.

2 You are coming in here making a representation to me,

3 based on hearsay, not under oath and not of y9ur own personal

4 knowledge, that your client is unable to retain counsel because

5 it has no money because of these attachments.

6 I'm not prepared to accept that.

7 I'm prepared to accept it if it's made in proper form.

8 MS. VAN HEMMEN: Yes, your Honor.

9 THE COURT: Okay. I'm prepared to accept an order to

10 show cause with an affidavit. I'm prepared to give you as fast

11 a hearing as it's humanly possible to give you.

12 MS. VAN HEMMEN: unfortunately, fastness is normally

13 what I would look for and that is how I was intending to

14 proceed until last night, until there's resolution of those

15 issues on fees because they are considerably in arrears and

16 they need to come up with fees for us to go forward, if I were

17 to stand here today and ask you for a fast --

18 THE COURT: But they're not considerably in arrears

19 because of the attachment.

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20 They are considerably in arrears, you say, because

21 they have no money.

22 MS. VAN HEMMEN: NO. They were trying to send -- they

23 were trying to send money, which would have brought them up --

24 I was expecting more than the ten, quite frankly. And it turns

25 out it was just the ten. The ten would have brought them up to

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1 their current --

2 THE COURT: I hear what your problem is.

3 MS. VAN HEMMEN: -- debt.

4 THE COURT: I used to be in private practice. Believe

5 me. You have every sympathy. This is extremely intriguing.

6 it's very intriguing.

7 MS. VAN HEMMEN: Could I suggest one solution that I'd

8 just like to get on the record?

9 THE COURT: Sure.

10 MS. VAN HEMMEN: This ten thousand dollars that has

11 been seized by wilhelmsen, they're already secured, last I

12 heard, to the tune of about nine hundred thousand.

13 I'm wondering if it's within the court's equitable

14 powers under admiralty to instruct them to release that ten and

15 to allow another 20 to go forward so that the defendant, for

16 whom they're seeking this remedy, is in a position to appear in

17 court. And I believe that the court has certain inherent

18 equitable powers as well.

19 THE COURT: I do have inherent equitable powers. I

20 understand that I have inherent equitable powers.

21 All you're doing is standing up and telling me --

22 well, let me hear from your opponent.

23 This is, and I will say it on the record, the perfect

24 example of why Winter Storm is a disastrous development in the

25 law.

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1 MS. VAN HEMMEN: And on the heels of that --

2 THE COURT: in addition to consuming inordinate

3 amounts of the time of the court in the Southern District of

4 New York.

5 MS. VAN HEMMEN: Your Honor, on the heels of that, I

6 would like to start laying the foundation in the eyent that we

7 are able to stay on as counsel, and I heard your view toward

8 the EFTs which --

9 THE COURT: But the first thing we're going to do, if

10 you stay on as counsel, is decide if this is a maritime

11 contract; and if it's not, I'm going to vacate the attachment

12 and that will be the end of it. I will not go out of my way to

13 reach out for some other issue.

14 I can't reverse the Second Circuit on Winter Storm.

15 Former Chief Judge walker questioned Winter Storm in a footnote

16 in Aqua Stoli. But it's good law, and I will follow it. I

17 will not overturn it until such time as the Second Circuit has

18 done so.

19 MS. VAN HEMMEN: Should we be put in funds and proceed

20 as counsel, and should we make a determination that this is a

21 maritime contract, we will be petitioning the court for an

22 interlocutory appeal, which I understand requires exceptional

23 circumstances, so I just mention to the court that these facts

24 here today, I hope, at that time, if and when it develops, will

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25 be borne in mind when it comes to the exceptional circumstances

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1 because we have two ongoing business entities that really are

2 on their knees and one in the process of considering winding up

3 as of last night.

4 THE COURT: Yes. is there an arbitration pending

5 anywhere?

6 MR. FREVOLA: There is not, your Honor, and that's

7 because there was a --

8 THE COURT: is there an arbitration clause between you

9 and UBS or you and Rae Corp?

10 MR. FREVOLA: I believe there is, your H9nor.

11 THE COURT: where. Show it to me. Physically. This

12 minute. Give it to me. Put it in my hand. The arbitration

13 clause.

14 MR. FREVOLA: I don't have a copy of the verified

15 complaint.

16 THE COURT: Well, excuse me. YOU brought a verified

17 complaint in this court and are seeking an attachment in aid of

18 an arbitration that doesn't exist and there may not be an

19 arbitration clause. You show me the arbitration clause right

20 now.

21 MR. FREVOLA: May I approach, your Honor?

22 THE COURT: Yes. Please announce what the provision

23 is.

24 MR. FREVOLA: Provisions 14.8 and 14.9, your Honor, of

25 the Sumitomo general terms and conditions.

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1 THE COURT: You're not Sumitomo. You're not Sumitomo.

2 MR. FREVOLA: Your Honor -- I'd have to go back to

3 look.

4 THE COURT: I said do you have an arbitration clause

5 in your contract with UBS.

6 MR. FREVOLA: The correspondence between the parties,

7 your H9nor, incorporated the Sumitomo general terms and

8 conditions.

9 THE COURT: where? Show me.

10 MR. FREVOLA: I don't have a copy of the

11 correspondence with me.

12 THE COURT: What are you doing in court without your

13 papers? what are you doing in court without your papers?

14 That's a contract between Sumitomo and somebody else.

15 MR. FREVOLA: Again, your Honor, it's my understanding

16 that these terms and conditions were sent to UBS and that it

17 said it will incorporate these terms, including the arbitration

18 clause. And there is ample case law that deals with the issue

19 of incorporation of an arbitration clause by reference between

20 the parties.

21 THE COURT: Yeah, but you haven't shown me anything

22 that incorporates it by reference between the parties.

23 MR. FREVOLA: You're right, your Honor, I haven't. I

24 should have brought that paper with me. I regret that. I

25 thought this was just going to be a scheduling conference, your

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1 Honor. I didn't know any application was going to be made

2 today.

3 Even if there was not an arbitration clause, your

4 Honor, and there -- it's our position there is.

5 Right now the reason why arbitration hasn't gone

6 forward in London is because there is what's known as a

7 statutory demand which has been made in Australia on UBS. And

8 what a statutory demand is, is a procedural device under

9 Australian law which is a precursor towards putting someone

10 into receivership. And because there was a bankruptcy

11 proceeding in Australia, it W9uld raise issues as to whether

12 arbitration would go forward in London. That's why there

13 hasn't been an arbitration yet commenced in London.

14 THE COURT: So they are in financial distress.

15 MR. FREVOLA: I don't think there's any disagreement

16 on that, your Honor.

17 And if there wasn't an arbitration clause, your Honor,

18 this would be just a general purpose, garden variety maritime

19 attachment, or just similar to a Rule C arrest or Rule B

20 attachment of cargo.

21 THE COURT: Except that there's a dispute about

22 whether this is or is not a maritime -- the contract between

23 you and UBS is a maritime contract.

24 MR. FREVOLA: And I believe, your Honor, the U.S.

25 Supreme court in Exxon v. Central Gulf Lines back in the

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1 mid '90s answered this question. And we responded to and be an

2 opponent in the Central District of California in a case back

3 in May on this very issue, where it was --i n this situation

4 the fuel had not even been provided to the vessel and

5 nevertheless it was still a maritime contract.

6 In this context, your Honor, every one of these

7 claims, fuel was provided to the vessel.

8 There is also an equitable doctrine dealing with a

9 per$9n stepping into the shoes of the provider if they pay that

10 provider. That doctrine may also apply to make it a maritime

11 contract.

12 I don't think we have to go that far. I think Exxon

13 v. central Gulf Lines -- I think it's right on point.

14 Plus, there was a requirements contract where there

15 are people being retained around the world to do this and

16 Waterman Steamship Company wound up getting a supplier in

17 Jeddah, Saudi Arabia to do this very thing, it was a maritime

18 contract.

19 The Supreme Court said this contract is a contract if

20 it was done directly by the supplier. It cannot not be a

21 maritime contract just because agents somewhere else did it for

22 them. And that, your Honor, W9uld be our argument in terms of

23 the preliminary services doctrine.

24 I'm trying to take a look to see anything else.

25 I believe those are the issues.

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1 THE COURT: Were you the agent for the supplier? I

2 thought you were the agent for the buyer.

3 MR. FREVOLA: No, your Honor. We are the agent for

4 the supplier.

5 THE COURT: You had a contract with Sumitomo, not with

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6 UBS? You have no contract --

7 MR. FREVOLA: Both of them, we were in between.

8 AS I understand it, you have UBS we were then tasked

9 to go out and get it --

10 THE COURT: Excuse me. wait. You had a contract with

11 UBS, wh9 tasked you to go out and get something, so UBS hired

12 you as its agent to go out and buy oil for it, which you did,

13 from a supplier, from somebody who had oil.

14 MR. FREVOLA: TO supply --

15 THE COURT: You weren't Sumitomo's agent. You were

16 the broker. You were the buyer's broker.

17 MR. FREVOLA: No, your Honor. We were hired to wind

18 up, procure bunkers for specific vessels. And we wound up by

19 making it possible so that vessel was supplied.

20 If you look at Exxon v. Central Gulf Lines, your

21 Honor, it covers this.

22 THE COURT: what's the citation on that?

23 MR. FREVOLA: I don't have the citation on that.

24 MS. VAN HEMMEN: I might even have the case, and it's

25 clearly distinguishable.

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1 May I, your Honor.

2 Your Honor, may I comment on that?

3 THE COURT: NO. Let him finish.

4 MR. FREVOLA: I believe that I've answered the

5 outstanding issues in terms of what was been presented,

6 obviously, in terms of briefing --

7 THE COURT: No, you haven't because there's a due

8 process -- there's an argument that the Rule B due process

9 rights of UBS are being violated by your attachment of the

10 funds that were being sent to pay a lawyer to come into court

11 and respond to this.

12 we agree that UBS has a due process right to moye to

13 vacate this attachment. That's the only reason that maritime

14 attachment is constitutional, right?

15 MR. FREVOLA: Agreed, your Hon9r.

16 THE COURT: And we agree that in the State of New

17 York, state and federal courts, a corporation can only appear

18 by counsel, right?

19 MR. FREVOLA: Yes, your Honor.

20 THE COURT: And we agree, do we not, that lawyers have

21 a right to be paid?

22 MR. FREVOLA: Yes, your Honor, I've been --

23 THE COURT: would H9lland & Knight go on record as

24 saying that lawyers have a right to be paid?

25 MR. FREVOLA: Yes, your Honor.

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1 And your Honor, we have been in the same position as

2 MS. van Hemmen is right now, and I understand it, and I

3 actually, your Honor, in terms 9f -- if there's a potential to

4 do it, we tend to let these go if -- we make a recommendation

5 to let them go if they can be let go, in this certain context.

6 THE COURT: what do you mean, we make the

7 recommendation to let what go?

8 MR. FREVOLA: if the client, depending on the

9 situation between the parties, depending on how large the debt

10 is, how acrimonious the dispute is, we tend to say that perhaps

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11 it makes sense to allow the retainer to go through, as a

12 courtesy, because we've been on the other side of this, your

13 Honor. I understand it.

14 I have posed that question to my client.

15 THE COURT: Has the due process issue ever been

16 litigated?

17 MR. FREVOLA: I am unaware of that, your Honor. I

18 don't think so.

19 THE COURT: Because it's a very intriguing issue.

20 MR. FREVOLA: These things tend to raise very

21 interesting issues, your Honor, and they are always new.

22 THE COURT: Very intriguing issue.

23 MR. FREVOLA: Your Honor, would it make sense for

24 me -- I have not gotten an answer back from my client one way

25 or another on this. Would it make sense for me to ask my

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1 client about allowing the retainer to come through?

2 THE COURT: It would certainly make a lot of sense for

3 you do that.

4 MR. FREVOLA: I will do that today, your Honor.

5 THE COURT: Because if you don't, it seems t9 me that

6 I'm going to haye to decide whether the due process rights of

7 UBS are being violated by your clients' taking or stealing,

8 depending on how you look at it, their lawyer s money and

9 thereby preventing them, by the use of this -- that would be

10 constitutionally infirm but for their right to come into court,

11 literally preventing them from coming into court.

12 MR. FREVOLA: The only other thing in terms of, for

13 scheduling, I am about to purchase tickets to go to Norway to,

14 among other people, visit this particular client for not this

15 coming week but the week following.

16 THE COURT: Yes, but you have a very large firm.

17 MR. FREVOLA: Yes, your Honor.

18 THE COURT: And I swore to God when I was at Paul,

19 Weiss that I would never say that if I ever became a judge, and

20 I am foresworn.

21 MR. FREVOLA: Thank you, your Hon9r.

22 THE COURT: But you're taking their money with9ut any

23 adjudication of the dispute between you and, indeed, prior to

24 the time when any court or arbitral panel, be it a court or

25 arbitral panel that would have jurisdiction, is seized of the

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1 dispute between you for four-and-a-half million dollars. So no

2 progress is being made to adjudicate that. And I just want you

3 to understand that you should go to Norway. Just make sure

4 somebody else in your firm is covering the file because we will

5 move very, very expeditiously.

6 You need to get back to me by the first thing Monday

7 morning, and certainly get back to your opponent -- if she's,

8 in fact, your opponent -- with a word on whether the retainer

9 money is going to come -- be allowed to go through.

10 MR. FREVOLA: Yes, your Honor.

11 THE COURT: if it's not, then because you are holding

12 the money, you have 48 hours or until noon on Wednesday to

13 serve me with a brief explaining why you have not violated

14 UBS's due process rights by taking the money that's intended

15 for them to appear by counsel, which is the only way that they

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16 can appear, for the purpose of vindicating their constitutional

17 right to vacate the Rule B attachment. Or you could concede

18 that their due process rights are thereby violated. That may

19 give you some leverage with your client who might prefer not to

20 have an opinion on this issue floating around out there.

21 okay. Now, let's make an assumption. Let's make an

22 assumption that your firm gets a little money. How quickly can

23 you get your order to show cause before me?

24 MS. VAN HEMMEN: HOW about the following Monday, your

25 Honor.

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1 THE COURT: Fine. So get the people ready at your

2 firm -- so we're talking Monday the 18th. I have a trial

3 starting Monday the 4th. So I'm going to want to do a hearing

4 on Friday. I have conferences all morning, so, it will be

5 Friday afternoon. I'll need responsive papers by Thursday at

6 noon.

7 Everybody knows what the issues are. Is there a

8 maritime contract? Is there any underlying basis for an

9 attachment? I know that an arbitration does not need to have

10 been commenced. I know that. I've read that in the cases, but

11 that really isn't the issue.

12 And let's get all these issues decided. It seems to

13 me that it's a pretty finite amount of work for each of us to

14 do to get these issues decided.

15 NOW, the alter ego issue is S9mewhat rmpre complicated.

16 MS. VAN HEMMEN: And I was going to raise that. Our

17 view is they haven't made a prima facie case, and we do intend

18 to brief that as well.

19 THE COURT: Fine. And I'm prepared to listen to --

20 it's y°ur burden, of course, and I'm prepared to listen to

21 witnesses on that.

22 MS. VAN HEMMEN: Your Honor, I understand your issue

23 on the EFTs. However, this ultimately could be going up on

24 appeal and so it's an issue we would want to preserve.

25 THE COURT: Fine. Preserve -- write one sentence in.

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1 winter Storm should be reversed.

2 And I won't reverse it. Okay. But then you can take

3 it up.

4 And if -- and of course the panel of the second

5 circuit won't reverse it, but if the panel wants to see if they

6 want to en bane the issue --

7 MS. VAN HEMMEN: Thank you, your Honor.

8 THE COURT: But we all understand that my hands are

9 ti ed.

10 MS. VAN HEMMEN: Understood.

11 THE COURT: When they have these hearings in front of

12 the Senate, some senator always says: Now, you understand that

13 you are not a lone ranger. You are bound by the decision --

14 what court are you bound by the decisions of? The Supreme

15 Court and the united States court of Appeals for the Second

16 Circuit, we all did it.

17 I'll hear from you Monday morning.

18 MS. VAN HEMMEN: Thank you, your Honor.

19 MR. FREVOLA: Thank you, your Honor.

20 THE DEPUTY CLERK: Hearing the 28th in the afternoon

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21 did we say?

22 THE COURT: That's what we said.

23 THE DEPUTY CLERK: TWO o'clock.

24 THE COURT: Unless, put it on for the following

25 Monday. I don't know what you have on the following Monday.

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1 THE DEPUTY CLERK: we could put it on --

2 THE COURT: We can't because we have a trial on the

3 24th.

4 Put it on for Monday.

5 THE DEPUTY CLERK: Monday at 10:00. That's October 1.

6 MR. FREVOLA: That would be the hearing?

7 THE DEPUTY CLERK: The hearing. 10:00. October 1.

8 MR. FREVOLA: And the briefing would be September 17

9 for the initial moving; September 20 for our responsive.

10 THE COURT: I was talking about doing the hearing on

11 Friday the 21st.

12 THE DEPUTY CLERK: Then it's all right.

13 THE COURT: Let's put dates on all this.

14 when are you going to have your order to show cause to

15 me?

16 MS. VAN HEMMEN: A week from Monday, your H9nor.

17 THE COURT: So it's Monday the 24th -- no, it's

18 Monday the 17th. We're talking about a hearing on Friday the

19 21st, is what I thought we were talking about. Now Friday the

20 21st is Yom Kippur, and there's stuff on.

21 (Pause)

22 THE COURT: We're going to put it on for the 21st and

23 we'll start the trial on the 22nd -- I'm sorry, Monday the

24 24th. We'll start the trial on Tuesday.

25 THE DEPUTY CLERK: 9:30 on the 24th. (Adjourned)

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