D'Amico Dry Ltd. v. Primera Mar. (Hellas) Ltd.
| Decision Date | 29 March 2018 |
| Docket Number | August Term 2016,No. 16-3125-cv,16-3125-cv |
| Citation | 886 F.3d 216 |
| Parties | D'AMICO DRY LIMITED, Plaintiff–Appellant, v. PRIMERA MARITIME (HELLAS) LIMITED aka Primera Maritime Limited, Sonic Finance Inc., Mirage Finance Inc., Nikka Finance Incorporated, Handy Finance Inc., Pasha Finance Inc., Movida Finance Inc., Element Finance Inc., Caldera Marine Co. Ltd., Adalia Marine Co. Ltd., Seasatin Navigation Inc., Annamar Navigation Inc., Seasafe Navigation Inc., Chemnav Inc., Paul Coronis, Nikolaos Coronis aka Nicholas Coronis, Primebulk Shipmanagement Ltd., Primera Ocean Services S.A., Bulknav Inc., J.P.C. Investments S.A. aka JPC Investments S.A., Chemnav Shipmanagement Ltd., Defendants–Appellees. |
| Court | U.S. Court of Appeals — Second Circuit |
Thomas L. Tisdale, Tisdale Law Offices, LLC, New York, New York, for Plaintiff–Appellant.
John J. Reilly, Squire Patton Boggs (US) LLP, New York, New York, for Defendant–Appellee Primera Maritime (Hellas) Limited AKA Primera Maritime Limited.
William R. Bennett, III, Blank Rome LLP, New York, New York, for Defendants–Appellees Sonic Finance Inc., Mirage Finance Inc., Nikka Finance Incorporated, Handy Finance Inc., Pasha Finance Inc., Movida Finance Inc., Element Finance Inc., Caldera Marine Co. Ltd., Adalia Marine Co. Ltd., Seasatin Navigation Inc., Annamar Navigation Inc., Seasafe Navigation Inc., Chemnav Inc., Paul Coronis, Nikolaos Coronis AKA Nicholas Coronis, Primebulk Shipmanagement Ltd., Primera Ocean Services S.A., Bulknav Inc., J.P.C. Investments S.A. AKA JPC Investments S.A., Chemnav Shipmanagement Ltd.
Before: Katzmann, Chief Judge, Jacobs and Livingston, Circuit Judges.
Plaintiff–Appellant d'Amico Dry Limited ("d'Amico") is a shipping company and Defendant–Appellee Primera Maritime (Hellas) Limited ("Primera") is a ship management company. In 2008, d'Amico sold a derivative financial instrument known as a forward freight agreement ("FFA") to Primera. Under the FFA, d'Amico was obligated to pay Primera if the mean market rates for shipping on certain types of vessels on certain routes during certain months exceeded an agreed-upon rate. In turn, Primera was obligated to pay d'Amico if the market rate was less than the agreed-upon rate. When Primera failed to pay d'Amico as required under the agreement, d'Amico terminated the FFA and obtained a judgment against Primera in an English court. Then, seeking to enforce the judgment, d'Amico sued Primera and its alleged alter egos and successors-in-interest in the United States District Court for the Southern District of New York. D'Amico asserted subject matter jurisdiction under 28 U.S.C. § 1333(1), which empowers federal district courts to hear admiralty cases. The district court dismissed the case for lack of subject matter jurisdiction because the judgment was rendered by a commercial (not admiralty) court and the underlying claim was nonmaritime under English law. On appeal, this Court vacated the dismissal and remanded for the district court to determine in the first instance whether the underlying claim was maritime under U.S. law.
After a four-day bench trial, the district court again dismissed the case for lack of subject matter jurisdiction. The district court concluded that the agreement between d'Amico and Primera was not a maritime contract falling within § 1333(1)'s jurisdictional grant because d'Amico had not proven it made the agreement to protect against the risk that specific vessels in d'Amico's fleet would be underemployed during the period of the FFA.
On appeal, d'Amico argues that the FFA was a maritime contract because, on the facts found by the district court at trial, the agreement with Primera was a hedge against another risk: d'Amico's exposure to shifts in the market price for shipping on certain routes. We agree: the combination of d'Amico's identity as a market participant with the substance of the agreement establishes that the FFA was part of d'Amico's shipping business. Because the FFA's principal objective was maritime commerce, it is a maritime contract and claims arising from it fall within our admiralty jurisdiction. See Norfolk S. Ry. Co. v. Kirby , 543 U.S. 14, 23–24, 125 S.Ct. 385, 160 L.Ed.2d 283 (2004). We therefore VACATE the judgment of the district court and REMAND for proceedings consistent with this opinion.
D'Amico, incorporated in Ireland, owns and operates dry bulk shipping vessels. In 2008 and 2009, when the events underlying this lawsuit occurred, d'Amico's fleet included approximately thirty vessels—including ten to twelve "Panamax" vessels. Panamax vessels have the maximum dimensions that can traverse the Panama Canal. They transport commodities such as coal, minerals, and grains to destinations all over the globe. D'Amico owned about half of its fleet, and chartered the rest of its vessels long term. D'Amico employed the vessels it controlled in various ways—in part through long-term time charters, but also on the spot market through single-trip-voyage or short-duration charters.
As a shipping company, d'Amico is exposed to the ebbs and flows of shipping prices, including the risk that the market rate for shipping on a route its vessels ply will sink significantly. According to d'Amico's 2008 Directors' Report, the company used FFAs "to mitigate movements in the ‘physical market’ " that could harm its business. Joint App'x 739; see also id. at 751 (). An FFA is a contract for the difference between a contract rate and a settlement rate. The contract rate is a rate agreed upon by the parties. The settlement rate is the market rate for freight carried by a certain type of vessel, traveling a certain route (or group of routes), during a certain time period in the future. Because FFAs are not commitments to perform shipping services, any individual or entity (including one with no other tether to maritime commerce) can trade in FFAs. FFAs are traded over the counter rather than on regulated exchanges. In 2008, when the FFA at issue here was made, most FFAs were concluded bilaterally rather than through a clearinghouse, so each party bore the risk that its counterpart would fail to meet its obligations under the contract. There was no general requirement that these transactions be secured, although a prospective trader could request assurances from a potential counterparty.2
In September 2008, d'Amico sold an FFA to Primera, a ship management company incorporated in Liberia and operating in Greece ("the d'Amico-Primera FFA"). The d'Amico-Primera FFA covered forty-five days in the first quarter of 2009. The contract rate was $55,750 per day. The FFA was to be settled monthly; the settlement rate was the mean of the daily published Baltic Panamax Index ("BPI") for all days of the pertinent month. The BPI is one of several indices published daily by the Baltic Exchange, a London-based organization that provides maritime market information. The BPI, which is based on reports from independent freight brokers about the freight market's performance, incorporates rates for shipping on standard routes travelled by Panamax carriers. For each month that the settlement rate exceeded the contract rate, d'Amico, as seller, was obligated to pay Primera, as buyer, the difference between the two rates. If instead the contract rate exceeded the settlement rate, Primera would have to pay the difference to d'Amico.
For the first month of the FFA, January 2009, the latter came to pass as the late-2008 financial crisis had sunk freight rates from historic crests in the mid-2000s. When Primera breached by failing to pay the amount due for January 2009, d'Amico terminated the contract and sued Primera in the English High Court of Justice, as provided for in the contract. On June 19, 2009, the English court issued a judgment in favor of d'Amico for $ 1,766,278.54 plus costs.
In September 2009, d'Amico filed this lawsuit against Primera in the United States District Court for the Southern District of New York, seeking enforcement of the English judgment. The following December, d'Amico filed an amended complaint adding several individual and entity defendants, which d'Amico sought to hold liable for the English judgment as Primera's alleged alter egos and successors-in-interest.
In 2011, the defendants moved to dismiss the case for lack of subject matter jurisdiction. The district court granted the motion, holding that it lacked jurisdiction under the principle recognized in Penhallow v. Doane's Adm'rs , 3 U.S. (3 Dall.) 54, 97, 1 L.Ed. 507 (1795), which permits admiralty courts to enforce judgments issued by their foreign counterparts. D'Amico Dry Ltd. v. Primera Mar. (Hellas) Ltd. , No. 09-cv-7840-JGK, 2011 WL 1239861, at *2–3 (S.D.N.Y. Mar. 28, 2011). According to the district court, Penhallow did not apply because the English judgment was neither rendered by an admiralty court nor based on a claim deemed maritime by English law. Id. at *3–4. After judgment, d'Amico moved for reconsideration, arguing the district court had jurisdiction under 28 U.S.C. § 1333 because the d'Amico-Primera FFA was a maritime contract under U.S. law. D'Amico Dry Ltd. v. Primera Mar. (Hellas) Ltd. , No. 09-cv-7840-JGK, 2011 WL 3273208, at *4 (S.D.N.Y. Aug. 1, 2011). The district court denied this motion, holding that a judgment enforcement action is separate from the underlying substantive action, and that "a suit to enforce a judgment rendered on a maritime claim is not itself maritime in nature." Id.
On appeal, this Court vacated the district court's judgment dismissing the case, holding that "under § 1333, United States courts have jurisdiction to enforce a judgment of a foreign non-admiralty court if the claim underlying that judgment would be deemed maritime under the standards of U.S. law." D'Amico Dry...
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ADMIRALTY LAW - ANOTHER WAY IN: SECOND CIRCUIT GRANTS ADMIRALTY JURISDICTION TO FORWARD FREIGHT AGREEMENTS - d'Amico Dry, Ltd. v. Primera Mar.
...the scope of admiralty jurisdiction to transactions that in any way related to ships or vessels some aspect of maritime commerce. Id. (3.) 886 F.3d 216 (2nd Cir. 2018) (holding due to nature of agreement and Plaintiffs status as shipping company, admiralty jurisdiction (4.) See d'Amico, 886......