IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 95-20807
_____________________
PONTOON SHIPPING COMPANY LIMITED (CYPRUS),
Plaintiff - Counter Defendant - Appellee,
v.
NORTH AMERICAN MARINE INCORPORATED,
ANTHONY POGOURTZIS
Defendant - Counter Claimant - Appellant.
_________________________________________________________________
Appeals from the United States District Court
for the Southern District of Texas
(H-95-CV-1074)
_________________________________________________________________
March 14, 1997
Before KING, JONES and SMITH, Circuit Judges.
PER CURIAM:*
North American Marine Incorporated (“NAM”) appeals an order
of the district court releasing the security posted by Pontoon
Shipping Company (Cyprus) (“Pontoon”). Finding no error, we
affirm.
I. BACKGROUND
*
Pursuant to Local Rule 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
On February 23, 1995, Pontoon, through its management
company, contracted with NAM for the repair of the rudder on its
ship, the M/V ZOUZOU. A disagreement arose about the cost of the
repairs after the rudder had been removed from the vessel and NAM
had begun repairing it. Pontoon demanded that NAM return
Pontoon’s property, and filed suit on April 13, 1995, under
Supplemental Admiralty Rule D, in the district court. NAM
counterclaimed.
As part of the suit and countersuit, Pontoon agreed to post
security to avoid the arrest of the M/V ZOUZOU or any of its
other property. A magistrate judge ordered Pontoon to post
security of $200,000, and ordered NAM to return the rudder and
related equipment to Pontoon.2
Pontoon tendered the ordered security and filed a motion for
countersecurity under Supplemental Admiralty Rule E(7).3 The
2
The magistrate judge reduced the security amount to
$172,000 to reflect Pontoon’s own payment for services on and
retrieval of the lower pintle, external and internal bushing, and
key for this equipment from a third party to which NAM had
contracted work on the rudder.
3
Supplemental Admiralty Rule E(7) sets out, in pertinent
part
Whenever there is asserted a counterclaim arising
out of the same transaction or occurrence with respect
to which the action was originally filed, and the
defendant or claimant in the original action has given
security to respond in damages, any plaintiff for whose
benefit such security has been given shall give
security in the usual amount and form to respond in
damages to the claims set forth in such counterclaim,
unless the court, for cause shown, shall otherwise
2
magistrate judge granted Pontoon’s motion for countersecurity.
NAM appealed the magistrate judge’s decision to the district
judge. The district judge, finding NAM financially unable to
post security, vacated the magistrate judge’s order that NAM post
countersecurity. The district judge also, however, released the
security that had been posted by Pontoon. NAM appealed this
portion of the district court’s order.
This court determined in a prior review of this case that
because the district court did not give written reasons for its
release of the security posted by Pontoon, it could not ascertain
whether the district court had properly exercised its
discretion.4 We therefore remanded the case to the district
court for a statement of its reasons for the release. We now
review to determine whether the district court properly exercised
its discretion.
II. DISCUSSION
In our prior review of this case we noted the importance or
preserving the utility of maritime liens. See Titan Navigation,
direct; and proceedings on the original claim shall be
stayed until such security is given, unless the court
otherwise directs.
4
Our jurisdiction to consider the appeal was also at issue
in our prior review. The court held that the order releasing
defendants’ security was appealable under both 28 U.S.C. § 1291
and the collateral-order doctrine. See Incas & Monterey Printing
& Packaging, Ltd. v. M/V SANG JIN, 747 F.2d 958, 962-63 (5th Cir.
1984).
3
Inc. v. Timsco, Inc., 808 F.2d 400, 404 (5th Cir. 1987) (“the
guidon for this analysis is the court’s obligation to preserve
the integrity of maritime liens”). Nevertheless, the court held
in Titan Navigation, Inc. v. Timsco, Inc. that in limited
circumstances the district court may, in its discretion, release
the security of a maritime party. See id. at 405.
The court held in Titan Navigation that the security could
be released if the party claiming the need for security “would be
adequately protected by its in personam action”, including the
notion that the adverse party “could respond in damages should it
be so cast.” See id. at 405. We also noted that the release
should not impair “the fundamental utility of maritime liens,
i.e. as an inducer of credit for a ship’s needed goods and
services.” See id. The court held that a district court would
not abuse its discretion in releasing a party’s security under
factual circumstances that meet these requirements, even though
the release would “force a lien-holder to relinquish a privileged
position because of a financial inability to post
countersecurity.” See id.
On remand, the district court set forth reasons sufficient
to sustain its release of Pontoon’s security under the abuse of
discretion standard. The district court noted that NAM is
adequately protected by its in personam action against Pontoon.
The district court recognized that a large portion of NAM’s
4
damage claims have either already been paid by Pontoon or were
expenses that NAM did not incur in the first place. The district
court also observed that NAM’s claims would be in the nature of
an offset should both parties prevail on their claims.
Additionally, the district court held that, even if Pontoon were
to fail on its claims against NAM, NAM’s claimed damages are in
an amount that Pontoon is financially able to pay. The district
court noted, in conjunction with Pontoon’s ability to pay
damages, that the factual circumstances of the case indicate
Pontoon’s intent to litigate the case.
The district court also held that the release would not
impair the fundamental utility of maritime liens as an inducer of
credit for a ship’s needed goods and services because Pontoon’s
intention in its Rule E(7) motion before the magistrate judge was
to gain countersecurity.5 The district court, cognizant of the
facts attendant to Pontoon’s motion, was within its discretion in
determining that the release would not threaten the integrity of
maritime liens.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s
release of the security posted by Pontoon.
The motion to withdraw as counsel is GRANTED.
5
Pontoon originally only requested “other relief as is
proper” in its motion before the magistrate judge.
5
6