Offshore Marine Towing, Inc. v. MR23

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JUNE 20, 2005
No. 04-15126 THOMAS K. KAHN
________________________ CLERK

D. C. Docket No. 02-60988-CV-UUB

OFFSHORE MARINE TOWING, INC.,

Plaintiff-Appellant,

versus

MR23,
her engines, boiler, machinery, tackle, equipment,
freights, furnishings, and appurtenances, etc., in rem,
CHERIF AYOUTY,
WINGHAM, LTD.,
in personam, as owner of MR23,

Defendants-Appellees,

GIBRALTAR BANK,
Garnishee-Appellee.

________________________

Appeal from the United States District Court
for the Southern District of Florida
_________________________
(June 20, 2005)

Before DUBINA, PRYOR and KRAVITCH, Circuit Judges.
PRYOR, Circuit Judge:

This admiralty appeal presents two related issues: (1) whether attorney’s

fees may be awarded to a salvor in an in rem action against the vessel; and (2)

whether the district court acted within its authority under the Federal Arbitration

Act, 9 U.S.C. section 11, when it modified the arbitration award in favor of the

salvor to exclude attorney’s fees and expenses. We affirm the decision of the

district court, because attorney’s fees are not part of a salvage lien that may be

awarded in an in rem action and the awarding of attorney’s fees was not submitted

to the arbitrator.

I. BACKGROUND

On July 6, 2002, the M/V MR23, a sixty-one foot luxury motor yacht, was

grounded on the shore of Gun Cay in the Bahamas. The owner of the MR23,

Cherif Ayouty, was on board and requested assistance. Offshore Marine Towing,

Inc. (OMT) responded to the call for assistance.

On arrival at the stranded vessel, OMT presented Ayouty with a Standard

Form Marine Salvage Contract, which Ayouty executed. The contract provided

that the services of OMT were rendered on a no-cure/no-pay basis and provided for

arbitration of all disputes regarding the reasonableness of any fees or charges due

under the contract. The contract did not contain any provision regarding the in

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personam jurisdiction of the vessel owner. After execution of the contract, OMT

successfully freed the MR23 and towed her to Fort Lauderdale, Florida, where a

dispute arose over the salvage award due OMT.

On July 19, 2002, OMT filed suit in the United States District Court for the

Southern District of Florida to arrest the MR23 as security for its salvage lien.

OMT invoked the admiralty and maritime jurisdiction of the court under 28 U.S.C.

section 1333, and stated that the case was an action to foreclose a maritime lien.

The district court issued a warrant in rem for the MR23. Ayouty, who is not

subject to personal jurisdiction in Florida, entered a limited appearance, under Rule

E(8) of the Supplemental Rules for Certain Admiralty and Maritime Claims, to

defend the vessel without subjecting himself to in personam jurisdiction.

OMT moved the district court to compel arbitration. The district court

ordered the parties to submit to arbitration. The arbitrator issued an award in favor

of OMT for salvage in the amount of $15,852.50 and interest. The arbitrator

overruled Ayouty’s objections to an award of attorney’s fees and stated that “the

award of attorney’s fees is specifically permitted in salvage cases.” The arbitrator

granted OMT legal fees and expenses in the amount of $29,314.82. The arbitrator

noted that it was not clear that the issue of attorney’s fees had been submitted to

arbitration, but stated “[i]f it was not the intention of the [c]ourt for the issue of

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fees and costs to be a subject of this award, it can certainly so state and handle

those issues as it sees fit.”

OMT moved the district court to confirm the arbitration award. Ayouty

moved the district court to modify or vacate the award solely with regard to the

attorney’s fees and expenses. On review, the district court ruled that attorney’s

fees could not be awarded in an in rem action and that the issue of attorney’s fees

had not been submitted to the arbitrator. The district court granted Ayouty’s

motion to modify the arbitration award. OMT appeals.

II. STANDARD OF REVIEW

This Court reviews an order that vacates or modifies an arbitration award

“for clear error with respect to factual findings and de novo with respect to the

district court’s legal conclusions.” Gianelli Money Purchase Plan & Trust v. ADM

Investor Servs., Inc., 146 F.3d 1309, 1311 (11th Cir. 1998).

III. DISCUSSION

Arbitration awards may be modified in a limited number of circumstances.

We first address whether the district court properly modified the arbitration award.

We then address whether attorney’s fees may be awarded to a salvor in an in rem

action for salvage, which is a question of first impression in this circuit.

A. Because the Issue of Attorney’s Fees Was Not a Matter Submitted to the
Arbitrator, the District Court Properly Modified the Arbitration Award.

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 Under the Federal Arbitration Act, a district court may modify the decision

of an arbitrator in a limited number of circumstances:

(a) Where there was an evident material miscalculation of figures or
an evident material mistake in the description of any person, thing, or
property referred to in the award.
(b) Where the arbitrators have awarded upon a matter not submitted to
them, unless it is a matter not affecting the merits of the decision upon
the matter submitted.
(c) Where the award is imperfect in matter of form not affecting the
merits of the controversy.

9 U.S.C. § 11. The district court ruled that the issue of attorney’s fees was not

submitted to the arbitrator and modified the arbitration award.

“Under the FAA, upon motion of a party, district courts must compel

arbitration of all claims subject to arbitration.” Am. Exp. Fin. Advisors, Inc. v.

Makarewicz, 122 F.3d 936, 940 (11th Cir. 1997). OMT argues that the order of the

district court that compelled arbitration included attorney’s fees, because the

contract between OMT and Ayouty required arbitration and, as stated in the district

court order, “any doubts concerning the scope of arbitrable issues should be

resolved in favor of arbitration.”

This argument fails. The district court cannot compel arbitration on an issue

not before it. The only question before the district court was the value of the

salvage lien. As we explain below, because attorney’s fees are not part of the

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salvage lien, the district court did not submit the issue of attorney’s fees to the

arbitrator. The district court correctly found that the award of attorney’s fees was

not a matter submitted to the arbitrator.

B. Attorney’s Fees Are Not Part of a Salvage Lien and May
Not Be Awarded in an In Rem Action for Salvage.

It is the general rule that attorney’s fees are not awarded in admiralty cases,

Ins. Co. of N. Am. v. M/V Ocean Lynx, 901 F.2d 934, 941 (11th Cir. 1990), but

there are a few exceptions to this rule. Attorney’s fees have been awarded when

the losing party has acted in bad faith or vexatiously. Alyeska Pipeline Serv. Co.

v. Wilderness Soc., 421 U.S. 240, 258-59, 95 S. Ct. 1612, 1622 (1975); Vaughan v.

Atkinson, 369 U.S. 527, 530-31, 82 S. Ct. 997, 999-1000 (1962). Attorney’s fees

have also been awarded to an indemnitee in a suit against the indemnitor, Platoro,

Ltd., Inc. v. Unidentified Remains of a Vessel, 695 F.2d 893, 906 n.19 (5th Cir.

1983), and in cases involving breach of the warranty of workmanlike performance.

Delta S.S. Lines, Inc. v. Avondale Shipyards, Inc., 747 F.2d 995, 1011 (5th Cir.

1984).

This case does not involve any recognized exception to the general rule, and

the district court correctly held that Bradford Marine Inc. v. M/V Sea Falcon, 64

F.3d 585 (11th Cir. 1995), controls this case. In Bradford, we held that attorney’s

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fees could not be collected in an in rem action to enforce a maritime lien for

necessaries: “A suit in rem to enforce a maritime lien is limited to the value of the

lien itself. ‘The only object of the proceeding in rem, is to make [the right to the

maritime lien] available–to carry it into effect. It subserves no other purpose.’” Id.

at 589 (quoting The Rock Island Bridge, 73 U.S. (6 Wall.) 213, 215 (1867)). We

further held that “the attorney’s fees in this case are properly charged against the

Sea Falcon in rem . . . only if the fees, which Bradford incurred as a result of

retaining legal counsel to pursue a claim against the Sea Falcon and its owners,”

were necessaries and provided to the Sea Falcon. Id. Because the attorney’s fees

were not necessaries provided to the Sea Falcon, we held that the attorney’s fees

could not be assessed in the in rem action. Id.

Although OMT attempts to distinguish Bradford on the ground that it

involved a lien for necessaries, this arguments is unpersuasive. There is no basis to

limit the reasoning of Bradford to in rem actions for a maritime lien for

necessaries. A maritime action in rem for salvage, including contract salvage, is

also a suit to enforce a lien. 46 U.S.C. § 31301 (5)(F). Because the attorney’s fees

incurred in the litigation and arbitration were not part of the value of the salvage

lien against the vessel, they could not properly be recovered in an action in rem.

“Awards for performance of salvage services are not limited to a strict

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quantum meruit measure of the value of the services performed. Rather, the award

is calculated to include a bounty or premium based upon the risk involved in the

operation and the skill with which it was performed.” Treasure Salvors, Inc. v.

Unidentified Wreck & Abandoned Sailing Vessel, 640 F.2d 560, 567 (5th Cir.

1981). The calculation of the award is specific to the facts of each case, and

compensation is given as a reward “for perilous services, voluntarily rendered, and

as an inducement to seamen and others to embark in such undertakings to save life

and property.” The Blackwall, 77 U.S. (10 Wall.) 1, 14 (1869).

In The Blackwall, the Supreme Court enumerated six factors related to the

salvor’s skill and risk in the calculation of a salvage award:

(1.) The labor expended by the salvors in rendering the salvage
service. (2.) The promptitude, skill, and energy displayed in rendering
the service and saving the property. (3.) The value of the property
employed by the salvors in rendering the service, and the danger to
which such property was exposed. (4.) The risk incurred by the
salvors in securing the property from the impending peril. (5.) The
value of the property saved. (6.) The degree of danger from which the
property was rescued.

Id. at 13-14. These factors are a guide to measure both the cost to the salvors of

performing the service and the benefit to the salvee. Margate Shipping Co. v. M/V

JA Orgeron, 143 F.3d 976, 986-87 (5th Cir. 1998).

Attorney’s fees do not fit within any of the Blackwall factors. Attorney’s

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fees are not a measure of the labor expended by the salvors, the skill of the salvors,

the value of salving property, or the risk to the salvors or the property. Neither do

the attorney’s fees correspond to the value of the salved property or the risk to that

property. Rather, attorney’s fees arise in the enforcement of a salvage lien;

attorney’s fees are not part of the lien itself.

The cases cited by OMT to establish the propriety of an award of attorney’s

fees in an in rem action are distinguishable; in no case on which OMT relies were

attorney’s fees awarded against a vessel. In Southernmost Marine Services v. M/V

Potential, 250 F. Supp. 2d 1367, 1380-81 (S.D. Fla. 2003), attorney’s fees were

awarded against an insurance company for its frivolous failure to pay a salvage

award after contracting with the salvors. In Cobb Coin v. Unidentified, Wrecked

Abandoned Sailing Vessel, 549 F. Supp. 540, 562-63 (S.D. Fla. 1982), attorney’s

fees were awarded against the State of Florida for its bad faith interference with the

salvor’s federal rights. In Treasure Salvors, Inc. v. Unidentified, Wrecked &

Abandoned Sailing Vessel, 556 F. Supp. 1319, 1341 (S.D. Fla. 1983), attorney’s

fees were awarded against the intervening salvor. In Compania Galena, S.A. v.

M/V Caribbean, 565 F.2d 358 (5th Cir. 1978), no attorney’s fees were awarded,

and in Faneuil Advisors, Inc. v. O/S Sea Hawk, 50 F.3d 88 (1st Cir. 1995), which

OMT erroneously cited for tacit support of its position, the First Circuit reversed

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the district court on the ground that the vessel at issue had not been salvaged. The

court expressed no opinion on the remaining issues, including attorney’s fees,

because its holding that the vessel was not salvaged “obviate[d] the need for any

discussion on these other issues.” Id. at 90 n.6.

We conclude that attorney’s fees may not be recovered in an in rem action to

enforce a salvage lien. The district court did not have in personam jurisdiction

over the vessel owner to enforce a contractual obligation to pay attorney’s fees, and

OMT did not pursue any remedies quasi in rem. The district court, therefore, did

not err in modifying the arbitration award.

IV. CONCLUSION

Because attorney’s fees may not be awarded in an in rem action for a salvage

lien and the issue of attorney’s fees was not submitted to the arbitrator, the district

court correctly modified the arbitration award in favor of OMT to exclude

attorney’s fees and costs.

AFFIRMED.

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