Admiralty Law - George M. Earle

• Publication year: 2000

SURVEY ARTICLES

Admiralty Law by George M. Earle*

The Eleventh Circuit Court of Appeals published six admiralty opinions in 1999. The court faced one issue of first impression, but otherwise applied existing case law to decide the cases before it. In the case presenting the issue of first impression, the court joined the Fifth Circuit in holding that an ocean carrier's unreasonable deviation does not nullify the one-year statute of limitation for filing suit under the Carriage of Goods by Sea Act.¹ The cases decided with reference to existing law included two cases involving maritime liens,² one case addressing appellate jurisdiction,³ one case addressing personal jurisdiction,⁴ and one case resolving whether one party's alleged nonperformance under a contract of carriage would excuse the other party's performance.⁵

I. Maritime Liens

A. Waiver of Maritime Lien for Necessaries

In Rose v. M/V GULF STREAM FALCON,⁶ the Eleventh Circuit employed principles of contract interpretation to determine whether a claimant had waived his maritime lien for necessaries against a vessel.⁷ Reversing the district court, the Eleventh Circuit held that no waiver had occurred and remanded the case to the district court for further proceedings.⁸

In 1990 Alden Hanson ("Owner"), the owner of the M/V BEAU SOUTHERN ("Vessel"), entered into discussions with Captain Mark Rose ("Claimant") for Claimant's possible purchase of the Vessel for use in Claimant's offshore dive-excursion business. The two also discussed using the Vessel as a commercial diving vessel. Claimant advised Owner that the Vessel would require major renovations to be used as a commercial diving vessel.⁹

From January 1990 to March 1992, the parties engaged in negotiations for a joint venture agreement whereby Claimant would renovate and operate the Vessel, with both parties recouping their investments from the Vessel's operations. Although the parties failed to execute a written joint venture agreement, Claimant was permitted to renovate the Vessel in anticipation of purchasing it.¹⁰

In March 1992 the parties entered into a first Purchase and Sale Agreement ("March Purchase Agreement") for the Vessel. However, Claimant could not obtain funding and, therefore, did not purchase the Vessel. In June 1992 the parties entered into a second Purchase and Sale Agreement ("June Purchase Agreement"), expressly superseding the March Purchase Agreement. The parties, together with a third party named Buckley ("Investor"), also entered into a joint venture and a Bareboat Charter agreement ("Charter Party") pursuant to which the Vessel would be used for whale-watching tours. Under the terms of the Charter Party, Claimant was to serve as the captain for these excursions and could not be removed from his position absent grossly negligent conduct. Conflicts developed in the parties' business relationship, and as a result, Owner and Investor removed Claimant as captain of the Vessel. The Charter Party was subsequently canceled.¹¹

In May 1993 Owner and Claimant decided once again to work together in the whale-watching excursion business. Claimant was to serve again as the captain of the Vessel.¹² On May 16, 1993, the parties entered into the Arcadian Operating Agreement ("Operating Agreement"), which provided, in relevant part, as follows:

3. Revenues earned in the operation of the [Vessel] will be distributed as follows:

b) Payment of outstanding debt incurred by [Claimant] in the conversion of the vessel to a whale watch vessel. [Owner] will make the final determination, at his sole discretion, of which bills will be paid.

4. All parties acknowledge that payment of the above amounts impy [sic] no ownership interest or claim in the [Vessel] or any claim against [Owner] for any reason.¹³

The whale-watching joint venture failed to produce profits that could be distributed to the joint venturers. As a result Claimant sued to foreclose on his $334,476.17 maritime lien for his work in renovating the Vessel. Owner counterclaimed for breach of contract and wrongful arrest of the Vessel. After a bench trial, the district court dismissed all claims and counterclaims except Claimant's maritime lien claim against the Vessel.¹⁴ As to that claim, the district court held that paragraphs 3 and 4 of the Operating Agreement constituted an explicit waiver by Claimant of his lien arising from work he performed on the Vessel before May 16, 1993. The district court awarded Claimant $15,955.81 for work performed on the vessel after that date.¹⁵

The Eleventh Circuit identified three issues raised on appeal: (1) whether the district court erred in finding Claimant waived his maritime lien for goods and services provided to the Vessel prior to May 16, 1993; (2) whether Owner was entitled to the proceeds from the sale of the Vessel pursuant to the June Purchase Agreement; and (3) whether the district court erred in awarding damages to Claimant for his maritime lien for necessaries provided to the Vessel after May 16, 1993.¹⁶

The Eleventh Circuit began its analysis of the waiver issue by confirming that Claimant's maritime lien arose from his provision of necessaries to the Vessel in accordance with the Federal Maritime Lien Act.¹⁷ Claimant sought to recover his costs incurred in converting the Vessel to a commercial diving vessel.¹⁸

Before reaching the issue of waiver, the court addressed Owner's argument that Claimant was never entitled to a maritime lien because he was a joint venturer and, therefore, not a "stranger" to the Vessel. The court set forth the general proposition that joint venturers usually are not entitled to a maritime lien for necessaries because their status is similar to that of a vessel owner.¹⁹ A stranger to the vessel, on the other hand, generally "is entitled to a maritime lien for 'necessaries'. . . because a 'stranger' relies on the credit of the vessel, and not on the credit of the co-venturer."²⁰

The Eleventh Circuit affirmed the district court's rejection of Owner's argument that no lien ever existed, concluding that the district court was not clearly erroneous in finding no joint venture existed between the parties except between June and August of 1992.²¹ The court found sufficient evidence in the record to support the district court's finding that no joint venture existed prior to June 3, 1992—the period when

Claimant was converting the Vessel to a commercial diving vessel.²² The court held Claimant was entitled to assert a maritime lien for work performed on the Vessel prior to that date because he was a stranger to the vessel, not a joint venturer.²³

The Eleventh Circuit then turned to the district court's determination that Claimant had explicitly waived his lien pursuant to the language of the Operating Agreement. The district court relied exclusively on the language of the Operating Agreement to reach the conclusion that the lien had been waived. On appeal Claimant argued that paragraph 3(b) of the Operating Agreement merely gave Owner discretion to use profits from the whale-watching venture to compensate Claimant for costs in converting the Vessel from a commercial diving vessel to a whale-watching vessel. Claimant emphasized that he was seeking compensation for his earlier efforts in converting the Vessel from a treasure-salvage vessel to a commercial diving vessel, not for the later conversion to a whale-watching vessel. Thus, the plain language of paragraph 3(b) could not be read as a waiver of Claimant's maritime lien for the earlier conversion of the Vessel. Claimant argued that paragraph 4 of the Operating Agreement could not be construed as a waiver of his lien because it merely governed the distribution of profits and confirmed that Owner's payment of profits should not be construed to suggest that Claimant would have any claims against Owner or the Vessel. Finally, Claimant asserted that the Operating Agreement was ambiguous and must be resolved against Owner, the drafter of the agreement. Owner argued that the "whereas" clause of the Operating Agreement confirmed Claimant's intent to waive his lien. The "whereas" clause provided, "All parties hereto recognize and confirm that [Owner] is the sole owner of the [Vessel] and no party has a claim against the [Vlessel."²⁴

The Eleventh Circuit reviewed the contractual language de novo²⁵ and applied Florida law pursuant to conflicts of law principles.²⁶ Florida law mandated that the court look first to the "words used on the face of the contract to determine whether that contract [was] ambiguous," for Florida law provides that the actual language of the contract is the best evidence of the parties' intent and, thus, that the plain meaning of the contract language governs.²⁷

The Eleventh Circuit determined that the language of the Operating Agreement was not ambiguous and that its plain meaning did not support the district court's finding of an explicit waiver of Claimant's maritime lien.²⁸ The court concluded that paragraph 3(b) of the Operating Agreement established only the priority of revenues earned from the Vessel, if any.²⁹ Likewise, the plain meaning of paragraph 4 of the Operating Agreement suggested that it governed only the act of distributing revenues and, "[a]t the very least," did not constitute an explicit waiver of any lien claims.³⁰

Finally, the court rejected Owner's argument that the "whereas" clause of the Operating Agreement was sufficient to find a waiver of Claimant's maritime lien.³¹ Florida law provides that "whereas" or other prefatory clauses are not binding upon the parties to the contract.³² Thus, even if the "whereas" clause could be construed as a waiver, it would not be binding against Claimant.³³ In addition, the court of appeals stated that it need not look to the "whereas" clause of the Operating Agreement if the operative language of the agreement was unambiguous.³⁴ Having found the language of paragraphs 3(b) and 4 unambiguous, the court declined to consider the...