Orbis Marine Enterprises v. TEC Marine Lines, Ltd.

• Decision Date: 09 November 1988
• Docket Number: No. 87 Civ. 60 (KC).,87 Civ. 60 (KC).
• Citation: 692 F. Supp. 280
• Parties: ORBIS MARINE ENTERPRISES, INC., Plaintiff, v. TEC MARINE LINES, LTD., TEC Lines, Ltd., Penco Kancov, and Thomas Cheatham, Defendants.
• Court: U.S. District Court — Southern District of New York

692 F. Supp. 280

ORBIS MARINE ENTERPRISES, INC., Plaintiff, v. TEC MARINE LINES, LTD., TEC Lines, Ltd., Penco Kancov, and Thomas Cheatham, Defendants.

No. 87 Civ. 60 (KC).

United States District Court, S.D. New York.

November 9, 1988.

Erwin J. Shustak, Bizar, D'Allessandro, Shustak & Martin, New York City, for plaintiff.

Alan C. Rassner, Rassner, Rassner & Olman, New York City, for defendants.

MEMORANDUM OPINION AND ORDER

CONBOY, District Judge.

The plaintiff entered a contract with the defendant TEC Lines, Ltd. to purchase marine shipping containers on that defendant's behalf, and also contracted to "arrange any required repairs" for the containers. See Exhibit A to Affidavit of Maria Fabros, executed July 2, 1987. The plaintiff complains that the defendants are liable for a debt of $35,922.31 arising from services rendered under the contract. The verified amended complaint alleges that jurisdiction lies under both 28 U.S.C. section 1332(a)(2), diversity of citizenship, and 28 U.S.C. section 1333, admiralty. See Verified Amended Complaint at para. 7.

On April 16, 1987, the plaintiff obtained from the late Honorable Edward Weinfeld, U.S.D.J., an order, pursuant to Rule B of the Supplemental Rules For Certain Admiralty and Maritime Claims of the Federal Rules of Civil Procedure hereinafter "Supplemental Rule B", attaching a debt owed to either or both of the defendants TEC Marine Lines, Ltd.¹ and TEC Lines, Ltd.²

The action is before the court on the motion of the defendants TEC Lines, Ltd. and Thomas E. Cheatham to dismiss the amended complaint for lack of admiralty subject matter jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1), or for defective service of process, pursuant to Fed.R.Civ.P. 12(b)(5).³ Judge Weinfeld referred the question of service of process to Magistrate Gershon. The court is in receipt of the Magistrate's Report and Recommendation hereinafter "Report", as well as the objections of the moving defendants to the Magistrate's Report. Further facts will be discussed only as necessary.

LEGAL ANALYSIS

A. Admiralty Jurisdiction

"The precise categorization of the contracts that warrant invocation of the federal courts' admiralty jurisdiction has proven particularly elusive." CTI-Container Leasing Corp. v. Oceanic Operations Corp., 682 F.2d 377, 379 (2d Cir. 1982). Neither the parties nor the court has located a case directly on point. The defendants argue that this court should analogize from the distinction in admiralty between contracts to lease, charter, or hire a vessel, which are held to be within admiralty jurisdiction, and contracts to purchase a vessel, which are held to be outside admiralty jurisdiction. See CTI-Container Leasing Corp., 682 F.2d at 380 n. 4. The defendants argue that contracts to purchase containers similarly should be held to be outside admiralty jurisdiction, even though contracts to lease containers are held to be within admiralty jurisdiction. See id. at 381 (contract to lease containers is maritime contract, within admiralty jurisdiction).

The court declines to make such an analogy. Containers are not the equivalent of vessels. Containers are deemed to be "necessaries" provided to vessels that may serve as the basis for the imposition of a maritime lien, pursuant to 46 U.S.C.App. section 971.⁴See Foss Launch & Tug Co. v. Char Ching Shipping U.S.A., Ltd., 808 F.2d 697, 700 (9th Cir.), cert. denied, ___ U.S. ___, 108 S.Ct. 96, 98 L.Ed.2d 57 (1987); Itel Containers Int'l Corp. v. Atlanttrafik Express Serv., Ltd., 668 F.Supp. 225, 228 (S.D.N.Y.1987); Transamerica ICS, Inc. v. M/V Panatlantic, 1984 A.M.C. 489, 490 (S.D.Fla.1983); Nautilus Leasing Servs. v. M/V Cosmos, 1983 A.M.C. 1483, 1483 (S.D.N.Y.1983). Contracts to furnish necessaries, such as supplies or accessories, are maritime in nature. See Gerard Constr., Inc. v. Motor Vessel Virginia, 480 F.Supp. 488, 490 (W.D.Pa.1979); Houston-New Orleans, Inc. v. Page Eng'g Co., 353 F.Supp. 890, 898-99 (E.D.La.1972). Goods and services are "furnished" whether they are leased, see, e.g., Itel Containers Int'l Corp., 668 F.Supp. at 226, 231, or purchased outright. See, e.g., The Everosa, 93 F.2d 732, 733, 735 (1st Cir.1937). Maritime contracts are within the purview of admiralty jurisdiction. See Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 890, 6 L.Ed.2d 56 (1961); CTI-Container Leasing Corp., 682 F.2d at 379; Gerard Constr., Inc., 480 F.Supp. at 490 (quoting Ohio Barge Line, Inc. v. Dravo Corp., 326 F.Supp. 863, 864 (W.D.Pa.1971)); 7A J. Moore & A. Palaez, Moore's Federal Practice para. .225 at 2701-02 (2d ed. 1988).

This does not conclude the matter. The settled rule has been that

the fact that an agreement may be to furnish services, supplies or facilities that are unquestionably necessary for a vessel to engage in maritime commerce or navigation has not alone been deemed sufficient to invoke the admiralty jurisdiction. In addition, it has generally been held that, to be within the admiralty jurisdiction, such an agreement must (at least until executed) relate to a particular, identifiable vessel.

7A J. Moore & A. Palaez, Moore's Federal Practice para. .2303 at 2771 (2d ed. 1988); see, e.g., Foss Launch & Tug Co., 808 F.2d at 703; Gerard Constr., Inc., 480 F.Supp. at 490; Page Eng'g Co., 353 F.Supp. at 898-99. The question is whether this contract is one such that the court should adhere to this general rule.

It is beyond dispute that "containerization has revolutionized maritime cargo-handling techniques." CTI-Container Corp., 682 F.2d at 380. "The advantage this equipment offers is its transferability. If the equipment had to be earmarked for a particular vessel and (presumably) used only by that vessel, that advantage would be lost." Itel Containers Int'l Corp., 668 F.Supp. at 230. The facts of this case illustrate this state of affairs. In the agreement between the plaintiff and TEC Lines, Ltd., the plaintiff "arranged to deliver the ocean freight containers from the point of storage to various ships and piers as required by TEC Lines, Ltd.." Affidavit of Maria Fabros, executed July 2, 1987, at para. 6 (emphasis added).⁵ Orbis assumed that the containers were destined "to be loaded on TEC's ships for the Caribbean." Id. Exhibit A.

Under these circumstances, the court concludes that it possesses admiralty jurisdiction⁶ over this action. Cf. Dampskibsselskabet Dannebrog v. Signal Oil & Gas Co., 310 U.S. 268, 270, 276-77, 281, 60 S.Ct. 937, 938, 941-42, 943, 84 L.Ed. 1197 (1940) (affirming Court of Appeals' affirmance of maritime lien against vessels where contract called for supplier to provide "the fuel oil requirements of any and all vessels owned, chartered, or operated" by purchaser); Equilease Corp. v. M/V Sampson, 793 F.2d 598, 600-01, 603 (5th Cir.) (en banc) (insurer of vessel entitled to maritime lien based on contract of insurance, despite absence of "actual delivery of something to the vessel"), cert. denied, 479 U.S. 984, 107 S.Ct. 570, 93 L.Ed.2d 575 (1986); Itel Containers Int'l Corp., 668 F.Supp. at 231 ("furnishing" in 46 U.S.C. § 971 "may support a lien on a fleet of vessels," rather than only on particular vessels); Transamerica ICS, Inc., 1984 A.M.C. at 490 ("for purposes of creating a valid maritime lien, it may not be essential, and indeed may not be desirable, that the container be ... earmarked for a particular vessel"). But see Foss Launch & Tug Co., 808 F.2d at 703 (cargo containers leased in bulk to time-charterer of group of vessels for unrestricted use on board the vessels are not furnished to any particular vessel of the group, so that maritime lien is not available). It is impractical, as well as uneconomical, to require that the containers be required by specific vessels, in order for admiralty jurisdiction to exist. This is especially true in these circumstances, since the plaintiff contracted to make deliveries to different ships at TEC Lines, Ltd.'s direction. The defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) is denied.

B. Service of Process

The moving defendants "accept the Magistrate's finding that proper service of process was made on them pursuant to Judge Weinfeld's Order of April 16, 1987 ..., but only with respect to the action based upon admiralty jurisdiction by reason of the attachment." Objections to Report and Recommendation of Nina Gershon, U.S. Magistrate, at 2. It appears, as will be seen, that there is some confusion as to the purpose of that order. Regarding the Magistrate's conclusion that TEC Lines, Ltd. was "served" in accordance with the April 16 order, the court accepts the Magistrate's factual findings, and concludes that TEC Lines, Ltd. received proper notice of the attachment.⁷

Regarding the sufficiency of service to confer personal jurisdiction under the grant of diversity jurisdiction, TEC Lines, Ltd. and Cheatham raise separate arguments. TEC Lines, Ltd. argues that service on Jerry Chester, President of TEC Marine Lines, Ltd., is not service on TEC Lines, Ltd. See Objections to Report and Recommendation at 3. Cheatham argues that service on a person of suitable age and discretion at his "former residence," followed by the mailing of copies of the summons and complaint to "that former residence" "is not adequate service of process." Id.

1. TEC Lines, Ltd.

The order of attachment signed by Judge Weinfeld issued against TEC Marine Lines, Ltd. and TEC Lines, Ltd., and not against Cheatham individually. See supra note 2. Thus, the action against TEC Marine Lines, Ltd. having been discontinued, see supra note 1, the liability of TEC Lines, Ltd. is limited to the value of the property attached. The plaintiff, though, has asserted that there is diversity of citizenship between itself and TEC Lines, Ltd. See Verified Amended Complaint at paras. 7-8. The question of personal jurisdiction under admiralty attachment, as opposed to general in personam jurisdiction under the grant of diversity jurisdiction, is not...