Case of the Day: Sea Hope Navigation v. Novel Commodities

The case of the day is Sea Hope Navigation, Inc. v. Novel Commodities, SA (S.D.N.Y. 2013). Sea Hope claimed that it had chartered a vessel to Novel. Holders of a bill of lading later asserted claims against Sea Hope for damage to the cargo caused by “rough handling.” Sea Hope commenced an arbitration against Novel in London, seeking indemnification. Novel never responded to the notice of appointment of Sea Hope’s arbitrator, so the arbitration proceeded before a sole arbitrator, who awarded damages to Sea Hope. Sea Hope then sought confirmation of the award in New York and served the summons and the petition on Novel’s registered agent for service of process in New York. Novel defaulted, and Sea Hope sought a default judgment. The court ordered Sea Hope to send a copy of the papers to the address given on Novel’s website, which it did. Novel, seventeen days after receipt of the papers, entered an appearance and opposed the motion for entry of a default judgment (which the court treated also as a motion to vacate the default). Novel claimed that it had never received notice of the action and indeed, that it had never received notice of the arbitration!

One of the factors a defendant seeking relief from a default must show is that it has a potentially meritorious defense. Thus not only was the supposed lack of notice of the confirmation proceeding at issue; Novel’s claim that it had never received notice of the arbitration is also relevant, because under Article V(1)(B) the lack of notice is a basis for refusing to confirm an award.

The magistrate judge gave Novel the benefit of the doubt on this issue. Sea Hope had sent the notice to what Novel described as “a generic Novel email address, which was not actively monitored by anyone at Novel,” and that it received no notice by post or other means. Sea Hope submitted an affidavit that cast doubt on Novel’s account, but the judge refused to consider the credibility of the competing affidavits when determining, for default purposes, whether the defendant has a meritorious defense. Weighing this and the other relevant factors, the judge held that Novel was entitled to relief from the default.

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