iebls/outlines a-d/admiraltyoutline-a.doc  · web viewgeneral electric v. s.s. nancy lykes (1983)...

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ADMIRALTY OUTLINE I. Jurisdiction II. Substantive Law of Admiralty Article III, Sec. 2 - Constitution allows for admiralty jurisdiction without defining what is a case of what is admiralty Jurisdictional quest is trying to define what the framers of the Constitution meant by “admiralty” Admiralty court sits without a jury in the federal jurisdiction 28 U.S.C. 1333: admiralty/maritime jurisdiction which is counterpart to §9 of Judiciary Act of 1789 (which never defined the meaning of admiralty) Authoritative Sources of Maritime: Congressional legislation and General Maritime law Certain amount of state law is applied in admiralty cases A. HISTORICAL BACKGROUND The Constitution and the Judiciary Act of 1789 left the courts with the task of working out answers to 3 questions: 1. The scope and limits of the federal admiralty jurisdiction 2. The scope and limits of the concurrent jurisdiction of common law courts over admiralty and maritime cases; and 3. The sources, nature and ultimately the content of the substantive law applicable in admiralty and maritime cases First admiralty law question faced by US courts was the meaning of the constitutional and statutory phrase “admiralty and maritime” Admiral - commander of the sea Admiralty - court hearing disputes arising from naval and marine matters Maritime - of or pertaining to the sea Historically, admiralty was used in referring to courts and to technicalities of jurisdiction and procedure and maritime was used for substantive matters litigated and the substantive law applied in those courts DeLovio v. Boit (1815) – whether a contract of marine insurance was within the jurisdiction Libelant brought action upon a policy of insurance that insured a vessel against losses at sea Issue: what is admiralty jurisdiction? All cases of admiralty and maritime jurisdiction to the courts of the US comprehends all maritime contracts, torts, and injured Policies of insurance are within the admiralty and maritime jurisdiction 1

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Page 1: Iebls/Outlines A-D/admiraltyoutline-a.doc  · Web viewGeneral Electric v. S.S. Nancy Lykes (1983) 3 locomotive cars shipped by GE were loaded on Lykes to be shipped from New Orleans

ADMIRALTY OUTLINE

I. JurisdictionII. Substantive Law of Admiralty

Article III, Sec. 2 - Constitution allows for admiralty jurisdiction without defining what is a case of what is admiraltyJurisdictional quest is trying to define what the framers of the Constitution meant by “admiralty”Admiralty court sits without a jury in the federal jurisdiction28 U.S.C. 1333: admiralty/maritime jurisdiction which is counterpart to §9 of Judiciary Act of 1789 (which never defined the meaning of admiralty)Authoritative Sources of Maritime: Congressional legislation and General Maritime lawCertain amount of state law is applied in admiralty cases

A. HISTORICAL BACKGROUNDThe Constitution and the Judiciary Act of 1789 left the courts with the task of working out answers to 3 questions:

1. The scope and limits of the federal admiralty jurisdiction2. The scope and limits of the concurrent jurisdiction of common law

courts over admiralty and maritime cases; and3. The sources, nature and ultimately the content of the substantive law

applicable in admiralty and maritime cases

First admiralty law question faced by US courts was the meaning of the constitutional and statutory phrase “admiralty and maritime”

Admiral - commander of the seaAdmiralty - court hearing disputes arising from naval and marine mattersMaritime - of or pertaining to the sea

Historically, admiralty was used in referring to courts and to technicalities of jurisdiction and procedure and maritime was used for substantive matters litigated and the substantive law applied in those courts

DeLovio v. Boit (1815) – whether a contract of marine insurance was within the jurisdiction• Libelant brought action upon a policy of insurance that insured a vessel

against losses at sea• Issue: what is admiralty jurisdiction?• All cases of admiralty and maritime jurisdiction to the courts of the US

comprehends all maritime contracts, torts, and injured• Policies of insurance are within the admiralty and maritime jurisdiction• Admiralty contract jurisdiction does not depend on locality but extends all

over contracts which relate to the navigation, business, or commerce of the sea

• Language of the Constitution warrants the most liberal interpretation and refers to that maritime jurisdiction which commercial convenience, public policy, and national rights have contributed to establish

Infra corpus comitatus: within the body of a county

The Thomas Jefferson (1825)• Justice Story passed up a chance to further expand American Admiralty

Jurisdiction

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• In England, the admiralty judges had never claimed jurisdiction upriver further than the ebb and flow of the tide

• Libel claims wages earned on a voyage on the Missouri River• Issue: Is there admiralty/maritime jurisdiction?• Admiralty jurisdiction is found in cases where the service was substantially

performed, or to be performed, upon the sea, or upon waters within the ebb and flow of the tide

• This voyage was several hundred miles above the ebb and flow of the tide and therefore, the wages cannot be considered as earned in maritime employment

The Genesee Chief v. Fitzhugh (1851) opens the lakes and the waters connecting them to the general jurisdiction of the district courts in admiralty• Collision on Lake Ontario• Schooner Cuba claims that the Genesse ran foul of her and damaged her so

seriously that as a result she sank with her cargo on board • Proceeding was in rem and in admiralty under Great Lakes Act of 1845 which

extending the jurisdiction to the district courts to certain cases upon the lakes and navigable waters connecting the same

• Question of jurisdiction and constitutionality of the Great Lakes Act because it was narrower than the Constitution contemplated

• Law contains no regulation of commerce and it is evident from the title that Congress did not intend to exercise their power to regulate commerce

• Goes against Thomas Jefferson with ebb and flow of tide• Court rejected tidal limit• There is clearly nothing in the ebb and flow of the tide that makes the waters

peculiarly suitable for admiralty jurisdiction, nor anything in the absence of a tide that renders it unfit

• There is commerce on the water and there need not be tide in the lake

NOTES: the constitutional grant of admiralty jurisdiction was not limited by tidelands rule

The Eagle – (1868)• Eagle, tug, towing a brig and barge, grounded the brig on a shoal in Detroit

River causing the barge to collide with the grounded brig• Owners of brig filed suit against tug and barge• Issue: Did the District Court have subject matter jurisdiction?• The §9 of the Judiciary Act of 1789 regards the district courts as having

conferred upon then a general jurisdiction in admiralty on lakes and the waters connecting them

• Great Lakes Act is no longer in effect

When a matter is “in admiralty” as per Article III, §2, Cl. 3 then:1. Congress has the power to provide substantive law governing the

resolution of the dispute. If Congress has not done so, the courts must fashion a dispositive “federal admiralty common law”. Courts will accord deference to, but are not bound by, the general maritime law of nations. If there is no federal statute and no need for a uniform national law, the courts may apply the law of the state with the most significant relationship to the controversy under the maritime but local doctrine

2. Case may be heard in federal court without regard to diversity of citizenship or amount in controversy, but litigant will not have a jury. Most admiralty cases may also be brought in state court under “savings to suitors” clause with trial by jury if allowed. If admiralty claim arises under federal statute, or if it arises under maritime common law but the requirements of diversity are satisfied, the claim may be heard in federal court as a law claim, with the right to trial by jury. Regardless of the court in which an admiralty matter is brought, the

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Admiralty jurisdiction is now extended to the lakes and navigable rivers of the US

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substantive law which governs is federal admiralty law, unless the “maritime but local” doctrine applies

B. ADMIRALTY JURISDICTION IN CONTRACT CASES In admiralty law, the nature and subject matter of the contract, not the

place of making or performance, govern Contracts to furnish repairs or stevedoring services for a vessel are

maritime, but contracts to procure such services are not Marine insurance contract is in admiralty, but a contract to obtain

marine insurance is not Contract to insure, supply, load or unload, tow, pilot or dock, a vessel is

in admiralty Contracts to build or sell vessels are not in admiralty, but contracts to

lease vessels are

Insurance Co. v. Dunham (1870): admiralty jurisdiction extends over maritime insurance policies

North Pacific Steamship Co. v. Hall Brothers Marine Railway and Shipbuilding Co. (1919)Ship in need of repairs kept being taken in and out of the water• Issue: Whether there is admiralty jurisdiction• Shipbuilding filed in personam against Steamship to recover balance due for

certain work and labor done, services rendered, and materials furnished• Just because the ship was dry docked does not take away from admiralty• The contract for materials furnished and work performed in repairing

her under the circumstances was a maritime contract• “Any person furnishing repairs, supplies, or other necessaries, including the

use of dry dock or marine railway, to a vessel, whether foreign or domestic” upon the order of a proper person shall have a maritime lien upon the vessel

General Rule: to be a maritime contract, the subject matter of the contract must be directly and intimately related to the operation of a vessel and navigation

Contracts that are not directly related to maritime matters and ship navigation afford no justification for the application of the uniform admiralty law and are best left for decision under state law contract principles

An agreement involving the construction or drilling operations on a fixed platform on outer continental shelf is not a maritime contract

An agreement to transport men and supplies to and from an offshore drilling rig is within admiralty jurisdiction

Shipbuilding v. Ship repairOne cannot have a maritime lien against a vessel until the vessel is built

Sale of vesselsContracts to sell a vessel are non-maritime

Products liability contracts claimsClaims for breach of warranty involving ship construction are non-maritime

Kossick v. United Fruit Co. (1961)• Petitioner was employed as chief steward on vessel of United Fruit and

suffered thyroid ailment• Employer wanted petitioner to go to US Public Heath Service Hospital, but

respondent wished to be treated by a private physician• Ended up going to Public health and received improper treatment and sued

respondent for $250,000 for bodily injury• Issue: What is the interplay b/t state and maritime law?• Contract for employment was a maritime contract

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• What was the subject matter of the contract? Seaman giving up a right guaranteed him by the maritime law whether he was right in his criticism in the hospitals or not and the contract sprang from the maritime contract of employment

• This alleged oral contract sprang from a maritime relationship• This is a maritime contract b/c it concerns seaman, which concern

vessels, concerns the assertions of the rights under the maritime maintenance and cure

Exxon Corp. v. Central Gulf Lines, Inc. (1991)• Unpaid bill for fuels acquired for the vessel Hooper which is owned by Central

Gulf chartered by Waterman• Waterman and Exxon negotiated a marine fuel requirements contract - they

would fuel them at ports where Exxon was located and when the vessels were at non-Exxon ports, they would arrange for local suppliers to which Exxon would pay and Waterman would pay Exxon

• Exxon was Waterman’s agent in getting fuel from Arabian Marine in Saudi Arabia

• Arabian Marine billed Exxon, Exxon billed Watrman and Waterman filed Chapter 11 never paying the bill in full

• Central Gulf agreed to assume personal liability for the unpaid bill if a court were to hold Hooper liable in rem for that cost

• Issue: Whether admiralty jurisdiction extends to claims arising from agency contracts

• Minturn v. Maynard - an agent who advanced funds for repairs and supplies necessary for a vessel could not bring a claim in admiralty against the vessel’s owners - should this be overruled?

• Holding: Minturn is overruled there is no per se exception of agency contracts for admiralty jurisdiction

• The true criterion in determining whether a contract falls within admiralty is the nature and subject matter of the K, as whether it was a maritime contract, having reference to maritime service or maritime transactions

• Courts should look to the subject matter of the agency contract and determine whether the services performed under the contract are maritime in nature

• When the nature and subject matter of 2 transactions are the same as they relate to maritime commerce, if admiralty jurisdiction extends to one, it must extend to the other

North Pacific v. Hall Brothers Marine Railway & Shipbuilding Co. (1919)• If subject matter of contract is maritime, there is admiralty jurisdiction here• Boat wasn’t afloat• Contract to certain amount of work would be done by pulling the vessel up on

the land so they could get to the bottom of the ship - almost rebuilt vessel• A contract to repair a vessel is a maritime contract (getting vessel back

into commerce so it can serve maritime needs)• Is this a contract for repair? Contract was peculiarly worded• It becomes a vessel when it is launched and is in condition as was intended• Contract to build a vessel and contract going to build a vessel are not

maritime contracts until the vessel was far enough along to function as intended

• Putting too much emphasis on the fact that part of the repairs would be done on land

• Court said locality of the contract was the rule under the Old English law which was thrown off and we substitute subject matter of the contract, the contract’s nature is maritime

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Mixed Contract is not within admiralty jurisdiction unless it is wholly maritime If the primary purpose is maritime, the contract is treated as wholly maritime,

despite its nonmaritime elements

Lease/Purchase agreement where they agreed that after a certain time either party could exercise the purchase agreement

It is only the per se agency contract where the court has to look at the contract to see nature and subject matter of contract

C. THE NAVIGABLE WATERS ISSUE

LeBlanc v. Cleveland (1999)• LeBlanc and Ossen suffered personal injuries when their kayak was struck by

a recreational vehicle on the Hudson River operated by Cleveland and owned by Grant

• LeBlanc and Ossen sued Grant and Cleveland invoking federal admiralty jurisdiction

• A waterway at the situs in issue is navigable for jurisdictional purposes if it is presently used, or is presently capable of being used, as an interstate highway for commercial trade or travel in the customary modes of travel on water

• Interstate commerce requirement - waters must be able to be used in foreign commerce

• Hudson River is navigable but this accident took place where there was no outlet to the ocean or to another state because dams that had been built and there are waterfalls

• Before the dams were built, this river was fully navigable• Daniel Ball calls for ordinary condition as highways of commerce• Test to use is present capability of use as a highway of commerce but with

artificial obstructions there is no capability of use

D. THE VESSEL ISSUE

The term vessel is defined in 1 U.S.C. §3 : the word “vessel” includes every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water

Admiralty jurisdiction is basically defined by waters1. Ferry Boat - first question: Do the vessels operate in admiralty waters? If you

required activity itself to be interstate commerce, this wouldn’t fit but the Mississippi River is the largest navigable water in the US so it will always have admiralty jurisdiction

2. Highly intrastate activity on Mississippi River will be in admiralty5

Mixed Contracts Contracts with maritime component and a

non-maritime component If the maritime and non-maritime elements

are separable, the admiralty court will exercise jurisdiction over the maritime portion

If the non-maritime element of the contract is incidental, the court will exercise admiralty jurisdiction over the entire claim

Where the maritime and non-maritime claims are bound together and cannot be separated, the court will deny jurisdiction even of maritime portion

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• What is the test and why do you have to ask it?• Are employees on River Boat Casinos in admiralty jurisdiction under the Jones

Act? Has to be a crew member on a vessel to be a Jones Act seaman• Vessel status - if they contribute to the mission of the vessel and are more

than transitly connected with vessel• Code defines various terms that will be applied• 1 U.S.C. §3 - the word “vessel” includes every description of watercraft or

other artificial contrivance used, or capable of being used, as a means of transportation on water

• Vessel never required its own motor power• any seaman who contributes to the function of the vessel will have a Jones Act

liability case

The Robert W. Parsons (1903)• Contract for repair of canal boat• Just because horses pulled a boat, doesn’t take it out of admiralty jurisdiction• What definition do they give us for future cases? Purpose for which the craft

was constructed and the business in which it is engaged - TWO PART TEST• The movement function here is not merely incidental to its primary function

Manuel v. P.A.W. Drillings (1998)Clearest provisions on what is a vessel and what is not a vessel

E. THE EXCLUSIVE JURISDICTION OF THE FEDERAL ADMIRALTY COURTS AND THE CONCURRENT JURISDICTION OF “COMMON LAW” COURTS

Article III, §2 – admiralty/maritime jurisdiction1789 Judiciary Act – §9 had admiralty jurisdiction to the Federal Courts – today 28 U.S.C. §1333:Original: the federal district courts shall have exclusive original cognizance of all

civil causes of admiralty and maritime jurisdiction savings to suitors, in all cases, the right of a common law remedy where the common law is competent to give it

Present: The district courts shall have original jurisdiction, exclusive of the Courts of the states, of any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled

What is saving the suitors clause about? Federal District Court have exclusive jurisdiction over admiralty matters but those courts can do something called common law remedy where they can give it

The Moses Taylor (1866)o P contracted with owner of steamship as steerage passengero When he arrived in San Fran. He brought suit for bad food and bad

conditions.o California statute allowed for P to bring ship in remo If the action fell within the savings clause, then the state court could have

heard the action but since they held that it didn’t fall under savings clause (common law remedy)

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Determination of vessel - Two part test1. PURPOSE for which craft was

constructed and2. BUSINESS in which it is engaged

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o In admiralty actions you can go against the personal owner of the vessel in personam but you can also go against the vessel itself as the Δ in the action and treat the vessel as the Δ and if you are successful on the merits, have the vessel seized and sold to satisfy the judgment in your favor

o Look at federal admiralty courts, you didn’t get a juryo Remedy available in common court was a common remedy in 1789 o Broken down into in personam and in rem – in personam is not as radicalo In personam could be brought in state court of common law in 1789; in rem

admiralty action could not, it had to be brought in a state admiralty court in 1789

o Common law could not entertain on an in rem actiono Saving the suitors clause is in personam actions, concurrent jurisdictions and

in rem is federal admiralty

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In 1860’s during the Civil War the Supreme Court decides to gives something back to the states to make up for Genesee Chief – gives back concurrent jurisdiction to all in personam suits and keep exclusively the in rem suits

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Hard core admiralty jurisdiction is maritime commerce

o In rem action exclusive to admiraltyo The state legislature passes statute authorizing courts to take jurisdiction

over maritime in rem jurisdiction. If case goes

on, then he is to sell the vessel out from under owner. Defect is not that state courts couldn’t create in rem action, they are talking about state courts – the legislature has authorized the state courts to get the in rem action and they CANNOT do this

Rounds v. Clover Foundry & Machine Co. (1915)o Lien placed on vessel for supplies usedo State court ordered vessel sold and goes to appealo Was this an in rem or in personam action?o It was in personam b/c they sued the owners themselves and not the ship and

therefore the state court has jurisdictiono Does fall under saving suitors clause b/c it was in personam action

In rem: Federal JurisdictionIn personam: Concurrent jurisdiction – admiralty/law – Exception - if

Congress makes a certain type of case even though in personam if in the statute it provides for exclusive admiralty jurisdiction

Thornsteinsson v. M/V Drangur (1990)o Seamen asserted claims for wages against a ship that had been seized in

Iceland and sold in foreclosure to the Δo Icelandic jurisdiction in the in rem foreclosure proceeding was based on

constructive possession of the vessel via the vessel’s papero Δ raises defenses of laches and execution sale as clearing all lienso Court held that actual, not constructive, seizure is needed in order to put

claimants on notice as to the execution saleo Laches defense involved analysis of actual notice to the seameno Factors emphasized:

o Whether seamen’s employer knew of seamen’s claims when suit was filed in Ireland, and if so;

o Whether the employer had an obligation to inform either the Icelandic court or the vessel purchaser at the auction and

o Whether the purchaser was prejudiced by enforcement of the claims

Madruga v. Superior Court (1954) – Admiralty Jurisdiction over partial actionso Supreme Court ruled that under the “Savings to Suitors” clause of 28 USCA

§1333, Federal and State courts have concurrent jurisdiction to order the partition of ships in a proceeding in personam and there is no federal admiralty rule barring judicial partition of a vessel unless the ownership interests are dead locked

o Court held not in rem actiono Wanted to partition the vesselo Not going against vessel so it is not in remo Partition suit between co-owners of vessel is not in maritime – this was held in

certain jurisdictions

F. THE DISTINCTIVENESS OF THE FEDERAL ADMIRALTY COURT AND SOME FUNDAMENTAL FEATURES OF ITS PROCEDURE

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Option a P has – o If he has diversity, he can choose to

bring his admiralty case in federal law

o If he doesn’t want federal law he comes in state court and gets jurisdiction there under saving the

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Two sides of Federal Court1. Sitting in admiralty2. Sitting in law

1. The two sides of federal courtRomero v. International Terminal Operating Co. (1959)

Seaman who lost his leg on Spanish ship. Injured at port in New York and struck by cable

Sued on law side in Federal District Court, even though it is hard core admiralty case

Sues under Jones Act (negligence action of seaman against employer), unseaworthiness and maintenance and cure

Saving the suitors: go to federal admiralty, federal law (if diverse) or state

Federal law – Jones Act (federal question) provides jury trial in federal trial

Problem is with unseaworthiness and M&C – not provided by federal statute, they arise under general maritime law

Only way to do it is under the savings to suitors clause – Problem is that under this clause when you bring general maritime claims at law there has to be diversity and there is no diversity

Can he come in under federal question with general maritime claims? Federal question jurisdiction (1875) came after Judiciary Act (1789) Maritime granted in 1789, Federal question granted in 1875 Did Congress intend the federal question jurisdiction to include

general maritime law? NO, you had admiralty jurisdiction in 1789 Rule: GML clams (unseaworthiness/M&C) CANNOT be brought at

federal law exercising 28 U.S.C. §1331 federal question jurisdiction; they must be brought under 28 U.S.C. §1331 diversity jurisdiction

A maritime common law claim does not fall within the courts “federal question” jurisdiction

Romero bars removal as a federal question under section 1441(b)

o If the seaman is an American citizen or resident, or in a blue water seaman’s case if the vessel is an American flag vessel or is owned by American citizens or a shipowner whose “base of operations” is in the US, American maritime law should apply and the court should take jurisdiction

o Other maritime cases commenced in state court ordinarily may be removed to the law “side” of federal court, if the requisites for diversity jurisdiction are present or if there is federal question jurisdiction

o However, a maritime common law claim does not fall within the courts federal question jurisdiction under 28 USC §1331 although it arises under the Constitution

2. Admiralty Procedure Before 1966o Originally admiralty, equity and law were different classes, each having their

own procedural ruleso 1938 – combined law and equity into one class, and admiralty into one classo No jury in admiraltyo Jury available at law

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Romero Pendent Jurisdiction: regular pendent jurisdiction allows you to take state claim and federal claim together. Here, 2 federal claims, one in law and one in admiralty – allows general maritime claims pendent to Jones Act and the Jones Act jury can here all cases

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3. Admiralty Procedure since 1966o 1966 – combine admiralty rules into FRCPo After 1966 – imperfect merger with admiraltyo Some rules might not applyo There are 8 – 9 supplemental rules for cases of admiralty – procedure within

rem, etc. which they couldn’t merge with FRCPo These rules shall not be interpreted as providing a jury in admiralty

o Merger made it easier for judges and lawyerso Wanted all cases to be treated the same, procedure wiseo Big Problem – jury trial in hybrid case that has elements of admiralty and civil

elements

Advisory Committee Notes – FRCP Rule 9(h)o Since they merged admiralty with common law, you are going to get more

cases with admiralty component and law component

o Under savings the suitors clause you will get more admiralty and lawo Problem with what to do with cases; at one time try admiralty before judge

and law before jury (7th amendment right)o When they merged they didn’t want two fact finderso Provide cases may be tried together through supplemental jurisdictiono 9(h) – if you have 2 grounds for being in federal district court, one admiralty

and one law then you will go in at law unless you designate your claim as one in admiralty or maritime jurisdiction

o Counterclaim relies on diversity – what do you do with this when a case has come in under admiralty – HYBRID

o Not getting a jury in admiralty is traditional, not constitutional – but it would harm your basis for your denying jury in admiralty

4. The Right to Jury Trial in Hybrid CasesSphere Drake Insurance PLC v. Shree Corp. (1999)

o Case concerning insurance claim on lost gemso Underwriters want declaratory judgment – admiralty claimo Shree brought compulsory counterclaim and wanted jury trialo Issue: Whether a Δ in an admiralty case is entitled to a jury trial of the Δ’s

compulsory counterclaims which are premised upon non-admiralty jurisdictional grounds

o Rule 38(a) of FRCP provides the right to a jury, whether statutory or constitutional, “shall be preserved inviolate”

o Underwriters’ motion to strike Shree’s jury demand is denied

o Always want to avoid 2 fact finders in a caseo Jury trial argument is probably the most strongest when Δ asserts a

compulsory counterclaim that falls outside admiralty jurisdiction

Ghotra v. Bandila Shipping, Inc. (1998)10

A plaintiff in personam maritime claims has three choices1. File suit in federal court under the federal

court’s admiralty jurisdiction2. File suit in federal court under diversity

jurisdiction if the parties are diverse and the amount in controversy is satisfied

3. File suit in state court

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o Captain killed on ship and survivors brought WD action against vessel owner and vessel

o Had in rem and in personam claimo In rem action is admiralty and in personam is law questiono P were denied a jury trialo Issue: Whether district judge committed constitutional and legal error in

denying the P the right to a jury trial for claims brought under the court’s diversity jurisdiction

o P bringing two claims himselfo Rule: under the 7th Amendment, the Ghotras were entitled to a jury

trial on the claims brought under the court’s diversity jurisdictiono Can bring an in personam and in rem action when claim arises out of single

occurrenceo Fitzgerald – the 7th Amendment neither requires jury trials nor forbidso Giving this in rem action to jury is so in teeth with savings with suitors clause

5. Impleader under Rule 14(c) Δ in an admiralty action may bring into the lawsuit a party “who may be wholly or partly liable, either to the plaintiff or to the Δ”

6. Possessory, petitory, and partition actions, including actions to try title to vessels

Really in rem actions, but not really – they are much more like attachments

7. Limitation of liability proceedingsExclusive federal jurisdiction

8. Equitable remedies in admiralty casesEquitable remedies (injunction ordering something other than money damages) – our admiralty courts have no jurisdiction to give equitable relief

9. Personal Jurisdiction1. There must be a legislative authorization for the exercise of jurisdiction

over the Δ2. There must be enough of a relationship b/t the Δ and the forum to justify

the conclusion that the Δ can be haled into court there without offending the constitutional guarantees of due process

Authorizations for personal jurisdiction1. State long-arm statutes (Rule 4(k)(1))2. Jurisdiction over foreign defendants who have significant nationwide

contacts while lacking “minimum contacts” with any state (Rule 4(k)(2))3. Maritime attachment and garnishment (Rule B)4. Actions in rem (Rule C)

United Rope Distributors, Inc. v. Seatriumph Marine Corp. (1991)o Very maritime, lost cargo during voyage - but we need personal

jurisdictiono Sued in Federal District Court in Wisconsin o Seatriumph contends they can’t get personal jurisdiction in Wisconsino Long arm statute was predicated upon minimum contacts with the

stateo Federal courts acquire personal jurisdiction only to the extent the state

law authorizes service of processo Rule 4(e) specifies that service of process may be made under the

circumstances prescribed by state lawo United Rope lost, can’t bring suit in Wisconsin

Nissho v. M/V Star Sapphire (1995)

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o Jurisdiction over foreign nations who have significant nationwide contacts while lacking “minimum contacts” with any state (Rule 4(k)(2))

o Cargo contamination case – company from Sweden – foreign Δo Two types of jurisdiction

o Specific: when the cause of action relates to or arises out of the Δ’s contact with the forum

o General: jurisdictions exists where the Δ has such systematic and continuous contacts with the forum that it is not unreasonable to submit to jurisdiction in that forum

o There is no specific jurisdictiono Rule 4(k)(2) authorizes personal jurisdiction over foreign Δ for claims arising

under federal law when the Δ have sufficient contacts with the US as a whole to justify the application of the US law, but without sufficient contact with any single state to support jurisdiction there

o Both charterer and owner maintain significant control of vessel and they brought it to TX

o Δ had systematic and continuous contacts with the US therefore, there is jurisdiction over Δ

Blueye Navigation v. Oltenia Navigation (1995)o Concern attachment (to get PJ over Δ and to have a fund if they win on the

merits from which judgment can be paid) and garnishmento Garnishment – attachment of personal debt/obligationo Borrowed loan, breach of charter contract and withdrew vessel after most of

loan was spento Bank arrested shipo Δ brought suit in London seek declarations that they had no liability to Po Suit is to seek to attach assets of Δ found in this districto Jurisdiction is obtained only by attaching property – quasi in remo P had no property to attach to get jurisdiction over Δo If maritime claim and he is not found in district, then attachment is

appropriateo Δ motion to dismiss is granted for lack of jurisdiction

RULE C In rem Action procedureo Problem: when you go in rem, you go after ship and you treat ship as Δ,

the owner is not the actual Δ in the in rem action, it’s the property that is the Δ

o Under venue rules, you can hit the ship wherever you find it – seizure is really important because ships are very easily moved around the world

o In rem exists to execute lien and if successful on the merits to sell ito Strict Personification Theory – doctrines whereby the holder of a maritime

lien can use in rem process to force a judicial sale of the vessel regardless of the owner’s personal liability for the debt (treat ship as Δ). Personify the ship and make it a personal Δ

o China – famous case where British ship came into New York harbor and US ship rammed it and the owner of the Kentucky sues the British ship in rem and defense is that there can be no in rem jurisdiction without an underlying personal jurisdiction of the owner and this owner was not in any way responsible for this because this was a compulsory pilot – held English ship responsible

10. Constitutional and prudential limitations on admiralty’s broad power to seize ships

Amstar Corp. v. S/S Alexandros T. (1981)o Amstar claimed a cargo of raw sugar was damages o Brought action against vessel in rem and against owner in personam

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o Rule C – marshal arrested the ship in the in rem proceeding and pursuant to Rule B attached it in the in personam proceeding

o Issue: Is Rule C constitutional?o By enforcing maritime liens through the arrest of vessels in rem proceedings,

admiralty enables people engaged in maritime commerce to obtain redress for certain kinds of injuries caused by the vessel and its crew without seeking compensation abroad from the vessel’s owner

o The arrest of a vessel has an important economic effect on the ownero Notice prior to arrest would in many instances enable the owner to frustrate

judicial enforcement of the lien by simply ordering the master to put out to sea

o Requirement of due process is the opportunity to be heard at a meaningful time and in a meaningful manner – Rule C provides the shipowner an opportunity to be heard before a maritime lien is ultimately enforced by sale

o Holding: a pre-arrest hearing need not be afforded the shipowner o Even though goods are damaged, the consignee is required to accept them

from the carrier unless they are completely worthless

11. Removal will get you in trouble: Savings suitor clause gives P choice where to hold hearing; one of

which is state court yet if you can freely remove those actions to federal court you have defeated one of the purposes of saving the suitors clause (letting P make his choice)

General provision for removal of civil actions from state to federal court, 28 U.S.C.A. §1441, applies to maritime actions commenced in a state court, but not such actions may be removed

A Jones Act claim commenced in a state court is not removable, even if there is federal jurisdiction independent of the Jones Act, such as diversity jurisdiction

12. Admiralty Appeals A final judgment in a suit brought as an admiralty claim in federal court is

reviewable in the same fashion as judgments in other cases. 28 U.S.C.A. §1291

A trial judge’s findings of fact “shall not be set aside unless clearly erroneous” – FRCP 52(a)

An interlocutory judgment of a federal court sitting in admiralty may be reviewed under Rule 54(b), which permits the trial court to convert into a final judgment an order disposing of all of the claims of one party in a multiparty suit, or an order disposing of one of several claims between the same parties

Some states apply their own appellate standards in reviewing appeals in maritime matters – this is acceptable in savings to suitor cases, but not in review of Jones Act jury trials, since the right to a jury verdict is an integral part of the seaman’s substantive rights under the act, and the weight of the jury’s verdict should not be diminished by a state appellate review standard

G. The Sources of the Substantive Law Applied in Admiralty and Maritime Cases

Three tribunals:1. Admiralty side2. Law side3. State court

Four bodies of law:1. Federal statutes2. Federal nonstatutory maritime law3. State statutes4. State caselaw

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o No place in the Constitution does it give Congress the power to enact any maritime legislation

o Congress is not a source of federal maritime law

Courts have used several constitutional grants from Article I in order to give Congress the power:

a. Originally thought commerce clause gave Congress power to enact substantive rules in maritime law (Interpret commerce clause narrowly)

b. Then, the admiralty grant of Article III, §2 (judicial grant, not substantive law making grant) along with sweeping clause (necessary and proper clause) It is necessary and proper for them to carry out their admiralty and maritime jurisdictional grant that the have substantive rules to base their decision on, therefore, it is an implied power – only thing against that is that states could have maintain substantive law making power and federal courts could have been there to interpret enactments

o Original thought: substantive rules of GML as found in constitution when it was enacted, plus those decisions of federal courts, were the real rules of decision that the courts should rely on

o Courts have always had a great power to mold GMLo Real power of admiralty law was in federal judges (particular appeal judges)

having power to mold GML and to interpret acts of Congresso In the last 20 years – Miles v. Apex – the Supreme Court has said that

Congress has to slavishly follow dictate of federal statute – heavy congressional supremacy

o Only bounds on Congress maritime law is if you find an act of Congress unconstitutional

o Courts very seldom find the acts of Congress unconstitutional

Problem with State law v. maritime law – Congress will win this fight because of Supremacy Clause of Constitution

1. THE LESSER DIFFICULTY: THE MARITIME AUTHORITY OF CONGRESS Congress gets its admiralty and maritime authority from Article III,

§2 by way of the Necessary and Proper Clause

2. THE GREATER DIFFICULTY: NONSTATUTORY FEDERAL MARITIME LAW VS. STATE LAW Fight between the general (nonstatutory) maritime law comes into

potential conflict with state law

Ballard Shipping Co. v. Beach Shellfish (1994)o Raise question of RI state law and whether it is preempted by Supreme Court

decisiono Oil tanker ran aground and spilled oil in bayo Is state statute preempted?o Robins decision said you can’t recover for purely economic loss without

impacto Shellfishers had only economic losso Court looks to Jensen – state legislation affecting maritime commerce if it

interferes…..look first to congressional legislation to see if state law is out of step, then look to GML to see if state law is out of step

o Where did federal maritime law originate?o RI decision is not in conflict with Robins b/c it is not maritime lawo Congress did not intend preemption

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o Rhode Island Compensation Act as reasonably construed and applied is not preempted by admiralty clause of the Constitution

Southern Pacific Co. v. Jensen (1917)o Employee of Southern Pacific CO. diedo Family sued under NY law for workman’s compensation which was awardedo He was on gangway, vessel equipment, on navigable waters of US therefore

maritime torto Why did she want to invoke state law as opposed to maritime law or some tort

provision of state law? This was fresh NY law; she didn’t bring it in maritime b/c he wasn’t a seaman and the LHWCA wasn’t established until 1927

o Even if you apply comparative damages, they were going to fully blame this man and take him out of federal and state whereas workman’s compensation is no fault

o Maritime law at this time did not have workmen’s compensation (1927 – LHWCA)

o To a maritime tort, could the state compensation law be applied? Act conflicted with the constitution and could not apply NY state law to a maritime tort

o NY workers compensation statute could not be constitutionally appliedo To allow state compensation awards would destroy the very uniformity in

respect to maritime matters which the Constitution was designed to establish

o There is no federal compensation scheme, no GML compensation – if you jump these two cases, it is an area where uniformity of law is required. If compensation law of different states can be applied, then there would be no uniformity.

o But this is a longshoreman, not a seaman that travels from jurisdiction to jurisdiction

o Passed amendment to saving to suitors clause, even though this case wasn’t under this clause: saving to suitors the workmen’s compensation of any state…comes up in Supreme Court again, and Congress : excluding masters and members of vessels

o Can’t get uniformity by just excluding members – supreme court has found substantive enactment of Congress to be unconstitutional

o Court ruled that if a longshoreman’s injury or death occurred on navigable waters, state worker compensation law could not apply. The decision left maritime workers, other than seaman, without an adequate remedy against their employers in work-related injuries occurring on water

1927 – LHWCA gave Congress what it wanted

Jensen 3 part rule (apply state law if it is not inconsistent with policy, or if it is not inconsistent with policy under GML)

In no place does it say you have to apply state law

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3 part test where state law may or may not apply to a case in admiralty jurisdiction

1. If it contravenes the essential purpose expressed by an act of Congress

2. Works material prejudice to the characteristic features of the GML

3. Interferes with the proper harmony and uniformity with that law in its international and interstate relations

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If you are coming in under savings to suitors clause in state or federal court under diversity jurisdiction, the same law applies as would apply in federal admiralty

Absent Jensen, unless Jensen authorizes application of state law, under savings to suitor cases they are not authorized to apply state law

Savings to Suitors has to be merely with forum, not substantive law to be applied

Chelentis v. Luckenbach decided this in 1918 Today, when state law applies the substantive law does not apply just

because it is a savings clause case – it must jump the Jensen case If you have matters of procedure come up in state court for savings,

you can apply state procedural law to maritime case even though you couldn’t apply state substantive law

Erie Railroad Co. v. Tompkins (1938) PA citizen injured while walking along train track RR argued he was trespasser and under PA law they aren’t

liable to trespassers Judge applied federal law – there is general federal common law Erie appealed arguing under opposition to Swift This only applies to diversity matters In diversity they must apply state law Savings clause is the reverse Erie doctrine b/c in Erie they have

to apply state law wherein savings cases federal maritime law applies

Reverse Erie Doctrine: case is in state court but maritime law applies except where the controversy or issue falls under the “maritime but local” doctrine, but even there state law is being applied “in admiralty”

Savings suitor: apply federal maritime lawAlways have a conflict b/t state and federal law

§34 of the 1789 Judiciary Act is known as the Rules of Decision Act In 28 U.S.C. §1652 provides: “The laws of the several states, except where

the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply

Pope & Talbot v. Hawn (1953) When you can apply state law to maritime action Hawn injured on P&T vessel in PA waters Issue – Whether maritime recognized contributory negligence or to apply PA

law Maritime law has comparative negligence where PA law has contributory

negligence as a bar Court held that maritime law was comparative and they weren’t going to

apply PA law because it was a maritime tort Cause of action is an injury to a seaman aboard a vessel While states may sometimes supplement federal maritime policies, a state

may not deprive a person of any substantial admiralty rights as defined in controlling acts of Congress or by interpretative decisions of this Court

Court extended the duty of seaworthiness to persons who were not members of the crew, but who were aboard the vessel doing work traditionally performed by a member of the crew

Negligent conduct causing loss to others constitutes a traditional maritime tort

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1972 the LHWCA was amended to provide that nonseamen can no longer sue on the basis of unseaworthiness

Kossick v. United Fruit (1961) Hospital case – if anything went wrong the boss would re-pay What is the source of law – whether alleged contract is maritime Court held that the maritime contract would upset uniformity of maritime

law if they used state law NY Statute of Frauds disallow oral contracts but maritime contract does

not disallow oral contracts Uniformity is required under maritime law This is a Jensen case – the notion that if such a limited and essentially local

transaction as the contract here in issue were allowed to be governed by a local statute of frauds it would “disturb the uniformity of maritime law”, is too abstract and doctrinaire a view of the true demands of maritime laws

Deals with hardcore maritime commerce: the relationship between the shipowner and the cargo ownerCarriage of goods has been statutized – comprehensively covered by federal statute

Two types of carriage1. Public

a. Liners that have scheduled routes that you can send cargo on to various places

b. Common carriersc. What they can put in their contract is covered by Harter and

COSGAd. Bill of lading – very little freedom of contract b/c before statutes

came in in 1893, Harter Act and COGSA (Carriage of Goods by Sea Act – 1936), this carriage was under GML – relationship of ship to cargo; when cargo is lost or damaged, who has to pay for the loss?

2. Privatea. Charter parties leasing vesselsb. Not as concerned with chartersc. Freedom of contract

With GML, there was freedom of contract for common carriers – the ship was an insurer of the goods and no matter how or why the goods were damaged or loss, the ship had to pay for it except for a few circumstances

Didn’t have to establish the ship was negligent Ship interest began to write contracts (bills of lading), they put in exculpatory

clauses that ship will not be responsible for a number of things Ships began to exempt almost everything from liability England held ships could exempt even their own negligence US Courts held that this was against GML policy of the US – you couldn’t

contract out of your own negligence English could carry at a lower rate than US, b/c US had to bill responsibility

into rate system therefore English would get all of the business Congress passed in 1893 the Harter Act: compromise between different

interests; even though we know ships are responsible for everything, that would destroy shipping industry; for certain causes of loss the ship is/is not responsible

Ships were given negligence in the master and crew of the vessel which cause damage or loss to cargo

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Rest of shipping world looked at our experience, and there is International Convention

COGSA is passed in 1936 – essentially a copy of the Harter Act except where in the interim they had found some defects in Harter Act so changed those parts

Did not repeal the Harter Act

HARTER ACTAct passed by Congress making a statutory allocation of the risks between shipper and carrierRequires carrier to use due diligence in sending out a seaworthy vessel at the commencement of the voyage and holds the carrier responsible for its negligence in the handling of the cargo during the voyage

COGSACongress provided that the Harter Act would remain applicable to the situations not within the reach of this new legislation

COGSA HARTER ACTApplies to every bill of lading … which is evidence of a contract for the carriage of goods by sea to or from ports of the US

Applies to all voyages, including those between American ports and between American ports and foreign ports

Applies only to the risks of the voyage between loading at the port of departure and unloading at the port of destination

Allocates the risks from delivery to the carrier until redelivery to the cosignee at a fit and customary wharf

Applies between loading and unloading On voyage between American port and foreign port, this act applies from delivery to the shipper until loading and from unloading at the port of destination until delivery to the consignee

Carriers failure to use due diligence to send out a seaworthy vessel imposes liability upon the carrier only if the unseaworthiness was a cause of the damages to the goods

On voyage between American ports, absent permissible agreement, this act applies at all times between delivery and redelivery

Prohibits a carrier from limiting its liability to less than $500 per package

When this act applies the parties may stipulate that their rights will be governed by COGSA either:

1. from delivery to loading and from unloading to redelivery, in voyages between American and foreign ports

2. For the entire voyage, in shipments between American ports

If the vessel owner defaults in its duty to use due diligence to send out a seaworthy vessel, it may not claim the benefit of exculpatory language in Harter or in the Bill of LadingCarrier may limit its liability for damage to any amount

Parties may not avoid COGSA and Harter by stipulating to foreign law which imposes less responsibility upon the carrier, or by adopting a forum selection clause which would have the same effect

The Germanic (1905)o Unloading vessel covered with ice and at the same time they are fueling it

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o Ships rolls from one side to the othero Ships eventually sinks and damages cargo in the shipo Cargo owner wants to recover from shipo Depends on cause of loss – was it the ship or the cargo?o What happened to the ship happened because of the way the cargo was being

unloadedo Primary purpose: unload the cargoo Harter Act will be applied to foreign vessels in suits brought in the United

States

The Hague Rules of 1921 = COGSA Visby Amendments – amended the COGSA, but not in the United States International Community – private organizations of maritime groups from

various countries

1921 International Law Association’s Maritime Law Committee: formulate uniform model rules to govern ocean bills of lading

1. Carrier required to exercise due diligence to make the ship seaworthy2. Carrier liable for proper and careful handling, loading, stowage,

carriage, custody, care and unloading of the cargo3. Carrier not liable for faults or errors in the navigation or management

of the ship

Hamburg Rules – comprehensive re-doing of COGSA that is in effect in some places, but not in the United States

US has traditional COGSA Ship is responsible for cargo damage when ships agents are hands on cargo Ship is responsible if it fails to use due diligence Cargo is responsible if ship uses due diligence to be seaworthy

Most controversial and likely to be changed – letting ship off the hook for damage to cargo due to errors in navigation and management of vessel

THE CARGO CLAIMANT’S ACTION UNDER COGSA

1. The Plaintiff’s Prima Facie Case A lot depends in cargo cases on the burden of proof Burden of proof – if the cargo demonstrates that it turned the cargo over to

the vessel in an undamaged condition and if cargo establishes that the ship turned it out damaged, that makes a prima facie case for the cargo against the ship

The initial burden is with the P (shipper or consignee) who must establish a prima facie case that the goods were damaged or lost while in the possession of the carrier

Shipper can meet the burden by showing the goods were delivered to the carrier in an undamaged condition and were not redelivered, or were redelivered in a damaged condition

Bally, Inc. v. M/V Zim America (1994)o Zim shipping Bally’s leather goodso Goods placed in sealed containers – makes it easier to load/unloado Upon destination, containers were not weighedo Perfect case that burden of proof is going to control this case because the

seals on the containers were still in tacko Receiving manager of warehouse noticed one container was shorto Did cargo make out its prima facie case?o Arguing the point of outturn – whether it was when containers were unloaded

or when trucking company delivered the containers

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o Satisfied they turned it in in good condition but did not satisfy the second part concerning loss in possession of the ship

o P establishes a prima facie case for recovery under COGSA by demonstrating that the goods were damaged while in the carrier’s custody

o Burden can be met by provingo Delivery of the goods to the carrier in good condition ando Outturn by the carrier in damaged condition

o When the consignee proves its prima facie case, the burden shifts to the carrier to show that the loss or damage falls within one of the COGSA exceptions

2. Burdens of ProofLekas & Drivas, Inc. v. Goulandris (1962)

o Bringing cargo back from Europe and route had to be changed due to war and it took a year to get back

o British government made it go around Africao Soft Cheese and olive oil was the cargoo Ship was damaged and needed to be dry docked; unloaded cheese and

covered it with tarps o Ship is not responsible for restrain on princeso Plaintiff has burden of proofo It was not negligent for master to not sell cargo b/c they were overdue

on voyage and cheese was small part of the cargo and were responsible to transport other cargo

The Harter/COGSA burden of proof structure has sometimes been analogized to a ping-pong game because the burden moves back and forth between the plaintiff and defendant

EXPECTED PERILS1. Fire – COGSA § 4(2)(b)

Fire Statute of 1851: vessel owner was not responsible for losses caused by fire on board unless such fire is caused by the design or neglect of such owner

Fire is exemption under COGSA § 4(2)(b) A carrier seeking exoneration under the “fire” provisions first must prove that

the damage was caused by fire If it meets this burden, the weight of authority is that the shipper then must

prove the fire was caused by the “design or neglect” of the shipowner

Westinghouse v. Leslie Lykes (1984)o Westinghouse shipped several electric rotors aboard Lykes which were placed

in No. 4 holdo Fire started in No. 3 hold where cotton was stored – cotton is very difficult to

extinguisho Crew members heard a clanking noise but did not check it outo 12 ½ hours later after the clanking was hear, smoke was observedo Access could not be obtained to No. 3 b/c bags of flour had been stowed over

the manhole cover in No. 3 upper tween decko Cargo brought action against Carrier for damage to its cargo, and Carrier

asserted the defense of Fire statuteo In a maritime cargo claim, the initial burden is on Cargo to prove

good order bad order that he delivered the goods to the carrier in apparent good order and condition that upon return were damaged

o Reject court’s conclusion that stowage was brought about by design and neglect of shipowner so as to overcome fire defense

o Evidence showed only that the stowage plan called for the manhole to be covered with sacks of flour and that the stowage plan had been prepared in the Lykes cargo layout department in New Orleans

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o Carrier not liable

Fire is an exemption in favor of ship, which is a quasi exemption; exemption only if you can’t show involvement of owner with itIf this had not happened by fire, then you would have had a completely different caseOnce you bring in fire, burden of proof is singular

2. Perils of the Sea – COGSA §4(2)(c)

Thyseen, Inc. v. S/S Eurounity (1994)o Thyseen purchased steel from Europe and made arrangements with Δ to ship

ito Vessel owner warranted a good shipo Ship hit a storm and there was discrepancy on how what caused the entry of

water o District Court – P had proved a prima facie case by evidence that the cargo

was in good order at loading but damaged at outturn; Δ had failed to prove that the damage to the cargo was due to a “peril of the sea”

o Peril of the sea occurs when conditions are of an extraordinary nature or arise from irresistible force of overwhelming power, and which cannot be guarded against by the ordinary exertions of human skill and prudence

o There was no peril of the seao Severe storms occur on a regular basis in the Atlantic and that the winds,

waves and cross seas experienced by the Vessel were to be expected therefore the Vessel has not proven that it is entitled to exoneration based on a peril of the sea

Peril of the sea is close to an act of god A storm would be a peril of the sea under certain circumstances, but not here

b/c it was foreseeable that this might happen Peril of sea is movement of sea that such the best skill of the mariner can’t

act against it

3. The “Q” Clause – COGSA §4(2)(q) – The Catch-All Exemption

Q Clause itself states that the “burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage”

Quaker Oats Co. v. M/V Torvanger (1984)o Quaker purchased 500 tons of tetrahydrofuran and chartered Δ to

transporto Analysis of samples showed that the peroxide content was well within

commercially acceptable levelso Samples taken upon arrival revealed peroxide contamination in one of

the tankso Quaker sued Δ asserting rights under COGSA for recovery of expenses

incurred in purging the peroxide from the tetrahydrofurano District Court – Quaker had established a prima facie case by

producing evidence that the tetra. Was “within purchase order specifications” upon delivery to Δ and that at least a portion of it was no longer in that condition when tendered to P after shipment. Δ rebutted prima facie case and the burden of proof was back on P and Quaker failed to carry burden.

o Carrier’s rebuttal was not good enough

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o Carrier must further prove that the damage was caused by something other than its own negligence

Notes:o “Q” clause only requires the carrier to prove that neither its negligence nor

the negligence of its agents or servants caused the losso “Q” clause will remain substantially unchanged

THE PACKAGE LIMITATIONo If the burden of proof has shifted from the cargo claimant to the Δ carrier

and back again, the court concludes that the carrier is liable for cargo damage

o Once liability is established, it is necessary to calculate damageso Issue is whether the package limitation will apply and if so, how it will

applyo COGSA §4(5): carrier is generally entitled to limit liability to $500 per

package or customary freight units

What is a package and when can a container itself be a package?Basic idea – how you can maintain similar break down between right of carrier and right of cargo after container revolution to make is analogous to same situation prior to container revolution

Fishman & Tobin, Inc. v. Tropical Shipping and Construction Co. (1999)o Cargo (Fishman) sues carrier (Tropical Shipping) for damages relating to cargo

losso Tropical Shipping admits liability but asserts CGOSA 4(5) limits its liability to

$500 per packageo The MacClenny Products Cargo

o 5000 men’s jackets put in 40 foot container; put on the reembarque and commercial invoice to which Tropical Shipping issued a bill of lading

o Bill of lading described the shipment as one forty foot container said to contain 5000 men’s jackets

o Container lost overboardo MacCLenny asserts that each individually wrapped jacket it a package

and Tropical is liable for $241,557.96o Tropical asserts that the container alone was the package and they are

limited to $500o The Fishman & Tobin Cargo

o 27,908 boys pants assorted into bundles not exceeding a dozen pair of pants that was held together by a 3inch wide paper band; placed in 39 cartons which were placed in a 40 foot container that Tropical supplied

o Bill of lading – one 40 foot container said to contain 39 big packs containing 27,908 units of boys pants

o F&T argued that each paper bundle container constitutes a package and Tropical is liable for $190,600.60. Tropical argues that each big pack containing boys pants is a package and that its liability is $19,500 or $500 for each lost big pack

o The COGSA and its limitations of Liability Provisiono COGSA 4(5) limits a carrier’s liability to $500 per package, unless the

shipper explicitly declares a higher valueo Requires courts to look not at the larger unit of transport into

which goods are consolidated, but at the smaller unit, or package, into which goods are prepared

o MacClenny Packageso Follows second Binladen rule: when the bill of lading lists the number

of containers as the number of packages, and fails to disclose the number of COGSA packages within each container, the $500 liability limit applies

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o F&T Packageso Nowhere in the commercial documents, however, does the shipper

describe the cargo as bundles of boys pantso $19,500

In a container package – what is a package? Standard ship is using to charge the shipment

Henley Drilling Co. v. McGee (1994)o Sea Barge (ocean carrier) agreed to transport drilling equipment belonging to

Henley from Houston to Puerto Rico and back to Houstono Shipper arranged cargo insurance with McGeeo On return shipment to Houston, Sea Barge retained a stevedore to stow the

drilling rig aboard the barge but when ship arrived at Houston, the drilling rig was no where to be found

o Henley sued Sea Barge, McGee and shipper (shipper and McGee subrogated)o Sea Barge moved for partial summary judgment contending their liabilities

could not exceed the $500 per package limit imposed by COGSAo District court granted SJ on ground that the drilling rig constituted a package

under COGSA §4(5); McGee appealedo Carrier must provide the shipper some notice of COGSA package/CFU

liability limitationo Bill of lading in this case afforded fair opportunity notice sufficient to satisfy

whatever essential requirements are imposed by the other courtso Notice was contained in valuation clauseo Issue: Whether actual or constructive notice affords the shipper fair

opportunity? YESo Follows the 9th Circuit – decline to expand the fair opportunity requiremento Affirmed – drilling rig was a package

Have to give fair opportunity to cargo to know that they can pay more and stipulate a higher value on their property so they aren’t stuck with $500A lot of people are willing to take the $500 because as odds go, these things don’t happen often enough

Carrier must give the shipper an opportunity to declare the value of the goods. The carrier bears the initial burden of proving that the shipper was given a fair opportunity to declare the value

If the bill describes the goods as consisting of certain number of packages, and the shipper delivers that number of cargo worthy packages, subsequent action by the carrier should not operate to reduce the shipper’s protection

A provision in a bill of lading limiting the carrier’s liability to less than $500 per package or customary freight until may be valid under the Harter Act but invalid under COGSA

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Application of COGSA’s liability limitations to containerized shipping:

1. When a bill of lading disclosed the number of COGSA packages in a container, the liability limitation of §4(5) applies to those packages; but

2. When a bill of lading lists the number of containers as the number of packages, and fails to disclose the number of COGSA packages within each container, the liability limitation of §4(5) applies to the containers themselves

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DEVIATION COGSA §4(4) – concept of reasonable deviation versus unreasonable

deviation It defines unreasonable deviation COGSA is silent on the issue of whether impermissible deviation makes the

carrier liable for damages to the cargo when there is no causal connection between the deviation and the damage

COGSA provides by implication that only an unreasonable deviation is a breach of the contract of carriage

Also makes certain deviations – those for the purpose of attempting to save life or property at se – per se reasonable and makes others – those for the purpose of loading and unloading cargo and passengers – prima facie unreasonable

Bill of lading may contain a clause which sanctions every conceivable kind of deviation by the vessel from the customary routes and ports of call – liberty clause

If the bill of lading specifies stowage above the deck, COGSA does not apply

1. Was there a deviation in the first place?2. If there was, was it reasonable or unreasonable?3. If unreasonable, what are its effects?

Carrying cargo on deck when bill of lading calls for under cargo storage – most deviated claim

General Electric v. S.S. Nancy Lykes (1983)o 3 locomotive cars shipped by GE were loaded on Lykes to be shipped from

New Orleans to Taiwano Bill of lading allowed them to be stowed on deck due to their sizeo Bill of lading contained liberties clause which defined the scope of the voyage

as usual and customary and allowed the vessel to call any port to take fuelo Decided to add extra port stop, which was not advertised nor communicated

with GE – vessel hit rough waters and 2 locomotives went overboardo Pursuant to agreement with Taiwan, GE was required to replace lost cabso GE brought suit against vessel and owner for unreasonable deviationo District Court held Lykes liable for the loss of the cab based on COGSA §4(4)

which implies that any unreasonable deviation is to be treated as a breach of COGSA and the contract of carriage

o COGSA §4(4) excuses the carrier from liability for an reasonable deviation

You knock out COGSA and all the protections that ship had (navigation, management) and you knock out bill of lading – so under GML, the ships role was insurer in relation to the cargo (it was responsible)

Does deviation have to cause the loss? Modern law of marine insurance usually covers the ship under deviation Today, the one thing that has changed is that they do require causation –

deviation must be causally related to your loss

Deviation to save life or property at sea are examples of reasonable deviationDeviation to load cargo or passengers are examples of unreasonable deviation

NEGLIGENT THIRD PARTIES

• COGSA §3(6) protects the carrier and the ship from suits filed more than one year after delivery of goods• COGSA §1(a) says only that the term carrier includes the owner of the vessel or the charterer who enters into a contract of carriage with a shipper

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• If cargo is damaged at the hands of an independent contractor, the carrier who issued the bill of lading may well be liable for the loss• 3rd parties performing a carrier’s duties were automatically entitled to the benefit of the carriers exculpatory rights

Robert Herd & Co. v. Krawill Machinery Corp. (1959)o ISSUE: Whether the provisions of §4(5) of the COGSA or the parallel

provisions of an ocean bill of lading, limiting the liability of an ocean bill of lading, limiting the liability of an ocean carrier to a shipper to $500 per package of cargo, also apply to and likewise limit the liability of a negligent stevedore

o Nothing in COGSA limits liability from anyone but carriero Stevedore is liable for damageso Only reason why they can’t take carrier is $500 limitationo If Congress wanted to say that independent agents could be a part of

limitation, it should have said soo Absence something in contract, then they didn’t have limited liabilityo Stevedores are liable for damage caused by their negligence

Himalaya Clause: Professor Robinson said what if carrier has to hold agent harmless

Since nothing in contract, couldn’t take advantage of limitation but they can put something in the bill of lading

Favors agents Gives protection to assist carrier Independent agent has to be of the carrier – in privity of contract Not that important if the ship is responsible Exculpatory provision which seeks to extend non-carriers the protections

available to the carrier under COGSA

Instead of giving it to common carrier with published route, you privately contract with owner of the ship for entire vessel

1. Demise or Bareboat Charter Charterer takes possession and operates the ship during the

period of the charter as though the vessel belonged to the charterer (ex. tenant who rents a home)

Charterer provides the vessel’s master and crew and pays the operating expenses

Permits a shipping company to supplement its fleet, perhaps on a temporary basis

Bareboat charter: permits a company to acquire a vessel without incurring the full rights and obligations of legal ownership

Demise charterer may sublease If demise charter has been perfected, the owner is relieved of is

obligations as owner and operator of the vessel for the term of the charter

2. Voyage and Time Charters Obtains the use of the ship in a more limited sense while owner

continues to operate the vessel The owner provides the vessel’s master and crew and pays the

normal operating expenses, while charterer obtains the commercial benefit of having its cargo carried (taxi or limo service)

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i. Specifies amount due for carrying a specified cargo on specified voyage

ii. Owner agrees to carry a specified cargo by a named ship on a single voyage from one specified port or range of ports to another specified port or range of ports

iii. Freight will be barred on the amount of cargo actually loaded on the vessel, with a penalty for failing to load a full cargo

iv. Vessel’s normal operational costs are paid by the ownerv. Charterer will be in a position to influence how quickly

loading and unloading take place – provisions for demurrage to create an incentive for charterers to load and unload the vessel as quickly as possible

vi. Charterer is permitted a certain amount of time, for loading and unloading the vessel. If these operations exceed the allowed time, then charterer must pay the owner “demurrage” at a rate established in the charter party, as a form of liquidated damages for the delay

b. Timei. Specifies the amount due for each day that the vessel is on

hireii. The owner agrees to employ a named ship as directed by

the charterer for the number of voyages that can be completed within a specified time period, with charter hire paid at a specified daily rate

iii. Time charterer is liable for the costs directly connected with the use of the vessel

iv. It is in the charterer’s interest to ensure that every aspect of the operation proceeds expeditiously

v. Typical time charter will include a “cesser of hire” clause specifying the circumstances under which the vessel will be considered

3. The “Slot” or “Space” Charter SLOTHIRE – enable charterer to obtain a specific number of

“slots” on a container vessel Slot charters enable 2 or more carriers to combine their

capacities and offer more frequent service on their routes Charterer simply hires a part of the owner’s vessel, such as a

specified hold or deck, or a specified part of the vessel’s carrying capacity

o Most occur because of bad weather (mostly fog which lessen visibility) and when 2 mariners are not on same wave length

o Maritime law imposes a duty upon the vessel and its operator to protect the vessel’s seamen and passengers from harm

o Crew and passengers injured in a collision of two or more vessels are likely to proceed only against the vessel on which they were serving or being carried

o That vessel, if at fault, may be a joint tortfeasor with the other vessels and will be liable to its passengers and crew for the full amount of their damages

o When a vessel owner makes his claim for the damages to his vessel against the other vessels involved in the collision, he will join with it his claims for contribution for the damages he has paid to his crew and passengers

o While the usual collision case involves collision between two moving ships, the same rules usually regulate accidents in which a moving ship collides with a stationary ship or a fixed object, or a ship runs aground, or a ship’s movement causes damage to another vessel or to other property

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o The basis of liability in collision cases is fault; there is no recovery unless there has been negligence in the navigation or operation of the vessel

o A court may reject a plaintiff’s claim in a collision case by finding that the accident was “inevitable” or was caused by an Act of God

o General test of fault is whether the person navigating the vessel acted as a reasonably prudent mariner at the time of the accident

o Vessels, because of their size and the lack of friction, may not quickly decrease speed, stop or change course

o Collision between them frequently can be avoided only if the mariners in charge of the vessels discover any risk of collision at the earliest possible time and promptly engage in a course of conduct which is designed to avoid collision and with which both mariners are familiar

o International Rules called Collision Regulations – COLREGS were adopted by the US

o Congress then unified one set of rules, the Inland Rules, which apply to all vessels upon the inland waters of the US, and to vessels of the US on the Canadian waters of the Great Lakes to the extent that there is no conflict with Canadian law

o Violation of a custom may constitute fault if the custom is “firmly established by proof” and “well understood” and is not in conflict with the Rules of the Road – Hal Antillen

The Jumnao Jumna collided with flotilla which hit a piero Trial Court determined the incident was the result of an inevitable accident, in

the sense of admiralty law and awarded no damageso Test to use: could the collision have been prevented by the exercise of

ordinary care, caution and maritime skill?o If no negligence can be imputed to either vessel there is a presumption that

they are navigating in a lawful manner and where no fault can be shown the accident may be said to be inevitable

“Inevitable”: act of God; when all precautions reasonably to be required have been taken, and the accident has occurred notwithstanding

The Pennsylvaniao Involved a collision on the high seas between 2 British ships, the Steam Boat

Pennsylvania and the bark Mary Troopo Collision took place in a heavy fogo PA was proceeding too fast for the circumstances, and the bark, contrary to

the provisions of the British Merchant Shipping Act, was ringing a bell instead of sounding a fog horn

o When the look out on the PA was first ported, then put to starboard, but before the steamboat had moved her length, it struck the bark, which was cut in half and sank

o There was mutual faulto When a ship violates a statutory rule it contributes to the cause of the collisiono Burden rests upon the ship of showing not merely that her fault might not

have been one of the causes, or that it probably was not but that it could not have been

The breach by a vessel of its duty to others will not give rise to liability unless it is the cause in fact of the damages

In determining cause in fact, the collision claimant often is aided by the rule in The Pennsylvania and by the Major/Minor Fault rule

Pennsylvania rule is that if a vessel’s negligence is a violation of a statutory duty, the burden shifts to that vessel to prove that its conduct did not and could not have caused the accident

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Major/Minor Rule provides that if the fault of a vessel is uncontradicted and sufficient in itself to account for the accident, there is a presumption that the other vessel was not at fault, or that its fault did not contribute to the collision – genesis of the rule was a desire to alleviate the harshness of the former collision rule of divided damages which provided that each vessel at fault was liable for its per capita share of all damages incurred in the collision, regardless of the degrees of fault of the offending vessels

Hal Antillen NV v. Mt. Ymitos MSo Noordam (passenger liner) collided with Mt. Ymitos (cargo ship)o Waters governed by navigation “traffic laws” – COLREGSo Heading toward each other starboard to starboard, Mt. Ymitos made sudden

turn and Noordam couldn’t avoid collisiono District Court – 90% Mt. Ymitos and 10% fault to Noordamo Can’t sue custom of starboard to starboard passing – COLREG 14 provides

that vessels will ordinarily pass port to porto Proximate cause of collision was poor seamanship of Mt. Ymitos and her

imprudent turn to starboard moments before the collisiono In maritime collision cases, the court must allocate liability

proportionate to the comparative degrees of the parties’ fault

Puerto Rico Ports Authority v. M/V Manhattan Princeo Manhattan Prince collided with pier in Puerto Ricoo PRPA brought in rem action against vessel for damages caused to facilitieso Sujeen (owner of tanker) brought action for damage to blow by Crowley and

compulsory pilot (tugboats hired to help tanked dock)o Was PRPA responsible for negligence of pilot?

Gaines Towing and Transportation v. Atlantia Tankero Gaines towing owned the tug Patricia which was moored at a dock for unload

sand. Coast Guard issued a slow bell broadcast to request passing vessels to reduce their speed. The Atlantia, although it reduced its speed, created a 3 to 4 foot wall of water which caused the Patricia to strike the berth causing extensive damages

o District Court – Patricia was properly moored and Atlantia proceeded through the channel at the correct speed – BUT Atlantia should have taken additional precautions

o Supreme Court affirms an issue of liability but damages were based on errors of law

o When a vessel is damaged in a collision or other marine casualty, the amount of recovery depends on whether it is deemed a total or constructive loss or whether its partial damage justifies repair

o A vessel is considered a constructive total loss when the damage is repairable but the cost of repairs exceeds the fair market value of the vessel immediately before the casualty

o Damages for loss of use may not be awarded when the vessel is a constructive total loss

o District Court remarked that the damages may have exceeded the value of the vessel and therefore, loss of income is essentially out of the question

o If the vessel was a constructive total loss, the court should have awarded damages in an amount equal to the pre-collision market value of the vessel, and should not have awarded any damages for loss of use of the vessel

United States v. Reliable Transfer CO.o Mary Whalen, a tanker owned by Reliable Transfer, was stranded on a sand

bar outside of NY Harbor

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o There was supposed to be a flashing light maintained by the Coast Guard to mark the breakwater, but there was no light

o District Court – 25% fault to vessel 75% fault to Coast Guard – but under admiralty rule of divided damages, the US was liable for ½ damages to vessel

o Issue: Should there be comparative fault in vessel collisions or should divided damages remain in effect?

o US is the only maritime nation not adhering to the rule of the proportional fault

o When two or more parties have contributed by their fault to cause property damage in a maritime collision or stranding, liability for such damage is to be allocated among the parties proportionately to the comparative degree of their fault, and that liability for such damages is to be allocated equally only when the parties are equally at fault or when it is not possible fairly to measure the comparative degree of their fault

o That a vessel is primarily negligent does not justify its shouldering all responsibility, nor excuse the slightly negligent vessel from bearing any responsibility at all

Divided Damages Rule: each vessel now is liable to the other offending vessel in contribution for that part of the total damages proportionate to its fault, and is liable for its per capita share only when the respective faults of the vessels are equal, or when proportionate fault cannot be determined

United States v. Atlantic Mutual Insurance Co.o Cargo owners shipped goods on steamship – Nathanial Bacon – owned by the

USo Collided with Esso Belgium and cargo was damaged; ships also damagedo Bill of lading contained “Both-to-Blame Clause”: requires cargo owners to

indemnify the carrier Bacon for any amounts the Bacon loses because damages recovered by the cargo owners from the Belgium are included in the aggregate damages divided between the two ships

o Issue: Is the Both-to-Blame clause valid?o General Rule: common carriers cannot stipulate for immunity from

their own or their agents negligenceo The Harter Act took away the right of the cargo owner to sue his own carrier

for cargo damages caused by the negligent navigation of the carrier’s servants or agents

o It did not deprive the cargo owner of his tort action against the noncarrying ship

o It would be anomalous to hold a cargo owner, who has an unquestioned right under the law to recover full damages from a noncarrying vessel, can be compelled to give up a portion of that recovery to his carrier because of a stipulation exacted in a bill of lading

o Both to Blame clause is invalid – must only chose oneo Ship does have to indirectly pay the sum of the damageso If there are 2 ships in collision, then the carrier might have to indirectly pay

for cargo damages, if carrier shares the loss with another ship in mutual fault case, then carrier may have to contribute to some of cargo damages

o “Both to Blame” was declared to be a violation of Harter Act

A. INTRODUCTIONo Equitable doctrine in GMLo If the ship is in danger of being destroyed and if destruction is

inevitable and the master in charge of ship decides to do something harmful to vessel or to rid itself of cargo, then we shouldn’t let the loss

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bare the entire loss – we should spread it around to all interests involved

o There must be voluntary sacrifice by the master to move the peril from all interest involved and those whose property is saved must contribute to those whose property was lost

General Average applies only when1. There is a danger to which both vessel and cargo are

exposed;2. The danger is imminent and apparently inevitable,

which means that there is no probable escape except by inflicting loss upon one of the interests;

3. There is a voluntary sacrifice, such as jettisoning cargo or stranding the vessel

4. The attempt to avoid the common peril is successful, and

5. The party seeking contribution from the owners of the other interests is free from fault

The Olerono If a vessel be laden to sail and it happens that a storm overtakes her at

sea, so violent, that she cannot escape without casting some of the cargo overboard for lightening the vessel and preserving the rest of the lading, as well as the vessel itself; then the master may do so as he thinks fit

Noteso Average: damage or loss of ship or cargoo General average is restricted to voluntary sacrifices and expenditures

for the common benefito Common justice dictates that where two or more parties are engaged in

the same sea risk, and one of them, in a moment of peril, makes a sacrifice to avoid the impending danger or incurs extraordinary expenses to promote the general safety, the loss or expenses so incurred shall be assessed upon all in proportion to the share of each in the adventure

o Owner of the property that has been sacrificed is not made whole; instead, the owners of the property saved contribute an amount so that each property owner suffers the same percentage of loss

o Law of average is part of the general maritime law

B. THE SACRIFICENeed voluntary sacrifice in part of cargo in order to save the rest of the cargo

Barnard v. Adams (1850)o Recovery for loss of ship which ran ashore and cargo was uninjuredo Transferred cargo to another ship and sold beached ship because it would

have cost more than the ship was worth to get it off the beacho Argument of jury - If the ship was going to be lost by storm anyway, their

beaching the ship would not entitle them to recovery – they didn’t sacrifice anything

Three factors for general average6. A common danger; a danger in which ship, cargo and

crew all participate a danger imminent and apparently inevitable, except by voluntarily incurring the loss of a portion of the whole to save the remainder

7. There must be a voluntary jettison….or casting away of some portion of the joint concern for the purpose of avoiding this imminent peril…or, in other words, a transfer of the peril from the whole to a particular portion of the whole

8. This attempt to avoid imminent common peril must be successful

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o Ship wants contribution from cargo for general compensation losso If the common peril is directed from the common venture to a certain portion

of venture, then that is the sacrifice they wanto Ship shouldn’t suffer anymore than it’s proportional losso Ship has the same right to demand contribution that the owners of the cargo

would have had against her, had it been cast into the sea to insure her safety

Notes:It has long been debated whether a voluntary stranding ought to constitute a general average act

Ralli v. Troop (1895) o Fully loaded vessel was morred at port when fire broke out in cargo holdo Port authorities took direction and put vessel agroundo Master removed part of the cargo and wanted to get more, but port

authorities wouldn’t let himo Port authorities scuttled the vessel o Rest of cargo was saved in a damaged conditiono Vessel owners claimed general average contributions from cargo that was

savedo Must meet 3 criteria to meet the general average acto If 3rd party orders action, then there is no protection under general

average, but if master agrees to action, there is protection under general average

o Voluntary sacrifice can’t be to save some third party not under the ventureo Court comes down on who made the sacrificeo USSC would not allow general average – this was not a voluntary sacrificeo Motive of the port authorities was unclear and in order to constitute a

general average, the sole object of the sacrifice must appear to have been to save the vessel and cargo

o A sacrifice of vessel or cargo by the act of a stranger to the adventure, although authorized by the municipal law to make the sacrifice for the protection of his own interests or those of the public, gives no right of contribution

C. THE PERILNavigazione Generale Italiana v. Spencer Kellogg & Sons, Inc. (1937)

o Mincio was stranded on a muddy river bottom and anchors were run outo When it finally came free, it ventured to New York where it dropped off it’s

cargo and was dry docked to assess damageso Owner of Mincio asserted general average lieno If the danger be real and substantial, a sacrifice or expenditure made in

good faith for the common interest is justified, even though the advent of any catastrophe may be distant or indeed unlikely

o Elements of general average were meto Any time a ship cannot move in its element, the ship is in perilo There must be a fair reason to regard a vessel in peril in order to require a

contribution in general average. While the courts in some cases have used expression indicating that both in general average and salvage cases it is essential that the property at risk be subject to an immediately impending danger

o When a vessel is stranded she and her cargo are practically always in substantial peril

NOTESIf there is a peril, but the master is mistaken as to its degree and takes more drastic action than necessary, general average can still be allowed

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D. VESSEL FAULTo American law, before the passage of the Harter Act, gave no general average

right to the ship through whose fault the peril arose and that clauses which exonerated the ship from liability to the cargo for negligence was invalid

o Harter Act §3 exonerated shipowner from liability under certain conditions for cargo damage due to negligence in navigation and management of the ship but at the same time removed the bar against his entitlement to general average contribution where his negligence created the peril

o Jason clause: included in a bill of lading a clause providing that where the general average situation arose through negligence of the ship, from the effects of which she would be exonerated by Harter Act, and where her owners exercised due diligence to make her seaworthy, general average was to be payable

The Jason (1912)o Steamship Jason, while on voyage from Cuba to New York with 12,000 bags of

Arbuckle sugar was stranded off the Coast of Cuba through negligence of navigators

o Jettisoned 2,042 bags of sugar, 1,657 bags of Arbuckleo Sacrifices were necessary to relieve the ship, cargo and freight from common

perilo Adjusters determined that Arbuckle owed general average contribution of

$5060.24o Arbuckle refused to pay on the ground that the stranding resulted from the

ship’s negligenceo Bill of lading contained provision for imminent perilo There was a common, imminent peril involving ship and cargo, followed by a

voluntary and extraordinary sacrifice of property, necessarily made to avert the peril, and a resulting common benefit to the adventure

o Is the Jason Clause valid? YESSince the Harter Act has relieved the shipowner from responsibility for the negligence of his mater and crew, it is no longer against the policy of the law for him to contract with the cargo owners for a participation in general average contribution growing out of such negligence

Federal legislation (The Harter Act and COGSA) relieves the carrier from liability to the cargo owner for some of the consequences of his fault, such as that incurred in the navigation and management of the vessel

Carriers began inserting clauses in bills of lading providing that general average is payable if it arises through negligence of the carrier for which he is exculpated by the Harter Act – Jason Clauses

E. RIGHTS OF VESSEL AND CARGO: THE ADJUSTMENT

Zim Isreal Navigation Co. v. 3-D Imports, Inc. (1998) Zim Isreal owned container ship Zim Montreal Cargo from Far East was loaded on Montreal to be shipped to North America

and Europe Hatzlachh Supply was owner of cargo to be shipped to the US Montreal suffered fire damaging some of the cargo, including a portion owned

by Hatzlachh Bill of Lading – General average to be adjusted to any port of place at the

Carrier’s option and to be settled according to York-Antwerp Rules of 1974 Zim hired Richards Hogg, Ltd. To conduct General Average Adjustment Adjustment showed Hatzlachh both owed and was owed money Zim acted as Trustee, responsible for collecting general average contributions

and disburse them Many cargo owners refused to pay their contribution

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Zim commenced this action to collect contributions owed Hatzlachh asserted counterclaim for its proportionate share of the General

Average Fund Dispute centers on whether a shipowner can he held liable for failure to

apportion the loss suffered by cargo owners equally among all of the participants in the adventure

General Average does not require that every partner who suffers a loss be fully compensated, but it does require that all partners to the adventure share the loss equally

Hatzlachh is entitled to same percentage of its claim as all of the other owners whose cargo was lost – since Zim paid all of the other cargo owners 100% of their proportionate share under the Adjustment, it must pay Hatzlachh 100% as well

The one’s who suffered losses get 100% of their loss paid based on adjustment

No one gets 100% made absolutely whole in general average Hatzlachh claim was time barred and ship wanted to pay it less than 100% of

what adjustment said was coming to it

Most of salvage is GML Response to a need b/c in the ocean you don’t have emergency vessels to

come out if you have emergency so there is a need to encourage the private ships to perform salvage services

Whole idea – get as much value back to the owner as you can get b/c if you damage owner too much, it is going to hurt maritime commerce

Give enough of a reward to try to induce salvor’s to get the property back to the owner and not to embezzle property

Salvage 2nd most important maritime lien – pure marine salvage Exclusive federal jurisdiction in admiralty Elements of salvage

o Must be a marine peril – peril that threatens the vessel and cargo with destruction

o Voluntary act on part of salvor – if the other ship is already under legal duty to salvage this ship, then the owner can’t be hit of the ship in trouble (crew cannot participate in the salvage of their own ship)

o Must be successful in whole or in part

Markakis v. S/S Volendam (1980)o S.S. Monarch Sun, now known as Volendam, brought suit to recover a salvage

award for services allegedly rendered to the S.S. Monarch Star – both were passenger cruise voyages

o Star sustained engine failure while sailing off the northern coast of Cuba and the emergency generator failed

o Sun, which was en route from Florida to Puerto Rico, received a TMP radio-telephone message that the Star was disabled and instructed Markakis to change course and render assistance to the Star

o Sun altered its courseo When it reached the Star, the two captains agreed on procedures for

transferring the passengers, some of the crew, baggage, and provisions of the crippled ship to the Sun

o Captain Avdelas and other members of the Star remained on boardo TMP ordered Markakis to tow the Star farther away from the coast of Cuba and

into the Old Bahama Channelo The purpose of the tow was to bring the ship “to a safer place” until a tugboat

sent from Miami by the Star’s owners arrived and finished the job

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o Sun resumed its journey, embarking at destinations on its own route as well as those that would have been on the Star’s itinerary

o The Star was close to Cuba during the entire ordealo In order to prevail upon a claim for salvage award, the plaintiff must prove

three essential elements: 1) A marine peril; 2) Service voluntarily rendered when not required as an existing duty or from a special contract; 3) Success in whole or in part, or that the service rendered contributed to such success

o Owners of the Star are liable to the captain and crew of the Sun for salvage services performed

o Court found that the service was a salvage service of a low grade Salvage is inherently a property reward No reward under salvage for pure life salvage - Under GML, you

received no reward for saving lives at sea

The Salvage Act includes a 2 year statute of limitations; life salvors had a right to share in the property salvage award if life and property are salvaged on the same occasion

o Salvage v. Towageo Whether a contract is one for towage or for salvage has several

consequences. If the fee is not agreed to, salvage service commands a larger award. Under a salvage contract, not only is the vessel liable for payment, but the cargo is as well. A salvage contract, not only is the vessel liable for payment, but the cargo is as well. A salvage contract also creates a “preferred” maritime lien, which has a higher priority than the maritime lien created by a towage contract

o Salvage of one’s own shipo Seaman are generally not entitled to salvage of their own vesselo Crew members have a pre-existing duty to save their own ship

o Statutory duty to stand byo In case of collision, vessels are required by statute to stand by and

render necessary assistance o No cure- no pay

o Under the general rule there can be no reward if nothing is savedo What services count

o Salvor need only contribute to the saving of the property to be entitled to salvage

Margate Shipping Co. v. M/V JA Orgeron (1998)o During tropical storm the Cherry Valley, an oil tanker belonging to Margate

Shipping Co., rescued a barge containing a valuable external fuel tank for NASA’s space shuttle

o Orgeron’s distress call had been picked up by Cherry Valleyo Cherry Valley’s master immediately altered course to rendezvous with the tugo Cherry Valley was able to take the flotilla in tow and her propeller was

churning in mudo Margate filed cross claim for salvage against USo Judge Duval stated that Margate was entitled to a salvage award equal to

12.5% of the value of the salved property – he relied on 6 traditional factors first announced in The Blackwall

o An award will be altered only if it was based upon incorrect principles of law or misapprehension of the facts or it is either so excessive or so inadequate as to indicate an abuse of discretion

o The greater the value of the threatened property, the greater the potential loss, and, the more the salvee would be willing to pay to save the property from destruction

o Value of the salved property is one of the most important factorso There is no market of any kind for space shuttle fuel tanks, there can be no

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o The most appropriate measure of value is replacement cost

Usually the cargo on the salving vessel, does not participate in salvage award unless it has been contracted in that he will participate in the contract for carriage

A salvor’s misconduct may reduce or eliminate an award A salvor’s negligence will reduce the reward The reasonable care requirement is adjusted in light of the emergency Refusal of salvage: A vessel owner can decline the assistance of

others so long as only the owner’s property interests are at stake; BUT you have to know that others are attempting to salvage the vessel

Sea Hunt, Inc. v. Unidentified Shipwrecked Vessel (2000)o Abandoned Shipwreck Act (ASA) of 1987 asserts the United States’ title to

any shipwreck that is abandoned and embedded in the submerged lands of a state and then in the same provision transfers that title to the state

o Sea Hunt spent $1 million in conducting searches and claims to have found 2 shipwrecks

o La Galga, 50 foot frigate commissioned into the Spanish Navy in 1732 which sank off the coast of MD/VA border; most of the crew and passengers reached land safely

o The Juno, 34 frigate entered the service of the Spanish Navy in 1790; 413 sailors, soldiers and civilians perished in the sinking of the Juno; location of the wreck was not discovered until Sea Hunt’s efforts

o District Court issued an order directing the arrest of the shipwrecked vessels and granting Sea Hunt exclusive rights of salvage until further notice

o Court directed Sea Hunt to send specific notice of the action to both the US and to Spain

o US moved to intervene and filed a verified claim on behalf of Spain because of 1902 Treaty of Friendship and General Relations between US and Spain provides that in cases of shipwreck, damages at sea, or forced putting in, each party shall afford to the vessels of the other…the same immunities which would have been granted to its own vessels in similar cases

o District Court found that the US lacked authority to appear on behalf of Spain and granted Spain 90 days to refile a verified claim

o Spain’s verified claim stated that the Kingdom of Spain was and still is the true and bona fide owner of the vessels Juno and La Galga and that title and ownership interest in said vessels has never been abandoned or relinquished or transferred by the Kingdom of Spain

o In order for Virginia to acquire title to the shipwrecks and to issue salvage permits to Sea Hunt, these vessels must have been abandoned by Spain

o When an owner comes before the court to assert his rights, relinquishment would be hard, if not impossible to show

o Under admiralty law, where an owner comes forward to assert ownership in a shipwreck, abandonment must be shown by express acts

o There was no abandonment of either La Galga or Juno

Abandonment – the owner has given up his claim to the vessel without the intention to returning to it and without the hope to salvage itIf property is owned by someone:

1. May have to get permission to salvage it and owner can refuse which is what Spain did – sovereign has to express in writing the specific abandonment of their vessels, the passage of time alone is not enough to constitute an abandonment – must show some express act that indicates their intention to give up treasure

Contract Salvage

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o Often happens that a salvor will contract with a vessel owner before saving the vessel

o Common for the contract to leave the amount of compensation open to later determination by arbitration

o Commonly used form contracts, a Lloyd’s Standard Form of Salvage Agreement (Lloyd’s Open Form) provides for arbitration in LondonSeveral Courts have recently held that this contract is unenforceable in purely domestic context when a US vessel is salvaged by US salvor in US waters

o Courts will overturn the K if there is any overbearing

Peninsular & Oriental Steam Navigation Co. v. Overseas Oil Carriers, Inc. (1977)

o Overseas Progress, American tanker traveling in the mid-Atlantic Ocean, en route from Isreal to Baltimore. Ship’s fireman, Turpin, was stricken with severe chest pains and Overseas Progress did not have a doctor aboard. Overseas officers aided Turpin as best they could. Captain Lidwin, sent out radio message calling for responses from all ships in the vicinity with doctors aboard. The Canberra was requested to rendezvous with the Overseas Progress and provide treatment for the ailing seaman. In the course of their radio communications, the masters of the Canberra and the Overseas Progress briefly considered the allocation of the rescue effort’s costs. Canberra’s owner, P&O, may look to the owner of the Overseas Progress for reimbursement of diversion costs, medical and out of pocket expenses. Lidwin did not in any way indicate that such compensation would be refused

o Judge granted recovery of $500 for nursing services but denied any reimbursement for the Canberra’s additional fuel expenses - Under traditional admiralty doctrines of salvage, there could be no reward for pure life salvage

o Principles of quasi-contract require recovery – performance of another’s duty to a 3rd person, if rendered by one qualified to provide such services with intent to charge for them, is a ground for recovery in quasi-contract

o This is not a case in which good Samaritan volunteered his services without the knowledge or consent of the person whose duty was discharged

o P&O is not seeking a reward; it merely requests reimbursement for its expenses

o We believe this rule will encourage seaman aboard large vessels to perform their moral obligation to their brethren on smaller ships without fear their benevolence will result in unreasonable expenses to their ship’s owners

o But this is not pure life salvage, they are not asking for salvage rewardo Pure life salvage does not prevent us from giving a reward in this case – with

seaman involved, he may have an out because the employer (Overseas) has a duty when a seaman is injured or falls ill to make sure under the doctrine of M&C that he does everything possible within reason to get him to medical care

o M&C is only owed by the employer and is a nondelegable dutyo Canberra who carried out the duty of M&C that is imposed on Overseas,

invokes equitable contract doctrine of unjust enrichment b/c if we didn’t have reimbursement, then Overseas would be enriched

Raises the issue of life salvageUnder GML of salvage, there is no award for pure life salvageProblem with life salvage is that there is no fund – you need property for there to be a fundLiability salvage is the new theory – if these guys had not picked up people from the water and onboard the ship, that ship and it’s owner would have been responsible for wrongful death awards

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Three ways to get around life salvage1. Unjust enrichment – if you voluntarily carry out an obligation

imposed on someone else and you save the other side money, if we don’t even it up, the person who carried out the obligation would be out and the person whom he carried out the obligation for would be unjustly enriched

2. Giving them property salvage to make up for life salvage3. Liability salvage

When a party has a maritime lien, the party can sue the vessel in rem

A. PERSONIFICATION THEORY

There is no general rule of separating in rem and in personam liability, and the personification theory of the ship is a legal fiction that fails to explain the basis of the maritime lien

The true nature of the maritime lien is that it is a special security device that accompanies and is not separate from in personam liability

If an in personam action is dismissed, it is ordinarily a bar to a subsequent action in rem; a dismissal in rem is res judicata to a claim in personam

Limited liability (in rem) is proper when the breach of duty is committed by a 3rd party in control of a vessel

A maritime lien is a secret lien that is not recorded any place Maritime line does not require possession In rem action exists solely to execute a maritime lien on a vessel Allows you to get jurisdiction over the ship where you can’t get personal

jurisdiction over the owner Admiralty court will sell vessel free of lien to pay off debt Wipes vessel totally clean of any interest Best place in the world to buy a ship is in maritime lien sale b/c you get it free

of all past liens Lien is so dangerous because when you put secret together with non-

possessory, you have ship out there concurring debts all over the world

The China Ship went into NY waters and NY has compulsory pilot law Pilot screwed up and ran another vessel down Seized the China to execute in rem lien that arose against the vessel Ship owner says he was not at fault because pilot was not his employee Court imposed liability on the ship which we personify and treat just like a

personal Δ In this case, the real owner is innocent, but it does not render the Court from

going in rem to the vessel to satisfy the lien Admiralty court has exclusive in rem jurisdiction over foreclosure of

maritime lien of a vessel

Harmer v. Bell (1852) – The Bold Bucchleugh – Developed the maritime lien Bold Bucchleugh, steamship, ran down and sank the William in Humber River

in England Suit was brought in rem in England, but the Bold Buccleugh left for Scotland

before process could be served on it Wiliam’s owners sued the owner of the BB in Scottish Court of Sessions Steamer was attached in Scotland and released on bail and sold to Harmer

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When vessel returned to England, it was arrested and Harmer contested the power of the admiralty court to entertain the suit – Harmer said he had no notice of the collision claims

Issue: Whether the bona fide sale of the vessel after the damage, without notice to purchaser, discharged the vessel from liability – NO

Held that a lien for collision damage could be enforced against the offending ship in the hands of an owner who had bought her after the collision and whose good faith and lack of notice the court was willing to assume

Admiralty court had jurisdiction and the sale of the vessel had not released it from responsibility of collision

The claim travels with the thing, into whosesoever possession it may come – in rem action

Personification Theory: under American Law, the ship can be liable in rem even if the owner of the vessel is not liable in personam

Most maritime lines are based on judge made law One of the advantages of having a maritime lien is that it provides the

successful claimant with the ability to have the arrested vessel sold free and clear of all liens, even those not before the court

When a court orders the sale of a vessel pursuant to an attachment in an in personam proceeding, the buyer acquires only the interest of the defendant, subject to all other interests and liens

Cavcar Co. v. M/V Suzdal (1983) Operator of a vessel entered into contract with Iran to sell Ford Broncos When ship arrived in Iran, the consignee refused to preclear the cargo (ship

would have to pay the import tax) Ship waited and no one took delivery so the operator ordered the ship back to

the US Cargo was seized and sold in the US Action by Iranian entity who didn’t receive Broncos for breach of contract of

transportation because duty of ship is to carry safely at the appointed time, deliver it safely and they never delivered the Broncos

Claim was that the owner of the vessel had his master on the vessel, but the vessel was really run by operating company

Master didn’t sign the bill of lading Issue: Whether a vessel may be liable in rem for breach of the contract of

carriage by the operator of the vessel when the vessel’s owner is not liable in personam for the breach

There is in rem liability Although the master of the Finn Amer did not sign the bill of lading for the

Broncos, the departure of the ship from Philadelphia with the cargo on board effected an implied ratification of the bill of lading, binding the ship to the obligations therein, including the duty to deliver the goods at the designated port

Vessel is liable in rem even though Amer Sea is not personally liable in contract for the breach

Once the ship begins its voyage with the cargo on board, then the ship personified ratifies what was originally a personal contract of someone else – it is now the ship’s contract

Limitations on the personification theory Dismissal or settlement of an in rem claim will bar relitigation in an in

personam action on the grounds of res judicata

B. CLAIMS THAT GIVE RISE TO MARITIME LIENS

Osaka Shosen Kaishu v. Pacific Export Lumber Co. (1923) - The Saigon Maru

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Kaisha, incorporated under the laws of Japan, owned The Saigon Maru which it chartered, including her deck, to Lumber Company to carry full load of lumber from Columbia, OR to Bombay

Cargo was loaded and filled the under deck cargo space and the captain refused to accept more

Lumber Co insisted the vessel was not loaded to capacity and demanded she receive more and libeled her, setting up the charter party and the captain’s refusal and claimed substantial damages

Owner gave bond, the vessel departed and safely delivered her cargo Kaisha excepted to the libel upon the ground that the facts alleged showed no

lien or right to proceed in rem The theory that partial acceptance of designated cargo under a contract of

affreightment creates a privilege of lien upon the ship for damages resulting from failure to take all, is inconsistent with opinions of the court

A ship may not be proceeded against in rem for refusal to receive cargo, though the refusal may be a breach of the maritime contract of carriage

The maritime lien in favor of cargo arises as a result of a default occurring after the cargo is loaded and the physical relation of the ship and cargo is established

No case had actually held a lien in favor of cargo to arise for damages for the nonperformance of the unexecuted portion of a partially executed contract

When cargo is shipped under a voyage or time charter, the shipowner has a lien for its freight on the charterer’s cargo

Krauss Bros. Lumber Co. v. Dimon Steamship Corp. (1933) The Pacific Cedar Contract of affreightment provided for the shipment of lumber from the Pacific

Coast to East Coast ports at the rate of $10 per thousand feet but with a provision that in the event “a regular intercoastal carrier moves similar cargo at a lower rater” the lower rate should be applied

Payment was made at $10 rate , both parties acting in good faith Subsequently it was discovered that a regular intercoastal carrier had moved

lumber at a lower rate and the shipper, in an action to recover overpayment, libeled the ship in rem, joining an in personam libel against the owner

Where vessel agreed to carry cargo at specified rate or such lower rate as should be used for similar cargo by regular intercoastal carrier, and freight at specified rate was paid in ignorance that such lower rate had been so used, shipper was entitled to cargo lien on vessel for excess freight so paid.

A cargo owner with a general average claim has a maritime lien against the vesselA vessel’s general average claim gives rise to a lien against the cargo

C. THE FEDERAL MARITIME LIEN ACT (FMLA)

SHIPE MORTGAGE ACT: A person providing necessaries to a vessel on the order of the owner or person authorized by the owner

1. Has a maritime lien on the vessel2. May bring a civil action in rem to enforce the lien;

and3. Is not required to allege or prove in the action that

credit was given to the vessel

The following persons are presumed to have authority to procure necessaries from a vessel:

2. The owner3. The master4. A person entrusted with the management of the

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5. An officer or agent appointed by:a. The ownerb. The chartererc. An owner pro hac vice; ord. An agreed buyer in possession of the vessel

1. Providing necessaries to a vessel

Silver Star Enterprises, Inc. v. Saramacca MV (1996) SMS operated a shipping container service which owned or chartered 8

different vessels, including Saramacca on which Silver Star had 2 preferred ship mortgages

Trans Ocean began furnishing up to 100 22 cargo containers to SMS fleet pursuant to a Master Container Lease

Silver Star commenced in rem action to enforce ship mortgages against Saramacca

Trans Ocean claimed maritime lien rights arising from the lease of containers Saramacca was seized and sold Trans Ocean – 64 container were used aboard the vessel and 10 were aboard

the seized vessel District Court – partial SJ in favor of Trans Ocean acknowledging a maritime

lien for past due rentals, etc. for the 10 containers Silver Star appealed Silver Star furnished containers to SMS, not the SMS vessels, and it was SMS

which dictated upon which vessel the containers were placed Neither party knew aboard which ship a particular container would be placed

at any given time Silver Star has failed to demonstrate that necessaries were provided to a

vessel as required by the FMLA

“Necessaries: include: Repairs Supplies Towage Use of a dry dock or marine railway Goods or services that are useful to the vessel, keep her out of danger, and

enable her to perform her particular function

2. On the credit of the vessel

Statute creates a rebuttable presumption that the one who provides necessaries to a vessel extended credit to the vessel

3. Presumed authority

Statute lists several persons as having presumed authority to procure necessaries, but this presumption can be rebutted

Owners of vessel under charter have frequently tried to protect themselves by inserting a “no lien” or “prohibition of lien” clause into the charter party

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c. PRIORITY AMONG MARITIME LIENS

The John G. Stevens (1898) Issue: Is the lien for damages by the collision to be preferred to the lien for

supplies furnished before the collision? The collision, as soon as it takes place, creates as security for the damages, a

maritime lien or privilege in the offending ship Issue: Whether a claim by a tow against her tug, for damages coming from

collision with a 3rd vessel b/c of negligent towage, is a claim in tort A claim of tow against tug for negligent towage outranked claims for supplies

furnished to the tug during the 3 months preceeding the damage to the tow The lien for damages occasioned by the negligent towage must be

preferred to the previous liens for supplies

The “beneficial service” rule theorizes that some services contribute more than others to the preservation of the vessel and its continuing operation and consequently are entitled to a superior position in the hierarchy of liens

The William Leishear (1927) Schooner William Leishear was sold and this proceeding was to determine the

rights of the libellants to share in the proceeds from the sale General rule that maritime liens rank in an order inverse to the order of their

creation General order of priority

o Seaman’s wages 5 sailors with contracts with the ship lien is allowed

o Salvage Salvor was son of owner of vessel Didn’t bring claim until 7 months later Court cut down the award

o Tort and collision lienso Repairs, supplies, towage, wharfage, pilotage, and other necessaries

Labor and materials used to repair ship created lien Wharfage for time of domestication Services for watchman not allowed Services for transporting sail is not allowed

o Bottomry bondso Nonmaritime claims

d. SHIP MORTGAGES 1920 – Ship Mortgage Act – gave maritime lien status to certain ship

mortgages In order to have lien status, a ship mortgage must qualify as a “preferred

ship mortgage”

Requirements for preferred ship mortgage:4. It must include the whole of the vessel5. It must be filed with the Coast Guard in substantial compliance with

the requirements of §313216. It must cover a documented vessel or a vessel for which an application

is filed that is in substantial compliance with the documentation statute and regulations

Preferred maritime lien means a maritime lien on a vessela. Arising before a preferred mortgage was filed [with the Coast Guard];

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Inverse-order doctrine

Ordinary maritime liens the usual rule is inverse-order preferenceShip mortgages the order of priority is reversed

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b. For damage arising out of maritime tort;c. For wages of a stevedore when employed by a person listed in §31341

[as having presumptive authority to procure necessaries for a vessel];d. For wages of the crew of the vessel;e. For general average; orf. For salvage, including contract salvage

Governor & Company of Bank of Scotland v. Maria S.J. M/V (2000) Bank of Scotland libeled Maria in rem seeking to enforce preferred ship

mortgage and former crew members of the vessel intervened, alleging the Golden Lines Shipping owned the vessel and had failed to pay wages pursuant to settlement agreement between Golden Lines and union for the crewmembers

Bank purchased the Maria using the outstanding amount of mortgage in a credit bid in lieu of cash payment

Bank posted a letter of undertaking for the amount of the purchase to pay any final judgment in relation to any claims against the vessel that are held to have priority over Bank of Scotland’s claims against the vessel

A preferred ship mortgage enjoys priority over all claims against a vessel, with the exception of expenses and preferred maritime liens

Wages of the crew fall within the category of preferred liens Claims for seamen’s wages enjoy priority status over a preferred ship

mortgage Issue: Whether proceeds from the sale of Maria constitute an interest of the

owner or master such that the crewmembers may claim against the sale proceeds for penalty wages?

Owners lack any real interest in the proceeds of sale Permitting a penalty wage claim against the proceeds would essentially

penalize a party other than the owner or master, be it the Bank or some other creditor

Proceeds from the sale of the Maria are available to pay the crewmembers’ claims for unpaid wages

Penalty wages are not payable out of the proceeds from the sale of the vessel

e. BANKRUPTCY

Bankruptcy courts have jurisdiction “over the validity and priority of maritime liens”

The bankruptcy judge has full authority to administer the debtor’s maritime property, including the power to sell a vessel free and clear of all liens

Once the bankruptcy petitioner is filed, in rem action against the debtor’s property must cease

The automatic stay of 11 U.S.C. §362 kicks in, and the bankruptcy court acquires exclusive jurisdiction over the res

United States v. The Chandon (1989) Tractug obtained loan from the Federal Maritime Administration (MARAD) to

finance construction of 3 vessels, one being the Chandon. Tractug executed US Government guaranteed ship financing notes in the amount of $17 million. Tractug defaulted in payments and MARAD had the right to foreclose on its first preferred fleet mortgage, which it did and libeled the vessels

Tractug filed voluntary reorganization under Chapter 11 of Bankruptcy Act and the vessels were released from arrest due to automatic stay provision of 11 U.S.C. §362(a)(4)

Bankruptcy court approved a wage deferral agreement which permitted the vessels to continue to operate and provided that Tractug would pay the crew

US brought this admiralty foreclosure action in rem Crew members intervened seeking to enforce maritime liens for their wages

earned prior to the automatic stay and wages deferred pursuant to the agreement approved by the bankruptcy court

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Issue: Whether the rights of a seaman under admiralty law prevails those of debtors under bankruptcy laws

Maritime liens for seaman wages have priority over a preferred ship mortgage and are sacred liens entitled to protection

Automatic stay provisions of Bankruptcy Act did not apply to maritime lien for seamen’s wages earned after filing of vessel owner’s petition for reorganization

Congress’ omission of any reference to maritime law in §362(a)(4) as evidence of its intention to limit the reach of that statute to land-based transactions where (1) recording of a lien interest is required and (2) the creditor first is time is entitled to privity

District Court must distribute the funds received from the foreclosure sale according to the priorities established under maritime law

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