Petroleos Mexicanos v. MT King A

Opinions of the United
2009 Decisions States Court of Appeals
for the Third Circuit

1-27-2009

Petroleos Mexicanos v. MT King A
Precedential or Non-Precedential: Precedential

Docket No. 07-3402

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 PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________

No. 07-3402
_____________

PETROLEOS MEXICANOS REFINACION,

Appellee

v.

M/T KING A (EX-TBILISI),
her engines, boilers, etc., in rem
by KING DAVID SHIPPING CO., LTD.,

Appellant
_____________

On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 02-cv-01215)

District Judge: Honorable Dennis M. Cavanaugh
____________

Argued September 11, 2008
____________
 Before: SLOVITER, FUENTES and ALDISERT, Circuit
Judges
(Filed: January 27, 2009)

Jeremy J.O. Harwood (Argued)
Blank Rome LLP
405 Lexington Avenue
New York, New York 10174

Counsel for Appellant

Michael Cohen (Argued)
Terry L. Stoltz
Kevin J.B. O’Malley
Nicoletti Hornig & Sweeney
Wall Street Plaza
88 Pine Street, 7 th Floor
New York, New York 10005

Andrew J. Goldstein
Goldstein Isaacson, PC
100 Morris Avenue, 3 rd Floor
Springfield, New Jersey 07081

Counsel for Appellee

OPINION OF THE COURT

2
ALDISERT, Circuit Judge.

In this admiralty case, the owner of a seagoing vessel
appeals on behalf of its vessel in rem from a judgment of the
United States District Court for the District of New Jersey
denying its Supplemental Rule E(4)(f) application to vacate a
warrant of arrest for the vessel, to cancel and discharge
substitute security and to dismiss a complaint brought by a
charterer of the vessel in a claim for cargo damages.1 Although
other issues are presented, we must first decide whether the one-
year time-for-suit provision for cargo damage claims provided
for in the Carriage of Goods by Sea Act (“COGSA”), 46 U.S.C.
§ 30701,2 extinguished the maritime lien on the vessel. We
decide that the running of the COGSA statute of limitations did
extinguish the maritime lien on the vessel and that the District
Court therefore lacked admiralty in rem jurisdiction to issue the

1
Because this is an in rem action, the vessel itself is the
defendant with owner King David Shipping Co. merely acting
on its behalf. See Salazar v. Atlantic Sun, 881 F.2d 73, 76 (3d
Cir. 1989). For simplicity’s sake, we will dispense with the
linguistic formality in the opinion and refer simply to King
David’s actions, arguments, etc., while recognizing that it
appears only on behalf of its vessel.
2
Previously, COGSA appeared at 46 U.S.C. § 1303, et
seq. The Act is still in force but was not recodified. Currently,
COGSA appears in a note to 46 U.S.C. § 30701.

3
warrant of arrest for the vessel. We therefore reverse the
judgment of the District Court denying the motion to vacate the
warrant of arrest and other requested relief.3

I.

On November 19, 1992, Petroleos Mexicanos Refinacion
(“Pemex”) chartered a ship, the M/T TBILISI (now renamed
M/T KING A), from Tbilisi Shipping Co., Ltd., pursuant to a
contractual charter agreement. The vessel was to carry diesel oil
and unleaded gasoline to several Mexican ports. During the
discharge of the cargo at Guaymas, Mexico, it was discovered

3
The District Court had admiralty jurisdiction under 28
U.S.C. § 1333. Whether a valid maritime lien existed, giving
rise to the District Court’s subject matter jurisdiction, is an issue
on appeal. This Court has jurisdiction pursuant to 28 U.S.C. §
1291. This Court exercises plenary review over the District
Court’s determination that Petroleos Mexicanos Refinacion’s
complaint seeking a warrant of arrest was not barred by
COGSA’s one-year limitation period. See Syed v. Hercules Inc.,
214 F.3d 155, 159 n.2 (3d Cir. 2000) (“We exercise plenary
review over the District Court’s choice of the applicable statute
of limitations.”). Furthermore, this Court exercises plenary
review over the District Court’s determination that a maritime
lien giving rise to in rem jurisdiction existed. See, e.g., Myers v.
Am. Triumph F/V, 260 F.3d 1067, 1069 (9th Cir. 2001).

4
that the two cargoes had been cross-contaminated during their
voyage on the M/T TBILISI. Tbilisi Shipping did not dispute its
liability for the contamination. Pemex salvaged the
contaminated cargoes, incurring a disputed amount of salvage
costs and losses. Pemex withheld $530,320 of charter hire as
security for its anticipated claim for damages.

In April 1993, Tbilisi Shipping demanded arbitration to
recover the withheld hire. On May 18, 1993, Tbilisi Shipping’s
protection and indemnity (“P & I”) club, Steamship Mutual
Underwriting Association (Bermuda), Ltd. (“Steamship
Mutual”), issued a Letter of Undertaking (“First LOU”) to
secure a possible arbitration award in Pemex’s favor up to
$530,320, inclusive of costs and attorneys’ fees, plus interest up
to $94,000. In return for the issuance of the First LOU, Pemex
agreed to pay the withheld hire and to refrain from arresting the
vessel, except to the extent that Pemex’s claim exceeded the
amount secured by the First LOU. The First LOU also stated
that “[t]his letter is provided entirely without prejudice to any
rights or defenses which the said M/V TBILISI and/or Tbilisi
may have under applicable law.” App. JA-111. As we will
develop, it is this reservation-of-rights clause that triggers
operation of the one-year statute of limitations that prevents the
issuance of the warrant of arrest. See infra Part V.

In 1995, prior to Pemex presenting a claim to the
arbitration panel, Tbilisi Shipping made an application to the
arbitration panel for dismissal of Pemex’s claim. Tbilisi

5
Shipping contended that Pemex’s claim was barred by the one-
year statute of limitations for cargo damage claims provided for
in COGSA. The arbitration panel found that Pemex’s claim was
not barred by the statue of limitations, but the arbitrators
instructed Pemex to submit any claim it had against Tbilisi
Shipping expeditiously. Pemex submitted a Statement of Claim
on January 15, 1996. The claim was solely against Tbilisi
Shipping, in personam.

Sometime during the arbitration, Pemex discovered that
Tbilisi Shipping had sold the M/T TBILISI to King David
Shipping Co. (“King David”) and that the vessel had been
renamed M/T KING A. In early 2002, Pemex discovered that
the M/T KING A was scheduled to call at a terminal in New
Jersey. In March 2002, Pemex filed its complaint in the District
Court for the District of New Jersey naming the M/T KING A
as an in rem defendant and the District Court issued the warrant
of arrest for the vessel. King David was advised of the issuance
of the warrant of arrest and was given the opportunity to avoid
the arrest by posting additional security. Accordingly, King
David’s P&I Club, also Steamship Mutual, issued another LOU
(“Second LOU”) in the amount of $707,819.60, plus interest,
costs and attorneys’ fees.

On September 10, 2002, King David submitted an
application in the District Court to vacate the warrant of arrest

6
pursuant to Supplemental Rule E(4)(f).4 Through the
application, King David also sought to cancel and discharge the
Second LOU and any bond demanded thereon and dismiss
Pemex’s complaint. The District Court determined that a valid
maritime lien on the vessel existed, and that the warrant of arrest
was properly issued. The District Court also determined that the
complaint was not barred by the statute of limitations, and
therefore the complaint need not be dismissed. On April 15,
2003, the District Court denied the application to vacate the
warrant.

King David appealed the District Court’s denial of its
application to this Court. See Petroleos Mexicanos Refinacion
v. M/T KING A (Ex-TBILISI), 377 F.3d 329 (3d Cir. 2004).
This Court dismissed the action for lack of appellate jurisdiction
as no final order from the District Court had been issued.

On August 9, 2006, a final arbitration award was issued

4
Supplemental Rule E(4)(f) provides:

Whenever property is arrested or attached, any person claiming
an interest in it shall be entitled to a prompt hearing at which the
plaintiff shall be required to show why the arrest or attachment
should not be vacated or other relief granted consistent with
these rules.
Supplemental Rule E(4)(f), Supplemental Rules for Admiralty
or Maritime Claims.

7
against Tbilisi Shipping and in favor of Pemex in the amount of
$950,413.18. Part of the award was satisfied by the First LOU.
On July 26, 2007, Pemex and King David consented to entry of
a final judgment in the District Court in the amount of
$395,265.04, which represented the unpaid balance of the
arbitration award. From this final judgment, King David appeals
the merits of the District Court’s 2003 denial of its application
to vacate the warrant of arrest.5

II.

A maritime lien and a proceeding in rem are correlative;
“where one exists, the other can be taken, and not otherwise.”
The Rock Island Bridge, 73 U.S. 213, 215 (1867). Accordingly,
any action in rem pursuant to Supplemental Rule C to enforce a
maritime lien on a vessel must be premised on the existence of
a valid maritime lien at the time that the action was filed. See
Belcher Co. of Ala. v. M/V Maratha Mariner, 724 F.2d 1161,
1163 (5th Cir. 1984) (“a maritime lien on the vessel is a
prerequisite to an action in rem”); Amstar Corp. v. S/S
Alexandros T., 664 F.2d 904, 908 (4th Cir. 1981) (“[a] maritime
lien is an essential predicate for the arrest of a vessel in a private
in rem action”); Rainbow Line, Inc. v. M/V Tequila, 480 F.2d

5
In many instances in this opinion, we use the short
expression “to vacate the warrant of arrest” to include also “to
cancel and discharge substitute security and dismiss the
complaint.”

8
1024, 1028 (2d Cir. 1973) (“in rem jurisdiction in the admiralty
exists only to enforce a maritime lien.”) (citations omitted).

Supplemental Rule C permits an action in rem “[t]o
enforce any maritime lien.” Rule C(1)(a), Supplemental Rules
for Admiralty or Maritime Claims. Furthermore, Supplemental
Rule E requires a party seeking a warrant of arrest to file a
“complaint [that] shall state the circumstances from which the
claim arises with such particularity that the defendant or
claimant will be able, without moving for a more definite
statement, to commence an investigation of the facts and to
frame a responsive pleading.” Id. Rule E(2)(a). “If the
conditions for an in rem action appear to exist, the court must
issue an order directing the clerk to issue a warrant for the arrest
of the vessel or other property that is the subject of the action.”
Id. Rule C(3)(a)(ii)(A).

It is well settled that claims for breach of charter and
cargo damage give rise to maritime liens. See Rainbow Line,
480 F.2d at 1027 (“The American law is clear that there is a
maritime lien for the breach of a charter party . . . .”); RR
Caribbean, Inc. v. Dredge “Jumby Bay”, 147 F. Supp. 2d 378,
381 (D.V.I. 2001) (recognizing a maritime lien for breach of a
partially executed charter party); Demsey & Assocs., Inc. v. S.S.
Sea Star, 461 F.2d 1009, 1014 (2d Cir. 1972), abrogated on
other grounds by Seguros Illimani S.A. v. M/V Popi P, 929 F.2d
89 (2d Cir. 1991) (“[e]very claim for cargo damages creates a
maritime lien against the ship which may be enforced by a libel

9
in rem”). In this case, the breach of the charter agreement
through the contamination of the diesel oil and unleaded
gasoline gave rise to a maritime lien. Pemex’s verified
complaint filed in the District Court requesting a warrant of
arrest for the M/V KING A plainly asserts facts giving rise to a
maritime lien. App. JA-60-65.

When a maritime lien exists, the district court has
admiralty jurisdiction and it is proper for the district court to
issue a warrant of arrest for the vessel pursuant to Supplemental
Rule C(3)(a)(i). King David’s contention that the District Court
improperly issued the warrant of arrest is based primarily on its
statute of limitations defense. King David argues that the
expiration of the COGSA limitation period extinguished any lien
that Pemex had on the vessel. Because no lien on the vessel
existed when Pemex filed its complaint, King David argues, the
District Court lacked the admiralty jurisdiction to issue the
warrant of arrest.

It is undisputed that COGSA was incorporated into the
parties’ charter agreement and that the one-year statute of
limitations applies. The following portions of COGSA assist us
in the analysis of this case:

Sec. 1. Definitions
(a) The term ‘carrier’ includes the owner or the
charterer who enters into a contract of carriage
with a shipper.

10
 Sec. 3. Responsibilities and liabilities of carrier
and ship
(2) Cargo
The carrier shall properly and carefully load,
handle, stow, carry, keep, care for, and discharge
the goods carried.

(6) [L]imitation of actions
In any event the carrier and the ship shall be
discharged from all liability in respect of loss or
damage unless suit is brought within one year
after delivery of the goods or the date when the
goods should have been delivered.
Carriage of Goods by Sea Act §§ 1, 3, Historical and Statutory
Notes to 46 U.S.C. § 30701.

The COGSA statute of limitations “is one which
extinguishes the cause of action itself, and not merely the
remedy.” M.V.M., Inc. v. St. Paul Fire & Marine Ins. Co., 156
F. Supp. 879, 883 (S.D.N.Y. 1957), rev’d on other grounds sub
nom, St. Paul Fire & Marine Ins. Co v. U.S. Lines Co., 258 F.2d
374 (2d Cir. 1958); Am. Hoesch, Inc. v. S.S. AUBADE, 316 F.
Supp. 1193, 1194 (D.S.C. 1970) (recognizing that COGSA’s
time-for-suit provision extinguishes the cause of action and the
remedy); cf. Midstate Horticultural Co. v. Penn. R.R., 320 U.S.
356, 363-364 (1943) (recognizing that the time-for-suit clause
in the Interstate Commerce Act terminates a substantive claim
and its corresponding remedy). Accordingly, if we determine

11
that Pemex’s in rem complaint was barred by the COGSA
statute of limitations, it necessarily follows that the District
Court had no grounds upon which to issue a warrant of arrest.
Our determination of the untimeliness of Pemex’s complaint is
based on the applicability of the COGSA time bar and the
contractual provisions of the First LOU.

III.

Letters of undertaking (“LOUs”) are contracts between
the parties identified in the letter. Perez & Compania (Cataluna),
S.A. v. M/V MEXICO I, 826 F.2d 1449, 1451 (5th Cir. 1987).
Generally, once a LOU is issued, the letter becomes a complete
substitute for the res and the maritime lien transfers from the
vessel to the LOU. Maritima Antares, S.A. v. The Vessel ESSI
CAMILLA, 633 F. Supp. 694, 695 (E.D. Va. 1986) (“[A]s a
substitute for the res, [it] ha[s] the effect of transferring the
maritime lien from the vessel to the security fund.”); see also
Mackensworth v. S.S. AMERICAN MERCHANT, 28 F.3d 246,
252 (2d Cir. 1994) (“In accordance with generally accepted
practice, this Letter of Undertaking became the substitute res for
the value of [the] claim.”). As stated in The Law of Admiralty:
“With respect to a lien in suit the effect of release is to transfer
the lien from the ship to the fund represented by the bond or
stipulation. The lien against the ship is discharged for all
purposes and the ship cannot again be libeled in rem for the
same claim.” Grant Gilmore & Charles L. Black, Jr., The Law
of Admiralty § 9-89, at 799 (2d ed. 1975) (footnote omitted).

12
 If the amount of security provided by the LOU is
insufficient to satisfy a judgment, the court ordinarily may
authorize the re-arrest of the vessel only if the amount of the
original security was obtained through fraud or mistake. See
Moore v. M/V ANGELA, 353 F.3d 376, 385-386 (5th Cir.
2003) (“While it is true that a district court may require ‘further
security’ at any time, we interpret the phrase to mean substitute
or replacement security (e.g., when a surety has become
insolvent) rather than additional security, except where the
vessel was released by fraud, misrepresentation, or mistake of
the court.” (internal citation omitted) (emphasis in original));
Industria Nacional Del Papel, CA. v. M/V ALBERT F, 730 F.2d
622, 626 (11th Cir. 1984) (holding that a mistake sufficient to
justify re-arrest must be tinged with fraud or misrepresentation).

Although in this case there was no fraud or mistake, the
First LOU expressly authorized Pemex to seek additional
security if the amount of its claim exceeded the amount secured
by the First LOU. Generally, a LOU would not contain such a
provision. A standard LOU serves as a complete substitute for
the res, but here the First LOU served only to secure the
remittance of the withheld hire and not to prevent service of an
arrest warrant on the vessel. Accordingly, the First LOU
contained this unique contractual reservation of the right to later
arrest the vessel. Pemex, however, failed to take such action to
increase its security until nine years had passed. King David
contends that Pemex had seven months from the issuance of the
First LOU to calculate the amount of its claim for cargo

13
damages and to seek any additional security.6 Had Pemex done
so, King David argues, it would have undoubtedly been within
the COGSA limitations period, but attempting to seek the
additional security after the expiration of the limitations period
renders Pemex’s claim for additional security untimely.

Critical to the resolution of this action is the interaction
of two contractual provisions in the First LOU: (1) language in
the recital paragraph permitting later arrest of the vessel should
Pemex’s claim exceed the amount of the First LOU, and (2) the
reservation-of-rights clause in Paragraph Six.

The recital paragraph states:

In consideration of [Pemex] making a telegraphic
remittance . . . of outstanding hire in the amount
of $530,320 . . . and in consideration of Pemex
refraining from arresting the M/V TBILISI and

6
The cargo was contaminated in December 1992 and
Pemex’s mitigation efforts were complete no later than March
1993. The First LOU was issued on May 18, 1993. King David
argues that if the claim arose in December 1992, Pemex would
have roughly seven months from the issuance of the First LOU
to file its claim for damages within the COGSA one-year statute
of limitations. Even if the claim arose when mitigation efforts
were complete, King David argues that Pemex did not seek to
arrest the vessel until March 2002, nine years later.

14
 from attaching other property of Tbilisi
[Shipping], their agents and operators, for its
claim for alleged damage to a cargo of diesel and
magna sin gasoline shipped under the captioned
charter party except to the extent the claim
exceeds the amount of security provided herein,
namely $530,320 . . . .
App. JA-108-109 (emphasis supplied).

Paragraph Six provides:

This letter is provided entirely without prejudice
to any rights or defenses which the said M/V
TBILISI and/or Tbilisi [Shipping] may have
under applicable law, including but not limited to
the right of arbitration and claims for interest on
late paid hire, none of which is to be regarded as
waived, and is provided without prejudice to the
terms of the Charter.
App. JA-111-112 (emphasis supplied).

Our decision turns on whether the terms of COGSA,
including its one-year statute of limitations, come within the
“applicable law” referenced in Paragraph Six of the First LOU,
irrespective of the seemingly unlimited right to later arrest the
vessel provided for in the recital paragraph of the same
document.

15
 If we decide that the one-year limitations period did not
bar Pemex from seeking additional security at a very late date,
we must determine that the District Court’s issuance of the
warrant of arrest for the vessel was proper. If we decide that
Pemex’s efforts were barred by the one-year limitations period,
however, we must reverse the District Court’s judgment for lack
of admiralty jurisdiction. We now turn to reasons supplied by
the District Court in refusing to vacate the arrest warrant.

IV.

Even the most cursory reading of the District Court’s
opinion discloses that the District Court made no mention of the
critical Paragraph Six of the First LOU that explicitly reserves
any rights King David may “have under applicable law.” Its
opinion assumes that COGSA applies, but does not reconcile
Paragraph Six with the recital paragraph’s language permitting
later arrest of the vessel. Instead, the District Court writes a
modest dissertation discussing the relationship between in rem
and in personam claims.

In determining that Pemex’s complaint was not barred by
the statute of limitations, the District Court relied on the
reasoning of the United States Court of Appeals for the Second
Circuit in Thyssen, Inc. v. Calypso Shipping Corp., S.A., A.M.,
310 F.3d 102 (2d Cir. 2002). Although Thyssen addressed
different circumstances, the District Court cited the case for its
explanation of the close interrelation between in rem and in

16
personam claims in the maritime context. We do not believe that
Thyssen was a proper analogy because that case addressed a
situation wholly different from the one presented here.

In Thyssen, the Second Circuit addressed whether the
district court erred by dismissing a plaintiff’s in rem claims after
a panel of London arbitrators ruled on the plaintiff’s in
personam claims. Specifically, the plaintiff in Thyssen
contended that English law had no mechanism for granting the
arbitrators jurisdiction over the in rem claims, so any ruling it
made on the in personam claims had no bearing on the in rem
claims. Thyssen, 310 F.3d at 106. Rejecting this argument, the
Thyssen court recognized that most maritime claims give rise to
both in personam and in rem claims and stated,

Under[ 9 U.S.C.] § 8, the plaintiff may seize the
ship in rem, obtain a bond, and proceed with
arbitration. If the plaintiff wins but cannot recover
against the owner of the vessel, it can recover
against the vessel itself. The in rem claim serves
as a way of making sure that a plaintiff can
recover if it wins in arbitration. Any interpretation
of the [Federal Arbitration Act] that allowed an in
rem claim to proceed after the failure of an in
personam claim would undermine the purpose of
the Act with respect to maritime proceedings.
Id. at 107 (citations omitted).

17
 Ultimately, relying on Thyssen, the District Court
concluded,

The in rem and in personam claims are closely
intertwined. In the case at bar the Court agrees
with [Pemex’s] assertion that the action was
timely filed as it was initiated pursuant to an
ongoing arbitration and pursuant to the [First]
LOU. This action is not time-barred by the statute
of limitations under COGSA, 46 U.S.C. §
1303(6). An arbitration was timely commenced,
and the arrest of the vessel was sought in order to
protect [Pemex’s] interests during that arbitration.

Petroleos Mexicanos Refinacion v. M/T King A, 2003 WL
21706137, at *5 (D.N.J. Apr. 17, 2003). The District Court’s
conclusion that the complaint was not timed-barred is hence
rooted in two separate grounds: (1) Pemex filed its complaint
pursuant to the First LOU; and (2) Pemex’s complaint related
back to the timely filed arbitration because Pemex’s in rem
claim was closely intertwined with its in personam claim. We
will address each predicate of the District Court’s decision,
beginning with its determination that Pemex’s complaint was
filed “pursuant to” the First LOU.

V.

King David challenges the District Court’s determination

18
that the additional security was issued “pursuant to” the First
LOU. The District Court did not explain what it meant by
“pursuant to” the First LOU, namely whether the terms of
COGSA, including its one-year statute of limitations, come
within the “applicable law” referenced in Paragraph Six of the
First LOU, irrespective of the seemingly unlimited right to later
arrest the vessel provided for in the recital paragraph of the
same document.

This is a unique situation. Usually, LOUs serve as a
complete substitute for the res and therefore contain “non-
waiver of rights” clauses preventing the holder of the LOU from
later arresting the vessel and providing that the holder’s rights
shall be “precisely the same as they would have been had the
vessel, in fact, been taken into custody by the United States
Marshal under said in rem process, and released by the filing of
claim [of owner] and release bond.” Cont’l Grain Co. v. Fed.
Barge Lines, Inc., 268 F.2d 240, 243 n.3 (5th Cir. 1959), aff’d,
364 U.S. 19 (1960). Under the unique set of circumstances here,
however, Pemex retained the right to later arrest the vessel
should its claim exceed the amount of the First LOU. The First
LOU, therefore, was only a partial substitute for the res and it
contractually guaranteed the right to later arrest the vessel. The
question before this Court is, how does this unique right to later
arrest the vessel interact with the reservation-of-rights clause of
Paragraph Six?

“It is axiomatic in contract law that two provisions of a

19
contract should be read so as not to be in conflict with each
other if it is reasonably possible.” Keystone Fabric Laminates,
Inc. v. Fed. Ins. Co., 407 F.2d 1353, 1356 (3d Cir. 1969). Pemex
argues that the right to later arrest the vessel is paramount, and
does not address Paragraph Six’s reservation-of-rights clause.
King David argues that Paragraph Six reserved all defenses of
the vessel and Tbilisi Shipping, including the one-year COGSA
statute of limitations. We must construe the First LOU so as to
give meaning to both the recital paragraph and Paragraph Six,
two reconcilable provisions. Read in conjunction with one
another, they provide that Pemex retained the right to later arrest
the vessel, subject to the well-known one-year COGSA statute
of limitations.

VI.

We agree totally with Thyssen’s characterization of in
rem and in personam claims as often closely linked, but find its
reasoning inapplicable in furnishing the answer to the question
presented in this case. Apparently, the District Court
extrapolated from Thyssen and reasoned that the close
intertwining of the in rem and in personam claims permitted the
relation back of the in rem action to the in personam arbitration,
making Pemex’s 2002 complaint timely. However, neither the
District Court nor our own research discovered any case law to
support the proposition that the mere fact of interrelation
provides a basis for relation back or a tolling of the statute of
limitations.

20
 King David challenges the District Court’s relation back
reasoning, contending that the arbitration and in rem proceeding
are separate actions, and we agree with its analysis. King David
notes that the vessel was not a party to the timely filed
arbitration. See Marine Transit Corp. v. Dreyfus, 284 U.S. 263,
275 (1932) (“[9 U.S.C. § 8] does not contemplate ‘the vessel or
other property,’ which may be seized, as being the party to the
arbitration agreement.”). The arbitration was properly
commenced against Tbilisi Shipping in personam and the First
LOU was obtained to secure any award in favor of Pemex issued
by the arbitrators against Tbilisi Shipping. As the vessel was not
a party to the arbitration, King David contends, the complaint
cannot relate back to the arbitration.

Although the vessel was not a party to the arbitration, this
is not due to a pleading error on Pemex’s part. An in rem action
is cognizable only in federal court; therefore the vessel could not
have been a party to the in personam arbitration. Madruga v.
Superior Court, 346 U.S. 556, 560 (1954). This does not,
however, preclude an aggrieved party from utilizing admiralty
remedies where, as here, the parties have agreed to arbitrate any
disputes. The Federal Arbitration Act (“FAA”) specifically
addresses this concern:

If the basis of jurisdiction be a cause of action
otherwise justiciable in admiralty, then . . . the
party claiming to be aggrieved may begin his
proceeding hereunder by libel and seizure of the

21
 vessel or other property of the other party
according to the usual course of admiralty
proceedings, and the court shall then have
jurisdiction to direct the parties to proceed with
the arbitration and shall retain jurisdiction to enter
its decree upon the award.
9 U.S.C § 8.

As the Thyssen court correctly stated, the FAA thus
permits a plaintiff to seize a ship in rem, obtain a bond, and then
proceed with arbitration. Thyssen, 310 F.3d at 107. “If the
plaintiff wins but cannot recover against the owner of the vessel,
it can recover against the vessel itself. The in rem claim serves
as a way of making sure that a plaintiff can recover if it wins in
arbitration.” Id. (citations omitted).

Thyssen followed the approach sanctioned by the FAA
and began an in rem proceeding in federal district court on a
claim for cargo damages. Id. at 103. In exchange for release of
the ship, Thyssen accepted an LOU from the vessel’s insurer. Id.
After securing in rem jurisdiction with the LOU, the suit in the
district court was stayed for the action to proceed to arbitration
in London pursuant to an arbitration agreement. Id. at 103-104.
The London arbitrators were appointed, but the parties agreed to
allow the Commercial Court in London to decide whether or not
Thyssen’s claims were time-barred. (English law, like COGSA,
includes a one-year time bar on damaged-goods claims.) Id. at
104. That court decided that the claims were indeed time-barred

22
and dismissed Thyssen’s claims. Id. The case then returned to
the federal district court which confirmed the arbitration award
and disposed of all of Thyssen’s claims. Id. On appeal, Thyssen
argued that as English law does not grant arbitrators in rem
jurisdiction, the London arbitrators could not adjudicate its in
rem claim and therefore the arbitrators’ dismissal should have
no bearing on its in rem claim. Id. at 106.

The Second Circuit in Thyssen rejected this argument,
holding that as “[a]lmost all maritime disputes generate both an
in personam and in rem claim; if plaintiffs were able to bring in
rem claims in court after the failure of their in personam claims
before an arbitrator, parties would have no incentive to arbitrate
maritime matters.” Id. The Second Circuit’s ruling was thus
predicated on not undermining the purpose of the FAA with
respect to maritime proceedings. Id. at 107. This is the source of
the “close intertwining” cited by the District Court in this case.

While seemingly related, this reasoning has no
application to the case before this Court. In Thyssen, the
appellant sought a second bite at the apple, attempting to
proceed in rem against the vessel after its arbitration against the
ship owner was dismissed. Here, Pemex prevailed in arbitration,
but failed to properly secure an award with pre-arbitration
seizure before the statute of limitations had run. Although the
FAA clearly would have permitted Pemex to proceed in rem to
seize the vessel to secure a later arbitration award, Pemex failed
to fully secure its claim in rem when it accepted an LOU that

23
limited the amount of recovery to $530,320 absent further in
rem proceedings. See 9 U.S.C. § 8. Had Pemex secured its claim
with a standard LOU, the LOU would have served as a complete
substitute for the res and its claim would have been fully
secured. Had Pemex secured its claim with a later in rem
proceeding pursuant to the LOU, and within the one-year
COGSA statute of limitations, its claim would have been fully
secured. Instead, Pemex accepted an LOU that was only a partial
substitute for the res and failed to act in a timely manner.

Thyssen illustrates that maritime cases almost always
involve both in rem and in personam claims and that in relation
to the FAA, they are particularly closely linked, but Thyssen did
not sanction relation back of these distinct, albeit related,
actions.

Because we hold that a close interrelation does not
provide a basis for relation back, this case is controlled by Third
Circuit precedent. In Claussen v. Mene Grande Oil Co., C.A.,
275 F.2d 108 (3d Cir. 1960), this Court examined whether a
seaman’s complaint filed in 1956 in the District of Delaware
alleging injuries sustained in 1947 was time-barred even though
the seaman had originally filed a timely complaint alleging the
same claims in the Southern District of New York. In
determining that the seaman’s second complaint did not relate
back to his first complaint, the Court explained, “An argument
that an earlier suit filed on these claims in the Southern District
of New York less than three years after the accident somehow

24
tolled the statute of limitations for the present entirely distinct
action, as filed years later in the District of Delaware, is wholly
without merit.” Id. at 110. Similar to the seaman in Claussen,
Pemex here attempts to avoid a statute of limitations by relating
its in rem claim against the vessel back to an entirely distinct in
personam arbitration against Tbilisi Shipping.

Here, as in Claussen, the claim has no merit. Although a
standard LOU would have served as a complete substitute for
the res, and thereby provided sufficient security for Pemex’s
eventual damage award, the First LOU was not a typical LOU.
Instead, it limited recovery to $530,320 and required later in rem
action to secure any additional amount Pemex may have sought.
Although the First LOU provided for a possible later arrest of
the vessel, that subsequent in rem proceeding is distinct from the
arbitration. The facts underlying both actions are the same, but
the parties are different: Pemex and the vessel in the in rem
action and Pemex and Tbilisi Shipping in the arbitration.

The personification theory, while criticized by academics,
remains fundamental to American admiralty practice and is the
theoretical foundation of the maritime lien. Salazar v. Atlantic
Sun, 881 F.2d 73, 76 (3d Cir. 1989); 1 Thomas J. Schoenbaum,
Admiralty and Maritime Law § 9-1, at 515 (4th ed. 2004).
Admiralty law does not contemplate the concept of relation back
of in rem and in personam claims and Thyssen provides no
persuasive guidance on that issue. Usually, a party will secure in
rem jurisdiction over a vessel, within the limitations period,

25
before seeking arbitration, so as to secure a possible in personam
award. But, as discussed, the facts before us are highly unusual.
We are loathe to create an ad hoc framework to allow for such
novel relation back. Accordingly, we are comfortable resting
this portion of our opinion on the formalistic distinction that the
ship and the shipowner are separate parties.

VII.

Furthermore, it does not appear that the doctrine of
equitable tolling would be applicable in this case. “[E]quitable
tolling is proper only when the ‘principles of equity would make
[the] rigid application [of a limitation period] unfair.’” Miller v.
N.J. Dep’t of Corr., 145 F.3d 616, 618 (3d Cir. 1998) (quoting
Shendock v. Dir., Office of Workers’ Comp. Programs, 893
F.2d 1458, 1462 (3d Cir. 1990) (en banc) (alteration in
original)). Equitable tolling generally applies in three scenarios:
“(1) where a defendant actively misleads a plaintiff with respect
to her cause of action; (2) where the plaintiff has been prevented
from asserting her claim as a result of other extraordinary
circumstances; or (3) where the plaintiff asserts her claims in a
timely manner but has done so in the wrong forum.” Lake v.
Arnold, 232 F.3d 360, 370 n.9 (3d Cir. 2000). None of these
circumstances is present in this case, and neither the parties nor
the District Court cited or analyzed any of the factors.
Accordingly, it does not appear that equitable tolling was
applicable to make Pemex’s complaint timely.

26
 VIII.

In sum, Paragraph Six of the First LOU provides that
“[t]his letter is provided entirely without prejudice to any rights
or defense which the said M/V TIBILSI” and/or Tbilisi
[Shipping] may have under applicable law.” We are satisfied
that COGSA qualifies as “applicable law” because it is
undisputed that COGSA was incorporated into the parties’
charter agreement. Reading Paragraph Six in conjunction with
the arrest provision in the recital paragraph, we construe the
First LOU as permitting later arrest of the vessel subject to the
one-year statute of limitations. We conclude that neither the
“closely intertwined” nor relation back arguments dilute the
potency of our reasoning. Accordingly, as Pemex did not file its
in rem complaint until some nine years had passed, we hold that
the COGSA one-year statute of limitations extinguished the
maritime lien on the vessel, and that the District Court therefore
lacked in rem jurisdiction to issue the warrant of arrest for the
vessel.

The judgment of the District Court will be reversed and
the District Court is directed to vacate the warrant of arrest, to
cancel and discharge substitute security and to dismiss the
complaint.

27
FUENTES, Circuit Judge, dissenting.

I disagree with the majority for two reasons. First, Pemex’s
seizure of the ship was appropriate because the in rem and in
personam proceedings were essentially the same claim, and the
former “relates back” to the latter. Second, the seizure was
justified by the specific contract provision contained within the
LOU that reserved Pemex’s right to seize the ship at a later date in
the event the amount of its claim against Tblisi exceeded $530,320.
Thus, I respectfully disagree with the majority and I would affirm
the District Court’s decision.

As the majority explains, under a charter agreement, the
vessel Tblisi commenced a voyage on December 6, 1992, carrying
a cargo of diesel oil and unleaded gasoline on behalf of Pemex.
Sometime in December 1992, the oil and gasoline cross-
contaminated, causing Pemex to withhold the charter fee owed to
Tblisi Shipping as security for its damages.

Four months after the damage to Pemex’s cargo, Tblisi
demanded arbitration to claim the withheld charter fee. The
arbitration began in April 1993, well within the one-year statute of

28
limitations provided in the Carriage of Goods by Sea Act
(“COGSA”), 46 U.S.C. app. § 1300 et seq.

Tblisi Shipping’s insurer issued a Letter of Undertaking
(“LOU”) to Pemex on May 18, 1993. The LOU outlines that, in
consideration of Pemex’s payment of the withheld fee of $530,320
to Tblisi Shipping, the insurer would guarantee payment of
damages up to the amount of the withheld fee. In addition, the
LOU explains that Pemex would forego seizing the Tblisi, “except
in the event [Pemex’s] claim exceeds the amount of the security,”
namely $530,320.

The arbitration proceedings were unusually long, and as of
March 2002, there was still no resolution. Pemex learned at that
time that the vessel, now renamed the “King A,” would dock at a
port in New Jersey. In an effort to secure its loss, which was now
clearly in excess of the $530,320 guaranteed in the LOU, Pemex
sought to seize the ship. The majority now claims that the March
2002 seizure of the ship was time-barred because it did not occur
within COGSA’s one-year statute of limitations.

A. Relation Back

29
 Pemex claims that its seizure of the King A is not barred by
COGSA’s one-year statute of limitations because the seizure of a
ship is an in rem proceeding that, under current admiralty
principles, relates back to the filing of the arbitration proceeding.
Under this doctrine, an act done at a later time is deemed by law to
have occurred at an earlier time. B LACK’S L AW D ICTIONARY 1314
(8th ed. 2004); see also Garvin v. City of Philadelphia, 354 F.3d
215, 220 (3d Cir. 2003) (noting that the relation back doctrine
“aims to ameliorate the harsh result of the strict application of the
statute of limitations”). Thus, Pemex argues that the seizure of the
ship–the in rem proceeding–must be treated as though it occurred
at the time that the arbitration proceeding–the in personam
proceeding–was filed in April 1993.

There is no doubt that the seizure of a vessel (in rem) and an
arbitration (in personam) have long been interconnected
proceedings in maritime law. As S e c t i o n 8 o f t h e F e d e r a l
Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., states

If the basis of jurisdiction be a cause of action
otherw ise justiciab le in ad m iralty, then,
notwithstanding anything herein to the contrary, the
party claiming to be aggrieved may begin his
proceeding hereunder by libel and seizure of the

30
 vessel or other property of the other party according
to the usual course of admiralty proceedings, and the
court shall then have jurisdiction to direct the parties
to proceed with the arbitration and shall retain
jurisdiction to enter its decree upon the award.

9 U.S.C. § 8. Several courts have stated that the purpose of this
section of the FAA is to give an aggrieved party the benefit of
security provided by jurisdiction in rem while preserving the right
to arbitrate their dispute. See, e.g., Marine Transit Corp. v.
Dreyfus, 284 U.S. 263, 275 (1932) (concluding that seizure of the
vessel was the first step in enforcing arbitration, and explaining
that it was not necessary for the arbitration panel to “split” the in
personam claim against the corporation and the in rem claim
against the vessel).

In my view, Section 8 of the FAA clearly states that the in
rem and in personam claims are one proceeding, with the in rem
claim serving as security for the in personam claim. The two
claims arise from the same set of operative facts, and there is a
clear connection between the in rem claim against the vessel and
the in personam claim against the corporation.

31
 When Pemex accepted the security provided by the LOU in
May 1993, which guaranteed that Pemex could arrest the vessel at
a later date if the claim exceeded $530,320, Pemex secured its
claim as provided by Section 8 of the FAA. It is irrelevant that
Tblisi initiated the arbitration rather than Pemex, as the arbitration
panel noted when Tblisi first attempted to dismiss Pemex’s claim
as time-barred by COGSA.7 The underlying claim was commenced
within the one-year COGSA statute of limitations, and the parties
similarly negotiated and executed the LOU, which provided
$530,320 of security and reserved Pemex’s right to later arrest the
vessel, within the one-year statute of limitations.

The same reasoning regarding the closely intertwined nature
of in rem and in personam claims underlies the Second Circuit’s
rationale in Thyssen, Inc. v. Calypso Shipping Corp., 310 F.3d 102

1
As noted above, Tblisi initiated the arbitration to claim the
withheld fee in April 1993. As the result of a series of delays,
Pemex did not submit its itemized claim for damages until March
17, 1995. Three days later, Tblisi filed a notice with the arbitration
panel arguing that Pemex failed to initiate arbitration or otherwise
commence its claim for damages within COGSA’s one-year statute
of limitations. The arbitration panel held that Pemex rightfully
asserted a claim for Tblisi’s contamination of the cargo as a
defense to Tblisi’s claim for the charter fee.

32
(2d Cir. 2002). The plaintiff in Thyssen filed an in rem action in
federal district court after an arbitration panel dismissed his in
personam claims in a dispute over damaged cargo. The Second
Circuit affirmed the District Court’s decision, reasoning that
Section 8 of the FAA “mak[es] clear that where there is an
arbitration clause in a contract, in rem proceedings serve to provide
a plaintiff with security while the in personam claim awaits
arbitration.” Id. at 106. The court continued that almost all
maritime disputes result in both in rem and in personam claims, and
to allow a plaintiff to bring an in rem claim after an in personam
claim has failed would give parties no incentive to arbitrate
maritime claims. Id. The court stated the proper way to handle
these proceedings is for the plaintiff to seize the ship in rem, obtain
a bond, and proceed with the arbitration. Id. at 107. If the plaintiff
wins at arbitration, but cannot recover against the owner of the
vessel, the preserved in rem claim provides security so that the
plaintiff can recover against the vessel. Id.; see also Diana
Compania Maritima, S. A. of Panama v. Subfreights of S. S.
Admiralty Flyer, 280 F. Supp. 607, 615-16 (S.D.N.Y. 1968)
(rejecting argument that an arbitration award must be limited to a
judgment in personam between a vessel owner and a charterer and
holding instead that an arbitration award is effective in rem against
the subfreights).

Although the facts of Thyssen are somewhat
distinguishable, the law is not. Had Thyssen succeeded in his

33
arbitration claim, the Second Circuit’s rationale would have
permitted him to pursue his claim against the vessel. Here, Pemex
was a party to an arbitration commenced five months after the
incident, well within the COGSA statute of limitations. It is of no
import that the arbitration did not conclude until 2006. Now,
Pemex is entitled to enforce the lien it has held on the vessel for
over sixteen years. Therefore, I conclude that the relation back
doctrine alone is sufficient to justify the seizure of the ship in 2002.

B. Contract Law

There is a second, independent basis to permit Pemex’s
seizure of the ship. The LOU contained a clause which expressly
and unambiguously reserved Pemex’s right to arrest the vessel in
the event its damages exceeded $530,320.

It is well-established in contract law that specific and exact
terms are given greater weight than general language. Great Am.
Ins. Co. v. Norwin Sch. Dist., 544 F.3d 229, 247 (3d Cir. 2008);
see also R ESTATEMENT (S ECOND) OF C ONTRACTS § 203(c) (1981);
5 C ORBIN ON C ONTRACTS § 24.23 (2007) (“[T]he more specific
term should usually be held to prevail over the more general

34
term.”). Here, the majority imports the COGSA statute of
limitations into the LOU under the Paragraph Six “reservation of
rights” clause that generically reserved “any rights or defenses”
available to the vessel and its owner under “applicable law.” By
doing so, the majority elevates the boilerplate language of the
“reservation of rights” clause over the specific language, negotiated
by the parties under these special circumstances, that reserves
Pemex’s right to arrest the ship at a later date. Even the majority
notes that this language is unusual in LOUs, calling it “[a] unique
contractual reservation of right to later arrest the vessel.” Maj. Op.
at 13. This further supports the argument that this clause is
negotiated language that should trump the boilerplate language in
Paragraph Six.

Further, the majority’s interpretation of the LOU renders the
clause that reserves Pemex’s right to arrest the vessel at a later date
virtually useless, which is disfavored under general principles of
contract interpretation. USX Corp. v. Liberty Mut. Ins. Co., 444
F.3d 192, 200 (3d Cir. 2006); see also R ESTATEMENT (S ECOND) OF
C ONTRACTS § 203(a) (1981) (“[A]n interpretation which gives a
reasonable, lawful, and effective meaning to all the terms is
preferred to an interpretation which leaves a part unreasonable,
unlawful, or of no effect.”). According to the majority opinion,
Pemex, which was already a party to an arbitration arising from the
contamination incident, signed the LOU in May 1993 knowing that
their right to increase security via seizure of the vessel would

35
expire in seven months. It is important to note that Tblisi Shipping,
not Pemex, commenced the arbitration proceeding in April 1993 to
claim the withheld fee. Pemex did not even submit its itemized
damages to the arbitration panel until January 1995, although
Pemex knew that its damages would exceed the $530,320 secured
by the LOU when it was issued in May 1993. In my view, Pemex
entered the LOU aware that its right to arrest the vessel was
preserved indefinitely, given that an arbitration arising out of this
incident had already been commenced. The right to arrest the ship,
which related back to the date of the arbitration, rendered
inapplicable COGSA’s statute of limitations. Under these
circumstances, it is unreasonable to import the COGSA statute of
limitations into the LOU, which would have limited Pemex’s right
to later arrest the vessel to seven months from the date the LOU
was issued.

In addition, the majority faults Pemex for not securing the
full amount of the award in the LOU. The record reflects that
Pemex wanted more than the $530,320 security provided in the
LOU, but Tblisi Shipping refused to provide security beyond the
amount of the withheld fee. (J.A. at 147.) Because Tblisi Shipping
refused to provide additional security at that time, Pemex
negotiated the right to seize the vessel in the future because it knew
that the damages would exceed $530,320. This was the next best
option available to Pemex under the circumstances.

36
For the foregoing reasons, I respectfully dissent.

37