Case: 21-40642 Document: 00516259969 Page: 1 Date Filed: 03/30/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
No. 21-40642 March 30, 2022
Summary Calendar
Lyle W. Cayce
Clerk
K Investments, Incorporated,
Plaintiff—Appellant,
versus
B-Gas Limited, also known as Bepalo LPG Shipping
Limited; B-Gas AS; Bergshav Shipping, Limited;
Bergshav Shipholding AS; Bergshav Shipping AS; B-Gas
Holding, Limited; Atle Bergshaven; LPG Invest AS;
Bergshav Invest AS,
Defendants—Appellees,
______________________________
Bahla Beauty, Incorporated,
Plaintiff—Appellant,
versus
B-Gas Limited, also known as Bepalo LPG Shipping
Limited; B-Gas AS; Bergshav Shipping, Limited;
Bergshav Shipholding AS; Bergshav Shipping AS; B-Gas
Holding, Limited; Atle Bergshaven,
Defendants—Appellees,
Case: 21-40642 Document: 00516259969 Page: 2 Date Filed: 03/30/2022
No. 21-40642
______________________________
Sikousis Legacy, Incorporated,
Plaintiff—Appellant,
versus
B-Gas Limited, also known as Bepalo LPG Shipping
Limited; B-Gas AS; Bergshav Shipping, Limited;
Bergshav Shipholding AS; Bergshav Shipping AS; B-Gas
Holding, Limited; Atle Bergshaven,
Defendants—Appellees.
Appeal from the United States District Court
for the Southern District of Texas
Case No: 3:21-CV-16
Before Wiener, Dennis, and Haynes, Circuit Judges.
Per Curiam:*
Appellants K Investments, Inc., Sikousis Legacy, Inc., and Bahla
Beauty, Inc. (collectively “Plaintiffs”) appeal an order of the district court
vacating the attachment of the vessel, M/T BERGITTA (“BERGITTA”),
owned by Bergshav Shipping AS (“Bergshav Shipping”). For the reasons
set forth below, we conclude that the district court did not err in vacating the
attachment and AFFIRM.
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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A. Background
Plaintiffs, the owners of several liquid petroleum gas carrier vessels,
entered into bareboat charter agreements with B-Gas Limited, now known as
Bepalo LPG Shipping Ltd. (“Bepalo”). In 2020, Bepalo attempted to
negotiate a reduction in charter-hire rates due to financial difficulties brought
on by the COVID-19 pandemic. After Plaintiffs refused to negotiate, Bepalo
wound up its business and redelivered the vessels to Plaintiffs. Plaintiffs
commenced arbitration proceedings against Bepalo for breach of contract.
In the present action, Plaintiffs filed a complaint under Rule B of the
Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture
Actions (“Rule B” of the “Supplemental Admiralty Rules”) praying for
attachment of the M/T BERGITTA, a vessel. In response to Plaintiffs’
invocation of Rule B, the district court issued orders authorizing the process
of maritime attachment and garnishment. The US Marshal executed the
process and seized the BERGITTA on behalf of each of the Plaintiffs. The
BERGITTA is owned by Bergshav Shipping. However, Plaintiffs allege that
Bergshav Shipping is the alter ego of Bepalo.
Bergshav Shipping made a restrictive appearance under Rule E(8) of
the Supplemental Admiralty Rules and moved to vacate the attachment of
the BERGITTA. Bergshav Shipping asserted that vacatur was warranted
because Plaintiffs failed to comply with the requirements of Rule B. Its
argument relied on two grounds: (1) Plaintiffs failed to institute attachment
with a properly verified complaint, as required by Rule B; and (2) Plaintiffs
failed to state a prima facie case to support their alter ego theory of liability.
With regards to the first point, Bergshav Shipping argued that
Plaintiffs’ pleadings were not actually verified as required by Rule B.
Plaintiffs attempted to satisfy their Rule B obligation by attaching the
verification of Christian Krohn-Hansen, a broker of the Plaintiffs’ managing
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agents, to their complaints. Krohn-Hansen negotiated the initial bareboat
charter agreements and participated in follow-up discussions regarding the
agreements. His verification provides the following, in pertinent part:
Pursuant to 28 U.S.C. § 1746, Christian Krohn-Hansen,
declares under the penalty of perjury:
1. I am an individual of sound mind, and have never been
convicted of a crime of moral turpitude.
2. I am a resident of Athens, Greece and a lawful
representative of the Plaintiff in the above action and duly
authorized on its behalf to make this verification.
3. I have read the foregoing Verified Complaint and
exhibits thereto in the above captioned action and know the
contents thereof; and
I declare under the penalty of perjury that the foregoing
is true and correct.
The district court held a hearing on Bergshav Shipping’s motion to
vacate. At the hearing, Krohn-Hansen testified that he had read the
pleadings and attachments, but he agreed that when he signed the
verifications, he did not verify the truth of the allegations set forth in the
complaints. In light of this testimony and supplemental briefing on the issue,
the magistrate judge recommended granting the motion to vacate, and the
district court adopted that recommendation. K Investment, Inc. v. B-Gas Ltd.,
No. 3:21-CV-00016, 2021 WL 3477356, at *4–5 (S.D. Tex. June 4, 2021),
report and recommendation adopted, 2021 WL 3473502 (S.D. Tex. Aug. 6,
2021). The court determined that a verified complaint is a jurisdictional
prerequisite, that Plaintiffs’ verifications were insufficient, and that
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therefore, the court lacked jurisdiction. Thus, the court vacated the
attachment and dismissed the complaints. Plaintiffs timely appealed.
B. Jurisdiction & Standard of Review
The district court had jurisdiction over the case pursuant to 28 U.S.C.
§ 1333 and Rule 9(h) of the Federal Rules of Civil Procedure. We have
jurisdiction over the district court’s appealable collateral order. Heidmar,
Inc. v. Anomina Ravennate di Armamento Sp.A of Ravenna, 132 F.3d 264, 267
(5th Cir. 1998). In admiralty cases, we review the district court’s legal
conclusions de novo and its factual findings for clear error. E.A.S.T., Inc. of
Stamford, Conn. v. M/V Alaia, 876 F.2d 1168, 1171 (5th Cir. 1989).
C. Discussion
Plaintiffs raise three issues on appeal. They argue that the district
court erred in (1) concluding that the complaints were not properly verified,
(2) dismissing the case for lack of jurisdiction, and (3) failing to allow
Plaintiffs the opportunity to amend their verification. We address each issue
in turn.
First, Plaintiffs argue that the district court erred in determining that
the verification was deficient. The district court concluded that Plaintiffs’
pleadings were invalid because they were “not verified in accordance with
Rule B.” Rule B permits a court to exercise quasi in rem jurisdiction via an
order of maritime attachment.1 See Fed. R. Civ. P. Adm. Supp. R.
B(1)(a). Maritime attachment serves both to obtain jurisdiction over a
defendant through its property and to assure satisfaction of the claim. See
1
Rule B states the following in pertinent part: “If a defendant is not found within
the district . . . , a verified complaint may contain a prayer for process to attach the
defendant’s tangible or intangible personal property—up to the amount sued for—in the
hands of garnishees named in the process.” FED. R. CIV. P. ADM. SUPP. R. B(1)(a).
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Malin Int’l Ship Repair & Drydock, Inc. v. Oceanografia, S.A. de C.V., 817 F.3d
241, 244 (5th Cir. 2016). In order to properly invoke Rule B, a plaintiff must
file a verified complaint sufficient to make a prima facie showing that (1) the
plaintiff has a maritime claim against the defendant and (2) that the
defendant is not present in the district. Aqua Stoli Shipping Ltd. v. Gardner
Smith Pty Ltd., 460 F.3d 434, 445 (2d Cir. 2006), abrogated on other grounds
by Shipping Corp. of India Ltd. v. Jaldhi Overseas Pte Ltd., 585 F.3d 58 (2d Cir.
2009).
An individual may move to vacate an attachment if it believes the
plaintiff failed to satisfy the requirements of Rule B. See Fed. R. Civ. P.
Adm. Supp. R. E(4)(f). Upon a motion to vacate, the plaintiff bears the
burden of demonstrating why the attachment should not be vacated. See id.
Rule B expressly requires a verified complaint. Fed. R. Civ. P.
Adm. Supp. R. B (1)(a). A verified complaint must include a “declaration
made under penalty of perjury.” Falcon v. Holly, 480 F. App’x 325, 326 (5th
Cir. 2012) (per curiam). Facts in a verified complaint must be “within the
personal knowledge of the affiant,” and the affiant must “be competent to
testify” to them. Huckabay v. Moore, 142 F.3d 233, 240 n.6 (5th Cir. 1998),
abrogated on other grounds by Heath v. Bd. of Supervisors for S. Univ. & Agric.
& Mech. Coll., 850 F.3d 731 (5th Cir. 2017). In signing a verified complaint,
“the signator must satisfy himself that the averments in the complaint are
true, based upon either his own knowledge or upon information and belief.”
Chan v. Soc’y Expeditions, Inc., 123 F.3d 1287, 1295 (9th Cir. 1997) (internal
quotation marks and citations omitted).
In this case, Plaintiffs attempted to comply with Rule B by attaching
the Krohn-Hansen verification to each of their respective complaints.
Bergshav Shipping contends that this verification is insufficient because
Krohn-Hansen did not affirm the veracity of the facts alleged in each
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complaint. In other words, Krohn-Hansen did not affirm that he believed the
factual allegations in the complaints to be true and correct. Rather, Krohn-
Hansen’s verification affirms only that he read and understood the contents
of the verified complaints. Therefore, per Bergshav Shipping, Plaintiffs’
pleadings are deficient because the complaints are not properly verified.
After evaluating the text of the verification, the district court
determined that the “statement concerning the penalty of perjury
specifically refer[red] to the factual attestations contained in the respective
verification” rather than the facts alleged in the verified complaints
themselves. Thus, the verification was deficient because it did not verify the
factual allegations in the related complaints, as required by Rule B. We agree
with the district court’s conclusion. Krohn-Hansen’s verification does not
state that he believed the facts alleged in the complaints to be true and correct.
Rather, Krohn-Hansen declared “that the foregoing is true and correct.”
The text preceding “foregoing” is limited to Krohn-Hansen’s affirmations
regarding his residency, his mental competency, and the fact that he read the
complaints and exhibits. Nowhere does Krohn-Hansen affirm the veracity of
the allegations that Plaintiffs relied on to establish their alter-ego theory of
liability, subsequently permitting the attachment of the BERGITTA. As
such, the Krohn-Hansen verification fails to satisfy Rule B’s verified
complaint requirement.
Plaintiffs argue that the district court’s interpretation of the
verification was an improper “syntactical and grammatical analysis of the
text of the respective verification,” and they maintain that Krohn-Hansen
had, in fact, affirmed the veracity of the allegations in the complaints.
However, this determination was not solely based on a “syntactical” or
“grammatical” analysis of Krohn-Hansen’s statement; rather any doubts
about whether Krohn-Hansen had or had not verified the allegations were
resolved at the hearing on the motion to vacate. At the hearing, Krohn-
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Hansen testified that he “did not verify the truth of the allegations set forth
in the verified Complaint”; instead, he merely “read the verified Complaint
and the exhibits.” Without such affirmation, the complaints were not
properly verified. As such, we hold that the district court did not err in
concluding that Plaintiffs failed to comply with Rule B. The district court’s
analysis and Krohn-Hansen’s testimony confirm this conclusion.
The next issue, then, is whether Plaintiffs’ failure to satisfy Rule B
deprived the court of jurisdiction. The district court determined that the
filing of a verified complaint was a jurisdictional prerequisite; because
Plaintiffs failed to satisfy that requirement, the district court could not obtain
proper jurisdiction over the BERGITTA. Therefore, the court vacated the
attachment and dismissed the suit. Plaintiffs contend that “[v]erification of
the complaint is a formal claim-processing requirement, but not a
jurisdictional prerequisite,” and thus this dismissal was erroneous.
We recognize that the Supreme Court has cautioned against the
mischaracterization of claim-processing rules as jurisdictional rules. See, e.g.,
Hamer v. Neighborhood Hous. Servs. of Chic., 138 S.Ct. 13, 17 (2017);
Henderson ex rel. Henderson v. Shinseki, 562 U.S. 428, 434 (2011). In many
cases, the distinction between what is merely a claim-processing rule and
what is a jurisdictional prerequisite is critical: courts are “oblig[ated] to
notice jurisdictional issues and raise them on their own initiative.” Hamer,
138 S.Ct. at 17. On the other hand, claim-processing rules can be waived or
forfeited if not raised by the parties. 2 See id. Nevertheless, the Supreme
2
Accordingly, the reasoning for the Court’s cautionary warning is straightforward:
treating claims processing rules as jurisdictional can “result in the waste of judicial
resources and may unfairly prejudice litigants.” Shinseki, 562 U.S. at 434. Thus, “a rule
should not be referred to as jurisdictional unless it governs a court's adjudicatory capacity.”
Id. at 435.
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Court has been clear that “[i]f properly invoked, mandatory claim-processing
rules must be enforced” and thus provide relief to the party who properly
raised the issue. Id. at 18.
It is unsettled in this circuit whether Rule B’s verified complaint
requirement is a claim-processing rule or a jurisdictional mandate. In an
analogous context, we have concluded that “the filing of a verified
complaint” is a “prerequisite to obtaining in rem jurisdiction.” Pizani v. M/V
Cotton Blossom, 669 F.2d 1084, 1090 (5th Cir. 1982) (discussing Fed. R.
Civ. P. Adm. Supp. R. C(2) (“Rule C”)). In Pizani, the plaintiff sought
attachment of a vessel under Rule C. 669 F.2d at 1090. However, the
plaintiff’s complaint was not verified, service was not perfected, and the
service instructions did not request that in rem process issue. Id. Based on
these failures to comply with the plain requirements of Rule C, we
determined that the district court lacked jurisdiction and reversed the in rem
judgment against the vessel. Id.
Analogizing to our reasoning in Pizani, the district court determined
that there was “no difference warranting two distinct jurisdictional
inquiries” between Rule B and Rule C. Like Rule C, Rule B requires a
verified complaint to initiate proceedings. Compare Fed. R. Civ. P. Adm.
Supp. R. C(2) (“In an action in rem the complaint must . . . be
verified . . . .”), with Fed. R. Civ. P. Adm. Supp. R. B(1)(a) (“[A]
verified complaint may contain a prayer for process to attach the defendant’s
tangible or intangible personal property”). Accordingly, the district court
found no substantive differences between the two Supplemental Admiralty
Rules that warranted a different outcome.
Ultimately, here we need not reach the issue of whether the verified
complaint requirement under Rule B is a jurisdictional rule. Even if we
determined that Rule B was merely a mandatory claim-processing obligation,
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Bergshav Shipping “properly invoked” Rule B. Bergshav Shipping raised
the issue via a timely motion to vacate, and therefore it “must be enforced.”
Frew v. Young, 992 F.3d 391, 396 n.3 (5th Cir. 2021) (quoting Hamer, 138
S.Ct. at 17). Because Bergshav Shipping raised the verified pleading issue in
the district court and on appeal, “it remains mandatory even if not
jurisdictional.” Id. As such, regardless of whether Rule B is jurisdictional or
procedural, we hold that the district court did not err in dismissing the action.
The final issue then is whether the district court should have
permitted Plaintiffs to cure their verification by amendment. Plaintiffs
objected to the magistrate judge’s memorandum and recommendation,
arguing that they could cure the defective verification via a supplementary
verification under Federal Rule of Civil Procedure 15.
At the outset, we note that Plaintiffs never filed a formal motion to
amend their verification. At the hearing on the motion to vacate, the
magistrate judge requested briefing on whether the inadequate verification
was “a jurisdictional bar up front” or whether it could be amended. In
response to this request, Bergshav Shipping briefed the issue, insisting that
the verification could not be cured due to the time-of-filing rule and futility.
Plaintiffs did not respond to Bergshav Shipping’s arguments or otherwise
comply with the magistrate judge’s request for briefing on the issue of
amendment. As such, the memorandum and recommendation does not
make any findings or include a recommendation as to whether the verification
could be amended. Rather, Plaintiffs waited until the magistrate judge had
issued its memorandum and recommendation to raise the issue of
amendment for the first time. Plaintiffs—in one paragraph of their seventeen-
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page objections—first make an argument styled under Federal Rule of Civil
Procedure 15 requesting leave to amend.
It is well settled that issues raised for the first time in objections to a
magistrate judge’s report are deemed not properly before the district court
and therefore cannot be raised on appeal. See Cupit v. Whitley, 28 F.3d 532,
535–36 n.5 (5th Cir. 1994); United States v. Armstrong, 951 F.2d 626, 630 (5th
Cir. 1992) (concluding that issues first argued in “objections to the
magistrate judge’s findings” were “not properly before the district court”
and refusing to address them); Harrison v. Smith, 83 F. App’x 630, 632 (5th
Cir. 2003) (per curiam) (rejecting attempt to raise new issue in objections to
report and recommendation). As such, we reject Plaintiffs’ untimely attempt
to request leave to amend and deem the issue duly waived.
AFFIRMED.
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