Alphamate Commodity GmbH v. Food

Filing

PUBLISHED OPINION FILED. [09-30804 Vacated and Remanded] Judge: EHJ , Judge: ECP , Judge: RCO Mandate pull date is 12/20/2010 [09-30804]

Alphamate Commodity GmbH v. Food Case: 09-30804

Document: 00511305245 Page: 1 Date Filed: 11/29/2010

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IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
N o . 09-30804 November 29, 2010 Lyle W. Cayce Clerk A L P H A M A T E COMMODITY GMBH, P la in t iff ­ Intervenor ­ Defendant ­ Appellant v. C H S EUROPE SA; CHS INC., Intervenor Plaintiffs ­ Appellees v. F O O D , a Certain Consignment of Yellow Corn Laden a b o a r d the M/V Golden Star, quasi in rem D e fe n d a n t

A p p e a l from the United States District Court fo r the Eastern District of Louisiana

B e fo r e JONES, Chief Judge, PRADO, Circuit Judge, and O'CONNOR, District J u d g e .* E D I T H H. JONES, Chief Judge: A lp h a m a t e Commodity GMBH sought and obtained a Rule B maritime a t t a c h m e n t in New Orleans, Louisiana, on a shipment of corn that had been lo a d e d on the M/V GOLDEN STAR bound for Green Valley for Animal Feed

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District Judge of the Northern District of Texas, sitting by designation.

Dockets.Justia.com

Case: 09-30804 Document: 00511305245 Page: 2 Date Filed: 11/29/2010 No. 09-30804 L ib y a ("AFL")1 in Tripoli, Libya. Alphamate was owed money by AFL.

I m m e d ia t e ly following this ex parte order, the corn seller, CHS, Inc., and its a ffilia t e , CHS Europe (collectively, "CHS" or "Appellees"), intervened and moved t o vacate the attachment.2 Appellees contended that they owned the corn

b e c a u s e under the contract between CHS and AFL, title transferred upon p a y m e n t , which had not occurred. The district court agreed with CHS on the m e r it s and vacated the attachment. Alphamate appeals. W e hold that the district court lacked maritime jurisdiction over the d is p u t e between AFL and Alphamate. Their contracts for sales of grain are not w h o lly maritime, nor are the demurrage and detention charges suffered by A lp h a m a t e severable from the alleged breaches of their sales contracts. The c o u r t did not have the power to issue a Rule B maritime attachment. Therefore, t h e judgment is vacated and the case remanded for further proceedings. I . BACKGROUND A lp h a m a t e is a German international grain merchant. AFL, a Libyan c o m p a n y , entered three contracts with Alphamate to purchase grain from E u r o p e . AFL failed to issue timely and satisfactory letters of credit as required b y their contracts and, as a result of AFL's failure to complete its purchases, A lp h a m a t e claimed approximately $8 million in damages, including $3 million in demurrage charges and $1 million in unpaid detention. Alphamate has been a r b it r a t in g these contractual disputes with AFL at the Grain and Feed Trade A s s o c ia t io n ("GAFTA") based in London. I n an attempt to recover its losses, Alphamate sought a Rule B maritime a t t a c h m e n t against a shipment of corn aboard the M/V GOLDEN STAR berthed in Louisiana. The corn was being sold by CHS to AFL pursuant to an

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AFL is also known as Elshahel Alakhdar for Animal Feed Libya. AFL has not appeared in this litigation.

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Case: 09-30804 Document: 00511305245 Page: 3 Date Filed: 11/29/2010 No. 09-30804 in d e p e n d e n t contract. While the Rule B attachment proceeding was pending in d is t r ic t court, AFL had not paid CHS, nor had CHS received a bill of lading. O n July 18, 2009, the district court approved Alphamate's ex parte a p p lic a t io n and issued the writ of attachment. On July 21, Appellees moved to in t e r v e n e , asserting that because title had not transferred to AFL and they r e m a in e d the rightful owners of the corn, Alphamate had no right to attach A p p e lle e s ' property. On July 23, Alphamate posted a corporate surety bond for $ 2 5 0 ,0 0 0 as security for costs. On July 27, the district court held a Rule E(4)(f) h e a r in g and concluded that CHS retained title to the corn: I find that title has not passed on CHS. Under both the custom and u s a g e recognized by the Fifth Circuit in POLLUX, the applicable E n g lis h law, there is no passing title until payment. Payment has n o t been made; therefore, I am vacating the previously issued a t t a c h m e n t . I am granting the motion to vacate attachment and r e le a s e cargo filed by CHS. T h e M/V GOLDEN STAR left port and presumably delivered the corn to AFL in A fr ic a . Alphamate's appeal to this court dwells on whether title to the corn had p a s s e d to AFL under English law after it was loaded on the vessel. Appellees, h o w e v e r , raise threshold mootness and jurisdictional issues that we must d is c u s s first. I I . MOOTNESS A s an initial matter, Appellees assert that the case is moot because the c o r n has been transported outside the jurisdiction and Alphamate has no claim a g a in s t the Appellees personally. We review mootness de novo. Envtl.

C o n s e r v a tio n Org. v. City of Dallas, 529 F.3d 519, 524-25 (5th Cir. 2008). An a p p e lla te court normally retains jurisdiction over an in rem or quasi in rem d is p u t e even if the property in question leaves the jurisdiction. Republic Nat. B a n k of Miami v. United States, 506 U.S. 80, 87-88, 113 S. Ct. 554 (1992). Appellate courts retain jurisdiction "in any case where the judgment will have a n y effect whatever." Id. at 85 (citing United States v. The Little Charles, 26 F.

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Case: 09-30804 Document: 00511305245 Page: 4 Date Filed: 11/29/2010 No. 09-30804 C a s . 979 (C.C.D.Va. 1818) (No. 15,612)) (emphasis added). A judgment is not " u s e le s s " simply because the court is unable to order property returned to the s u c c e s s fu l litigant. Elliot v. M/V Lois B, 980 F.2d 1001, 1005 (5th Cir. 1993). A judgment is useless only if there is no chance that it will provide "concrete v a lu e " to the successful litigant. Id. H e r e , Alphamate posted a $250,000 bond as security against any charges, in c lu d in g demurrage and detention charges CHS owed to the M/V GOLDEN S T A R , that might be imposed by the court in the event the attachment was u n s u c c e s s fu l. Appellees are seeking such damages in the district court. Which p a r ty receives the benefit of the security is an issue that renders the case still a live controversy. I I I . JURISDICTION A p p e lle e s also contend that federal admiralty jurisdiction is lacking b e c a u s e the underlying dispute between AFL and Alphamate is not maritime. Consequently, Alphamate could not assert a prima facie admiralty claim against t h e defendant.3 A Rule B maritime attachment is a remedy available only under a court's admiralty jurisdiction. See FED. R. CIV. P. 9(h) (Supplemental Rules for A d m i r a l t y or Maritime Claims are limited to claims for relief "within the a d m ir a lt y or maritime jurisdiction"); FED. R. CIV. P., SUPP. R. A(1)(A) ("These S u p p le m e n t a l Rules apply to the procedure in admiralty and maritime claims w i t h i n the meaning of Rule 9(h) . . . ."). "Neither Rule B nor any other of the S u p p le m e n ta l Rules create `a valid prima facie admiralty claim.' Rather, the S u p p le m e n t a l Rules fashion procedures by which a valid maritime claim may fo r m the basis for a writ of maritime attachment." Sonito Shipping Co. Ltd. v. S u n United Maritime Ltd., 478 F. Supp. 2d 532, 536 (S.D.N.Y. 2007). "A party m a y only seek Rule B attachment if the underlying claim satisfies admiralty

The Appellees did not make this argument at the Rule E(4)(f) hearing before Judge Zainey and conceded jurisdiction at that time. Nevertheless, the court must always consider jurisdiction whether it was timely raised below or not.

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Case: 09-30804 Document: 00511305245 Page: 5 Date Filed: 11/29/2010 No. 09-30804 ju r is d ic t io n under 28 U.S.C. § 1333." ProShipLine Inc. v. Aspen Infrastructures L td ., 594 F.3d 681, 687 (9th Cir. 2010).4 If the underlying dispute or claim does n o t fall within admiralty jurisdiction, the court lacks the authority to issue the R u le B attachment. A lp h a m a t e 's dispute with AFL arises from three contracts for the sale of g r a in .5 The contracts contemplated that Alphamate would ship the grain via sea t r a n s p o r t and include the term "CFR" (Cost and Freight), meaning that A lp h a m a t e was responsible for arranging and paying for transport. Alphamate c o n t e n d s that "the severable contractual undertaking of a buyer of a commodity t o pay for the ship's demurrage . . . is very much a maritime obligation." This s t a te m e n t must be examined with care under principles of admiralty ju r is d ic t io n . F ir s t , Alphamate does not dispute that the primary subject matter of the A lp h a m a t e -A F L contracts is the sale of grain. Sea transport is incidental to a c c o m p lis h in g that purpose. The sale contract here is not maritime in toto. A m a r it im e contract is one in which the "primary objective is to accomplish the t r a n s p o r t a t io n of goods by sea . . . ." Norfolk Southern Ry. Co. v. Kirby, 543 U.S. 1 4 , 24, 125 S. Ct. 385 (2004). "It is well-established that such a sale of goods by it s e lf would not be `maritime' merely because the seller agrees to ship the goods b y sea to the buyer." Lucky-Goldstar Int'l (America) Inc. v. Phibro Energy Int'l
If the underlying dispute was maritime, federal court was the proper venue to pursue an attachment against property onboard the M/V GOLDEN STAR. Attaching the corn impeded the ship's departure and interfered with maritime commerce. "[T]he primary focus of admiralty jurisdiction is unquestionably the protection of maritime commerce . . . ." Foremost Ins. Co. v. Richardson, 457 U.S. 668, 674, 102 S. Ct. 2654 (1982). State courts could not issue an attachment, even under state law, because doing so would almost certainly interfere with admiralty law. American Dredging Co. v. Miller, 510 U.S. 443, 447, 114 S. Ct. 981 (1994) (A state court may not issue any remedy which "works material prejudice to the characteristic features of the general maritime law or interferes with the proper harmony and uniformity of that law in its international and interstate relations." (quoting Southern Pacific Co. v. Jensen, 244 U.S. 205, 216, 37 S. Ct. 524 (1917)). Alphamate never submitted these contracts to the district court, but submitted them to this court by request following oral argument.
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Case: 09-30804 Document: 00511305245 Page: 6 Date Filed: 11/29/2010 No. 09-30804 L td ., 958 F.2d 58, 59 (5th Cir. 1992) (internal citation omitted). As summarized in a leading treatise: I n order to be considered maritime, there must be a direct and s u b s ta n tia l link between the contract and the operation of the ship, its navigation, or its management afloat, taking into account the n e e d s of the shipping industry, for the very basis of the c o n s t it u t io n a l grant of admiralty jurisdiction was to ensure a n a t io n a l uniformity of approach to world shipping. 1 BENEDICT ON ADMIRALTY § 182 (2010) (emphasis added). A contrary rule would e x p a n d admiralty jurisdiction to include nearly every contract involving the sale o f goods transported by ship. Luckenbach S.S. Co. v. Gano Moore Co., 298 F. 3 4 3 , 344 (S.D.N.Y. 1923) (Hand, J.), rev'd on other grounds, 298 F. 344 (2d Cir. 1 9 2 4 ). S e c o n d , although Alphamate concedes that the contracts are essentially fo r the sale of goods, it argues that they are "mixed" contracts containing both m a r it im e and non-maritime elements. A mixed contract may create maritime ju r is d ic t io n in only two limited circumstances. Lucky-Goldstar, 958 F.2d at 59. The court may consider a mixed contract maritime if the contract is primarily m a r it im e and the non-maritime elements of the contract are incidental to that p r im a r y purpose. Id. That is not the case here. Alternatively, "if a contract's m a r it im e obligations are separable from its non-maritime aspects and can be t r ie d separately without prejudice to the other, admiralty jurisdiction will s u p p o r t trial of the maritime obligations." Id. Alphamate contends its

d e m u r r a g e and detention claims are severable maritime obligations. D e m u r r a g e fees are paid by a charterer to the vessel owner when the v e s s e l is detained beyond the specified date agreed to in the charter party c o n t r a c t. This situation typically arises when the charterer fails to load or u n lo a d cargo within the agreed time. See BLACK'S LAW DICTIONARY 465 (8th ed. 2 0 0 4 ). Some courts have held that demurrage claims are separable from sales o f good contracts and may be litigated as admiralty claims. In those cases, the

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Case: 09-30804 Document: 00511305245 Page: 7 Date Filed: 11/29/2010 No. 09-30804 p a r tie s ' contract created an independent obligation to pay for demurrage, or d e m u r r a g e was the sole basis of the claim. See, e.g., Crossbow Cement SA v. M o h a m e d Ali Saleh Al-Hashedi & Bros., No. 08-5074, 2008 WL 5101180, at *5-*7 (S.D.N.Y. Dec. 4, 2008) (severing a demurrage maritime claim from a sale o f goods contract because the contract created an independent obligation for d em u rr a g e charges); Centramet Trading S.A. v. Egyptian American Steel Rolling C o ., No. 07-6379, 2007 WL 5731922, at *1 (S.D.N.Y. Sept. 28, 2007) (same); K u lb e r g Finances Inc. v. Spark Trading D.M.C.C., 628 F.Supp. 2d 510, 517-18 (S .D .N .Y . 2009). A lp h a m a t e asserts that its demurrage claims are separable, but it offers n o argument based on its contracts. Simply raising demurrage claims is not e n o u g h ; the plaintiff must demonstrate an independent, severable obligation. See French Republic v. Fahey, 278 F. 947, 949 (D. Md. 1922) (indicating that a n o n -m a r it im e contract of sale and purchase does not become maritime merely b e c a u s e one of the parties may be entitled to recover demurrage damages). Unlike the cases where courts have found separable demurrage claims, the A lp h a m a t e -A F L contracts did not create an independent obligation in AFL to p a y demurrage charges. Moreover, Alphamate's demurrage and detention

c la im s stem from AFL's breach of its obligation to purchase the grain. According t o Alphamate's summary of claims offered in the pending arbitration, when AFL w o u ld not open timely letters of credit for its purchases, Alphamate refused to d e liv e r the contracted cargo. In the ensuing logistical logjam, Alphamate

in c u r r e d demurrage and detention damages in addition to lost sales. Thus, the d e m u r r a g e charges, which are maritime in nature, are thoroughly intertwined w it h the non-maritime breach of contract claims and most likely stand or fall w it h the broader default claims. Accordingly, the court cannot exercise maritime ju r is d ic t io n over this aspect of the dispute. See Lucky-Goldstar, 958 F.2d at 59; B e r w in d -W h ite Coal Mining Co. v. City of New York, 135 F.2d 443, 447 (2d Cir. 1 9 4 3 ) (The severability of a maritime obligation from a non-maritime obligation 7

Case: 09-30804 Document: 00511305245 Page: 8 Date Filed: 11/29/2010 No. 09-30804 t u r n s on whether "maritime subject matter is capable of being divided from the r e s t so that the rights of the parties which flow from the non-maritime part of t h e contract may be, if necessary, litigated separately and only that part which is maritime be put in issue in the admiralty suit."). I V . CONCLUSION A lp h a m a t e did not present a prima facie admiralty claim to undergird its R u le B attachment motion. As the contractual dispute between AFL and

A lp h a m a t e was not maritime in whole or in severable part, the district court la c k e d admiralty jurisdiction. The district court's judgment on the merits must b e VACATED and the case REMANDED for further proceedings consistent h e re w ith . V A C A T E D and REMANDED.

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