What’s a Maritime Contract Continues to Confound Courts
d’Amico Dry Limited v. Primera Maritime (Hellas) Limited, 886 F.3d 216 (2d Cir. March 29, 2018)
Plaintiff is incorporated in Ireland and operates dry bulk supping vessels which it also charters to other companies. It entered into Freight Forwarding Agreements (FFA, a contract for the difference between a contract rate and settlement rate) to buffer against market fluctuations. When Primera Maritime breached its FFA with d’Amico by failing to pay, d’Amico sued in an English court as required by the forum and selection of law clause of the FFA and obtained a judgment in excess of $1.7 million. It then filed suit in the Southern District of New York.In the first round, the trial court dismissed the suit for lack of admiralty jurisdiction on the basis that the judgment was not rendered by an English admiralty court nor based on a claim considered maritime under maritime under English law. (2011 WL 133986, S.D. N.Y. 2011). The Second Circuit reversed in the first appeal and remanded the matter with instructions to the district court to determine whether “the underlying claim on the FFA is deemed maritime under the standards of U.S. law.” (756 F.3d 151, 162 [2d Cir. 2014]) After a four day trial, the trial court held that d’Amico failed to prove the FFA is a maritime contract; thus, it lacked admiralty jurisdiction and granted the motion to dismiss. d’Amico again appealed.The panel based its decision on the U.S. Supreme Court’s holding in Norfolk S.Ry. Co. v. Kirby, 543 U.S. 14 (2004) which held that the “appropriate inquiry is whether the principal objective of the agreement is maritime commerce.” (543 U.S. at 25) In applying this standard the trial court stated that d’Amico “had to prove that its subjective purpose for entering the agreement was to hedge against the underemployment of specific vessels in its fleet. (201 F.Supp.3d 399, 411 [S.D. N.Y. 2016])The appellate panel reversed though commented that “though the question is clear,…the law is murky.” It held that the FFAs had sufficient maritime flavor for admiralty jurisdiction. “Where the identity of at least one party (here d’Amico is a shipping business) aligns with the substance of the agreement (here, the parties’ respective estimations of the market rate for freight on vessels and certain routes integral to at least one party’s business), the resulting agreement is distinctly briny.”The panel was critical of the trial court’s underpinning subject matter jurisdiction on the subjective intent of the party in making the FFAs. The principal nature of the party’s business and substance of the contract can easily be determined by documentary evidence. Preliminary evidentiary hearings to determine jurisdiction are unnecessary.This decision mirrors the Fifth Circuit’s application of Kirby to determine whether a contract is maritime in In re: Doiron, 879 F.3d 568 (5th Cir. 2018). But, where it appears the Fifth Circuit may require the trial court to inquire into a party’s intent (e.g. the second inquiry in Doiron: “does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract?” [879 F.3d at 576]), the Second Circuit short circuits such an inquiry as the determination can be made by documentary evidence.
