BargeCarib Inc. v. Offshore Supply Ships Inc.

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 98-20329
BARGECARIB INCORPORATED,
Plaintiff - Appellant,
VERSUS
OFFSHORE SUPPLY SHIPS INCORPORATED, in personam; THE M/V
SOVEREIGN, her engines, tackle, apparel, etc., in rem;
Defendants - Appellees,
GLOBAL TOWING, L.L.C.,
Claimant - Appellee.
Appeal from the United States District Court
for the Southern District of Texas
March 4, 1999
Before HIGGINBOTHAM, DUHÉ, and DeMOSS, Circuit Judges.
DUHÉ, Circuit Judge:
BargeCarib Inc. (“BargeCarib”) filed a complaint in rem
against the M/V Sovereign (“Sovereign”) and in personam against the
Sovereign’s owner Offshore Supply Ships Inc. (“Offshore”), alleging
breach of a time charter. The Sovereign was arrested, then
released after subsequent proceedings when the district court
concluded Offshore did not breach the charter. BargeCarib appeals
the order vacating seizure and denying return of the vessel.
Because Offshore breached the charter, we reverse the order
vacating seizure, and remand to the district court for further
proceedings. We lack authority to compel return of the vessel.
Global Towing, LLC (“Global”), which purchased the Sovereign from
Offshore during the duration of the charter and owned the Sovereign
at the time of seizure, moved for damages, sanctions, costs,
attorneys’ fees and other expenses under Federal Rules of Appellate
Procedure 38 and 39, and Federal Rule of Civil Procedure 11. We
deny Global’s motion.
BACKGROUND
On August 15, 1996, BargeCarib executed a time charter
agreement (“Charter”) with Offshore. Offshore’s vessel the
Sovereign would tow BargeCarib’s ocean-going barge LaurieKristie
for a period of one year with an option to extend for one year.
The Charter permitted Offshore to substitute a similar vessel of
comparable power at anytime, subject to BargeCarib’s approval,
which could not be unreasonably withheld.
On May 20, 1997, Global bought the Sovereign from Offshore
while the vessel was at sea under the time charter, and informed
BargeCarib of the purchase. Offshore and Global entered into an
agreement permitting the Sovereign to complete its then current
voyage.
On June 19, Raymond Ledoux of Offshore confirmed the sale of
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the Sovereign, and met with David Kay of BargeCarib to discuss
substitute vessels. In early July, Offshore proposed several
substitute vessels. BargeCarib objected to these vessels and
stated that it would not release Offshore from the Charter unless
Offshore substituted an acceptable vessel. On July 7, Offshore
informed BargeCarib that the Sovereign would make BargeCarib’s next
scheduled voyage. During the week of July 10, Global also informed
BargeCarib that the Sovereign would make the next voyage. In
reliance on these assurances, Kay ordered the LaurieKristie fully
loaded.
On July 9-10, BargeCarib contacted Hillman of Global and
requested that the voyage commence. Global refused to order the
Sovereign to commence unless BargeCarib agreed to release the
Sovereign from any further obligations under the Charter.
On July 10, BargeCarib filed a Verified Complaint alleging
that Offshore breached the Charter and asserting a maritime lien on
the vessel to secure the performance of the Charter.1 The
complaint asserted an in rem claim against the Sovereign and an in
personam claim against Offshore. The magistrate judge granted a
Writ of Seizure, and the U.S. Marshal arrested the Sovereign.
Offshore filed an emergency motion to vacate the arrest, and Global
filed various motions, including an emergency motion to vacate the
1
BargeCarib represented to the Court that it had made a present
demand on Offshore that the Sovereign undertake a voyage to Haiti
under the Charter and that Offshore refused to commence the voyage.
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arrest and dismiss BargeCarib’s complaint.
The magistrate judge held a hearing to allow BargeCarib to
show probable cause for the arrest, and found that BargeCarib’s
Complaint was factually inaccurate.2 The magistrate judge ordered
vacature of the seizure and immediate release of the vessel.
BargeCarib objected, claiming that vacating the order was a
dispositive action beyond the scope of the magistrate judge’s
authority. The magistrate judge disagreed, and released the
Sovereign.
BargeCarib appealed the magistrate judge’s order to the
district court. The district court vacated the magistrate judge’s
order vacating seizure. BargeCarib then moved for return of the
Sovereign. Offshore and Global moved for reconsideration and
objected to the return of the vessel. The district court granted
the motion to reconsider. After reviewing the magistrate judge’s
order de novo, the district court entered an order accepting and
adopting the magistrate judge’s order vacating seizure and denying
BargeCarib’s motion for return of the vessel. BargeCarib appeals
the district court’s orders vacating seizure and denying return of
the vessel. BargeCarib did not seek a stay of the district court’s
order pending appeal.
STANDARD OF REVIEW
2
The magistrate judge found that BargeCarib had made no present
demand on Offshore.
4
We review de novo the district court’s legal conclusion that
Offshore did not breach the Charter. See E.A.S.T., Inc. of
Stamford, Conn. v. M/V ALAIA, 876 F.2d 1168, 1171 (5th Cir. 1989)
(noting that, in admiralty cases, the standard of review is de novo
for questions of law and clearly erroneous for findings of fact).
ANALYSIS
The district court released the Sovereign, the res at issue in
this in rem proceeding. However, removal of the res does not
necessarily divest the court of jurisdiction. Once proper seizure
establishes jurisdiction, the court maintains jurisdiction until
the litigation ends, unless a judgment would be “useless.” See
Republic Nat’l Bank of Miami v. United States, 506 U.S. 80, 84-89
(1992); Elliott v. M/V LOIS B, 980 F.2d 1001, 1004-05 (5th Cir.
1993). The “useless” exception “will not apply to any case where
the judgment will have any effect whatever.” Republic Nat’l Bank
of Miami, 580 U.S. at 85 (citing language in the opinion of Chief
Justice Marshall sitting as a Circuit Justice in United States v.
The Little Charles, 26 F. Cas. 979, 982(C.C.Va. 1818)(No. 15,612)).
Whether the Sovereign was properly seized turns on whether Offshore
breached the Charter, giving rise to a maritime lien. Thus, the
jurisdictional issue will turn, in part, on a resolution of the
merits.
A maritime lien “affords special protection to the party who
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has been injured by a breach of contract . . . .” E.A.S.T., Inc. of
Stamford, Conn., 876 F.2d at 1174; see also Cardinal Shipping Corp.
v. M/S SEISHO MARU, 744 F.2d 461, 466 (5th Cir. 1984) (noting that
a maritime lien “arises by operation of law to provide security to
the victims of certain maritime . . . contract breaches.”). Breach
of a time charter by the owner gives rise to a maritime lien as
long as the vessel has been delivered to the charterer and the
contract is no longer executory. See E.A.S.T., Inc. of Stamford,
Conn., 876 F.2d at 1175-76. A maritime lien entitles the charterer
to proceed in rem directly against the vessel. See Cardinal
Shipping Corp., 744 F.2d at 466.
On July 7, Offshore informed BargeCarib that the Sovereign
would make BargeCarib’s next scheduled voyage. During the week of
July 10, Global confirmed that the Sovereign would make
BargeCarib’s next voyage. On July 9-10, BargeCarib contacted
Hillman of Global and requested that the voyage commence. Despite
Offshore’s arguments to the contrary,3 BargeCarib’s demand on
Hillman constituted a demand for performance under the Charter:
Offshore and Global had agreed that the Sovereign would make the
journey, and BargeCarib made the demand on the only party capable
of ordering the Sovereign to commence the journey. Hillman’s
3
Offshore argues that BargeCarib made a demand on Global, not
Offshore. Further, Offshore insists that, had BargeCarib made a
demand directly on Offshore, Offshore would have performed either
by securing the services of the Sovereign or by securing a
substitute vessel.
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refusal to order the Sovereign to commence constituted breach of
the Charter.
Global argues that it purchased the Sovereign free and clear
of the Charter. This argument is not persuasive. A maritime lien
“rests upon the fiction of the personality of the vessel. . . .
[I]t is based . . . on the fiction that the vessel may be a
defendant in a breach of contract action when the vessel itself has
begun to perform under the contract.” E.A.S.T., Inc. of Stamford,
Conn., 876 F.2d at 1174. Although Global may have purchased the
Sovereign free of any personal obligations under the Charter (an
issue we need not decide), the purchase could not terminate the
Sovereign’s obligations under the Charter. Global’s refusal to
order the Sovereign to commence unless BargeCarib agreed to release
the Sovereign from any further obligations under the Charter
represents Global’s tacit acknowledgment of the Sovereign’s
continuing obligations.
Offshore argues that BargeCarib breached the Charter prior to
the Sovereign’s failure to commence by refusing to accept
Offshore’s tender of substitute vessels. The Charter permitted
Offshore to “substitute a similar tug or tugs of comparable power
at any time. . . . However, any such substitution . . . is subject
to charterer’s prior approval; but such approval shall not be
unreasonably withheld.” Because Offshore proffered “substitutes”
requiring terms and rates less favorable to BargeCarib than the
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Charter, BargeCarib’s refusal to approve these substitutes was not
“unreasonable.” BargeCarib did not breach the Charter by refusing
Offshore’s proffered substitutes.
This court has continuing jurisdiction despite the absence of
the res. First, Offshore’s breach of the Charter gave rise to a
maritime lien permitting an in rem action by BargeCarib.
Therefore, the court properly had jurisdiction over the res at the
commencement of the suit. Second, the judgment that Offshore
breached the Charter is not useless. BargeCarib may use this
judgment as a basis for re-seizing the Sovereign should it return
to an American port, and as a basis for pursuing Offshore
personally. See Elliott, 980 F.2d at 1005 (noting that the
judgment was not useless because it “ha[d] potential concrete
value” in the plaintiff’s likely litigation with a third party).
BargeCarib cites no persuasive precedent for our authority to
compel return of the Sovereign. Although we agree that BargeCarib
has a valid maritime lien against the Sovereign, our jurisdiction
does not extend to compelling the return of the vessel. We reverse
and remand to the district court for further proceedings.
We deny Global’s motion for damages, sanctions, costs,
attorneys’ fees and other expenses under Federal Rules of Appellate
Procedure 38 and 39, and Federal Rule of Civil Procedure 11.
REVERSE and REMAND
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