Case of the Day: In re Newbrook Shipping

The case of the day is In re Newbrook Shipping Corp. (D. Md. 2020). Nardella Corp., a Nevis company, obtained an order from a South African court to arrest the M/V Falcon Traveller to provide security for a claim in an arbitration in Singapore regarding the arrest of another vessel, the M/V Falcon Carrier.. Newbrook challenged the arrest, and the South African court set it aside on the grounds that the Falcon Traveller was not associated with the Falcon Carrier, even though Nadella had acted in good faith. Later, Newbrook obtained a similar order in South Africa to arrest the M/V Falcon Confidence, and Falcon Confidence Shipping sought to set the arrest aside. The court denied that motion.

Newbrook and Falcon Confidence Shipping then brought a § 1782 application to seek evidence GMS, a Maryland company alleged to be Nadella’s registered agent, and Anil F. Sharma, alleged to own Nadella. They wanted to get evidence about Nadella’s claims in South Africa that the Falcon Traveller and the Falcon Confidence and about Nadella’s corporate structure.

The court granted the ex parte application. GMS then moved to strike service, quash the subpoenas, and dismiss the action.

The motion to strike arose because the subpoena was “left … with a GMS employee who was not authorized to accept service.” FRCP 45 requires service by delivery to the “named person.” The court did some handwaiving and pointed to cases holding that strict compliance with the rule isn’t always required and then, oddly, cited FRCP 4, which governs service of summonses, and Maryland state procedural rules on service on corporations,, which are not incorporated into FRCP 45. So the court denied the motion. The court noted that Sharma had not yet been served and suggested that the applicants might make a motion for alternate service, but again, this is an odd suggestion, as there is no provision in FRCP 45 for alternate methods of service that is analogous to FRCP 4(f)(3). For corporations, a good practice that avoids these issues is to serve the corporation’s registered agent for service of process.

Sharma and GMS also argued that the subpoena improperly ordered them to travel more than 100 miles for their depositions. But in an interesting COVID twist, the court recognized that because the deposition notices would be modified to provide for a remote deposition, there was no need for travel.

The court went on to do a pretty standard statutory and Intel analysis and held that the application should be granted (and thus the motion to dismiss should be denied). There was a somewhat interesting discussion of the applicants’ effort to have the application dismissed on the grounds that it was brought in bad faith. The applicants argued the application had been brought “for the sole purpose of harassing GMS and gaining some untoward leverage in the international battle taking place in South Africa and Singapore,” noting that the information sought would have been obtainable in discovery under South African law. But that’s obviously insufficient to show the application was brought in bad faith.

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