Absent Federal Admiralty Jurisprudence, Fifth Circuit Turns to State Common Law in Personal Jurisdiction and Breach of Contract Dispute

Absent Federal Admiralty Jurisprudence, Fifth Circuit Turns to State Common Law in Personal Jurisdiction and Breach of Contract Dispute

By Claudia Carrizales

Edited By: Andrew Lifsey

Malin Int'l Ship Repair & Drydock, Inc. v. Oceanografia, S.A. de C.V., No. 15-40463, 2016 WL 1161215, at *1 (5th Cir. Mar. 23, 2016).Malin sued OSA, a Mexican Corporation, and Con-Dive, a now-extinct Texas company, to recover the balance on unpaid invoices for work, services, materials, and supplies it provided to OSA at Con-Dive’s request.. Malin gained jurisdiction over OSA via Supplemental Admiralty Rule B, by attaching certain fuel bunkers in which OSA had a possessory interest. Malin also moved for summary judgment on its breach of contract and quantum meruit claims against OSA.Malin argued that either Con-Dive was OSA’s agent and had authority to bind OSA for the invoices from Malin, or OSA ratified the invoices by its conduct. Alternatively Malin argued that OSA was liable to Malin under quantum meruit. Malin attached invoices detailing the amounts owed, all of which  provided for attorney’s fees in the event of a dispute. Malin also attached emails showing that OSA had received the invoices and agreed to pay them. However, OSA in its opposing motion for summary judgment only filed a single item of supporting evidence – a declaration from an OSA employee that Con-Dive did not act as OSA’s agent.The district court judge adopted the magistrate judge’s recommendation in favor of Malin on the ratification and quantum meruit theories and awarded Malin the amount of the invoices as well as accrued interest and attorney fees. OSA’s appeal alleged that the bunkers were improperly attached under Supplemental Rule B, and that the court erred in granting the motion for summary judgment in favor of Malin on the ratification theory.The court first discussed the propriety of the attachment of the bunkers for jurisdiction under Rule B, explaining that the rule allows a district court to take jurisdiction over a defendant in an admiralty action by attaching the defendant’s “tangible or intangible personal property,” serving to secure the defendant’s appearance in court and to assure satisfaction if the suit is successful. The issue for consideration was whether the fuel bunkers were OSA’s tangible or intangible personal property at the time of attachment. The bunkers were aboard a vessel chartered by OSA through a separate company Cal Dive.[1]OSA and Cal Dive alleged that because OSA had neither paid for the bunkers nor received an invoice for them, they did not own them and therefore had no attachable interest in them for purposes of Rule B. The rule provided no guidance as to the required level of ownership, leading the court to examine federal admiralty jurisprudence to determine: a) whether a party must own the property for it to be subject to attachment, as OSA asserted; or  b) whether Malin was correct in arguing that an interest in property less than full ownership, such as agreement to purchase and possession of the bunkers, was sufficient.Although early Supreme Court and circuit court jurisprudence indicated a conditional right to title could support Rule B attachment, more recent cases out of the circuit courts indicated a trend toward narrow interpretation, requiring ownership in the thing to find an attachable interest for Rule B. However, jurisprudence out of the district courts indicated a tendency to find that an attachable property interest can exist despite less than full ownership by the defendant. Thus, the court resolved the ambiguity by turning to state law.The court relied on Texas common law. The provisions of UCC Article 2 were not applicable to the type of contract between OSA and Cal Dive because the right arose from the bareboat charter agreement rather than a typical contract for the sale of goods. Based on the evidence available, the court reasoned that the transaction contemplated by the parties was properly classified as a credit transaction; thus, ownership had transferred on delivery of the vessel and bunkers although OSA and Cal Dive argued that they intended to delay transfer of title until OSA paid for the bunkers in full.  Consequently, OSA had an attachable interest in the bunkers for purposes of jurisdiction under Rule B.As to the motion for summary judgment, the court found that OSA ratified Con-Dive’s conduct. The lower court based this finding on several facts including: a) that Con-Dive represented itself as acting for and with permission of OSA when arranging for services with Malin; b) that Malin received directions from OSA employees though Con-Dive; and c) OSA accepted and agreed to pay Malin’s invoices and never indicated it did not approve of Con-Dive’s show of authority or of the work Malin performed. The court noted that OSA retained the benefits of Malin’s work and found OSA’s agreement to pay the invoices as sufficient proof of ratification.Finally, the court stated that OSA offered no summary judgment evidence to counter Malin’s invoices and emails indicating OSA’s receipt and agreement to pay for Malin’s services even after the invoices were overdue. Because each invoice contained a provision for interest and attorney’s fees, the court found that the district court committed no error in granting summary judgment in favor of Malin.[1] The charter agreement between OSA and Cal Dive stated that “[a]t the time of delivery[, OSA] shall purchase the bunkers . . . in the said Vessel at the then current market price at the port of delivery.” OSA accepted delivery of the bunker on October 15, 2012. Malin attached the fuel bunkers aboard the vessel on October 29, 2012.