Admiralty - Thomas S. Rue

• Jurisdiction: United States,Federal
• Publication year: 1995
• Citation: Vol. 46 No. 4

SURVEY ARTICLES

Admiraltyby Thomas S. Rue^*

The Court of Appeals for the Eleventh Circuit decided nine admiralty cases with written opinions in 1994. In one case the court faced for the first time the issue of whether a vessel on dry dock was on land or water for purposes of admiralty jurisdiction. In another case the court interpreted, for the first time, a statute concerning marine sanctuaries. The other seven cases did not change the law as it exists in this circuit. This was the case despite a factually attractive opportunity to relax the court's requirement that a shipper literally comply with the procedures set forth in the carrier's bill of lading to avoid the $500 package limitation. Finally, the Government shows no signs of abandoning its attempts to reverse maritime lien law as it relates to public vessels.

I. Cargo

The Eleventh Circuit reviewed two cargo cases both involving package limitation issues. The first cargo case decided by the Eleventh Circuit, Marine Transportation Services Sea-Barge Group, Inc. v. Python High Performance Marine Corp.,¹ began as a simple suit for freight but ended up with a substantial counterclaim for conversion.² The case arose when the shipper, Python High Performance Marine Corp., booked a twenty-foot sealed container of boat parts and three boat molds (one hull mold and two deck molds) for shipment from Miami to San Juan, Puerto Rico.³ The container was shipped first, freight collect, under a separate bill of lading. The hull mold and one of the two deck molds were bound together for shipment. The deck mold that remained separate disappeared before shipment. Despite this, the bill of lading issued for the shipment of the two-mold set reflected that three packages of break bulk boat molds were shipped. The bill of lading also noted that a request and charge for insurance had been made by the shipper.⁴

When the shipment reached San Juan, the consignee refused to accept the cargo ostensibly because of the missing deck mold. When the shipper contacted the carrier's traffic manager he told the shipper to file a claim for the lost deck mold. The traffic manager also offered to return all the cargo to Miami at no charge and said that the freight for the Miami-San Juan voyage would be deducted from the proceeds of the claim.⁵ When the container and two-mold set arrived back in Miami, the shipper went to the terminal to pick up the cargo but on that occasion was told by the same traffic manager that he would have to pay the freight charges on the two-mold set for the Miami to San Juan trip before he could pick up the cargo. The traffic manager referred the shipper to its claims manager who confirmed that the freight would have to be paid prior to the release of the cargo.⁶

The shipper obtained a corporate check in the amount of the freight and returned to the terminal to obtain the cargo. On that occasion the traffic manager refused to accept the check and told the shipper that he could not release the cargo and that the shipper would have to wait to hear from the carrier's attorney.⁷

The container and two-mold set, which had deteriorated beyond repair due to exposure to the elements, remained in the carrier's possession. The carrier brought suit to recover freight due for the carriage of the container and the boat molds from Miami to San Juan and for the return trip to Miami. The carrier also asked for demurrage on the cargo while it remained in the carrier's possession in San Juan and Miami. The shipper counterclaimed for the loss of the boat mold and for conversion of the container and two-mold set because of the carrier's refusal to release the cargo.⁸

The district court found that the carrier was entitled to recover the freight charges and interest but denied its claim for demurrage since the delay had been occasioned by the carrier, and under such circumstances a provision in the bill of lading provided that no demurrage would be payable.⁹ On the counterclaim, the district court held that the carrier was liable to the shipper for the missing mold plus interest.¹⁰ The district court held that the $500 package limitation was not applicable because the shipper had declared a $100,000 value on the boat mold and incurred a $50 insurance charge, in accordance with the bill of lading requirements to avoid the package limitation.¹¹ The district court further found that the carrier had converted the container and two-mold set by refusing to release the cargo when the carrier tendered a corporate check in payment for the freight.¹² The court denied the shipper's claim for lost profits because the agreement between the shipper and its consignee had not been consummated.¹³

While both parties in the district court relied on Florida law on the issue of equitable estoppel,¹⁴ the court of appeals, under admiralty jurisdiction, applied general maritime law.¹⁵ The court of appeals then recited the requirements of the doctrine: "(1) a representation of fact by one party contrary to a later asserted position; (2) good faith reliance by another party upon the representation; and (3) a detrimental change in position brought by the later party due to the reliance."¹⁶

In the district court, the issue concerning equitable estoppel was whether the carrier could insist on payment in United States currency.¹⁷ In the Eleventh Circuit, using a slightly different analysis the court focused on whether the carrier, having communicated to the shipper that there was nothing it could do to retrieve the cargo, could, at trial, take the position that all the shipper had to do was to tender cash or a cashier's check.¹⁸ To the court of appeals this constituted a representation of material fact contrary to a later asserted position.¹⁹ The court of appeals found that the shipper relied on the representation because the shipper assumed that nothing it could do would result in the release of the cargo.²⁰ Lastly, the court of appeals found that the shipper's position had been detrimentally changed since the carrier now demanded demurrage in addition to the freight; moreover, the two-deck mold set had deteriorated beyond repair and the shipper was defending a lawsuit.²¹

The court of appeals quickly disposed of the carrier's argument that the district court did not have subject matter jurisdiction of the shipper's land-based claim of conversion.²² The Eleventh Circuit reasoned: "[The] counterclaim for conversion arose directly from the same transaction or occurrence upon which [the carrier's] complaint [was] founded. As such it was a compulsory counterclaim. Therefore, the district court had ancillary jurisdiction in admiralty to hear the counterclaim."²³ With that foundation the court of appeals concluded that the district court properly entertained the shipper's state law conversion claim since no independent basis for federal jurisdiction is required for ancillary jurisdiction.²⁴ The court of appeals went on to find that the carrier wrongfully deprived the shipper of the property when the carrier refused the corporate check tendered by the shipper.²⁵ The Eleventh Circuit noted that pursuant to Florida law "'[t]he essence of the tort is not the acquisition of the property; rather, it is the wrongful deprivation.'"²⁶

The court of appeals also rejected the carrier's alternative argument that the district court erred in not applying the doctrine of avoidable consequences.²⁷ The carrier argued that when the shipper learned that the carrier would not accept its corporate check, the shipper had a duty to mitigate and avoid the consequences of the carrier's action, i.e., tender cash or a cashier's check. The carrier lost this argument because it had never informed the shipper of why it had rejected the corporate check.²⁸ According to the court of appeals, "[m]anifest in this doctrine is the assumption that the injured party knows what reasonable efforts to use to mitigate damages."²⁹

In urging its claim for demurrage, the carrier contended that it was due demurrage because the shipper had failed to file a written claim for waiver of demurrage in accordance with the bill of lading. The carrier also claimed that it was not at fault for the delays which caused the demurrage.³⁰ The court of appeals affirmed the district court's determination that the shipper's answer denying liability for demurrage met the bill of lading requirements for a written claim of waiver.³¹ While at first glance this appears to have been a fairly weak compliance, in view of the fact that the carrier made no demand for demurrage prior to trial it is easier to understand the holding. The court of appeals also affirmed the district court's finding that the demurrage was due to the fault of the carrier.³² In the first instance, the carrier's loss of the deck mold caused the demurrage in San Juan, and the carrier's conversion caused the demurrage in Miami.³³

The court of appeals reversed the district court on the package limitation issue.³⁴ In doing so, the Eleventh Circuit adhered to its precedent of requiring literal adherence to the requirements in the bill of lading to avoid the package limitation.³⁵ While the shipper had declared a $100,000 value in its booking notice with the carrier, the court of appeals found this insufficient, holding that "ft]he shipper must declare the value of its cargo on the face of the bill of lading, not on some other related documents, to satisfy the valuation requirement."³⁶ The court of appeals noted that while another $100,000 figure appeared on the bill of lading, it reflected "the amount of insurance coverage [the shipper] sought, not a declaration of value for the purpose of satisfying the valuation requirement."³⁷ Thus, in order to meet the valuation requirement and avoid the package limitation, the shipper must declare the value of the cargo on the face of the bill of lading. The difficulty is that bills of lading rarely provide a specific place for this declaration. In the absence, the shipper...