WJ Holding Limited and Stubrick Limited v. Shireen Maritime Ltd., Mazlin Trading Corp., AMM Consulting and Management Group LLC, and Alexander Spiegel

At a glance

Parties

WJ Holding Limited and Stubrick Limited (Cyprus) v. Shireen Maritime Ltd. (Liberia), Mazlin Trading Corp. (BVI), AMM Consulting and Management Group LLC (Florida) and Alexander Spiegel

Case no.

20 CV 1068 (LDH) (CLP)

Court

U.S. District Court, Eastern District of New York (Report and Recommendation of Chief Magistrate Judge Cheryl L. Pollak)

Underlying award(s)

LCIA final awards of 23 January 2018 in favour of Mazlin against the plaintiffs

Treaty

New York Convention; Federal Arbitration Act, Chapter 2 (9 U.S.C. §§ 203, 205)

Sector

Vegetable oil production; loan financing

Outcome

Recommended that the case be remanded to New York State Supreme Court, Kings County, for lack of subject matter jurisdiction, and that the plaintiffs' request for fees and costs be denied.

The dispute

WJ Holding Limited and Stubrick Limited are Cyprus companies owned by Yuri Drukker. WJ Holding owns Bender Oil, a vegetable oil extraction plant in Transdniestria, Moldova. The plaintiffs alleged that Alexander Spiegel agreed to buy 30% of Bender Oil for $7,000,000 but instead arranged for his undisclosed companies, Shireen and Mazlin, to lend the purchase money to the plaintiffs, and then broke his oral promise to take on the debt. Shireen and Mazlin began an LCIA arbitration in November 2016. In April 2017 the plaintiffs sued in New York state court for a declaration that the loan agreements were sham agreements, an injunction against their enforcement, and damages under state law. The defendants removed the case to federal court under the New York Convention and the FAA, relying on their res judicata and collateral estoppel defences based on the LCIA awards, and also argued diversity jurisdiction. The plaintiffs moved to remand.

Key holdings

1. Removal authority under 9 U.S.C. § 205 is separate from subject matter jurisdiction under § 203. A federal court needs both. The Second Circuit reads § 203 narrowly: it covers actions to compel arbitration, to confirm or vacate awards, and measures in aid of arbitration. pp. 12–14
2. A defence of res judicata or collateral estoppel based on an LCIA award does not make the plaintiffs' state-law action one 'falling under the Convention' within § 203. The test of whether the defence could 'conceivably affect' the outcome applies only to removal under § 205. The state court had also found that its action was broader than the London arbitration, and the claims extended to AMM and Spiegel. pp. 15–16
3. The separate petition to confirm the awards in the Southern District of New York does not give this Court jurisdiction over the state-law claims. The petition would not resolve all of the claims, and the defendants never asked for the two actions to be consolidated. p. 17
4. There is no diversity jurisdiction. Both plaintiffs are foreign entities, and two of the defendants (the Liberian and BVI companies) are also foreign, so there are aliens on both sides of the case. The defendants offered no evidence of the parties' citizenship. pp. 18–20
5. Remand was recommended, so the Court did not decide the plaintiffs' motion for default. p. 20
6. The Court recommended denying fees and costs. The removal was not objectively unreasonable: Judge Koeltl's earlier remand was expressly without prejudice to removal to the Eastern District, and this time the defendants removed to the proper district. pp. 21–22

Procedural history

1. November 2016Shireen and Mazlin commence an LCIA arbitration against the plaintiffs.
2. 7 April 2017The plaintiffs sue in Supreme Court, Kings County.
3. 23 January 2018LCIA final awards issued in favour of Mazlin against the plaintiffs.
4. 13 March 2018The state court denies the defendants' motion to dismiss.
5. April 2018Mazlin sues in Miami-Dade County, Florida, to confirm the award; that case is later stayed pending the New York action.
6. 8 August 2019First removal, to the Southern District of New York; a petition to recognise and enforce the awards is filed there on 16 August 2019.
7. 11 February 2020By agreement, the Southern District remands the case to state court.
8. 27 February 2020Second removal, to the Eastern District of New York; the plaintiffs move to remand on 30 March 2020 and 8 June 2020.
9. 25 November 2020Report and Recommendation: remand recommended; fees and costs refused.

Tribunal, counsel and experts

Decided by

• Cheryl L. Pollak Judge, U.S. District Court, Eastern District of New York (Chief United States Magistrate Judge; Report and Recommendation)

For the claimant

Yonatan Y. Jacobs

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Keywords

• New York Convention
• Federal Arbitration Act
• 9 U.S.C. § 203
• 9 U.S.C. § 205
• removal
• remand
• subject matter jurisdiction
• diversity jurisdiction
• alienage
• res judicata
• collateral estoppel
• LCIA
• Bender Oil
• Transdniestria
• sham loan agreements
• attorneys' fees
• Spiegel

Summary generated with AI from the published documents — refer to the award for the authoritative text.