Dresdner Bank AG v. M/V Olympia Voyager

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
________________________
FILED
U.S. COURT OF APPEALS
No. 05-10862 ELEVENTH CIRCUIT
________________________ May 1, 2006
THOMAS K. KAHN
D. C. Docket No. 03-62225 CV-JIC

DRESDNER BANK AG, Dresdner Bank AG in Hamburg,
NORDDEUTSCHE LANDESBANK-GIROZENTRALE
KREDITANSTALT FUR,

Plaintiffs-Cross-
Defendants-Appellants,

BLOHM AND VOSS GMBH, et al.,

Intervenor-Plaintiffs,

AKTINA TRAVEL, S.A.,

Intervenor-Plaintiff-
Appellee,

MONACO TELECOM INTERNATIONAL,

Intervenor-Plaintiff-
Cross-Claimant,

versus

M/V OLYMPIA VOYAGER, a 157.90 meter Blohm
Voss GmbH motor vessel, Hull No. 961, Greek official
number 10750, her engines, tackle equipment, rigging,
dinghies, furniture, appurtenances, etc., in rem,
and Olympic World Cruises Inc., her owner, in personam,

Defendant.

________________________

Appeal from the United States District Court
for the Southern District of Florida
_________________________

(May 1, 2006)

Before DUBINA, MARCUS and COX, Circuit Judges.

PER CURIAM:

In this admiralty appeal, we consider whether United States law was

properly applied to govern a transaction between a Liberian shipowner and a

Greek travel agency for travel services benefitting a Greek-flagged cruise vessel

while it was in a United States port. We find that Greek law–not United States

law–should have been applied. Thus, we reverse.

I. Introduction

This appeal arises out of an action filed by Dresdner Bank AG in Hamburg,

Kreditandstalt Fur Wiederaufbau, and Norddeutsche Landesbank-Girozentrale

(collectively, “the Banks”) to foreclose a preferred ship mortgage on a foreign

vessel. The Banks filed a complaint in the Southern District of Florida in rem

2
against the M/V Olympia Voyager (“the Vessel”), a Greek-flagged passenger

cruise vessel, and in personam against Olympic World Cruises (“OWC”), the

owner of the Vessel.

The district court entered a default judgment of foreclosure against the

Vessel and ordered it sold. Subsequently, numerous parties filed claims or

motions to intervene to assert claims against the Vessel or the proceeds of its sale.

In response to these claims and motions, the district court entered an order

requiring the Banks to provide security for any claims found to be superior in

priority to the preferred ship mortgage, and allowing the Banks to stand in the

shoes of the Vessel to defend against all claimants asserting such priority. On

January 13, 2005, the district court entered a final judgment in favor of Aktina

Travel, S.A. (“Aktina”) on its claim against the Vessel. The Banks appeal.

II. Background

Aktina is a Greek travel agency, which contracted with the operators of the

Vessel to provide airline tickets for crew members to use to travel to and from the

United States, either before boarding or after disembarking the Vessel. The parties

contracted in Greece, and Aktina provided the travel arrangements from Greece by

telephone and other electronic means. Aktina filed a motion to intervene in this

action, claiming that it was entitled to a maritime lien under the Commercial

3
Instruments and Maritime Liens Act (“CIMLA”), 46 U.S.C. § 31301 et seq., which

grants priority to creditors holding maritime liens for necessaries provided in the

United States over those holding preferred mortgages on foreign vessels. See 46

U.S.C. §31326.

No written agreement between the parties existed, so the district court

engaged in a choice-of-law analysis prior to determining the existence of a

maritime lien under CIMLA. The court first determined that a conflict existed

between United States law, which would afford a maritime lien to Aktina, and

Greek law, which would not. Next, the court applied the factors laid out in Gulf

Trading & Transport Co. v. The Vessel Hoegh Shield, 658 F.2d 363, 366-68 (5th

Cir. Oct. 7, 1981) (Unit A), to determine which nation’s laws should apply. The

court ultimately determined that United States law should apply. The court based

this determination substantially on two factual findings: (1) that the place of

performance of the contract was the United States, and (2) that the subject matter

of the contract consisted of airline tickets, and that these tickets were located in

the United States.

After finding that United States law properly applied, the court found that

Aktina was entitled to a maritime lien under CIMLA, and that this lien’s priority

was superior to that of the Banks’ preferred ship mortgage. The court fixed the

4
amount of the lien at 137,405.26 euro. Then, recognizing that United States

district courts cannot award damages in foreign currencies, the court converted the

award to 146,787.52 United States dollars.

III. Contentions of the Parties

The Banks contend that the district court erred in its determination that

United States law should apply to this transaction. Alternatively, the Banks

contend that even if the district court correctly chose United States law, it erred in

finding that Aktina is entitled to a maritime lien under CIMLA. Aktina agrees

with the district court’s characterization of both the place of performance and the

location of the subject matter of the contract as the United States, and contends

that the court’s decision to base its choice-of-law determination substantially on

these factors was correct. Aktina also contends that the district court properly

found that CIMLA applies and that, once applied, CIMLA grants Aktina a valid

maritime lien.

IV. Standards of Review

We review choice-of-law determinations de novo. Sigalas v. Lido

Maritime, Inc., 776 F.2d 1512, 1516 (11th Cir. 1985). The factual findings

underpinning a choice-of-law determination are reviewed for clear error. Szumlicz

v. Norwegian America Line, Inc., 698 F.2d 1192, 1196 (11th Cir. 1983). A finding

5
of fact is clearly erroneous when the entirety of the evidence leads the reviewing

court to a definite and firm conviction that a mistake has been committed. United

States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S. Ct. 525, 542 (1948).

When reviewing the judgment of a district judge sitting in admiralty with no jury,

we may not set aside the court’s findings of fact unless they are clearly erroneous.

McAllister v. United States, 348 U.S. 19, 20, 75 S. Ct. 6, 8 (1954); Harbor Tug &

Barge, Inc. v. Belcher Towing Co., 733 F.2d 823, 825 (11th Cir. 1984); Sisung v.

Tiger Pass Shipyard Co., 303 F.2d 318, 322 (5th Cir. 1962). We review

conclusions of admiralty law de novo. Venus Lines Agency, Inc. v. CVG Int’l

America, Inc., 234 F.3d 1225, 1228 (11th Cir. 2000).

V. Discussion

A. Choice of Law

No written contract between the parties existed, and the district court

conducted a choice-of-law analysis. The district court correctly resolved the first

issue in any such analysis–whether a conflict of laws exists. See Brewer v.

Memphis Pub. Co., Inc., 626 F.2d 1238, 1242 n.7 (5th Cir. 1980). The district

court properly concluded that the application of United States law leads to the

conclusion that Aktina is entitled to a maritime lien for the travel services

6
provided, while the application of Greek law leads to the opposite conclusion.

Thus, we must move to the next step–determining which nation’s law to apply.

Generally, to determine which law to apply in an admiralty case, courts

examine several factors, as outlined in Lauritzen v. Larsen, 345 U.S. 571, 583-92,

73 S. Ct. 921, 928-33 (1953), and Romero v. Int’l Terminal Operating Co., 358

U.S. 354, 382, 79 S. Ct. 468, 485 (1959). These factors include: (1) the situs of

the claim; (2) the law of the flag of the vessel; (3) the allegiance of the seamen; (4)

the allegiance of the shipowner; (5) the place of the contract; (6) the access to a

foreign forum; and (7) the law of the forum making the choice of law. In Hellenic

Lines Ltd. v. Rhoditis, 398 U.S. 306, 309, 90 S. Ct. 1731, 1734 (1970), the

Supreme Court added the additional factor of the shipowner’s base of operations.

See also Thorsteinsson v. M/V Drangur, 891 F.2d 1547, 1555 n.9 (11th Cir. 1990)

(remanding in part for a determination of the applicable law to apply and

instructing the district court to apply the foregoing cases).

Nevertheless, we agree with the district court that the Supreme Court's

conflicts jurisprudence in admiralty cases does not squarely apply here, as those

cases, beginning with Lauritzen, generally address choice of law in maritime tort

actions, while this action concerns a maritime contract. The Lauritzen Court

provided a list of factors to be considered in a Jones Act case, and the two major

7
Supreme Court cases applying and expanding Lauritzen both arose out of tort. See

Rhoditis, 398 U.S. at 307, 90 S. Ct. at 1733; Romero, 358 U.S. at 355, 79 S. Ct. at

471. Thus, the Supreme Court has not specifically laid down a choice of law

approach in maritime contract cases. Like the district court, we think that the Fifth

Circuit's opinion in Gulf Trading & Transport Co. v. The Vessel Hoegh Shield,

658 F.2d 363, 366-368 (5th Cir. 1981) (Unit A), provides the proper analysis for

choice-of-law problems in maritime contract cases like this one, and we adopt it

today as this circuit's approach.1

In Hoegh Shield, the Fifth Circuit distinguished Lauritzen and applied the

Second Restatement of Conflicts of Law, Sections 6 (Choice-of-Law Principles)

and 188 (Validity of Contracts and Rights Created Thereby), as well as

governmental interest analysis, to hold that the proper choice of law in the contract

dispute before it was the United States. Id. The contract in Hoegh Shield involved

the physical provision of necessaries in the form of supplies and fuel by an

American supplier directly to a foreign vessel in what was then an American port,

1
The decisions of the former Fifth Circuit rendered before October 1, 1981 are binding on
this circuit. Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc). After that
date, however, only the decisions of the continuing Fifth Circuit’s Administrative Unit B are binding
on this circuit, while Unit A decisions are merely persuasive. Stein v. Reynolds Sec., Inc., 667 F.2d
33, 34 (11th Cir. 1982). See generally, Thomas E. Baker, A Primer on Precedent in the Eleventh
Circuit, 34 Mercer L. Rev. 1175 (1983).

8
the Panama Canal Zone. Id. at 364-65. Applying in this case the analysis that the

Hoegh Shield court conducted, the result clearly points to Greek law.

To conduct a choice-of-law analysis based on the Restatement, the court

must determine which sovereign entity has the “most significant relationship” with

the transaction at issue. See Eugene F. Scoles, Peter Hay, Patrick J. Borchers, &

Symeon C. Symeonides, Conflict of Laws §2.14 (4th ed. 2004). Section 6 of the

Restatement outlines several general principles to be considered when making this

determination. However, for a contract dispute such as this one, the Restatement

provides more specific factors in §188 to effectuate the general choice-of-law

principles outlined in § 6. See Restatement (Second) Conflicts of Law §188(2).

These factors are: (a) the place of contracting; (b) the place of negotiation; (c) the

place of performance; (d) the locus of the subject matter of the contract; and (e)

the domicile of the parties.

Here, the district court found that both the place of contracting (factor (a)),

and the place of negotiation (factor (b)) were Greece, and this finding is not

challenged on appeal. In addition, factor (e), the domicile of the parties, also

points to Greek law because the domicile of Aktina is Greece, the domicile of

OWC, the owner of the Vessel, is Liberia, and the domicile of the sole shareholder

of OWC, Royal Olympic Cruises, is Greece. The Vessel also flew a Greek flag.

9
None of these facts are in dispute, probably because the district court placed little

importance on them. Instead, the court found that the most important factors were

(c), the place of performance, and (d), the locus of the subject matter of the

contract.

As to the place of performance, the district court concluded that the services

were “for the physical transport of crew members to and from the United States.”

(R.10-373 at 17.) This factual conclusion is clearly erroneous, and it is the

principal conclusion upon which the district court's ruling rests. The services

provided by Aktina did not include the physical transport of any crew members.

Aktina is not an airline–it is a travel agent. The service that it provided was the

purchasing of plane tickets. This service was entirely performed in Greece. And,

the district court left out of its analysis other important aspects of performance,

such as payment and breach. Aktina invoiced the cost of the tickets to OWC in

Greece. OWC was to pay the invoices in euro, and OWC breached the contract in

Greece by not paying the invoices. Thus, these aspects of performance bolster the

conclusion that the place of performance was Greece.

The district court’s conclusion based on factor (d), the locus of the subject

matter of the contract, is also questionable. The court characterized the subject

matter of the contract as tickets, and said that these tickets were uniformly located

10
in the United States. But it is clear from the record that roughly half of the tickets

were not picked up in the United States, but in airports around the world–primarily

in Greece. This is because roughly half of the arrangements were made to ensure

that crew members could travel to the United States and make arrangements on

their own to join the Vessel there. The district court correctly found that each of

the tickets was in the United States either at the beginning of a flight or at the end

of it, but each ticket was also in another country–most often Greece–at the other

end of each flight. To conclude, then, that the locus of the subject matter of the

contract was solely the United States was erroneous.

Once this error and the erroneous factual determination that the place of

performance was the United States are corrected, the § 188 factors point

overwhelmingly to Greece. And, the Restatement states that, when one state is

both the place of negotiation and the place of performance of a contract, that

state’s law should usually govern the contract. Restatement (Second) Conflicts of

Law §188(3). In this case, Greece was both the place of negotiation and the place

of performance, and in the absence of other significant factors pointing toward

United States law, Greece’s law should apply.

Section 6 of the Second Restatement of Conflicts of Law contains the

general factors that courts should consider in any choice-of-law analysis. The

11
parties have not briefed the application of these factors, and the district court did

not rely on them. However, we briefly review them to determine whether they

establish that the United States has a more significant relationship than Greece to

the transaction at issue, despite our conclusion based on the § 188 factors. The § 6

factors are: (a) the needs of the international system; (b) the relevant policies of

the forum (here, CIMLA); (c) the relevant policies of other interested states (here,

Greece’s maritime law that does not provide maritime liens for necessaries); (d)

the protection of justified expectations; (e) the policy underlying the field of law in

question; (f) the interest in predictability and uniformity; and (g) the ease in

determining and applying the relevant law. Of these factors, three–(a), (e), and

(f)–do not favor either nation’s laws. Two–(b) and (g)–favor the application of

United States law. The remaining two–(c) and (d)–favor the application of Greek

law. Thus, after reviewing the § 6 factors, we conclude that they do not establish

that the United States has a more significant relationship than Greece to the

transaction at issue here.

After applying the Restatement analysis, the Hoegh Shield court further

supported its conclusion with a brief governmental interest analysis, from which it

concluded that the United States had the stronger interest in the case before it. See

Hoegh Shield, 658 F.2d at 368. In this case, as with the § 6 Restatement factors,

12
the parties have not argued that governmental interest analysis resolves the choice-

of-law issue, and the district court did not conduct a governmental interest

analysis. Nevertheless, consistent with Hoegh Shield, we review the competing

interests of the United States and Greece as to the application of their laws to this

transaction. We conclude from this review that Greece’s interests outweigh those

of the United States.

The United States has an interest in ensuring that United States suppliers,

and those supplying goods and services to ships in United States ports, are

protected from the defaults of vessels after receiving their supplies or services.

CIMLA supports this policy. However, similar to the United States’s interest as to

maritime transactions in its territory, Greece has a strong interest in ensuring that

those who negotiate contracts in Greece will receive the benefit of their bargains.

Greece also has an interest in determining the proper protections and priorities for

Greek corporations and foreign vessel operators when they deal with each other.

To apply United States law to what is almost completely a Greek transaction

would violate Greece’s interests in governing transactions within its borders,

while it would do little to serve the United States’s interests under CIMLA. Thus,

governmental interest analysis favors the application of Greek law.

13
 Based both on our analysis of the factors outlined in the Second

Restatement of Conflicts of Law and on our analysis of the competing

governmental interests in this case, we hold that Greek law is the proper law to

apply to the transaction between Aktina and the Vessel. The district court erred in

applying United States law.

B. No Maritime Lien Exists

Once the proper choice of law is made, it becomes clear that Aktina is not

entitled to a maritime lien superior to the Banks’ preferred mortgage lien. No

provision of Greek law provides for such a lien. Greek law establishes a statutory

lien system, but statutory lien rights do not carry priority over preferred ship

mortgages on foreign vessels. See 46U.S.C. § 31326.

VI. Conclusion

Based on the foregoing, Aktina is not entitled to payment of its receivables

from the proceeds of the foreclosure sale of the Vessel. Accordingly, we reverse

the district court’s judgment as to Aktina and remand for entry of judgment in

favor of the Banks on Aktina’s claim.

REVERSED AND REMANDED.

14