CHARTER PARTIES: WHEN BEING ON THE LIST IS NOT ENOUGH
Casillo Commodities Italia S.P.A. v. M/V Long Cheer, 2017 U.S. Dist. LEXIS 100012* (E.D. La. June 28, 2017, Decided ).
By: Callan Johns
This dispute arose between Casillo Commodities Italia S.P.A (“Casillo”) and M/V Long Cheer on a voyage from Mexico to Venezuela. Casillo alleged that its voyage chartered the M/V Long Cheer to deliver 30,000 metric tons of Mexican white corn to be sold. Although clean bills of lading were issued and signed by the master of the M/V Long Cheer in Mexico, Venezuelan authorities rejected two holds-worth of corn as unfit for consumption because of its moldy and wet condition.Casillo sought over $4 million in damages representing the loss of the cargo, alleging that the defendants’ breached the charter party by failing to provide a seaworthy vessel. Casillo also alleged the defendants’ failure to deliver the cargo in the same condition in which it was received invokes a maritime lien, giving rise to its Rule C allegations in rem against M/V Long Cheer. Casillo also asserted a breach of charter party constituted a breach of contract claim, which also invokes Rule B allegations in personam against Ong Cheer Shipping Co.In November of 2016, Long Cheer issued a letter securing Long Cheers appearance and release of the M/V Long Cheer. The vessel was released and its cargo hatches were inspected. Long Cheer alleges that it was not a party to the voyage charter party and moved to vacate the arrest and attachment, to cancel security, dismiss the lawsuit, and award wrongful seizure damages. According to Supplemental Rule E(4)(f) for Admiralty or Maritime Claims, “a person claiming an interest in property arrested or attached is entitled to a 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.’” Fed. R. Civ. P. Supp. R. E(4)(f). The arresting or attaching party has the burden to present sufficient evidence to show that there are reasonable grounds for attachment and that the arrest is supported by probable cause.Rule C in rem arrest of the M/V Long CheerAn action in rem may be brought to enforce a maritime lien. Fed R. Civ. P. Supp. R. C(1)(a). A maritime lien is a property right in a vessel which provides the lien holder priority. Maritime liens cannot be created by contract since they arise in favor of the creditor by operation of law, thus conferring such a powerful right that most nations limit or preclude their application. Under Supplemental Admiralty Rule C, a maritime lien on a vessel is a prerequisite to an action in rem. An owner’s breach of a charter party can create a maritime lien on the owner’s vessel in favor of the charterer to whom the vessel owner has chartered the vessel.After a warrant for the arrest of the M/V Long Cheer was issued, Long Cheer challenged the arrest for lack of probable cause. Casillo failed to carry its burden to show that the arrest was supported by probable cause and that the arrest and attachment should not be vacated due to uncontroverted evidence that demonstrated that probable cause was lacking.The unsigned charter party submitted by Casillo was the only indication that Long Cheer was a party to the charter party. However, Long Cheer submitted compelling evidence that Clipper Bulk was a party to the charter party with Casillo, not Long Cheer. Katrina Fan, one of Long Cheer’s employees stated that Long Cheer entered into a time charter with Clipper Bulk Shipping Ltd. The time charter between Long Cheer and Chipper Bulk was for a period of about 11-13 months. Ms. Fan stated that Long Cheer was not a party to the voyage and did not have an agreement to arbitrate any dispute, and had no contract with Casillo at the time. Ms. Fan further stated that Clipper Bulk was the tie charterer of the vessel at the time it entered into the voyage charter with Casillo, and did not act as the manager for long Cheer in the voyage charter party. She went on to state that the charter broker for the Casillo voyage charter party never acted as a charter broker for Long Cheer. In sum, Ms. Fan comports that Clipper Bulk had no authority from Long cheer to claim it acted as its manager and that Long Cheer never had any contractual relationship with Casillo.Mr. Bjorn Holte Jensen handled chartering activities on Clipper Bulk’s behalf. He stated that Clipper Bulk time chartered M/V Long from Long Cheer for about 11-13 months and that during and pursuant to the time charter, Clipper Bulk sublet the vessel to Casillo a few months later. Mr. Jensen stated that while the voyage charter party was never signed by the parties, there were a series of emails confirming the intentions of Clipper Bulk and Casillo to enter and bind themselves to the voyage charter party. Mr. Jensen further stated that Clipper Bulk was never Cheer’s manger since Clipper Bulk never acted as a manager for Long Cheer.After hearing these two declarations, the court determined that the evidence supports that Long Cheer was not a party to the voyage charter party, and that any breach of the agreement did not give rise to a maritime lien against M/V Long Cheer.Rule B in personam attachment of the M/V Long CheerIn order for a plaintiff to support a maritime attachment of property under this rule, filing, notice, and service requirements must be satisfied as well as a showing of four other elements. See Aqua Stoli Shipping Ltd. V. Gardner Smith Pty. Ltd., 460 F. 3d 434, 445 (2d Cir. 2006). In response, the defendant contests the attachment by moving to vacate the attachment under Rule E(4)(f) and the attachment must be vacated unless the attaching party presents sufficient evidence to show probable cause. Courts are called upon to merely hold that it is or is not likely that alleged facts are true.Casillo submitted an unsigned voyage charter party alleging that it named Long Cheer as a party to the contract in support of its petition for attachment of M/V Long Cheer. However, the evidence previously submitted by Ms. Fan and Mr. Jensen supports that it was Clipper Bulk that was the true party to the voyage charter party, there was no link between Long Cheer and Casillo, and no contractual relationship existed. The court found in favor of Long Cheer, submitting that the Court must vacate the Rule B Attachment since Casillo failed to plead a prima facie case for in personam liability based on breach of contract.Long Cheer Filing for Wrongful Seizure DamagesLong Cheer filed suit against Casillo for wrongful seizure damages, as well as a request for 14 days to submit evidence and a memorandum of its damages, attorney’s fees, and cost surrounding the wrongful arrest and attachment. Casillo answers that Long Cheer failed to establish that Casillo acted with bad faith, malice, or gross negligence and, characterizes Long Cheer’s named appearing in the charter party as a mistake.Maritime law controls the substantive law of maritime seizures and requires that damages be awarded only on a showing of bad faith, malice, or gross negligence. Additionally, advice of competent counsel, honesty sought and acted upon in good faith is alone a complete defense to an action for malicious prosecution. The 5th Circuit has determined that “[w]here a there is a ‘bona fide dispute over the validity of the lien’ and ‘the parties could have legitimately and honestly believed the lien would stand up’ the party is held to have acted in good faith”Long Cheer contends that Casillo seized its vessel knowing that it had no charter party with Long Cheer or any legitimate legal basis to arrest to attach the M/V Long Cheer. Long Cheer failed to meet the burden of proving that the arresting party acted maliciously or in a negligent fashion. While Long Cheer cites to Mr. Jensen’s statements about email correspondence confirming the intensions of Clipper Bulk and Casillo to bind themselves to the charter party, no such emails were submitted to the court for review. Since it was the broker who prepared the voyage charter party naming Long Cheer by mistake, the fact that Casillo simply relied on the language of its voyage charter party naming Long Cheer does not rise to the level of bad faith.In sum, Long Cheer’s motion to vacate the arrest and attachment of the M/V Long Cheer, cancel security, dismiss the plaintiff’s lawsuit was granted while the suit for wrongful arrest damages was denied.
