* District Judge of the Western District of Louisiana, sitting by designation. United States Court of Appeals,

Fifth Circuit.

No. 91–2827.

AROCHEM CORPORATION, Plaintiff–Appellant,

v.

WILOMI, INC., a/k/a WILLOMI, INC., Defendant–Appellee.

June 8, 1992.

Appeal from the United States District Court for the Southern District of Texas.

Before WILLIAMS and WIENER, Circuit Judges, and LITTLE, * District Judge.

JERRE S. WILLIAMS, Circuit Judge:

To insure payment for its carriage of crude oil from Scotland to Puerto Rico, Wilo mi, Inc.

arrested the oil subsequent to its delivery. Arochem Corp., appellant, which had purchased the oil,

claimed the arrest was wrongful because Wilomi's lien was no longer valid. Arochem brought suit

seeking damages for the allegedly wrongful arrest. Holding that the arrest was not wrongful because

a valid lien existed, the district court granted summary judgment for Wilomi.

I. FACTS

On September 1, 1988, Marimpex Miner alo el–Handelsgesellschaft MBH & Co., KG

("Marimpex") entered into a charter agreement with t h e defendant Wilo mi, Inc. ("Wilomi") for

carriage of crude oil aboard Wilo mi's tanker, the M/T CZANTORIA. Wilomi was to deliver the oil

from Scotland to the U.S. Gulf. The charter agreement provides that English law governs the

agreement's construction and performance. The CZANTORIA set sail on September 6, 1988.

On September 19, 1988, while the oil was enroute, Arochem purchased it from Marimpex.

Marimpex then ordered the CZANTORIA to cancel its original destination and proceed instead to1 Because it was anchored eight miles off the coast of Puerto Rico, the CZANTORIA was on

the high seas, not in United States territory. At the time of this event, the United States

recognized a territorial sea of three nautical miles. On December 27, 1988, the territorial sea was

extended to twelve nautical miles. Presidential Proclamation No. 5928, 54 Fed.Reg. 777 (1989). Guayanilla, Puerto Rico. Several days later, Marimpex sent Wilomi a letter of indemnity instructing

the CZANTORIA to deliver the cargo to Arochem. Because Arochem would be unable to provide

bills of lading upon the cargo's arrival at its destination, the letter of indemnity was required by Clause

50 of the charter agreement between Wilomi and Marimpex.

The CZANTORIA arrived and anchored eight nautical miles off Guayanilla, Puerto Rico 1 on

Sept e mber 24, 1988, and two days later it began delivering the oil into the M/T PHILLIPS

VENEZUELA. The lightering operatio n involved three separate loadings over a nine-day period.

At its conclusion, Marimpex became obligated to pay Wilo mi $547,112.75 in total freight as well as

$79,545.05 in demurrage for the extra port time used for loading and discharge. Wilomi sent a telex

demanding payment, but the telex did not inquire as to Marimpex's interest in the cargo.

Marimpex informed Wilo mi that, due to financial difficulties, Marimpex was unable to pay

its obligation at that time. Clause 22 of the charter agreement grants Wilomi a maritime "lien upon

the cargo for all freight

... [and] demurrage, and the cost of recovery of same." When Wilomi learned

that Marimpex could not pay its $626,657.80 obligation, Wilo mi immediately filed Lien Notices under

19 U .S.C. § 1564 with the United States Custom Service Puerto Rico office on October 6, 1988.

In addition, Wilomi commenced an action the following day in the United States District Court for

the Eastern District of Texas, asserting its marit ime lien on the carg o aboard the PHILLIPS

VENEZUELA. Wilomi gave no notice of either of these actions to Arochem.

On October 9, 1988, the United States Marshal arrested the cargo aboard the PHILLIPS

VENEZUELA at the Sun Oil facilit y in Nederland , Texas, pursuant to a warrant issued under the

provisions of Supplemental Admiralty Rule C(3) of the Federal Rules of Civil Procedure. In a2 Although Arochem had paid Marimpex with an irrevocable letter of credit, Arochem was still

obligated under the sales contract to make an additional payment to Marimpex for demurrage.

This additional payment could be used to satisfy a valid lien.

3 Arochem, for example, asserts that the District Court applied the somewhat esoteric doctrine

of renvoi in determining the choice of law. Under the doctrine of renvoi, a court applying foreign

law adopts the foreign jurisdiction's rules as to the conflict of laws. The conflict rules may in turn

refer the court back to the law of the forum. This Court has expressed doubt as to the use of

renvoi. Brandon v. Denton, 302 F.2d 404, 409 n. 1 (5th Cir.1962); Nailen v. Ford Motor Co.,

873 F.2d 94, 96–97 (5th Cir.1989). telephone hearing before the district court in Texas, Arochem explained to both District Judge Cobb

and Wilo mi's attorney that Arochem had purchased the cargo and had paid for the cargo under an

irrevocable letter of credit. 2 Arochem claimed it was not obligated t o pay Wilomi to obtain the

release of its cargo because it viewed the arrest as an unlawful taking. Judge Cobb declined to make

a ruling over the telephone. Arochem advised the court that although it was capable of bonding the

cargo, it refused to do so.

On October 12, 1988, Marimpex paid the amount owed for total freight and gave security for

the demurrage. The cargo was immediately released. Consequently, Arochem brought this suit

asking for damages in the approximate amount of $350,000 flowing from Wilo mi's allegedly wrongful

arrest. After extensive discovery, Wilomi's motion for summary judgment was granted on April 30,

1991. Arochem now appeals to this Court.

II. CHOICE OF LAW

The primary issue is whether the district court applied the proper choice of law. The district

court applied American law to this case, but Arochem contends it should have applied English law.

We review the district court's choice-of-law determination de novo. Bailey v. Dolphin International,

Inc., 697 F.2d 1268, 1274 (5th Cir.1983). A dispute exists between the parties as to what process

the district court used in determining which jurisdiction's l aw should appl y

. 3 But, we are not

concerned with what process the district court used. We focus our attention on the validity of

applying American law.Arochem insists that the controlling case is Lauritzen v. Larsen, 345 U.S. 571, 73 S.Ct. 921,

97 L.Ed. 1254 (1 953). That case introduced the modern approach to choice-of-law issues in

marit ime cases. "Maritime law ... has attempted to avoid or resolve conflicts between competing laws

by ascertaining and valuing points of contact between the transaction and the states or governments

whose competi ng laws are involved." I d. 345 U.S. at 582, 73 S.Ct. at 928. The Supreme Court

enunciated the seven factors for a court to con sider in a maritime tort case: (1) the place of the

wrongful act; (2) the law of the flag; (3) the allegiance or domicile of the injured; (4) the allegiance

of the defendant shipowner; (5) the place of the contract; (6) inaccessibility of a foreign forum; and

(7) the law of the forum.

Contrary to Arochem's assertions, these factors support the application of American

substantive law. The wrongful act claimed in this lawsuit is the arrest of the cargo in Nederland,

Texas, after its transshipment. The flag of the PHILLIPS VENEZUELA, the ship transporting the

cargo at the time of arrest, is the American flag. The allegiance of the legal entity claiming injury

further supports the use of American law because Arochem is a Delaware corporati on with a principal

place of business in Stamford, Connecticut.

Other factors cited in Lauritzen favor neither English nor American law. Although this court

is unsure of the shipowner's allegiance, the CZANTORIA flew the Liberian flag. Also, both

American and English courts are equally competent and accessible. We recognize, of course, that

the charter agreement was negotiated, drafted, and executed in London and that the agreement itself

provides in terms for English law to govern its construction and performance. This factor is rendered

nugatory, however, because Arochem here claiming injury was not a party to the charter agreement.

Although we can distinguish the present case from Lauritzen because Lauritzen involved a

torts claim under the Jones Act, the factors listed by the Supreme Court provide a useful outline from

which to begin our analysis. The present case, however, more closely parallels G ulf Trading &Transp. Co. v. Vessel Hoegh Shield, 658 F.2d 363 (5th Cir. Unit A 1981), c ert. denied, 457 U.S.

1119, 102 S.Ct. 2932, 73 L.Ed.2d 1332 (1982). In G ulf Trading, we had to determine whether to

apply English or American law in a marit ime lien case in which one of the litigants was not a party

to the contract. This Court favorably cited the factors in Lauritzen and then added:

Leaving the contract, and entering the broader context of the marit ime lien invo lving Gulf and

the Vessel's owner, the Restatement (Second) of Conflicts of Law § 6 sets forth principles to

be applied in choice o f law matters. In the absence of statutory directives and subject to

constitutional restrictions, the relevant factors includ e (a) the needs of the international

system, (b) relevant policies of the forum, (c) relevant policies of other interested states, (d)

the protecti on of justified expectations, (e) the basic policies underlying the particular field

of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination

and application of the law to be applied.

Gulf Trading, 658 F.2d at 367; s ee also, Cardinal Shipping Corp. v. M/S Seisho Maru, 744 F.2d

461, 465 (5th Cir.1984).

The factors articulated in Gulf Trading favor applying American law. Arochem's claim is for

wrongful arrest, and the arrest was administered by a United States Marshal in a United States port.

Arochem is a United States company and Wilomi has a place of business and a general agent in the

United States. With these contacts between the transaction and the United States, it is consistent and

rational to apply American law.

Although the contract was formed in England, it is illogical to argue England has as great an

interest as the United States in protecting an American purchaser from an unlawful arrest of cargo

on an American vessel in an American port. S ee, Gulf Trading, 658 F.2d at 368. The district court,

therefore, properly applied American law.

III. WRONGFUL ARREST

Arochem claims on the merits that under United States law Wilomi wrongfully arrested the

cargo. "The gravamen of the right to recover damages for wrongful seizure or detention of vessels

is the bad faith, malice, or gross negligence of the offending party." Frontera Fruit Co. v. Dow ling,91 F.2 d 293, 297 (5th Ci r.1937). S ee also, Marastro Compania Naviera v. Canadian Maritime

Carriers Ltd., 959 F.2d 49, 53 (5th Cir.1992). The district court held that Wilomi carried its burden

of showing that a lien existed on the cargo, and that Arochem failed to offer evidence to establish that

the lien did not exist at the time of the arrest. We affirm the holding.

Under United States law, it has been settled for over a century that we presume a marit ime

lien exists in favor of a shipowner on cargo for charges incurred during the course of its carriage. T he

Bird of Paradise, 72 U.S. (5 Wall) 545, 554, 18 L.Ed. 662 (1866); A tlantic Richfield Co. v. Good

Hope Refineries, Inc., 604 F.2d 865, 872 (5th Cir.1979). "The lien for freight and demurrage is

possessory in nature, and, therefore , it is o rdinarily lost by u nconditional delivery of the cargo."

Atlantic Richfield, 604 F.2d at 872 (emphasis added). The parties to the transaction, however, may

agree that the lien survives beyond discharge. T he Eddy, 72 U.S. (5 Wall) 481, 495–96, 18 L.Ed.

486 (1866); T

he Bird of Paradise, 72 U.S. (5 Wall) at 555. In other words, the shipowner can make

a conditional delivery of the cargo. A tlantic Richfield, 604 F.2d at 873 ("When a cargo reaches its

destination, the shipowner always has the choice of asserting rights against the cargo—by delivering

it conditionally or attaching it—or permitting unconditional delivery and losing the lien"). Practical

considerations support the survival of a maritime lien beyond delivery:

[I]t often happens that the necessities and usages of trade require that the cargo should pass

into the hands of the consignee before he pays the freight. It is the interest of the ship-owner

that his vessel should discharge her cargo as speedily as possible after her arrival at the port of delivery.... The consignee, too, in many instances, might desire to see the cargo unladen

before he paid the freight, in order to ascertain whether all of the goods mentioned in the bill

of lading were on board, and not damaged by the fault of the ship.... And if the cargo cannot

be unladen and placed in the warehouse of the consignee without waiving the lien, it would

seriously embarrass the ordinary operations and convenience of co mmerce, both as to the

ship-owner and the merchant.... [I]t is frequently, perhaps more usually, understood between

the parties, that transferring the goods from the ship to the warehouse shall not be regarded

as a waiver of the lien, and the ship-owner reserves the right to proceed in rem to enforce it,

if the freight is not paid.

4,885 Bags of Linseed, 66 U.S. (1 Black) 108, 114, 17 L.Ed. 35 (1861).

Accordingly, we must determine whether Wilo mi conditionally or unconditionally delivered4 Clause 7: "Freight shall be payable immediately after completion of discharge ..."

Clause 15: "The vessel shall discharge its cargo such that the period of time between the

commencement of discharging and the completion thereof shall not, after the deduction of

stoppages (if any), demanded solely by the shore terminal, exceed 24 hours. In the event

that the time taken by the vessel for discharging exceeds 24 hours any demurrage claim

submitted by Owners shall include the following information:

Vessel Facilities ...

Cargo ..."

Shore Facilities ...

Any demurrage claim submitted by Owners based, whether wholly or impartially, on

excess discharge time as aforesaid shall not be deemed to have been correctly submitted

until the aforementioned information has been provided in full and the liability of

Charterers as to the payment of demurrage shall not arise until such a claim has been

correctly submitted in accordance with the provisions of this Clause.

Clause 53: "Demurrage as well as other expenses for Charterer's account are payable after

receipt of Owner's invoice supported by copy of Notice of Readiness, which Owners will

endeavour to have duly signed, Statement of Facts and time sheets from load and

discharge port(s) duly signed by shippers respectively receivers or agents and Master.

Claims to be received by Charterers within 3 months from completion of discharge

otherwise such claims are timebarred." the cargo. Analysis of the charter agreement between Wilomi and Marimpex resolves t he issue.

Clause 22 of the charter agreement explicitly gran t s Wilo mi a lien against the cargo for "freight,

deadfreight, demurrage and cost of recovery thereof." The charter agreement further pro vides,

however, that payment for many of the costs is not due until after the cargo's delivery. 4 No rational

person would establish a lien on cargo for certain costs that are due after delivery of the cargo but

have delivery of the cargo extinguish the lien. If that were t he case, the lien would be a futile

mechanism for protecti on. Consequently, the parties must have intended the lien to survive delivery

of the cargo.

The district court correctly granted Wilo mi's motion for summary judgment agains t Arochem's

wrongful arrest claim because Wilo mi acted neither in bad faith, nor with malice or gross negligence.

A company does not wrongfully arrest cargo by asserting a bona fide lien to protect its interest.IV. CONCLUSION

We find no error in the district court's treatment of this case. The district court properly

applied American law because most o f the parties and incidents were in the United States.

Furthermore, the lien was still valid because Wilo mi had not unconditionally delivered the cargo, and,

therefore, the arrest was not wrongful.

AFFIRMED.