E.S. BINNINGS, INC., Plaintiff-Appellee,
v.
M/V SAUDI RIYADH, her engines, boilers, tackle, furniture,
apparel, etc., in rem., Defendant,
The National Shipping Company of Saudi Arabia, Claimant-Appellant.
No. 86-8502.
United States Court of Appeals,
Eleventh Circuit.
April 29, 1987.
Rehearing and Rehearing En Banc Denied June 5, 1987.
Robert S. Glenn, Jr., Savannah, Ga., Donald J. Kennedy, Haight, Gardner, Poor & Havens, Mark C. Flavin, New York City, for claimant-appellant.
Edward T. Brennan, Brennan, Harris & Rominger, Savannah, Ga., Michael W. Lodwick, O'Neil, Eichin & Miller, New Orleans, La., for plaintiff-appellee.
Appeal from the United States District Court for the Southern District of Georgia.
Before HILL and JOHNSON, Circuit Judges, and HENLEY*, Senior Circuit Judge.
JOHNSON, Circuit Judge:
Appellant, the National Shipping Company of Saudi Arabia ("NSCSA"), appeals from the district court's order granting a maritime lien in the amount of $85,530.75 against the NSCSA cargo liner the M/V Saudi Riyadh in favor of Appellee, E.S. Binnings, Inc. ("Binnings"). We reverse and remand with instructions to dissolve the maritime lien and dismiss the action for lack of subject matter jurisdiction.
I. BACKGROUND
Binnings is a Louisiana corporation that provides agency services to vessels in United States Gulf ports. NSCSA is a corporation organized under the laws of the Kingdom of Saudi Arabia. In 1981, NSCSA began providing regular cargo liner service between ports in the United States and Saudi Arabia. NSCSA hired F.W. Hartmann & Company, Inc. ("Hartmann"), a New York-based steamship agent, to serve as NSCSA's general agent with regard to liner activities in North America and to serve as NSCSA's equipment control agent for worldwide activities. The contract between Hartmann and NSCSA permitted appointment of subagents to perform Hartmann's work and Binnings was appointed subagent for the Gulf. Binnings provided four types of services as Gulf agent for NSCSA vessels: (1) cargo solicitation; (2) documentation services; (3) financial services; and (4) husbanding services. For its services, Binnings received a commission equal to a percentage of the net ocean freights manifested in Binnings' territory.1
Between 1981 and 1984, Hartmann's financial stability deteriorated and it fell into arrears in its payment of commissions to Binnings. Binnings' attempts to work out credit arrangements with Hartmann eventually failed and the relationship between Hartmann and Binnings was terminated in October 1984. On October 18, 1984, Binnings filed an in personam action against NSCSA in the United States District Court for the Eastern District of Louisiana seeking $411,584.14 in commissions due with regard to freight carried by various NSCSA vessels, as well as $58,527.03 in costs advanced on behalf of NSCSA and $57,988.16 in communication costs and equipment fees. On August 30, 1985, Binnings filed the present in rem proceeding against the Saudi Riyadh and the vessel was arrested in the Port of Savannah. Binnings' in rem complaint asserted a maritime lien pursuant to the Federal Maritime Lien Act, 46 U.S.C.A. Secs. 971-975 ("FMLA"), against the Saudi Riyadh in the amount of $85,530.75, representing its commissions due for cargo manifested on that vessel. Binnings' claim against the Saudi Riyadh did not include any claim for advances, costs or fees.
NSCSA obtained release of the vessel by posting security against Binnings' claim. NSCSA filed a claim to the vessel and filed a motion to vacate the arrest under Fed.R.Civ.P.Supp.Rule E, which was denied by the district court after an evidentiary hearing. NSCSA then filed an answer and asserted a counterclaim for withheld freight monies and wrongful arrest. Binnings' motion to sever the counterclaim and transfer it to the Louisiana in personam action was granted on February 27, 1986. On March 20, 1986, a bench trial was conducted in the in rem action and the district court entered an order on June 4, 1986, granting judgment against the Saudi Riyadh in the amount of $85,530.75. This appeal followed.
II. DISCUSSION
NSCSA asserts that the district court lacked subject matter jurisdiction over this in rem action because Binnings' agency agreement is not a maritime contract and, therefore, is not within the district court's admiralty jurisdiction. Binnings argues that the district court had jurisdiction both because the agency agreement was maritime and because the claim was brought pursuant to the FMLA, which Binnings argues should be viewed as providing a separate basis for jurisdiction. The district court found that it had admiralty jurisdiction on both grounds asserted by Binnings. Because we find that Binnings' agency agreement was not a maritime contract and, therefore, could not provide a basis for the assertion of admiralty jurisdiction or give rise to a maritime lien under the FMLA, we reverse.2
A. Jurisdiction Based on the Maritime Nature of the Contract
Article III, Section 2, of the United States Constitution extends the judicial power of the United States to "all Cases of admiralty and maritime Jurisdiction," but does not attempt to further define the boundaries of this broad jurisdictional grant. In the area of contracts, the demarcation between maritime and nonmaritime concerns has focussed on "the nature of the contract, as to whether it have reference to maritime service or maritime transactions." North Pacific S.S. Co. v. Hall Bros. Marine R. & Shipbuilding Co.,
Maritime character of the nature to attract admiralty jurisdiction does not attach to a contract merely because the services to be performed under the contract have reference to a ship, or to its business, or that the ship is the object of such services or that it has reference to navigable waters. In order that such character attach, there must be present a direct and proximate juridicial [sic] link between the contract and the operation of the ship, its navigation or its management afloat....
1 E. Jhirah, A. Sann, B. Chase & M. Chynsky, Benedict on Admiralty Sec. 182, at 11-7 (7th ed. 1985) (hereinafter "Benedict").
Application of the broad guiding principles of maritime contract jurisdiction has led to "fairly complete coverage of the primary operational and service concerns of the shipping industry, with a few anomalous exceptions." G. Gilmore & C. Black, The Law of Admiralty Sec. 1-10, at 22 (2d ed. 1975). One of the "anomalous exceptions" is agency contracts. The general rule is that agency contracts by which a party agrees to solicit or procure freight, passengers, crew and supplies for a vessel are not deemed maritime in nature. 7A J. Moore, Moore's Federal Practice para. .250, at 3001 (2d ed. 1985); accord, Peralta,
The reason for excluding such contracts is the distinction long recognized in admiralty between contracts that involve preliminary services leading to maritime contracts and those that are themselves maritime. 7A J. Moore, supra, para. .250, at 3002 & n. 2. Although contracts for performance of preliminary services "relate to the business of the ship, they are essentially no different from services ordinarily performed by other shoreside persons who are not involved in the operation or navigation of the ship," and, therefore, are not maritime in nature. Outbound Maritime Corp. v. P.T. Indonesian Consortium of Constr. Indus.,
The distinction between preliminary services leading to a maritime contract and such contracts themselves have [sic] been affirmed in this country from the first, and not yet departed from. It furnishes a distinction capable of somewhat easy application. If it be broken down, [one cannot] perceive any other dividing line for excluding from the admiralty many other sorts of claims which have a reference, more or less near or remote, to navigation and commerce. If the broker of a charter-party be admitted, the insurance broker must follow--the drayman, the expressman, and all others who perform services having reference to a voyage either in contemplation or executed.
The Thames,
Review of the services provided by Binnings under its agency agreement shows that those services are of the type traditionally held not to give rise to a maritime contract under the above principles. A contract is nonmaritime if "the functions to be performed under the contract are 'of a preliminary nature and end when the freight is placed at the pier.' " Outbound Maritime Corp.,
Despite this long-established rule, the district court found that it had admiralty jurisdiction over Binnings' contract under the former Fifth Circuit case of Hadjipateras v. Pacifica, S.A.,
The district court interpreted Hadjipateras as holding that a contract for agency services was a maritime contract. We cannot agree. The agreement involved in Hadjipateras was a vessel management agreement, not a general agency agreement. The core of that agreement was the actual physical operation of the vessel by the agent. Thus, the contract clearly was not one that was merely preliminary to maritime activity. As the Court noted, "its very purpose [was] to effectuate the physical, economic operation and employment of a vessel." Id. at 703. Binnings' agreement does not involve management and operation of NSCSA vessels. It is merely an agency agreement providing for the performance of services that no doubt facilitate maritime activity but, under long-standing precedent, are not sufficiently related to actual maritime activity to support admiralty jurisdiction. See, G. Gilmore & C. Black, supra, Sec. 1-10, at 28 (vessel management agreement is within admiralty jurisdiction while general agency agreement is not); 7A J. Moore, supra, para. .250, at 3002-03 (general agency agreements and brokerage agreements are nonmaritime, but when agent in fact agrees to operate vessels rather than arrange for operation by others agreement is maritime).3
Nor do we find the approach taken by the district court and the Ninth Circuit in Hinkins persuasive on the facts of this case. In Hinkins, the district court found that a contract pursuant to which services as husbanding agent were performed for one ship in connection with a specific voyage at the request of the operating agent of the vessel owner was within the court's admiralty jurisdiction.
Further, unlike the contract at issue in Hinkins, Binnings' contract did not involve only husbanding services, but also called for performance of documentation, cargo solicitation and accounting services. The Hinkins court recognized that services of this type were "shoreside" services not within admiralty jurisdiction and distinguished the case before it from previous case law on the basis that these shoreside services were not involved in Hinkins. See Hinkins,
B. Jurisdiction Under the FMLA
Binnings argues that the district court had admiralty jurisdiction over this action even if the contract out of which Binnings' services arose is not a maritime contract because the FMLA provides a separate basis for jurisdiction.5 Binnings asserts that the maritime nature of the contract is relevant only to liens arising under the general maritime law and that a maritime lien can arise and be enforced under the FMLA although the underlying contract would not be considered maritime. The district court agreed, stating that "services need not be rendered pursuant to a maritime contract to support a claim for a lien."
This argument misconstrues the nature of maritime liens. Maritime liens arise out of the breach of contracts that are maritime in nature. 7A J. Moore, supra, para. C.05, at 623. Therefore, "to give rise to a maritime lien, the occurrence out of which the ... dispute arose must itself be maritime" and "[t]hat means that the occurrence must be within the admiralty jurisdiction of the United States as established by the Constitution and adopted by the Congress." Id. para C.03, at 611; accord, The Walter Adams,
Congress, of course, may extend the admiralty jurisdiction to areas not formerly included within it "as experience or changing conditions might require," so long as it keeps within "a proper conception of maritime concerns." Detroit Trust Co. v. The Thomas Barlum,
The broad interpretation given the FMLA with regard to the types of maritime claims that may give rise to a lien does not dictate a contrary result. Although the present state of the law with regard to coverage of the FMLA is "not far from the point where any service which is convenient, useful and at times necessary may qualify as a lien under the Lien Act," the "ancient distinction between claims maritime and nonmaritime ... survives: to be a lien on any theory a claim must be in the first instance maritime." G. Gilmore & C. Black, supra, Secs. 9-34 to 35, at 658-59.7
III. CONCLUSION
The subject matter of Binnings' agency agreement deals with preliminary services and, therefore, that contract is not a maritime contract and is outside the admiralty jurisdiction. The fact that Binnings claims a lien on the Saudi Riyadh for performance of those services under the FMLA does not change the character of those services or create in the district court the admiralty jurisdiction that is otherwise lacking. The district court was without subject matter jurisdiction over this in rem proceeding.8
The judgment of the district court is REVERSED and the cause is REMANDED to the district court with instructions that the action be DISMISSED for lack of subject matter jurisdiction.
REVERSED and REMANDED with instructions.
Notes
Honorable J. Smith Henley, Senior U.S. Circuit Judge for the Eighth Circuit, sitting by designation
The percentage varied with the type of cargo. The commission claimed by Binnings in this litigation is based on the 3% commission for general cargo. Binnings also received a monthly fee for equipment control and communication costs under the agreement
Enforcement of a maritime lien through an in rem proceeding against a vessel such as the action involved in the present case can be maintained only within the district court's admiralty jurisdiction. Todd Shipyards Corp. v. The City of Athens,
The importance to the Hadjipateras decision of the nature of the contract as a vessel management agreement is underlined by that Court's reference to the case of United Fruit Co. v. United States Shipping Bd Merchant Fleet Corp.,
In holding that Binnings' agency agreement was not a maritime contract, we recognize that the rule that such contracts are not within the admiralty jurisdiction has been condemned by commentators, e.g., G. Gilmore & C. Black, supra, Sec. 1-10, at 28 n. 94b (predicting that Supreme Court will hold general agency agreements within admiralty jurisdiction when it next considers the issue); 7A J. Moore, supra, para. .250, at 3006 ("Quite clearly, such agreements are in integral part of, and in furtherance of, maritime commerce and, consequently, should be cognizable within the admiralty jurisdiction of the district courts."), as well as by courts. See Peralta,
Section 971 of the FMLA provides that:
Any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of the vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall not be necessary to allege or prove that credit was given to the vessel.
46 U.S.C.A. Sec. 971.
A further indication that the FMLA did not extend admiralty jurisdiction into traditionally nonmaritime areas is the way in which claims for a lien under the FMLA for services and supplies provided to a vessel that is under construction rather than being repaired have been treated by the courts. Although provision of services and supplies for construction clearly falls within the language of section 971, the supplier has been held not to have a lien, or even a maritime cause of action, because contracts to construct a new vessel traditionally have been held to be outside the admiralty jurisdiction. See New Bedford Dry Dock Co. v. Purdy,
Binnings points to a number of cases which it claims have allowed maritime liens under the FMLA for services arising out of contracts that a leading authority on admiralty lists as having been held nonmaritime for purposes of the general maritime jurisdiction. See 1 Benedict Sec. 187. These cases do not stand for the proposition that the FMLA enlarged the traditional admiralty jurisdiction. Rather, comparison of these cases with those cited in Benedict shows that they merely represent differing interpretations of the extent of that jurisdiction. Compare, e.g., Gilbert Hubbard & Co. v. Roach,
Binnings also cites several cases in which courts have allowed maritime liens under the FMLA in favor of special agents. We do not find these cases persuasive. Some of these cases are distinguishable from the present case because they involve recovery by a special agent of monies advanced on behalf of its principal. E.g., Ameejee Valleejee & Sons v. M/V Victoria U,
The parties have raised a number of other issues on appeal, including whether Binnings' services qualify as "other necessaries" and can be said to have been furnished to the Saudi Riyadh under the FMLA. Because we find that the district court did not have subject matter jurisdiction over this action, we do not reach these other issues
