Court Opinion

ID: 2716361
Source: CourtListenerOpinion
Date Created: 2014-08-08 07:02:06.893941+00
Date Added: 2024-06-11T12:00:11.273383
License: Public Domain

PUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 14-1189

FLAME S.A.,

                 Plaintiff - Appellee,

           v.

FREIGHT BULK PTE. LTD.,

                 Defendant - Appellant,

           and

INDUSTRIAL CARRIERS, INC.; VISTA SHIPPING,          INC.;   VIKTOR
BARANSKIY; GLORY WEALTH SHIPPING PTE LTD.,

                 Defendants.

Appeal from the United States District Court for the Eastern
District of Virginia, at Norfolk.     Robert G. Doumar, Senior
District Judge. (2:13-cv-00658-RGD-LRL)

Argued:   May 14, 2014                       Decided:   August 5, 2014

Before WILKINSON, AGEE, and DIAZ, Circuit Judges.

Affirmed by published opinion. Judge Agee wrote the opinion, in
which Judge Wilkinson and Judge Diaz joined.    Judge Wilkinson
wrote a separate concurring opinion.

ARGUED: Charles Alan Rothfeld, MAYER BROWN, LLP, Washington,
D.C., for Appellant.  William Robert Bennett, III, BLANK ROME
LLP, New York, New York, for Appellee.   ON BRIEF: Carmine R.
Zarlenga, Richard Caldarone, Paul W. Hughes, MAYER BROWN LLP,
Washington, D.C., for Appellant.     Alan M. Weigel, Lauren B.
Wilgus, Nicholas R. Tambone, BLANK ROME LLP, New York, New York,
for Appellee.

                               2
AGEE, Circuit Judge:

      Freight Bulk Pte. Ltd. (“Freight Bulk”) appeals from the

district court’s order denying its motion to vacate a writ of

maritime attachment previously issued in favor of Flame S.A.

(“Flame”) under      Supplemental       Rule     B   of   the    Federal    Rules   of

Civil Procedure (“Rule B”). Flame filed a verified complaint in

the   Eastern    District       of    Virginia       seeking     attachment    of   a

shipping vessel for purposes of satisfying an English judgment,

the underlying basis of which was a claim for breach of certain

Forward    Freight     Swap    Agreements     (“FFAs”).     The    district     court

denied Freight Bulk’s motion to vacate after concluding that its

jurisdiction was determined by reference to federal, rather than

English,   law   and    that    the   FFAs     are    maritime    contracts    under

federal law. For the reasons set forth below, we affirm the

decision of the district court.

                                         I.

      In 2008, Flame, an integrated shipping and trading company

organized under the laws of Switzerland and headquartered in

Lugano,    Switzerland,       entered    into    four     FFAs    with     Industrial

Carriers, Inc. (“ICI”), a corporation organized under the laws

                                         3
of a foreign country and registered to do business in the state

of New York. 1

         FFAs are similar to futures or hedging contracts tied to

the spread between a specified rate and market shipping prices

at   a       future      date.    To    act   as       a   diversification    against      the

vagaries of future maritime price fluctuations, shippers like

Flame may enter into FFAs with another party although any entity

could be a contracting party even if unrelated to the maritime

industry. The FFAs in this case identified particular shipping

routes listed in a specified maritime freight index, the Baltic

Panamax        Index,      which       provides        market   freight     rates   for    the

maritime industry. The shipping services contemplated in an FFA

would likely never be performed by the parties who would usually

settle the contract by exchanging cash, as the parties intended

in this case.

         FFAs      can    be     complicated       financial     transactions,       but    we

found        the   Second      Circuit’s      description        of   how    FFAs   work    in

D’Amico Dry Ltd. v. Primera Maritime (Hellas) Ltd., No. 11-3473-

cv, 2014 WL 2609648 (2d Cir. June 12, 2014), an easy to follow

narrative of the type of agreement at issue here:

         1
       Three of the FFAs specified Flame as the seller and ICI as
the buyer. The fourth was the reverse, with ICI as seller and
Flame as the buyer. The record reflects only that ICI was a
foreign corporation, but does not identify its country of
origin.

                                                   4
          A major risk of an ocean carrier’s business
          is that a slowdown in worldwide commercial
          activity    will    lead    to   diminution    in
          shipments of cargo, causing vessels to make
          expensive voyages partially empty or, in
          more extreme circumstances, to lay idle. The
          rates carriers charge for carriage of goods
          fall during such slowdowns. . . . As a way
          of offsetting losses from its vessels being
          underemployed    or    idle    during   such    a
          slowdown, [a carrier may] enter[] into
          futures contracts on international shipping
          rates. These contracts, sometimes called
          “forward   freight    agreements”    or  “FFAs,”
          specify a base rate (the “contract rate”)
          for a hypothetical shipment of specified
          goods over specified routes and future dates
          for comparison of the contract rate with the
          market rates on such future dates. If on a
          specified future date the market rate is
          above the contract rate, then the party that
          took the downside of the agreement must pay
          the other party the difference. If on the
          future date the market rate is below the
          contract rate, the party that took the
          upside of the contract must pay the other
          party the difference. Profits realized from
          such contracts as rates fall will increase
          [the carrier’s] revenues when demand is low,
          counteracting        its        losses       from
          underemployment. Conversely, the losses on
          such contracts will decrease [the carrier’s]
          net revenues when demand is high and rates
          rise.

D’Amico, 2014 WL 2609648, at *1.

     In   September   2008,   freight   rates    in     the    international

shipping market entered a steep decline, causing ICI to become

financially   distressed.     In   October      2008,    ICI     voluntarily

petitioned for bankruptcy in Greece, which constituted an Event

of Default under the terms of the FFAs. Under the FFAs, ICI owed

                                   5
Flame a substantial amount based on the difference between the

contract and market rates.

      In November 2010, Flame brought suit against ICI in the

High Court of Justice, Queen’s Bench Division, Commercial Court

in London, England (the “English Court”), alleging breaches of

the FFAs and seeking monetary damages. The English Court entered

judgment    against   ICI   on    December   13,   2010    in   the    amount   of

$19,907,118.36 (the “English judgment”).

      After     obtaining   the   English    judgment     against     ICI,   Flame

moved for recognition and enforcement of that judgment in the

United States District Court for the Southern District of New

York. 2   ICI   appeared    before   the    district    court   and    moved    to

dismiss for failure to state a claim, arguing that it did not

have notice of the action in the English Court. The district

court denied ICI’s motion. ICI’s counsel subsequently filed a

motion to withdraw as counsel, which the district court granted.

When granting the withdrawal motion, the district court warned

ICI that it must obtain new counsel or face a default judgment.

ICI failed to obtain substitute counsel, and the court entered

      2
       No federal statute provides for the recognition of foreign
judgments. Instead, federal courts generally recognize judgments
of foreign courts out of comity. See Hilton v. Guyot, 159 U.S.
113, 163–64, 202–03 (1895).

                                       6
default judgment on October 4, 2011, 3 recognizing the English

judgment in favor of Flame.

     On October 17, 2013, Flame registered the judgment of the

Southern   District     of   New   York       in   the    United    States    District

Court for the Eastern District of Virginia pursuant to 28 U.S.C.

§ 1963. Flame then filed a verified complaint seeking an Order

of Attachment against the shipping vessel M/V CAPE VIEWER (the

“CAPE VIEWER”), docked at Norfolk, Virginia, pursuant to Rule B.

Flame sought attachment of the CAPE VIEWER, which is owned by

Freight Bulk, on the theory that Freight Bulk is the alter ego

of ICI. The district court issued an attachment order, which was

timely served on Freight Bulk.

     Freight Bulk then appeared and moved the district court to

vacate the Order of Attachment pursuant to supplemental Rule

E(4)(f),     arguing     that      the    court          lacked     subject     matter

jurisdiction to enter the order. In particular, Freight Bulk

contended that (1) the district court should apply English law

in determining whether the FFAs are maritime contracts; and (2)

regardless of the court’s choice of law, FFAs are not maritime

contracts.    Because    Flame     invoked         only    the     court’s    maritime

     3
       The United States District Court for the Southern District
of New York entered default judgment in recognition of the well-
established rule that “‘a corporation may appear in the federal
courts only through licensed counsel.’” See In re Under Seal,
749 F.3d 276, 290 n.17 (4th Cir. 2014).

                                          7
jurisdiction in its complaint, Freight Bulk argued that in the

absence   of    a    valid      maritime    claim    the     district      court     lacked

subject matter jurisdiction and had no authority to enter the

Rule B Order of Attachment.

     After several hearings on Freight Bulk’s motion to vacate,

the district court denied that motion with respect to Freight

Bulk’s    jurisdictional          arguments. 4      Specifically,          the    district

court concluded that it had properly exercised its admiralty

jurisdiction        over   the    case     because    federal       law,     rather    than

English     law,      controlled         that    issue.       The     district        court

determined that FFAs are maritime contracts under federal law.

“However,      considering         the      complexities        and        uncertainties

involved . . . and the importance of clarifying the procedural

issues presented,” the district court certified the matter for

expedited      appeal      to    this    Court.      Flame     S.A.     v.       Industrial

Carriers, Inc., No. 2:13-cv-658, 2014 WL 108897, at *4 (E.D. Va.

     4
       In its Rule E(4)(f) motion to vacate, Freight Bulk also
asserted that Flame’s Complaint failed to set forth a legally
sufficient basis upon which to pierce Freight Bulk’s corporate
veil. The district court withheld ruling on this separate issue
of whether Flame properly pled that Freight Bulk is the
corporate alter ego of ICI. As that question was not decided by
the district court, it is not before us on appeal, and we offer
no opinion on the issue.

                                             8
Jan. 10, 2014). Freight Bulk then sought permission to file an

interlocutory appeal, which this Court granted. 5

                                     II.

     This case presents two distinct issues on appeal, both of

which concern the court’s subject matter jurisdiction. First, we

must determine whether federal law or foreign law controls our

jurisdictional   inquiry.    Second,       we   must   consider    whether   the

FFAs at issue in this case are maritime contracts under the

controlling law, establishing whether the district court could

properly exercise admiralty jurisdiction in this case. We review

the district court’s legal conclusions regarding its own subject

matter   jurisdiction   de   novo.     See      Vitol,   S.A.     v.   Primerose

Shipping Co., 708 F.3d 527, 533 (4th Cir. 2013). “We review the

district court’s factual findings with respect to jurisdiction

for clear error.” Velasco v. Gov’t of Indon., 370 F.3d 392, 398

(4th Cir. 2004).

     5
       Section 1292(b) of 28 U.S.C. allows for the interlocutory
appeal of an otherwise unappealable order when a district court
judge certifies that the order “involves a controlling question
of law as to which there is substantial ground for difference of
opinion and that an immediate appeal from the order may
materially advance the ultimate termination of the litigation.”

                                     9
                                      III.

                                       A.

       “The judicial Power [of the United States] extend[s] . . .

to   all   Cases    of   admiralty    and    maritime   Jurisdiction.”      U.S.

Const. art. III, § 2. In addition to this constitutional grant

of original jurisdiction to the federal courts over admiralty

matters, Congress has made plain the federal courts’ exclusive

authority over admiralty cases first with the Judiciary Act of

1789 and presently in 28 U.S.C. § 1333. That statute provides

that   “The    district    courts    shall    have    original    jurisdiction,

exclusive of the courts of the States, of: (1) Any civil case of

admiralty or maritime jurisdiction, saving to suitors in all

cases all other remedies to which they are otherwise entitled.”

28 U.S.C. § 1333; see Judiciary Act of 1789, § 9, Ch. 20, 1

Stat. 73, 76–77.

       Since the Founding, the Supreme Court has made clear the

authority     and   primacy   of     the    federal   courts     in   matters   of

admiralty particularly as relates to the recognition of foreign

admiralty judgments.

                    It is well recognized that federal
              courts    in    the   United   States  possess
              jurisdiction in admiralty over claims to
              enforce a foreign admiralty judgment. See,
              e.g.,   1    Benedict   on   Admiralty §   106
              (“[A]dmiralty jurisdiction in the United
              States may be broadly stated as extending to
              ... any claim to enforce a judgment of a
              foreign admiralty court.”). Even in the

                                       10
            earliest days of the Republic, the Supreme
            Court *534 confirmed that the courts of the
            United   States   possess   jurisdiction  to
            recognize the admiralty decrees of foreign
            admiralty courts. See Penhallow v. Doane's
            Adm'rs, 3 U.S. (3 Dall.) 53, 97, 1 L. Ed.
            507 (1795) (Iredell, J.) (“It was clearly
            shown at the bar, that a Court of Admiralty,
            in one nation, can carry into effect the
            determination of the [C]ourt of Admiralty of
            another.”).

Vitol, 708 F.3d at 533–34.

       To proceed on a request for a Rule B writ of maritime

attachment,          the    plaintiff     must     have       a    claim    against     the

defendant that is cognizable in admiralty. See Vitol, 708 F.3d

at     533–34        (considering       whether      the      court      had    admiralty

jurisdiction over a request for attachment under Rule B). In the

case    before       us,    the   initial    issue      is    whether      United   States

courts apply the law of the foreign jurisdiction that rendered

the    judgment        to    determine      if    the    claim      is     cognizable   in

admiralty       or    whether     the   maritime        law   of   the     United   States

determines the admiralty status of that claim.

       As the district court recognized, the distinction between

English and American law is determinative in the case at bar.

            It is apparent to the Court that under
            English law the [FFAs] would not be maritime
            contracts and as a result the English
            judgment in this matter would not be an
            admiralty judgment. Therefore, if English
            law were used in addressing this Rule B
            attachment, no admiralty jurisdiction would
            exist.

                                             11
                     Under federal law, however, it appears
                that the [FFAs] in question would certainly
                be maritime contracts.

Flame, 2014 WL 108897, at *3. Thus, the district court concluded

“if    federal         law    is    applied,       then      this   Court     has    admiralty

jurisdiction. If English law is applied, there is no admiralty

jurisdiction.” Id. at *1.

       Both before the district court and on appeal, Freight Bulk

has argued that a claim to enforce a foreign judgment falls

within      a     federal      court’s      admiralty        and    maritime       jurisdiction

only    if      the    claim       underlying      the    foreign        judgment        would   be

considered         a    maritime         claim   under       the    laws    of     the    foreign

jurisdiction           that    rendered      the      judgment.      The     district       court

rejected Freight Bulk’s argument and concluded that the maritime

nature       of    a    claim       to    enforce     a   foreign        judgment        must    be

determined under the laws of the United States. The district

court characterized the issue as “a question of choice of law on

a   procedural         issue”       and    noted      that    “[g]enerally,         procedural

questions in federal court are governed by federal law,” which

led    it    to    its       ultimate      conclusion        that    “federal       law    should

inform this Court’s determination of whether it has admiralty

jurisdiction.” Flame, 2014 WL 108897, at *2, *3.

       The district court determined that there was no directly

applicable Fourth Circuit precedent on the issue despite Freight

Bulk’s      argument         that    our   prior      decision      in     Vitol    dictated      a

                                                 12
result in its favor. In the absence of controlling authority,

the   district    court     looked    to      analogous      precedent      from    the

Supreme Court in Norfolk Southern Railway v. Kirby, 543 U.S. 14

(2004), and the Second Circuit’s opinion in Blue Whale Corp. v.

Grand   China    Shipping      Development      Co.,   722     F.3d   488   (2d    Cir.

2013). In our review of the district court’s decision and the

arguments presented to us, we first examine the impact of Vitol

and then consider the application of other precedent.

                                         B.

      Freight    Bulk   contends     that       our    prior    opinion     in    Vitol

requires holding that a claim’s characterization under foreign

law controls our jurisdictional inquiry. We disagree. Freight

Bulk’s reliance on Vitol is misplaced.

      In Vitol, we considered whether a district court’s Rule B

attachment order to enforce a foreign admiralty judgment was

properly issued. 708 F.3d at 533. The defendants-appellees in

Vitol (the companies owning or controlling the vessel) argued

that the district court lacked admiralty jurisdiction because

the plaintiff-appellant (the company seeking Rule B attachment

and judgment holder) elected to pursue its cause of action in

the English Commercial Court rather than the Admiralty Court

(both part of the English High Court of Justice). In the Vitol

appellants’     view    this    choice     of   forum     in    England     made    the

                                         13
foreign judgment obtained a non-admiralty judgment. 6 Id. at 534.

We rejected that argument:

           [The appellee ship owners] ask this Court to
           hold that the choice of forum in England,
           not the subject matter of the underlying
           claim,     is    dispositive    of    whether
           jurisdiction lies with the district court
           pursuant to 28 U.S.C. § 1333. In other
           words, [appellees] contend that [the] choice
           of forum in the English Commercial Court for
           an otherwise valid admiralty claim there
           divests   any  resulting   judgment  of   its
           admiralty character in this country so it
           can no longer be considered as an admiralty
           matter. We find this argument unpersuasive
           and unsupported.

                The approach advocated by [appellees],
           which looks purely to form at the expense of
           substance, is unsupported by citation to any
           case as authority for its position. Indeed,
           the dispositive question is not whether the
           English Judgment issued from an “admiralty
           court,” but rather, whether the claim itself
           is maritime in nature.

Id. at 535 (emphasis added).

     The   issue   Freight   Bulk   now   raises,   whether   federal   or

foreign law applies when characterizing a foreign judgment as an

admiralty judgment for purposes of federal jurisdiction, was not

an issue in Vitol. As the Second Circuit recognized in D’Amico:

           the Vitol decision did not constitute a
           precedent  on   the  question whether  the
           maritime character of the claim under U.S.

     6
       The parties in Vitol did not dispute that the claim at
issue was a maritime claim under either federal law or English
law or that the English court had jurisdiction to render its
judgment. See Vitol, 708 F.3d at 533–35.

                                    14
             law is pertinent, both because the Vitol
             court never considered the question whether
             U.S. law should be consulted, and because
             the answer would have been the same under
             either   British   or   U.S.  law,  as   the
             underlying claim (breach of the warranty of
             seaworthiness) is maritime in both nations.
             Vitol never considered whether the maritime
             character of the underlying claim under U.S.
             law standards justifies the exercise of
             federal admiralty jurisdiction.

2014 WL 2609648, at *6. Vitol resolved the isolated issue raised

in    that   case       and   no    more.    Freight      Bulk’s     argument   to     the

contrary is without merit.

                                             C.

       Supreme Court precedent strongly indicates that federal law

should control our determination of whether a claim, such as the

FFA   dispute      in    this      case,   sounds    in   admiralty.     Although      the

Supreme Court has not directly addressed the issue, its opinion

in Kirby offers guidance.

       In Kirby, the Supreme Court considered whether federal or

state law governed the interpretation of two maritime contracts.

543 U.S. at 22–23. The Court concluded that “[w]hen a contract

is a maritime one, and the dispute is not inherently local,

federal      law    controls        the     contract      interpretation.”      Id.     In

reaching     this       conclusion,        the    Supreme    Court    explained       that

Article III’s purpose in granting admiralty jurisdiction to the

federal courts was to provide for the uniformity of maritime law

                                             15
throughout the country, including the uniform interpretation of

maritime contracts. Id. at 28.

              It   certainly    could   not  have  been the
              intention [of Article III] to place the rule
              and   limits   of    maritime  law  under the
              disposal and regulation of the several
              States, as that would have defeated the
              uniformity and consistency at which the
              Constitution aimed on all subjects of a
              commercial      character     affecting   the
              intercourse of the States with each other or
              with foreign states.

Id. at 28–29; see also Ins. Co. v. Dunham, 78 U.S. (11 Wall.) 1,

24 (1870) (holding that “the admiralty and maritime jurisdiction

of the United States is not limited either by the restraining

statutes or the judicial prohibitions of England, but is to be

interpreted by a more enlarged view of its essential nature and

objects”).       As    the     district    court        observed,       based      upon     the

constitutional principle of uniformity in the maritime context,

“it could not have been the intention of Article III’s grant of

admiralty jurisdiction to place the rules and limits of maritime

law under the disposal and regulation of foreign states.” Flame,

2014 WL 108897, at *2 n.2.

       This     conclusion       was    bolstered           by    the   Second     Circuit’s

opinion    in    Blue    Whale,        which    is    instructive           in   part.    While

seemingly       on    point,    the     Blue        Whale        decision    discusses      the

similar, but ultimately distinct, issue of whether a plaintiff

“has   a   valid      prima     facie     admiralty          claim”     for      purposes    of

                                               16
satisfying the four-factor test for issuing a Rule B attachment

adopted in Aqua Stoli Shipping Ltd. v. Gardner Smith Pty Ltd.,

460 F.3d 434 (2d Cir. 2006). Blue Whale, 722 F.3d at 493. The

Second Circuit split its inquiry into two parts: (1) whether the

plaintiff alleged a claim sounding in admiralty, and (2) whether

that claim is prima facie valid. Id. Recognizing a “split of

authority”     in   the    Southern   District    of   New     York,    the   Second

Circuit reached the choice-of-law issue even though “[n]either

party disputed that [the plaintiff] had alleged a claim sounding

in admiralty and that the court had maritime jurisdiction.” Id.

at 491. The court explained:

             Despite the divide, what is clear is that
             federal law controls the procedural inquiry,
             namely, whether a plaintiff’s claim sounds
             in admiralty. This question is inherently
             procedural by virtue of its relationship to
             the courts’ subject matter jurisdiction and,
             thus, is controlled by federal maritime
             law. . . . We hold that federal maritime law
             governs whether a claim sounds in admiralty.

Id.   at    494–95. 7     Thus,    while    helpful,   the     Second    Circuit’s

treatment     of    the    issue     in    Blue   Whale   is     only    analogous

precedent.

      After briefing and oral argument in the case at bar, the

Second Circuit decided D’Amico which does directly address the

jurisdictional question before us. In D’Amico, the holder of an

      7
       The court then proceeded to the second                      part       of   its
inquiry, which is not relevant to this case.

                                           17
English judgment sought attachment under Rule B invoking the

district court’s admiralty jurisdiction. 2014 WL 2609648, at *1.

The district court concluded that it lacked jurisdiction because

“the       maritime      nature      of     [a]        claim    must    be   determined      by

reference to the law of the nation that rendered the judgment,”

and    under       the    laws      of    England,        “the    claim      underlying     the

judgment was not deemed maritime in English law.” Id. at *2.

       The Second Circuit vacated the judgment of the district

court, holding that “a suit to enforce a foreign judgment may be

heard in the federal admiralty jurisdiction under § 1333 if the

claim underlying the judgment would be deemed maritime under

U.S. law.” Id. at *9. In a thorough analysis, the D’Amico court

persuasively        concluded        that    choice        of    law    principles       support

using      federal       law    because      “[t]he        question      whether     a    claim

belongs       in     one       or    another       court         is    jurisdictional       and

procedural,” and “[u]nder choice of law principles, the law of

the forum state is used for such a question.” Id. at *8. 8

       The Second Circuit in D’Amico reached the same conclusion

that Kirby leads us to: that by extending federal jurisdiction

to    “all    Cases      of    admiralty      and       maritime       Jurisdiction,”      “the

Framers of the Constitution and Congress wanted to ensure that

       8
       In the district court and before us, Freight Bulk relied
on the decision from the Southern District of New York in
D’Amico. Now that the Second Circuit has reversed that decision,
Freight Bulk is left with scant authority for its argument.

                                                  18
matters      deemed   maritime   under     our   laws   have   access   to   our

federal courts.” Id. at *7. As the D’Amico court explained:

              The policy of the United States to place
              maritime matters in the federal courts is so
              strong that § 1333 makes federal court
              jurisdiction   exclusive.   Although,   as  a
              general proposition, there is widespread
              agreement throughout the world which kinds of
              matters are maritime and which are not, there
              is no assurance that some other nation might
              not define its own maritime jurisdiction more
              broadly, or more narrowly, than we do. It
              seems reasonable to assume that the Framers
              of the Constitution and Congress wanted to
              ensure that matters deemed maritime under our
              laws have access to our federal courts. There
              is no reason to suppose that the Founders or
              Congress would have wished to exclude from
              the admiralty jurisdiction matters that U.S.
              law deems maritime, merely because another
              nation does not consider them maritime. The
              fact that some nation, unlike ours, does not
              reserve a special jurisdiction for maritime
              matters, or classify maritime matters as
              subject to a discrete body of laws, does not
              derogate from the policies of our law to
              provide for the adjudication of matters we
              regard as maritime in our federal courts.

Id. at *7.

     Based on the Supreme Court’s reasoning in Kirby and the on-

point and persuasive opinion in D’Amico, we hold that federal

law, rather than foreign law, controls the procedural inquiry

into whether a foreign judgment is a maritime judgment. Thus, a

claim   to    enforce   a   foreign   maritime     judgment    is   within   the

admiralty subject matter jurisdiction of United States courts

                                      19
when the claim underlying the judgment would be an admiralty or

maritime claim under federal law.

                                     IV.

                                         A.

      Having      determined      that        federal      law    controls     our

jurisdictional inquiry, we must now consider whether the FFAs at

issue in this case are maritime contracts under federal law. If

the FFAs are not maritime contracts, then the district court’s

admiralty jurisdiction could not be invoked.

      “The boundaries of admiralty jurisdiction over contracts—as

opposed to torts or crimes—being conceptual rather than spatial,

have always been difficult to draw.” Kossick v. United Fruit

Co., 365 U.S. 731, 735 (1961). Whether a contract is maritime

depends not upon “whether a ship or other vessel was involved in

the   dispute.”    Kirby,   543    U.S.       at   23.   “Instead,     the   answer

‘depends upon . . . the nature and character of the contract,’

and the true criterion is whether it has ‘reference to maritime

service   or   maritime     transactions.’”          Id.   at    24;   see   1-XII

Benedict on Admiralty § 182 (providing that “a contract relating

to a ship in its use as such, or to commerce or navigation on

navigable waters, or to transportation by sea or to maritime

employment is subject to maritime law and the case is one of

admiralty jurisdiction”).

                                         20
     In    consideration     of    this       question,    the    district    court

stated, “Under federal law, it is clear that the question of

whether the [FFAs] are maritime contracts is answered in the

affirmative,” citing a number of decisions holding that certain

FFAs are maritime contracts. Flame, 2014 WL 108897, at *3. Thus,

the district court seemingly made a broad holding that all FFAs

are maritime contracts under federal law.

     However,    other     language      in   the   district      court’s    opinion

indicates that its holding is more nuanced and specific to the

FFAs in this case. For example, the district court observed that

“Flame’s   use   of   [FFAs]      appears      to   have   been    primarily    for

hedging the risks inherent in their shipping business” and that

“the [FFAs] in question would certainly be maritime contracts,”

which Freight Bulk also challenges. Id. (emphasis added). The

district court then seemed to express a case-specific holding

that “the FFAs in question (and Flame’s underlying claim) are

maritime contracts.” Id.

     Ultimately,      we   need    not    resolve     whether      all   FFAs   are

maritime contracts as a matter of law or remand the case for

further consideration. Instead, because the district court made

factual findings limited to the FFAs involved here, we affirm

the district court’s judgment with respect to the FFAs at issue

in this case. We leave to another case the issue of whether all

FFAs are maritime contracts as a matter of law.

                                         21
                                              B.

       On    appeal,   Freight     Bulk       argues       that    the    FFAs       cannot    be

maritime      contracts    because           they    have    no        connection      to     any

particular vessel or to the transport of any particular cargo.

Freight Bulk points out that the FFAs at issue in this case

could   be    settled     only    with       cash    and    not     by    delivery       (i.e.,

performance of an actual shipment across the designated route).

And Freight Bulk posits that FFAs cannot be maritime contracts

because      they   are   nothing        more       than    financial        bets      on     the

direction of the freight shipping market.

       First, with respect to Freight Bulk’s argument that the

FFAs have no connection to any particular vessel or shipment,

the Supreme Court has directly held that a maritime contract

need not refer to any particular vessel. See Kirby, 543 U.S. at

23   (“To    ascertain    whether        a    contract      is     a    maritime       one,    we

cannot look to whether a ship or other vessel was involved in

the dispute.”). Nor do maritime contracts need to refer to any

particular shipment. See generally Folksam. Reinsurance Co. v.

Clean Water of N.Y., Inc., 413 F.3d 307 (2d Cir. 2005) (holding

that    an    insurance       contract         providing          coverage       for    losses

sustained      to   vessels      while       undergoing      repairs       is    a     maritime

contract). In fact, several district courts have concluded that

FFAs are maritime contracts regardless of the fact that they do

not refer to any particular vessels or shipments because “the

                                              22
purpose of the [FFA] is to facilitate maritime commerce.” Flame

S.A. v. M/V Lynx, No. 10-00278, 2010 U.S. Dist. LEXIS 145880, at

*9 (E.D. Tex. June 22, 2010); see Transfield ER Futures Ltd. v.

Deiulemar   Shipping     S.P.A.,     Nos.   11-00099,   11-00754,   2012   WL

123286, at *3 (E.D. La. Jan. 17, 2012) (concluding that “the

very   essence   of   these   FFAs    concerns   commitments   to   perform

shipping services in the future” and that the FFA contracts,

like those at issue in this case, provided “contract routes,

contract months, contract quantity, the date upon which payment

was due for such services and contract rates that would govern

each particular contract”). Thus, the fact that the FFAs in this

case did not refer to a particular vessel or a particular voyage

is not dispositive.

       Second, the fact that the FFAs could be settled only with

cash also does not defeat the conclusion that these FFAs are

maritime    contracts.    Again,      marine   insurance    contracts      are

usually maritime contracts as a matter of law. See Dunham, 78

U.S. (11 Wall.) at 30-36. Marine insurance contracts cover risks

inherent in maritime transportation, and, like the FFAs in this

case, marine insurance contracts call for the payment of cash

rather than the execution of a maritime shipment. See Int’l Sea

Food Ltd. v. M/V Campeche, 566 F.2d 482, 485 (5th Cir. 1978); 16

Williston on Contracts § 49:28 (4th ed. 2014 supp.). Thus, that

                                      23
the   FFAs    call    for   cash    settlement    does    not    preclude     the

conclusion that they are maritime contracts.

      Lastly, as Freight Bulk points out, while in some cases

financial speculators could enter into an FFA on either side of

the transaction, we need not resolve the global issue of whether

all   FFAs    are   maritime   contracts.    In   this   case,   there   is    no

dispute      that    both   Flame   and     ICI   are    shipping    companies

principally engaged in maritime commerce. It thus follows, as

the district court found, that Flame and ICI did not create the

FFAs as mere financial speculators, but as a component of their

shipping businesses. The district court expressly found that the

parties entered into the FFAs “primarily for hedging the risks

inherent in their shipping business,” a finding that Freight

Bulk fails to demonstrate is clearly erroneous. 9 Flame, 2014 WL

108897, at *3.

      We therefore hold that the district court did not err in

concluding that the FFAs at issue in this case are maritime

      9
       Freight Bulk contests this finding by arguing that Flame
was listed as the seller on some of the FFAs and thus could not
have been using the FFAs as a hedge. However, Freight Bulk does
not contest that the FFAs listing Flame as the seller were used
by the parties as hedges in their shipping businesses or that
both Flame and ICI are chiefly engaged in the business of
international shipping. Thus, consistent with the district
court’s finding, all of the FFAs here were used “primarily for
hedging the risks inherent in” international shipping regardless
of which party was listed as the buyer or seller on each
instrument.

                                      24
contracts. Accordingly, the district court had subject matter

jurisdiction to adjudicate the matter before it. 10

                                V.

     For the foregoing reasons, we affirm the district court’s

decision.

                                                        AFFIRMED

     10
        We note that our holding is consistent with that of a
number of out-of-circuit district courts that have considered
whether similar FFAs are maritime contracts under federal law.
See Transfield, 2012 WL 123286, at *3; Flame, 2010 U.S. Dist.
LEXIS 145880, at *12; Primera, 2010 WL 481075, at *2; Brave Bulk
Transport Ltd. v. Spot On Shipping Ltd., No. 07 Civ. 4546(CM),
2007 WL 3255823, at *2 (S.D.N.Y. Oct. 30, 2007).

                                25
WILKINSON, Circuit Judge, concurring:

      I readily concur in Judge Agee’s fine opinion in this case.

Notwithstanding        my    respect     for    English     law,    and    in     full

agreement with the majority opinion, I write to underscore my

conviction      that        the   availability         of   federal       admiralty

jurisdiction simply must be determined by domestic, rather than

foreign, law.

      First, applying the law of the forum -- here, federal court

-- accords with basic choice-of-law principles.                     In Blue Whale

Corp. v. Grand China Shipping Development Co., 722 F.3d 488, 494

(2d Cir. 2013), the Second Circuit held that the question of

whether a claim “sounds in admiralty” is “inherently procedural

by   virtue   of     its    relationship   to    the    courts’    subject      matter

jurisdiction,” that jurisdiction being, in the Second Circuit’s

view, a procedural matter.             Because courts generally apply their

own procedural law, the jurisdictional issue “is controlled” by

the law of the forum: federal maritime law.

      In fact, the argument for applying domestic law is even

stronger      than     the    Second     Circuit       suggested.         Rules     of

jurisdiction are conceptually distinct from rules of procedure;

the former determine whether a court is competent to hear a

particular case, whereas the latter govern how the court is to

hear it.      See Bowles v. Russell, 551 U.S. 205, 210-11 (2007);

                                         26
Scott Dodson, In Search of Removal Jurisdiction, 102 Nw. U. L.

Rev. 55, 59-60 (2008).

     Therefore,      a    court     could      theoretically        import     foreign

procedure, just as it might use foreign substantive law as its

rule of decision.         Strictly speaking, however, it is incoherent

to speak of adopting foreign law to decide the jurisdictional

question.    Jurisdiction is the sovereign grant of authority to

make legally binding rules or determinations in a particular

situation.    To allow foreign law to dictate the availability of

subject-matter jurisdiction would be to divest the Constitution

and Congress of their sovereign authority to decide the extent

of the power of the judicial branch.                  In other words, federal

courts would no longer be acting as courts of the United States,

since their power would be exercised pursuant to a grant of

authority    from    a    different       sovereign    --   here,      the     foreign

jurisdiction.        It   would,     as    Justice    Story    recognized        in   a

related context, “annihilate the sovereignty and equality of the

nations,”    and    violate   the    principle       that   “every     nation     must

judge for itself, what is its true duty in the administration of

justice.”     Joseph Story, Commentaries on the Conflict of Laws

§§ 32, 34 (1834).

     Second, considerations of administrability counsel in favor

of   using   domestic,      rather    than      foreign,      law     to     determine

subject-matter jurisdiction.              Even if we limit ourselves to the

                                          27
many major maritime commercial powers, that would still require

courts seeking to determine jurisdiction to analyze a different

body    of     foreign     law   every    time    a    contract    with    a    different

choice-of-forum or -law clause or every time a judgment from a

different rendering jurisdiction came before them.                         See D’Amico

Dry Ltd. v. Primera Maritime (Hellas) Ltd., No. 11-3473-cv, 2014

WL 2609648, at *8 (2d Cir. June 12, 2014). To make matters

worse,       other   countries       may    not       have   the    same       conceptual

frameworks for determining jurisdiction or maritime status as we

do.     This will often make asking whether a contract or judgment

is maritime under their law for the purposes of our requirements

of subject-matter jurisdiction anything but an apples-to-apples

analysis, if not entirely meaningless.

       Not only would this inquiry be incongruous, it would also

impose an immense administrative burden on the judicial process.

Our own law distinguishing maritime from non-maritime contracts

has frequently been pilloried as opaque and arbitrary.                                  See,

e.g., Charles L. Black, Jr., Admiralty Jurisdiction: Critique

and Suggestions, 50 Colum. L. Rev. 259, 264 (1950) (“The attempt

to project some ‘principle’ is best left alone. There is about

as much ‘principle’ as there is in a list of irregular verbs.”).

To     force     courts     and     litigants         down   the    rabbit      hole     of

incorporating        the    law    of     various      foreign     countries       at   the

jurisdictional        stage       would    only       make   matters      worse.        See

                                            28
D’Amico, 2014 WL 2609648, at *8. Limiting the inquiry to the

maritime status of a contract or judgment under domestic law is

the best and most administrable option.

       Third, applying domestic law in this case accords with the

Constitution’s and Congress’s vesting of admiralty jurisdiction

in federal courts.             Imagine what would happen if we held that

foreign law controlled the jurisdictional inquiry here.                             The

federal    court       would    lack   admiralty    jurisdiction      and    appellee

would likely thus have to file suit in state court.                         (The same

situation would occur if the parties were U.S. but non-diverse.)

Thus, the state court would probably be the only available forum

to hear the claim and the special procedures associated with

federal admiralty jurisdiction might not be available.

       None of this is to say that state courts are incapable of

properly adjudicating maritime issues.                 But it does fly in the

face      of     the      Constitution’s        vesting      of      subject-matter

jurisdiction in Article III courts over “all Cases of admiralty

and maritime Jurisdiction,” U.S. Const. art. III, § 2, cl. 1

(emphasis       added),    and     Congress’s      grant    to    federal    district

courts, virtually unchanged since the Judiciary Act of 1789, of

subject-matter jurisdiction over “[a]ny civil case of admiralty

or maritime jurisdiction,” 28 U.S.C. § 1333(1) (emphasis added).

Whether    to    promote       greater   uniformity    in    maritime   law    or    to

ensure    the     vindication       of   American     maritime     interests,       the

                                          29
Framers    clearly     wanted      federal       courts    to    possess       admiralty

jurisdiction over those cases that the courts believed to be

maritime     in   nature.       See    D’Amico,     2014    WL     2609648,      at    *7.

Allowing foreign law to control the jurisdictional inquiry would

subvert this goal and constrict the space that federal courts,

already sandwiched between foreign and state law, possess to sit

in admiralty.

      Fourth and finally, applying domestic rather than foreign

law   in   determining       subject-matter         jurisdiction       advances        the

national policy goals of the Constitution’s grant of admiralty

jurisdiction to federal courts: the “advantages resulting to the

commerce and navigation of the United States.”                     DeLovio v. Boit,

7 F. Cas. 418, 443 (C.C.D. Mass. 1815) (No. 3776) (Story, J.);

see   also    Sisson    v.    Ruby,     497      U.S.   358,     367   (1990)     (“The

fundamental interest giving rise to maritime jurisdiction is the

protection     of   maritime       commerce . . . .”)           (internal      quotation

marks omitted).        This is because, in determining what counts as

advancing    the    United    States’       maritime      interests,      we    must    by

necessity     refer    to    our      own    conception     of     what     counts      as

“maritime”; after all, “we have a maritime law of our own.”                            The

Lottawanna, 88 U.S. 558, 574 (1874).                    Although this particular

contract is between two non-U.S. parties engaging in a private

financial transaction, the United States still has an interest

in providing a forum for this type of contract, especially since

                                            30
U.S. parties to a similar arrangement would benefit from being

able to seek enforcement.

      Appellant argues that international comity requires us to

use foreign law to determine subject-matter jurisdiction.                                 See

Appellant’s Br. at 18 & n.6.               It notes that, in the interests of

international        comity,        federal          courts      exercise         admiralty

jurisdiction over judgments issued by foreign tribunals sitting

in   admiralty,      even      if   the   judgments        would     not    otherwise      be

treated as maritime under U.S. law.                     See Int’l Sea Food Ltd. v.

M/V Campeche, 566 F.2d 482, 485 (5th Cir. 1978); see also Vitol,

S.A. v. Primrose Shipping Co., 708 F.3d 527, 536 & n.4 (4th Cir.

2013).

      Appellant would have us extend this rule and declare that

federal courts must refuse to assert admiralty jurisdiction over

contracts or judgments characterized as non-maritime by their

rendering      forums.         Neither         logic    nor    comity      dictates   this

result.     Just because we accept the foreign characterization of

a dispute for the purpose of exercising admiralty jurisdiction –

- a jurisdictional expansion -- does not mean that we must also

accept    it   for       the   purpose     of       refusing    to    hear    a    case    in

admiralty      --    a      jurisdictional             contraction.          The    former

accommodation       is    supported       by    considerations        of    international

comity; the latter is not.

                                               31
      Comity    is   satisfied      as    long      as    one   court   enforces   the

judgment of another court.               Thus, it should not matter to the

rendering court under what technical head of jurisdiction its

judgment is ultimately enforced, at least where, as here, there

is no indication that the rendering forum intended its judgment

to be effectuated in only a particular way.                        See D’Amico, 2014

WL 2609648, at *8. It is hard to fathom the British High Court

of Justice caring what jurisdictional subclause of Article III,

Section 2 the federal court invokes to enforce the judgment.                       It

should be enough that a plaintiff in possession of a favorable

English     judgment     is    given          the        maximum    constitutionally

permissible freedom to choose his preferred forum -– here, a

federal court sitting in admiralty.                      If anything, such a rule

enhances, rather than diminishes, comity.                       It may also make it

easier for U.S. parties to enforce contracts such as the one

here in foreign maritime courts.

      To   be   sure,    foreign         law     is      not    irrelevant   to    the

determination of whether federal admiralty jurisdiction exists.

The status of the contract or judgment under foreign law informs

the inquiry in important ways.                The question of whether a legal

issue is maritime in nature is not an exercise in logic chopping

wholly     internal     to    the        conceptual         schemas     of   American

jurisprudence; instead, it asks whether, as a practical matter,

the   “principal       objective         of    [the]       contract     is   maritime

                                          32
commerce.”       Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 25 (2004).

The     reasoned       judgments      of       experienced        jurists,       foreign     or

domestic,    on    this       issue      are    due    respectful         consideration      by

federal     courts.             Additionally,              whether       other     countries

characterize       a     contract        as     maritime         might    have    collateral

consequences that may affect its real-world impact on maritime

commerce    --     for       example,      in    terms      of    how    the     contract    is

interpreted overseas or what procedures its interpretations are

afforded.

      Nevertheless, the ultimate question of whether a contract

or judgment is maritime for the purpose of supporting federal

admiralty jurisdiction must, for the reasons explained above, be

answered    by     reference        to     domestic        rather       than   foreign     law.

While    foreign       law    may   or     may       not   be    instructive       under    the

circumstances,           it     cannot          determine         the     subject     matter

jurisdiction of an American court. And, as ably demonstrated in

Judge     Agee’s       majority       opinion,         the       contract      here   has    a

“genuinely salty flavor.”                Kossick v. United Fruit Co., 365 U.S.

731, 742 (1961).             Thus, federal admiralty jurisdiction properly

lies.

                                                33