Court Opinion

ID: 9850184
Source: CourtListenerOpinion
Date Created: 2023-09-24 04:53:09.806031+00
Date Added: 2024-06-11T09:20:32.849070
License: Public Domain

FUENTES, Circuit Judge,
dissenting.
I disagree with the majority for two reasons. First, Pemex’s seizure of the ship was appropriate because the in rem and in personam proceedings were essentially the same claim, and the former “relates back” to the latter. Second, the seizure was justified by the specific contract provision contained within the LOU that reserved Pemex’s right to seize the ship at a later date in the event the amount of its claim against Tbilisi exceeded $530,320. Thus, I respectfully disagree with the majority and I would affirm the District Court’s decision.
As the majority explains, under a charter agreement, the vessel Tbilisi commenced a voyage on December 6, 1992, carrying a cargo of diesel oil and unleaded gasoline on behalf of Pemex. Sometime in December 1992, the oil and gasoline cross-contaminated, causing Pemex to withhold the charter fee owed to Tbilisi Shipping as security for its damages.
*111Four months after the damage to Pe-mex’s cargo, Tbilisi demanded arbitration to claim the withheld charter fee. The arbitration began in April 1993, well within the one-year statute of limitations provided in the Carriage of Goods by Sea Act (“COGSA”), 46 U.S.C. app. § 1300 et seq.
Tbilisi Shipping’s insurer issued a Letter of Undertaking (“LOU”) to Pemex on May 18, 1993. The LOU outlines that, in consideration of Pemex’s payment of the withheld fee of $530,320 to Tbilisi Shipping, the insurer would guarantee payment of damages up to the amount of the withheld fee. In addition, the LOU explains that Pemex would forego seizing the Tbilisi, “except in the event [Pemex’s] claim exceeds the amount of the security,” namely $530,320.
The arbitration proceedings were unusually long, and as of March 2002, there was still no resolution. Pemex learned at that time that the vessel, now renamed the “King A,” would dock at a port in New Jersey. In an effort to secure its loss, which was now clearly in excess of the $530,320 guaranteed in the LOU, Pemex sought to seize the ship. The majority now claims that the March 2002 seizure of the ship was time-barred because it did not occur within COGSA’s one-year statute of limitations.

A. Relation Back

Pemex claims that its seizure of the King A is not barred by COGSA’s one-year statute of limitations because the seizure of a ship is an in rem proceeding that, under current admiralty principles, relates back to the filing of the arbitration proceeding. Under this doctrine, an act done at a later time is deemed by law to have occurred at an earlier time. Black’s Law Dictionary 1314 (8th ed.2004); see also Garvin v. City of Philadelphia, 354 F.3d 215, 220 (3d Cir.2003) (noting that the relation back doctrine “aims to ameliorate the harsh result of the strict application of the statute of limitations”). Thus, Pemex argues that the seizure of the ship — the in rem proceeding — must be treated as though it occurred at the time that the arbitration proceeding — the in personam proceeding — was filed in April 1993.
There is no doubt that the seizure of a vessel {in rem) and an arbitration {in personam) have long been interconnected proceedings in maritime law. As Section 8 of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., states
If the basis of jurisdiction be a cause of action otherwise justiciable in admiralty, then, notwithstanding anything herein to the contrary, the party claiming to be aggrieved may begin his proceeding hereunder by libel and seizure of the vessel or other property of the other party according to the usual course of admiralty proceedings, and the court shall then have jurisdiction to direct the parties to proceed with the arbitration and shall retain jurisdiction to enter its decree upon the award.
9 U.S.C. § 8. Several courts have stated that the purpose of this section of the FAA is to give an aggrieved party the benefit of security provided by jurisdiction in rem while preserving the right to arbitrate their dispute. See, e.g., Marine Transit Corp. v. Dreyfus, 284 U.S. 263, 275, 52 S.Ct. 166, 76 L.Ed. 282 (1932) (concluding that seizure of the vessel was the first step in enforcing arbitration, and explaining that it was not necessary for the arbitration panel to “split” the in personam claim against the corporation and the in rem claim against the vessel).
In my view, Section 8 of the FAA clearly states that the in rem and in personam claims are one proceeding, with the in rem claim serving as security for the in person-am claim. The two claims arise from the same set of operative facts, and there is a *112clear connection between the in rem claim against the vessel and the in personam claim against the corporation.
When Pemex accepted the security provided by the LOU in May 1993, which guaranteed that Pemex could arrest the vessel at a later date if the claim exceeded $530,320, Pemex secured its claim as provided by Section 8 of the FAA. It is irrelevant that Tbilisi initiated the arbitration rather than Pemex, as the arbitration panel noted when Tbilisi first attempted to dismiss Pemex’s claim as time-barred by COGSA.7 The underlying claim was commenced within the one-year COGSA statute of limitations, and the parties similarly negotiated and executed the LOU, which provided $530,320 of security and reserved Pemex’s right to later arrest the vessel, within the one-year statute of limitations.
The same reasoning regarding the closely intertwined nature of in rem and in personam claims underlies the Second Circuit’s rationale in Thyssen, Inc. v. Calypso Shipping Corp., 310 F.3d 102 (2d Cir.2002). The plaintiff in Thyssen filed an in rem action in federal district court after an arbitration panel dismissed his in personam claims in a dispute over damaged cargo. The Second Circuit affirmed the District Court’s decision, reasoning that Section 8 of the FAA “mak[es] clear that where there is an arbitration clause in a contract, in rem proceedings serve to provide a plaintiff with security while the in personam claim awaits arbitration.” Id. at 106. The court continued that almost all maritime disputes result in both in rem and in personam claims, and to allow a plaintiff to bring an in rem claim after an in personam claim has failed would give parties no incentive to arbitrate maritime claims. Id. The court stated the proper way to handle these proceedings is for the plaintiff to seize the ship in rem, obtain a bond, and proceed with the arbitration. Id. at 107. If the plaintiff wins at arbitration, but cannot recover against the owner of the vessel, the preserved in rem claim provides security so that the plaintiff can recover against the vessel. Id.; see also Diana Compania Maritima, S.A. of Panama v. Subfreights of S.S. Admiralty Flyer, 280 F.Supp. 607, 615-16 (S.D.N.Y.1968) (rejecting argument that an arbitration award must be limited to a judgment in personam between a vessel owner and a charterer and holding instead that an arbitration award is effective in rem against the subfreights).
Although the facts of Thyssen are somewhat distinguishable, the law is not. Had Thyssen succeeded in his arbitration claim, the Second Circuit’s rationale would have permitted him to pursue his claim against the vessel. Here, Pemex was a party to an arbitration commenced five months after the incident, well within the COGSA statute of limitations. It is of no import that the arbitration did not conclude until 2006. Now, Pemex is entitled to enforce the lien it has held on the vessel for over sixteen years. Therefore, I conclude that the relation back doctrine alone is sufficient to justify the seizure of the ship in 2002.

B. Contract Law

There is a second, independent basis to permit Pemex’s seizure of the ship. The LOU contained a clause which expressly *113and unambiguously reserved Pemex’s right to arrest the vessel in the event its damages exceeded $530,320.
It is well-established in contract law that specific and exact terms are given greater weight than general language. Great Am. Ins. Co. v. Norwin Sch. Dist., 544 F.3d 229, 247 (3d Cir.2008); see also Restatement (Second) of Contracts § 203(c) (1981); 5 Corbin on Contracts § 24.23 (2007) (“[T]he more specific term should usually be held to prevail over the more general term.”). Here, the majority imports the COGSA statute of limitations into the LOU under the Paragraph Six “reservation of rights” clause that generically reserved “any rights or defenses” available to the vessel and its owner under “applicable law.” By doing so, the majority elevates the boilerplate language of the “reservation of rights” clause over the specific language, negotiated by the parties under these special circumstances, that reserves Pemex’s right to arrest the ship at a later date. Even the majority notes that this language is unusual in LOUs, calling it “[a] unique contractual reservation of right to later arrest the vessel.” Maj. Op. at 105. This further supports the argument that this clause is negotiated language that should trump the boilerplate language in Paragraph Six.
Further, the majority’s interpretation of the LOU renders the clause that reserves Pemex’s right to arrest the vessel at a later date virtually useless, which is disfavored under general principles of contract interpretation. USX Corp. v. Liberty Mut. Ins. Co., 444 F.3d 192, 200 (3d Cir.2006); see also Restatement (Second) of Contracts § 203(a) (1981) (“[A]n interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect.”). According to the majority opinion, Pemex, which was already a party to an arbitration arising from the contamination incident, signed the LOU in May 1993 knowing that their right to increase security via seizure of the vessel would expire in seven months. It is important to note that Tbilisi Shipping, not Pemex, commenced the arbitration proceeding in April 1993 to claim the withheld fee. Pemex did not even submit its itemized damages to the arbitration panel until January 1995, although Pemex knew that its damages would exceed the $530,320 secured by the LOU when it was issued in May 1993. In my view, Pemex entered the LOU aware that its right to arrest the vessel was preserved indefinitely, given that an arbitration arising out of this incident had already been commenced. The right to arrest the ship, which related back to the date of the arbitration, rendered inapplicable COGSA’s statute of limitations. Under these circumstances, it is unreasonable to import the COGSA statute of limitations into the LOU, which would have limited Pemex’s right to later arrest the vessel to seven months from the date the LOU was issued.
In addition, the majority faults Pemex for not securing the full amount of the award in the LOU. The record reflects that Pemex wanted more than the $530,320 security provided in the LOU, but Tbilisi Shipping refused to provide security beyond the amount of the withheld fee. (J.A. at 147.) Because Tbilisi Shipping refused to provide additional security at that time, Pemex negotiated the right to seize the vessel in the future because it knew that the damages would exceed $530,320. This was the next best option available to Pe-mex under the circumstances.
For the foregoing reasons, I respectfully dissent.

. As noted above, Tbilisi initiated the arbitration to claim the withheld fee in April 1993. As the result of a series of delays, Pemex did not submit its itemized claim for damages until March 17, 1995. Three days later, Tbilisi filed a notice with the arbitration panel arguing that Pemex failed to initiate arbitration or otherwise commence its claim for damages within COGSA’s one-year statute of limitations. The arbitration panel held that Pemex rightfully asserted a claim for Tbilisi’s contamination of the cargo as a defense to Tbilisi’s claim for the charter fee.