Opinion
Civil Action No. 00-0475
March 31, 2003
Before the Court is a Motion to Deem the Arrest of the M/V OCEAN D Wrongful [Doc. 45] and to award damages as a result of such arrest. The Court having studied the legal memoranda submitted by both parties, the record, and the applicable law, is fully advised on the premises and ready to rule.
ORDER AND REASONS
I. BACKGROUND:
On February 14, 2000, Pace Shipping ("Pace") requested the arrest of Ocean Pride's vessel the M/V OCEAN D. This Court on three previous occasions found Pace did not have a valid maritime lien. See Order Vacating Arrest and Reasons, Doc. No. 8, February 18, 2000; Order and Reasons, Doc. No. 18, February 22, 2000; Order, Doc. No. 43, March 5, 2001. However, the Court did not determine the merits of the alleged wrongful arrest.
Petrobras of Brazil ("Petrobras") in Rio Grande, Brazil supplied bunkers, which are the subject of the arrest, to the M/V HAIGHT, in October 1999. On November 26, 1999, Ocean Pride purchased the then M/V HAIGHT renaming it the MN OCEAN D ("the vessel"). Universal Chartering, Inc. ("Universal") chartered the vessel while contracting with Pace to supply the bunkers in Brazil in October 1999. In turn, Pace contracted with O.W. Bunker Malta Ltd. ("O.W. Bunker") to provide the bunkers in Brazil. O.W. Bunker ultimately contracted with Petrobras for the delivery of the bunkers. Petrobras obtained payment from O.W. Bunker for the delivery of the bunkers. However, O.W. Bunker never received payment from Pace.
The vessel's arrest occurred while discharging cargo in port on the Mississippi River. The arrest of the vessel stopped all discharging of cargo and operations in port. Disagreement arose as to the filing of a motion allowing for the continuance of the discharge of cargo and movement in port and as to the indemnification of the U.S. Marshal. This disagreement led to a delay of more than thirty hours before the vessel again began to discharge its cargo. It is alleged that this delay prevented the vessel from timely meeting its next fixture, a cargo of corn, on the Mississippi River. The vessel remained idle for more than five days before a new charter and fixture was attained.
On June 19, 2002, this Court held an evidentiary hearing on the Motion to Deem the arrest of the M/V OCEAN D wrongful, filed by the defendant, Ocean Pride. At the hearing, live testimony was heard from Mary Giannioti, George Whitfield, and Dimitrios Gianniotis. After the hearing, the Court issued instructions to both parties to simultaneously file post-trial memoranda two weeks after the hearing date. On July, 5, 2002, Defendant filed certified English translations of two letters from the Hellenic Telecommunications [Doc. 65], which had been admitted into evidence at the evidentiary hearing as exhibits 20 and 21. The Defendant also submitted to the Court [Doc. 66], the original log book for the M/V OCEAN D, Vol. 1, previously admitted into evidence as exhibit 15(a). The Court granted leave to file, and subsequently admitted these into evidence. In accord with the direction of the Court, each party filed post-hearing memoranda [Plaintiff: Doc. 64; Defendant: Doc. 68].
II. ARGUMENT OF DEFENSE IN SUPPORT OF THE MOTION:
Ocean Pride claims Pace is not the holder of a maritime lien through subrogation because Pace fails to meet the three requirements set forth by the rule of advances. The rule of advances requires that the money (1) be advanced to a ship, (2) be advanced on order of the master or someone with similar authority, and (3) be used to satisfy an outstanding or future lien claim. Tramp Oil and Marine Ltd. v. M/V Mermaid I, 805 F.2d 42, 45 (1st Cir. 1986) citing 2 Benedict on Admiralty 33, at 3-12-3-13 (7th ed. 1986) (footnotes omitted). Ocean Pride argues that requirements (1) and (3) of the rule of advances have not been satisfied because Pace merely submitted a highly suspect, after-the-fact assignment by O.W. Bunker on February 18, 2000, four days after the arrest of the vessel. Furthermore, Ocean Pride points to the former ruling of this Court on February 22, 2000 concluding no evidence had been established indicating that Pace became subrogated to the rights of the supplier, Petrobas.
Next, Ocean Pride asserts that Pace lacks standing to pursue this cause as a lien claimant because it possessed actual notice of the no-lien clause in the Universal charter. Pace provides only a certified copy of the front of the delivery ticket at issue to prove an absence of a non-encumbrance stamp, and thus absence of actual knowledge of a no-lien clause. Again, Ocean Pride refers to this Court's previous finding on February 22, 2000 that this photostatic copy of the front page of the delivery ticket was not persuasive evidence.
However, Ocean Pride argues whether or not the bunker receipt includes a non-encumbrance stamp is irrelevant because Pace's actual notice of the no-lien status stems from the relationship between Pace and Universal, through George Whitfield ("Whitfield") because, (1) Whitfield held wide authority to and actually did manage and operate all the matters of Universal due to his 50 percent ownership of Universal, (2) Whitfield witnessed an addendum to the applicable charter party, (3) Whitfield was aware of the no-lien clause in that charter party, and (4) Whitfield, by admission, was (and still is) the managing director of Pace Shipping, and yet proceeded to arrest the M/V OCEAN D.
To further establish this inter-relationship between Universal and Pace, Ocean Pride attempts to show that the two companies have a common managing director, Whitfield, and the same physical address. Ocean Pride points to the Power of Attorney filed in favor of Whitfield in the Panamanian Registrar's Office by Universal. Also, Ocean Pride references the Court of First Instance of Piraeus, Greece decision that concluded that not only did Whitfield have control and part ownership of Universal, but it concluded Universal was essentially a branch of Pace.
Next, Ocean Pride offers the affidavits of John Polyzois, a broker involved in the sale of the M/V OCEAN D to Ocean Pride, and Dimitrios Giannotis, the Managing Director of Baru Delta Maritime, Ltd., the managers for Ocean Pride and the M/V OCEAN D. Through these affidavits, Ocean Pride claims the closing for the M/V HAIGHT (renamed the M/V OCEAN D) took place at the seller's law office in London, England, although all three parties of the closing (Haight Street Partnership, Ocean Pride, and Universal Chartering) were in different places — London, Piraeus, and Glyfada. Therefore, the charter party addendum was separately executed in each place.
Both Polyzois and Giannotis in their separate affidavits claim to have received the signature page of the addendum that contained the handwritten name of Whitfield via telefax. Also, Polyzois and Giannotis claim to have understood that at the time of the vessel sale, the managing director of Universal was Whitfield. Furthermore, Polyzois stated that Whitfield was the director of both Universal and Pace and that Universal had no other office but inside the Pace office.
Next, Ocean Pride attacks Pace's defense that even if Whitfield witnessed the NYPE charter party addendum of November 26, 1999, it has no bearing on the validity of the lien, which was originally created on October 16, 1999. Because Whitfield was not only a shareholder but also a director of Universal when the addendum and the original charter party were executed, he obviously had access to the original charter party containing the no-lien clause, particularly since the original charter party was incorporated into the addendum. Again, Ocean Pride relies upon this Court's February 22, 2000 ruling that Pace and Universal were in the same place. at the same time doing the same thing with Whitfield, who was acting as the managing director of Pace.
Finally, Ocean Pride contends that Pace acted in bad faith, with malice, and gross negligence in arresting the M/V OCEAN D by failing to allow the vessel to shift and continue cargo operations in port. Moreover, on the second day of the arrest, Pace's counsel refused to indemnify and hold harmless the U.S. Marshal. Pace's refusal to cooperate throughout the arrest process suspended cargo operations for thirty-six hours. This suspension caused Ocean Pride operational delays and ultimately caused it to lose its next charter.
Ocean Pride calculates their damages as follows:$11,700.00
1. Loss due to cancellation of the charter for carriage of the corn, including running expenses for 18 days (from February 17 when the charter was cancelled through March 6) at the daily rate of $8,214.00. $147,852.00 2. Difference between 23.33 days of the lost charter and the 18 days until a new charter was secured is 5.34 days; for 5.34 days, damages can be estimated as the difference between two charter rates, i.e. $8,214 - $5,200.00 = $3,014.00 × 5.34 $16,020.00 3. Additional expenses for extra dockage and detention $9,780.00 4. Consumption for fuel during vessel idle time (at $650.00 per day for 18 days) Grand Total = $185,352.00 Ocean Pride's claim of wrongful arrest of the M/V OCEAN D by Pace rests on the collective actions of Pace through its prior knowledge of the no-lien clause in the applicable charter party and Pace's two attempts to unreasonably delay cargo operations during arrest. Therefore, as a direct result of Pace's wanton action, Ocean Pride claims actual damages totaling $185,352.00, and attorneys' fees, interest, and costs.III. ARGUMENT OF PLAINTIFF IN OPPOSITION OF THE MOTION:
Pace contends that at all times it acted in good faith by having probable cause to arrest the M/V OCEAN D. Pace claims that (1) they and O.W. Bunker relied on the vessel for payment, (2) O.W. Bunker possessed a valid maritime lien against the vessel, (3) O.W. Bunker assigned its lien right to Pace and (4) neither O.W. Bunker nor Pace had notice of a prohibition of lien clause contained in the charter. Pace provides a certified copy of the delivery ticket claiming no non-encumbrance stamp was affixed on the original delivery ticket.
Next, Pace contends the argument of Ocean Pride that actual notice was obtained by Pace through Whitfield fails for three reasons. First, Whitfield did not sign the addendum. Second, Mary Tsigrimani, who signed the addendum on behalf of Universal, stated that Whitfield was not present when the document was signed nor did he sign it. Finally, Pace claims that the addendum was not executed until 30 days after the creation of the actual lien. Therefore, even if Whitfield signed the addendum, no actual notice existed because any such notice post-dates the lien at issue.
Next, Pace addresses the fact that they and Universal share the same physical address. Pace argues their only connection to Universal is the physical proximity of the companies and that each business is operated independently at arms length. Furthermore, Pace contends the Greek court decision in Piraeus finding Whitfield a 50 percent shareholder and manager of Universal is simply an interim relief proceeding that is in no way binding upon this Court. Pace claims it has standing through a valid lien assignment from O.W. Bunker and therefore is legally subrogated to enforce O.W. Bunker's maritime lien. Previously, a valid maritime lien was created in Petrobras's favor. This valid maritime lien followed to O.W. Bunker, who paid for the fuel bunkers, who in turn assigned this lien to Pace. Pace claims they came to a "meeting of the minds" when a verbal agreement to assign the lien for collection was reached and later reduced to writing.
Finally, Pace argues that they facilitated movement of the vessel and allowed for continuation of cargo operations to the fullest extent possible. An order from the court along with an agreement to indenmify the U.S. Marshal for any damage or claims resulting during the arrest is required before an arrested vessel may move about the district and/or continue vessel operations. Pace claims it offered Ocean Pride the documents necessary for this, but they refused and proceeded to draft their own. Furthermore, following this correspondence, Pace walked this order through the court to allow for movement and loading of the vessel. Pace contends this cooperation hardly constitutes wanton conduct.
IV. LAW AND ANALYSIS:
A. Law on Wrongful Arrest or Seizure in Admiralty
Maritime law controls the substantive law of maritime seizures and requires that damages be awarded on a showing of "bad faith, malice, or gross negligence." Marastro Compania Naviero v. Canadien Maritime Carries Ltd., 959 F.2d 49, 53 (5th Cir. 1992). A party has the right to recover damages for wrongful arrest or seizure in admiralty on a showing of "bad faith, malice, or gross negligence." Tennyo Maritime v. Norsk Hydro S.S. of Olso, 1994 A.M.C. 2687, 1994 WL 279849 (E.D. La. 1994); citing Incas Monterey Printing v. M/V Sang Jin, 747 F.2d 958, 964 (5th Cir. 1984). In order to collect attorneys' fees, the defendant must prove that the party seizing the vessel acted in bad faith with malice or with wanton disregard for the rights of his opponent. Cardinal Shipping Corp. v. M/S Seisho Maru, 744 F.2d 461, 474 (5th Cir. 1984).
B. Law on Actual Notice of a No-lien Clause
The supplier must have actual personal knowledge of a no-lien clause and the heavy burden of proving that knowledge is on the vessel owner due to the presumption in favor of a maritime lien. Lake Union v. Polar Viking, 446 F. Supp. 1286, 1978 AMC 1477 (W.D. Wash 1978); Freighters v. Jalavihar, 1982 AMC 2182, 8183 (E.D. La. 1981); Gulf Oil Trading Co. v. M/V Caribe Mar, 757 F.2d 743, 1985 AMC 2726 (5th Cir. 1985). Additionally, this knowledge must be at the moment of the creation of the lien. TTT Stevedores of Texas Inc. v. M/V Jagat Vijela, 696 F.2d 1135, 1983 AMC 1980 (5th Cir. 1983); Ferromet Res. v. Chemoil, 5 F.3d 902, 1995 AMC 157 (5th Cir. 1995). In the context of no-lien clauses, corporate proximity does not automatically demonstrate actual notice. Marine Fuel Supply Towing, Inc. v. M/V Ken Lucky, 859 F.2d 1405 (9th Cir. 1988).
C. Law on a Valid Lien Assignment
Maritime liens are assignable. Sunrise Shipping, LTD. v. M/V AMERICAN CHEMIST, et al, 1999 WL 718271 (E.D. La. 1999) citing Galehead, Inc. v. M/V Fratzis M., 1994 AMC 1162, (S.D. Fla. 1994). An assignment of a claim for collection vests such an interest in the assignee as to entitle him to sue thereon in his own name. Vevrica v. Drill Barge Buccaneer No. 7, 1974 AMC 26, 35, 488 F.2d 880, 887 (5th Cir. 1974).
D. The Court's Analysis of Validity of the Arrest of the OCEAN D
Ocean Pride contends Pace possessed actual notice of the no lien clause in the original charter party through the relationship of Whitfield between Pace and Universal. In an affidavit dated November 29, 2001, Maria Tsigrimani attested to the actual relationship between Neptune, Pace, and Universal. Ms. Tsigrimani was the secretary of Neptune at the time of the facts at issue. It was explained to Ms. Tsigrimani at the time she accepted the position of secretary that she would be working for Neptune, which was a broker of the chartering company, Universal, while Pace was the agent of the vessels. Ms. Tsigrimani attests that there was no corporate distinction between/among Universal, Neptune, and Pace who shared a common office with a common entrance, telephone switchboard, and computer system. She attests that the telephone and fax numbers were the same and that there was no partition between the offices.
On November 26, 1999, Ms. Tsigrimani states that she was requested by Alexandros Koutroumanidis, the Chartering Manager of Neptune and Universal, to initial an Addendum of the time charter party dated July 16, 1999 involving the MN OCEAN D. Koutroumanidis told Ms. Tsigrimani that he did not want to sign the document because he did not have good relations with the new ship owner. When Ms. Tsigrimani initialed the original addendum, the name of "George Whitfield" as a witness and the company seal of Universal Chartering were not present.
On February 21, 2000, Ms. Tsigrimani states that a copy of the charter party addendum was received in their office containing the names of "George Whitfield" and "Mary Tsigrimani-Director", as well as the company seal of Universal Chartering. These three notations on the addendum were not present when Ms. Tsigrimani originally affixed her initials to the addendum. On that same date, Ms. Tsigrimani signed an affidavit with respect to the events that had taken place on November 26, 1999, telling her that it was necessary for her to do this in order to clear her name. Ms. Tsigrimani signed the affidavit fearing that she would lose her job otherwise.
At the time of the most recent affidavit (November 29, 2001), Ms. Tsigrimani no longer worked for Neptune/Universal/Pace, and was no longer in fear of losing her job. In addition, she attested that she was never a director of Neptune, nor of Universal, but only worked there as a secretary. She states that she had no direct involvement with the matter at issue, while Mr. Koutroumanidis and Mr. Whitfield had direct involvement and had full knowledge of all actions in matters surrounding the ownership change of a vessel that had been chartered by their company on July 16, 1999.
The new affidavit of Ms. Tsigrimani establishes the relationship among Whitfield, Pace and Universal. Both Whitfield and Koutroumanidis were actually involved in the management of Pace and Universal, and therefore Whitfield had actual knowledge of the details of the charter party, including its "prohibition of lien" clause. The knowledge of the clause is imputed to Pace, and, having that knowledge, Pace should not have proceeded with the arrest of the M/V OCEAN D in February, 2000. It is the opinion of the Court that the evidence, presented both by affidavit and by testimony at the evidentiary hearing, overwhelmingly indicates an intricate relationship between Whitfield and Koutroumanidis/ Pace and Universal.
In fact, the Managing Director of Pace Shipping, George Whitfield, held a similar position of authority withe Universal. Contrary to Pace's assertions that "at no time was Whitfield in a position to act in authority for Universal, either as a principal or agent," Ocean Pride submitted the affidavit of Panamanian attorney, Ricardo Eskildsen. Mr. Eskildsen's affidavit fully supports that George Whitfield holds a Power of Attorney to act on behalf of Universal. See Eskildsen affidavit attached to Memorandum in Support of Motion to Deem Arrest of the M/V OCEAN D Wrongful, [Doc. 45], Exhibit D, and certified copy of the Power of Attorney from the Public Registrar's Office in Panama, Exhibit D, Attachment No. 1.
When a party has actual notice of a no-lien clause, yet continues to seize the vessel, that seizure raises to the level of "bad faith, malice, or gross negligence." Therefore, an award of damages is appropriate in this matter.
E. The Ocean D would not have made the February 17, 2000 fixture
The largest share of Ocean Pride's requested damages involves expenses and losses due to the M/V OCEAN D's inability to meet the 12 noon February 17, 2000 deadline set by Corn Products. To determine whether or not the arrest of the M/V OCEAN D affected its ability to meet that deadline, an time/labor analysis of the discharge of the M/V OCEAN D must be undertaken.
An accurate accounting of the number of stevedore hours necessary to fully discharge the cargo aboard the M/V OCEAN D is provided in the Statement of Facts supplied by Pennant Shipping Services (Exhibit 9). Based upon this record, a total of 15 work days were used in the discharge, commencing on January 31, 2000 and completing on February 17, 2000. No work occurred on the Sundays February 6th and February 13th. The unloading of the M/V OCEAN D's cargo took a total of 417 hours; this number disregards any hours lost due to mechanical problems, communication problems or barge difficulties. In each day, there are 12 working hours from 8:00am to 9:00pm including one hour off for meals. On various days between January 31 and February 17, 2000, there would be either two or three crews of stevedores working to offload the cargo. If two crews were working on the ship, the maximum number of work hours possible for that day would be 24. If there were three crews working, the maximum hours of work hours possible for that day would be 36.
The number of crews offloading is critical to the establishment of the likelihood of the M/V OCEAN D could have made the February 17, 2000 fixture deadline. If the M/V OCEAN D had been offloaded by three crews every day, the ship would have been discharged in 11.6 days (417 hours divided by 36 hours possible daily = 11.6 days). If Ocean Pride had used three crews every day, the offloading of the M/V OCEAN D would have completed by the end of the day on February 12, 2000. Even accounting for various technical and mechanical difficulties and adding the day and a half of labor necessary to clean the holds to meet agricultural standards, the M/V OCEAN D would have easily made the noon deadline for the February 17th fixture had they consistently used three crews.
However, Ocean Pride chose not to work three crews every day of offloading and instead had 8 days of three crew days and 7 days of two crew days. Even factoring in the time lost while the ship was under arrest, the M/V OCEAN D could not have made the deadline for the next fixture. Offloading of the M/V OCEAN D stopped at 8:00pm on February 14 and did not resume until 8:00am on February 16. This resulted in a total lost work time of 13 hours (1 hour from 8:00pm to 9:00pm on February 14, and 12 hours from 8:00am to 9:00pm on February 15). In terms of work crew hours this means that the M/V OCEAN D lost 26 hours of work time for a two work crew day or 39 hours for a three work crew day. A determination on whether the M/V OCEAN D could have made the fixture deadline but for the arrest can be made in two simple steps:
1.) subtract the number of lost hours from the completion time: a) 10:00pm 2/17/00 minus 26 hours (2 crew day) = 7:30pm 2/16/00 or b) 10:00pm 2/17/00 minus 39 hours (3 crew day) = 12:00pm 2/16/00 and
2.) add the day and a half necessary to clean the holds: a) 7:30pm 2/16/00 plus 1.5 days (18 hours) = 1:00pm 2/18/02 or b) 12:00pm 2/16/00 plus 1.5 days (18 hours) = 7:00pm 2/17/00
Note that under neither scenario does the completion time comply with the 12 noon deadline on February 17, 2000 for the next fixture. Thus, the arrest by Pace of the M/V OCEAN D did not cause the loss of the next fixture for Corp Products Inc.
F. Analysis of Damages
Based on the material provided to this court by both parties and examined at length above, this court has determined that while the arrest of the M/V OCEAN D on February 14, 2000 was wrongful, the arrest of the vessel was not the reason for the M/V OCEAN D's failure to meet its next fixture. Thus, this court will not award any of the damages requested by Ocean Pride and listed in their Trial Exhibit 16. However, having found that the seizure of the vessel was wrongful, this Court finds that the M/V OCEAN D is to be awarded attorney's fees. In Cardinal Shipping Corp. v. M/S Seisho Mara, 744 F.2d 461, 474 (5th Cir. 1984), the Fifth Circuit clearly states their policy regarding the collection of attorney's fees. In Cardinal, the Fifth Circuit wrote: "In order to collect fees, the plaintiff must prove that the party seizing the vessel acted in bad faith, with malice, or with wanton disregard for the rights of his opponent." As established above, the arrest of the M/V OCEAN D has been deemed by this court to be in bad faith, thus the awarding of attorney's fees is appropriate.
Accordingly,
IT IS ORDERED that the Motion to Deem the Arrest of the MN Ocean D Wrongful, M/V Ocean D, (Ex-Haight), Her Engines, Tackle, Apparel, etc., in rem, be, and the same, is hereby GRANTED. IT IS FURTHER ORDERED that Ocean Pride be, and the same is hereby, awarded attorney's fees.
IT IS FURTHER ORDERED that Ocean Pride's Motion to Set Security Pursuant to Rule E(2) of the Supplemental Rules for Certain Admiralty and Maritime Claims [Doc. 69], be and the same, is hereby declared MOOT.