Court Opinion

ID: 17010
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:59:51+00
Date Added: 2024-06-11T16:46:41.123696
License: Public Domain

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.

                                          6
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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