14‐2752‐cv (L) Cedar Petrochemicals, Inc. v. Dongbu Hannong Chem. Co.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 15th day of October, two thousand fifteen.

PRESENT: DENNY CHIN, CHRISTOPHER F. DRONEY, Circuit Judges. KATHERINE B. FORREST, District Judge.*

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x CEDAR PETROCHEMICALS, INC., Plaintiff‐Appellant‐Cross‐Appellee,

v. 14‐2752‐cv (Lead) 14‐2890‐cv (XAP) DONGBU HANNONG CHEMICAL CO., LTD., Defendant‐Cross‐Claimant‐Appellee‐Cross‐Appellant,

KUMHO P&B CHEMICALS, INC., Defendant‐Cross‐Defendant. ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x

* The Honorable Katherine B. Forrest, of the United States District Court for the Southern District of New York, sitting by designation.

FOR PLAINTIFF‐APPELLANT: JOHN T. LILLIS, Nathan T. Williams, Kennedy Lillis Schmidt & English, New York, New York.

FOR DEFENDANT‐APPELLEE: ROBERT A. WEINER, Michael R. Huttenlocher, McDermott Will & Emery LLP, New York, New York.

Appeal from a judgment and order of the United States District Court for

the Southern District of New York (Nathan, J.).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment and order of the district court are

AFFIRMED.

Appellant Cedar Petrochemicals, Inc. (ʺCedarʺ) appeals from the district

courtʹs entry of judgment, after a four‐day bench trial, in favor of Defendant Dongbu

Hannong Chemical Co., Ltd. (ʺDongbuʺ) and against Cedar, as well as from the district

courtʹs order denying Cedarʹs motion for reconsideration. We assume the partiesʹ

familiarity with the underlying facts, procedural history of the case, and issues on

appeal.

This suit arises from a May 17, 2005 contract between Cedar and Dongbu

for the sale of 2,000 metric tons of phenol, to be delivered F.O.B. Ulsan, Korea. On May

21, 2005, the phenol was loaded on Dongbuʹs nominated vessel, the Green Pioneer. On

May 24, 2005, the Green Pioneer arrived at Ulsan and the phenol was transferred to

Cedarʹs nominated vessel, the Bow Flora. The Bow Flora then set sail for Rotterdam.

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On or about July 19, 2005 the Bow Flora arrived in Rotterdam and the quality of the

phenol was tested, revealing that the color was off‐specification. The test results

regarding the damaged phenol were provided to Ertisa, S.A. (ʺErtisaʺ), the ultimate

purchaser of the phenol, and Ertisa made a claim for the chemicals through its

insurance broker.

Cedar initially brought suit in Korean court against the owners and

operators of the Green Pioneer, as well as one of the phenol testing companies. After

withdrawing that action, Cedar brought the instant suit against Dongbu on May 24,

2006, alleging that Dongbu had delivered non‐conforming liquid phenol. The parties

agreed that to demonstrate liability, Cedar had to prove by a preponderance of the

evidence that the phenol was damaged before it was transferred to the Bow Flora.

Because the damage did not manifest itself ‐‐ despite the testing of samples in transit ‐‐

until it was offloaded in Rotterdam, Cedar argued what its expert called the ʺseedingʺ

theory of injury. According to this theory, the phenol was damaged, imperceptibly,

while still in Dongbuʹs control. That initial injury, via a slowly unfurling free radical

chain reaction, was finally detected as off‐specification phenol in Rotterdam.

The district court was not persuaded by the seeding theory, and by

Opinion dated October 21, 2013, following a bench trial, found that Cedar failed to

prove by a preponderance of the evidence that Dongbu breached its contract by

providing injured phenol.

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On appeal, Cedar alleges that the district court (1) abused its discretion by

prohibiting Cedar from outlining its seeding theory of phenol injury in its post‐trial

memorandum and subsequently ruling against the seeding theory without the benefit

of the proposed briefing, (2) clearly erred in entering judgment in favor of Dongbu after

finding that Cedar failed to show that the phenol was already injured when delivered,

and (3) abused its discretion in declining to reach the merits of Cedarʹs motion for

reconsideration. On cross‐appeal, Dongbu contends that the district court abused its

discretion in declining to sanction Cedar for filing its motion for reconsideration.

1. Post‐Trial Memorandum and Motion for Reconsideration

Cedar claims that the district court abused its discretion in prohibiting

them from explaining the seeding theory in Cedarʹs post‐trial memorandum. Cedar

further contends that the district court abused its discretion in deciding that the seeding

theory was contradicted by Cedarʹs own evidence, Cedar Exhibits 70A‐70P (the

ʺLiteratureʺ).

The district court, however, did not deny Cedar the opportunity to argue

its seeding theory. At the conclusion of the bench trial, the district court ordered the

parties to submit final proposed findings of fact and conclusions of law, as well as a

memorandum of law. Specifically, the district court asked that the proposed findings

and conclusions be keyed to the trial record and address the primary question of when

and where the phenol was damaged. And Cedar did, in fact, address the seeding

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theory in its submissions. Additionally, though Cedar submitted direct testimony in

the form of declarations of its experts Martin East and John Minton, neither was able to

demonstrate at trial how the Literature supported the seeding theory.

2. The Seeding Theory of Phenol Injury

Cedar argues that the district court clearly erred in holding that Cedar

failed to meet its burden in proving that the phenol was already injured upon delivery

by Dongbu. ʺIn reviewing a judgment entered after a bench trial, we accept the district

courtʹs findings of fact unless they are clearly erroneous.ʺ Ortho Pharm. Corp. v.

Cosprophar, Inc.,

(2d Cir. 1994). The factfinderʹs choice between two

permissible views of the evidence cannot be clearly erroneous. Anderson v. City of

Bessemer City, N.C.,

(1985).

Cedar argues that (1) the parties stipulated that phenol discolors

gradually, as opposed to rapidly or instantaneously as the district court found, (2) the

Literature supports the seeding theory, (3) the Literature illustrates that the phenol

could not have discolored rapidly or instantaneously due to the quantities of

contaminates, oxidizing agents, and catalysts, (4) Cedarʹs expert never actually

conceded that the Literature contradicted the seeding theory, (5) testimony on blending

supported the seeding theory, and (6) differences in the phenolʹs storage and carriage

conditions and sampling timing limited the ability of the quality‐inspection regime to

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generate the kind of data the district court suggested would be consistent with the

seeding theory.

We have conducted an independent review of the record and conclude

that the district court did not clearly err. The trial judge properly assessed the

credibility of the witnesses and drew reasonable inferences from the evidence before it.

The district court held that the seeding theory could not explain the results of the post‐

shipment tests of the phenol, and that it was unsupported by the scientific literature

provided by the parties. Specifically, the district court found that Cedarʹs experts were

not credible, and that they failed to account for the fact that the ʺpeaks and valleysʺ in

the test results did not comport with the linear degradation anticipated by the seeding

theory. App. at 768‐69; see Krist v. Kolombos Rest. Inc.,

(2d Cir. 2012) (ʺIt is

within the province of the district court as the trier of fact to decide whose testimony

should be credited.ʺ).

The district courtʹs decision in favor of Dongbu, that the phenol was not

injured before it crossed the rails of the Bow Flora, was amply supported by the record.

3. Cedarʹs Motion for Reconsideration

Cedar also appeals the district courtʹs June 30, 2014 denial of its motion to

amend the findings of fact and alter the judgment under Federal Rules of Civil

Procedure 52(b) and 59(e) (ʺmotion for reconsiderationʺ). We review a district courtʹs

denial of a motion for reconsideration for abuse of discretion. RJE Corp. v. Northville

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Indus. Corp.,

(2d Cir. 2003). ʺThe standard for granting such a motion

is strict, and reconsideration will generally be denied unless the moving party can point

to controlling decisions or data that the court overlooked ‐‐ matters, in other words, that

might reasonably be expected to alter the conclusion reached by the court.ʺ Shrader v.

CSX Transp., Inc.,

(2d Cir. 1995).

The district court did not abuse its discretion in denying Cedarʹs motion

for reconsideration. Only after the district court had found in favor of Dongbu and

rejected the seeding theory did Cedar try to connect the Literature to its theory of the

phenol degradation. Cedar purported, in its motion for reconsideration, to provide a

ʺcritical readingʺ of the Literature to show why the district courtʹs findings were wrong.

But the proper time for such a critical reading was trial. Cedar failed to point to

decisions or data that the district court had ʺoverlooked.ʺ Id.

4. Sanctions

On cross‐appeal, Dongbu contends that the district court erred in

declining to sanction Cedar for filing its motion for reconsideration, which, Dongbu

alleges, revived positions that relied on expert conclusions from its previously

withdrawn supplemental report, expanded on these conclusions by making inferences

based on the previously withdrawn supplemental report, submitted and relied on

documents that were not disclosed during discovery, and asserted a ʺtrend analysisʺ

theory that had not previously been disclosed or offered.

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We review a district courtʹs decision regarding sanctions for abuse of

discretion. Schlaifer Nance & Co. v. Estate of Warhol,

(2d Cir. 1999). This

deferential standard is in recognition of the premise that ʺthe district court is better

situated than the court of appeals to marshal the pertinent facts and apply the fact‐

dependent legal standard that informs its determination as to whether sanctions are

warranted.ʺ

(internal quotation marks omitted).

The district court described Cedarʹs motion for reconsideration as

ʺborderline frivolous,ʺ but declined to sanction Cedar because ʺ[p]laintiff has not

previously been sanctioned or warned regarding the possibility of sanctions in this

action.ʺ App. at 954. Dongbu argues that Cedar was ʺwarnedʺ because it did in fact

have notice, in accordance with Federal Rule of Civil Procedure 11, and that in response

to that notice Cedar informed Dongbu that it would not be withdrawing its

reconsideration motion. Despite the Rule 11 notice, it was within the sound discretion

of the trial judge to deny sanctions based on lack of warning from the district court, lack

of previous sanctions, as well the other ʺpertinent facts.ʺ Schlaifer Nance,

.

* * *

We have considered all of Cedar and Dongbuʹs remaining arguments and

find them to be without merit. Accordingly, we AFFIRM the judgment and order of the

district court.

FOR THE COURT: Catherine OʹHagan Wolfe, Clerk

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