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ROSE MARINE TRANSP., INC. v. KAISER ALUMINUM & CHE

February 4, 1991

ROSE MARINE TRANSPORTATION, INC., Plaintiff,
v.
KAISER ALUMINUM & CHEMICAL CORP., et al., Defendants


Milton I. Shadur, United States District Judge.


The opinion of the court was delivered by: SHADUR

MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE

 ABB Trading (U.S.) Inc. ("ABB"), one of the three defendants in this action brought by Rose Marine Transportation, Inc. ("Rose Marine"), has followed its success on Rose Marine's originally-asserted substantive claims *fn1" with a motion for sanctions under Fed. R. Civ. P. ("Rule") 11. ABB's motion stems from Rose Marine's pleadings in this action, which served to facilitate Rose Marine's unlawful seizure of calcined coke ("coke") that was owned by ABB and was located on barges that Rose Marine had leased to co-defendant Calciner Industries, Inc. ("Calciner"). For the reasons stated in this memorandum opinion and order, ABB's motion is granted.

 At the outset it is important to separate out what ABB is not claiming in the current motion from what it is. At least at this stage of the litigation, ABB is not complaining about its having been sued at all by Rose Marine. *fn2" Instead it challenges the propriety of Rose Marine's having proceeded with filings that involved the confiscation of many millions of dollars worth of ABB's property just to obtain satisfaction of a claimed indebtedness from Calciner of about one-half of one percent of the value of the seized property. *fn3"

 Background

 In accordance with the modified terms of a Barge Supply and Service Agreement (the "Agreement") that -- after mesne transfers -- ended up documenting a relationship between Rose Marine as lessor and Calciner as lessee, in mid-1989 Calciner was using a number of leased barges owned by Rose Marine to carry coke belonging to ABB. When Rose Marine and Calciner had a falling out as to the terms of the Agreement, three critical events took place on the same day, July 6, 1989:

 
1. Calciner sent, via Federal Express, a check to Rose Marine for $ 38,155.04 -- the full amount that Rose Marine had claimed was past due to it under the Agreement.
 
2. Rose Marine terminated the Agreement because of Calciner's claimed defaults and seized a number of the leased barges containing more than $ 7 million worth of coke -- not merely as security for what was then owed to Rose Marine, but assertedly by way of its somehow having acquired outright ownership of all the coke as liquidated damages.
 
3. Rose Marine filed this lawsuit against Calciner and Kaiser Aluminum and Chemical Corp. ("Kaiser," which was the original party to the Agreement with Rose Marine), claiming that Calciner had breached the Agreement, therefore (sic) entitling Rose Marine to keep ABB's coke as such liquidated damages.

 As soon as it learned of Rose Marine's seizure of the coke, Calciner demanded (1) the coke's release and (2) Rose Marine's performance of the Agreement. Rose Marine refused. On the very next day (July 7) ABB filed suit in the United States District Court for the Eastern District of Louisiana, seeking a temporary restraining order ("TRO") to recover the seized coke. Because it was subject to the immediate pressure of having to deliver the coke to the waiting vessels of its own customers, ABB had to enter into an agreement in that Louisiana litigation to post a bond equal in value to all the coke released by Rose Marine. In opposition to ABB's motion for the TRO, Rose Marine took the position that only this Court (and not the Louisiana District Court) could resolve the right to possession of the coke because of the "first to file" rule and the one-day priority of this lawsuit. As part of its undertaking to obtain release of the coke, ABB consequently agreed to intervene in this action and submit to this Court's jurisdiction.

 Meanwhile, in this action Rose Marine has advanced four kinds of justification for its seizure of the coke:

 
1. As already stated, its Complaint asserted Rose Marine's entitlement to the coke as "liquidated damages" for Calciner's alleged breach of the Agreement.
 
2. Rose Marine also appeared from its Complaint to be claiming some kind of contractual lien over the coke under the Agreement -- although the Complaint was somewhat fuzzy in that respect. *fn4"
 
4. Finally Rose Marine said that it "has a warehousemen's lien on the goods stored in the RMT barges pursuant to the common law of the State of Louisiana" (id.).

 Indeed, in response to the repeated requests by ABB's counsel as to just how Rose Marine could assert a lien on ABB's coke, Rose Marine's lawyer Terrance Smith ("Smith") wrote a letter on April 12, 1990 saying that the just-referred-to Amended Answer to Calciner's interrogatory -- an answer that asserted a contractual security interest, a maritime law lien and a state law warehousemen's lien -- was self-explanatory and needed no elaboration.

 After its intervention here, ABB filed a motion for summary judgment against Rose Marine, accompanied by an extensive supporting memorandum and materials. In response Rose Marine completely disavowed its prior assertion of a maritime law lien or a Louisiana state law lien (Rose Marine Mem. 2 n. 1), choosing instead to rely only on (1) its claimed rights to liquidated damages and (2) a contractual lien under the terms of the Agreement.

 On September 10, 1990 this Court issued the Opinion granting ABB's motion for summary judgment. It found that Rose Marine's proposed reading of the Agreement and its assertions as to its claimed remedies were wholly untenable in light of established Illinois law, so that Rose Marine had no right to have seized the coke or to have obtained a bond from ABB securing the value of the coke.

 Rose Marine's Current Position

 Rose Marine has responded to ABB's motion with a creative example of revisionist history. Its memorandum *fn5" says at pages 1-2:

 
Rose Marine on the date it filed suit in this court was faced with the following facts, each constituting a separate and distinct breach of its barge contract . . . .:
 
1. Calciner/ABB was $ 95,900.40 delinquent in paying the flat fee due under the June invoices.
 
2. Calciner/ABB had failed to pay the escalation amounts due under the contract in the amount of $ 38,155.04.
 
3. Calciner/ABB was returning 14 barges as a result of a phony force majeure notice.
 
4. Calciner/ABB had leased 15 barges from a Rose Marine competitor in violation of the contract.
 
Rose Marine knew that it had 11 years, 3 months remaining on an economically advantageous contract and that Calciner/ABB, by breaching the contract caused Rose Marine to suffer a minimum of $ 12,611,333.00 in damages.

 Rose Marine's post hoc characterization of what happened is that it then concluded that "Calciner/ABB" (whom Rose Marine lumps together as a single party under its joint venture theory) was no longer dealing in good faith under the Agreement, so that on July 6 Rose Marine terminated the Agreement and (RM Mem. 2):

 
On that same day, Rose Marine filed this suit seeking a judicial determination of the validity of the liquidated damages clause found in the contract in Section X(b).

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