1044-00006 · Hargrove, Delacroix & Stern LLP · Legal Research

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: Douglas Carmichael, Francesca Morano, Carlos Espinoza

FROM: Hannah Brinkley

DATE: November 4, 2024

RE: Enforceability of Consent Judgment Provision in Proposed Settlement Agreement — Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County, Commercial Division

C&H Matter No.: 1044-00006

I. Executive Summary

This memorandum analyzes the enforceability under New York law of the proposed consent judgment provision in the Settlement Agreement and Mutual General Release currently being negotiated between our clients, Thalassa Shipping & Logistics SA ("TSL") and Aegean Fortuna Shipholding Ltd. (collectively, "Defendants"), and Northwind Maritime Corporation ("Northwind" or "Plaintiff"). The analysis is prompted by the mediator's term sheet dated October 29, 2024, and the parties' ongoing efforts to reduce the settlement to a definitive written agreement.

The proposed provision, reflected in Section 7.3 of the draft Settlement Agreement, provides that if TSL defaults on any of the three scheduled settlement payments totaling $7,850,000, Northwind may enter a consent judgment against TSL for the unpaid balance of the settlement amount plus interest at the rate of 9% per annum — the New York statutory rate on money judgments under CPLR § 5004. The settlement contemplates a three-payment structure as follows:

• Payment 1: $4,000,000, due within thirty (30) days of the Effective Date;

• Payment 2: $2,000,000, due within ninety (90) days of the Effective Date;

• Payment 3: $1,850,000, due within one hundred fifty (150) days of the Effective Date.

Conclusion: The consent judgment provision is enforceable under New York law, subject to certain drafting requirements and refinements discussed in detail below. New York courts routinely uphold stipulated or consent judgment provisions in settlement agreements, provided that (i) the judgment amount bears a reasonable relationship to the damages or obligations at issue, (ii) the provision is not unconscionable, and (iii) proper procedural safeguards exist for entry of the judgment. The proposed 9% per annum interest rate aligns precisely with the New York statutory rate and is not punitive. The judgment amount — limited to the unpaid balance of the settlement obligation — does not impose any additional penalty or premium beyond what TSL has already contractually agreed to pay.

An additional consideration enhancing enforceability is the companion Stipulation and Order Retaining Jurisdiction to Enforce Settlement, which provides for 180 days of retained jurisdiction by the Supreme Court following the Effective Date. This stipulation, once so-ordered by Justice Chen, ensures that a judicial mechanism exists for the ministerial entry of the consent judgment upon default, even after the parties have otherwise discontinued the underlying action.

This memorandum addresses each of the relevant legal and practical issues, including the distinction between consent judgments and confessions of judgment under CPLR § 3218, the liquidated damages versus penalty analysis, the permissibility of the interest rate, jurisdictional and procedural mechanics, enforcement considerations arising from TSL's status as a Greek Société Anonyme, and recommended drafting refinements. Our specific drafting recommendations are set forth in Section VI.

II. Question Presented

Whether the proposed consent judgment provision in Section 7.3 of the Settlement Agreement — permitting Northwind to enter a consent judgment in the Supreme Court of the State of New York, New York County, for the unpaid balance of the $7,850,000 settlement amount plus 9% per annum interest upon TSL's default on any scheduled settlement payment — is enforceable under New York law.

This principal question encompasses several subsidiary issues:

(a) Whether the consent judgment provision constitutes an unenforceable penalty under New York contract law, or whether it is properly characterized as an enforcement mechanism for a pre-existing contractual obligation;

(b) Whether the 9% per annum interest rate specified in the provision is permissible under New York law, including under CPLR § 5004 and the usury statutes codified in the General Obligations Law and Banking Law;

(c) Whether the Supreme Court must retain jurisdiction following any discontinuance of the underlying action in order for the consent judgment to be entered, and the mechanics by which entry of such a consent judgment is effectuated;

(d) Whether any notice-of-default and cure provisions are required or advisable as a condition precedent to Northwind's right to submit the consent judgment for entry; and

(e) Whether the enforceability of the consent judgment provision is affected by the fact that TSL is a Greek Société Anonyme (Anonymi Etairia) organized under the laws of the Hellenic Republic, with a New York registered agent — Piraeus Global Agency Corp., located at 30 Broad Street, Suite 1410, New York, NY 10004.

III. Brief Answer

The proposed consent judgment provision is enforceable under New York law. New York courts have long recognized and upheld stipulated or consent judgment provisions in settlement agreements as a legitimate and well-established mechanism to secure compliance with the financial terms of a settlement. The provision does not constitute an unenforceable penalty because the judgment amount — the unpaid balance of the settlement obligation plus statutory interest — does not exceed, and indeed merely restates, the original settlement obligation that TSL has voluntarily undertaken. No additional premium, multiplier, or punitive element is imposed upon default.

The 9% per annum interest rate is the statutory rate on money judgments under CPLR § 5004, and its application in this context is squarely within New York's established framework for post-judgment interest. The rate falls well below any applicable usury threshold, and in any event the settlement obligation is not a loan transaction to which the usury statutes would apply.

The enforceability of the consent judgment provision is enhanced by the proposed Stipulation and Order Retaining Jurisdiction for 180 days following the Effective Date. This stipulation — once so-ordered by Justice Chen — provides the procedural vehicle for the ministerial entry of the consent judgment upon TSL's default, thereby obviating the need for Northwind to commence a new action to enforce the settlement.

We recommend certain drafting refinements to the consent judgment provision as currently reflected in the mediator's term sheet. In particular, we recommend that Section 7.3 of the Settlement Agreement include: (i) a notice-and-cure provision requiring Northwind to provide at least five (5) business days' written notice of default before submitting the consent judgment for entry; (ii) a clear specification of the calculation methodology for the unpaid balance and accrued interest; (iii) an express waiver by TSL of all defenses to enforcement of the consent judgment, except for the narrow factual defense that no default has occurred; and (iv) a pre-agreed form of consent judgment attached as an exhibit to the Settlement Agreement. These refinements are discussed in detail in Section VI below.

IV. Factual Background

A. The Underlying Litigation

This memorandum arises in the context of Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County, Commercial Division (Part 49, before the Honorable Lorraine K. Chen, J.S.C.).

The action was commenced by Northwind on or about August 14, 2023, and sounds in breach of contract. Specifically, Northwind alleges that TSL breached the terms of a NYPE 2015 time charter-party (Reference No. NW-TSL-CP-2020-1203), executed on December 3, 2020, for a 36-month term commencing January 15, 2021, relating to the M/V Aegean Fortuna (IMO 9847231, Liberian flag, Supramax dry bulk carrier, 58,200 DWT). The M/V Aegean Fortuna is beneficially owned by Aegean Fortuna Shipholding Ltd., a single-ship holding company incorporated in the Republic of the marshall Islands and a wholly owned subsidiary of TSL.

Northwind's complaint alleges that TSL breached the charter-party in two principal respects. First, Northwind contends that TSL failed to maintain the vessel in a seaworthy condition, resulting in three separate mechanical incidents during the charter period that caused a total of sixty-eight (68) off-hire days. The most significant of these incidents occurred in August 2022 when the vessel experienced a catastrophic failure of its main engine turbocharger while transiting the Mozambique Channel, necessitating emergency drydocking at Durban, South Africa, for approximately 34 days. Second, Northwind alleges that TSL deviated from the agreed trade routes specified in the charter-party, specifically the unauthorized deviation to the port of Maputo, Mozambique, in September 2022, which resulted in additional delay and expenses to the charterer.

Northwind's total claimed damages in the action are $18,300,000, inclusive of off-hire claims, damages for deviation, additional fuel costs, and consequential losses arising from disruption of Northwind's forward freight commitments. TSL filed an answer with counterclaims on November 6, 2023, denying liability and asserting a counterclaim for $1,620,000 in hire that Northwind withheld during and following the mechanical incidents.

Plaintiff's counsel in the action is Hargrove, Delacroix & Stern LLP, led by partner Margaret Delacroix. Our firm, Calderwood & Harkness LLP, represents the Defendants. The action was assigned to Justice Chen's Part 49 and has been subject to the Commercial Division's expedited case management procedures. Discovery was substantially completed by September 2024, and the case was approaching the summary judgment briefing stage when the parties agreed to mediation.

B. The Settlement

Mediation was conducted on October 28 and 29, 2024, before the Honorable Gerald K. Fitzpatrick (Ret.), serving as mediator through Bayside Dispute Resolution Services LLC, located at 140 Broadway, Suite 3200, New York, NY 10005. The mediation was conducted over two full days, with multiple rounds of shuttle diplomacy between the parties and their respective counsel.

A settlement in principle was reached at the conclusion of the second day, October 29, 2024. The essential terms of the settlement were memorialized in a one-page mediator's term sheet, which was signed by counsel for both sides at the conclusion of the mediation session. The mediator's term sheet sets forth the following principal terms:

Total Settlement Amount: $7,850,000, payable by TSL to Northwind in three installments, as follows:

• Payment 1: $4,000,000, due within thirty (30) days of the Effective Date of the Settlement Agreement;

• Payment 2: $2,000,000, due within ninety (90) days of the Effective Date;

• Payment 3: $1,850,000, due within one hundred fifty (150) days of the Effective Date.

Funding Sources: Of the total settlement amount, $5,350,000 is to be funded from TSL's corporate operating accounts, and $2,500,000 is to be contributed by the Oceanus Mutual Protection & Indemnity Club under TSL's P&I insurance policy (Policy No. OCE-P&I-2020-TSL-0047). The Oceanus contribution is subject to approval by the Club's Board of Directors, which is expected at its next regularly scheduled meeting on November 22, 2024. We have been in communication with the Club's claims manager, Andreas Papageorgiou, who has indicated that Board approval is anticipated but cannot be guaranteed.

Mutual General Release: The settlement provides for a mutual general release by all parties of all claims, counterclaims, and cross-claims arising from or related to the charter-party, the M/V Aegean Fortuna, and the underlying litigation.

Escrow: All settlement funds are to be deposited into an escrow account established with Atlantic Fiduciary Trust Company, located at 60 Wall Street, Suite 2800, New York, NY 10005 (Escrow Account No. ESC-2024-NYK-08831). Funds deposited into escrow are to be released to Northwind upon joint instruction of the parties' counsel, consistent with the terms of a separate Escrow Agreement to be executed by the parties and the escrow agent.

discontinuance: A Stipulation of discontinuance with Prejudice is to be filed with the Clerk of the Court within ten (10) business days of receipt by Northwind (or confirmation of release from escrow) of the final settlement payment.

C. The Proposed Consent Judgment Provision

The mediator's term sheet includes, and proposed Section 7.3 of the Settlement Agreement reflects, a consent judgment provision. As currently drafted, the provision states in substance that if TSL defaults on any scheduled settlement payment, Northwind shall have the right to enter a consent judgment against TSL in the Supreme Court of the State of New York, New York County, for the unpaid balance of the $7,850,000 settlement amount, plus interest at the rate of 9% per annum (the New York statutory rate under CPLR § 5004), accruing from the date of the default.

To provide the procedural mechanism for entry of such a consent judgment, the parties have agreed in principle that a Stipulation and Order Retaining Jurisdiction will be submitted to Justice Chen for endorsement. The proposed stipulation provides that the Supreme Court shall retain jurisdiction over the action for a period of 180 days following the Effective Date of the Settlement Agreement, solely for the purpose of enforcing the settlement terms, including the entry of a consent judgment upon TSL's default.

A form of proposed consent judgment is being prepared contemporaneously with the Settlement Agreement. It is contemplated that this form will be attached as an exhibit to the Settlement Agreement, pre-signed by counsel for both parties, so that it may be submitted to Justice Chen's chambers for entry in a ministerial fashion upon default, without the need for further motion practice or substantive adjudication.

The enforceability of this proposed consent judgment provision under New York law is the subject of this memorandum.

V. Discussion

A. New York Law on Consent Judgment Provisions in Settlement Agreements

1. General Enforceability

New York courts have long recognized the enforceability of consent judgment provisions — also referred to in some decisions as "stipulated judgments" or "confessed judgments" — in settlement agreements. Such provisions serve as a well-established and commercially accepted mechanism to secure compliance with settlement terms, particularly where the settlement requires the payment of money over time and the settling plaintiff bears the risk that the defendant will default on future installments.

The doctrinal foundation for enforceability rests on two complementary principles of New York law. First, a settlement agreement is a contract, and its terms are enforceable under general contract law principles. Second, a court that presides over pending litigation retains inherent authority to enforce a settlement agreement made in the course of that litigation, including through the entry of a judgment on stipulation.

The enforceability of stipulations between parties to pending litigation is expressly governed by CPLR § 2104, which provides that an agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not enforceable unless it is in a writing subscribed by the party or the party's attorney. The proposed consent judgment provision, embodied in the Settlement Agreement and supported by the Stipulation and Order Retaining Jurisdiction, satisfies this requirement. Both documents will be executed by counsel for all parties and, in the case of the stipulation, so-ordered by the court.

Courts in the Commercial Division of the Supreme Court, New York County, routinely approve settlements that include consent judgment provisions as enforcement mechanisms. The utility of such provisions is well understood in the commercial litigation context: they provide the settling plaintiff with a streamlined enforcement remedy in the event of default, while permitting the settling defendant to avoid the full cost and burden of continued litigation. The consent judgment provision thus serves an important practical function in facilitating the resolution of commercial disputes.

It is a firmly established principle of New York law that a court has the authority to enforce a settlement agreement reached during the pendency of litigation before it, even where the settlement agreement has not been reduced to a formal stipulation of discontinuance or consent order. Where the parties have stipulated that the court shall retain jurisdiction to enforce the settlement, this authority is even more clearly established. The court's enforcement power extends to the entry of a judgment on the settlement terms, including a consent judgment in the amount of any unpaid settlement obligation.

The key principle underlying all of these authorities is that a settlement agreement is a contract, and consent judgment provisions therein are analyzed under contract law principles, subject to the public policy limitations that apply to all contracts — including the prohibitions against penalties and unconscionable terms, which are discussed in Section V.B below.

2. Distinction from Confessions of Judgment (CPLR § 3218)

An important preliminary issue is the distinction between the proposed consent judgment provision and a "confession of judgment" as that term is used in CPLR § 3218. This distinction is both conceptual and procedural, and careful drafting is required to ensure that the provision is properly characterized.

CPLR § 3218 governs confessions of judgment entered outside the context of pending litigation. Under that statute, a defendant (or debtor) may confess judgment by filing with the county clerk an affidavit executed by the defendant that states the sum for which judgment may be entered, the facts creating the indebtedness, and a statement that the sum confessed is justly due or is to become due. The statute imposes specific procedural requirements, including that the affidavit must be personally executed by the defendant (not merely by the defendant's attorney), and it must set forth the underlying facts with sufficient particularity to demonstrate that the obligation is genuine. A CPLR § 3218 confession of judgment is essentially an ex parte procedure — the creditor presents the debtor's affidavit to the clerk, and the clerk enters judgment without judicial review or an adversarial proceeding.

The proposed consent judgment provision in the Settlement Agreement is not a confession of judgment within the meaning of CPLR § 3218. It arises within the context of pending litigation — Index No. 655421/2023 — and is effectuated through a court-approved stipulation submitted to and so-ordered by the presiding justice, not through an ex parte affidavit filed with the county clerk. The procedural posture is fundamentally different: the consent judgment is a creature of the litigation itself, agreed to by both parties in the course of resolving the dispute, and entered by the court with full knowledge of the circumstances.

This distinction is significant because it means that the specific procedural requirements of CPLR § 3218 — the affidavit requirement, the statement of facts creating the indebtedness, and the personal execution by the defendant — do not apply to the proposed provision. Instead, the provision is governed by the more general principles applicable to stipulations in pending litigation under CPLR § 2104 and the court's inherent authority to enforce settlement agreements.

Nevertheless, careful drafting is needed to ensure that the consent judgment provision is unambiguously characterized as a stipulated judgment within the pending litigation, rather than a standalone confession of judgment. To this end, we recommend that Section 7.3 of the Settlement Agreement expressly reference the pending action by Index Number, reference the Stipulation and Order Retaining Jurisdiction, and specify that the consent judgment is to be entered by Justice Chen (or her successor) in the context of the retained jurisdiction over the settlement. This will foreclose any argument by TSL — or by a judgment creditor of TSL seeking to challenge the consent judgment — that the provision is actually a disguised confession of judgment that fails to comply with CPLR § 3218.

3. Requirements for Enforceability

New York courts have identified several requirements for the enforceability of consent judgment provisions in settlement agreements. While there is no single authoritative checklist, the following principles emerge from the case law:

Reasonable Relationship to the Obligation. The consent judgment amount must bear a reasonable relationship to the actual obligation that the settling defendant has undertaken. A consent judgment provision that would result in a judgment vastly exceeding the underlying obligation could be challenged as a penalty (discussed in Section V.B below). Here, the proposed consent judgment would be for the unpaid balance of the $7,850,000 settlement — that is, the exact amount that TSL has agreed to pay and has not yet paid, plus statutory interest from the date of default. This is facially reasonable and proportionate: the judgment merely converts the unpaid contractual obligation into a court judgment. No additional sum, premium, or multiplier is imposed.

No Unconscionability. The consent judgment provision must not be unconscionable under the standards applicable to commercial contracts in New York. Unconscionability requires a showing that the contract or the challenged provision is both procedurally unconscionable (i.e., the product of an absence of meaningful choice) and substantively unconscionable (i.e., unreasonably favorable to one party). Here, there is no indicia of either procedural or substantive unconscionability. Both parties are sophisticated commercial entities operating in the international shipping industry. TSL is a Greek Société Anonyme with approximately $612 million in annual revenue and a 34-vessel fleet; Northwind is a major international shipping company with approximately $1.2 billion in annual revenue. Both parties are represented by experienced commercial litigation counsel — Calderwood & Harkness LLP for the Defendants and Hargrove, Delacroix & Stern LLP for Northwind. The settlement was negotiated at arm's length through a two-day mediation conducted by a former judge. There is no basis for an unconscionability challenge.

Knowing and Voluntary Assent. Both parties must sign the Settlement Agreement knowingly and voluntarily, with full understanding of the consent judgment consequence. The Settlement Agreement should include representations by TSL that it has read and understood the agreement (including the consent judgment provision), has been advised by counsel, and is entering into the agreement of its own free will. TSL should further represent that the consent judgment provision was negotiated as a material inducement to Northwind's agreement to the installment payment structure, and that TSL understands and accepts the consequences of default. These representations, while standard in commercial settlement agreements, serve the important function of establishing the record that the consent judgment provision was not imposed unilaterally but was a negotiated term of a bargained-for exchange.

B. Whether the Consent Judgment Provision Constitutes an Unenforceable Penalty

1. Liquidated Damages vs. Penalty Analysis (Applicability)

Under New York law, a contractual provision that fixes damages for breach at an amount that is grossly disproportionate to the actual harm suffered, and that is designed to compel performance through the threat of an excessive forfeiture rather than to compensate the non-breaching party, may be struck down as an unenforceable penalty. The classic formulation of the test, articulated by the New York Court of Appeals, provides that a liquidated damages clause is enforceable if the amount is a reasonable forecast of just compensation for the harm caused by the breach and the harm is difficult to estimate at the time of contracting; conversely, a clause is an unenforceable penalty if the amount fixed is plainly disproportionate to the foreseeable harm.

It is critical to recognize, however, that the proposed consent judgment provision is not a liquidated damages clause at all. It does not impose an additional sum beyond the settlement obligation as a consequence of default. Rather, the consent judgment provision converts the unpaid balance of the settlement — an amount that TSL has already agreed to pay — into a judgment of the court. The distinction is fundamental: the consent judgment provision is an enforcement mechanism, not a damages-enhancement mechanism. It does not fix, estimate, or forecast damages for breach; it provides a procedural avenue for reducing an existing contractual payment obligation to a court judgment in the event that TSL fails to perform.

New York courts draw a clear distinction between clauses that accelerate or secure an existing obligation (which are generally enforceable) and clauses that impose additional penalties or forfeitures for breach (which may be unenforceable). The proposed provision falls squarely into the former category. TSL has agreed to pay $7,850,000 in three installments. The consent judgment provision simply provides that if TSL does not pay, Northwind may obtain a court judgment for the amount still owed. This is no different, in substance, from any other judgment that a court would enter following a trial or motion for summary judgment on a breach of contract claim — except that the consent judgment avoids the cost and delay of further litigation.

The addition of 9% per annum interest from the date of default does not render the provision punitive. Nine percent per annum is the statutory rate of interest on money judgments in New York under CPLR § 5004. Any judgment entered by the court — whether a consent judgment, a default judgment, or a judgment following trial — would carry interest at this rate by operation of law. The consent judgment provision merely makes explicit what would otherwise be implied by statute. There is nothing punitive about requiring the debtor to pay interest at the statutory rate on funds that it has failed to pay when due.

It is worth noting, for completeness, that the underlying charter-party itself contained a separate liquidated damages provision in Clause 28 (providing for damages of 150% of off-hire days multiplied by the daily hire rate, subject to a cap of $4,500,000). That charter-party liquidated damages provision — which was one of the contested issues in the underlying litigation — is entirely distinct from the consent judgment provision at issue in this memorandum. The consent judgment provision relates to TSL's obligation to pay the negotiated settlement amount; it does not attempt to liquidate damages for the underlying charter-party breach.

2. Application to the Proposed Provision

Applying the foregoing principles to the specific terms of the proposed provision, the conclusion is clear: the consent judgment provision is not an unenforceable penalty.

The consent judgment amount is limited to the unpaid balance of the $7,850,000 settlement. If, for example, TSL makes Payment 1 ($4,000,000) on time but defaults on Payment 2 ($2,000,000), the consent judgment would be for the remaining $3,850,000 (i.e., the $2,000,000 Payment 2 plus the $1,850,000 Payment 3), plus 9% per annum interest accruing from the date of default on Payment 2. The judgment amount thus corresponds precisely to the unfulfilled portion of TSL's contractual obligation. It does not add a penalty, a surcharge, or any amount above what TSL has already agreed to pay.

Interest at 9% per annum is the default statutory rate applicable to all money judgments in New York. It compensates the judgment creditor for the time value of money during the period between default and satisfaction of the judgment. It is neither a premium nor a penalty — it is, as a matter of law, the baseline rate that applies to all unpaid judgments. To the extent TSL might argue that the 9% rate is excessive relative to prevailing market interest rates, the short answer is that the rate is set by statute (CPLR § 5004), and courts do not have discretion to depart from it in ordinary commercial cases.

In sum, the consent judgment provision is properly characterized as an enforcement mechanism for a pre-existing contractual obligation. It is not an unenforceable penalty under New York law.

C. Interest Rate Analysis

1. CPLR § 5004 — Statutory Rate

CPLR § 5004 provides, in pertinent part, that "[i]nterest shall be at the rate of nine per centum per annum, except where otherwise provided by statute." This rate applies to interest on judgments and on accrued claims from the date of verdict, report, or decision to the date of entry of judgment, and thereafter on the judgment itself. The statutory rate is a fixed rate — it does not fluctuate with market conditions — and applies uniformly to all money judgments in New York courts unless a specific statute provides otherwise.

The proposed consent judgment provision specifies interest at 9% per annum, which precisely mirrors the CPLR § 5004 statutory rate. Accordingly, the interest rate in the proposed provision is presumptively reasonable: it is the rate that would apply to the consent judgment by operation of law, regardless of whether the Settlement Agreement specifically referenced it. The inclusion of the 9% rate in the Settlement Agreement serves a clarifying function and eliminates any ambiguity about the rate applicable to any period between the date of default and the date of actual entry of the consent judgment.

Under the proposed provision, interest would accrue from the date of default — that is, from the date on which a scheduled settlement payment was due but not made (after expiration of any applicable notice-and-cure period). This is consistent with standard New York practice for judgment interest and presents no enforceability concern.

2. No Usury Concern

New York's usury statutes impose caps on interest rates in certain lending and credit transactions. Under General Obligations Law §§ 5-501 and 5-511, the general civil usury limit is 16% per annum. Under Banking Law § 14-a, the criminal usury threshold is 25% per annum — a rate above which the transaction may give rise to criminal liability. Both provisions are directed primarily at loan transactions and credit arrangements.

The 9% per annum rate in the proposed consent judgment provision is well below either usury threshold. At 9%, the rate is just over half of the general civil usury limit and barely more than one-third of the criminal usury ceiling. There is, accordingly, no colorable usury argument.

Moreover, even if the rate were closer to the statutory usury thresholds, the usury statutes would likely not apply to this transaction. The settlement obligation is not a loan, a forbearance, or a credit extension — it is a compromise and settlement of a disputed claim, payable in installments. The New York Court of Appeals has consistently held that the usury statutes are directed at the "lending of money," and that a transaction that does not involve a loan or an extension of credit is not subject to the usury defense. The settlement payment obligation here arises not from a debtor-creditor relationship but from a negotiated resolution of a litigation dispute. TSL is not "borrowing" money from Northwind; it is paying an agreed amount to resolve claims against it. The 9% interest provision is a standard enforcement mechanism, not a disguised lending arrangement.

Accordingly, there is no usury concern associated with the proposed consent judgment provision.

D. Jurisdictional and Procedural Considerations

1. Retention of Jurisdiction

A critical procedural issue bearing on the enforceability of the consent judgment provision is whether the Supreme Court will retain jurisdiction to enter the consent judgment after the underlying action has been discontinued.

As a general rule, upon the filing of a stipulation of discontinuance, the court loses jurisdiction over the matter. A discontinuance with prejudice terminates the action, and the court may no longer exercise judicial authority over the parties or the subject matter of the dispute. This presents an obvious problem for consent judgment provisions: if the action has been discontinued and the court has lost jurisdiction, there is no procedural vehicle for the entry of the consent judgment upon default.

The well-established solution to this problem — and the one contemplated by the parties here — is a stipulation, so-ordered by the court, expressly providing that the court retains jurisdiction to enforce the settlement terms, including the entry of a consent judgment upon default. New York courts have consistently held that where the parties expressly stipulate, and the court so orders, that jurisdiction is retained to enforce a settlement agreement, the court retains the authority to enter a judgment on the settlement terms notwithstanding any subsequent discontinuance of the action.

The proposed Stipulation and Order Retaining Jurisdiction in this case provides that the Supreme Court shall retain jurisdiction over the action for a period of 180 days following the Effective Date of the Settlement Agreement, solely for the purpose of enforcing the settlement terms, including the entry of a consent judgment upon TSL's default. This 180-day period is carefully calculated to encompass all three scheduled settlement payments. Because all three payments fall due within 150 days of the Effective Date (Payment 1 at 30 days, Payment 2 at 90 days, and Payment 3 at 150 days), the 180-day retention period provides a 30-day buffer after the final payment deadline. This buffer is sufficient to permit Northwind to invoke the consent judgment mechanism — including providing the required notice of default and waiting for expiration of the cure period — in the event that TSL defaults on the final payment.

The Stipulation and Order Retaining Jurisdiction must be so-ordered by Justice Chen to be effective. A proposed form has been prepared, dated November 26, 2024, for submission to Justice Chen's chambers in Part 49 at 60 Centre Street, New York, NY 10007. We anticipate that the stipulation will be submitted to chambers concurrently with the executed Settlement Agreement and the proposed form of consent judgment. Based on prior experience with Justice Chen's chambers, we expect that the stipulation will be so-ordered without difficulty, as it is a routine procedural mechanism in the Commercial Division.

2. Mechanics of Entry

The mechanics of entry of the consent judgment upon default are straightforward, provided the proper groundwork is laid in the Settlement Agreement and the Stipulation and Order Retaining Jurisdiction.

Upon TSL's default on a scheduled settlement payment — and after expiration of the notice-and-cure period (discussed in Section V.F below) — Northwind would submit the following to Justice Chen's chambers:

(a) The pre-executed consent judgment form (attached as an exhibit to the Settlement Agreement and pre-signed by counsel for both parties);

(b) An affirmation or affidavit of Northwind's counsel (or, if appropriate, a principal of Northwind) attesting to the fact of default — specifically, that the scheduled payment was not received by the applicable deadline and that the cure period has expired without cure;

(c) A certification or letter from Atlantic Fiduciary Trust Company (the escrow agent) confirming that the required funds were not deposited into Escrow Account No. ESC-2024-NYK-08831 by the applicable deadline; and

(d) A copy of the Stipulation and Order Retaining Jurisdiction, demonstrating that the court retained jurisdiction to enter the judgment.

Upon receipt of this submission, the court would review the papers for compliance with the terms of the Stipulation and Order Retaining Jurisdiction and the Settlement Agreement. If the court is satisfied that a default has occurred and that the conditions for entry of the consent judgment have been met, it would sign and enter the judgment. This is a ministerial act — the court is not called upon to conduct a trial, hear testimony, or resolve contested factual issues. The consent judgment is entered on the basis of the parties' prior agreement, evidenced by the pre-executed consent judgment form and the supporting documentation of default.

Best Practice: To ensure that the entry of the consent judgment is as streamlined and ministerial as possible, the proposed consent judgment form should be pre-agreed and attached as an exhibit to the Settlement Agreement. The form should include blanks for the insertion of (i) the unpaid balance of the settlement amount and (ii) the accrued interest calculated at 9% per annum from the date of default. The mathematical calculation of the unpaid balance should be straightforward and should not require any further litigation, discovery, or expert analysis. By pre-agreeing the form, the parties eliminate any dispute about the format, content, or scope of the judgment and reduce the risk that TSL will contest the entry of the judgment on procedural grounds.

3. Enforcement Against a Foreign Entity

TSL is a Greek Société Anonyme (Anonymi Etairia) organized and existing under the laws of the Hellenic Republic, with its registered headquarters at 42 Akti Miaouli, Piraeus 185 38, Greece. TSL maintains a New York registered agent, Piraeus Global Agency Corp., located at 30 Broad Street, Suite 1410, New York, NY 10004, through which it was served with process in the underlying action.

TSL appeared in and submitted to the jurisdiction of the Supreme Court of the State of New York in Index No. 655421/2023. It filed an answer with counterclaims, participated in discovery, and engaged in mediation — all without raising any challenge to personal jurisdiction or venue. TSL's submission to jurisdiction is further confirmed by the TSL Board resolution dated October 18, 2024, which authorized the settlement on terms up to $8,500,000 and expressly approved TSL's entry into the Settlement Agreement, including the consent judgment provision. The Settlement Agreement will contain representations and warranties by TSL regarding its corporate authority, its capacity to enter into the agreement, and the due authorization of the settlement by its governing body.

A consent judgment entered by the Supreme Court of the State of New York would be enforceable domestically — that is, within the United States — in the same manner as any other New York judgment. Under the Full Faith and Credit Clause of the United States Constitution (Article IV, Section 1) and the implementing statute (28 U.S.C. § 1738), a judgment of the Supreme Court of the State of New York is entitled to recognition and enforcement in every other state. Accordingly, if TSL has assets in other states (including bank accounts, receivables, or other property), Northwind could domesticate and enforce the consent judgment in those jurisdictions.

International enforcement presents additional considerations. If Northwind were required to enforce the consent judgment against TSL's assets in Greece or in other foreign jurisdictions, it would need to commence recognition proceedings in the relevant foreign court. Under Greek law, a New York judgment could be recognized and enforced pursuant to the Greek Code of Civil Procedure (Articles 323 and 905), subject to requirements of reciprocity, public policy consistency, proper service, and finality of the judgment. While an analysis of Greek enforcement procedures is beyond the scope of this memorandum, we note that the enforceability of consent judgments in international recognition proceedings is an additional practical consideration. Greek courts have historically been receptive to recognizing foreign commercial judgments, although the process can be time-consuming and may require the assistance of Greek counsel.

For present purposes, however, the international enforcement question does not affect the enforceability of the consent judgment provision under New York law. The provision is enforceable as a matter of New York contract and procedural law; the question of whether the resulting judgment can be enforced against TSL's foreign assets is a separate and downstream issue.

As a practical matter, domestic enforcement may be sufficient to satisfy the judgment. TSL maintains assets within the United States, including funds that may be held in escrow at Atlantic Fiduciary Trust Company and funds that flow through its New York registered agent, Piraeus Global Agency Corp. Additionally, if the Oceanus P&I Club contribution has been funded but not yet paid to Northwind at the time of default, Northwind may be able to reach those funds through attachment or restraining notice procedures.

E. Waiver of Defenses

To maximize the enforceability of the consent judgment provision and to minimize the risk of collateral litigation at the time of enforcement, the Settlement Agreement should include an express waiver by TSL of any defenses to enforcement of the consent judgment. This waiver should be drafted broadly to encompass, without limitation, the following defenses:

(a) Lack of subject matter jurisdiction;

(b) Lack of personal jurisdiction over TSL;

(d) Insufficiency of process or service of process;

(e) Statute of limitations or laches;

(f) Failure to state a claim or absence of a justiciable controversy;

(g) Any defense that the consent judgment was procured by fraud, duress, or undue influence; and

(h) Any defense based on the form or content of the consent judgment itself, including any objection to the mathematical calculation of the unpaid balance or accrued interest.

TSL should also expressly waive the right to contest the amount of the judgment, which would be limited by the terms of the Settlement Agreement to the unpaid balance of the settlement amount plus 9% per annum interest from the date of default. By waiving the right to contest the amount, TSL eliminates a potential avenue for delay — the filing of objections or motions challenging the calculation of the judgment amount.

An important consideration, however, is that the waiver should be drafted to preserve TSL's right to assert the narrow factual defense that no default has occurred — i.e., that the settlement payment was timely made and that Northwind's assertion of default is incorrect. This is a fundamental due process safeguard: TSL should not be foreclosed from demonstrating that it complied with its obligations and that the consent judgment should not be entered. However, this defense should be narrowly drawn — it should be limited to the factual question of whether the payment was made by the applicable deadline (as determined by the escrow agent's records and the terms of the Settlement Agreement), and it should not be expanded to encompass broader legal defenses to the Settlement Agreement itself.

The waiver clause should also provide that, in the event TSL raises the defense that no default has occurred, the burden of proof shall be on TSL to demonstrate timely payment, and the court may resolve the dispute on the papers (i.e., on the basis of affidavits, escrow agent certifications, and documentary evidence) without an evidentiary hearing, unless the court determines that a hearing is necessary.

F. Notice and Cure Provisions

The mediator's term sheet dated October 29, 2024, is silent on whether TSL is entitled to notice of default and a cure period before Northwind may submit the consent judgment for entry. This silence creates an ambiguity that should be resolved in the definitive Settlement Agreement.

Recommendation: We recommend that Section 7.3 of the Settlement Agreement include a reasonable notice-and-cure provision requiring Northwind to provide written notice of default to TSL and its counsel (Calderwood & Harkness LLP) before Northwind may submit the consent judgment form to the court for entry. Specifically, we recommend a cure period of five (5) business days from the date of Northwind's written notice of default, during which TSL may cure the default by depositing the overdue payment (plus any accrued interest) into the escrow account.

This recommendation is grounded in several considerations:

First, a notice-and-cure provision is standard in commercial settlement agreements, and its inclusion would be consistent with established market practice in sophisticated commercial settlements in the New York Commercial Division. The absence of such a provision could be viewed by the court as an unusual omission and might give TSL grounds to argue that the consent judgment was entered precipitously, particularly in the case of a brief or technical payment delay.

Second, a notice-and-cure period provides a practical safeguard against the entry of a consent judgment based on a technical or administrative delay that does not reflect a genuine default. Wire transfers between international banks can be delayed by processing times, time zone differences, correspondent banking protocols, and compliance checks (including anti-money laundering and sanctions screening). A five-business-day cure period provides a reasonable window for TSL to remedy such delays without triggering the draconian consequence of a consent judgment.

Third, the inclusion of a notice-and-cure provision reduces the risk that TSL will challenge the entry of the consent judgment on equitable grounds, such as the argument that Northwind acted in bad faith by seeking immediate entry of a judgment when TSL's payment was merely a day or two late. By building a notice-and-cure mechanism into the Settlement Agreement, the parties establish a clear, pre-agreed process that eliminates ambiguity and reduces the potential for collateral disputes.

We anticipate that this issue will be the subject of negotiation with Hargrove, Delacroix & Stern LLP. Northwind may seek a shorter cure period (e.g., three (3) business days), arguing that the lengthy installment payment schedule already provides TSL with ample time to arrange funding and that a five-day cure period is excessive. We recommend that TSL insist on no fewer than five (5) business days, which is commercially reasonable and consistent with market practice. A cure period of ten (10) business days — while not unreasonable in some contexts — may be viewed as overly generous given the straightforward nature of the payment obligation, and Northwind is unlikely to agree to a period of that length.

The notice-and-cure provision should specify the method of delivering the default notice. We recommend that notice be delivered by (i) email to designated counsel (with delivery confirmed by read receipt or acknowledgment) and (ii) simultaneously by overnight courier to TSL's principal office in Piraeus and to Calderwood & Harkness LLP's New York office. The cure period should run from the date of delivery of the email notice, with the overnight courier notice serving as a backup.

G. Interaction with Escrow Arrangement

The escrow arrangement established with Atlantic Fiduciary Trust Company is an integral component of the settlement structure, and the consent judgment provision should be drafted to interact seamlessly with it.

Under the proposed terms, all settlement payments are to be deposited by TSL into the escrow account (Escrow Account No. ESC-2024-NYK-08831) maintained at Atlantic Fiduciary Trust Company, located at 60 Wall Street, Suite 2800, New York, NY 10005. Settlement funds held in escrow are to be released to Northwind upon joint instruction of the parties' counsel, in accordance with the terms of a separate Escrow Agreement to be executed by TSL, Northwind, and the escrow agent.

The consent judgment provision should specify with precision what constitutes a "default" for purposes of triggering the consent judgment. We recommend that "default" be defined as the failure by TSL to deposit the required settlement payment into the escrow account by 5:00 p.m. Eastern Time on the applicable payment deadline (or by the end of the cure period, if a notice-and-cure provision is included). This definition ties the default trigger to a verifiable, objective event — the presence or absence of funds in the escrow account — rather than to a more subjective standard that could give rise to factual disputes.

The escrow arrangement provides an important independent verification mechanism for the purpose of establishing default. Atlantic Fiduciary Trust Company, as escrow agent, maintains records of all deposits into and disbursements from the escrow account. In the event of a default, the escrow agent can certify in writing whether the required funds were deposited by the applicable deadline. This certification would be submitted to Justice Chen's chambers as part of the consent judgment submission package (as described in Section V.D.2 above) and would constitute strong evidence of default. By relying on the escrow agent's records, Northwind avoids the need to submit sworn testimony from its own personnel regarding the non-receipt of funds, and the court benefits from the disinterested confirmation of a neutral third party.

We recommend that Martin Schreiber (Vice President, Escrow Services) at Atlantic Fiduciary Trust Company be notified of the consent judgment provision at the time the Escrow Agreement is executed. The escrow agent should understand that it may be called upon to issue default certifications in connection with the consent judgment provision, and the Escrow Agreement should include a provision obligating the escrow agent to issue such certifications promptly upon request by either party. Coordination with Mr. Schreiber's office should be initiated as soon as the principal terms of the Settlement Agreement are finalized.

H. Lender Considerations

TSL's existing debt facilities impose certain notification and covenant obligations that are relevant to the settlement and the consent judgment provision.

TSL is party to a Credit Agreement with Meridian Capital Bank AG, dated April 1, 2019, providing for a $340,000,000 credit facility secured by first-priority vessel mortgages on twenty-two (22) vessels in TSL's fleet. Under Section 8.14 of the Credit Agreement, TSL is required to provide written notification to Meridian of any material litigation settlement exceeding $5,000,000 in value. The $7,850,000 settlement with Northwind exceeds this threshold, and TSL is accordingly required to provide notice to Meridian within five (5) business days of execution of the Settlement Agreement. The designated contact for such notices is Lukas Brandt, Managing Director, Shipping Finance Division, at Meridian's Frankfurt office.

The consent judgment provision itself — as a contingent enforcement mechanism that could result in the entry of a judgment against TSL — may trigger additional covenants under the Credit Agreement. For example, Section 9.02 of the Credit Agreement includes a negative covenant restricting TSL from consenting to the entry of judgments exceeding $2,000,000 without the prior written consent of Meridian (or the Required Lenders, as defined in the Credit Agreement). While the consent judgment is contingent on default and may not constitute a present "judgment" for purposes of the negative covenant, the issue requires careful analysis. A separate internal memorandum — the Lender Notification Compliance Analysis, dated November 18, 2024 — will address these considerations in detail, including whether prior lender consent is required for the consent judgment provision.

In the meantime, we recommend that the consent judgment provision be disclosed to Meridian as part of the settlement notification under Section 8.14 of the Credit Agreement. Full disclosure of the consent judgment mechanism — including its contingent nature and the circumstances that would trigger its enforcement — will avoid any subsequent claim by Meridian that TSL failed to disclose a material contingent liability. Transparency with the lender is particularly important given that a consent judgment, once entered, would constitute an unsecured claim against TSL that could affect the lender's recovery in the event of TSL's insolvency or financial distress.

We note that the interaction between the settlement and TSL's credit facilities is a complex issue that extends beyond the scope of this memorandum. The separate Lender Notification Compliance Analysis will provide a comprehensive treatment of these issues, including the negative covenant analysis, the notification requirements, and any amendments or waivers that may need to be obtained from Meridian.

VI. Drafting Recommendations

Based on the foregoing analysis, we recommend the following drafting refinements to the consent judgment provision and related documents.

A. Section 7.3 Drafting Points

The following points should be addressed in the drafting of Section 7.3 of the Settlement Agreement:

1. Unpaid Balance Calculation. The provision should clearly state that the consent judgment is for the "unpaid balance" of the $7,850,000 settlement amount — not the full $7,850,000 if partial payments have already been made. For example, if TSL timely makes Payment 1 ($4,000,000) but defaults on Payment 2 ($2,000,000), the consent judgment should be for the remaining $3,850,000 (Payments 2 and 3), not $7,850,000. The provision should include a formula or methodology for calculating the unpaid balance that accounts for partial payments previously made.

2. Interest Rate and Accrual Date. The provision should specify that interest accrues at the rate of 9% per annum, computed on a per diem basis, from the date of default on the missed payment (i.e., the date on which the payment was due and not made, or the expiration of the cure period, whichever is later). The calculation methodology should be stated with sufficient specificity to permit mechanical computation of the accrued interest without the need for further negotiation or adjudication.

3. Notice and Cure. Include a notice-and-cure provision requiring Northwind to provide at least five (5) business days' written notice of default to TSL and its counsel (Calderwood & Harkness LLP) before Northwind may submit the consent judgment for entry. The notice should be delivered by email and overnight courier to designated addresses. The cure period runs from the date of delivery of the email notice. If TSL cures the default within the cure period by depositing the overdue payment plus accrued interest into the escrow account, the default shall be deemed cured and the consent judgment shall not be entered.

4. Consent Judgment Form. Attach the pre-agreed form of consent judgment as an exhibit to the Settlement Agreement (e.g., Exhibit D). The form should be pre-signed by counsel for both parties and should include blanks for insertion of the unpaid balance and accrued interest, together with a calculation schedule.

5. Waiver of Defenses. Include an express waiver by TSL of all defenses to enforcement of the consent judgment, except for the narrow factual defense that no default has occurred (i.e., that the payment was timely made). The waiver should encompass, without limitation, defenses based on jurisdiction, venue, statute of limitations, and the form or content of the consent judgment.

6. Cross-Reference to Stipulation. The provision should expressly reference the Stipulation and Order Retaining Jurisdiction (attached as a separate exhibit to the Settlement Agreement) and should specify that entry of the consent judgment is the parties' agreed enforcement mechanism in the event of default.

7. Exclusive Remedy. State that upon entry of the consent judgment, all other remedies for breach of the Settlement Agreement (except execution on the judgment itself) are waived by Northwind, to avoid the risk of double recovery. This provision protects TSL by ensuring that Northwind cannot simultaneously pursue the consent judgment and a separate breach of contract action for the same unpaid settlement amounts.

8. Joint Liability Clarification. Clarify whether TSL's payment obligation is joint with Aegean Fortuna Shipholding Ltd. (the named co-defendant in the underlying action) or, alternatively, specify that TSL alone bears the payment obligation and is subject to the consent judgment. If the obligation is intended to be joint and several, the Settlement Agreement should so state, and the consent judgment form should name both entities as judgment debtors. If the obligation is TSL's alone, the Settlement Agreement should specify this, and Aegean Fortuna's role should be limited to the mutual release provisions.

B. Proposed Consent Judgment Form

The proposed consent judgment form, to be attached as an exhibit to the Settlement Agreement, should include the following elements:

1. Caption. The judgment should be captioned Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County, Commercial Division.

2. Recitals. The judgment should include recitals referencing (a) the Settlement Agreement (by title and date), (b) the three-payment schedule, (c) the specific payment that was not made and the date of default, and (d) the Stipulation and Order Retaining Jurisdiction that provides the court with authority to enter the judgment.

3. Judgment Amount. The operative paragraph should provide for the entry of judgment in favor of Northwind and against TSL in the amount of $[blank] — representing the unpaid balance of the settlement amount — plus accrued interest of $[blank], calculated at 9% per annum from [date of default] through [date of entry of judgment], for a total judgment of $[blank]. A calculation schedule should be appended.

4. Costs of Enforcement. The judgment should provide for reasonable costs of enforcement, including attorney's fees incurred in connection with the submission of the consent judgment and any subsequent execution proceedings, to the extent permitted by the Settlement Agreement and applicable law.

5. Signature Lines. The judgment form should include signature lines for (a) the Honorable Lorraine K. Chen, J.S.C. (or her successor), (b) counsel for Northwind (Hargrove, Delacroix & Stern LLP), and (c) counsel for TSL (Calderwood & Harkness LLP). Counsel's signatures should be affixed at the time the Settlement Agreement is executed; Justice Chen's signature would be affixed at the time the judgment is entered.

C. Stipulation and Order Retaining Jurisdiction

The proposed Stipulation and Order Retaining Jurisdiction should be reviewed with the following considerations in mind:

1. 180-Day Retention Period. Confirm that the 180-day retention period is adequate. As noted above, all three settlement payments fall due within 150 days of the Effective Date, providing a 30-day buffer for the consent judgment mechanism. However, the buffer is relatively tight: if TSL defaults on Payment 3 (due at day 150), and Northwind provides five business days' notice of default, and the cure period expires without cure, Northwind would be submitting the consent judgment for entry approximately 157–160 day

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Douglas Carmichael, Francesca Morano, Carlos Espinoza
FROM: Hannah Brinkley
DATE: November 4, 2024
RE: Enforceability of Consent Judgment Provision in Proposed Settlement Agreement — Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County, Commercial Division
C&H Matter No.: 1044-00006
I. Executive Summary
This memorandum analyzes the enforceability under New York law of the proposed consent judgment provision in the Settlement Agreement and Mutual General Release currently being negotiated between our clients, Thalassa Shipping & Logistics SA ("TSL") and Aegean Fortuna Shipholding Ltd. (collectively, "Defendants"), and Northwind Maritime Corporation ("Northwind" or "Plaintiff"). The analysis is prompted by the mediator's term sheet dated October 29, 2024, and the parties' ongoing efforts to reduce the settlement to a definitive written agreement.
The proposed provision, reflected in Section 7.3 of the draft Settlement Agreement, provides that if TSL defaults on any of the three scheduled settlement payments totaling $7,850,000, Northwind may enter a consent judgment against TSL for the unpaid balance of the settlement amount plus interest at the rate of 9% per annum — the New York statutory rate on money judgments under CPLR § 5004. The settlement contemplates a three-payment structure as follows:
• Payment 1: $4,000,000, due within thirty (30) days of the Effective Date;
• Payment 2: $2,000,000, due within ninety (90) days of the Effective Date;
• Payment 3: $1,850,000, due within one hundred fifty (150) days of the Effective Date.
Conclusion: The consent judgment provision is enforceable under New York law, subject to certain drafting requirements and refinements discussed in detail below. New York courts routinely uphold stipulated or consent judgment provisions in settlement agreements, provided that (i) the judgment amount bears a reasonable relationship to the damages or obligations at issue, (ii) the provision is not unconscionable, and (iii) proper procedural safeguards exist for entry of the judgment. The proposed 9% per annum interest rate aligns precisely with the New York statutory rate and is not punitive. The judgment amount — limited to the unpaid balance of the settlement obligation — does not impose any additional penalty or premium beyond what TSL has already contractually agreed to pay.
An additional consideration enhancing enforceability is the companion Stipulation and Order Retaining Jurisdiction to Enforce Settlement, which provides for 180 days of retained jurisdiction by the Supreme Court following the Effective Date. This stipulation, once so-ordered by Justice Chen, ensures that a judicial mechanism exists for the ministerial entry of the consent judgment upon default, even after the parties have otherwise discontinued the underlying action.
This memorandum addresses each of the relevant legal and practical issues, including the distinction between consent judgments and confessions of judgment under CPLR § 3218, the liquidated damages versus penalty analysis, the permissibility of the interest rate, jurisdictional and procedural mechanics, enforcement considerations arising from TSL's status as a Greek Société Anonyme, and recommended drafting refinements. Our specific drafting recommendations are set forth in Section VI.
II. Question Presented
Whether the proposed consent judgment provision in Section 7.3 of the Settlement Agreement — permitting Northwind to enter a consent judgment in the Supreme Court of the State of New York, New York County, for the unpaid balance of the $7,850,000 settlement amount plus 9% per annum interest upon TSL's default on any scheduled settlement payment — is enforceable under New York law.
This principal question encompasses several subsidiary issues:
(a) Whether the consent judgment provision constitutes an unenforceable penalty under New York contract law, or whether it is properly characterized as an enforcement mechanism for a pre-existing contractual obligation;
(b) Whether the 9% per annum interest rate specified in the provision is permissible under New York law, including under CPLR § 5004 and the usury statutes codified in the General Obligations Law and Banking Law;
(c) Whether the Supreme Court must retain jurisdiction following any discontinuance of the underlying action in order for the consent judgment to be entered, and the mechanics by which entry of such a consent judgment is effectuated;
(d) Whether any notice-of-default and cure provisions are required or advisable as a condition precedent to Northwind's right to submit the consent judgment for entry; and
(e) Whether the enforceability of the consent judgment provision is affected by the fact that TSL is a Greek Société Anonyme (Anonymi Etairia) organized under the laws of the Hellenic Republic, with a New York registered agent — Piraeus Global Agency Corp., located at 30 Broad Street, Suite 1410, New York, NY 10004.
III. Brief Answer
The proposed consent judgment provision is enforceable under New York law. New York courts have long recognized and upheld stipulated or consent judgment provisions in settlement agreements as a legitimate and well-established mechanism to secure compliance with the financial terms of a settlement. The provision does not constitute an unenforceable penalty because the judgment amount — the unpaid balance of the settlement obligation plus statutory interest — does not exceed, and indeed merely restates, the original settlement obligation that TSL has voluntarily undertaken. No additional premium, multiplier, or punitive element is imposed upon default.
The 9% per annum interest rate is the statutory rate on money judgments under CPLR § 5004, and its application in this context is squarely within New York's established framework for post-judgment interest. The rate falls well below any applicable usury threshold, and in any event the settlement obligation is not a loan transaction to which the usury statutes would apply.
The enforceability of the consent judgment provision is enhanced by the proposed Stipulation and Order Retaining Jurisdiction for 180 days following the Effective Date. This stipulation — once so-ordered by Justice Chen — provides the procedural vehicle for the ministerial entry of the consent judgment upon TSL's default, thereby obviating the need for Northwind to commence a new action to enforce the settlement.
We recommend certain drafting refinements to the consent judgment provision as currently reflected in the mediator's term sheet. In particular, we recommend that Section 7.3 of the Settlement Agreement include: (i) a notice-and-cure provision requiring Northwind to provide at least five (5) business days' written notice of default before submitting the consent judgment for entry; (ii) a clear specification of the calculation methodology for the unpaid balance and accrued interest; (iii) an express waiver by TSL of all defenses to enforcement of the consent judgment, except for the narrow factual defense that no default has occurred; and (iv) a pre-agreed form of consent judgment attached as an exhibit to the Settlement Agreement. These refinements are discussed in detail in Section VI below.
IV. Factual Background
A. The Underlying Litigation
This memorandum arises in the context of Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County, Commercial Division (Part 49, before the Honorable Lorraine K. Chen, J.S.C.).
The action was commenced by Northwind on or about August 14, 2023, and sounds in breach of contract. Specifically, Northwind alleges that TSL breached the terms of a NYPE 2015 time charter-party (Reference No. NW-TSL-CP-2020-1203), executed on December 3, 2020, for a 36-month term commencing January 15, 2021, relating to the M/V Aegean Fortuna (IMO 9847231, Liberian flag, Supramax dry bulk carrier, 58,200 DWT). The M/V Aegean Fortuna is beneficially owned by Aegean Fortuna Shipholding Ltd., a single-ship holding company incorporated in the Republic of the marshall Islands and a wholly owned subsidiary of TSL.
Northwind's complaint alleges that TSL breached the charter-party in two principal respects. First, Northwind contends that TSL failed to maintain the vessel in a seaworthy condition, resulting in three separate mechanical incidents during the charter period that caused a total of sixty-eight (68) off-hire days. The most significant of these incidents occurred in August 2022 when the vessel experienced a catastrophic failure of its main engine turbocharger while transiting the Mozambique Channel, necessitating emergency drydocking at Durban, South Africa, for approximately 34 days. Second, Northwind alleges that TSL deviated from the agreed trade routes specified in the charter-party, specifically the unauthorized deviation to the port of Maputo, Mozambique, in September 2022, which resulted in additional delay and expenses to the charterer.
Northwind's total claimed damages in the action are $18,300,000, inclusive of off-hire claims, damages for deviation, additional fuel costs, and consequential losses arising from disruption of Northwind's forward freight commitments. TSL filed an answer with counterclaims on November 6, 2023, denying liability and asserting a counterclaim for $1,620,000 in hire that Northwind withheld during and following the mechanical incidents.
Plaintiff's counsel in the action is Hargrove, Delacroix & Stern LLP, led by partner Margaret Delacroix. Our firm, Calderwood & Harkness LLP, represents the Defendants. The action was assigned to Justice Chen's Part 49 and has been subject to the Commercial Division's expedited case management procedures. Discovery was substantially completed by September 2024, and the case was approaching the summary judgment briefing stage when the parties agreed to mediation.
B. The Settlement
Mediation was conducted on October 28 and 29, 2024, before the Honorable Gerald K. Fitzpatrick (Ret.), serving as mediator through Bayside Dispute Resolution Services LLC, located at 140 Broadway, Suite 3200, New York, NY 10005. The mediation was conducted over two full days, with multiple rounds of shuttle diplomacy between the parties and their respective counsel.
A settlement in principle was reached at the conclusion of the second day, October 29, 2024. The essential terms of the settlement were memorialized in a one-page mediator's term sheet, which was signed by counsel for both sides at the conclusion of the mediation session. The mediator's term sheet sets forth the following principal terms:
Total Settlement Amount: $7,850,000, payable by TSL to Northwind in three installments, as follows:
• Payment 1: $4,000,000, due within thirty (30) days of the Effective Date of the Settlement Agreement;
• Payment 2: $2,000,000, due within ninety (90) days of the Effective Date;
• Payment 3: $1,850,000, due within one hundred fifty (150) days of the Effective Date.
Funding Sources: Of the total settlement amount, $5,350,000 is to be funded from TSL's corporate operating accounts, and $2,500,000 is to be contributed by the Oceanus Mutual Protection & Indemnity Club under TSL's P&I insurance policy (Policy No. OCE-P&I-2020-TSL-0047). The Oceanus contribution is subject to approval by the Club's Board of Directors, which is expected at its next regularly scheduled meeting on November 22, 2024. We have been in communication with the Club's claims manager, Andreas Papageorgiou, who has indicated that Board approval is anticipated but cannot be guaranteed.
Mutual General Release: The settlement provides for a mutual general release by all parties of all claims, counterclaims, and cross-claims arising from or related to the charter-party, the M/V Aegean Fortuna, and the underlying litigation.
Escrow: All settlement funds are to be deposited into an escrow account established with Atlantic Fiduciary Trust Company, located at 60 Wall Street, Suite 2800, New York, NY 10005 (Escrow Account No. ESC-2024-NYK-08831). Funds deposited into escrow are to be released to Northwind upon joint instruction of the parties' counsel, consistent with the terms of a separate Escrow Agreement to be executed by the parties and the escrow agent.
discontinuance: A Stipulation of discontinuance with Prejudice is to be filed with the Clerk of the Court within ten (10) business days of receipt by Northwind (or confirmation of release from escrow) of the final settlement payment.
C. The Proposed Consent Judgment Provision
The mediator's term sheet includes, and proposed Section 7.3 of the Settlement Agreement reflects, a consent judgment provision. As currently drafted, the provision states in substance that if TSL defaults on any scheduled settlement payment, Northwind shall have the right to enter a consent judgment against TSL in the Supreme Court of the State of New York, New York County, for the unpaid balance of the $7,850,000 settlement amount, plus interest at the rate of 9% per annum (the New York statutory rate under CPLR § 5004), accruing from the date of the default.
To provide the procedural mechanism for entry of such a consent judgment, the parties have agreed in principle that a Stipulation and Order Retaining Jurisdiction will be submitted to Justice Chen for endorsement. The proposed stipulation provides that the Supreme Court shall retain jurisdiction over the action for a period of 180 days following the Effective Date of the Settlement Agreement, solely for the purpose of enforcing the settlement terms, including the entry of a consent judgment upon TSL's default.
A form of proposed consent judgment is being prepared contemporaneously with the Settlement Agreement. It is contemplated that this form will be attached as an exhibit to the Settlement Agreement, pre-signed by counsel for both parties, so that it may be submitted to Justice Chen's chambers for entry in a ministerial fashion upon default, without the need for further motion practice or substantive adjudication.
The enforceability of this proposed consent judgment provision under New York law is the subject of this memorandum.
V. Discussion
A. New York Law on Consent Judgment Provisions in Settlement Agreements
1. General Enforceability
New York courts have long recognized the enforceability of consent judgment provisions — also referred to in some decisions as "stipulated judgments" or "confessed judgments" — in settlement agreements. Such provisions serve as a well-established and commercially accepted mechanism to secure compliance with settlement terms, particularly where the settlement requires the payment of money over time and the settling plaintiff bears the risk that the defendant will default on future installments.
The doctrinal foundation for enforceability rests on two complementary principles of New York law. First, a settlement agreement is a contract, and its terms are enforceable under general contract law principles. Second, a court that presides over pending litigation retains inherent authority to enforce a settlement agreement made in the course of that litigation, including through the entry of a judgment on stipulation.
The enforceability of stipulations between parties to pending litigation is expressly governed by CPLR § 2104, which provides that an agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not enforceable unless it is in a writing subscribed by the party or the party's attorney. The proposed consent judgment provision, embodied in the Settlement Agreement and supported by the Stipulation and Order Retaining Jurisdiction, satisfies this requirement. Both documents will be executed by counsel for all parties and, in the case of the stipulation, so-ordered by the court.
Courts in the Commercial Division of the Supreme Court, New York County, routinely approve settlements that include consent judgment provisions as enforcement mechanisms. The utility of such provisions is well understood in the commercial litigation context: they provide the settling plaintiff with a streamlined enforcement remedy in the event of default, while permitting the settling defendant to avoid the full cost and burden of continued litigation. The consent judgment provision thus serves an important practical function in facilitating the resolution of commercial disputes.
It is a firmly established principle of New York law that a court has the authority to enforce a settlement agreement reached during the pendency of litigation before it, even where the settlement agreement has not been reduced to a formal stipulation of discontinuance or consent order. Where the parties have stipulated that the court shall retain jurisdiction to enforce the settlement, this authority is even more clearly established. The court's enforcement power extends to the entry of a judgment on the settlement terms, including a consent judgment in the amount of any unpaid settlement obligation.
The key principle underlying all of these authorities is that a settlement agreement is a contract, and consent judgment provisions therein are analyzed under contract law principles, subject to the public policy limitations that apply to all contracts — including the prohibitions against penalties and unconscionable terms, which are discussed in Section V.B below.
2. Distinction from Confessions of Judgment (CPLR § 3218)
An important preliminary issue is the distinction between the proposed consent judgment provision and a "confession of judgment" as that term is used in CPLR § 3218. This distinction is both conceptual and procedural, and careful drafting is required to ensure that the provision is properly characterized.
CPLR § 3218 governs confessions of judgment entered outside the context of pending litigation. Under that statute, a defendant (or debtor) may confess judgment by filing with the county clerk an affidavit executed by the defendant that states the sum for which judgment may be entered, the facts creating the indebtedness, and a statement that the sum confessed is justly due or is to become due. The statute imposes specific procedural requirements, including that the affidavit must be personally executed by the defendant (not merely by the defendant's attorney), and it must set forth the underlying facts with sufficient particularity to demonstrate that the obligation is genuine. A CPLR § 3218 confession of judgment is essentially an ex parte procedure — the creditor presents the debtor's affidavit to the clerk, and the clerk enters judgment without judicial review or an adversarial proceeding.
The proposed consent judgment provision in the Settlement Agreement is not a confession of judgment within the meaning of CPLR § 3218. It arises within the context of pending litigation — Index No. 655421/2023 — and is effectuated through a court-approved stipulation submitted to and so-ordered by the presiding justice, not through an ex parte affidavit filed with the county clerk. The procedural posture is fundamentally different: the consent judgment is a creature of the litigation itself, agreed to by both parties in the course of resolving the dispute, and entered by the court with full knowledge of the circumstances.
This distinction is significant because it means that the specific procedural requirements of CPLR § 3218 — the affidavit requirement, the statement of facts creating the indebtedness, and the personal execution by the defendant — do not apply to the proposed provision. Instead, the provision is governed by the more general principles applicable to stipulations in pending litigation under CPLR § 2104 and the court's inherent authority to enforce settlement agreements.
Nevertheless, careful drafting is needed to ensure that the consent judgment provision is unambiguously characterized as a stipulated judgment within the pending litigation, rather than a standalone confession of judgment. To this end, we recommend that Section 7.3 of the Settlement Agreement expressly reference the pending action by Index Number, reference the Stipulation and Order Retaining Jurisdiction, and specify that the consent judgment is to be entered by Justice Chen (or her successor) in the context of the retained jurisdiction over the settlement. This will foreclose any argument by TSL — or by a judgment creditor of TSL seeking to challenge the consent judgment — that the provision is actually a disguised confession of judgment that fails to comply with CPLR § 3218.
3. Requirements for Enforceability
New York courts have identified several requirements for the enforceability of consent judgment provisions in settlement agreements. While there is no single authoritative checklist, the following principles emerge from the case law:
Reasonable Relationship to the Obligation. The consent judgment amount must bear a reasonable relationship to the actual obligation that the settling defendant has undertaken. A consent judgment provision that would result in a judgment vastly exceeding the underlying obligation could be challenged as a penalty (discussed in Section V.B below). Here, the proposed consent judgment would be for the unpaid balance of the $7,850,000 settlement — that is, the exact amount that TSL has agreed to pay and has not yet paid, plus statutory interest from the date of default. This is facially reasonable and proportionate: the judgment merely converts the unpaid contractual obligation into a court judgment. No additional sum, premium, or multiplier is imposed.
No Unconscionability. The consent judgment provision must not be unconscionable under the standards applicable to commercial contracts in New York. Unconscionability requires a showing that the contract or the challenged provision is both procedurally unconscionable (i.e., the product of an absence of meaningful choice) and substantively unconscionable (i.e., unreasonably favorable to one party). Here, there is no indicia of either procedural or substantive unconscionability. Both parties are sophisticated commercial entities operating in the international shipping industry. TSL is a Greek Société Anonyme with approximately $612 million in annual revenue and a 34-vessel fleet; Northwind is a major international shipping company with approximately $1.2 billion in annual revenue. Both parties are represented by experienced commercial litigation counsel — Calderwood & Harkness LLP for the Defendants and Hargrove, Delacroix & Stern LLP for Northwind. The settlement was negotiated at arm's length through a two-day mediation conducted by a former judge. There is no basis for an unconscionability challenge.
Knowing and Voluntary Assent. Both parties must sign the Settlement Agreement knowingly and voluntarily, with full understanding of the consent judgment consequence. The Settlement Agreement should include representations by TSL that it has read and understood the agreement (including the consent judgment provision), has been advised by counsel, and is entering into the agreement of its own free will. TSL should further represent that the consent judgment provision was negotiated as a material inducement to Northwind's agreement to the installment payment structure, and that TSL understands and accepts the consequences of default. These representations, while standard in commercial settlement agreements, serve the important function of establishing the record that the consent judgment provision was not imposed unilaterally but was a negotiated term of a bargained-for exchange.
B. Whether the Consent Judgment Provision Constitutes an Unenforceable Penalty
1. Liquidated Damages vs. Penalty Analysis (Applicability)
Under New York law, a contractual provision that fixes damages for breach at an amount that is grossly disproportionate to the actual harm suffered, and that is designed to compel performance through the threat of an excessive forfeiture rather than to compensate the non-breaching party, may be struck down as an unenforceable penalty. The classic formulation of the test, articulated by the New York Court of Appeals, provides that a liquidated damages clause is enforceable if the amount is a reasonable forecast of just compensation for the harm caused by the breach and the harm is difficult to estimate at the time of contracting; conversely, a clause is an unenforceable penalty if the amount fixed is plainly disproportionate to the foreseeable harm.
It is critical to recognize, however, that the proposed consent judgment provision is not a liquidated damages clause at all. It does not impose an additional sum beyond the settlement obligation as a consequence of default. Rather, the consent judgment provision converts the unpaid balance of the settlement — an amount that TSL has already agreed to pay — into a judgment of the court. The distinction is fundamental: the consent judgment provision is an enforcement mechanism, not a damages-enhancement mechanism. It does not fix, estimate, or forecast damages for breach; it provides a procedural avenue for reducing an existing contractual payment obligation to a court judgment in the event that TSL fails to perform.
New York courts draw a clear distinction between clauses that accelerate or secure an existing obligation (which are generally enforceable) and clauses that impose additional penalties or forfeitures for breach (which may be unenforceable). The proposed provision falls squarely into the former category. TSL has agreed to pay $7,850,000 in three installments. The consent judgment provision simply provides that if TSL does not pay, Northwind may obtain a court judgment for the amount still owed. This is no different, in substance, from any other judgment that a court would enter following a trial or motion for summary judgment on a breach of contract claim — except that the consent judgment avoids the cost and delay of further litigation.
The addition of 9% per annum interest from the date of default does not render the provision punitive. Nine percent per annum is the statutory rate of interest on money judgments in New York under CPLR § 5004. Any judgment entered by the court — whether a consent judgment, a default judgment, or a judgment following trial — would carry interest at this rate by operation of law. The consent judgment provision merely makes explicit what would otherwise be implied by statute. There is nothing punitive about requiring the debtor to pay interest at the statutory rate on funds that it has failed to pay when due.
It is worth noting, for completeness, that the underlying charter-party itself contained a separate liquidated damages provision in Clause 28 (providing for damages of 150% of off-hire days multiplied by the daily hire rate, subject to a cap of $4,500,000). That charter-party liquidated damages provision — which was one of the contested issues in the underlying litigation — is entirely distinct from the consent judgment provision at issue in this memorandum. The consent judgment provision relates to TSL's obligation to pay the negotiated settlement amount; it does not attempt to liquidate damages for the underlying charter-party breach.
2. Application to the Proposed Provision
Applying the foregoing principles to the specific terms of the proposed provision, the conclusion is clear: the consent judgment provision is not an unenforceable penalty.
The consent judgment amount is limited to the unpaid balance of the $7,850,000 settlement. If, for example, TSL makes Payment 1 ($4,000,000) on time but defaults on Payment 2 ($2,000,000), the consent judgment would be for the remaining $3,850,000 (i.e., the $2,000,000 Payment 2 plus the $1,850,000 Payment 3), plus 9% per annum interest accruing from the date of default on Payment 2. The judgment amount thus corresponds precisely to the unfulfilled portion of TSL's contractual obligation. It does not add a penalty, a surcharge, or any amount above what TSL has already agreed to pay.
Interest at 9% per annum is the default statutory rate applicable to all money judgments in New York. It compensates the judgment creditor for the time value of money during the period between default and satisfaction of the judgment. It is neither a premium nor a penalty — it is, as a matter of law, the baseline rate that applies to all unpaid judgments. To the extent TSL might argue that the 9% rate is excessive relative to prevailing market interest rates, the short answer is that the rate is set by statute (CPLR § 5004), and courts do not have discretion to depart from it in ordinary commercial cases.
In sum, the consent judgment provision is properly characterized as an enforcement mechanism for a pre-existing contractual obligation. It is not an unenforceable penalty under New York law.
C. Interest Rate Analysis
1. CPLR § 5004 — Statutory Rate
CPLR § 5004 provides, in pertinent part, that "[i]nterest shall be at the rate of nine per centum per annum, except where otherwise provided by statute." This rate applies to interest on judgments and on accrued claims from the date of verdict, report, or decision to the date of entry of judgment, and thereafter on the judgment itself. The statutory rate is a fixed rate — it does not fluctuate with market conditions — and applies uniformly to all money judgments in New York courts unless a specific statute provides otherwise.
The proposed consent judgment provision specifies interest at 9% per annum, which precisely mirrors the CPLR § 5004 statutory rate. Accordingly, the interest rate in the proposed provision is presumptively reasonable: it is the rate that would apply to the consent judgment by operation of law, regardless of whether the Settlement Agreement specifically referenced it. The inclusion of the 9% rate in the Settlement Agreement serves a clarifying function and eliminates any ambiguity about the rate applicable to any period between the date of default and the date of actual entry of the consent judgment.
Under the proposed provision, interest would accrue from the date of default — that is, from the date on which a scheduled settlement payment was due but not made (after expiration of any applicable notice-and-cure period). This is consistent with standard New York practice for judgment interest and presents no enforceability concern.
2. No Usury Concern
New York's usury statutes impose caps on interest rates in certain lending and credit transactions. Under General Obligations Law §§ 5-501 and 5-511, the general civil usury limit is 16% per annum. Under Banking Law § 14-a, the criminal usury threshold is 25% per annum — a rate above which the transaction may give rise to criminal liability. Both provisions are directed primarily at loan transactions and credit arrangements.
The 9% per annum rate in the proposed consent judgment provision is well below either usury threshold. At 9%, the rate is just over half of the general civil usury limit and barely more than one-third of the criminal usury ceiling. There is, accordingly, no colorable usury argument.
Moreover, even if the rate were closer to the statutory usury thresholds, the usury statutes would likely not apply to this transaction. The settlement obligation is not a loan, a forbearance, or a credit extension — it is a compromise and settlement of a disputed claim, payable in installments. The New York Court of Appeals has consistently held that the usury statutes are directed at the "lending of money," and that a transaction that does not involve a loan or an extension of credit is not subject to the usury defense. The settlement payment obligation here arises not from a debtor-creditor relationship but from a negotiated resolution of a litigation dispute. TSL is not "borrowing" money from Northwind; it is paying an agreed amount to resolve claims against it. The 9% interest provision is a standard enforcement mechanism, not a disguised lending arrangement.
Accordingly, there is no usury concern associated with the proposed consent judgment provision.
D. Jurisdictional and Procedural Considerations
1. Retention of Jurisdiction
A critical procedural issue bearing on the enforceability of the consent judgment provision is whether the Supreme Court will retain jurisdiction to enter the consent judgment after the underlying action has been discontinued.
As a general rule, upon the filing of a stipulation of discontinuance, the court loses jurisdiction over the matter. A discontinuance with prejudice terminates the action, and the court may no longer exercise judicial authority over the parties or the subject matter of the dispute. This presents an obvious problem for consent judgment provisions: if the action has been discontinued and the court has lost jurisdiction, there is no procedural vehicle for the entry of the consent judgment upon default.
The well-established solution to this problem — and the one contemplated by the parties here — is a stipulation, so-ordered by the court, expressly providing that the court retains jurisdiction to enforce the settlement terms, including the entry of a consent judgment upon default. New York courts have consistently held that where the parties expressly stipulate, and the court so orders, that jurisdiction is retained to enforce a settlement agreement, the court retains the authority to enter a judgment on the settlement terms notwithstanding any subsequent discontinuance of the action.
The proposed Stipulation and Order Retaining Jurisdiction in this case provides that the Supreme Court shall retain jurisdiction over the action for a period of 180 days following the Effective Date of the Settlement Agreement, solely for the purpose of enforcing the settlement terms, including the entry of a consent judgment upon TSL's default. This 180-day period is carefully calculated to encompass all three scheduled settlement payments. Because all three payments fall due within 150 days of the Effective Date (Payment 1 at 30 days, Payment 2 at 90 days, and Payment 3 at 150 days), the 180-day retention period provides a 30-day buffer after the final payment deadline. This buffer is sufficient to permit Northwind to invoke the consent judgment mechanism — including providing the required notice of default and waiting for expiration of the cure period — in the event that TSL defaults on the final payment.
The Stipulation and Order Retaining Jurisdiction must be so-ordered by Justice Chen to be effective. A proposed form has been prepared, dated November 26, 2024, for submission to Justice Chen's chambers in Part 49 at 60 Centre Street, New York, NY 10007. We anticipate that the stipulation will be submitted to chambers concurrently with the executed Settlement Agreement and the proposed form of consent judgment. Based on prior experience with Justice Chen's chambers, we expect that the stipulation will be so-ordered without difficulty, as it is a routine procedural mechanism in the Commercial Division.
2. Mechanics of Entry
The mechanics of entry of the consent judgment upon default are straightforward, provided the proper groundwork is laid in the Settlement Agreement and the Stipulation and Order Retaining Jurisdiction.
Upon TSL's default on a scheduled settlement payment — and after expiration of the notice-and-cure period (discussed in Section V.F below) — Northwind would submit the following to Justice Chen's chambers:
(a) The pre-executed consent judgment form (attached as an exhibit to the Settlement Agreement and pre-signed by counsel for both parties);
(b) An affirmation or affidavit of Northwind's counsel (or, if appropriate, a principal of Northwind) attesting to the fact of default — specifically, that the scheduled payment was not received by the applicable deadline and that the cure period has expired without cure;
(c) A certification or letter from Atlantic Fiduciary Trust Company (the escrow agent) confirming that the required funds were not deposited into Escrow Account No. ESC-2024-NYK-08831 by the applicable deadline; and
(d) A copy of the Stipulation and Order Retaining Jurisdiction, demonstrating that the court retained jurisdiction to enter the judgment.
Upon receipt of this submission, the court would review the papers for compliance with the terms of the Stipulation and Order Retaining Jurisdiction and the Settlement Agreement. If the court is satisfied that a default has occurred and that the conditions for entry of the consent judgment have been met, it would sign and enter the judgment. This is a ministerial act — the court is not called upon to conduct a trial, hear testimony, or resolve contested factual issues. The consent judgment is entered on the basis of the parties' prior agreement, evidenced by the pre-executed consent judgment form and the supporting documentation of default.
Best Practice: To ensure that the entry of the consent judgment is as streamlined and ministerial as possible, the proposed consent judgment form should be pre-agreed and attached as an exhibit to the Settlement Agreement. The form should include blanks for the insertion of (i) the unpaid balance of the settlement amount and (ii) the accrued interest calculated at 9% per annum from the date of default. The mathematical calculation of the unpaid balance should be straightforward and should not require any further litigation, discovery, or expert analysis. By pre-agreeing the form, the parties eliminate any dispute about the format, content, or scope of the judgment and reduce the risk that TSL will contest the entry of the judgment on procedural grounds.
3. Enforcement Against a Foreign Entity
TSL is a Greek Société Anonyme (Anonymi Etairia) organized and existing under the laws of the Hellenic Republic, with its registered headquarters at 42 Akti Miaouli, Piraeus 185 38, Greece. TSL maintains a New York registered agent, Piraeus Global Agency Corp., located at 30 Broad Street, Suite 1410, New York, NY 10004, through which it was served with process in the underlying action.
TSL appeared in and submitted to the jurisdiction of the Supreme Court of the State of New York in Index No. 655421/2023. It filed an answer with counterclaims, participated in discovery, and engaged in mediation — all without raising any challenge to personal jurisdiction or venue. TSL's submission to jurisdiction is further confirmed by the TSL Board resolution dated October 18, 2024, which authorized the settlement on terms up to $8,500,000 and expressly approved TSL's entry into the Settlement Agreement, including the consent judgment provision. The Settlement Agreement will contain representations and warranties by TSL regarding its corporate authority, its capacity to enter into the agreement, and the due authorization of the settlement by its governing body.
A consent judgment entered by the Supreme Court of the State of New York would be enforceable domestically — that is, within the United States — in the same manner as any other New York judgment. Under the Full Faith and Credit Clause of the United States Constitution (Article IV, Section 1) and the implementing statute (28 U.S.C. § 1738), a judgment of the Supreme Court of the State of New York is entitled to recognition and enforcement in every other state. Accordingly, if TSL has assets in other states (including bank accounts, receivables, or other property), Northwind could domesticate and enforce the consent judgment in those jurisdictions.
International enforcement presents additional considerations. If Northwind were required to enforce the consent judgment against TSL's assets in Greece or in other foreign jurisdictions, it would need to commence recognition proceedings in the relevant foreign court. Under Greek law, a New York judgment could be recognized and enforced pursuant to the Greek Code of Civil Procedure (Articles 323 and 905), subject to requirements of reciprocity, public policy consistency, proper service, and finality of the judgment. While an analysis of Greek enforcement procedures is beyond the scope of this memorandum, we note that the enforceability of consent judgments in international recognition proceedings is an additional practical consideration. Greek courts have historically been receptive to recognizing foreign commercial judgments, although the process can be time-consuming and may require the assistance of Greek counsel.
For present purposes, however, the international enforcement question does not affect the enforceability of the consent judgment provision under New York law. The provision is enforceable as a matter of New York contract and procedural law; the question of whether the resulting judgment can be enforced against TSL's foreign assets is a separate and downstream issue.
As a practical matter, domestic enforcement may be sufficient to satisfy the judgment. TSL maintains assets within the United States, including funds that may be held in escrow at Atlantic Fiduciary Trust Company and funds that flow through its New York registered agent, Piraeus Global Agency Corp. Additionally, if the Oceanus P&I Club contribution has been funded but not yet paid to Northwind at the time of default, Northwind may be able to reach those funds through attachment or restraining notice procedures.
E. Waiver of Defenses
To maximize the enforceability of the consent judgment provision and to minimize the risk of collateral litigation at the time of enforcement, the Settlement Agreement should include an express waiver by TSL of any defenses to enforcement of the consent judgment. This waiver should be drafted broadly to encompass, without limitation, the following defenses:
(a) Lack of subject matter jurisdiction;
(b) Lack of personal jurisdiction over TSL;
(c) Improper venue;
(d) Insufficiency of process or service of process;
(e) Statute of limitations or laches;
(f) Failure to state a claim or absence of a justiciable controversy;
(g) Any defense that the consent judgment was procured by fraud, duress, or undue influence; and
(h) Any defense based on the form or content of the consent judgment itself, including any objection to the mathematical calculation of the unpaid balance or accrued interest.
TSL should also expressly waive the right to contest the amount of the judgment, which would be limited by the terms of the Settlement Agreement to the unpaid balance of the settlement amount plus 9% per annum interest from the date of default. By waiving the right to contest the amount, TSL eliminates a potential avenue for delay — the filing of objections or motions challenging the calculation of the judgment amount.
An important consideration, however, is that the waiver should be drafted to preserve TSL's right to assert the narrow factual defense that no default has occurred — i.e., that the settlement payment was timely made and that Northwind's assertion of default is incorrect. This is a fundamental due process safeguard: TSL should not be foreclosed from demonstrating that it complied with its obligations and that the consent judgment should not be entered. However, this defense should be narrowly drawn — it should be limited to the factual question of whether the payment was made by the applicable deadline (as determined by the escrow agent's records and the terms of the Settlement Agreement), and it should not be expanded to encompass broader legal defenses to the Settlement Agreement itself.
The waiver clause should also provide that, in the event TSL raises the defense that no default has occurred, the burden of proof shall be on TSL to demonstrate timely payment, and the court may resolve the dispute on the papers (i.e., on the basis of affidavits, escrow agent certifications, and documentary evidence) without an evidentiary hearing, unless the court determines that a hearing is necessary.
F. Notice and Cure Provisions
The mediator's term sheet dated October 29, 2024, is silent on whether TSL is entitled to notice of default and a cure period before Northwind may submit the consent judgment for entry. This silence creates an ambiguity that should be resolved in the definitive Settlement Agreement.
Recommendation: We recommend that Section 7.3 of the Settlement Agreement include a reasonable notice-and-cure provision requiring Northwind to provide written notice of default to TSL and its counsel (Calderwood & Harkness LLP) before Northwind may submit the consent judgment form to the court for entry. Specifically, we recommend a cure period of five (5) business days from the date of Northwind's written notice of default, during which TSL may cure the default by depositing the overdue payment (plus any accrued interest) into the escrow account.
This recommendation is grounded in several considerations:
First, a notice-and-cure provision is standard in commercial settlement agreements, and its inclusion would be consistent with established market practice in sophisticated commercial settlements in the New York Commercial Division. The absence of such a provision could be viewed by the court as an unusual omission and might give TSL grounds to argue that the consent judgment was entered precipitously, particularly in the case of a brief or technical payment delay.
Second, a notice-and-cure period provides a practical safeguard against the entry of a consent judgment based on a technical or administrative delay that does not reflect a genuine default. Wire transfers between international banks can be delayed by processing times, time zone differences, correspondent banking protocols, and compliance checks (including anti-money laundering and sanctions screening). A five-business-day cure period provides a reasonable window for TSL to remedy such delays without triggering the draconian consequence of a consent judgment.
Third, the inclusion of a notice-and-cure provision reduces the risk that TSL will challenge the entry of the consent judgment on equitable grounds, such as the argument that Northwind acted in bad faith by seeking immediate entry of a judgment when TSL's payment was merely a day or two late. By building a notice-and-cure mechanism into the Settlement Agreement, the parties establish a clear, pre-agreed process that eliminates ambiguity and reduces the potential for collateral disputes.
We anticipate that this issue will be the subject of negotiation with Hargrove, Delacroix & Stern LLP. Northwind may seek a shorter cure period (e.g., three (3) business days), arguing that the lengthy installment payment schedule already provides TSL with ample time to arrange funding and that a five-day cure period is excessive. We recommend that TSL insist on no fewer than five (5) business days, which is commercially reasonable and consistent with market practice. A cure period of ten (10) business days — while not unreasonable in some contexts — may be viewed as overly generous given the straightforward nature of the payment obligation, and Northwind is unlikely to agree to a period of that length.
The notice-and-cure provision should specify the method of delivering the default notice. We recommend that notice be delivered by (i) email to designated counsel (with delivery confirmed by read receipt or acknowledgment) and (ii) simultaneously by overnight courier to TSL's principal office in Piraeus and to Calderwood & Harkness LLP's New York office. The cure period should run from the date of delivery of the email notice, with the overnight courier notice serving as a backup.
G. Interaction with Escrow Arrangement
The escrow arrangement established with Atlantic Fiduciary Trust Company is an integral component of the settlement structure, and the consent judgment provision should be drafted to interact seamlessly with it.
Under the proposed terms, all settlement payments are to be deposited by TSL into the escrow account (Escrow Account No. ESC-2024-NYK-08831) maintained at Atlantic Fiduciary Trust Company, located at 60 Wall Street, Suite 2800, New York, NY 10005. Settlement funds held in escrow are to be released to Northwind upon joint instruction of the parties' counsel, in accordance with the terms of a separate Escrow Agreement to be executed by TSL, Northwind, and the escrow agent.
The consent judgment provision should specify with precision what constitutes a "default" for purposes of triggering the consent judgment. We recommend that "default" be defined as the failure by TSL to deposit the required settlement payment into the escrow account by 5:00 p.m. Eastern Time on the applicable payment deadline (or by the end of the cure period, if a notice-and-cure provision is included). This definition ties the default trigger to a verifiable, objective event — the presence or absence of funds in the escrow account — rather than to a more subjective standard that could give rise to factual disputes.
The escrow arrangement provides an important independent verification mechanism for the purpose of establishing default. Atlantic Fiduciary Trust Company, as escrow agent, maintains records of all deposits into and disbursements from the escrow account. In the event of a default, the escrow agent can certify in writing whether the required funds were deposited by the applicable deadline. This certification would be submitted to Justice Chen's chambers as part of the consent judgment submission package (as described in Section V.D.2 above) and would constitute strong evidence of default. By relying on the escrow agent's records, Northwind avoids the need to submit sworn testimony from its own personnel regarding the non-receipt of funds, and the court benefits from the disinterested confirmation of a neutral third party.
We recommend that Martin Schreiber (Vice President, Escrow Services) at Atlantic Fiduciary Trust Company be notified of the consent judgment provision at the time the Escrow Agreement is executed. The escrow agent should understand that it may be called upon to issue default certifications in connection with the consent judgment provision, and the Escrow Agreement should include a provision obligating the escrow agent to issue such certifications promptly upon request by either party. Coordination with Mr. Schreiber's office should be initiated as soon as the principal terms of the Settlement Agreement are finalized.
H. Lender Considerations
TSL's existing debt facilities impose certain notification and covenant obligations that are relevant to the settlement and the consent judgment provision.
TSL is party to a Credit Agreement with Meridian Capital Bank AG, dated April 1, 2019, providing for a $340,000,000 credit facility secured by first-priority vessel mortgages on twenty-two (22) vessels in TSL's fleet. Under Section 8.14 of the Credit Agreement, TSL is required to provide written notification to Meridian of any material litigation settlement exceeding $5,000,000 in value. The $7,850,000 settlement with Northwind exceeds this threshold, and TSL is accordingly required to provide notice to Meridian within five (5) business days of execution of the Settlement Agreement. The designated contact for such notices is Lukas Brandt, Managing Director, Shipping Finance Division, at Meridian's Frankfurt office.
The consent judgment provision itself — as a contingent enforcement mechanism that could result in the entry of a judgment against TSL — may trigger additional covenants under the Credit Agreement. For example, Section 9.02 of the Credit Agreement includes a negative covenant restricting TSL from consenting to the entry of judgments exceeding $2,000,000 without the prior written consent of Meridian (or the Required Lenders, as defined in the Credit Agreement). While the consent judgment is contingent on default and may not constitute a present "judgment" for purposes of the negative covenant, the issue requires careful analysis. A separate internal memorandum — the Lender Notification Compliance Analysis, dated November 18, 2024 — will address these considerations in detail, including whether prior lender consent is required for the consent judgment provision.
In the meantime, we recommend that the consent judgment provision be disclosed to Meridian as part of the settlement notification under Section 8.14 of the Credit Agreement. Full disclosure of the consent judgment mechanism — including its contingent nature and the circumstances that would trigger its enforcement — will avoid any subsequent claim by Meridian that TSL failed to disclose a material contingent liability. Transparency with the lender is particularly important given that a consent judgment, once entered, would constitute an unsecured claim against TSL that could affect the lender's recovery in the event of TSL's insolvency or financial distress.
We note that the interaction between the settlement and TSL's credit facilities is a complex issue that extends beyond the scope of this memorandum. The separate Lender Notification Compliance Analysis will provide a comprehensive treatment of these issues, including the negative covenant analysis, the notification requirements, and any amendments or waivers that may need to be obtained from Meridian.
VI. Drafting Recommendations
Based on the foregoing analysis, we recommend the following drafting refinements to the consent judgment provision and related documents.
A. Section 7.3 Drafting Points
The following points should be addressed in the drafting of Section 7.3 of the Settlement Agreement:
1. Unpaid Balance Calculation. The provision should clearly state that the consent judgment is for the "unpaid balance" of the $7,850,000 settlement amount — not the full $7,850,000 if partial payments have already been made. For example, if TSL timely makes Payment 1 ($4,000,000) but defaults on Payment 2 ($2,000,000), the consent judgment should be for the remaining $3,850,000 (Payments 2 and 3), not $7,850,000. The provision should include a formula or methodology for calculating the unpaid balance that accounts for partial payments previously made.
2. Interest Rate and Accrual Date. The provision should specify that interest accrues at the rate of 9% per annum, computed on a per diem basis, from the date of default on the missed payment (i.e., the date on which the payment was due and not made, or the expiration of the cure period, whichever is later). The calculation methodology should be stated with sufficient specificity to permit mechanical computation of the accrued interest without the need for further negotiation or adjudication.
3. Notice and Cure. Include a notice-and-cure provision requiring Northwind to provide at least five (5) business days' written notice of default to TSL and its counsel (Calderwood & Harkness LLP) before Northwind may submit the consent judgment for entry. The notice should be delivered by email and overnight courier to designated addresses. The cure period runs from the date of delivery of the email notice. If TSL cures the default within the cure period by depositing the overdue payment plus accrued interest into the escrow account, the default shall be deemed cured and the consent judgment shall not be entered.
4. Consent Judgment Form. Attach the pre-agreed form of consent judgment as an exhibit to the Settlement Agreement (e.g., Exhibit D). The form should be pre-signed by counsel for both parties and should include blanks for insertion of the unpaid balance and accrued interest, together with a calculation schedule.
5. Waiver of Defenses. Include an express waiver by TSL of all defenses to enforcement of the consent judgment, except for the narrow factual defense that no default has occurred (i.e., that the payment was timely made). The waiver should encompass, without limitation, defenses based on jurisdiction, venue, statute of limitations, and the form or content of the consent judgment.
6. Cross-Reference to Stipulation. The provision should expressly reference the Stipulation and Order Retaining Jurisdiction (attached as a separate exhibit to the Settlement Agreement) and should specify that entry of the consent judgment is the parties' agreed enforcement mechanism in the event of default.
7. Exclusive Remedy. State that upon entry of the consent judgment, all other remedies for breach of the Settlement Agreement (except execution on the judgment itself) are waived by Northwind, to avoid the risk of double recovery. This provision protects TSL by ensuring that Northwind cannot simultaneously pursue the consent judgment and a separate breach of contract action for the same unpaid settlement amounts.
8. Joint Liability Clarification. Clarify whether TSL's payment obligation is joint with Aegean Fortuna Shipholding Ltd. (the named co-defendant in the underlying action) or, alternatively, specify that TSL alone bears the payment obligation and is subject to the consent judgment. If the obligation is intended to be joint and several, the Settlement Agreement should so state, and the consent judgment form should name both entities as judgment debtors. If the obligation is TSL's alone, the Settlement Agreement should specify this, and Aegean Fortuna's role should be limited to the mutual release provisions.
B. Proposed Consent Judgment Form
The proposed consent judgment form, to be attached as an exhibit to the Settlement Agreement, should include the following elements:
1. Caption. The judgment should be captioned Northwind Maritime Corporation v. Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., Index No. 655421/2023, Supreme Court of the State of New York, New York County, Commercial Division.
2. Recitals. The judgment should include recitals referencing (a) the Settlement Agreement (by title and date), (b) the three-payment schedule, (c) the specific payment that was not made and the date of default, and (d) the Stipulation and Order Retaining Jurisdiction that provides the court with authority to enter the judgment.
3. Judgment Amount. The operative paragraph should provide for the entry of judgment in favor of Northwind and against TSL in the amount of $[blank] — representing the unpaid balance of the settlement amount — plus accrued interest of $[blank], calculated at 9% per annum from [date of default] through [date of entry of judgment], for a total judgment of $[blank]. A calculation schedule should be appended.
4. Costs of Enforcement. The judgment should provide for reasonable costs of enforcement, including attorney's fees incurred in connection with the submission of the consent judgment and any subsequent execution proceedings, to the extent permitted by the Settlement Agreement and applicable law.
5. Signature Lines. The judgment form should include signature lines for (a) the Honorable Lorraine K. Chen, J.S.C. (or her successor), (b) counsel for Northwind (Hargrove, Delacroix & Stern LLP), and (c) counsel for TSL (Calderwood & Harkness LLP). Counsel's signatures should be affixed at the time the Settlement Agreement is executed; Justice Chen's signature would be affixed at the time the judgment is entered.
C. Stipulation and Order Retaining Jurisdiction
The proposed Stipulation and Order Retaining Jurisdiction should be reviewed with the following considerations in mind:
1. 180-Day Retention Period. Confirm that the 180-day retention period is adequate. As noted above, all three settlement payments fall due within 150 days of the Effective Date, providing a 30-day buffer for the consent judgment mechanism. However, the buffer is relatively tight: if TSL defaults on Payment 3 (due at day 150), and Northwind provides five business days' notice of default, and the cure period expires without cure, Northwind would be submitting the consent judgment for entry approximately 157–160 day

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