Schiffahartsgesellschaft Leonhardt & Co. v. A. BOTTACCHI

• Decision Date: 09 December 1982
• Docket Number: No. CV482-201.,CV482-201.
• Parties: SCHIFFAHARTSGESELLSCHAFT LEONHARDT & CO. (G.M.B.H. & CO.), Plaintiff, v. A. BOTTACCHI S.A. DE NAVEGACION, Defendant.
• Court: U.S. District Court — Southern District of Georgia

552 F. Supp. 771

SCHIFFAHARTSGESELLSCHAFT LEONHARDT & CO. (G.M.B.H. & CO.), Plaintiff, v. A. BOTTACCHI S.A. DE NAVEGACION, Defendant.

No. CV482-201.

United States District Court, S.D. Georgia, Savannah Division.

December 9, 1982.

Robert Glenn, Jr., Lamar C. Walter, Savannah, Ga., for plaintiff.

Lamar C. Walter (Chamlee, Dubus, Sipple & Walter), Savannah, Ga., for defendant.

ORDER

EDENFIELD, District Judge.

The Court has before it the defendant's motion pursuant to Supplemental Rule E(8), Fed.R.Civ.P., to dismiss the complaint and quash the process of maritime attachment and garnishment. The defendant contends that the Court lacks personal jurisdiction over it and that the issuance of process of maritime attachment and garnishment under Admiralty Rule B(1), Fed.R.Civ.P., violates its right to due process of law guaranteed by the Fifth Amendment to the United States Constitution.

Procedural Background

The plaintiff Schiffahartsgesellschaft Leonhardt & Co. (G.M.B.H. & Co.) (hereinafter referred to as "Leonhardt") filed its complaint in admiralty and petition to compel arbitration against defendant A. Bottacchi S.A. De Navegacion (hereinafter referred to as "Bottacchi") on May 24, 1982. The plaintiff alleged that the defendant is a foreign corporation organized and existing under the laws of Argentina and that no officer could be found within this district but that certain property belonging to the defendant, the vessel M/V Puntas Malvinas, was or would be within this district during the pendency of the action. The plaintiff's attorney submitted an affidavit signed by him in support of the assertion that the defendant could not be found within the Southern District of Georgia. The facts giving rise to the institution of this suit as alleged in the complaint are as follows:

The defendant time-chartered the plaintiff's vessel, the M/V Barbara Leonhart, by a New York Produce Exchange Charter Party dated March 16, 1982. On or about April 14, 1982, while operating under the charter party on a voyage between St. John, New Brunswick, Canada, and Buenos Aires, Argentina, the M/V Barbara Leonhart encountered bad weather during which she and her cargo were damaged, allegedly due to the defendant's negligence and breach of contract. Upon arrival in Buenos Aires, the plaintiff was required to post security in the amount of $450,000.00 to secure the claims of the cargo recipients for the cargo lost or damaged during the voyage. Contending that it is entitled to indemnity and/or contribution from defendant with respect to any liability which may be adjudged against it in favor of the cargo interests (together with costs, expenses, and attorney's fees, and damages for the injury to the vessel and the posting of security), the plaintiff sought the issuance of a summons with process of attachment and garnishment against the defendant's vessel, the M/V Puntas Malvinas. On May 25, 1982, the plaintiff amended its complaint after discovering that the defendant was not the owner of the M/V Puntas Malvinas, but the bareboat charterer, and prayed for issuance of process of attachment and garnishment against certain bunkers and stores owned by the defendant aboard the vessel M/V Puntas Malvinas, as well as against certain freights and subfreights due the defendant. The summons was issued by the court clerk against the vessel on May 24, 1982, and against the bunkers and freights on May 25, 1982. On May 26, the parties came before the Court and argued the constitutionality of Admiralty Rule B(1). The vessel was released as were the bunkers and freights after the defendant posted security pursuant to Rule E(5).

The defendant filed its motion to dismiss on June 4, asserting a lack of jurisdiction over the person of the defendant because the defendant is not the owner of the vessel attached and has not been personally served and arguing the unconstitutionality of Admiralty Rule B(1). The parties have submitted briefs and the Court again heard oral argument.

The Contention of the Parties

The initial attachment of the M/V Puntas Malvinas in this case demonstrates the fallibility of Rule B(1), according to the defendant's argument that Rule B(1) is unconstitutional because it does not provide adequate safeguards to protect against wrongful or mistaken deprivation of property. The defendant does not argue that the plaintiff did not follow the procedures set forth in Rule B. Moreover, the defendant cannot argue that as applied in its case Rule B violated its constitutional right to due process, since the defendant's agent received prior notice of the attachment and an opportunity for a prompt post-seizure hearing was afforded defendant. Bottacchi attacks the Rule on its face, contending that the issuance of the summons with process of attachment and garnishment by the court clerk upon the plaintiff's submission of a complaint and affidavit containing conclusory allegations, without provision for prior notice or a preseizure or prompt postseizure hearing, violates its right to procedural due process guaranteed by the Fifth Amendment of the United States Constitution.¹ The defendant's position, though not expressly articulated, relies on the application to Rule B(1) of the due process principles set forth in the Supreme Court's line of decisions in the area of state creditor's rights statutes, Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969); Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Mitchell v. W.T. Grant Co., 416 U.S. 600, 94 S.Ct. 1895, 40 L.Ed.2d 406 (1974); and North Georgia Finishing Co. v. Dichem, Inc., 419 U.S. 601, 95 S.Ct. 719, 42 L.Ed.2d 751 (1975).

The plaintiff ably presents the counterargument that the considerations of due process in the admiralty context are different from those in state attachment proceedings because of the unique character of commercial practices in admiralty. Thus, the plaintiff urges, the process due the defendant is not the same process due the debtors in the Sniadach line of cases. The plaintiff argues that Rule B(1), as supplemented by the Federal Rules, local rules, and the court's inherent equitable power in admiralty, ensures the defendant all the process to which it is due.

Court's Commentary

That the admiralty rules of maritime seizure are not beyond attack, and even invalidation, has been well established in recent years by the initiation of suits questioning their constitutionality in light of Sniadach and its progeny and Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). Though the case before the Court raises no challenge to Admiralty Rule C which governs actions in rem and does not broach the jurisdictional issue under Shaffer, some discussion of in rem actions and quasi in rem jurisdiction will be necessary.

Rules B and C "permit seizures pursuant to a warrant issued by the ex parte application of a party to the clerk of a federal district court without requiring that the owner of such property be given prior notice or an opportunity to be heard." Batiza & Partridge, The Constitutional Challenge to Maritime Seizures, 26 Loyola L.Rev. 203, 211 (1980). Though similar procedurally, the purposes of the two rules are quite different and any discussion of their constitutionality must take into account the critical distinctions. Rule B governs in personam actions instituted by attachment of the defendant's property if the defendant cannot be found within the district for personal service. Its salutary purpose is to permit suits in any district in which the defendant's property may be attached thereby obviating the need to follow the defendant to his residence. Though Rule B is, in theory, a device for obtaining personal jurisdiction over the defendant, in practice it is often used as a means of securing the plaintiff's claim. Maritime Seizures, supra, at 213.

Where the plaintiff has acquired a maritime lien in any of the numerous ways by which it may do so, an action in rem will lie and Rule C will provide the means for enforcing the lien by authorizing the arrest of the vessel. The viability of an action in rem to enforce a maritime lien depends intrinsically upon the court's acquisition of custody of the vessel pursuant to Rule C. Maritime Seizures, supra, at 212. This is so because a maritime lien, unlike a common law lien, is actually a property right in the vessel which arises at the moment of the event which creates the lien. Amstar Corporation v. S/S Alexandros T., 664 F.2d 904, 908-09 (4th Cir.1981); see generally, Gilmore & Black, The Law of Admiralty, §§ 9-1, 9-2, at 586-89. The presence of the maritime lien, as a substantive element of maritime law, distinguishes Rule C arrest from Rule B attachment. Compare Grand Bahama Petroleum Co., Ltd. v. Canadian Transportation Agencies, Ltd., 450 F.Supp. 447 (W.D.Wash.1978) with Kodiak Fishing Co. v. M/V Pacific Pride, 535 F.Supp. 915 (W.D.Wash.1982). The action lies against the vessel herself and Rule C arrest provides the means of satisfying the lien. Amstar Corp., supra, at 909. Thus, Rule C is not merely a procedural device to obtain jurisdiction over the owner; this characterization more accurately describes the theoretical purpose of Rule B.

As I have already noted, though their purposes are markedly different, the procedures provided in Rules B and C are very similar: Upon the filing of a verified complaint stating "the circumstances from which the claim arises with such particularity that the defendant or claimant will be able ... to commence an investigation of the facts and to frame a responsive answer," Admiralty Rule E(2)(a), the clerk may forthwith issue a summons and process of attachment and garnishment or a warrant for the arrest of the vessel. Under Rule B, an affidavit signed by the plaintiff or his attorney must accompany the complaint stating that "to the affiant's knowledge or to the best of his information and belief, the...