USCA1 Opinion
____________________
No. 96-1850
NAVIEROS INTER-AMERICANOS, S.A.,
Plaintiff, Appellee,
v.
M/V VASILIA EXPRESS et al.,
Defendants, Appellants,
DUSAN JEFTIMIADES,
Petitioner, Intervenor-Appellant.
_________________________________
No. 96-1851
NAVIEROS INTER-AMERICANOS, S.A.,
Plaintiff, Appellee,
v.
M/V VASILIA EXPRESS et al.,
Defendants, Appellants,
COASTAL SHIP REPAIR, INC.,
Petitioner, Intervenor-Appellant.
_________________________________
No. 96-2174
NAVIEROS INTER-AMERICANOS, S.A.,
Plaintiff, Appellee,
v.
M/V VASILIA EXPRESS et al.,
Defendants, Appellants,
MOTOR-SERVICES HUGO STAMP, INC.,
Petitioner, Intervenor-Appellant.
_________________________________
No. 96-2175
NAVIEROS INTER-AMERICANOS, S.A.,
Plaintiff, Appellee,
v.
M/V VASILIA EXPRESS et al.,
Defendants, Appellants.
_________________________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jose A. Fuste, U.S. District Judge]
____________________
Before
Selya, Circuit Judge,
Aldrich, Senior Circuit Judge,
and Lynch, Circuit Judge.
____________________
Harry A. Ezratty for intervenor-appellant Dusan Jeftimiades.
Francisco G. Bruno and Lilia R. Rodriguez Ruiz, with whom
McConnell Valdes was on brief, for intervenor-appellant Coastal
Ship Repair, Inc.
Antonio M. Bird, Jr., with whom Bird Bird and Hestres was on
brief, for intervenor-appellant Motor-Services Hugo Stamp, Inc.
Stephen T. Perkins for defendant-appellants M/V VASILIA
EXPRESS et al.
Mark C. Landry, with whom Carlos J. Quilichini, Robert A.
Mathis, and Newman, Mathis, Brady, Wakefield & Spedale were on
brief, for appellee Gulf Coast Bank & Trust Co.
____________________
July 28, 1997
____________________
LYNCH, Circuit Judge. This admiralty case features
seven competing claimants, each trying to take from the
proceeds of the sale of a seized vessel, the M/V VASILIA
EXPRESS. Three claimants, in addition to the original
charterer plaintiff, were allowed to intervene; all four won
judgments after a three-day, expedited bench trial. Suit was
originally brought in rem against the vessel. The vessel's
corporate owner and its shipping agent both appeared, however,
in personam to defend the action, and were also held liable on
two of the judgments (for the original charterer and another
intervening charterer). The proceeds of the sale are
insufficient to satisfy even these four successful claims.
Various other claimants, whose claims would further tax the
available funds, were not allowed to intervene. Three of
these, the ship's captain and two repair companies, appeal.
The owner of the vessel, the shipping agent, and the vessel
itself also appeal together, arguing that the district court's
entry of judgment against them is in error, and hence that
there should be no division of proceeds at all. Alternatively,
they argue that the two charterers were awarded excessive
damages. These four appeals were consolidated.
We affirm the judgment against the vessel and the two
in personam defendants, but we vacate the damages awards to
both charterers and remand for a reassessment of damages. We
also affirm the denial of intervention to the captain, but we
-2- 2
reverse the denials of the two repair companies' motions to
intervene and remand to the district court to entertain those
companies' proof, to calculate damages due them, if any, and to
determine how the proceeds from the sale of the vessel should
be allocated among the various judgment winners.
I.
The underlying facts are not now in dispute. On the
morning of March 28, 1996, Navieros Interamericanos S.A., Inc.
("Navieros"), a Florida corporation, entered a fixed time
charter party with the M/V VASILIA EXPRESS on a standard New
York Produce Exchange form through a ship's broker, Jan Gisholt
Shipping, Inc., also of Florida. According to the charter
party, the M/V VASILIA EXPRESS was owned by Royal United
Shipping, Inc. ("Royal United"), and was registered in the West
Indies. During this litigation it was established that,
despite this written representation, the vessel was actually
1. A "charter party" is "a specialized form of contract for
the hire of an entire ship, specified by name." 2 Schoenbaum,
Admiralty & Maritime Law S 11-1, at 169 (2d ed. 1994). A "time
charter party," one of several different types of charter
parties, is a contract "to use a ship in order to ship goods
for a specific period of time." Id. S 11-5, at 178. Under
such agreements, "[t]he carrier makes the ship's capacity
available to the time charterer for this purpose. The
charterer bears the expenses connected with each voyage and
pays hire to the carrier based upon the time the ship is under
charter." Id.
A charter party is "fixed" when there is "a meeting of the
minds, evidenced by the parties' communications, on the
significant 'main terms' of a charter." Id. S 11-2, at 172.
-3- 3
owned by Vasilia, Inc. ("Vasilia"), a corporation with close
links to Royal United.
Navieros chartered the vessel for two round-trips
between Florida and Guatemala, with an option for a third
round-trip, for a total engagement of about 27 days, at $2,300
per day. Navieros intended to ship, on behalf of various
clients, "general merchandise, freight [of] all kinds,
electrical material, toys, hardware, food stuffs, . . . heavy
equipment, . . . road building construction-type machinery,
and . . . used vehicles." The time charter party stated that
delivery of the vessel to Navieros, the charterer, was to occur
upon the vessel's arrival at the pilot station in Port
Everglades, Florida, where Navieros's cargo was to be loaded.
The charter party stated that this would happen "any time, day,
night" after the fixing of the charter on March 28.
At approximately 2:00 in the afternoon on March 28,
Kenneth Coleman, the President of Navieros, boarded the vessel
at dock in Miami, about 30 miles from Port Everglades. Coleman
discussed the stowage plan with the captain, Dusan Jeftimiades,
and with Michael Psarellis and instructed the captain to berth
2. Vasilia is a Liberian corporation with its principal place
of business in Greece. Steven Psarellis, a Louisiana attorney,
is described as the attorney-in-fact for the corporation.
Royal United is a Delaware corporation. Vasilia Psarellis,
Steven's mother (and the person after whom the vessel is
named), is the president. Her other son, Michael, is the
"principal operating manager."
-4- 4
at Pier 19 when he arrived at Port Everglades, instead of at
the pilot station.
The next day, the M/V VASILIA EXPRESS left its berth
in Miami, apparently headed for Port Everglades. The only
deviation from the written agreement that Coleman had mentioned
involved the berthing of the ship at a different point in Port
Everglades, but the ship never reached Port Everglades.
The vessel experienced problems with its bridge
tachometer and stopped for repairs at Bicentennial Park, still
inside the Port of Miami. Kenneth Coleman and his brother
William, also a Navieros officer, visited the ship four or five
times over the next week. During this time, Navieros also
ordered fuel for the vessel, confirmed its reservation of the
berth space at Port Everglades, and issued the necessary check
in payment of United States customs dues.
During this unexpected delay, Royal United, the
putative owner of the vessel, entered into a second time
charter party with Comet Lines Agency, Inc. ("Comet"), which
was unaware of the charter party with Navieros. Royal United
apparently believed at this time that the Navieros charter
party had not yet been fixed. The Comet charter party,
brokered by Americana Marine Services, began on April 4 and was
3. The record does not reveal the name of the company which
made these repairs. We infer that it was Motor-Services Hugo
Stamp, Inc., one of the two repair company appellants denied
intervention in this case.
-5- 5
to last for a period of 30 days. It brought a more lucrative
charter rate, $2,630 per day, than did the Navieros charter.
Comet intended primarily to carry cargo between San Juan,
Puerto Rico and Venezuela. Since the vessel was in Miami at
the start of the charter, Comet arranged to have some
Venezuela-bound cargo brought down from Jacksonville and loaded
there; Comet's intention was to have the vessel proceed to San
Juan where more cargo would be loaded, and then to sail to
Venezuela.
Upon the vessel's arrival in the port of San Juan on
April 13, however, the United States Coast Guard detained the
vessel for a litany of safety violations and ordered it not to
proceed to sea without Coast Guard approval.
Navieros subsequently learned that the vessel was
being detained in Puerto Rico. On April 18, while the ship was
still in detention, Navieros filed a complaint in the federal
district court in Puerto Rico, initiating this litigation.
Initially, the action was in rem against the vessel to enforce
4. The violations of the International Convention for the
Safety of Life at Sea , 32 U.S.T. 47, T.I.A.S. No. 9700 (1974),
listed in the Coast Guard citation include: intoxication of
the master (Jeftimiades); inability of intoxicated master to
produce the necessary documents and certificates to Coast Guard
officers; non-compliance with minimum safe manning certificate;
various problems with electrical wiring in the engine room;
lighting in engine room not covered; watertight door in engine
room could not be closed due to installation of cable through
doorway; non-working aft port fire hose; unreadable fire
control plan; absence of dangerous cargo manifest for dangerous
cargo on board; and carbon dioxide alarm system disconnected
and activation pull cable not labeled.
-6- 6
an alleged maritime lien based on the breach of a time charter
agreement.
Later that same day, April 18, the district court, in
an ex parte proceeding, ordered the arrest of the vessel
pursuant to Rule C of the Supplemental Rules for Certain
Admiralty and Maritime Claims to the Federal Rules of Civil
Procedure. Rule C allows the holder of a maritime lien to
proceed in rem against the vessel that is the subject of the
lien. In its order, the court stated that Navieros had made a
prima facie showing of a maritime lien against the vessel.
Vasilia, as claimant of the in rem defendant M/V
VASILIA EXPRESS, filed a motion for a post-arrest hearing on
April 23. Vasilia claimed that the arrest of the vessel was
improper because Navieros had no maritime lien. The only
argument advanced by Vasilia at this point against the
existence of a lien was that the charter party between Navieros
and Royal United had not been fixed. A charterer's maritime
lien, a right derived from a contract, will not arise in the
absence of a fixed charter party, that is, in the absence of an
enforceable contract.
In response to Vasilia's motion, Navieros amended its
complaint on April 24 and moved alternatively for attachment of
5. Later, Vasilia would argue that there was no lien because
the contract was still executory at the time of the breach;
maritime liens do not arise from the breach of an executory
charter party.
-7- 7
the vessel under Supplemental Rule B. Navieros also added
Royal United as an in personam defendant. One of the pertinent
differences between Rules C and B is that the latter does not
require the existence of a maritime lien. Rule B allows an
admiralty plaintiff to acquire quasi in rem jurisdiction over
a defendant by attaching his property in the district; this
approach is available only if the defendant "shall not be found
within the district." As required by Rule B, Navieros
submitted an affidavit stating that, to the best of its
knowledge, after a diligent search, defendant Royal United
could not be found within the district.
The court ordered attachment of the vessel pursuant
to Rule B on April 29. In its May 1, 1996 answer to Navieros's
amended complaint, Vasilia reiterated that Navieros had no
maritime lien because there was no fixed charter party.
Vasilia also filed a counterclaim against Navieros for wrongful
arrest, and asserted that if the court should find that there
was a fixed charter party, then the dispute "would be subject
to compulsory arbitration." Vasilia did not move to compel
arbitration at this time.
The next day, April 30, Vasilia filed a "request for
amended process of arrest" in which it asserted that the Rule
B attachment was wrongly ordered by the court because Vasilia
had designated an agent in the district upon whom process could
be served on behalf of Vasilia. Navieros then amended its
-8- 8
complaint again to name Vasilia as in personam defendant along
with Royal United. Trial ultimately proceeded on this second
amended complaint.
That same day, the court held a hearing and ordered
the case expedited. The court accelerated discovery and set a
May 23 trial date. The court later explained, in its June 7
memorandum opinion, that this rushed schedule was necessary
because the vessel had "a fair market value of $500,000," it
"was accruing significant expenditures incidental to the
arrest," and there were "liens or potential liens exceeding its
fair market value." The court also denied Vasilia's motions
to vacate the Rule C arrest of the vessel and the Rule B
attachment of it. The court stated that the arrest could be
lifted by the posting of a $200,000 bond. No bond was posted.
On May 8, Vasilia filed a "second motion to vacate
arrest and attachment and for second post-arrest hearing."
Vasilia now claimed that "there are new reasons" showing that
the Rule C arrest was illegal. Vasilia argued that Navieros
had no maritime lien because the vessel had not been delivered
6. On the first day of trial, the court again expressed its
concern with the problems that would be caused by delay: "It's
a vessel of marginal value in a marginal trade with charters
and owners of marginal economic solvency and all that we're
going to create [by transferring the case to arbitration] is a
bigger problem for everybody here."
7. This motion and most subsequent submissions were filed by
Vasilia alone, not by Royal United or the vessel. Hence, we
often describe the collective defendants as "Vasilia."
-9- 9
to Navieros, the charter party was still executory, and a
maritime lien will not arise from the breach of an executory
charter party. Vasilia cited for the first time Navieros's
oft-repeated assertion in its pleadings that the vessel had not
been delivered as required by the charter party. Both in
personam defendants then waived the requirement that they be
served with process and waived any objections to lack of
personal jurisdiction. The court summarily denied Vasilia's
motion on May 20, three days before trial commenced.
On May 13, Comet and Transcaribbean Maritime Corp.
("Transcaribbean") filed motions to intervene as plaintiffs in
the lawsuit. Comet is the second charterer; like Navieros, it
pleaded a breach of contract claim. Transcaribbean is a San
Juan-based ship's agent and stevedoring contractor which paid,
on behalf of the vessel, harbor and port dues, pilot fees, and
other expenses incidental to the ship's arrival and its
subsequent detention in the Port of San Juan. On May 20, the
court allowed both claimants to intervene.
On May 22, on the eve of trial, Captain Jeftimiades
filed a motion to intervene as plaintiff, asserting a maritime
lien for unpaid seaman's wages. On May 23, the day the trial
started, Gulf Coast Bank & Trust Co. ("Gulf Coast"), the holder
of a first preferred mortgage on the vessel, filed a motion to
intervene as plaintiff in order to request foreclosure.
-10- 10
At the start of trial, the court ruled from the bench
on the two motions to intervene. After establishing that
neither Captain Jeftimiades nor his counsel were present in the
courtroom, the judge ascertained from Navieros's counsel that
Jeftimiades's counsel was aware that the trial was starting.
The court then denied Jeftimiades's motion to intervene,
stating:
Well, the captain is not here. His lawyer
is not here. Everybody is aware of the
fact that this case was being tried or
there was no reason not to know.
Therefore, at this point in time I am
denying for obvious lack of interest, they
are not here, the motion for permission to
intervene . . . .
Gulf Coast's motion to intervene was granted.
On this first day of trial, the court also ruled from
the bench on Vasilia's motion to compel arbitration, filed the
day before. Vasilia's motion relied on an arbitration clause
in the charter party between Navieros and Royal United (and on
a similar clause in the charter party with Comet). The motion
came two days after Vasilia's pre-trial concession regarding
the existence of a fixed charter with Navieros, a point Vasilia
had been contesting until then.
The court characterized this motion as among the
"strongest" of the many pre-trial motions, but nevertheless
denied it. The court stated that Vasilia had conducted itself
thus far in the litigation in a manner inconsistent with a
desire to enforce a contractual arbitration clause, and that it
-11- 11
had "by its actions moved away from its right to arbitrate."
Sending the case to arbitration, said the judge, would also, by
causing further delay, increase the costs attendant to the
continuing arrest of the vessel, and "create a bigger problem
for everybody here."
Because Vasilia admitted the existence and breach of
a charter party with Navieros, trial proceeded on the question
of damages alone. Vasilia argued that Navieros had no right to
arrest the vessel under Rule C or to attach it under Rule B.
Moreover, Navieros's resort to these procedures, Vasilia said
in its counterclaim, had caused Vasilia to breach its contract
with Comet and to incur other liabilities. Relying on the
venerable executory contract doctrine, Vasilia argued that the
Rule C arrest was improper because the vessel had not yet been
delivered to Navieros at the time of the breach, and the
charter party was still executory. Consequently, argued
Vasilia, Navieros had no maritime lien and its resort to Rule
C was invalid. Rule B attachment was also invalid, argued
Vasilia, because this measure may only be invoked where the
8. Had Vasilia filed the motion to compel arbitration earlier
in the pleadings, stated the court, "it would have been very
difficult not to grant it." Additionally, the court indicated
that, despite its belief that Vasilia had waived the right to
arbitration, it might have granted the motion if Vasilia, while
arguing the motion at trial, had expressed a willingness to
post a $200,000 bond to release the vessel from arrest, thus
hastening a conclusion to the expensive arrest. Vasilia's
counsel responded, however, that his client could not post such
a bond.
-12- 12
defendant cannot be found within the district, and Vasilia had
appointed an agent within the district for service of process
on its behalf.
The trial concluded on May 29, and the court issued
its written memorandum and order on June 7. The court upheld
both the Rule C arrest and the Rule B attachment. Rejecting
Vasilia's Rule C argument, the court held that the vessel was
effectively delivered to Navieros prior to the breach when
Coleman boarded the vessel in Miami. The court stated:
Although the vessel was to be technically
delivered at the pilot station in Port
Everglades, a location less than thirty
nautical miles away, due to the proximity
of the locations, the master and Mr.
Psarellis accepted Kenneth Coleman's
instructions to proceed further to Port
Everglades and, with a pilot, to berth at
Pier 19 in Port Everglades for loading.
The vessel was, for all purposes,
delivered to the charterer when Mr.
Psarellis and the ship's master accepted
Mr. Coleman's verbal instructions to
proceed under the charter party agreement
to Pier 19 at Port Everglades for loading.
The court also upheld the Rule B attachment, rejecting
Vasilia's argument that the attachment was improper because
Vasilia had appointed an agent for service of process within
the district. The court emphasized that Vasilia, a Liberian
corporation, had had no corporate presence whatsoever in the
district. The court stated that the eleventh hour appointment
by Vasilia of counsel as local agent for service of process was
-13- 13
a "strategic appointment directed at defeating the necessity of
the rule" and could not be used to elude attachment.
The court entered judgment against the vessel and the
two in personam defendants: for Navieros in the amount of
$182,952; for Comet in the amount of $100,312.13; for
Transcaribbean in the amount of $24,777.26; and for Gulf Coast
in the amount of $285,428.91. The total of the judgments
against Vasilia amounted to $593,470.30. The court ordered
that the vessel be sold by the United States Marshal at auction
to satisfy these judgments.
The court ruled that Gulf Coast had complied with the
requirements of the Ship Mortgage Act, 46 U.S.C. S 30101 et
seq., and had successfully shown that it had a preferred
mortgage. The court, however, did not rank the four judgment
winners. Nor did the court know, at the time the judgments
were handed down, how much money would be available from the
eventual sale of the vessel to satisfy the judgments.
Several more would-be plaintiffs moved to intervene
as a matter of right under Fed. R. Civ. P. 24(a) after the
decision was handed down; these motions were denied. We
discuss only those parties that appeal. The first of these
post-judgment movants was Motor-Services Hugo Stamp, Inc.
9. We note that Gulf Coast's compliance with the provisions of
the Ship Mortgage Act was the subject of considerable dispute
in the district court. That question, however, is not before
us.
-14- 14
("Motor-Services"), a Florida-based ship repair and supply
company which sought to intervene on June 7, the day judgment
issued. Motor-Services asserted a maritime lien in the amount
of $76,460.55 for unpaid receivables due for work done on the
M/V VASILIA EXPRESS and materials supplied to it between
February 28 and March 29, 1996. The second post-judgment
movant was Coastal Ship Repair, Inc. ("Coastal"), a Louisiana
corporation which sought intervention on June 11. Coastal,
too, asserted a maritime lien for moneys due for work performed
and materials supplied the vessel, from May 2, 1995, through
July 1, 1995. Coastal asserted a lien in the amount of
$144,800. The court denied these two late motions on July 3 by
separate written orders.
The public auction was held July 2, but the required
minimum bid of $400,000 was not achieved. A second auction was
held on July 23 with a lower minimum of $300,000. Gulf Coast,
the first preferred mortgage holder, bought the ship for
$300,000. After confirmation of the sale, Jeftimiades,
Coastal, and Motor-Services moved to stay disbursement of the
proceeds until final resolution of these appeals. This motion
was granted, and the proceeds of the sale, less certain
administrative costs and fees, remain in an escrow account
pending resolution of the appeal.
II.
Vasilia appeals on four grounds: (1) that the arrest
-15- 15
and attachment were invalid; (2) that the motion to compel
arbitration was wrongly denied; (3) that the court awarded both
charterers, Navieros and Comet, excessive damages; and (3) that
the court improperly pierced Vasilia's corporate veil. We
resolve Vasilia's claims without the benefit of briefs from
Navieros or any of the other plaintiffs in whose favor
judgment was entered.
A. Arrest and Attachment
Vasilia admitted before trial that it was in breach
of the charter party with Navieros. The main issue on appeal
is whether Navieros was entitled to take the measures it took
prior to trial regarding the vessel. Vasilia's position
remains that (1) Navieros had no maritime lien and thus no
right to arrest and (2) Vasilia had appointed an agent within
the district for service of process on its behalf and so
attachment was improper. Vasilia apparently infers that
Navieros is responsible for the chain of events set in motion
by the subsequent unavailability of the vessel: i.e., the
breach of the Comet charter; Gulf Coast's decision to bring its
foreclosure action; and the need for Transcaribbean to incur
the custodial costs associated with the arrest of the vessel.
10. Navieros, the original plaintiff in this action, chose not
to participate in this appeal. Navieros did not file a brief
and did not appear at oral argument. Presumably, Navieros
concluded that further participation in this litigation would
be fruitless given the $285,000 judgment awarded Gulf Coast on
its preferred mortgage lien.
-16- 16
Vasilia's position appears to be that Navieros should have
brought an in personam suit against Vasilia for breach of
contract, rather than moving against the vessel under Rules C
and B, and that this would not have resulted in the same domino
effect.
Navieros first invoked Rule C, seeking the arrest of
the vessel on the basis of an asserted maritime lien. After
Vasilia challenged the existence of a maritime lien, Navieros
moved alternatively for Rule B attachment. The two
strategies, though similar in effect, are based on entirely
different theories.
An in rem action [under Rule C] differs
from maritime attachment [under Rule B] in
that an in rem action is brought against
the vessel itself as defendant. By
contrast, a vessel is attached only as an
auxiliary to an in personam claim because
the vessel is property belonging to the
defendant.
2 Schoenbaum, supra, S 21-3, at 478-79. The district court
ordered both Rule C arrest and Rule B attachment of the vessel,
and ruled both procedures proper in its written opinion.
Vasilia challenges both rulings on appeal. Either procedure
standing alone would have been sufficient to enable Navieros to
11. The two rules may be invoked simultaneously. See, e.g. ,
Amstar Corp. v. S/S Alexandros T. , 664 F.2d 904, 906 (4th Cir.
1981); 2 Schoenbaum, supra, S 21-2, at 469 n.2, 470.
-17- 17
ensure the continued presence of the vessel in Puerto Rico
while the litigation proceeded.
1. Arrest
The Rule C question is a close one, and it takes us
into waters uncharted by this circuit. In order to invoke Rule
C to arrest a vessel, a plaintiff must have a valid maritime
lien against the defendant's vessel. See Bunn v. Global
Marine, Inc. , 428 F.2d 40, 48 n.10 (5th Cir. 1970) ("a maritime
lien is the foundation of a proceeding in rem"); Rainbow Line,
Inc. v. M/V Tequila, 480 F.2d 1024, 1028 (2d Cir. 1973) (" in
rem jurisdiction in the admiralty exists only to enforce a
maritime lien"); 2 Schoenbaum, supra, S 21-3, at 478-79. We
affirm the district court holding that Navieros had a maritime
lien. The Rule C arrest was thus valid.
Under the executory contract doctrine, charterers
have no maritime lien until performance of the charter contract
12. It is unclear from the record whether (and for how long)
the United States Coast Guard detention of the vessel in Puerto
Rico, effected on April 14, would have also detained the
vessel. This could be an important matter because Vasilia's
counterclaim -- based on the claim that Navieros wrongfully
deprived it of the use of its vessel -- would be entirely moot
if we could determine with any certainty that the Coast Guard
detention would have continued at least through June 7, the
date judgment was entered for Navieros. If this were the case,
any wrongful arrest or wrongful attachment would likely be
harmless error, cured by the judgment. The district court
opinion, issued on June 7, does state "[a]s of this date, the
vessel is still detained at the port of San Juan, Puerto Rico,
by virtue of the U.S. Coast Guard prohibition for the cited
safety violations." But there is no evidence in the record
before us on this point. In the absence of such evidence, we
address Vasilia's arguments on their merits.
-18- 18
begins. Krauss Bros. Lumber Co. v. Dimon S.S. Corp. (The
Pacific Cedar), 290 U.S. 117, 121 (1933); Osaka Shosen Kaisha
v. Pacific Export Lumber Co. (The Saigon Maru), 260 U.S. 490,
495 (1923). "Liability arises in the admiralty as elsewhere
from breach of any valid contract, but until the parties have
entered in performance remedy for the breach is in personam
only; the added advantages of lien status are reserved to
claimants under executed contracts." Gilmore & Black, The Law
of Admiralty S 9-22, at 635 (2d ed. 1975); see also Bunn, 428
F.2d at 48 n.10 ("The rule in admiralty is well settled that no
lien attaches for the breach of an executory contract. . . .
[U]ntil the parties have entered into performance, the remedy
in admiralty for the breach is in personam only."); Rainbow
Line, 480 F.2d at 1027 n.6; The Oceano, 148 F. 131, 133
(S.D.N.Y. 1906); Rule C(1) (setting forth when an action in rem
may be brought).
Here the goods to be shipped were never actually
loaded on the vessel. The vessel never got to the dockside for
loading. There is no evidence that the goods to be shipped
were ever in the custody or control of the vessel master.
Ordinarily, those facts would most likely end any claim of
maritime lien. See Gilmore & Black, supra, S 9-22, at 636.
The great majority of cases addressing the executory
contract doctrine, however, have concerned contracts of
-19- 19
affreightment evidenced by bills of lading or voyage charters.
E.A.S.T., Inc. v. M/V Alaia, 673 F. Supp. 796, 802 (E.D. La.
1987), aff'd, 876 F.2d 1168 (5th Cir. 1989). This case
involves a time charter agreement. The district court relied
heavily on the reasoning in E.A.S.T., where the court
distinguished between voyage charters and time charters as to
when the contract is no longer executory (and, consequently, as
to when a maritime lien arises). With voyage charters, whether
control over the cargo shifted to the vessel will most likely
determine whether a maritime lien exists. E.A.S.T., 673 F.
Supp. at 802-04. With time charters, however, a maritime lien
may arise even before control of the cargo shifts to the
vessel. Id.; see also Rainbow Line, 480 F.2d at 1027 n.6
(noting that cargo need not be loaded for time charter to lose
executory status).
This distinction is sensible because under a time
charter the shipowner agrees to put his vessel, master, and
crew to the service of the time charterer for a named period.
E.A.S.T., 673 F. Supp. at 802. The time charterer must begin
his performance "well before cargo is, if ever, loaded on the
vessel -- by paying hire, appointing and funding a port agent,
13. A "voyage charter" is a contract of affreightment under
which the carrier, who either owns or manages a ship, agrees to
transport a certain amount of the charterer's cargo ("freight")
from one port to another. The charterer pays for the shipment
of freight by the voyage. 2 Schoenbaum, supra, S 11-4, at 175-
76.
-20- 20
and arranging and paying for pilotage, tug assistance and line
handlers and all else necessary to berth the vessel in order to
load cargo." Id. at 803.
Here, the time charter form agreement specified that:
Vessel to be placed at the disposal of the
Charterers, at Delivery Arrival Pilot
Station Port Everglades Any Time, Day,
Night . . . .
The president of the plaintiff charterer boarded the vessel 30
miles from Port Everglades, and changed the instructions as to
the destination (berthing at Pier 19 at Port Everglades instead
of at the pilot station). The vessel proceeded until it
experienced mechanical problems and it stopped for repairs
short of Port Everglades. While it was undergoing repairs, the
charterer boarded the vessel four or five times, ordered fuel
for the vessel, confirmed its reservation of a berth space, and
issued a check to pay U.S. Customs fees.
Under these circumstances, we cannot say that the
experienced trial judge erred in concluding that there was
sufficient delivery of the vessel to the charterer, Navieros,
and sufficient performance of the contract that the charter was
no longer "executory." Accordingly, there was a maritime lien
and the Rule C arrest was proper.
2. Attachment
14. We reach this conclusion, as the district judge also did,
notwithstanding Navieros's claim in its pleadings that the
vessel had not been delivered to it.
-21- 21
We also affirm the Rule B attachment because Vasilia
was not "within the district" at the time attachment was sought
and granted.
On April 30 Vasilia submitted to the court a copy of
a letter saying that Vasilia had appointed an agent for service
in the district. The letter, dated April 26, 1996, states in
its entirety:
This is to confirm that owners are
authorizing CALVESBERT and BROWN as
attorneys to accept service of process on
behalf of VASILIA INC. who is the owner of
M/V VASILIA EXPRESS which was named in a
suit filed by Navieros Interamericanos in
Federal District Court in Puerto Rico.
There is no addressee designated on the face of the letter.
There is evidence at the top of the page that the letter had
been sent via fax to the recipient on April 29.
Rule B allows the attachment of a vessel or other
tangible property under certain circumstances to gain quasi in
rem jurisdiction over a defendant. A Rule B attachment may
only proceed when the defendant is not "found within the
district." The case law makes it clear that:
whether or not [a foreign defendant] can
be found within the district presents a
two-pronged inquiry: first whether it can
be found within the district in terms of
jurisdiction, and second, if so, whether
it can be found for service of process.
The first inquiry is directed to
whether or not the respondent is present
within the district by reason of
activities on its behalf by authorized
agents so as to subject it to [the
district court's] jurisdiction in in
-22- 22
personam proceedings. If not, then the
respondent cannot be found within the
district and this ground alone would be
sufficient to support the attachment.
Even if the foreign respondent be
found within the district in a
jurisdictional sense, its property is not
immunized from attachment. The second
question . . . then presents itself.
Could the respondent be found within the
district with due diligence for service in
the libel proceeding?
United States v. Cia. Naviera Continental S.A., 178 F. Supp.
561, 563-64 (S.D.N.Y. 1959) (footnote omitted). If the
respondent can be found within the district, then attachment
may not proceed.
As to the first inquiry, it is undisputed that by
purposefully sending its vessel into Puerto Rico, Vasilia
subjected itself to personal jurisdiction in that district. As
to the second inquiry, Vasilia argues that the attachment was
wrongful because it had appointed an agent for service of
process in the district. But the fact is Vasilia's purported
appointment of the agent came, at the earliest, on April 26,
two days after Navieros moved for an order of attachment (and
after Navieros filed an affidavit, as required by Supplemental
Rule B, saying Navieros had been unable to find the defendant
within the district).
15. Navieros's affidavit says that Navieros could not find
Royal United within the district. No mention was made of
Vasilia, the actual owner of the vessel. However, Navieros is
not to blame for this. Royal United held itself out as the
owner of the vessel in the charter party agreement with
Navieros. The two entities are obviously closely related.
-23- 23
The district court was not unjustified in stating
that Vasilia's argument would eviscerate the time-honored
process of maritime attachment. If we were to accept Vasilia's
position, a defendant who was otherwise safely outside the
service power of the district could effectively avoid Rule B
attachment by waiting until after the plaintiff filed a Rule B
motion to designate an agent for service.
Nor was Vasilia, simply by virtue of its subsequent
appearance in this action, entitled to dissolution of the
attachment. Swift v. Compania Colombiana, 339 U.S. 684, 693
(1950). But Vasilia was not without options. Prior to trial,
Vasilia had the opportunity, pursuant to Supplemental Rule
Whatever prejudice Vasilia may have suffered by virtue of the
fact that Navieros did not submit an affidavit stating that
Vasilia could not be found within the district properly falls
on Vasilia.
16. Moreover, the evidence defendant relies on here is simply
a letter from defendant to an unstated addressee purporting to
"confirm" that Calvesbert & Brown has been authorized to accept
service of process on Vasilia's behalf. This letter cannot be
enough to establish presence in the district within the meaning
of Rule B. The letter was not published and presumably neither
Navieros nor the court knew (nor could have known) about the
arrangement between Vasilia and its lawyers until after Vasilia
submitted a copy of the letter to the court.
17. Rule B, the modern codification of the ancient right of
foreign attachment in admiralty, see Swift v. Compania
Colombiana, 339 U.S. 684, 693 (1950), has two recognized
purposes: (1) to assure defendant's appearance and (2) to
assure satisfaction in case the suit is successful. Id. at
693-95; LaBanca v. Ostermunchner, 664 F.2d 65, 68 n.4 (5th Cir.
1981); Seawind Compania, S.A. v. Crescent Line, Inc. , 320 F.2d
580, 581-82 (2d Cir. 1963). Post-attachment appearance may
moot the first purpose but it does not address the second
purpose.
-24- 24
E(5)(a), to post a bond of $200,000 in order to obtain the
release of the vessel. Vasilia declined to exercise this
right.
B. Arbitration
The district court found that Vasilia had waived its
contractual right to arbitration by participating in the
litigation for over a month before filing a motion, one day
before the start of trial, to compel arbitration. Vasilia
protests that this ruling was error, but its arguments are not
persuasive.
Vasilia complains that it could not have moved to
compel arbitration earlier because it was not until two days
before the start of trial that Vasilia admitted the existence
of the charter party under which the right to arbitration was
established. Indeed, Vasilia did assert, at various stages of
the pleadings, that, if the court should determine the
existence of a charter party, then the case should be removed
to arbitration. Had it moved for arbitration earlier, Vasilia
says, this step could have been interpreted as a concession
that the charter party was fixed, because the right to
arbitration comes from a clause in the charter party. By not
moving until the day before trial, on the other hand, Vasilia
was found to have waived the right. Vasilia says the district
court's position presented Vasilia with a Hobson's choice
between admission and waiver. Litigation frequently puts
-25- 25
parties to hard choices, particularly as to which of seemingly
inconsistent theories to pursue. Vasilia is responsible for
the consequences of its choices.
Review of a district court's determination of waiver
of the right to arbitration is plenary. Menorah Ins. Co. v.
INX Reinsurance Corp. , 72 F.3d 218 (1st Cir. 1995); Commercial
Union Ins. Co. v. Gilbane Bldg. Co., 992 F.2d 386, 390 (1st
Cir. 1993). The party opposing the motion to compel
arbitration -- that is, the party urging a waiver -- must show
prejudice. Sevinor v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 807 F.2d 16, 19 (1st Cir. 1986).
There was prejudice here. The delay was not long in
absolute terms; it was only one month. But in the unusual
context of this litigation this delay was both long and
prejudicial. The delay lasted from the filing of the complaint
to the eve of trial. In the interim, in this expedited
litigation, the parties scrambled to prepare their cases for
trial, incurring expenses that would not have been occasioned
by preparing for an arbitration. That is enough to show
prejudice. Menorah, 72 F.3d at 212.
The desirability of enforcing arbitration clauses is
much recognized. Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth Inc. , 473 U.S. 614, 633 (1985). Arbitration may be "a
mutually optimal method and forum for dispute resolution
[which] serves the interests of efficiency and economy."
-26- 26
Menorah, 72 F.3d at 223. But we have also recognized that the
very rationale for arbitration may be undercut if a party is
permitted to pursue a claim through the courts and then later
claim a right to arbitration. Id. Accordingly, we have
repeatedly held that a party may, by engaging in litigation,
implicitly waive its contractual right to arbitrate. Id.;
Caribbean Ins. Servs., Inc. v. American Bankers Life Assurance
Co., 715 F.2d 17, 19 (1st Cir. 1983); Jones Motor Co. v.
Chauffeurs Local Union No. 633, 671 F.2d 38, 43 (1st Cir.
1982); Gutor Int'l AG v. Raymond Packer Co. , 493 F.2d 938, 945
(1st Cir. 1974).
Vasilia complains of self-inflicted wounds. Vasilia
denied it had a valid charter party with Navieros up until the
eve of trial. It then switched positions, admitted the
validity of the charter party, and sought to invoke arbitration
under the charter party. We agree with the district court that
this conduct amounted to a waiver.
C. Corporate Status of Vessel Owners
The Vasilia parties object to certain references in
the district court's opinion which, they believe, imply that
the court had pierced the corporate veils of Vasilia and Royal
United, without conducting the proper legal analysis. They ask
us to strike from the district court opinion these statements
(and strike from the pleadings similar references made by
plaintiffs). The argument is misplaced. It is a basic
-27- 27
principle of appellate jurisdiction that we review judgments,
not the editorial commentary in opinions.
To the extent that appellants mean to argue that the
district court's imputation of liability for the Navieros and
Comet judgments to the in personam defendants -- Vasilia and
Royal United -- was erroneous, they also fail. There are two
distinct issues here: (1) whether Vasilia, the owner of the
vessel, can be held liable for any damages apart from the
proceeds obtained from the sale of the vessel, and (2) whether
Royal United, the shipping agent and a nominally separate
corporation, can be held so liable. We agree with the district
court that the answer to both questions is yes.
The normal rule in admiralty actions in rem, such as
this one was initially, is that judgment creditors, absent
service of process on the vessel owner under Fed. R. Civ. P. 4,
are only entitled to enforce their liens against the vessel
itself. See Orbis Marine Enters., Inc. v. TEC Marine Lines,
Ltd., 692 F. Supp. 280, 284 (S.D.N.Y. 1988); East Asiatic Co.,
Ltd. v. Indomar Ltd. , 422 F. Supp. 1335, 1341 (S.D.N.Y. 1976);
2 Schoenbaum, supra, S 21-2, at 469; cf. Cooper v. Reynolds, 77
U.S. 308, 318-19 (1870) (same principle in non-admiralty action
in rem). The owners of the vessels against which actions in
18. The district court's finding of liability against Vasilia
and Royal United is limited to the judgments of the two
charterers, Navieros and Comet. The judgments of Gulf Coast
and Transcaribbean run only against the in rem defendant the
M/V VASILIA EXPRESS.
-28- 28
rem are brought are not, in such cases, personally liable for
judgments in excess of the value of the vessel, if any.
But this is not the normal case. Here, both in
personam defendants, Vasilia and Royal United, waived the
requirement of service of process and waived all defenses
related to personal jurisdiction. They both appeared
voluntarily as in personam defendants. We recognize, of
course, that this was done for strategic reasons. The waivers
and appearances came as part of defendants' ultimately
unsuccessful campaign against Rule B attachment of the vessel
by Navieros.
Nevertheless, Vasilia and Royal United must live with
the consequences of their choices. The waivers and appearances
allowed the action to blossom into the full in personam case
against the two defendants for breach of the charter party that
Navieros had contemplated in its pleadings. Cf. Atkins v. The
Disintegrating Co., 85 U.S. 272, 298 (1873). We see no error
in the district court's finding of liability against both
defendants.
D. Damages
Vasilia complains that both Navieros and Comet were
awarded excessive damages. The propriety of the amount of
19. We are dubious about the practical significance of this
matter. It is clear that there will be nothing left of the
proceeds for Vasilia. The parties who may have the greatest
interest in reducing the share awarded Comet or Navieros --
namely, the competing judgment winners -- have not complained.
-29- 29
damages awarded is an issue of fact, which we review for clear
error. Reilly v. United States, 863 F.2d 149, 166 (1st Cir.
1988).
1. Navieros
The breach of the Navieros time charter occurred when
the vessel was diverted to the use of Comet, after performance
of the Navieros contract commenced but before Navieros's cargo
was loaded. Without noting the distinction, defendants assert
that the measure of damages should be that which is used in
cases where the owner breached the charter party by repudiating
it before performance began . The general rule for recovery in
that situation was stated long ago by Judge Learned Hand: "the
withdrawal of the ship entitled [the charterer] prima facie to
damages measured by the difference between the hire reserved in
the charter and the hire necessary to secure such another
bottom." The Ada, 239 F. 363, 364 (S.D.N.Y. 1916), rev'd on
other grounds, 250 F. 194 (2d Cir. 1918); see also Sanders v.
Munson, 74 F. 649, 651 (2d Cir. 1896); 2 Schoenbaum, supra,
S 11-17, at 204-05 ("The charterer's damages for cancellation
are equal to the difference between the contract hire in the
And, indeed, neither Navieros nor Comet has appeared to defend
the judgments in their favor. However, in light of the
affirmance of the district court's liability finding as to the
two in personam defendants, it is possible that Navieros and/or
Comet will seek to enforce their judgments against the in
personam defendants. And so, we must visit this matter. We
also note that, as discussed later, the denial of intervention
to Motor-Services and Coastal was in error, and accordingly
those two parties may have an interest in these damages awards.
-30- 30
broken charter and the hire necessary to secure another
vessel."). It seems reasonable to apply this general rule
here, provided the victim of the breach is also allowed to
recover out-of-pocket expenses incidental to preparing for the
arrival of the ship for loading.
Inherent in that rule, of course, is a duty of
mitigation; the victim of the breach must make reasonable
efforts to locate a substitute vessel. See Glidden Co. v.
Hellenic Lines, Ltd., 315 F.2d 162, 164 (2d Cir. 1963); The
Ada, 239 F. at 364; Sanders, 74 F. at 651; 2 Schoenbaum, supra,
S 11-17, at 204-05. If the charterer is unable to locate a
suitable substitute vessel, then the proper measure of damages
for the breach is its lost profits. See Polar Steamship Corp.
v. Inland Overseas Steamship Corp. , 136 F.2d 835, 842 (4th Cir.
1943); The Ada, 239 F. at 364. Here, the trial court found
that Navieros was unable to locate an adequate substitute.
Defendants argue that Navieros in fact found a suitable
substitute, but did not use it. We review findings of fact for
clear error. Roche v. Royal Bank of Canada , 109 F.3d 820, 827
(1st Cir. 1997).
William Coleman's deposition testimony at trial and
Kenneth Coleman's trial testimony were the only evidence
offered by any of the parties on the question of mitigation.
According to William Coleman's uncontroverted testimony,
Navieros conducted an intensive but fruitless search for a
-31- 31
replacement vessel. Cf. Polar Steamship Corp. , 136 F.2d at 842
("The evidence is that efforts were made to obtain [another
vessel] but without success."). It is true that Navieros
learned about an available vessel and did consider using it in
place of the M/V VASILIA EXPRESS, but decided in the end that
this vessel was too slow. Such a decision was within
Navieros's rights. See Sanders, 74 F. at 652 (charterer "under
no obligation to accept a slower and smaller vessel than the
[originally chartered vessel] had been represented to be").
The district court was not obliged to credit William Coleman's
testimony, but it is certainly not clear error for it to have
done so.
Even using the rule advocated by defendants,
therefore, the proper measure of damages for the breach here
20. Defendants claim that this alternate vessel would have
been a suitable replacement, as its speed -- which William
Coleman stated to be 8 to 9 knots per hour -- was roughly the
same as the speed of the M/V VASILIA EXPRESS. Coleman's
deposition, taken in context, reveals that his concern was with
the speed in relation to other costs.
The thing that made her unattractive was
her speed, okay, related to her
costs. . . . Her speed, with the size tug
that they were talking about and the
barge, she would be offering you eight to
nine knots but the daily cost and the fuel
consumption was such that her per diem
cost was way high.
We are persuaded that Navieros's choice not to use this
alternate vessel was not a violation of its duty to mitigate.
-32- 32
was Navieros's lost profits. The court purported to apply
such a measure, but defendants argue that it awarded Navieros
"lost revenues" instead, a far more generous dollar amount.
Indeed, the court's choice of words was at times confusing; for
instance, it titled the table of damages calculations "Gross
Loss of Revenue." We must look past the question of word
choice and determine if the correct measure was applied.
These are the components of damages awarded Navieros:
(1) gross freight in the amount of
$67,000, returned to shippers upon
demand;
(2) canceled bills of lading issued in
Guatemala, representing $118,000 of
freight charges for three voyages;
(3) freight charges [of $71,175] on
southbound cargo received in Port
Everglades, eventually returned to
shippers;
(4) net loss of $3,377 over $26,000 worth
of freight rerouted through another
steamship line providing service to
Guatemala.
From this "Gross Loss" of $259,552, the court subtracted
"charter hire expense" of $57,600 and "fuel expense" of
21. Profit is "the excess of returns over expenditure in a
transaction." Webster's Third New International Dictionary
1811 (6th ed. 1993).
22. Revenue is, in this context, "the total income produced by
a given source." Webster's Third New International Dictionary
1942. Revenues are greater than profit; a portion of one's
revenues, in a successful venture, is profit.
-33- 33
$19,000. The "Net Loss" was $182,952, and the court awarded
damages in this amount.
That the court subtracted charter hire and fuel
expense from the sub-total seems to indicate that, despite its
choice of words, the court did not see the award as one of lost
"revenues" per se.
However, a radically different conception of
Navieros's lost profits is found in William Coleman's
deposition. Coleman stated that Navieros expected to make
$28,500 in profits from the shipping of cargo under the M/V
VASILIA EXPRESS charter (this estimate included the exercise by
Navieros of its option on a third round-trip).
Kenneth Coleman also testified at trial that Navieros
charters approximately 50 voyages per year and that Navieros's
1995 net profits were roughly $495,000. The average profit per
voyage is thus just under $10,000. Given this, it is hard to
understand how the loss of the three M/V VASILIA EXPRESS
voyages caused $182,952 in lost profits.
Because it is unclear on what basis the district
court calculated lost profits, we vacate the damages award and
remand the question of Navieros's damages to the district court
for clarification.
2. Comet
-34- 34
Defendants challenge six of the thirteen components
of the $100,312.13 award to Comet. They claim (1) that Comet
should not have been awarded the stevedoring fees ($4,500) and
ship's agency fees ($4,999.26) incurred at the port of origin,
Miami, because Comet would have incurred these expenses even if
the charter had not been breached; (2) that the award of fuel
costs for both the M/V VASILIA EXPRESS ($5,312) and the
replacement vessel secured by Comet ($7,326) was duplicative;
and (3) that the award of the entire cost of the substitute
vessel ($15,000), along with the reimbursement of the M/V
VASILIA EXPRESS charter hire ($39,450), was likewise
duplicative. Defendants also argue that the district court
"failed to account for the fact that cargo problems were part
of the reason why the U.S. Coast Guard initially detained the
M/V VASILIA EXPRESS in Puerto Rico, which, along with the
arrest by Navieros, led to the vessel's inability to carry
Comet's cargo."
The final point borders on frivolous, in light of the
numerous vessel-related and captain-related deficiencies cited
23. We need not be detained by the district court's statement
that Comet's damages were "announced as a stipulation of the
parties." If this were so, of course, defendants would have no
leg to stand on. But there was no such stipulation.
Defendants simply stipulated that they would not challenge the
admission of certain documents Comet intended to use to prove
its damages; they made clear their objections to the underlying
merits of the damages claims.
-35- 35
by the Coast Guard. See footnote 4 supra. But the first three
claims have considerable merit.
The damages award included reimbursement for the
stevedoring costs associated with transferring the cargo from
the M/V VASILIA EXPRESS to the replacement vessel. In light of
this, the award of costs for the original loading of the M/V
VASILIA EXPRESS was inappropriate. The award of the
stevedoring costs at the port of origin ($4,500) is thus
vacated. Comet did not make a claim for reimbursement for any
shipping agency fee for the replacement vessel, so there was no
double dipping there. But that is also why the fee paid by
Comet at the port of origin ($4,999.26) is not recoverable:
Comet apparently incurred no additional shipping agency costs
as a result of the breach. That award too is vacated.
There was excessive recovery for the fuel costs too.
Comet should pay only for the fuel used by the M/V VASILIA
EXPRESS on the initial Miami-San Juan run, which was completed
before the breach, but not for the additional fuel, if any,
that it deposited in that vessel's gas tanks in Miami in
expectation of the continuation of the voyage to Venezuela.
Comet is also entitled to differential money damages; that is,
it should be reimbursed for that portion of the fuel purchased
for the replacement vessel that was in excess of the expected
cost of fuel for the M/V VASILIA EXPRESS, had the latter ship
fulfilled its contractual obligations. These are calculations
-36- 36
that are necessarily based on estimates and expectations. The
record indicates that the replacement vessel consumed more fuel
than the M/V VASILIA EXPRESS, but we are unable to glean
precise details about this or about whether the M/V VASILIA
EXPRESS was left with any Comet-purchased fuel when detained
and arrested in the Port of San Juan, and if so, how much. We
thus vacate the two fuel cost awards ($5,312 & $7,326) and
remand to the district court for an amended award in light of
this discussion.
Comet was awarded excessive damages for charter hire
too. Comet is entitled to differential damages. Where the
substitute vessel costs less than the one originally chartered,
the charterer is entitled to a refund of the price paid for the
original, but it should pay for the substitute. If the
replacement costs more, the charterer should get reimbursed for
this difference in cost. It is difficult to imagine a
situation where the charterer would be entitled to a refund of
the original charter hire and an award of replacement costs.
Here, Comet's replacement vessel ($15,000) cost less than the
M/V VASILIA EXPRESS ($39,450). Comet therefore is entitled to
a refund of the M/V VASILIA EXPRESS charter hire, but not to an
award of costs for the hire of the replacement. The $15,000
award is thus vacated.
III.
We turn to the appeals of the various would-be
-37- 37
claimants whose motions for intervention were denied, and who
thus missed out on the chance to compete for a share of the
proceeds. We review a district court's denial of a motion to
intervene for abuse of discretion. Conservation Law Found. of
New England v. Mosbacher, 966 F.2d 39, 41 (1st Cir. 1992);
International Paper v. Town of Jay , 887 F.2d 338, 343 (1st Cir.
1989); cf. Banco Popular de Puerto Rico v. Greenblatt, 964 F.2d
1227, 1230 n.3 (1st Cir. 1992). We analyze the district
court's rulings against the backdrop of a purposefully
accelerated litigation in which scarcely more than a month
passed between the arrest of the vessel and the start of trial,
with the memorandum and order admirably following trial by less
than two weeks. We are also mindful of the fact that the
standards for timeliness are less strict for Rule 24(a) motions
to intervene (intervention as a matter of right) than for such
motions under Rule 24(b) (permissive intervention), and that
24. Gulf Coast, the preferred mortgage holder who won judgment
in the district court, appeared in this appeal to defend the
district court's decisions to deny intervention. Gulf Coast
obviously fears that the liens of the three would-be
intervenors would prime its own lien, severely diminishing, if
not eliminating entirely, its ultimate recovery in this action.
See 46 U.S.C. S 31326(b)(2) (for certain foreign vessels,
preferred mortgage lien subordinate to maritime lien for
necessaries provided in the United States); id. S 31326(b)(1)
(preferred mortgage lien subordinated to "preferred maritime
liens"); id. S 31301(5) (lien for seaman's wages is "preferred
maritime lien"); see also 1 Schoenbaum, supra, S 9.6, at 510.
-38- 38
all three appellants here invoked Rule 24(a). Banco Popular ,
964 F.2d at 1227 n.2; Fiandaca v. Cunningham, 827 F.2d 825,
832-33 (1st Cir. 1987); Stallworth v. Monsanto Co., 558 F.2d
257, 266 (5th Cir. 1977). We conclude that the district court
properly exercised its discretion in denying Captain
Jeftimiades's attempted intervention, but that it abused its
discretion in denying the attempted interventions of Motor-
Services and Coastal.
A. Captain Jeftimiades
Captain Jeftimiades, asserting a maritime lien for
unpaid seaman's wages, moved to intervene a day before the
start of trial. The district judge denied Jeftimiades's motion
from the bench on the first day of trial after learning that
neither the captain nor his attorney were present in the
courtroom. Unlike the motions of Coastal and Motor-Services,
the captain's motion was not denied on timeliness grounds;
indeed, the judge indicated that he probably would have allowed
intervention had the captain or his attorney been present at
the start of trial.
The judge carefully determined that the captain's
attorney had been duly informed of the trial date before
25. Motor-Services, alone among the post-judgment movants, did
not specify in its motion that it was seeking intervention as
of right under Fed. R. Civ. P. 24(a), as opposed to permissive
intervention under Fed. R. Civ. P. 24(b). But Motor-Services
captioned the motion as one to intervene "as a matter of
right," and so we give it the benefit of the doubt.
-39- 39
announcing that he was denying the motion. Jeftimiades does
not argue on appeal that his counsel had not been informed of
the May 23 trial date; he simply states that counsel
"erroneously thought the trial date was May 30th" and that he
was in New Jersey on May 23 and could not have appeared.
Jeftimiades argues that his counsel's associate was
available to represent the captain and that the court should
have requested that this associate appear on the captain's
behalf. However, the judge was not told that counsel was out
of the Commonwealth, and, while the judge certainly could have
inquired further into the matter if he wished, he was not
obliged to do so.
Captain Jeftimiades also argues that, as a seaman, he
is a ward of the court who is entitled to greater protection
than the average intervenor. Courts have allowed seamen to
avoid rules of common law which affect them particularly
harshly because of their vocation. This is true where a rule
of law has especially harsh results on a seaman because he is
a seaman . For instance, in Socony-Vacuum Oil Company v. Smith,
305 U.S. 424, 430-31 (1939), the leading case cited by
Jeftimiades, the Supreme Court was faced with the question of
whether a seaman who had used a dangerous appliance on board
could have his claim barred by the doctrine of assumption of
risk. The Court cautioned against the application of the
doctrine in admiralty cases because seamen often have fewer
-40- 40
alternatives than do land-based workers, and are often in less
of a position to avoid dangerous situations. Id. This case is
easily distinguishable. Captain Jeftimiades's failure to
appear at trial through counsel is not explained by any special
disabilities attendant to his status as a sailor.
Jeftimiades does not address the issue of whether
there would be any prejudice to the existing plaintiffs if he
were allowed now to intervene. Clearly, there would be
prejudice in light of the Coast Guard citation, which described
Jeftimiades as drunk at the time the vessel was detained.
Vasilia or some of the claimants might have attempted at trial
to prove that the captain forfeited his maritime lien for
wages. Cf. Johnston v. M/V Dieu Si Bon, 1996 WL 866112 (W.D.
Wa. 1996) (question of fact whether seaman forfeited lien for
wages by deserting ship). Of course, no one made this argument
at trial because the captain's attempted intervention was
denied. Allowing Jeftimiades to intervene now would
necessitate ordering new proceedings in which the parties could
attempt to make this claim. We recognize that the prejudice to
Jeftimiades is also severe, but he had the opportunity to make
26. His maritime lien is destroyed. It is a basic principle
of admiralty law that execution of a maritime lien extinguishes
all other liens on ship. See, e.g., Tamblyn v. River Bend
Marine Co., 837 F.2d 447, 448 (11th Cir. 1988) (per curiam);
Point Landing, Inc. v. Alabama Dry Dock & Shipbuilding Co. , 261
F.2d 861, 866 (5th Cir. 1958); see also Gilmore & Black, supra,
S 9-85, at 786-87.
-41- 41
his case and did not take advantage of this chance. There was
no abuse of discretion.
B. Motor-Services
Motor-Services moved to intervene on June 7, two
weeks after the start of trial and the day on which the
district court issued its memorandum and order. This motion
was denied as untimely by written order on July 3. The court
analyzed the motion under what it called "the First Circuit
standard of Banco Popular ." The timeliness standard applied in
Banco Popular , 964 F.2d 1227, is derived from the Fifth Circuit
opinion of Stallworth v. Monsanto Company, 558 F.2d 257 (5th
Cir. 1977). See Culbreath v. Dukakis, 630 F.2d 15, 20 (1st
Cir. 1980) (adopting Stallworth test).
The four factors are: the length of time the would-
be intervenor knew or reasonably should have known that its
interest was imperilled before it moved to intervene; the
foreseeable prejudice to the existing parties if intervention
is granted; the prejudice to the would-be intervenor if
intervention is denied; and exceptional circumstances which may
militate against or in favor of allowing late intervention.
Banco Popular, 964 F.2d at 1231.
The district court, weighing the matter by relying on
the facts as alleged by Motor-Services in the motion, first
determined that the credit term extended to Vasilia by Motor-
Services expired on April 29, and that from that date until
-42- 42
June 7 Motor-Services sought payment of the overdue receivables
only by leaving telephone messages that went unreturned. The
obvious implication of this finding (not stated by the court)
is that Motor-Services sat on its rights when it should have
been moving more decisively to protect its interest.
Moving on to the second factor, the court then noted
that the proposed intervention would prejudice the existing
parties because:
intervention on the day judgment was
entered seeks to disturb the core of the
judgment. The M/V VASILIA EXPRESS is
appraised at $500,000 and the court has
recognized plaintiffs by judgment in the
aggregate amount of $593,469.39. The
realities of the public sale market for
vessels dictated that the public sale
ordered would have an initial bidding
price set at $400,000. Any sale proceeds
will not be enough to cover the existing
plaintiffs' rights. It is not fair to
reopen the case for late-comers to gain an
undue advantage under the circumstances.
The court next found that no prejudice would inure to Motor-
Services as a result of the denial of the motion because Motor-
Services had waived its maritime lien by relying on the credit
of Michael and Steven Psarellis, the vessel owners, and the
credit of Royal United, the shipping agency. Finally, the
court found that there were no exceptional circumstances
militating in favor of intervention, as Motor-Services, in the
court's view, would still be fully able to litigate the matter
in personam against the vessel owners.
-43- 43
The denial of the intervention was, in large part,
based on erroneous legal conclusions reached by the district
court. We believe the district court abused its discretion and
that Motor-Services should have been allowed to intervene.
The court found that the first factor weighed against
Motor-Services because Motor-Services should have realized, as
of April 29, that its interests were imperilled, but it failed
to do anything about this until June 7, other than to try a few
times (unsuccessfully) to reach the vessel owners by telephone.
In the context of this expedited litigation, a period of
inaction lasting nearly six weeks would be difficult to excuse.
But the dates recited are not correct. In fact, it was not
until May 19 that the Vasilia account became overdue and Motor-
Services actively sought to collect but was misled by the
owners. Less than three weeks later, and within a few days of
learning of the suit, Motor-Services had a motion before the
court.
In the days after May 19, the president of Motor-
Services attempted to reach the vessel owners by telephone on
three separate occasions. He was told that the owners would
get back to him, but they never did. The secretary who
answered the phone did not tell him about the arrest of the M/V
VASILIA EXPRESS. Under these circumstances, we cannot say that
27. The invoice was issued on April 19 with a 30 day credit
term.
-44- 44
Motor-Services, which was actively trying to follow up on a
recently overdue account, was guilty of inaction. It was not
until June 3 that Motor-Services actually learned of the arrest
of the vessel. Local counsel was retained the next day, and
the motion to intervene was filed shortly thereafter, on June
6. Motor-Services had no way of knowing its maritime lien was
imperilled prior to June 3; once it learned, it took prompt
action to protect its interest. The first factor thus clearly
militates in favor of allowing intervention.
The district court, in discussing the second factor,
concluded that the existing plaintiffs would be prejudiced by
Motor-Services' intervention simply because the entry into the
case of another party, with an arguably superior lien, would
diminish the ultimate recovery available to those plaintiffs.
This may well be true, but it is not enough to outweigh the
other three factors, all of which favor intervention
(particularly since the plaintiffs' rights to a specific share
in the recovery had not yet become final and the sale proceeds
had not yet been disbursed).
On the third factor, the court found that there was
no prejudice to Motor-Services because Motor-Services had
waived its maritime lien. This was error. In inferring that
Motor-Services had waived its maritime lien on the vessel, the
28. The president of Motor-Services was told of the arrest by
a mechanic in Florida. He promptly called Navieros for
confirmation.
-45- 45
court relied on the existence of a promissory note given by
Michael Psarellis to Motor-Services and on the fact that Motor-
Services billed Royal United, the vessel's agent, rather than
the vessel owners for much of the work done on the vessel.
Motor-Services' maritime lien on the vessel arises by
operation of federal law (the Maritime Lien Act). 46 U.S.C.
S 31342. In order to acquire a lien on a vessel, a person
providing necessaries to the vessel is "not required to allege
or prove in the action that credit was given to the vessel."
Id. S 31342(a)(3); see Dampskibsselskabet Dannebrog v. Signal
Oil & Gas Co. , 310 U.S. 268, 273 (1940). This is assumed to be
the case unless proven otherwise; the party disputing the
existence of the lien is required to show that "[t]he party
entitled to the lien [took] affirmative actions that
manifest[ed] a clear intention to forego the lien." Farrell
Ocean Servs. v. United States , 681 F.2d 91, 94 (1st Cir. 1982).
The taking of additional security by the provider of
necessaries from the vessel owner, without more, does not
constitute such a step. Dampskibsselskabet Dannebrog , 310 U.S.
at 276-77; Farrell Ocean Servs. , 681 F.2d at 93-94; Crustacean
Transp. Corp. v. Atalanta Trading Corp., 369 F.2d 656, 660-61
(5th Cir. 1966); Gilmore & Black, supra, S 9-84, at 786. "The
party attacking the lien has the burden of . . . showing that
29. Here, Motor-Services obtained a personal guarantee and
promissory note from Michael Psarellis for $40,000.
-46- 46
the party rendering the service [Motor-Services] relied solely
on personal credit." Farrell Ocean Servs., 681 F.2d at 93
(emphasis added). No such showing has been made here.
The district court, in finding a waiver, also relied
on the fact that Motor-Services billed Royal United, the M/V
VASILIA's agent, rather than the owner of the vessel, for many
of the services provided. However, "the submission of a bill
to the owner's agent with whom the supplier has been dealing
rather than to the owner and the vessel [does not] constitute
waiver." Id. at 94; see also Nacirema Operating Co. v. S.S. Al
Kulsum, 407 F. Supp. 1222, 1226 (S.D.N.Y. 1975) ("mere fact"
that stevedore billed ship's agent for services provided vessel
"not sufficient to indicate that there was an implied waiver of
its right to a lien against the ship"). There was no waiver
here.
Because Motor-Services' lien was not waived by its
conduct, it is the execution of the other liens on the vessel
in this in rem proceeding which would strip Motor-Services of
its lien, which would be forever extinguished. See supra note
27. Clearly, there is ample prejudice to Motor-Services here.
Finally, the district court stated that there were no
special circumstances militating in favor of intervention
because Motor-Services could still bring an action in personam
against the vessel's owners. The record is silent as to
whether the defendants are presently solvent or not, but Motor-
-47- 47
Services is justifiably fearful that this right would be an
empty one. At any rate, it is a right that pales in comparison
to the right to exercise a lien against an identifiable sum of
money. In light of this, and the fact that trial was
expedited, we think there were special circumstances favoring
intervention. Intervention should have been allowed.
C. Coastal
Our Coastal analysis, in substance, tracks the Motor-
Services analysis. Coastal moved to intervene on June 11,
1996, asserting a maritime lien for repair work done on the
vessel and supplies furnished the vessel the previous summer.
The district court, by written opinion on July 3, denied the
motion on untimeliness grounds. The court applied the four-
factor test discussed above, and its reasoning was much the
same as that used in the Motor-Services' denial. The only
substantive difference in the court's analysis involved the
third factor, where the court found that Coastal had explicitly
waived its lien by agreeing to a payment plan with a clause
obligating Coastal to forebear from going in rem against the
vessel.
On the first factor, in finding that Coastal did not
move expeditiously to protect its interests, the court stressed
the 22-day gap between the time Coastal first learned of the
arrest and the time it sought intervention. We conclude that,
-48- 48
under the unique circumstances of this case, Coastal acted
reasonably promptly to protect its interests.
Vasilia was required, under the terms of its credit
agreement with Coastal, to make monthly payments of $17,500;
payments were due on the 8th of each month, starting in April
1996. Vasilia made only partial payment in April, and failed
to make the May payment. Coastal's president called Royal
United on May 15, a week after the May 8 due date, to inquire
about the non-payment. He was informed by Royal United that
there was an ongoing dispute with Navieros and Comet regarding
the charter of the vessel. While this is more information than
Motor-Services was able to obtain when Vasilia failed to make
its payment to Motor-Services at about the same time (May 19),
Coastal, like Motor-Services, was not told of the arrest and
the impending trial.
It is true that Coastal heard something about an
arrest through other channels during the week of May 20, but
the information it obtained consisted only of "unconfirmed
reports." Coastal moved expeditiously to confirm these
reports. By early June, it had learned the details, and by
30. This credit agreement was negotiated and signed in January
1996, after Vasilia proved unable to meet the payment schedule
originally agreed upon by the parties after Coastal's work on
the vessel was completed in July 1995.
31. The record does not reveal how Coastal learned about the
arrest. The district court fixed on May 20 because that is the
date Coastal stated, in its motion to intervene, that it first
heard about the arrest.
-49- 49
June 11 had moved to intervene. That Motor-Services managed to
get its motion in four days earlier is immaterial. The first
factor weighs in Coastal's favor.
As to the other factors, Coastal is in a similar
position to Motor-Services and we will not repeat the
analysis. Two of the remaining three factors clearly favor
intervention, and intervention should have been allowed.
IV.
We affirm the judgment against the defendants, but
vacate the awards of damages to Navieros and Comet and remand
for proceedings consistent with this opinion. We affirm the
denial of Captain Jeftimiades's motion to intervene. But we
reverse the denial of Motor-Services' and Coastal's motions to
intervene, and remand to the district court to entertain their
proof, calculate the damages due them, if any, rank the liens,
and order disbursal of the funds to the various judgment
creditors.
Each party to bear its/his own costs.
32. We pause only to note that, contrary to the district
court's findings, there was no explicit waiver of lien by
Coastal. Coastal's agreement not to proceed against the vessel
in rem was, by its terms, given "in consideration for [the
renegotiated] payment schedule" on the Vasilia account. It was
not a waiver of lien, but rather was an agreement by Coastal to
forebear from doing something that Coastal was otherwise
entitled to do. When Vasilia ceased making the required
payments under the schedule, however, Coastal's temporary
obligation to forebear from in rem action also ceased.
-50- 50