Court Opinion

ID: 6328304
Source: CourtListenerOpinion
Date Created: 2022-03-30 18:00:43.39684+00
Date Added: 2024-06-11T09:22:38.245669
License: Public Domain

Case: 21-40642   Document: 00516259969   Page: 1    Date Filed: 03/30/2022

          United States Court of Appeals
               for the Fifth Circuit
                                                              United States Court of Appeals
                                                                       Fifth Circuit

                                                                     FILED
                            No. 21-40642                       March 30, 2022
                          Summary Calendar
                                                                Lyle W. Cayce
                                                                     Clerk
   K Investments, Incorporated,

                                                   Plaintiff—Appellant,

                                versus

   B-Gas Limited, also known as Bepalo LPG Shipping
   Limited; B-Gas AS; Bergshav Shipping, Limited;
   Bergshav Shipholding AS; Bergshav Shipping AS; B-Gas
   Holding, Limited; Atle Bergshaven; LPG Invest AS;
   Bergshav Invest AS,

                                               Defendants—Appellees,

   ______________________________

   Bahla Beauty, Incorporated,

                                                   Plaintiff—Appellant,

                                versus

   B-Gas Limited, also known as Bepalo LPG Shipping
   Limited; B-Gas AS; Bergshav Shipping, Limited;
   Bergshav Shipholding AS; Bergshav Shipping AS; B-Gas
   Holding, Limited; Atle Bergshaven,

                                               Defendants—Appellees,
Case: 21-40642      Document: 00516259969          Page: 2    Date Filed: 03/30/2022

                                    No. 21-40642

   ______________________________

   Sikousis Legacy, Incorporated,

                                                             Plaintiff—Appellant,

                                       versus

   B-Gas Limited, also known as Bepalo LPG Shipping
   Limited; B-Gas AS; Bergshav Shipping, Limited;
   Bergshav Shipholding AS; Bergshav Shipping AS; B-Gas
   Holding, Limited; Atle Bergshaven,

                                                          Defendants—Appellees.

                   Appeal from the United States District Court
                       for the Southern District of Texas
                              Case No: 3:21-CV-16

   Before Wiener, Dennis, and Haynes, Circuit Judges.
   Per Curiam:*
          Appellants K Investments, Inc., Sikousis Legacy, Inc., and Bahla
   Beauty, Inc. (collectively “Plaintiffs”) appeal an order of the district court
   vacating the attachment of the vessel, M/T BERGITTA (“BERGITTA”),
   owned by Bergshav Shipping AS (“Bergshav Shipping”). For the reasons
   set forth below, we conclude that the district court did not err in vacating the
   attachment and AFFIRM.

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.

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                                      No. 21-40642

                                     A. Background
          Plaintiffs, the owners of several liquid petroleum gas carrier vessels,
   entered into bareboat charter agreements with B-Gas Limited, now known as
   Bepalo LPG Shipping Ltd. (“Bepalo”). In 2020, Bepalo attempted to
   negotiate a reduction in charter-hire rates due to financial difficulties brought
   on by the COVID-19 pandemic. After Plaintiffs refused to negotiate, Bepalo
   wound up its business and redelivered the vessels to Plaintiffs. Plaintiffs
   commenced arbitration proceedings against Bepalo for breach of contract.
          In the present action, Plaintiffs filed a complaint under Rule B of the
   Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture
   Actions (“Rule B” of the “Supplemental Admiralty Rules”) praying for
   attachment of the M/T BERGITTA, a vessel. In response to Plaintiffs’
   invocation of Rule B, the district court issued orders authorizing the process
   of maritime attachment and garnishment. The US Marshal executed the
   process and seized the BERGITTA on behalf of each of the Plaintiffs. The
   BERGITTA is owned by Bergshav Shipping. However, Plaintiffs allege that
   Bergshav Shipping is the alter ego of Bepalo.
          Bergshav Shipping made a restrictive appearance under Rule E(8) of
   the Supplemental Admiralty Rules and moved to vacate the attachment of
   the BERGITTA. Bergshav Shipping asserted that vacatur was warranted
   because Plaintiffs failed to comply with the requirements of Rule B. Its
   argument relied on two grounds: (1) Plaintiffs failed to institute attachment
   with a properly verified complaint, as required by Rule B; and (2) Plaintiffs
   failed to state a prima facie case to support their alter ego theory of liability.
          With regards to the first point, Bergshav Shipping argued that
   Plaintiffs’ pleadings were not actually verified as required by Rule B.
   Plaintiffs attempted to satisfy their Rule B obligation by attaching the
   verification of Christian Krohn-Hansen, a broker of the Plaintiffs’ managing

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   agents, to their complaints. Krohn-Hansen negotiated the initial bareboat
   charter agreements and participated in follow-up discussions regarding the
   agreements. His verification provides the following, in pertinent part:
                 Pursuant to 28 U.S.C. § 1746, Christian Krohn-Hansen,
          declares under the penalty of perjury:
                1. I am an individual of sound mind, and have never been
          convicted of a crime of moral turpitude.
                 2. I am a resident of Athens, Greece and a lawful
          representative of the Plaintiff in the above action and duly
          authorized on its behalf to make this verification.
                 3. I have read the foregoing Verified Complaint and
          exhibits thereto in the above captioned action and know the
          contents thereof; and
                  I declare under the penalty of perjury that the foregoing
          is true and correct.
          The district court held a hearing on Bergshav Shipping’s motion to
   vacate.   At the hearing, Krohn-Hansen testified that he had read the
   pleadings and attachments, but he agreed that when he signed the
   verifications, he did not verify the truth of the allegations set forth in the
   complaints. In light of this testimony and supplemental briefing on the issue,
   the magistrate judge recommended granting the motion to vacate, and the
   district court adopted that recommendation. K Investment, Inc. v. B-Gas Ltd.,
   No. 3:21-CV-00016, 2021 WL 3477356, at *4–5 (S.D. Tex. June 4, 2021),
   report and recommendation adopted, 2021 WL 3473502 (S.D. Tex. Aug. 6,
   2021). The court determined that a verified complaint is a jurisdictional
   prerequisite, that Plaintiffs’ verifications were insufficient, and that

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   therefore, the court lacked jurisdiction.             Thus, the court vacated the
   attachment and dismissed the complaints. Plaintiffs timely appealed.
                          B. Jurisdiction & Standard of Review
           The district court had jurisdiction over the case pursuant to 28 U.S.C.
   § 1333 and Rule 9(h) of the Federal Rules of Civil Procedure. We have
   jurisdiction over the district court’s appealable collateral order. Heidmar,
   Inc. v. Anomina Ravennate di Armamento Sp.A of Ravenna, 132 F.3d 264, 267
   (5th Cir. 1998). In admiralty cases, we review the district court’s legal
   conclusions de novo and its factual findings for clear error. E.A.S.T., Inc. of
   Stamford, Conn. v. M/V Alaia, 876 F.2d 1168, 1171 (5th Cir. 1989).
                                         C. Discussion
           Plaintiffs raise three issues on appeal. They argue that the district
   court erred in (1) concluding that the complaints were not properly verified,
   (2) dismissing the case for lack of jurisdiction, and (3) failing to allow
   Plaintiffs the opportunity to amend their verification. We address each issue
   in turn.
           First, Plaintiffs argue that the district court erred in determining that
   the verification was deficient. The district court concluded that Plaintiffs’
   pleadings were invalid because they were “not verified in accordance with
   Rule B.” Rule B permits a court to exercise quasi in rem jurisdiction via an
   order of maritime attachment.1 See Fed. R. Civ. P. Adm. Supp. R.
   B(1)(a). Maritime attachment serves both to obtain jurisdiction over a
   defendant through its property and to assure satisfaction of the claim. See

           1
             Rule B states the following in pertinent part: “If a defendant is not found within
   the district . . . , a verified complaint may contain a prayer for process to attach the
   defendant’s tangible or intangible personal property—up to the amount sued for—in the
   hands of garnishees named in the process.” FED. R. CIV. P. ADM. SUPP. R. B(1)(a).

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   Malin Int’l Ship Repair & Drydock, Inc. v. Oceanografia, S.A. de C.V., 817 F.3d
   241, 244 (5th Cir. 2016). In order to properly invoke Rule B, a plaintiff must
   file a verified complaint sufficient to make a prima facie showing that (1) the
   plaintiff has a maritime claim against the defendant and (2) that the
   defendant is not present in the district. Aqua Stoli Shipping Ltd. v. Gardner
   Smith Pty Ltd., 460 F.3d 434, 445 (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).
            An individual may move to vacate an attachment if it believes the
   plaintiff failed to satisfy the requirements of Rule B. See Fed. R. Civ. P.
   Adm. Supp. R. E(4)(f). Upon a motion to vacate, the plaintiff bears the
   burden of demonstrating why the attachment should not be vacated. See id.
            Rule B expressly requires a verified complaint. Fed. R. Civ. P.
   Adm. Supp. R. B (1)(a). A verified complaint must include a “declaration
   made under penalty of perjury.” Falcon v. Holly, 480 F. App’x 325, 326 (5th
   Cir. 2012) (per curiam). Facts in a verified complaint must be “within the
   personal knowledge of the affiant,” and the affiant must “be competent to
   testify” to them. Huckabay v. Moore, 142 F.3d 233, 240 n.6 (5th Cir. 1998),
   abrogated on other grounds by Heath v. Bd. of Supervisors for S. Univ. & Agric.
   & Mech. Coll., 850 F.3d 731 (5th Cir. 2017). In signing a verified complaint,
   “the signator must satisfy himself that the averments in the complaint are
   true, based upon either his own knowledge or upon information and belief.”
   Chan v. Soc’y Expeditions, Inc., 123 F.3d 1287, 1295 (9th Cir. 1997) (internal
   quotation marks and citations omitted).
            In this case, Plaintiffs attempted to comply with Rule B by attaching
   the Krohn-Hansen verification to each of their respective complaints.
   Bergshav Shipping contends that this verification is insufficient because
   Krohn-Hansen did not affirm the veracity of the facts alleged in each

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   complaint. In other words, Krohn-Hansen did not affirm that he believed the
   factual allegations in the complaints to be true and correct. Rather, Krohn-
   Hansen’s verification affirms only that he read and understood the contents
   of the verified complaints. Therefore, per Bergshav Shipping, Plaintiffs’
   pleadings are deficient because the complaints are not properly verified.
          After evaluating the text of the verification, the district court
   determined that the “statement concerning the penalty of perjury
   specifically refer[red] to the factual attestations contained in the respective
   verification” rather than the facts alleged in the verified complaints
   themselves. Thus, the verification was deficient because it did not verify the
   factual allegations in the related complaints, as required by Rule B. We agree
   with the district court’s conclusion. Krohn-Hansen’s verification does not
   state that he believed the facts alleged in the complaints to be true and correct.
   Rather, Krohn-Hansen declared “that the foregoing is true and correct.”
   The text preceding “foregoing” is limited to Krohn-Hansen’s affirmations
   regarding his residency, his mental competency, and the fact that he read the
   complaints and exhibits. Nowhere does Krohn-Hansen affirm the veracity of
   the allegations that Plaintiffs relied on to establish their alter-ego theory of
   liability, subsequently permitting the attachment of the BERGITTA. As
   such, the Krohn-Hansen verification fails to satisfy Rule B’s verified
   complaint requirement.
          Plaintiffs argue that the district court’s interpretation of the
   verification was an improper “syntactical and grammatical analysis of the
   text of the respective verification,” and they maintain that Krohn-Hansen
   had, in fact, affirmed the veracity of the allegations in the complaints.
   However, this determination was not solely based on a “syntactical” or
   “grammatical” analysis of Krohn-Hansen’s statement; rather any doubts
   about whether Krohn-Hansen had or had not verified the allegations were
   resolved at the hearing on the motion to vacate. At the hearing, Krohn-

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   Hansen testified that he “did not verify the truth of the allegations set forth
   in the verified Complaint”; instead, he merely “read the verified Complaint
   and the exhibits.” Without such affirmation, the complaints were not
   properly verified. As such, we hold that the district court did not err in
   concluding that Plaintiffs failed to comply with Rule B. The district court’s
   analysis and Krohn-Hansen’s testimony confirm this conclusion.
           The next issue, then, is whether Plaintiffs’ failure to satisfy Rule B
   deprived the court of jurisdiction. The district court determined that the
   filing of a verified complaint was a jurisdictional prerequisite; because
   Plaintiffs failed to satisfy that requirement, the district court could not obtain
   proper jurisdiction over the BERGITTA. Therefore, the court vacated the
   attachment and dismissed the suit. Plaintiffs contend that “[v]erification of
   the complaint is a formal claim-processing requirement, but not a
   jurisdictional prerequisite,” and thus this dismissal was erroneous.
           We recognize that the Supreme Court has cautioned against the
   mischaracterization of claim-processing rules as jurisdictional rules. See, e.g.,
   Hamer v. Neighborhood Hous. Servs. of Chic., 138 S.Ct. 13, 17 (2017);
   Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 434 (2011). In many
   cases, the distinction between what is merely a claim-processing rule and
   what is a jurisdictional prerequisite is critical: courts are “oblig[ated] to
   notice jurisdictional issues and raise them on their own initiative.” Hamer,
   138 S.Ct. at 17. On the other hand, claim-processing rules can be waived or
   forfeited if not raised by the parties. 2 See id. Nevertheless, the Supreme

           2
             Accordingly, the reasoning for the Court’s cautionary warning is straightforward:
   treating claims processing rules as jurisdictional can “result in the waste of judicial
   resources and may unfairly prejudice litigants.” Shinseki, 562 U.S. at 434. Thus, “a rule
   should not be referred to as jurisdictional unless it governs a court's adjudicatory capacity.”
   Id. at 435.

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   Court has been clear that “[i]f properly invoked, mandatory claim-processing
   rules must be enforced” and thus provide relief to the party who properly
   raised the issue. Id. at 18.
          It is unsettled in this circuit whether Rule B’s verified complaint
   requirement is a claim-processing rule or a jurisdictional mandate. In an
   analogous context, we have concluded that “the filing of a verified
   complaint” is a “prerequisite to obtaining in rem jurisdiction.” Pizani v. M/V
   Cotton Blossom, 669 F.2d 1084, 1090 (5th Cir. 1982) (discussing Fed. R.
   Civ. P. Adm. Supp. R. C(2) (“Rule C”)). In Pizani, the plaintiff sought
   attachment of a vessel under Rule C. 669 F.2d at 1090. However, the
   plaintiff’s complaint was not verified, service was not perfected, and the
   service instructions did not request that in rem process issue. Id. Based on
   these failures to comply with the plain requirements of Rule C, we
   determined that the district court lacked jurisdiction and reversed the in rem
   judgment against the vessel. Id.
          Analogizing to our reasoning in Pizani, the district court determined
   that there was “no difference warranting two distinct jurisdictional
   inquiries” between Rule B and Rule C. Like Rule C, Rule B requires a
   verified complaint to initiate proceedings. Compare Fed. R. Civ. P. Adm.
   Supp. R. C(2) (“In an action in rem the complaint must . . . be
   verified . . . .”), with Fed. R. Civ. P. Adm. Supp. R. B(1)(a) (“[A]
   verified complaint may contain a prayer for process to attach the defendant’s
   tangible or intangible personal property”). Accordingly, the district court
   found no substantive differences between the two Supplemental Admiralty
   Rules that warranted a different outcome.
          Ultimately, here we need not reach the issue of whether the verified
   complaint requirement under Rule B is a jurisdictional rule. Even if we
   determined that Rule B was merely a mandatory claim-processing obligation,

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   Bergshav Shipping “properly invoked” Rule B. Bergshav Shipping raised
   the issue via a timely motion to vacate, and therefore it “must be enforced.”
   Frew v. Young, 992 F.3d 391, 396 n.3 (5th Cir. 2021) (quoting Hamer, 138
   S.Ct. at 17). Because Bergshav Shipping raised the verified pleading issue in
   the district court and on appeal, “it remains mandatory even if not
   jurisdictional.” Id. As such, regardless of whether Rule B is jurisdictional or
   procedural, we hold that the district court did not err in dismissing the action.
          The final issue then is whether the district court should have
   permitted Plaintiffs to cure their verification by amendment. Plaintiffs
   objected to the magistrate judge’s memorandum and recommendation,
   arguing that they could cure the defective verification via a supplementary
   verification under Federal Rule of Civil Procedure 15.
          At the outset, we note that Plaintiffs never filed a formal motion to
   amend their verification. At the hearing on the motion to vacate, the
   magistrate judge requested briefing on whether the inadequate verification
   was “a jurisdictional bar up front” or whether it could be amended. In
   response to this request, Bergshav Shipping briefed the issue, insisting that
   the verification could not be cured due to the time-of-filing rule and futility.
   Plaintiffs did not respond to Bergshav Shipping’s arguments or otherwise
   comply with the magistrate judge’s request for briefing on the issue of
   amendment. As such, the memorandum and recommendation does not
   make any findings or include a recommendation as to whether the verification
   could be amended. Rather, Plaintiffs waited until the magistrate judge had
   issued its memorandum and recommendation to raise the issue of
   amendment for the first time. Plaintiffs—in one paragraph of their seventeen-

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   page objections—first make an argument styled under Federal Rule of Civil
   Procedure 15 requesting leave to amend.
          It is well settled that issues raised for the first time in objections to a
   magistrate judge’s report are deemed not properly before the district court
   and therefore cannot be raised on appeal. See Cupit v. Whitley, 28 F.3d 532,
   535–36 n.5 (5th Cir. 1994); United States v. Armstrong, 951 F.2d 626, 630 (5th
   Cir. 1992) (concluding that issues first argued in “objections to the
   magistrate judge’s findings” were “not properly before the district court”
   and refusing to address them); Harrison v. Smith, 83 F. App’x 630, 632 (5th
   Cir. 2003) (per curiam) (rejecting attempt to raise new issue in objections to
   report and recommendation). As such, we reject Plaintiffs’ untimely attempt
   to request leave to amend and deem the issue duly waived.
   AFFIRMED.

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