Ravenna Tankers Pte., Srl v. Omni Ships Pte. Ltd
Filing
55
ORDER & REASONS granting in part & denying in part, without prejudice 42 Morfini SpA's Motion for Issuance of Maritime Law Rule B Writs of Attachment & Garnishment, Rule C Warrant of Arrest, & Louisiana State Law Writs of Attachment, Sequestration, & Garnishment & to Appoint Undersigned Counsel to Serve Same as set forth in document. Signed by Judge Carl Barbier on 5/15/13. (Reference: 13-221)(sek, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
RAVENNA TANKERS PTE., SRL
CIVIL ACTION
VERSUS
NO: 13-127 C/W 13221
OMNI SHIPS PTE. LTD
SECTION: J (3)
THIS DOCUMENT RELATES TO:
13-221
ORDER AND REASONS
Before the Court is Morfini SpA’s (“Morfini”) Ex Parte Motion
for Issuance of Maritime Law Rule B Writs of Attachment and
Garnishment, Rule C Warrant of Arrest, and Louisiana State Law
Writs of Attachment, Sequestration, and Garnishment and to Appoint
Undersigned Counsel to Serve Same.
(Rec. Doc. 42.)1
Briefly
stated, Morfini seeks to arrest, attach, garnish, and/or sequester
certain funds previously deposited in the Court’s registry.
For
the reasons set forth below, the Court GRANTS Morfini’s motion with
respect to its requests under Admiralty Rules C and B, and DENIES
WITHOUT PREJUDICE Morfini’s motion with respect to its requests for
the Louisiana writs.
I. BACKGROUND AND PROCEDURAL HISTORY
These consolidated actions (Nos. 13-127 & 13-221) arise from
1
This motion was originally filed in case no. 13-221 as Record Document
2.
That case was later consolidated with case no. 13-127, and the motion was
refiled into the master case, 13-127, as Record Document 42. Unless otherwise
noted, all docket citations are to the master case, no. 13-127.
1
a charter party chain concerning the M/T ELECTA, an Italianflagged, 600 ft., oil and chemical tanker owned by Morfini.
On or
around October 23, 2009, Morfini entered into a time charter with
Ravenna Tankers Pte., Srl. (“Ravenna”) on an amended Shelltime 4
Form wherein Ravenna agreed to hire the ELECTA at a rate of $13,165
per day (“the Morfini/Ravenna Head Charter”).2
Around September
21, 2010, Ravenna subchartered the ELECTA to Omni Ships Pte., Ltd.
(“Omni” and “the Ravenna/Omni Subcharter”).3
Subcharter
was
nearly
identical
to
the
The Ravenna/Omni
Morfini/Ravenna
Head
Charter, with the only relevant exception being that Omni paid
Ravenna $13,600 per day to hire the ELECTA.
Omni then sub-
subchartered the ELECTA to another party, Vitol (“the Omni/Vitol
Sub-subcharter”).4
2
A charter party is a contract for the use of a ship.
While many
variants exist, there are three general types of charter arrangements: time
charter, voyage charter, and demise (or bareboat) charter. Under a time charter,
the charterer engages the vessel for a period of time. The charterer typically
selects the vessel’s destinations and the cargo to be transported, but does not
have operational control of the vessel.
The vessel owner typically retains
control of the vessel, provides the crew, and maintains the vessel.
The
charterer pays “hire” to the owner based on the time under charter and usually
bears the expenses connected with the voyage (e.g., fuel and port charges). The
parties typically use one of the standardized forms as the basis for their
contract, as the parties did here with the Shelltime 4 Form. See 2 Thomas J.
Schoenbaum, Admiralty and Maritime Law § 11-1, 11-5 (5th ed. 2011).
3
Omni was formerly known as Siba Ships Asia Pte., Ltd., which is the name
that appears on Ravenna/Omni Subcharter.
4
The Court refers to Omni’s subcharterer as “Vitol,” but this may not be
accurate.
The specifics of the charter party chain beyond the Ravenna/Omni
Subcharter are not entirely clear to the Court at this time.
For example,
Morfini represents that Omni subchartered to “Navig8,” as opposed to Vitol. (See
Morfini’s Compl. ¶ 11, No. 13-221, Rec. Doc. 1 (stating Omni subchartered to
Navig8, without reference to Vitol or any other entities); Decl. of Julian Clark
¶ 6, Ex. A to Morfini’s Suppl. Memo., Rec. Doc. 37 at 18 (same). But see Ex. 4
to Morfini’s Compl., No. 13-221, Rec. Doc. 1-1 at 35-40 (notice of lien letters
stating Omni subchartered to Vitol, who sub-subchartered to Navig8, who entered
2
Clause 41 in the Morfini/Ravenna Head Charter provides: “This
charter shall be construed and the relations between the parties
determined in accordance with the laws of England.”
Clause 89 states, in pertinent part:
Additionally,
“All disputes or differences
arising out of or under this contract that cannot be amicably
resolved shall be referred to arbitration in London. . . . English
law governs this contract and this shall apply to all proceedings
under this clause . . . .”
Identical clauses appear in the
Ravenna/Omni
according
Subcharter
and,
to
the
parties,
the
Omni/Vitol Sub-subcharter.
At some point, disputes arose among these parties over amounts
purportedly owed under the various charter arrangements. From what
has been represented to the Court, it appears that Vitol did not
pay certain amounts in hire and/or other expenses allegedly owed to
Omni under the Omni/Vitol Sub-subcharter
(perhaps because Vitol
was owed amounts from others further down the charter party chain).
Apparently as a result of Vitol’s nonpayment, Omni, in turn, did
not pay certain amounts allegedly owed to Ravenna under the
Ravenna/Omni Subcharter; and Ravenna, in turn, did not pay certain
amounts allegedly owed to Morfini under the Morfini/Ravenna Head
Charter.5
Consequently, on or around February 8, 2012, Morfini
into a voyage charter with Pacific Inter Link); Omni’s Opp’n Br. p.2, No. 13-127,
Rec. Doc. 34 (claiming Omni subchartered to “Mansel Ltd./Vitol Services, Ltd.”).)
However, such specifics do not appear relevant to the motion before the Court.
5
This is a general and perhaps overly-simplified description of the
disputes.
3
commenced
arbitration
proceedings
in
London
pursuant to Clause 89 in the Head Charter.
against
Ravenna
Ravenna similarly
commenced London arbitration against Omni, who also commenced
London arbitration against Vitol.
It appears that all of these
arbitrations are running concurrently before the same panel.6
On January 23, 2013,
Ravenna instituted proceedings in this
Court to attach Omni’s ship, the M/V STELLA BECRUX (not to be
confused with Morfini’s ship, the ELECTA), pursuant to Rule B of
the Supplemental Rules for Admiralty or Maritime Claims (“Admiralty
Rule B” or simply “Rule B”).
(Rec. Docs. 1, 3.)
Ravenna’s goal
was to obtain security for its claim against Omni pending in the
London arbitration (which it estimates to be between $899,629.21
and 994,560.69); the parties agree that this Court will not decide
the merits of Ravenna’s claim.7
On January 24, the writ of
attachment issued, and the marshal seized the STELLA BECRUX the
next day.
(Rec. Docs. 5, 6, 25.)
Because the parties could not
agree on the amount of security required for the release of the
6
Morfini represents that, on June 13, 2012, the arbitration panel ordered
that these three arbitrations would “run concurrently,” which means that
documents produced or submitted in one proceeding are made available in the other
proceedings. Also, arbitrators will issue awards for each of the proceedings at
the same time, comprehensively resolving the overall dispute among the parties.
(See Decl. of Julian Clark ¶13, Ex. A to Morfini’s Suppl. Memo., Rec. Doc. 37 at
20.) No party appears to dispute these statements.
7
“Section 8 [of the Federal Arbitration Act, 9 U.S.C. § 8] gives the
‘aggrieved party’ in a case subject to arbitration the important right to go into
court and obtain prejudgment security by seizing the other party’s vessel or
other property. The provision applies only to cases that otherwise would be
justiciable in admiralty, and its purpose is to give the plaintiff his admiralty
remedies while preserving the right to arbitrate.” Schoenbaum, supra note 2, §
21-15, at 598.
4
vessel (Omni calculated Ravenna’s claim to be only $110,079.61),
the Court, pursuant to Admiralty Rule E(5), set security at
$800,000.
(Minute Entry, Rec. Doc. 20.)
On January 31, Omni
deposited $800,000 in the Court’s registry, and the STELLA BECRUX
was released.
(Rec. Doc. 24.)
On February 6, 2013, Morfini also attempted to obtain security
for
its
claims
pending
in
the
London
arbitration.
Morfini
instituted a separate action, No. 13-221, that brought in personam
claims against Ravenna and Omni, as well as an in rem claim against
the $800,000 Omni had deposited in the Court’s registry.
221, Rec. Doc. 1.)
(No. 13-
Morfini’s complaint states that it is owed
$717,701.74 in unpaid charter hire and other expenses due under the
Morfini/Ravenna
Head
Charter,
plus
another
$335,395.48
for
estimated interest, costs, and attorney fees that are available
under English law, for a total of $1,053,097.22. (No. 13-221, Rec.
Doc. 1 ¶ 24.)
Contending, inter alia, that a clause in the
Morfini/Ravenna Head Charter gave it a lien over all “freights,
sub-freights, sub-hires and demurrage for any amounts due under
[the Head Charter],” Morfini sought to attach the $800,000 under
Admiralty Rule B and arrest the $800,000 under Admiralty Rule C.
Morfini also sought to attach, sequester, and garnish the funds
under certain Louisiana laws.
3541(5),
3571, 3503.
See La. Code Civ. Proc. arts.
Morfini’s action, Case No. 13-221, was
5
eventually consolidated with the Ravenna/Omni case, No. 13-127.8
Typically, Rule B and Rule C are ex parte procedures.
The
Court must review the complaint and supporting documentation and,
if the requisite conditions appear to exist, enter an order
instructing the Clerk of Court to issue the writ of attachment
and/or garnishment or warrant for arrest.
Supp. R. B(1)(b) & C(3)(a)(i).
See Fed. R. Civ. P.
In an order dated February 13,
2013, the Court stated it was unclear from Morfini’s documents
whether the conditions for arrest, etc., existed.
Consequently,
the Court deferred ruling on Morfini’s request for arrest, etc., of
the $800,000 and directed Morfini to submit additional briefing on
four issues, including:
Whether the $800,000 deposited with the Court should be
considered the “freights, sub-freights, sub-hires and
demurrage for any amounts due under this charter” over
which Ravenna claims to assert a maritime lien (see
Paragraph 26 of the Morfini-Ravenna charter party), given
that the $800,000 is, at present, a substitute res for
Omni’s vessel?
Stated another way, . . . assuming
Morfini could not assert a maritime lien against and
arrest Omni’s vessel under Rule C, can Morfini now assert
a maritime lien against funds that merely take the place
of the vessel? Likewise, the Court also requests that
Morfini generally explain the law governing liens and/or
maritime liens over hires, freights, sub-hires, and
sub-freights.
(Rec. Doc. 31.)
The February 13th order also invited Ravenna and
Omni to submit additional briefing.
8
Morfini and Omni submitted
On February 8, Morfini also moved to intervene into the Ravenna/Omni
case in order to assert identical relief. (Rec. Doc. 27.) That motion is before
the Magistrate Judge.
6
supplemental briefs; Ravenna did not.
Morfini also submitted a reply brief.
(Rec. Docs. 37, 34.)
(Rec. Doc. 41.)
Notably,
Omni’s brief did not directly address the issue quoted above.
II. DISCUSSION
As mentioned, Morfini’s motion invokes Rule C, Rule B, and
Louisiana law.
Because the Court finds Morfini may arrest the
funds under Rule C and attach the funds under Rule B, it does not
address Louisiana law.
A.
Conflicts of Law
The Court must briefly address a conflicts-of-law issue.9
Under Clause 41 and Clause 89 in both the Morfini/Ravenna Head
Charter and the Ravenna/Omni Subcharter (quoted above), it would
appear that the question of whether Morfini holds a maritime lien
over the $800,000 in the Court’s registry—and consequently whether
Morfini may proceed in rem under Rule C, as explained below—is
determined by English law.
Cf.
Sembawang Shipyard, Ltd. v.
Charger, Inc., 955 F.2d 983, 985-86, 988 (5th Cir. 1992)(where
contract stated, “[a]ny dispute shall be determined according to
the Arbitration Ordinance 1963” and “[t]he contract shall be
9
It is not uncommon for such issues to arise in maritime seizure cases.
See Martin Davies, Choice of Law and U.S. Maritime Liens, 83 Tul. L. Rev. 1435,
1435-36 (2009) (“Because of the international nature of the shipping business,
it is often the case that U.S. courts are required in consequence to consider in
rem actions brought by foreign claimants seeking recovery in claims governed by
foreign law. The attractiveness of U.S. courts as a forum for in rem claims is
enhanced by the fact that far more claims are secured by a maritime lien under
U.S. law than under the law of other countries.”); Schoenbaum, supra note 2, §
21-3, at 543.
7
governed by the Law of Singapore,” the issue of whether a maritime
lien existed was determined by Singapore law—despite the fact that
the
vessel
was
arrested
in
the
United
States—and
because
plaintiff’s claim did give rise to a maritime lien under Singapore
law, plaintiff could not proceed under Rule C).10
Nevertheless, it is the parties’ burden to establish with
reasonable certainty the substance of foreign law; otherwise, the
Court
may
apply
the
law
of
the
forum.
Banco
de
Credito
Industrial, S.A. v. Tesoreria General de la Seguridad Social de
Espana, 990 F.2d 827, 836 (5th Cir. 1993); In re Avantel, S.A., 343
F.3d 311, 321-22 (5th Cir. 2010) (non-maritime case); accord Cooper
v. Meridian Yachts, Ltd., 575 F.3d 1151, 1165-66 (11th Cir. 2009).
Although Omni urges that English law governs this matter, including
the existence vel non of a maritime lien, Omni never explains, much
less establishes, the substance of English law on this topic.
(Omni’s Opp’n p. 5, Rec. Doc. 34.)
More to the point, Omni’s brief
does not address—under any law—the law regarding maritime liens
over
subfreights,
etc.,
despite
the
fact
that
the
Court
specifically identified this issue in its February 13, 2013 Order.
10
The case law is unclear as to whether English law would also determine
whether Morfini holds a prima facie valid maritime claim against Omni, one of the
prerequisites for Rule B attachment. Compare Al Fatah Int’l Navigation Co. v.
Shivsu Canadian Clear Waters Tech. (P) Ltd., 649 F. Supp. 2d 295, 299-300
(S.D.N.Y. 2009) (Rule B attachment is determined by the law governing underlying
claim), with SLS Shipbuilding Co. Ltd. v. Ionia Mgmt. S.A., No. H-11-271, 2011
WL 2652365, at *4 (S.D. Tex. July 5, 2011) (“whether a claim is considered
maritime for purposes of Rule B is a question of federal law”). The Court need
not address this issue, however, because no party has established with reasonable
certainty the substance of English law, as explained below.
8
Morfini, on the other hand, does discuss maritime liens over
subfreights, but it asserts that U.S. law, not English law, governs
this issue, and, consistent with this contention, cites only U.S.
cases.
(See Morfini’s Suppl. Memo. pp.12 -13, Rec. Doc. 37;
Morfini’s Suppl. Reply Br. p.6, Rec. Doc. 41.)
While Morfini’s
argument that English law does not apply appears suspect, it need
not be addressed at this time. At bottom, no party has established
with reasonable certainty the substance of English law respecting
maritime liens and subfreights, much less that English law would be
different from U.S. law.11 Therefore, the Court will apply the law
of the forum, the United States.
11
Morfini alternatively argues that, “[t]o the extent English law would
apply, however, the earlier submitted, and uncontroverted, Declaration of Julian
James Clark [Morfini’s English solicitor] makes clear at paragraph 16 that
‘Morfini’s service of notice on the parties down the chartering chain was
effective, under English law [(called for by the Morfini/Ravenna and Ravenna/Omni
Charters)], to exercise Morfini’s lien rights.’” (Rec. Doc. 41 at 6.) Normally,
an un-rebuffed affidavit from an attorney is sufficient to establish the
However, Morfini’s
substance of foreign law.
Cooper, 575 F.3d at 1165-66.
declarant provides no support for his statement.
See id.
Also, while the
declaration states that there was an “effective . . . exercise [of] Morfini’s
lien rights,” this is arguably not the same as saying Morfini held a “maritime
Cf.
lien” under English law that would permit it to proceed under Rule C.
Sembawang Shipyard, Ltd., 955 F.2d at 988 (explaining that a statutory right to
proceed in rem under English and Singapore law is not necessarily the same as
holding a maritime lien for purposes of Rule C); Schoenbaum, supra note 2, §
21-3, at 543. Consequently, the Court will not reach a conclusion that the
declarant does not plainly express.
Finally, while Morfini’s brief argues
against the application of English law, its declarant openly states that English
law does apply. This contradiction raises suspicion about the motive behind
Morfini’s current resistance to English law, particularly when considered with
the fact that Morfini previously embraced English law when it ostensibly served
Morfini’s purpose. (See Morfini’s Compl. ¶ 23, No. 13-221, Rec. Doc. 1 (seeking
interest, costs, and attorney fees under English law)). For these reasons, the
Court finds that this declaration fails to established the substance of English
law with reasonable certainty. Of course, it is unlikely that Morfini will be
disappointed with this result, given that the consequence is that the Court will
apply United States law, which is the law Morfini seems to prefer here.
9
B.
Rule C
Morfini admits that it held no maritime lien against Omni’s
vessel, the STELLA BECRUX and, therefore, could not have arrested
it under Rule C.
(Morfini’s Suppl. Memo.
Despite
Morfini
this,
maintains
p. 9 n.2, Rec. Doc. 37.)
that
Clause
26
in
the
Morfini/Ravenna Head Charter gave it a lien against subfreights12
for amounts owed under the Head Charter, and thus provides the
basis for its in rem claim against the $800,000 deposited by Omni
into the Court’s registry.
Clause 26 provided, “Owners [Morfini]
shall have a lien upon all cargoes and all freights, sub-freights,
sub-hires and demurrage for any amounts due under this charter . .
. .”
(Ex. 1 to Morfini’s Compl., No. 13-221, Rec. Doc. 1-1 at 7
(emphasis omitted).) Morfini further asserts that it perfected its
lien on January 22, 2013 by sending letters to Omni (as well as the
other parties further down the charter party chain) stating that it
was exercising its lien rights.
(Ex. 4 to Morfini’s Compl., No.
13-221, Rec. Doc. 1-1 at 35-40.)
claims
against
Omni
for
amounts
Morfini adds that Ravenna’s
owed
under
the
Ravenna/Omni
Subcharter are substantially the same as the expenses and hire that
12
From the vessel owner’s perspective, “subfreights” generally refers to
compensation paid to someone other than the owner for the carriage of goods or
the hire of the vessel; e.g., subhire owed to a charterer from a subcharterer,
or freight that is owed to the charterer under a bill of lading or voyage
charter. See Chembulk Trading LLC v. Chemex Ltd., 393 F.3d 550, 556 (5th Cir.
2004); Cornish Shipping Ltd. v. Int'l Nederlanden Bank N.V., 53 F.3d 499, 502 (2d
Cir. 1995).
Thus, the amount Omni allegedly owes under the Ravenna/Omni
Subcharter is, from Morfini’s perspective, considered “subfreight,” even though
it might be more accurate to call these amounts “subhire.”
10
Morfini
seeks
under
the
Morfini/Ravenna
Head
Charter,
minus
Ravenna’s higher charter rates.
Again, Omni has not directly addressed the law regarding
maritime liens over subfreights.
Instead, Omni’s primary argument
is that no contract existed between Morfini and Omni, therefore,
Morfini has no claim against Omni, nor any maritime liens against
Omni’s property.
Under United States law, the ability to invoke Rule C’s in rem
remedy typically depends on the existence of a maritime lien; the
warrant for arrest is issued to foreclose and enforce a maritime
lien.
Schoenbaum, supra note 2, § 21-3, at 539-40; see also Fed.
R. Civ. P. Supp. R. C(1), (3)(a)(i)13; Sembawang Shipyard, 955 F.2d
at 987 (“In contrast [to Rule B, which is an adjunct to a claim in
personam], Supplemental Rule C is a true proceeding in rem.
claim is against the thing itself. . . .
plaintiff
must
hold
a
maritime
lien.”
The
Traditionally, the
(citation
omitted)).
Although the property to be arrested usually is a vessel, any
property that is subject to a maritime lien can be arrested,
13
Rule C provides, in pertinent part:
An action in rem may be brought:
(a) To enforce any maritime lien;
(b) Whenever a statute of the United States provides for a
maritime action in rem or a proceeding analogous thereto.
. . .
The Court must review the complaint and any supporting papers. If
the conditions for an in rem action appear to exist, the court must
issue an order directing the clerk to issue a warrant for the arrest
of the vessel or other property that is the subject of the action.
Fed. R. Civ. P. Supp. R. C(1), (3)(a)(i).
11
including intangible property such as subfreights. See Schoenbaum,
supra note 2, § 21-3, at 540 & n.14 (“In rem proceedings against
intangible property are almost always to enforce a lien against
subfreights for the payment of hire due under a charter party.”);
see also Fed. R. Civ. P. Supp. R. C(3)(b)(ii), (3)(c) (governing
service under Rule C for different types of property, including
intangible
property);
Fed.
R.
Civ.
P.
Supp.
R.
C,
Advisory
Committee Notes on 1966 Adoption, Subdivision (3) (discussing
situations “where the owner of a vessel under charter has a lien on
subfreights”).
While maritime liens are distinct—some might say peculiar—from
traditional “land liens,” see, e.g,
Grant Gilmore & Charles L.
Black, Jr., The Law of Admiralty § 9-1 to 9-2 (2d ed. 1975), the
subfreight lien is peculiar even among maritime liens.
See, e.g.,
Raymond P. Hayden & Kipp C. Leland, The Uniqueness of Admiralty &
Maritime Law: The Unique Nature of Maritime Liens, 79 Tul. L. Rev.
1227, 1232 (2005) (“Probably the maximum extent of a court’s in rem
jurisdiction arises in certain vessel charter situations, where
such an intangible as the debt of a cargo owner (for unpaid
freight) can be sued in rem.”).
The lien does not automatically
arise by operation of law, as do many other maritime liens; rather,
it is a creature of contract that arises from an express provision
in the charter party between vessel owner and charterer.
Lykes
Lines Ltd. v. M/V BBC Sealand, 398 F.3d 319, 323 (5th Cir. 2005);
12
Gilmore & Black, supra § 9-20, at 623 n.103.
Once perfected, the
lien is enforceable against a party that is not in privity with the
vessel owner, such as a subcharterer.
See Biehl & Co., Inc. v.
Apollonia Holding, Inc., 693 F. Supp. 457, 465 (E.D. La. 1988).
The Fifth Circuit has explained:
Shipowners, as a general rule, have a lien upon the cargo
owned by the charterer for compensation not yet paid. .
. . In contrast, when the cargo is not owned by the
charterer, a shipowner generally does not have a lien on
the cargo. The charter between the shipowner and the
charterer, however, may provide for a lien on any
freights owed by the cargo owner to the charterer.
Indeed, two general conditions are necessary for a
shipowner to maintain a lien against such a third person.
First, the shipowner must have a contractual right to
assert the lien; second, the shipowner must properly
perfect the lien.
. . .
The lien provision, as it appears in most form charters,
is usually phrased as: “the owners [meaning the owners of
the vessel] shall have a lien upon all cargoes and all
subfreight for charter money due under this charter.”
Chembulk Trading LLC v. Chemex Ltd., 393 F.3d 550, 354-55 (5th Cir.
2004) (citations omitted; some quotations and brackets omitted;
emphasis in original); see also Lykes Lines Ltd., 398 F.3d at 323.
To perfect the lien, the vessel owner must give “actual notice” to
the third party.
Lykes Lines, 398 F.3d at 323.
“The cases finding
notice generally do so when the cargo owner [or subcharterer] is
notified that the vessel owner is claiming a lien, the legal basis
for the lien (the charter party agreement) and that the vessel
owner intends to enforce it by demanding payment of freights
directly to it.”
Id. at 324.
Before such notice is given, the
13
lien is essentially inchoate.
Cornish Shipping Ltd. v. Int’l
Nederlanden Bank N.V., 53 F.3d 499, 502 (2d Cir. 1995).
After the
lien is perfected, if the third party pays ostensible subfreights
to the charterer, such payment will not discharge the third party’s
liability to the vessel owner.
Id.
Here, Clause 26 in the Morfini/Ravenna Head Charter was
sufficient to create a maritime lien against subfreights.
Cf.
Chembulk, 393 F.3d at 555, 557 (holding that the vessel owner held
a lien over subfreights, even though the lien clause in the charter
party
only
referred
to
“all
freights,”
as
opposed
to
“subfreights”). Furthermore, it appears that Morfini perfected its
lien when it sent the letters on January 22, 2013.
Notably, Omni
has not argued against either of these points.
The only question that remains at this stage is whether
Morfini’s lien can attach to the funds in the Court’s registry,
considering that the funds are not, at this time, subfreights per
se, but instead are the substituted res for Omni’s ship.
If, as
Morfini admits, it held no maritime lien over the STELLA BECRUX,
and therefore could not arrest same, then it is arguably odd to
permit Morfini to assert a maritime lien over funds that have
merely taken the place of that ship.
In 1927, the Supreme Court encountered a roughly similar issue
in United States v. Freights, etc., of the Mount Shasta, 274 U.S.
466 (1927).
There the United States (“Owner”) chartered its ship,
14
the
MOUNT
SHASTA,
to
the
Mount
Shasta
Steamship
Company
(“Charterer”). Like the Morfini/Ravenna Head Charter, the contract
between Owner and Charterer stated that “‘[t]he owner shall have a
lien upon all cargoes and all subfreights for any amounts due under
this charter party.’”
The Mount Shasta, 291 F.92, 92 (D. Mass.
1923), rev’d, 274 U.S. 466 (1927). The Charterer then entered into
a voyage charter with the Palmer & Parker Company (“Subcharterer”),
who used the ship to transport mahogany logs from Africa to Boston.
The Owner alleged that the Charterer owed it $289,680 in charter
hire and that the Subcharterer still owed $100,000 in freight under
the subcharter.
Claiming a lien over the latter amount, the Owner
brought a libel against these “freights” (i.e., brought an in rem
action against the $100,000) and sought a monition from the court
instructing the Subcharterer to deposit the $100,000 into the
Court’s registry.
The Subcharterer answered the libel and denied
that any amounts were due under the subcharter because it had
counterclaims against the Charterer that exceeded the $100,000;
therefore, there was no res and thus no basis of jurisdiction. The
district court agreed with this contention and dismissed the case
for lack of jurisdiction.14
14
The Supreme Court, however, found that
The district court reasoned:
I assume, as contended by the libelant, that freight money due
and payable constitutes a res of which an admiralty court has
jurisdiction; but to have that effect the freight money must be
actually due, and liability for it must, I think, either be admitted
by the person charged, or must be so clear and obvious as to leave
no room for bona fide denial. The mere assertion that freight is
due from a certain person, denied in good faith by the party
15
in rem jurisdiction was present under those circumstances and
reversed the lower court.
It explained:
By the general logic of the law a debt may be treated
as a res as easily as a ship. It is true that it is not
tangible, but it is a right of the creditor’s, capable of
being attached and appropriated by the law to the
creditor’s duties. The ship is a res not because it is
tangible but because it is a focus of rights that in like
manner may be dealt with by the law. . . .
But if it be conceded that the Admiralty Court has
jurisdiction to enforce a lien on sub-freights by a
proceeding in rem, and a libel is filed alleging such
sub-freights to be outstanding, we do not perceive how
the Court can be deprived of jurisdiction merely by an
answer denying that such freights are due.
The
jurisdiction is determined by the allegations of the
libel. It may be defeated upon the trial by proof that
the res does not exist. But the allegation of facts that
if true make out a case entitles the party making them to
have the acts tried. It is said that the Court derives
its jurisdiction from its power, and no doubt its
jurisdiction ultimately depends on that.
But the
jurisdiction begins before actual seizure, and authorizes
a warrant to arrest, which may or may not be successful.
Here the debtor is within the power of the Court and
therefore the debt, if there is one, is also within it.
The Court has the same jurisdiction to try the existence
of the debt that it has to try the claim of the libellant
for the hire of the Mount Shasta.
If the proof that
there is freight due shall fail it does not matter very
much whether it be called proof that the Court had no
jurisdiction or proof that the plaintiff had no case.
Either way the libel will be dismissed.
Freights, etc., of the Mount Shasta, 274 U.S. at 470-71 (citations
charged, does not, it seems to me, create a res within the
jurisdiction of the admiralty court. Such a claim might be made the
basis of a suit. But a claim is not a res in this sense. . . . The
res is in the nature of a fund in controversy. It must exist when
the suit is begun or there is no foundation of jurisdiction. And the
court cannot assume that freight money is due in order to draw to
itself jurisdiction to determine whether that assumption is correct.
Id. at 93.
16
omitted).
Under Mount Shasta’s logic, Morfini’s claimed lien is against
a debt Omni allegedly owes to Ravenna under the Ravenna/Omni
Subcharter.
Whether or not Omni actually owes anything to Ravenna
will be determined by the London arbitration panel (which will also
determine whether Ravenna owes anything to Morfini) , just as the
determination of whether the Subcharterer in Mount Shasta owed any
freight would be determined at trial.
panel
finds
that
Omni
owes
nothing
Here, if the arbitration
under
the
Ravenna/Omni
Subcharter, then that would mean there is no “debt” upon which
Morfini’s lien can attach, and the $800,000 would be released to
Omni.
See Biehl & Co., Inc., 693 F. Supp. at 466 (holding that a
vessel owner’s lien against subfreights is limited to the amounts
owed under the affeightment contract between charterer and third
party); Cornish Shipping, 53 F.3d at 504 (“[E]xercise of that lien
should vest the owner with the rights that the charterer would
otherwise have under the contract of affeightment to proceed
against that debt. . . . [H]owever, the owner does not accede to
any additional rights beyond those that the charterer formerly
had.”).
Or as Mount Shasta put it, “If the proof that there is
[sub]freight due shall fail it does not matter very much whether it
be called proof that the Court had no jurisdiction or proof that
the plaintiff had no case.
action] will be dismissed.”
Either way the libel [i.e., the in rem
274 U.S. at 471.
17
Under
determines
another
that
hypothetical,
Omni
owes
if
Ravenna,
the
say,
arbitration
$900,000
panel
under
the
Ravenna/Omni Subcharter, and further determines that Ravenna owes
Morfini $800,000 under the Morfini/Ravenna Head Charter, then it
would seem that the $800,000 in the Court’s registry would go to
satisfy Morfini’s lien, as opposed to Ravenna’s in personam claim
against Omni.
Ravenna may still seek enforcement of its award for
$100,000 (the amount Omni owed to Ravenna net what Ravenna owes to
Morfini), but satisfaction could not come from the $800,000 in the
Court’s registry.
In any case, Morfini has perfected its lien against a debt
allegedly owed by Omni to Ravenna. Funds securing this debt are in
the Court’s possession.15
Therefore, Morfini’s lien may attach to
these funds, subject to the outcome of the London arbitration. Cf.
W. Bulk Carriers (Australia) Pty. v. P.S. Int’l, Inc., 164 B.R.
616,
621-22
(S.D.
Ind.
1994)
(“We
have
found
no
authority
suggesting that the source of a debtor’s funds determines whether
the funds are subject to maritime liens.
We hold that the
existence of [the shipowner’s] maritime lien [over subfreights and
demurrage] does not depend on the source of the money satisfying
15
It should also be pointed out that Mount Shasta held there was in rem
jurisdiction even though there was no property in the court’s possession (hence
the Owner’s request for a monition against the Subcharterer).
The Court
explained that, because the Subcharterer was within the power of the court, so
was the debt; therefore the district court could order the Subcharterer to
deposit the funds. 274 U.S. at 471. Here, of course, the $800,000 is already
in the Court’s possession as a result of Ravenna’s prior attachment. Thus, the
instant matter does not require the Court to stretch jurisdiction in nearly the
same manner as occurred in Mount Shasta.
18
the debt but rather on whether the debt being satisfied is one
commonly recognized as subject to maritime liens. . . .
Mount
Shasta does not suggest that the debt can only be collected from
funds generated by the shipping transaction that produced the
debt.”).16
C.
Rule B
A
plaintiff
is
generally
permitted
to
seek
a
writ
of
attachment and/or garnishment under Rule B either in addition to or
in alternative of its in rem claim under Rule C.
P. Supp. R. C(1).
See Fed. R. Civ.
To proceed under Rule B, (1) a plaintiff must
have an in personam claim against the defendant that is cognizable
in admiralty, (2) the defendant must not be found within the
district in which the action is commenced, (3) the property
16
One question lingers, however. Cases after Mount Shasta described the
vessel owner’s lien on subfreights as “derivative” of the charterer’s rights,
Hornbeck Offshore Operators, Inc. v. Ocean Line of Bermuda, Inc., 849 F. Supp.
434, 439 (E.D. Va. 1994), or that the lien clause amounts to an “assignment” of
the debt owed to the charterer, Biehl & Co., Inc., 693 F. Supp. at 465; Saint
John Marine Co. v. United States, 92 F.3d 39, 48 (2d Cir. 1996), or that the
owner is “subrogated” to the charterer’s rights via the lien clause, Cornish
Shipping, 53 F.3d at 504. This might suggest that, if Ravenna could not arrest
Omni’s ship under Rule C (because Ravenna held no maritime lien against that
ship), then Morfini similarly cannot arrest the funds that have taken the place
of the ship.
In other words, if Morfini’s rights are truly derivative of
Ravenna’s, then Morfini should not be able invoke Rule C where Ravenna could only
invoke Rule B. Under this theory, Morfini would only be able to attach the funds
under Rule B.
The Court need not delve into such questions now. As explained below, at
a minimum it appears that Morfini may attach the funds under Rule B.
Furthermore, as between Morfini and Ravenna, Clause 26 in the Morfini/Ravenna
Head Charter would appear to give Morfini priority to the funds (assuming Omni
is found to owe amounts under the Ravenna/Omni Subcharter), even if Morfini does
not technically hold a maritime lien. Thus, assuming no other party appears and
asserts a claim to these funds, the Court will likely not need to determine
whether Morfini’s claim is technically in rem (Rule C) or only quasi in rem (Rule
B).
19
belonging to the defendant is present or will be present in the
district, and (4) there is no statutory or general maritime law
prohibition to the attachment.
at 521-22.
Schoenbaum, supra note 2, § 21-2,
There appears to be no dispute that elements (2), (3),
and (4) are met.
As to element (1), the Second Circuit has
explained that when a vessel owner gives timely notice to the
subcharterer that it is exercising its lien on subfreights, the
vessel owner also acquires an in personam action against the
subcharterer. Saint John Marine Co., 92 F.3d at 44 (citing Cornish
Shipping, 53 F.3d at 502). Therefore, after Morfini perfected its
lien against Omni, Morfini had an in personam claim against Omni
cognizable in admiralty (breach of a maritime contract), allowing
it to invoke Rule B against the $800,000 in the Court’s registry.
Like the Rule C analysis, however, this is subject to the findings
of the London arbitration.
CONCLUSION
For the foregoing reasons, the Court will grant Morfini’s
motion insofar as it seeks to arrest and attach the $800,000 in the
Court’s registry pursuant to Admiralty Rules C and B.
The Court
does not consider Morfini’s motion insofar as it seeks to attach,
sequester, and/or garnish these funds under Louisiana law and,
accordingly, will deny without prejudice Morfini’s motion in this
regard.
Accordingly,
IT IS ORDERED that (Rec. Doc. 42) Morfini’s Ex Parte Motion
20
for Issuance of Maritime Law Rule B Writs of Attachment and
garnishment, Rule C Warrant of Arrest and Louisiana State Law Writs
of
Attachment,
Sequestration
and
Garnishment
and
to
Appoint
Undersigned Counsel to Serve Same is GRANTED IN PART and DENIED IN
PART, WITHOUT PREJUDICE, as follows:
IT IS ORDERED that the $800,000 previously deposited in the
Court’s registry by Omni (as security for the release of the M/V
STELLA BECRUX) and subject to Ravenna’s attachment under Admiralty
Rule B in Case No. 13-127, is, by effect of this Order, hereby
ARRESTED by Morfini pursuant to Admiralty Rule C;
FURTHER ORDERED that the $800,000 previously deposited in the
Court’s registry by Omni (as security for the release of the M/V
STELLA BECRUX) and subject to Ravenna’s attachment under Admiralty
Rule B in Case No. 13-127, is, by effect of this Order, hereby
ATTACHED by Morfini pursuant to Admiralty Rule B;
FURTHER ORDERED that Morfini’s requests for Louisiana writs of
attachment, sequestration, and/or garnishment are DENIED WITHOUT
PREJUDICE.
Finally, because the property subject to Morfini’s arrest and
attachment is already within the custody of the Court, it is
unnecessary for the Clerk of Court to issue a warrant for arrest,
writ of attachment, or other process.
Cf. Fed. R. Civ. P. Supp. R.
C, Advisory Committee Notes on 1966 Adoption, Subdivision (3) (“In
such cases [where the owner of a vessel under charter has a lien on
21
subfreights] it would seem that the order to the person holding the
fund is equivalent to original process, taking the place of the
warrant for arrest.”).
This, of course, does not relieve Morfini
of any notice obligations, etc., that may apply under Rule B(2),
Rule C(4), Rule 4, or any other law.
Signed in New Orleans, Louisiana, this 15th day of May, 2013.
____________________________
United States District Judge
22
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