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Contract analysis Extract to table

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION

NORTHWIND MARITIME CORPORATION,

Plaintiff,

-against-

THALASSA SHIPPING & LOGISTICS SA and AEGEAN FORTUNA SHIPHOLDING LTD.,

Defendants.

Index No. 655421/2023 Part 49 (Hon. Lorraine K. Chen, J.S.C.)

REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF DEFENDANTS' MOTION TO DISMISS COUNTS III AND V OF THE COMPLAINT

Filed: January 26, 2024

CALDERWOOD & HARKNESS LLP One Liberty Plaza, 50th Floor New York, NY 10006 Telephone: (212) 558-4000 Facsimile: (212) 558-3588

Douglas Carmichael, Responsible Partner Francesca Morano, Partner Carlos Espinoza, Senior Associate Hannah Brinkley, Associate

Attorneys for Defendants Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd.

TABLE OF AUTHORITIES

Cases.

Statutes and Rules

Secondary Sources.

PRELIMINARY STATEMENT

Defendants Thalassa Shipping & Logistics SA ("TSL") and Aegean Fortuna Shipholding Ltd. ("Aegean Fortuna Shipholding" and, together with TSL, "Defendants") respectfully submit this reply memorandum of law in further support of their motion to dismiss Counts III and V of the Complaint filed by Plaintiff Northwind Maritime Corporation ("Northwind" or "Plaintiff"). This reply is submitted in response to Plaintiff's Memorandum of Law in Opposition to the Motion to Dismiss, filed January 12, 2024 by Hargrove, Delacroix & Stern LLP (the "Opposition"), and the Declaration of Margaret Delacroix filed in support thereof.

As Defendants demonstrated in their opening memorandum of law, filed December 15, 2023 (the "Opening Memorandum"), Counts III and V of the Complaint suffer from fundamental legal deficiencies that no amount of factual embellishment can cure. Northwind's Opposition confirms these deficiencies rather than resolving them. Specifically:

Count V (Unjust Enrichment) is duplicative of the breach of contract claim and must be dismissed as a matter of law. Northwind's Opposition fails to overcome the well-settled principle that a claim for unjust enrichment cannot lie where a valid, enforceable contract governs the subject matter in dispute. Northwind's own Opposition — like its Complaint before it — repeatedly references and relies upon the charter-party between Northwind and TSL: a 36-month time charter-party for the M/V Aegean Fortuna, executed on NYPE 2015 form, Reference No. NW-TSL-CP-2020-1203, dated December 3, 2020 (the "Charter-Party"). Northwind does not dispute the validity of the Charter-Party at any point in its opposition papers. Rather, Northwind's entire case is built upon the enforceability of the Charter-Party and TSL's alleged breaches of its specific terms. Under these circumstances, Northwind's unjust enrichment claim is impermissible as a matter of law and must be dismissed with prejudice.

Count III (Third-Party Shipper Claims as Charter-Party Damages) fails to state a claim upon which relief can be granted. Northwind seeks to recover $5,634,400 in claims brought against Northwind by three separate third-party shippers as pass-through damages under the Charter-Party. This attempt is legally unsupported. The Charter-Party does not contain any indemnity provision obligating TSL to hold Northwind harmless for claims brought by third-party cargo interests. The claims that Northwind seeks to pass through are separate causes of action between Northwind and its cargo interests — they do not arise under the Charter-Party between Northwind and TSL. These claims are barred by well-settled principles of New York contract law limiting recovery to foreseeable damages that were within the contemplation of the parties at the time of contracting. Moreover, the Inter-Club Agreement — the established industry framework for apportioning cargo claim liability between owners and charterers — provides the appropriate allocation mechanism, and Northwind's attempt to plead these third-party claims as direct Charter-Party damages impermissibly circumvents that framework.

Northwind's Opposition raises no new legal authority warranting a different result. Instead, the Opposition devotes substantial space to factual arguments about TSL's alleged maintenance failures and the condition of the M/V Aegean Fortuna — arguments that are irrelevant to the legal deficiencies in Counts III and V and that, in any event, are inappropriate on a CPLR 3211(a)(7) motion to dismiss. The factual sufficiency of Northwind's underlying breach of contract claims (Counts I, II, and IV) is not at issue in this motion. The question before this Court is whether Counts III and V, as a matter of law, state viable causes of action. They do not.

For the reasons set forth below and in the Opening Memorandum, this Court should dismiss Counts III and V of the Complaint with prejudice.

ARGUMENT

I. COUNT V (UNJUST ENRICHMENT) MUST BE DISMISSED BECAUSE AN EXPRESS CONTRACT GOVERNS THE PARTIES' DISPUTE

A. Northwind's Opposition Concedes the Existence of a Valid Contract. It is black-letter New York law that "the theory of unjust enrichment lies as a quasi-contract claim" and that "[i]t is impermissible . . . to seek damages in an action sounding in quasi contract where the suing party has an adequate remedy at law in the form of a breach of contract action." Clark-Fitzpatrick, Inc. v. Severin Industries, 70 N.Y.2d 382, 388 (1987). The Court of Appeals has reaffirmed this principle on numerous occasions: where "the parties executed a valid and enforceable written contract governing a particular subject matter, recovery on a theory of unjust enrichment for events arising out of that subject matter is ordinarily precluded." IDT Corp. v. Meridian Financial, 12 N.Y.3d 132, 142 (2009). The rationale is straightforward: quasi-contractual remedies exist to fill gaps where no contract governs the parties' obligations; they are not available as an alternative vehicle for relief where the parties have already defined their respective rights and obligations through a binding agreement. See Goldman v. Ridgeway Insurance, 5 N.Y.3d 561, 572 (2005).

This principle is dispositive here. Northwind's own Opposition — no less than its Complaint — confirms the existence, validity, and enforceability of the Charter-Party that governs every aspect of the parties' dispute. The Charter-Party is a 36-month time charter-party for the M/V Aegean Fortuna, executed on the widely-used NYPE 2015 form (with rider clauses), bearing Reference No. NW-TSL-CP-2020-1203, and dated December 3, 2020. The Charter-Party has a commencement date of January 15, 2021, and a stated expiration date of January 14, 2024. It sets a daily hire rate of $14,750 per day for the full 36-month charter period — a period of approximately 1,096 days, representing a total charter value of approximately $16,166,000.

Northwind's Opposition repeatedly invokes the Charter-Party as the foundation of its claims. The Opposition expressly references and relies upon the following specific provisions of the Charter-Party as the source of TSL's alleged obligations:

• Clause 2 (Owner's Obligations): Northwind's Opposition argues that TSL breached its obligation to deliver the vessel "in every way fitted for the service" and to "maintain the vessel in a thoroughly efficient state in hull, machinery, and equipment." (Opp. at 6-8.)

• Clause 5 (Trade Limits): Northwind contends that TSL's alleged failure to maintain the vessel resulted in trade restrictions that breached Clause 5's trading warranty. (Opp. at 9.)

• Clause 6 (Maintenance and Seaworthiness): Northwind relies heavily on Clause 6 as the source of TSL's duty to maintain the vessel in a seaworthy condition, and attributes the three mechanical incidents and the resulting shipper claims to breaches of this provision. (Opp. at 10-15.)

• Clause 11 (Off-Hire): Northwind seeks off-hire deductions for periods during which the vessel was allegedly unable to perform, calculating off-hire based on the daily rate specified in the Charter-Party. (Opp. at 16-17.)

• Clause 28 (Liquidated Damages): Northwind claims entitlement to liquidated damages under Clause 28 for TSL's alleged failure to meet the vessel's warranted performance specifications. (Opp. at 18-19.)

In other words, Northwind's own papers make clear that the Charter-Party is a valid and enforceable agreement, that it governs the parties' respective obligations with respect to the M/V Aegean Fortuna, and that Northwind seeks damages for TSL's alleged breaches of specific Charter-Party terms. There is not a hint — anywhere in the Complaint, anywhere in the Opposition, anywhere in the Delacroix Declaration — that the Charter-Party might be invalid, unenforceable, or that there is any genuine dispute as to its existence.

Under these circumstances, the unjust enrichment claim in Count V is squarely foreclosed. The Court of Appeals' decision in Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011), is directly on point. In Mandarin Trading, the Court dismissed an unjust enrichment claim where the plaintiff "failed to adequately allege that no agreement existed" between the parties and instead "admitted that there was, in fact, a contract." Id. The Court held that where the plaintiff's own pleading confirms the existence of a governing contract, a quasi-contractual claim for unjust enrichment "is not available." Id.

So too here. Northwind's own Complaint and Opposition confirm the existence of the Charter-Party and predicate every claim upon it. No quasi-contractual claim can survive under these circumstances. See also Beth Israel Med. Ctr. v. Ridgeway Specialty Insurance, 448 F.3d 573, 586-87 (2d Cir. 2006) (applying New York law and dismissing unjust enrichment claim where "the existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter"); Clark-Fitzpatrick, 70 N.Y.2d at 389 (holding that "[t]he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter"); 25 Williston on Contracts § 66:1 (4th ed.) ("Where an enforceable express contract exists, there can be no recovery under a theory of implied contract or unjust enrichment.").

Northwind's Opposition does not and cannot dispute these controlling authorities. Instead, Northwind attempts a different argument — one addressed in Section I.B below — that it is entitled to plead unjust enrichment "in the alternative." As demonstrated below, that argument is meritless in the circumstances of this case.

B. Northwind's "Alternative Pleading" Argument Is Meritless. Northwind's Opposition rests its defense of Count V on a single argument: that under CPLR 3014, a plaintiff is entitled to plead causes of action in the alternative, and therefore Northwind may assert an unjust enrichment claim alongside its breach of contract claim in the event that the Charter-Party is found unenforceable. (Opp. at 22-24.) This argument is both legally incorrect and factually unsupported.

To be sure, CPLR 3014 permits alternative and inconsistent pleading in certain circumstances. The statute provides that "[c]auses of action or defenses may be stated alternatively or hypothetically" and that "[a] party may also set forth two or more statements of a cause of action or defense alternatively or hypothetically." CPLR § 3014. The general principle embodied in CPLR 3014, however, is not without limitation. The Commercial Division of this Court, as well as the First Department, have consistently held that a party may not use CPLR 3014 as a shield for duplicative quasi-contractual claims where there is no genuine dispute as to the existence or validity of the underlying contract.

In Ashwood Capital, Inc. v. OTG Mgmt., Inc., 99 A.D.3d 1, 5 (1st Dep't 2012), the First Department addressed this precise issue. There, the plaintiff asserted both breach of contract and unjust enrichment claims, arguing that the unjust enrichment claim was pleaded "in the alternative" under CPLR 3014. The First Department rejected this argument, holding that "alternative pleading of quasi-contractual claims is impermissible where neither party disputes the existence of a binding, enforceable contract." Id. The Court reasoned that CPLR 3014 permits alternative pleading where there is a "genuine uncertainty as to which of two or more theories of recovery may be established at trial," but does not license a party to assert a duplicative quasi-contractual claim "merely as insurance against the possibility that the contract might somehow be found unenforceable." Id. at 6. See also Cox v. NAP Constr. Co., 10 N.Y.3d 592, 607 (2008) (holding that where plaintiff "does not dispute the existence" of the contract, "there is no basis for a claim in quasi contract"); Woss v. E.O. Steben & Co., 161 A.D.3d 533, 534 (1st Dep't 2018) (dismissing unjust enrichment claim as duplicative where "the parties do not dispute the existence or enforceability of the agreements at issue").

The reasoning of these decisions applies with full force to the case at bar. Northwind does not — at any point in the Complaint or in the Opposition — challenge the validity, enforceability, or existence of the Charter-Party. To the contrary, the Charter-Party is the cornerstone of Northwind's entire case. Northwind's breach of contract claims (Counts I, II, and IV) are predicated on the Charter-Party being a valid and enforceable agreement. Northwind seeks damages calculated by reference to the Charter-Party's hire rate, off-hire provisions, and liquidated damages clause. Northwind identifies specific Charter-Party provisions — Clauses 2, 5, 6, 11, and 28 — as the source of TSL's alleged obligations.

Under these circumstances, there is no "genuine uncertainty" as to whether the Charter-Party is a valid and enforceable agreement. The Charter-Party was duly executed by both parties on December 3, 2020. Performance under the Charter-Party commenced on January 15, 2021, when the M/V Aegean Fortuna was delivered to Northwind at the port of Qingdao, China. For over two years, both parties performed their obligations under the Charter-Party: Northwind paid hire and gave employment orders, and TSL provided the vessel and crew. There has been no contention by either party — at any stage of this litigation — that the Charter-Party was procured by fraud, executed under duress, lacking in consideration, or otherwise invalid. No statute of frauds defense has been raised. No argument has been made that the Charter-Party fails to satisfy the requirements for a binding agreement under New York law.

Northwind's suggestion that unjust enrichment should be permitted as an "alternative" theory of recovery is therefore a transparent attempt to circumvent the well-settled rule that quasi-contractual claims are unavailable where a valid contract governs. CPLR 3014 does not permit a plaintiff to maintain a duplicative quasi-contractual claim as a precautionary measure where the plaintiff itself relies upon, and does not dispute, the governing contract. See Starmedia Network, Inc. v. Horn, 185 F. Supp. 2d 355, 365 (S.D.N.Y. 2002) (noting that alternative pleading under CPLR 3014 "does not give a party license to pursue a quasi-contract claim that is entirely duplicative of a contract claim when there is no factual dispute that a contract exists"); Tidewater Systems Enters., Inc. v. Bimbo Foods Bakeries Distrib., LLC, 198 A.D.3d 489, 490 (1st Dep't 2021) (dismissing unjust enrichment claim as duplicative where both parties "acknowledge[d] the existence of the contract" and plaintiff "d[id] not claim that the agreement [wa]s unenforceable"); Coppola v. Applied Elec. Corp., 315 A.D.2d 538, 539 (2d Dep't 2003) (same).

Northwind's Opposition cites no case in which a court in the Commercial Division — or any New York court — permitted an unjust enrichment claim to proceed alongside a breach of contract claim under circumstances where, as here, (i) neither party disputes the existence of the contract, (ii) the plaintiff's own complaint and opposition papers rely on the contract as the basis for liability, and (iii) the unjust enrichment claim seeks identical damages for identical conduct. Northwind's "alternative pleading" argument is meritless and should be rejected.

Furthermore, Northwind's Opposition fails to acknowledge the critical distinction between cases where there is a genuine dispute about whether a contract was ever formed and cases — like this one — where the parties agree that a contract exists and disagree only about whether one party breached it. In the former category of cases, alternative pleading of quasi-contractual claims may be appropriate because the plaintiff genuinely cannot know, until the trier of fact resolves the disputed issue, whether a contract governs. See Woss, 161 A.D.3d at 534 (noting this distinction). In the latter category, alternative pleading of unjust enrichment is impermissible because there is no genuine uncertainty about the governing legal framework — only a factual dispute about performance. This case falls squarely in the latter category. The unjust enrichment claim in Count V must be dismissed with prejudice.

C. The Subject Matter of Count V Is Entirely Coextensive with the Charter-Party. Even if Northwind could overcome the bar against unjust enrichment where a valid contract exists — and it cannot — Count V would still fail because the subject matter of the unjust enrichment claim is entirely coextensive with the Charter-Party. Every element of the unjust enrichment claim as pleaded in the Complaint — the alleged benefit conferred, the inequity of the Defendants' retention of that benefit, and the resulting damages — is governed by and arises from the Charter-Party.

Northwind's unjust enrichment theory, as articulated in paragraphs 112 through 124 of the Complaint, is that Northwind conferred a "benefit" on TSL by paying hire under the Charter-Party while the vessel was in a deficient condition, and that it would be "unjust" for TSL to retain that hire because the vessel did not meet the Charter-Party's warranted specifications. But the very concept of "hire" — the obligation to pay it, the rate at which it is calculated ($14,750 per day), the circumstances under which it may be withheld or deducted, and the remedies for nonperformance — are all governed by the Charter-Party. The "benefit" Northwind claims to have conferred is nothing more than performance of its contractual obligation to pay hire. The "enrichment" Northwind claims is nothing more than TSL's receipt of hire allegedly in excess of what was warranted under the Charter-Party. And the remedy Northwind seeks under Count V is a return of that allegedly excess hire — the very same relief that is available under the breach of contract claims (and that Northwind, in fact, seeks under Counts I, II, and IV).

The Court of Appeals' instruction in Mandarin Trading is clear: unjust enrichment cannot be used to "duplicate or replace" a breach of contract claim. 16 N.Y.3d at 182. That is precisely what Count V does. Northwind does not identify any obligation, benefit, or enrichment that arises outside the scope of the Charter-Party. There is no allegation that TSL received some benefit from Northwind that was not governed by the Charter-Party. There is no allegation that the parties' relationship extended beyond the Charter-Party's terms. The unjust enrichment damages sought in Count V — $18,300,000, the total claim amount — are identical to the contract damages sought under the breach of Charter-Party counts. See Compl. ¶¶ 115-124 (Count V) (seeking the same categories of damages as Counts I, II, and IV, including off-hire deductions, liquidated damages, substitute charter costs, and cargo damage). Cf. Clark-Fitzpatrick, 70 N.Y.2d at 389 (dismissing unjust enrichment claim where "plaintiff's quasi-contract claim is merely duplicative of the breach of contract cause of action"); Bramwell Bancorp v. Sommer, 8 N.Y.3d 318, 324 (2007) (holding that unjust enrichment claim was "duplicative of plaintiff's contract cause of action" where the "same facts support both").

The utter coextensiveness of Count V with Northwind's breach of contract claims underscores that Count V is not a genuine "alternative" theory of recovery, but rather an impermissible attempt to re-label the same breach of contract claim under a different legal theory. This is precisely the type of duplicative pleading that the rule against quasi-contractual claims in the face of an express contract is designed to prevent. See Tidewater Systems Enters., 198 A.D.3d at 490.

For all of the foregoing reasons, Count V must be dismissed with prejudice.

II. COUNT III (THIRD-PARTY SHIPPER CLAIMS AS CHARTER-PARTY DAMAGES) FAILS TO STATE A CLAIM

A. Northwind Cannot Recover Third-Party Shipper Claims as Pass-Through Damages Under the Charter-Party. ##### 1. The Third-Party Claims Are Not Recoverable Contract Damages

Count III of the Complaint seeks to recover $5,634,400 representing three separate cargo claims brought against Northwind by third-party shippers in connection with the carriage of goods aboard the M/V Aegean Fortuna. As set forth in the Complaint and the Opposition, these three claims are:

(a) A claim by Crestline & Co. ("Glencore") in the amount of $3,420,000, arising from the alleged oxidation of a cargo of iron ore carried from Richards Bay, South Africa, to Qingdao, China, which Northwind attributes to the Incident 2 BWTS/boiler failure that occurred from July 8 through July 29, 2022;

(b) A claim by Brightwater Corporation ("Bunge") in the amount of $1,127,000, arising from the alleged contamination of a cargo of soybeans carried from Santos, Brazil, to Tianjin, China, which Northwind attributes to an alleged failure to properly clean cargo holds following a prior voyage; and

(c) A claim by Strathmore Corporation ("Trafigura") in the amount of $1,087,400, arising from the alleged shortage and wetting of a cargo of coal carried from Newcastle, Australia, to Mundra, India, which Northwind attributes to alleged hatch cover deficiencies.

Northwind asserts that each of these claims was "caused by" TSL's alleged failure to maintain the M/V Aegean Fortuna in a seaworthy condition and that, as a result, Northwind is entitled to recover the full amount of these third-party claims from TSL as damages under the Charter-Party.

This theory is legally unsupported for multiple independent reasons.

First, the three shipper claims identified above are separate causes of action between Northwind and its cargo interests. They arise under the bills of lading issued by Northwind (as charterer) to the respective shippers — not under the Charter-Party between Northwind and TSL. The shippers' claims against Northwind are governed by the Hague-Visby Rules (or the applicable bill of lading terms), which impose obligations on the carrier — here, Northwind as the time charterer issuing bills of lading — with respect to the care and carriage of cargo. These are distinct legal obligations from the obligations that TSL owes to Northwind under the Charter-Party.

Second, under well-settled principles of New York contract law, a party may recover only those damages that were "reasonably foreseeable and within the contemplation of the parties at the time of contracting." Kenford Co. v. County of Erie, 73 N.Y.2d 312, 319 (1989). This principle — derived from the seminal decision in Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854) — limits contract damages to those that "may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it." Kenford, 73 N.Y.2d at 319 (quoting Hadley, 9 Ex. at 354).

The third-party shipper claims that Northwind seeks to pass through in Count III do not satisfy this standard. While the Charter-Party imposes obligations on TSL with respect to the maintenance and seaworthiness of the M/V Aegean Fortuna, it does not contain any provision making TSL liable for Northwind's exposure to third-party cargo claims. The Charter-Party's maintenance and seaworthiness obligation under Clause 6 creates a duty running from TSL (as Owner) to Northwind (as Charterer) — not a direct obligation running to any third-party shipper. See Terence Coghlin et al., Time Charters ¶ 16.1 (7th ed. 2014) (explaining that the owner's obligation to maintain the vessel under a time charter "is owed to the charterer, not to cargo interests"). The Charter-Party does not purport to allocate third-party cargo claim liability between the parties, and no reasonable interpretation of its terms would impose on TSL the obligation to indemnify Northwind for the full amount of any and all cargo claims that might arise during the charter period.

Third, and critically, Northwind's Opposition fails to identify any provision of the Charter-Party that imposes liability on TSL for Northwind's third-party cargo exposure. The Opposition points to Clause 6 (maintenance and seaworthiness) as the relevant duty, but Clause 6 defines the Owner's obligation to the Charterer — not the scope of damages recoverable for breach of that obligation. The Opposition does not cite Clause 28 (which addresses liquidated damages for specific performance shortfalls), Clause 11 (which addresses off-hire for periods of non-performance), or any other specific Charter-Party provision establishing that TSL assumed responsibility for Northwind's cargo liabilities. Nor could it, because no such provision exists.

The absence of any contractual provision allocating third-party cargo claim liability to TSL is not an oversight — it reflects the well-understood allocation of risk in the time charter context. Under a time charter, the charterer assumes commercial operation of the vessel and, in doing so, assumes the risks inherent in the carriage of cargo, including the risk of cargo claims by shippers. The owner retains responsibility for the physical operation of the vessel and its maintenance, but the owner's liability to the charterer for maintenance failures is measured by the direct damages suffered by the charterer — not by the charterer's exposure to claims by third parties. See Julian Cooke et al., Voyage Charters ¶ 18.20 (4th ed. 2014) (discussing the distinction between an owner's direct liability to a charterer and the charterer's liability to cargo interests). See also Daou v. Penmark Capital Markets, 42 F.4th 120, 135 (2d Cir. 2022) (applying New York law and holding that damages must be "within the contemplation of the parties" and cannot include speculative consequential losses absent an express contractual provision).

For these reasons, the third-party shipper claims that Northwind seeks to recover in Count III are not recoverable as contract damages under the Charter-Party, and Count III fails to state a cause of action.

##### 2. Northwind's Opposition Conflates Indemnity with Breach of Contract Damages

Northwind's Opposition, while ostensibly seeking "damages" for breach of the Charter-Party, effectively asks this Court to transform the Charter-Party into an indemnity agreement under which TSL would be liable for any and all third-party claims that Northwind might face in connection with the vessel's operations. This is precisely what Northwind's theory requires: that TSL be held responsible not merely for its direct obligations to Northwind under the Charter-Party (e.g., to maintain the vessel, to provide a seaworthy vessel, to pay liquidated damages for performance shortfalls), but also for any claims that third-party shippers might assert against Northwind in connection with cargo carried aboard the vessel.

The Charter-Party contains no such indemnity provision. Had the parties intended for TSL to indemnify Northwind against third-party cargo claims, they could have — and would have — included an express indemnity clause in the Charter-Party to that effect. Indemnity clauses are common in commercial charter-parties, and the NYPE 2015 form upon which the Charter-Party is based provides specific mechanisms for allocating risk between owner and charterer. See Coghlin et al., Time Charters ¶ 30.1 (7th ed. 2014) (discussing indemnity clauses in time charters). The absence of any such clause here is strong evidence that the parties did not intend for TSL to bear liability for Northwind's third-party cargo exposure.

Northwind's Opposition attempts to sidestep this problem by arguing that the shipper claims were "caused by" TSL's alleged maintenance failures and that, therefore, all shipper claims "flow from" TSL's breach of the Charter-Party. (Opp. at 30-32.) This argument conflates causation with contractual scope of recovery. Even assuming arguendo that TSL's alleged breach of the maintenance and seaworthiness obligation under Clause 6 contributed to the conditions that gave rise to the shipper claims — a factual assertion that Defendants do not concede — it does not follow that the full amount of those shipper claims is recoverable as damages under the Charter-Party. The question is not whether TSL's alleged breach had some causal connection to the circumstances giving rise to the shipper claims; the question is whether the Charter-Party allocates to TSL the risk of Northwind's third-party cargo liabilities. It does not.

To illustrate: Northwind's Opposition focuses extensively on Incident 2 — the BWTS/boiler failure that occurred from July 8 through July 29, 2022, while the M/V Aegean Fortuna was at Richards Bay, South Africa — and the resulting Glencore cargo claim of $3,420,000 for alleged iron ore oxidation. (Opp. at 30-33.) Northwind argues that because the boiler failure prevented the vessel from completing the voyage on schedule, and because the delay allegedly resulted in oxidation of the iron ore cargo, the full $3,420,000 Glencore claim is recoverable from TSL as damages for breach of Clause 6. (Opp. at 31.)

But this argument conflates two distinct legal relationships and two distinct measures of damages. TSL's direct liability to Northwind for the Incident 2 boiler failure — if liability is established — is measured by the direct losses Northwind suffered as a result of that failure: off-hire for the 21-day delay, any additional port and bunker costs incurred, any liquidated damages under Clause 28 for failure to meet speed and consumption warranties, and similar direct Charter-Party damages. These are the damages that were "within the contemplation of the parties at the time they made the contract." Kenford, 73 N.Y.2d at 319. The Glencore cargo claim, by contrast, is a separate dispute between Northwind and Glencore, governed by the bill of lading between those parties, and potentially subject to defenses and limitations not present in the Charter-Party (including Hague-Visby limitations, contributory negligence, and inherent vice). The proper remedy for TSL's alleged breach is direct damages to Northwind under the Charter-Party — not a pass-through of amounts that Glencore claims against Northwind in a separate proceeding.

Northwind cannot use the Charter-Party to create a blanket indemnity obligation that the parties never agreed to.

B. The Inter-Club Agreement Framework Governs Cargo Claim Allocation Between Owner and Charterer. Northwind's Opposition attempts to dismiss the relevance of the Inter-Club New York Produce Exchange Agreement (the "ICA" or "Inter-Club Agreement") by arguing that it is "merely a voluntary industry agreement" with no binding force on the parties. (Opp. at 35-36.) This argument mischaracterizes both the ICA and its significance to the disposition of this motion.

The ICA is the established framework for apportioning cargo claim liability between owners and charterers in the dry bulk and container shipping industry. Originally adopted in 1970 and most recently amended on September 1, 2011, the ICA is administered by the International Group of P&I Clubs and has been incorporated — either expressly or by course of dealing — into the vast majority of NYPE-form time charter-parties. The ICA provides a detailed mechanism for allocating cargo claim liability based on the cause of the damage: claims arising from the condition of the vessel (e.g., unseaworthiness) are generally allocated to the owner, while claims arising from cargo handling, stowage, or other commercial operations are generally allocated to the charterer. Where liability is shared, the ICA provides for apportionment.

Courts have recognized the ICA as a significant and authoritative framework in maritime disputes involving cargo claim allocation between owners and charterers. See Bermuda Container Line Ltd. v. Int'l Longshoremen's Ass'n, 192 F.3d 250, 256 n.4 (2d Cir. 1999) (noting the ICA's role in the shipping industry); Pemberton Partners LLC v. Primerose Shipping Co., 708 F.3d 527, 537 (4th Cir. 2013) (discussing the ICA's allocation framework). Commentators have likewise recognized the ICA as the industry standard. See Coghlin et al., Time Charters ¶¶ 30.15-30.30 (7th ed. 2014) (detailed discussion of the ICA and its application); Julian Cooke et al., Voyage Charters ¶ 18.22 (4th ed. 2014) (same).

The relevance of the ICA to this motion is straightforward. Clause 6 of the Charter-Party (maintenance and seaworthiness) and the NYPE 2015 form's incorporation of standard industry practices support the application of the ICA allocation framework to any cargo claim dispute between Northwind and TSL. Under the ICA, the allocation of cargo claim liability between owner and charterer depends on the specific cause of the damage in each case. The ICA does not provide for a blanket pass-through of all third-party cargo claims from charterer to owner — which is precisely what Northwind seeks to accomplish through Count III.

Moreover, the ICA framework underscores why Northwind's attempt to plead these third-party claims as direct Charter-Party damages is legally improper. The ICA contemplates that cargo claim liability will be shared between owner and charterer based on fault and causation, with each party bearing its proportionate share. By pleading Count III as a straightforward breach of contract claim for the full $5,634,400 in shipper claims, Northwind seeks to circumvent the ICA's allocation mechanism and impose 100% of the cargo claim liability on TSL — regardless of whether some portion of that liability is attributable to Northwind's own acts or omissions as charterer, or to causes unrelated to TSL's maintenance obligations.

The Court need not decide on this motion whether the ICA is formally incorporated into the Charter-Party or whether it applies as a matter of industry custom. The point is narrower: the existence of the ICA — as the universally recognized framework for allocating cargo claims between owners and charterers — confirms that the shipping industry does not treat such claims as simple "pass-through" damages recoverable by a charterer against an owner under a time charter. See Hadami, S.A. v. Societe Française de Transports et d'Entrepôts, 1983 AMC 2417, 2424 (S.D.N.Y. 1983) (recognizing the role of industry practice in construing charter-party obligations); 2138747 Ontario, Inc. v. Northgate & Co. C&T Am., Inc., 2016 WL 4367231, at *8 (S.D.N.Y. Aug. 12, 2016) (considering industry custom in determining the scope of contractual obligations). Northwind's contrary theory — that it may simply plead the full amount of all shipper claims as direct Charter-Party damages — finds no support in the Charter-Party, in the ICA, or in governing law.

For these reasons, Northwind's attempt to dismiss the ICA as irrelevant should be rejected, and Count III should be dismissed.

C. The Third-Party Shipper Claims Are Unripe and Speculative. Independently of the legal deficiencies addressed above, Count III also fails because the third-party shipper claims that Northwind seeks to recover are, in significant part, unripe and speculative.

As of the filing of the Complaint on October 2, 2023, Northwind had not yet resolved the three underlying shipper claims totaling $5,634,400. These claims were and remain the subject of separate disputes between Northwind and the respective shippers. Northwind's Opposition concedes that at least one of the three shipper claims — specifically, the Glencore iron ore oxidation claim of $3,420,000, which constitutes over 60% of the total amount sought in Count III — remains unresolved as of the date of the Opposition. (Opp. at 37 n.12.)

To the extent Northwind seeks to recover amounts it has not yet paid — and may never pay — to third-party shippers, these damages are speculative and unripe. Northwind does not allege in its Complaint that it has actually paid $5,634,400 (or any specific amount) to the three shippers. Northwind does not allege that judgments have been entered against it in the three shipper claims. Northwind does not allege that it has entered into settlement agreements with the three shippers obligating it to pay specified amounts. The damages sought in Count III thus represent not actual losses sustained by Northwind, but potential future liabilities that may or may not materialize depending on the outcome of separate, unresolved disputes.

Under New York law, damages must be "reasonably certain" and may not be "merely speculative, possible, or imaginary." Marlowe Specialty Insurance v. Camberwell Indemnity Co., 110 A.D.3d 468, 470 (1st Dep't 2013). A claim for damages that depends on the outcome of separate, unresolved disputes between the plaintiff and third parties does not satisfy this standard. See Metro. W. Fin., Inc. v. Nat'l Westminster Bank USA, 175 A.D.2d 834, 835 (1st Dep't 1991) (holding that damages contingent upon "uncertain future events" are too speculative to support a cause of action).

Even under the most generous pleading standards, a claim for speculative future damages that depend on the outcome of separate, unresolved disputes between Northwind and its cargo interests fails to state a cause of action. Count III should be dismissed for this additional, independent reason.

D. Even If Some Limited Recovery Were Available, Count III as Pleaded Is Overbroad and Should Be Narrowed. In the alternative, if the Court declines to dismiss Count III in its entirety, Defendants respectfully submit that Count III as pleaded is impermissibly overbroad and should be substantially narrowed.

Count III lumps together three separate shipper claims totaling $5,634,400, treats them as a single undifferentiated category of Charter-Party damages, and seeks to hold TSL liable for the entirety of these claims without differentiating among them. This pleading approach is deficient for several reasons.

First, the three shipper claims relate to different voyages, different cargoes, different time periods, and different alleged causes of loss. The Glencore iron ore oxidation claim ($3,420,000) relates to a voyage from Richards Bay to Qingdao that Northwind attributes to the Incident 2 BWTS/boiler failure (July 8-29, 2022). The Bunge soybean contamination claim ($1,127,000) relates to a voyage from Santos to Tianjin that Northwind attributes to an alleged failure to properly clean cargo holds. The Trafigura coal shortage and wetting claim ($1,087,400) relates to a voyage from Newcastle to Mundra that Northwind attributes to alleged hatch cover deficiencies. Not all of these claims are connected to the three major mechanical incidents identified in the Complaint (Incident 1: March 12-April 2, 2022, main engine failure off the coast of Mozambique; Incident 2: July 8-29, 2022, BWTS/boiler failure at Richards Bay, South Africa; Incident 3: November 15-December 10, 2022, generator failure in the Strait of Malacca).

Second, Northwind does not plead with any specificity the causal nexus between a particular alleged breach of the Charter-Party by TSL and a particular shipper claim. Count III contains only a generalized assertion that TSL's failure to maintain the vessel "caused" Northwind to incur third-party cargo claims. This is insufficient. If Northwind wishes to recover third-party cargo claims as Charter-Party damages — a theory that Defendants maintain is legally deficient — it must at a minimum allege with specificity (i) which provision of the Charter-Party TSL allegedly breached, (ii) which shipper claim arose from that breach, and (iii) the causal mechanism by which the alleged breach resulted in the claimed cargo damage. The current pleading fails to do so.

Third, Count III does not exclude shipper claims that may be attributable in whole or in part to Northwind's own acts or omissions as charterer. As the charterer in commercial operation of the vessel, Northwind bore responsibility for cargo handling, stowage, lashing, and securing — functions that are frequently the cause of cargo damage in dry bulk operations. The Bunge soybean contamination claim, for example, may be attributable to improper hold cleaning between voyages — a function that, depending on the Charter-Party terms and the particular circumstances, may be the charterer's responsibility rather than the owner's. Count III makes no effort to distinguish between shipper claims attributable to TSL's alleged maintenance failures and those attributable to Northwind's own operational decisions.

If the Court does not dismiss Count III outright, the Court should at minimum require Northwind to replead Count III with specificity, identifying (i) each shipper claim for which it seeks recovery, (ii) the specific Charter-Party breach that allegedly gave rise to that claim, (iii) the causal nexus between the alleged breach and the claimed cargo damage, and (iv) the current status and resolution of each shipper claim. The Court should also exclude from Count III any shipper claims that remain unresolved or unpaid, and any shipper claims that are attributable to Northwind's own acts or omissions as charterer.

III. NORTHWIND'S OPPOSITION RAISES NO GENUINE FACTUAL ISSUES THAT PRECLUDE DISMISSAL

A. The Motion to Dismiss Standard Does Not Require Factual Development. Northwind's Opposition devotes a considerable portion of its pages — over twelve pages, by Defendants' count — to a detailed factual recitation of TSL's alleged maintenance failures and the condition of the M/V Aegean Fortuna (IMO No. 9847231, Supramax dry bulk carrier, 58,200 DWT, built 2016, Liberian flag, classified by Global Maritime Classification Bureau). The Opposition describes at length the three major mechanical incidents, the September 2022 deviation to Maputo, Mozambique, the alleged deficiencies identified in the vessel's class survey records, and the testimony of Northwind's marine surveyor regarding the vessel's condition.

These factual arguments, however extensive, are irrelevant to the legal deficiencies in Counts III and V. This motion does not challenge the factual sufficiency of Northwind's underlying breach of contract claims. Defendants' motion is limited to Counts III and V, and the grounds for dismissal are purely legal: Count V (unjust enrichment) is duplicative of the breach of contract claim because a valid and enforceable contract governs the subject matter in dispute, and Count III (third-party shipper claims) fails to state a cause of action because the Charter-Party does not support pass-through recovery of third-party cargo claims.

On a motion to dismiss under CPLR 3211(a)(7), the Court's inquiry is whether the challenged pleading "states a cause of action." EBC I, Inc. v. Pinnacle National Bank, 5 N.Y.3d 11, 19 (2005). The Court accepts the factual allegations of the complaint as true and accords the plaintiff the benefit of every favorable inference. See Nonnon v. City of New York, 9 N.Y.3d 825, 827 (2007). But the Court need not accept as true legal conclusions or allegations that are contradicted by documentary evidence. Id.

Even accepting all of Northwind's factual allegations as true — that TSL failed to maintain the M/V Aegean Fortuna in a seaworthy condition, that the vessel suffered three major mechanical incidents during the charter period, that the vessel deviated to Maputo in September 2022, and that these failures caused disruptions to Northwind's commercial operations — the legal deficiencies in Counts III and V remain. No amount of factual detail about the condition of the vessel or the nature of TSL's alleged maintenance failures can transform an unjust enrichment claim into a viable cause of action where a valid contract governs, or convert third-party shipper claims into direct Charter-Party damages. The factual sufficiency of Counts I, II, and IV — Northwind's breach of contract claims — is not before this Court and is not affected by this motion.

Northwind's factual recitation regarding the three mechanical incidents and the September 2022 Maputo deviation does not cure the legal defects in Count V (unjust enrichment duplicating contract claim) or Count III (improper pass-through of third-party shipper claims). The Court should decline Northwind's invitation to convert this motion to dismiss into a premature fact-finding exercise and should instead resolve the discrete legal questions presented.

B. Northwind's Policy Arguments Do Not Overcome Governing Law. Finally, Northwind's Opposition advances a policy argument that dismissing Count III would leave Northwind "without a remedy" for the third-party shipper claims allegedly caused by TSL's breaches of the Charter-Party. (Opp. at 40-41.) This argument is factually incorrect, legally irrelevant, and should be disregarded.

Northwind is not left without a remedy. To the contrary, Northwind has extensive remedies against TSL for direct damages under the Charter-Party, and has, in fact, asserted those claims in its Complaint. Northwind's own damages claim of $18,300,000 — as set forth in the Complaint and reiterated in the Opposition — includes the following substantial categories of damages in addition to the $5,634,400 in third-party shipper claims:

These categories encompass off-hire deductions for the periods during which the vessel was unable to perform (calculated at the Charter-Party rate of $14,750 per day), liquidated damages under Clause 28 for TSL's alleged failure to meet the vessel's warranted speed and consumption specifications, the cost of substitute tonnage that Northwind was required to charter to fulfill its commercial commitments during the vessel's periods of non-performance, direct cargo damage for which Northwind may establish a nexus to a specific Charter-Party breach, demurrage and dead freight incurred as a result of delays attributable to TSL's alleged maintenance failures, additional port charges and bunker costs, and lost profits on sub-charters that Northwind was unable to perform.

In short, Northwind has a robust array of remedies for the direct damages it allegedly suffered as a result of TSL's alleged Charter-Party breaches — remedies that Northwind is actively pursuing in Counts I, II, and IV of the Complaint. What Northwind cannot do is use the Charter-Party to create a blanket indemnity that the parties never agreed to, and then characterize the resulting recovery as ordinary "breach of contract damages." The Charter-Party defines the parties' respective rights and obligations, and the damages recoverable for breach are limited to those that the Charter-Party contemplates. Northwind is not left without a remedy; it simply cannot use Count III to expand the scope of recoverable damages beyond what the Charter-Party provides.

Northwind's policy argument is also legally irrelevant. The question on this motion is not whether it would be desirable or equitable for Northwind to recover its third-party cargo claim exposure from TSL; the question is whether Northwind's Complaint, as pleaded, states a cognizable cause of action under New York law. It does not. No policy argument can overcome the governing legal principles set forth in Section II above, and Northwind cites no authority for the proposition that policy considerations can override the well-established limitations on contract damages or the prohibition against quasi-contractual claims where a valid contract governs.

For all of the foregoing reasons, Northwind's Opposition fails to overcome the legal deficiencies in Counts III and V, and Defendants' motion to dismiss should be granted.

CONCLUSION

For all the foregoing reasons, and those set forth in Defendants' Opening Memorandum of Law filed December 15, 2023, and the Declaration of Douglas Carmichael filed in support thereof, Defendants Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd. respectfully request that this Court enter an order:

(i) Dismissing Count V (unjust enrichment) of the Complaint with prejudice;

(ii) Dismissing Count III (third-party shipper claims) of the Complaint with prejudice, or, in the alternative, narrowing Count III to require Plaintiff to plead with specificity the nexus between each shipper claim and a specific alleged breach of the Charter-Party, and to exclude (a) shipper claims that remain unresolved or unpaid, (b) shipper claims for which Plaintiff has not demonstrated a nexus to a specific Charter-Party breach, and (c) shipper claims attributable to Plaintiff's own acts or omissions as charterer; and

(iii) Granting such other and further relief as the Court deems just and proper.

A Proposed Order on Motion to Dismiss was submitted with Defendants' Opening Memorandum on December 15, 2023, and remains pending before the Court. Defendants respectfully request that the Court grant the motion and enter an order consistent with the Proposed Order.

Dated: January 26, 2024 New York, New York

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Carmichael Francesca Morano Carlos Espinoza Hannah Brinkley

One Liberty Plaza, 50th Floor New York, NY 10006 Telephone: (212) 558-4000 Facsimile: (212) 558-3588

Attorneys for Defendants Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd.

CERTIFICATE OF SERVICE

I, Carlos Espinoza, an attorney duly admitted to practice before the courts of the State of New York, hereby certify that on January 26, 2024, a true and correct copy of the foregoing Reply Memorandum of Law in Further Support of Defendants' Motion to Dismiss Counts III and V of the Complaint was filed with the Court via the New York State Courts Electronic Filing System ("NYSCEF") and served upon counsel for Plaintiff via NYSCEF electronic notification and electronic mail at the following address:

Margaret Delacroix, Esq. Hargrove, Delacroix & Stern LLP 600 Lexington Avenue, 28th Floor New York, NY 10022 Telephone: (212) 403-7500

Email: mdelacroix@hdslaw.com

Attorneys for Plaintiff Northwind Maritime Corporation

________________________________________

Carlos Espinoza

WORD COUNT CERTIFICATION

Pursuant to Rule 17 of the Rules of the Commercial Division of the Supreme Court, I, Carlos Espinoza, an attorney of record for Defendants Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., hereby certify that the foregoing Reply Memorandum of Law in Further Support of Defendants' Motion to Dismiss Counts III and V of the Complaint complies with the applicable word count limitation. According to the word-processing system used to prepare this memorandum, the total word count of the memorandum, exclusive of the caption, table of contents, table of authorities, signature block, and certificate of service, is 7,428 words.

________________________________________

Carlos Espinoza

Page(s)

Marlowe Specialty Insurance v. Camberwell Indemnity Co., 110 A.D.3d 468 (1st Dep't 2013)	24
Ashwood Capital, Inc. v. OTG Mgmt., Inc., 99 A.D.3d 1 (1st Dep't 2012)	7, 9
Bramwell Bancorp v. Sommer, 8 N.Y.3d 318 (2007)	12
Bermuda Container Line Ltd. v. Int'l Longshoremen's Ass'n, 192 F.3d 250 (2d Cir. 1999)	21
Beth Israel Med. Ctr. v. Ridgeway Specialty Insurance, 448 F.3d 573 (2d Cir. 2006)	6
Clark-Fitzpatrick, Inc. v. Severin Industries, 70 N.Y.2d 382 (1987)	5, 6, 11
Coppola v. Applied Elec. Corp., 315 A.D.2d 538 (2d Dep't 2003)	10
Cox v. NAP Constr. Co., 10 N.Y.3d 592 (2008)	7
Daou v. Penmark Capital Markets, 42 F.4th 120 (2d Cir. 2022)	15
EBC I, Inc. v. Pinnacle National Bank, 5 N.Y.3d 11 (2005)	27
Tidewater Systems Enters., Inc. v. Bimbo Foods Bakeries Distrib., LLC, 198 A.D.3d 489 (1st Dep't 2021)	10, 12
Goldman v. Ridgeway Insurance, 5 N.Y.3d 561 (2005)	5
Hadami, S.A. v. Societe Française de Transports et d'Entrepôts, 1983 AMC 2417 (S.D.N.Y. 1983)	22
Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854)	15, 16
IDT Corp. v. Meridian Financial, 12 N.Y.3d 132 (2009)	5
Kenford Co. v. County of Erie, 73 N.Y.2d 312 (1989)	15, 16
Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011)	5, 6, 7, 11
Metro. W. Fin., Inc. v. Nat'l Westminster Bank USA, 175 A.D.2d 834 (1st Dep't 1991)	24
Nonnon v. City of New York, 9 N.Y.3d 825 (2007)	27
Oldcastle Precast, Inc. v. Lumbermens Mut. Cas. Co., 326 F.3d 22 (2d Cir. 2003)	16
Northgate & Co. SDI Co. v. Matsushita Elec. Indus. Co., 2007 WL 4267498 (S.D.N.Y. Dec. 4, 2007)	22
Starmedia Network, Inc. v. Horn, 185 F. Supp. 2d 355 (S.D.N.Y. 2002)	10
Swift v. Tyson, 41 U.S. (16 Pet.) 1 (1842)	22
2138747 Ontario, Inc. v. Northgate & Co. C&T Am., Inc., 2016 WL 4367231 (S.D.N.Y. Aug. 12, 2016)	22
Pemberton Partners LLC v. Primerose Shipping Co., 708 F.3d 527 (4th Cir. 2013)	21

Woss v. E.O. Steben & Co., 161 A.D.3d 533 (1st Dep't 2018)

Page(s)

CPLR § 3014	8, 9, 10
CPLR § 3211(a)(7)	4, 27, 28
N.Y. Comm. Div. R. 17	35

Page(s)

International Group of P&I Clubs, Inter-Club New York Produce Exchange Agreement 1996 (as amended Sept. 1, 2011)	20, 21, 22, 23
Julian Cooke et al., Voyage Charters (4th ed. 2014)	16, 21
Terence Coghlin et al., Time Charters (7th ed. 2014)	15, 21, 22
25 Williston on Contracts § 66:1 (4th ed.)	6
Damage Category	Amount
Off-hire deductions (Clause 11)	$1,003,000
Liquidated damages (Clause 28)	$4,500,000
Substitute charter costs	$471,600
Cargo damage (direct)	$3,420,000
Demurrage and dead freight	$1,230,000
Additional port and bunker costs	$875,400
Lost sub-charter profit	$166,600
Legal fees and survey costs	$999,000
Subtotal (excluding Count III shipper claims)	$12,665,600

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION
NORTHWIND MARITIME CORPORATION,
Plaintiff,
-against-
THALASSA SHIPPING & LOGISTICS SA and AEGEAN FORTUNA SHIPHOLDING LTD.,
Defendants.
Index No. 655421/2023 Part 49 (Hon. Lorraine K. Chen, J.S.C.)
REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF DEFENDANTS' MOTION TO DISMISS COUNTS III AND V OF THE COMPLAINT
Filed: January 26, 2024
CALDERWOOD & HARKNESS LLP One Liberty Plaza, 50th Floor New York, NY 10006 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Douglas Carmichael, Responsible Partner Francesca Morano, Partner Carlos Espinoza, Senior Associate Hannah Brinkley, Associate
Attorneys for Defendants Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd.
TABLE OF AUTHORITIES
Cases.
Statutes and Rules
Secondary Sources.
PRELIMINARY STATEMENT
Defendants Thalassa Shipping & Logistics SA ("TSL") and Aegean Fortuna Shipholding Ltd. ("Aegean Fortuna Shipholding" and, together with TSL, "Defendants") respectfully submit this reply memorandum of law in further support of their motion to dismiss Counts III and V of the Complaint filed by Plaintiff Northwind Maritime Corporation ("Northwind" or "Plaintiff"). This reply is submitted in response to Plaintiff's Memorandum of Law in Opposition to the Motion to Dismiss, filed January 12, 2024 by Hargrove, Delacroix & Stern LLP (the "Opposition"), and the Declaration of Margaret Delacroix filed in support thereof.
As Defendants demonstrated in their opening memorandum of law, filed December 15, 2023 (the "Opening Memorandum"), Counts III and V of the Complaint suffer from fundamental legal deficiencies that no amount of factual embellishment can cure. Northwind's Opposition confirms these deficiencies rather than resolving them. Specifically:
Count V (Unjust Enrichment) is duplicative of the breach of contract claim and must be dismissed as a matter of law. Northwind's Opposition fails to overcome the well-settled principle that a claim for unjust enrichment cannot lie where a valid, enforceable contract governs the subject matter in dispute. Northwind's own Opposition — like its Complaint before it — repeatedly references and relies upon the charter-party between Northwind and TSL: a 36-month time charter-party for the M/V Aegean Fortuna, executed on NYPE 2015 form, Reference No. NW-TSL-CP-2020-1203, dated December 3, 2020 (the "Charter-Party"). Northwind does not dispute the validity of the Charter-Party at any point in its opposition papers. Rather, Northwind's entire case is built upon the enforceability of the Charter-Party and TSL's alleged breaches of its specific terms. Under these circumstances, Northwind's unjust enrichment claim is impermissible as a matter of law and must be dismissed with prejudice.
Count III (Third-Party Shipper Claims as Charter-Party Damages) fails to state a claim upon which relief can be granted. Northwind seeks to recover $5,634,400 in claims brought against Northwind by three separate third-party shippers as pass-through damages under the Charter-Party. This attempt is legally unsupported. The Charter-Party does not contain any indemnity provision obligating TSL to hold Northwind harmless for claims brought by third-party cargo interests. The claims that Northwind seeks to pass through are separate causes of action between Northwind and its cargo interests — they do not arise under the Charter-Party between Northwind and TSL. These claims are barred by well-settled principles of New York contract law limiting recovery to foreseeable damages that were within the contemplation of the parties at the time of contracting. Moreover, the Inter-Club Agreement — the established industry framework for apportioning cargo claim liability between owners and charterers — provides the appropriate allocation mechanism, and Northwind's attempt to plead these third-party claims as direct Charter-Party damages impermissibly circumvents that framework.
Northwind's Opposition raises no new legal authority warranting a different result. Instead, the Opposition devotes substantial space to factual arguments about TSL's alleged maintenance failures and the condition of the M/V Aegean Fortuna — arguments that are irrelevant to the legal deficiencies in Counts III and V and that, in any event, are inappropriate on a CPLR 3211(a)(7) motion to dismiss. The factual sufficiency of Northwind's underlying breach of contract claims (Counts I, II, and IV) is not at issue in this motion. The question before this Court is whether Counts III and V, as a matter of law, state viable causes of action. They do not.
For the reasons set forth below and in the Opening Memorandum, this Court should dismiss Counts III and V of the Complaint with prejudice.
ARGUMENT
I. COUNT V (UNJUST ENRICHMENT) MUST BE DISMISSED BECAUSE AN EXPRESS CONTRACT GOVERNS THE PARTIES' DISPUTE
A. Northwind's Opposition Concedes the Existence of a Valid Contract. It is black-letter New York law that "the theory of unjust enrichment lies as a quasi-contract claim" and that "[i]t is impermissible . . . to seek damages in an action sounding in quasi contract where the suing party has an adequate remedy at law in the form of a breach of contract action." Clark-Fitzpatrick, Inc. v. Severin Industries, 70 N.Y.2d 382, 388 (1987). The Court of Appeals has reaffirmed this principle on numerous occasions: where "the parties executed a valid and enforceable written contract governing a particular subject matter, recovery on a theory of unjust enrichment for events arising out of that subject matter is ordinarily precluded." IDT Corp. v. Meridian Financial, 12 N.Y.3d 132, 142 (2009). The rationale is straightforward: quasi-contractual remedies exist to fill gaps where no contract governs the parties' obligations; they are not available as an alternative vehicle for relief where the parties have already defined their respective rights and obligations through a binding agreement. See Goldman v. Ridgeway Insurance, 5 N.Y.3d 561, 572 (2005).
This principle is dispositive here. Northwind's own Opposition — no less than its Complaint — confirms the existence, validity, and enforceability of the Charter-Party that governs every aspect of the parties' dispute. The Charter-Party is a 36-month time charter-party for the M/V Aegean Fortuna, executed on the widely-used NYPE 2015 form (with rider clauses), bearing Reference No. NW-TSL-CP-2020-1203, and dated December 3, 2020. The Charter-Party has a commencement date of January 15, 2021, and a stated expiration date of January 14, 2024. It sets a daily hire rate of $14,750 per day for the full 36-month charter period — a period of approximately 1,096 days, representing a total charter value of approximately $16,166,000.
Northwind's Opposition repeatedly invokes the Charter-Party as the foundation of its claims. The Opposition expressly references and relies upon the following specific provisions of the Charter-Party as the source of TSL's alleged obligations:
• Clause 2 (Owner's Obligations): Northwind's Opposition argues that TSL breached its obligation to deliver the vessel "in every way fitted for the service" and to "maintain the vessel in a thoroughly efficient state in hull, machinery, and equipment." (Opp. at 6-8.)
• Clause 5 (Trade Limits): Northwind contends that TSL's alleged failure to maintain the vessel resulted in trade restrictions that breached Clause 5's trading warranty. (Opp. at 9.)
• Clause 6 (Maintenance and Seaworthiness): Northwind relies heavily on Clause 6 as the source of TSL's duty to maintain the vessel in a seaworthy condition, and attributes the three mechanical incidents and the resulting shipper claims to breaches of this provision. (Opp. at 10-15.)
• Clause 11 (Off-Hire): Northwind seeks off-hire deductions for periods during which the vessel was allegedly unable to perform, calculating off-hire based on the daily rate specified in the Charter-Party. (Opp. at 16-17.)
• Clause 28 (Liquidated Damages): Northwind claims entitlement to liquidated damages under Clause 28 for TSL's alleged failure to meet the vessel's warranted performance specifications. (Opp. at 18-19.)
In other words, Northwind's own papers make clear that the Charter-Party is a valid and enforceable agreement, that it governs the parties' respective obligations with respect to the M/V Aegean Fortuna, and that Northwind seeks damages for TSL's alleged breaches of specific Charter-Party terms. There is not a hint — anywhere in the Complaint, anywhere in the Opposition, anywhere in the Delacroix Declaration — that the Charter-Party might be invalid, unenforceable, or that there is any genuine dispute as to its existence.
Under these circumstances, the unjust enrichment claim in Count V is squarely foreclosed. The Court of Appeals' decision in Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011), is directly on point. In Mandarin Trading, the Court dismissed an unjust enrichment claim where the plaintiff "failed to adequately allege that no agreement existed" between the parties and instead "admitted that there was, in fact, a contract." Id. The Court held that where the plaintiff's own pleading confirms the existence of a governing contract, a quasi-contractual claim for unjust enrichment "is not available." Id.
So too here. Northwind's own Complaint and Opposition confirm the existence of the Charter-Party and predicate every claim upon it. No quasi-contractual claim can survive under these circumstances. See also Beth Israel Med. Ctr. v. Ridgeway Specialty Insurance, 448 F.3d 573, 586-87 (2d Cir. 2006) (applying New York law and dismissing unjust enrichment claim where "the existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter"); Clark-Fitzpatrick, 70 N.Y.2d at 389 (holding that "[t]he existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter"); 25 Williston on Contracts § 66:1 (4th ed.) ("Where an enforceable express contract exists, there can be no recovery under a theory of implied contract or unjust enrichment.").
Northwind's Opposition does not and cannot dispute these controlling authorities. Instead, Northwind attempts a different argument — one addressed in Section I.B below — that it is entitled to plead unjust enrichment "in the alternative." As demonstrated below, that argument is meritless in the circumstances of this case.
B. Northwind's "Alternative Pleading" Argument Is Meritless. Northwind's Opposition rests its defense of Count V on a single argument: that under CPLR 3014, a plaintiff is entitled to plead causes of action in the alternative, and therefore Northwind may assert an unjust enrichment claim alongside its breach of contract claim in the event that the Charter-Party is found unenforceable. (Opp. at 22-24.) This argument is both legally incorrect and factually unsupported.
To be sure, CPLR 3014 permits alternative and inconsistent pleading in certain circumstances. The statute provides that "[c]auses of action or defenses may be stated alternatively or hypothetically" and that "[a] party may also set forth two or more statements of a cause of action or defense alternatively or hypothetically." CPLR § 3014. The general principle embodied in CPLR 3014, however, is not without limitation. The Commercial Division of this Court, as well as the First Department, have consistently held that a party may not use CPLR 3014 as a shield for duplicative quasi-contractual claims where there is no genuine dispute as to the existence or validity of the underlying contract.
In Ashwood Capital, Inc. v. OTG Mgmt., Inc., 99 A.D.3d 1, 5 (1st Dep't 2012), the First Department addressed this precise issue. There, the plaintiff asserted both breach of contract and unjust enrichment claims, arguing that the unjust enrichment claim was pleaded "in the alternative" under CPLR 3014. The First Department rejected this argument, holding that "alternative pleading of quasi-contractual claims is impermissible where neither party disputes the existence of a binding, enforceable contract." Id. The Court reasoned that CPLR 3014 permits alternative pleading where there is a "genuine uncertainty as to which of two or more theories of recovery may be established at trial," but does not license a party to assert a duplicative quasi-contractual claim "merely as insurance against the possibility that the contract might somehow be found unenforceable." Id. at 6. See also Cox v. NAP Constr. Co., 10 N.Y.3d 592, 607 (2008) (holding that where plaintiff "does not dispute the existence" of the contract, "there is no basis for a claim in quasi contract"); Woss v. E.O. Steben & Co., 161 A.D.3d 533, 534 (1st Dep't 2018) (dismissing unjust enrichment claim as duplicative where "the parties do not dispute the existence or enforceability of the agreements at issue").
The reasoning of these decisions applies with full force to the case at bar. Northwind does not — at any point in the Complaint or in the Opposition — challenge the validity, enforceability, or existence of the Charter-Party. To the contrary, the Charter-Party is the cornerstone of Northwind's entire case. Northwind's breach of contract claims (Counts I, II, and IV) are predicated on the Charter-Party being a valid and enforceable agreement. Northwind seeks damages calculated by reference to the Charter-Party's hire rate, off-hire provisions, and liquidated damages clause. Northwind identifies specific Charter-Party provisions — Clauses 2, 5, 6, 11, and 28 — as the source of TSL's alleged obligations.
Under these circumstances, there is no "genuine uncertainty" as to whether the Charter-Party is a valid and enforceable agreement. The Charter-Party was duly executed by both parties on December 3, 2020. Performance under the Charter-Party commenced on January 15, 2021, when the M/V Aegean Fortuna was delivered to Northwind at the port of Qingdao, China. For over two years, both parties performed their obligations under the Charter-Party: Northwind paid hire and gave employment orders, and TSL provided the vessel and crew. There has been no contention by either party — at any stage of this litigation — that the Charter-Party was procured by fraud, executed under duress, lacking in consideration, or otherwise invalid. No statute of frauds defense has been raised. No argument has been made that the Charter-Party fails to satisfy the requirements for a binding agreement under New York law.
Northwind's suggestion that unjust enrichment should be permitted as an "alternative" theory of recovery is therefore a transparent attempt to circumvent the well-settled rule that quasi-contractual claims are unavailable where a valid contract governs. CPLR 3014 does not permit a plaintiff to maintain a duplicative quasi-contractual claim as a precautionary measure where the plaintiff itself relies upon, and does not dispute, the governing contract. See Starmedia Network, Inc. v. Horn, 185 F. Supp. 2d 355, 365 (S.D.N.Y. 2002) (noting that alternative pleading under CPLR 3014 "does not give a party license to pursue a quasi-contract claim that is entirely duplicative of a contract claim when there is no factual dispute that a contract exists"); Tidewater Systems Enters., Inc. v. Bimbo Foods Bakeries Distrib., LLC, 198 A.D.3d 489, 490 (1st Dep't 2021) (dismissing unjust enrichment claim as duplicative where both parties "acknowledge[d] the existence of the contract" and plaintiff "d[id] not claim that the agreement [wa]s unenforceable"); Coppola v. Applied Elec. Corp., 315 A.D.2d 538, 539 (2d Dep't 2003) (same).
Northwind's Opposition cites no case in which a court in the Commercial Division — or any New York court — permitted an unjust enrichment claim to proceed alongside a breach of contract claim under circumstances where, as here, (i) neither party disputes the existence of the contract, (ii) the plaintiff's own complaint and opposition papers rely on the contract as the basis for liability, and (iii) the unjust enrichment claim seeks identical damages for identical conduct. Northwind's "alternative pleading" argument is meritless and should be rejected.
Furthermore, Northwind's Opposition fails to acknowledge the critical distinction between cases where there is a genuine dispute about whether a contract was ever formed and cases — like this one — where the parties agree that a contract exists and disagree only about whether one party breached it. In the former category of cases, alternative pleading of quasi-contractual claims may be appropriate because the plaintiff genuinely cannot know, until the trier of fact resolves the disputed issue, whether a contract governs. See Woss, 161 A.D.3d at 534 (noting this distinction). In the latter category, alternative pleading of unjust enrichment is impermissible because there is no genuine uncertainty about the governing legal framework — only a factual dispute about performance. This case falls squarely in the latter category. The unjust enrichment claim in Count V must be dismissed with prejudice.
C. The Subject Matter of Count V Is Entirely Coextensive with the Charter-Party. Even if Northwind could overcome the bar against unjust enrichment where a valid contract exists — and it cannot — Count V would still fail because the subject matter of the unjust enrichment claim is entirely coextensive with the Charter-Party. Every element of the unjust enrichment claim as pleaded in the Complaint — the alleged benefit conferred, the inequity of the Defendants' retention of that benefit, and the resulting damages — is governed by and arises from the Charter-Party.
Northwind's unjust enrichment theory, as articulated in paragraphs 112 through 124 of the Complaint, is that Northwind conferred a "benefit" on TSL by paying hire under the Charter-Party while the vessel was in a deficient condition, and that it would be "unjust" for TSL to retain that hire because the vessel did not meet the Charter-Party's warranted specifications. But the very concept of "hire" — the obligation to pay it, the rate at which it is calculated ($14,750 per day), the circumstances under which it may be withheld or deducted, and the remedies for nonperformance — are all governed by the Charter-Party. The "benefit" Northwind claims to have conferred is nothing more than performance of its contractual obligation to pay hire. The "enrichment" Northwind claims is nothing more than TSL's receipt of hire allegedly in excess of what was warranted under the Charter-Party. And the remedy Northwind seeks under Count V is a return of that allegedly excess hire — the very same relief that is available under the breach of contract claims (and that Northwind, in fact, seeks under Counts I, II, and IV).
The Court of Appeals' instruction in Mandarin Trading is clear: unjust enrichment cannot be used to "duplicate or replace" a breach of contract claim. 16 N.Y.3d at 182. That is precisely what Count V does. Northwind does not identify any obligation, benefit, or enrichment that arises outside the scope of the Charter-Party. There is no allegation that TSL received some benefit from Northwind that was not governed by the Charter-Party. There is no allegation that the parties' relationship extended beyond the Charter-Party's terms. The unjust enrichment damages sought in Count V — $18,300,000, the total claim amount — are identical to the contract damages sought under the breach of Charter-Party counts. See Compl. ¶¶ 115-124 (Count V) (seeking the same categories of damages as Counts I, II, and IV, including off-hire deductions, liquidated damages, substitute charter costs, and cargo damage). Cf. Clark-Fitzpatrick, 70 N.Y.2d at 389 (dismissing unjust enrichment claim where "plaintiff's quasi-contract claim is merely duplicative of the breach of contract cause of action"); Bramwell Bancorp v. Sommer, 8 N.Y.3d 318, 324 (2007) (holding that unjust enrichment claim was "duplicative of plaintiff's contract cause of action" where the "same facts support both").
The utter coextensiveness of Count V with Northwind's breach of contract claims underscores that Count V is not a genuine "alternative" theory of recovery, but rather an impermissible attempt to re-label the same breach of contract claim under a different legal theory. This is precisely the type of duplicative pleading that the rule against quasi-contractual claims in the face of an express contract is designed to prevent. See Tidewater Systems Enters., 198 A.D.3d at 490.
For all of the foregoing reasons, Count V must be dismissed with prejudice.
II. COUNT III (THIRD-PARTY SHIPPER CLAIMS AS CHARTER-PARTY DAMAGES) FAILS TO STATE A CLAIM
A. Northwind Cannot Recover Third-Party Shipper Claims as Pass-Through Damages Under the Charter-Party. ##### 1. The Third-Party Claims Are Not Recoverable Contract Damages
Count III of the Complaint seeks to recover $5,634,400 representing three separate cargo claims brought against Northwind by third-party shippers in connection with the carriage of goods aboard the M/V Aegean Fortuna. As set forth in the Complaint and the Opposition, these three claims are:
(a) A claim by Crestline & Co. ("Glencore") in the amount of $3,420,000, arising from the alleged oxidation of a cargo of iron ore carried from Richards Bay, South Africa, to Qingdao, China, which Northwind attributes to the Incident 2 BWTS/boiler failure that occurred from July 8 through July 29, 2022;
(b) A claim by Brightwater Corporation ("Bunge") in the amount of $1,127,000, arising from the alleged contamination of a cargo of soybeans carried from Santos, Brazil, to Tianjin, China, which Northwind attributes to an alleged failure to properly clean cargo holds following a prior voyage; and
(c) A claim by Strathmore Corporation ("Trafigura") in the amount of $1,087,400, arising from the alleged shortage and wetting of a cargo of coal carried from Newcastle, Australia, to Mundra, India, which Northwind attributes to alleged hatch cover deficiencies.
Northwind asserts that each of these claims was "caused by" TSL's alleged failure to maintain the M/V Aegean Fortuna in a seaworthy condition and that, as a result, Northwind is entitled to recover the full amount of these third-party claims from TSL as damages under the Charter-Party.
This theory is legally unsupported for multiple independent reasons.
First, the three shipper claims identified above are separate causes of action between Northwind and its cargo interests. They arise under the bills of lading issued by Northwind (as charterer) to the respective shippers — not under the Charter-Party between Northwind and TSL. The shippers' claims against Northwind are governed by the Hague-Visby Rules (or the applicable bill of lading terms), which impose obligations on the carrier — here, Northwind as the time charterer issuing bills of lading — with respect to the care and carriage of cargo. These are distinct legal obligations from the obligations that TSL owes to Northwind under the Charter-Party.
Second, under well-settled principles of New York contract law, a party may recover only those damages that were "reasonably foreseeable and within the contemplation of the parties at the time of contracting." Kenford Co. v. County of Erie, 73 N.Y.2d 312, 319 (1989). This principle — derived from the seminal decision in Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854) — limits contract damages to those that "may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it." Kenford, 73 N.Y.2d at 319 (quoting Hadley, 9 Ex. at 354).
The third-party shipper claims that Northwind seeks to pass through in Count III do not satisfy this standard. While the Charter-Party imposes obligations on TSL with respect to the maintenance and seaworthiness of the M/V Aegean Fortuna, it does not contain any provision making TSL liable for Northwind's exposure to third-party cargo claims. The Charter-Party's maintenance and seaworthiness obligation under Clause 6 creates a duty running from TSL (as Owner) to Northwind (as Charterer) — not a direct obligation running to any third-party shipper. See Terence Coghlin et al., Time Charters ¶ 16.1 (7th ed. 2014) (explaining that the owner's obligation to maintain the vessel under a time charter "is owed to the charterer, not to cargo interests"). The Charter-Party does not purport to allocate third-party cargo claim liability between the parties, and no reasonable interpretation of its terms would impose on TSL the obligation to indemnify Northwind for the full amount of any and all cargo claims that might arise during the charter period.
Third, and critically, Northwind's Opposition fails to identify any provision of the Charter-Party that imposes liability on TSL for Northwind's third-party cargo exposure. The Opposition points to Clause 6 (maintenance and seaworthiness) as the relevant duty, but Clause 6 defines the Owner's obligation to the Charterer — not the scope of damages recoverable for breach of that obligation. The Opposition does not cite Clause 28 (which addresses liquidated damages for specific performance shortfalls), Clause 11 (which addresses off-hire for periods of non-performance), or any other specific Charter-Party provision establishing that TSL assumed responsibility for Northwind's cargo liabilities. Nor could it, because no such provision exists.
The absence of any contractual provision allocating third-party cargo claim liability to TSL is not an oversight — it reflects the well-understood allocation of risk in the time charter context. Under a time charter, the charterer assumes commercial operation of the vessel and, in doing so, assumes the risks inherent in the carriage of cargo, including the risk of cargo claims by shippers. The owner retains responsibility for the physical operation of the vessel and its maintenance, but the owner's liability to the charterer for maintenance failures is measured by the direct damages suffered by the charterer — not by the charterer's exposure to claims by third parties. See Julian Cooke et al., Voyage Charters ¶ 18.20 (4th ed. 2014) (discussing the distinction between an owner's direct liability to a charterer and the charterer's liability to cargo interests). See also Daou v. Penmark Capital Markets, 42 F.4th 120, 135 (2d Cir. 2022) (applying New York law and holding that damages must be "within the contemplation of the parties" and cannot include speculative consequential losses absent an express contractual provision).
For these reasons, the third-party shipper claims that Northwind seeks to recover in Count III are not recoverable as contract damages under the Charter-Party, and Count III fails to state a cause of action.
##### 2. Northwind's Opposition Conflates Indemnity with Breach of Contract Damages
Northwind's Opposition, while ostensibly seeking "damages" for breach of the Charter-Party, effectively asks this Court to transform the Charter-Party into an indemnity agreement under which TSL would be liable for any and all third-party claims that Northwind might face in connection with the vessel's operations. This is precisely what Northwind's theory requires: that TSL be held responsible not merely for its direct obligations to Northwind under the Charter-Party (e.g., to maintain the vessel, to provide a seaworthy vessel, to pay liquidated damages for performance shortfalls), but also for any claims that third-party shippers might assert against Northwind in connection with cargo carried aboard the vessel.
The Charter-Party contains no such indemnity provision. Had the parties intended for TSL to indemnify Northwind against third-party cargo claims, they could have — and would have — included an express indemnity clause in the Charter-Party to that effect. Indemnity clauses are common in commercial charter-parties, and the NYPE 2015 form upon which the Charter-Party is based provides specific mechanisms for allocating risk between owner and charterer. See Coghlin et al., Time Charters ¶ 30.1 (7th ed. 2014) (discussing indemnity clauses in time charters). The absence of any such clause here is strong evidence that the parties did not intend for TSL to bear liability for Northwind's third-party cargo exposure.
Northwind's Opposition attempts to sidestep this problem by arguing that the shipper claims were "caused by" TSL's alleged maintenance failures and that, therefore, all shipper claims "flow from" TSL's breach of the Charter-Party. (Opp. at 30-32.) This argument conflates causation with contractual scope of recovery. Even assuming arguendo that TSL's alleged breach of the maintenance and seaworthiness obligation under Clause 6 contributed to the conditions that gave rise to the shipper claims — a factual assertion that Defendants do not concede — it does not follow that the full amount of those shipper claims is recoverable as damages under the Charter-Party. The question is not whether TSL's alleged breach had some causal connection to the circumstances giving rise to the shipper claims; the question is whether the Charter-Party allocates to TSL the risk of Northwind's third-party cargo liabilities. It does not.
To illustrate: Northwind's Opposition focuses extensively on Incident 2 — the BWTS/boiler failure that occurred from July 8 through July 29, 2022, while the M/V Aegean Fortuna was at Richards Bay, South Africa — and the resulting Glencore cargo claim of $3,420,000 for alleged iron ore oxidation. (Opp. at 30-33.) Northwind argues that because the boiler failure prevented the vessel from completing the voyage on schedule, and because the delay allegedly resulted in oxidation of the iron ore cargo, the full $3,420,000 Glencore claim is recoverable from TSL as damages for breach of Clause 6. (Opp. at 31.)
But this argument conflates two distinct legal relationships and two distinct measures of damages. TSL's direct liability to Northwind for the Incident 2 boiler failure — if liability is established — is measured by the direct losses Northwind suffered as a result of that failure: off-hire for the 21-day delay, any additional port and bunker costs incurred, any liquidated damages under Clause 28 for failure to meet speed and consumption warranties, and similar direct Charter-Party damages. These are the damages that were "within the contemplation of the parties at the time they made the contract." Kenford, 73 N.Y.2d at 319. The Glencore cargo claim, by contrast, is a separate dispute between Northwind and Glencore, governed by the bill of lading between those parties, and potentially subject to defenses and limitations not present in the Charter-Party (including Hague-Visby limitations, contributory negligence, and inherent vice). The proper remedy for TSL's alleged breach is direct damages to Northwind under the Charter-Party — not a pass-through of amounts that Glencore claims against Northwind in a separate proceeding.
Northwind cannot use the Charter-Party to create a blanket indemnity obligation that the parties never agreed to.
B. The Inter-Club Agreement Framework Governs Cargo Claim Allocation Between Owner and Charterer. Northwind's Opposition attempts to dismiss the relevance of the Inter-Club New York Produce Exchange Agreement (the "ICA" or "Inter-Club Agreement") by arguing that it is "merely a voluntary industry agreement" with no binding force on the parties. (Opp. at 35-36.) This argument mischaracterizes both the ICA and its significance to the disposition of this motion.
The ICA is the established framework for apportioning cargo claim liability between owners and charterers in the dry bulk and container shipping industry. Originally adopted in 1970 and most recently amended on September 1, 2011, the ICA is administered by the International Group of P&I Clubs and has been incorporated — either expressly or by course of dealing — into the vast majority of NYPE-form time charter-parties. The ICA provides a detailed mechanism for allocating cargo claim liability based on the cause of the damage: claims arising from the condition of the vessel (e.g., unseaworthiness) are generally allocated to the owner, while claims arising from cargo handling, stowage, or other commercial operations are generally allocated to the charterer. Where liability is shared, the ICA provides for apportionment.
Courts have recognized the ICA as a significant and authoritative framework in maritime disputes involving cargo claim allocation between owners and charterers. See Bermuda Container Line Ltd. v. Int'l Longshoremen's Ass'n, 192 F.3d 250, 256 n.4 (2d Cir. 1999) (noting the ICA's role in the shipping industry); Pemberton Partners LLC v. Primerose Shipping Co., 708 F.3d 527, 537 (4th Cir. 2013) (discussing the ICA's allocation framework). Commentators have likewise recognized the ICA as the industry standard. See Coghlin et al., Time Charters ¶¶ 30.15-30.30 (7th ed. 2014) (detailed discussion of the ICA and its application); Julian Cooke et al., Voyage Charters ¶ 18.22 (4th ed. 2014) (same).
The relevance of the ICA to this motion is straightforward. Clause 6 of the Charter-Party (maintenance and seaworthiness) and the NYPE 2015 form's incorporation of standard industry practices support the application of the ICA allocation framework to any cargo claim dispute between Northwind and TSL. Under the ICA, the allocation of cargo claim liability between owner and charterer depends on the specific cause of the damage in each case. The ICA does not provide for a blanket pass-through of all third-party cargo claims from charterer to owner — which is precisely what Northwind seeks to accomplish through Count III.
Moreover, the ICA framework underscores why Northwind's attempt to plead these third-party claims as direct Charter-Party damages is legally improper. The ICA contemplates that cargo claim liability will be shared between owner and charterer based on fault and causation, with each party bearing its proportionate share. By pleading Count III as a straightforward breach of contract claim for the full $5,634,400 in shipper claims, Northwind seeks to circumvent the ICA's allocation mechanism and impose 100% of the cargo claim liability on TSL — regardless of whether some portion of that liability is attributable to Northwind's own acts or omissions as charterer, or to causes unrelated to TSL's maintenance obligations.
The Court need not decide on this motion whether the ICA is formally incorporated into the Charter-Party or whether it applies as a matter of industry custom. The point is narrower: the existence of the ICA — as the universally recognized framework for allocating cargo claims between owners and charterers — confirms that the shipping industry does not treat such claims as simple "pass-through" damages recoverable by a charterer against an owner under a time charter. See Hadami, S.A. v. Societe Française de Transports et d'Entrepôts, 1983 AMC 2417, 2424 (S.D.N.Y. 1983) (recognizing the role of industry practice in construing charter-party obligations); 2138747 Ontario, Inc. v. Northgate & Co. C&T Am., Inc., 2016 WL 4367231, at *8 (S.D.N.Y. Aug. 12, 2016) (considering industry custom in determining the scope of contractual obligations). Northwind's contrary theory — that it may simply plead the full amount of all shipper claims as direct Charter-Party damages — finds no support in the Charter-Party, in the ICA, or in governing law.
For these reasons, Northwind's attempt to dismiss the ICA as irrelevant should be rejected, and Count III should be dismissed.
C. The Third-Party Shipper Claims Are Unripe and Speculative. Independently of the legal deficiencies addressed above, Count III also fails because the third-party shipper claims that Northwind seeks to recover are, in significant part, unripe and speculative.
As of the filing of the Complaint on October 2, 2023, Northwind had not yet resolved the three underlying shipper claims totaling $5,634,400. These claims were and remain the subject of separate disputes between Northwind and the respective shippers. Northwind's Opposition concedes that at least one of the three shipper claims — specifically, the Glencore iron ore oxidation claim of $3,420,000, which constitutes over 60% of the total amount sought in Count III — remains unresolved as of the date of the Opposition. (Opp. at 37 n.12.)
To the extent Northwind seeks to recover amounts it has not yet paid — and may never pay — to third-party shippers, these damages are speculative and unripe. Northwind does not allege in its Complaint that it has actually paid $5,634,400 (or any specific amount) to the three shippers. Northwind does not allege that judgments have been entered against it in the three shipper claims. Northwind does not allege that it has entered into settlement agreements with the three shippers obligating it to pay specified amounts. The damages sought in Count III thus represent not actual losses sustained by Northwind, but potential future liabilities that may or may not materialize depending on the outcome of separate, unresolved disputes.
Under New York law, damages must be "reasonably certain" and may not be "merely speculative, possible, or imaginary." Marlowe Specialty Insurance v. Camberwell Indemnity Co., 110 A.D.3d 468, 470 (1st Dep't 2013). A claim for damages that depends on the outcome of separate, unresolved disputes between the plaintiff and third parties does not satisfy this standard. See Metro. W. Fin., Inc. v. Nat'l Westminster Bank USA, 175 A.D.2d 834, 835 (1st Dep't 1991) (holding that damages contingent upon "uncertain future events" are too speculative to support a cause of action).
Even under the most generous pleading standards, a claim for speculative future damages that depend on the outcome of separate, unresolved disputes between Northwind and its cargo interests fails to state a cause of action. Count III should be dismissed for this additional, independent reason.
D. Even If Some Limited Recovery Were Available, Count III as Pleaded Is Overbroad and Should Be Narrowed. In the alternative, if the Court declines to dismiss Count III in its entirety, Defendants respectfully submit that Count III as pleaded is impermissibly overbroad and should be substantially narrowed.
Count III lumps together three separate shipper claims totaling $5,634,400, treats them as a single undifferentiated category of Charter-Party damages, and seeks to hold TSL liable for the entirety of these claims without differentiating among them. This pleading approach is deficient for several reasons.
First, the three shipper claims relate to different voyages, different cargoes, different time periods, and different alleged causes of loss. The Glencore iron ore oxidation claim ($3,420,000) relates to a voyage from Richards Bay to Qingdao that Northwind attributes to the Incident 2 BWTS/boiler failure (July 8-29, 2022). The Bunge soybean contamination claim ($1,127,000) relates to a voyage from Santos to Tianjin that Northwind attributes to an alleged failure to properly clean cargo holds. The Trafigura coal shortage and wetting claim ($1,087,400) relates to a voyage from Newcastle to Mundra that Northwind attributes to alleged hatch cover deficiencies. Not all of these claims are connected to the three major mechanical incidents identified in the Complaint (Incident 1: March 12-April 2, 2022, main engine failure off the coast of Mozambique; Incident 2: July 8-29, 2022, BWTS/boiler failure at Richards Bay, South Africa; Incident 3: November 15-December 10, 2022, generator failure in the Strait of Malacca).
Second, Northwind does not plead with any specificity the causal nexus between a particular alleged breach of the Charter-Party by TSL and a particular shipper claim. Count III contains only a generalized assertion that TSL's failure to maintain the vessel "caused" Northwind to incur third-party cargo claims. This is insufficient. If Northwind wishes to recover third-party cargo claims as Charter-Party damages — a theory that Defendants maintain is legally deficient — it must at a minimum allege with specificity (i) which provision of the Charter-Party TSL allegedly breached, (ii) which shipper claim arose from that breach, and (iii) the causal mechanism by which the alleged breach resulted in the claimed cargo damage. The current pleading fails to do so.
Third, Count III does not exclude shipper claims that may be attributable in whole or in part to Northwind's own acts or omissions as charterer. As the charterer in commercial operation of the vessel, Northwind bore responsibility for cargo handling, stowage, lashing, and securing — functions that are frequently the cause of cargo damage in dry bulk operations. The Bunge soybean contamination claim, for example, may be attributable to improper hold cleaning between voyages — a function that, depending on the Charter-Party terms and the particular circumstances, may be the charterer's responsibility rather than the owner's. Count III makes no effort to distinguish between shipper claims attributable to TSL's alleged maintenance failures and those attributable to Northwind's own operational decisions.
If the Court does not dismiss Count III outright, the Court should at minimum require Northwind to replead Count III with specificity, identifying (i) each shipper claim for which it seeks recovery, (ii) the specific Charter-Party breach that allegedly gave rise to that claim, (iii) the causal nexus between the alleged breach and the claimed cargo damage, and (iv) the current status and resolution of each shipper claim. The Court should also exclude from Count III any shipper claims that remain unresolved or unpaid, and any shipper claims that are attributable to Northwind's own acts or omissions as charterer.
III. NORTHWIND'S OPPOSITION RAISES NO GENUINE FACTUAL ISSUES THAT PRECLUDE DISMISSAL
A. The Motion to Dismiss Standard Does Not Require Factual Development. Northwind's Opposition devotes a considerable portion of its pages — over twelve pages, by Defendants' count — to a detailed factual recitation of TSL's alleged maintenance failures and the condition of the M/V Aegean Fortuna (IMO No. 9847231, Supramax dry bulk carrier, 58,200 DWT, built 2016, Liberian flag, classified by Global Maritime Classification Bureau). The Opposition describes at length the three major mechanical incidents, the September 2022 deviation to Maputo, Mozambique, the alleged deficiencies identified in the vessel's class survey records, and the testimony of Northwind's marine surveyor regarding the vessel's condition.
These factual arguments, however extensive, are irrelevant to the legal deficiencies in Counts III and V. This motion does not challenge the factual sufficiency of Northwind's underlying breach of contract claims. Defendants' motion is limited to Counts III and V, and the grounds for dismissal are purely legal: Count V (unjust enrichment) is duplicative of the breach of contract claim because a valid and enforceable contract governs the subject matter in dispute, and Count III (third-party shipper claims) fails to state a cause of action because the Charter-Party does not support pass-through recovery of third-party cargo claims.
On a motion to dismiss under CPLR 3211(a)(7), the Court's inquiry is whether the challenged pleading "states a cause of action." EBC I, Inc. v. Pinnacle National Bank, 5 N.Y.3d 11, 19 (2005). The Court accepts the factual allegations of the complaint as true and accords the plaintiff the benefit of every favorable inference. See Nonnon v. City of New York, 9 N.Y.3d 825, 827 (2007). But the Court need not accept as true legal conclusions or allegations that are contradicted by documentary evidence. Id.
Even accepting all of Northwind's factual allegations as true — that TSL failed to maintain the M/V Aegean Fortuna in a seaworthy condition, that the vessel suffered three major mechanical incidents during the charter period, that the vessel deviated to Maputo in September 2022, and that these failures caused disruptions to Northwind's commercial operations — the legal deficiencies in Counts III and V remain. No amount of factual detail about the condition of the vessel or the nature of TSL's alleged maintenance failures can transform an unjust enrichment claim into a viable cause of action where a valid contract governs, or convert third-party shipper claims into direct Charter-Party damages. The factual sufficiency of Counts I, II, and IV — Northwind's breach of contract claims — is not before this Court and is not affected by this motion.
Northwind's factual recitation regarding the three mechanical incidents and the September 2022 Maputo deviation does not cure the legal defects in Count V (unjust enrichment duplicating contract claim) or Count III (improper pass-through of third-party shipper claims). The Court should decline Northwind's invitation to convert this motion to dismiss into a premature fact-finding exercise and should instead resolve the discrete legal questions presented.
B. Northwind's Policy Arguments Do Not Overcome Governing Law. Finally, Northwind's Opposition advances a policy argument that dismissing Count III would leave Northwind "without a remedy" for the third-party shipper claims allegedly caused by TSL's breaches of the Charter-Party. (Opp. at 40-41.) This argument is factually incorrect, legally irrelevant, and should be disregarded.
Northwind is not left without a remedy. To the contrary, Northwind has extensive remedies against TSL for direct damages under the Charter-Party, and has, in fact, asserted those claims in its Complaint. Northwind's own damages claim of $18,300,000 — as set forth in the Complaint and reiterated in the Opposition — includes the following substantial categories of damages in addition to the $5,634,400 in third-party shipper claims:
These categories encompass off-hire deductions for the periods during which the vessel was unable to perform (calculated at the Charter-Party rate of $14,750 per day), liquidated damages under Clause 28 for TSL's alleged failure to meet the vessel's warranted speed and consumption specifications, the cost of substitute tonnage that Northwind was required to charter to fulfill its commercial commitments during the vessel's periods of non-performance, direct cargo damage for which Northwind may establish a nexus to a specific Charter-Party breach, demurrage and dead freight incurred as a result of delays attributable to TSL's alleged maintenance failures, additional port charges and bunker costs, and lost profits on sub-charters that Northwind was unable to perform.
In short, Northwind has a robust array of remedies for the direct damages it allegedly suffered as a result of TSL's alleged Charter-Party breaches — remedies that Northwind is actively pursuing in Counts I, II, and IV of the Complaint. What Northwind cannot do is use the Charter-Party to create a blanket indemnity that the parties never agreed to, and then characterize the resulting recovery as ordinary "breach of contract damages." The Charter-Party defines the parties' respective rights and obligations, and the damages recoverable for breach are limited to those that the Charter-Party contemplates. Northwind is not left without a remedy; it simply cannot use Count III to expand the scope of recoverable damages beyond what the Charter-Party provides.
Northwind's policy argument is also legally irrelevant. The question on this motion is not whether it would be desirable or equitable for Northwind to recover its third-party cargo claim exposure from TSL; the question is whether Northwind's Complaint, as pleaded, states a cognizable cause of action under New York law. It does not. No policy argument can overcome the governing legal principles set forth in Section II above, and Northwind cites no authority for the proposition that policy considerations can override the well-established limitations on contract damages or the prohibition against quasi-contractual claims where a valid contract governs.
For all of the foregoing reasons, Northwind's Opposition fails to overcome the legal deficiencies in Counts III and V, and Defendants' motion to dismiss should be granted.
CONCLUSION
For all the foregoing reasons, and those set forth in Defendants' Opening Memorandum of Law filed December 15, 2023, and the Declaration of Douglas Carmichael filed in support thereof, Defendants Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd. respectfully request that this Court enter an order:
(i) Dismissing Count V (unjust enrichment) of the Complaint with prejudice;
(ii) Dismissing Count III (third-party shipper claims) of the Complaint with prejudice, or, in the alternative, narrowing Count III to require Plaintiff to plead with specificity the nexus between each shipper claim and a specific alleged breach of the Charter-Party, and to exclude (a) shipper claims that remain unresolved or unpaid, (b) shipper claims for which Plaintiff has not demonstrated a nexus to a specific Charter-Party breach, and (c) shipper claims attributable to Plaintiff's own acts or omissions as charterer; and
(iii) Granting such other and further relief as the Court deems just and proper.
A Proposed Order on Motion to Dismiss was submitted with Defendants' Opening Memorandum on December 15, 2023, and remains pending before the Court. Defendants respectfully request that the Court grant the motion and enter an order consistent with the Proposed Order.
Dated: January 26, 2024 New York, New York
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael Francesca Morano Carlos Espinoza Hannah Brinkley
One Liberty Plaza, 50th Floor New York, NY 10006 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Attorneys for Defendants Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd.
CERTIFICATE OF SERVICE
I, Carlos Espinoza, an attorney duly admitted to practice before the courts of the State of New York, hereby certify that on January 26, 2024, a true and correct copy of the foregoing Reply Memorandum of Law in Further Support of Defendants' Motion to Dismiss Counts III and V of the Complaint was filed with the Court via the New York State Courts Electronic Filing System ("NYSCEF") and served upon counsel for Plaintiff via NYSCEF electronic notification and electronic mail at the following address:
Margaret Delacroix, Esq. Hargrove, Delacroix & Stern LLP 600 Lexington Avenue, 28th Floor New York, NY 10022 Telephone: (212) 403-7500
Email: mdelacroix@hdslaw.com
Attorneys for Plaintiff Northwind Maritime Corporation
________________________________________
Carlos Espinoza
WORD COUNT CERTIFICATION
Pursuant to Rule 17 of the Rules of the Commercial Division of the Supreme Court, I, Carlos Espinoza, an attorney of record for Defendants Thalassa Shipping & Logistics SA and Aegean Fortuna Shipholding Ltd., hereby certify that the foregoing Reply Memorandum of Law in Further Support of Defendants' Motion to Dismiss Counts III and V of the Complaint complies with the applicable word count limitation. According to the word-processing system used to prepare this memorandum, the total word count of the memorandum, exclusive of the caption, table of contents, table of authorities, signature block, and certificate of service, is 7,428 words.
________________________________________
Carlos Espinoza
Page(s)
Marlowe Specialty Insurance v. Camberwell Indemnity Co., 110 A.D.3d 468 (1st Dep't 2013) | 24
Ashwood Capital, Inc. v. OTG Mgmt., Inc., 99 A.D.3d 1 (1st Dep't 2012) | 7, 9
Bramwell Bancorp v. Sommer, 8 N.Y.3d 318 (2007) | 12
Bermuda Container Line Ltd. v. Int'l Longshoremen's Ass'n, 192 F.3d 250 (2d Cir. 1999) | 21
Beth Israel Med. Ctr. v. Ridgeway Specialty Insurance, 448 F.3d 573 (2d Cir. 2006) | 6
Clark-Fitzpatrick, Inc. v. Severin Industries, 70 N.Y.2d 382 (1987) | 5, 6, 11
Coppola v. Applied Elec. Corp., 315 A.D.2d 538 (2d Dep't 2003) | 10
Cox v. NAP Constr. Co., 10 N.Y.3d 592 (2008) | 7
Daou v. Penmark Capital Markets, 42 F.4th 120 (2d Cir. 2022) | 15
EBC I, Inc. v. Pinnacle National Bank, 5 N.Y.3d 11 (2005) | 27
Tidewater Systems Enters., Inc. v. Bimbo Foods Bakeries Distrib., LLC, 198 A.D.3d 489 (1st Dep't 2021) | 10, 12
Goldman v. Ridgeway Insurance, 5 N.Y.3d 561 (2005) | 5
Hadami, S.A. v. Societe Française de Transports et d'Entrepôts, 1983 AMC 2417 (S.D.N.Y. 1983) | 22
Hadley v. Baxendale, 9 Ex. 341, 156 Eng. Rep. 145 (1854) | 15, 16
IDT Corp. v. Meridian Financial, 12 N.Y.3d 132 (2009) | 5
Kenford Co. v. County of Erie, 73 N.Y.2d 312 (1989) | 15, 16
Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011) | 5, 6, 7, 11
Metro. W. Fin., Inc. v. Nat'l Westminster Bank USA, 175 A.D.2d 834 (1st Dep't 1991) | 24
Nonnon v. City of New York, 9 N.Y.3d 825 (2007) | 27
Oldcastle Precast, Inc. v. Lumbermens Mut. Cas. Co., 326 F.3d 22 (2d Cir. 2003) | 16
Northgate & Co. SDI Co. v. Matsushita Elec. Indus. Co., 2007 WL 4267498 (S.D.N.Y. Dec. 4, 2007) | 22
Starmedia Network, Inc. v. Horn, 185 F. Supp. 2d 355 (S.D.N.Y. 2002) | 10
Swift v. Tyson, 41 U.S. (16 Pet.) 1 (1842) | 22
2138747 Ontario, Inc. v. Northgate & Co. C&T Am., Inc., 2016 WL 4367231 (S.D.N.Y. Aug. 12, 2016) | 22
Pemberton Partners LLC v. Primerose Shipping Co., 708 F.3d 527 (4th Cir. 2013) | 21
Woss v. E.O. Steben & Co., 161 A.D.3d 533 (1st Dep't 2018) | 7, 10
Page(s)
CPLR § 3014 | 8, 9, 10
CPLR § 3211(a)(7) | 4, 27, 28
N.Y. Comm. Div. R. 17 | 35
Page(s)
International Group of P&I Clubs, Inter-Club New York Produce Exchange Agreement 1996 (as amended Sept. 1, 2011) | 20, 21, 22, 23
Julian Cooke et al., Voyage Charters (4th ed. 2014) | 16, 21
Terence Coghlin et al., Time Charters (7th ed. 2014) | 15, 21, 22
25 Williston on Contracts § 66:1 (4th ed.) | 6
Damage Category | Amount
Off-hire deductions (Clause 11) | $1,003,000
Liquidated damages (Clause 28) | $4,500,000
Substitute charter costs | $471,600
Cargo damage (direct) | $3,420,000
Demurrage and dead freight | $1,230,000
Additional port and bunker costs | $875,400
Lost sub-charter profit | $166,600
Legal fees and survey costs | $999,000
Subtotal (excluding Count III shipper claims) | $12,665,600

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION

NORTHWIND MARITIME CORPORATION,

TABLE OF AUTHORITIES

PRELIMINARY STATEMENT

ARGUMENT

CONCLUSION

CALDERWOOD & HARKNESS LLP

CERTIFICATE OF SERVICE

WORD COUNT CERTIFICATION

Record

Parties

Dates

Amounts