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Arabian Gas and Oil Development Co. v. Wisdom Marines Lines, S.A.

United States District Court, N.D. California

June 1, 2017

ARABIAN GAS AND OIL DEVELOPMENT COMPANY, Plaintiff,
v.
WISDOM MARINES LINES, S.A., et al., Defendants.

          ORDER DENYING PLAINTIFF ARABIAN GAS AND OIL DEVELOPMENT COMPANY'S MOTION TO STAY AND HOLDING REQUEST FOR CIVIL CONTEMPT IN ABEYANCE RE: DKT. NO. 70

          Donna M. Ryu, United States Magistrate Judge

         Plaintiff Arabian Gas and Oil Development Company (“Plaintiff”) moves to stay the March 30, 2017 order requiring it to post an additional undertaking in the amount of $171, 804.05 pending the resolution of its petition for writ of mandamus before the Ninth Circuit. [Docket No. 70]. Specially Appearing Defendants Wisdom Marine Lines, S.A. and Wisdom Marine Lines Co. (“Defendants”) oppose, and request that the court hold Plaintiff in civil contempt and/or award monetary sanctions. [Docket No. 73]. The court held oral argument on May 25, 2017. Having considered the parties' papers and oral argument, and for the reasons stated herein and on the record, Plaintiff's motion to stay is DENIED. Plaintiff is ordered to post the additional undertaking of $171, 804.05 by June 1, 2017, otherwise the court will consider Defendants' request for civil contempt. Defendants' request for civil contempt is held in abeyance until the end of the day on June 1, 2017.

         I. RELEVANT FACTS AND PROCEDURAL HISTORY

         The facts underlying this attachment action and its procedural history are set forth in the court's March 30, 2017 order. See Arabian Gas & Oil Dev. Co. v. Wisdom Marines Lines, S.A., No. 16-CV-03801-DMR, 2017 WL 1175592, at *1-2 (N.D. Cal. Mar. 30, 2017) [Docket No. 68]. Briefly stated, the underlying dispute between the parties involves an alleged breach of contract over an allegedly defectively ship which Defendants sold to Plaintiff. The parties are currently arbitrating this dispute in London. Plaintiff filed this attachment action to attach a vessel owned by Defendants which was then located within the court's jurisdiction, as security for the London arbitration proceedings. Plaintiff posted the statutory $10, 000.00 undertaking required by California Code of Civil Procedure Section 498.220(a). This court thereafter issued a writ of attachment and arrested the vessel. However, the court later vacated the attachment and released the vessel upon Defendants' motion to dismiss and/or set aside the writ of attachment. After vacating the writ and releasing the vessel, the court instructed the clerk to close the case.[1]However, the court did not discharge Plaintiff's $10, 000.00 statutory undertaking.

         Defendants then moved to increase Plaintiff's undertaking to include the attorneys' fees and costs that Defendants incurred in defeating Plaintiff's writ of attachment. Plaintiff opposed, arguing, among other things, that this court lacked jurisdiction because it had vacated the writ of attachment and the vessel was no longer within the court's territorial waters. [Docket No. 59 at 3-4]. However, at the hearing on Defendants' motion to increase Plaintiff's undertaking, Plaintiff withdrew its jurisdictional argument and asserted instead that Defendants could not demonstrate “probable recovery for wrongful attachment” as required by California Code of Civil Procedure Section 498.220(b) (“Section 489.220(b)”) because Defendants could not show that it was likely to prevail in the London arbitration proceedings.

         On March 30, 2017, the court granted in part and denied in part Defendants' motion. The court recognized that the language in Section 489.220(b) was ambiguous and could be interpreted to permit a court to consider the merits of the underlying action. As explained in the March 30, 2017 order, at least one California Court of Appeal has held that trial courts have the discretion to consider the probability of a plaintiff prevailing in the underlying action in determining a defendant's “probable recovery for wrongful attachment” under section 489.220(b). See Arabian Gas & Oil Dev. Co., 2017 WL 1175592, at *4 (citing N. Hollywood Marble Co. v. Superior Court, 157 Cal.App.3d 683, 688 (1984)).

         In considering the underlying merits, the court found that there was no record evidence to suggest that Plaintiff was more likely to prevail in the London arbitration proceedings than Defendants. Specifically, Plaintiff failed to present concrete, non-conclusory evidence demonstrating that it was likely to prevail in the London arbitration proceedings, either in its original application for writ of attachment, or in its opposition to Defendants' motion to increase the undertaking. The court then reviewed the attorneys' fees and costs sought by Defendants, and declined to award $15, 000.00 of the $186, 804.05 proposed increase in the undertaking. The court then ordered Plaintiff to post an additional undertaking in the amount of $171, 804.05 within 14 days of the order, or by April 13, 2017. See Arabian Gas & Oil Dev. Co., 2017 WL 1175592, at *8.

         By the April 13, 2017 deadline, Plaintiff had neither posted the additional undertaking nor had it obtained a stay of the March 30, 2017 order. Instead, Plaintiff filed a mandamus petition with the Ninth Circuit. See Petition for Writ of Mandamus [Docket No. 69-1]; see also In re: Arabian Gas & Oil Dev. Co., No. 17-71080. However, a filing a mandamus petition with the Ninth Circuit does not have the effect of staying a trial court order. See Wright & Miller, 16A Fed. Prac. & Proc. Juris. § 3954 (4th ed.) (“The taking of an appeal does not by itself suspend the operation or execution of a district-court judgment or order during the pendency of the appeal.”).

         On April 17, 2017, four days after the deadline to post the additional undertaking, Plaintiff filed the instant motion to stay.

         II.LEGAL STANDARD

         “A stay is not a matter of right . . . . It is instead ‘an exercise of judicial discretion' . . . [that] ‘is dependent upon the circumstances of the particular case.'” Nken v. Holder, 556 U.S. 418, 433 (2009) (quoting Virginian Ry. Co. v. United States, 272 U.S. 658, 672-73 (1926)). “The party requesting a stay bears the burden of showing that the circumstances justify an exercise of that discretion.” Nken, 556 U.S. at 433-34.

         In Nken, the U.S. Supreme Court distilled the legal principles that courts should consider in determining whether to issue a stay into four factors: “‘(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.'” Id. at 434 (quoting Hilton v. Braunskill, 481 U.S. 770, 776 (1987)); see also Lair v. Bullock, 697 F.3d 1200, 1203 (9th Cir. 2012) (setting forth the four Nken factors as the standard of review for motions to stay); Powertech Tech. Inc. v. Tessera, Inc., No. C 11-6121 CW, 2013 WL 1164966, at *1 (N.D. Cal. Mar. 20, 2013) (applying Nken factors to plaintiff's motion to stay the proceedings pending resolution of plaintiff's Ninth Circuit mandamus petition); Morgan Tire of Sacramento, Inc. v. Goodyear Tire & Rubber Co., No. 2:15-CV-00133-KJM-AC, 2015 WL 3623369, at *1 (E.D. Cal. June 9, 2015) (same). “The first two Nken factors ‘are the most critical.'” Lair, 697 F.3d at 1204 (quoting Nken, 556 U.S. at 434).

         In applying the Nken factors, the Ninth Circuit has adopted a “‘sliding scale approach' . . . whereby the elements . . . of the test are balanced so that a stronger showing of one element may offset a weaker showing of another.'” Leiva-Perez v. Holder, 640 F.3d 962, 964 (9th Cir. 2011) (quoting Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011)); see also Dunson v. Cordis Corp., Lead Case No. 16-cv-03076-EMC, 2016 U.S. Dist. LEXIS 155168, at *12 (N.D. Cal. Nov. 8, 2016).

         In particular, if a plaintiff cannot make a “strong showing” on the first Nken factor that he/she is likely to succeed on the merits, the plaintiff may still satisfy that factor by making a lesser showing that its appeal “raises serious legal questions or has a reasonable probability of success.” Leiva-Perez, 640 F.3d at 971. “A party meeting this lesser threshold is not required to show that it is more likely than not to win on the merits . . ., but must then demonstrate that the balance of hardships under the second and third [Nken] factors tilts sharply in its favor.” Morse v. Servicemaster Glob. Holdings, Inc., Lead Case No. C 08-03894, 2013 WL 123610, at *2 ...


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