D'Amico Dry Ltd. v. Primera Mar. (Hellas) Ltd.
886 F.3d 216
2d Cir.2018Background
- D'Amico Dry Ltd., an Irish shipowner/operator with a Panamax fleet, sold a forward freight agreement (FFA) to Primera Maritime (Hellas) Ltd. in 2008 settling against the Baltic Panamax Index (BPI) for early 2009.
- The FFA required the seller (d'Amico) to pay Primera if market rates exceeded the contract rate; Primera breached by failing to pay when market rates were low in January 2009. D'Amico obtained an English judgment and sought enforcement in U.S. district court.
- The district court dismissed for lack of admiralty jurisdiction, finding the underlying FFA non-maritime under English law and, after trial, also under U.S. law because d'Amico purportedly failed to show the FFA hedged against underemployment of specific vessels.
- On interlocutory appeal the Second Circuit remanded for the district court to assess maritime character under U.S. admiralty standards rather than foreign law; a bench trial followed on that issue.
- The district court credited expert testimony that d'Amico’s trading resembled speculative derivatives trading and found no credible evidence the FFA hedged specific vessels, dismissing for lack of admiralty jurisdiction.
- The Second Circuit reversed: it held that where a contracting party is a shipowner exposed to freight-rate risk and the FFA is settled against market freight indices tied to that business, the FFA’s principal objective is maritime commerce and thus is a maritime contract under § 1333.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the d'Amico–Primera FFA is a "maritime contract" under U.S. admiralty law | The FFA hedged d'Amico's exposure to freight-rate fluctuations in its shipping business; therefore it furthers maritime commerce | The FFA was non-maritime/financial speculation; FFAs are not maritime unless tied to underemployment of specific vessels | The FFA is maritime: identity of party (shipowner) + substantive tie to freight market make its principal objective maritime commerce |
| Proper test for maritime character of FFAs | Maritime character should not depend on subjective intent to hedge particular vessels | Court should require evidence FFAs were intended to protect specific vessels (per expert) | Rejected subjective- specific-vessel requirement; focus is on principal objective and relation to maritime commerce |
| Whether foreign jurisdictions' uniform view precludes U.S. admiralty jurisdiction | N/A (argued by Primera) | Other jurisdictions treat FFAs as non-maritime, so U.S. should too | Foreign characterizations are not controlling; U.S. law governs admiralty reach for federal courts |
| Whether sanctions are warranted for filing the appeal | D'Amico argued appeal was non-frivolous and raised novel issue | Primera sought sanctions as frivolous and based on false testimony | No sanctions: appeal presented substantial question of first impression and was meritorious |
Key Cases Cited
- Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14 (2004) (maritime-contract inquiry centers on whether principal objective is maritime commerce)
- Folksamerica Reinsurance Co. v. Clean Water of N.Y., Inc., 413 F.3d 307 (2d Cir. 2005) (use case-by-case approach; consider nature and character of contract)
- Flame S.A. v. Freight Bulk Pte. Ltd., 762 F.3d 352 (4th Cir. 2014) (FFAs can be maritime where parties are in shipping business and FFAs function as hedges)
- Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603 (1991) (admiralty jurisdiction protects maritime commerce)
- Sisson v. Ruby, 497 U.S. 358 (1990) (purpose of admiralty jurisdiction relates to maritime commerce)
- Northern Pacific S.S. Co. v. Hall Bros. Marine Ry. & Shipbldg. Co., 249 U.S. 119 (1919) (historical formulation: contract has reference to maritime service or transactions)