Peralta Shipping Corp. v. Smith & Johnson (Shipping) Corp.

• Decision Date: 11 July 1984
• Docket Number: D,No. 951,951
• Court: U.S. Court of Appeals — Second Circuit
• Parties: PERALTA SHIPPING CORPORATION, Plaintiff-Appellant, v. SMITH & JOHNSON (SHIPPING) CORP., Defendant-Appellee. ocket 83-7922.

Page 798

739 F.2d 798

1985 A.M.C. 989

PERALTA SHIPPING CORPORATION, Plaintiff-Appellant, v. SMITH & JOHNSON (SHIPPING) CORP., Defendant-Appellee.

No. 951, Docket 83-7922.

United States Court of Appeals Second Circuit.

Argued March 22, 1984.

Decided July 11, 1984.

Michael G. Chalos, New York City (Peter Skoufalos, Halley & Chalos, New York City, on the brief), for plaintiff-appellant.

Thomas D. Toy, New York City (Hill, Rivkins, Carey, Loesberg, O'Brien & Mulroy, New York City, on the brief), for defendant-appellee.

Before LUMBARD, NEWMAN and PRATT, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

Navigating the jurisdictional channels of the federal courts' admiralty jurisdiction sometimes presents a choice between observance of ancient landmarks and heeding the siren call of the commentators to venture out into uncharted waters. The choice is put to us squarely by this appeal in which we are asked to abandon the long-standing rule that suits upon general agency contracts are not within the jurisdiction of the silver oar. The request is made by plaintiff-appellant Peralta Shipping Corp. ("Peralta") in its appeal from a judgment of the District Court for the Southern District of New York (Vincent L. Broderick, Judge), dismissing for lack of subject matter jurisdiction Peralta's complaint against defendant-appellant Smith & Johnson (Shipping) Corp. ("S & J"). Though we find considerable merit in the arguments favoring classification of general agency and sub-agency agreements as "maritime contracts" cognizable in admiralty, we feel bound by controlling precedent of the Supreme Court and this Court to affirm the judgment of the District Court.

Facts

Peralta, a New York corporation, is the general agent in the United States, Mexico, and the Panama Canal Zone for the Bangladesh Shipping Corporation (also known as Bangladesh National Lines) ("Bangladesh"), an operator of several ocean-going cargo vessels. On July 5, 1979, Peralta and S & J, also a New York corporation, executed an agreement entitled "Agency Agreement," whereby Peralta appointed S & J as "Gulf agents" responsible for arranging services for all Bangladesh vessels calling at ports between Brownsville, Texas, and Tampa, Florida.

S & J's principal obligations under the "Agency Agreement" were as follows:

S & J shall act as ships' husbanding agents for [Bangladesh's] vessels at the [Gulf] ports and shall perform the services normally incident thereto, including arranging for entrance and clearance of vessels at the Custom House, execution of all Custom House documents incidental thereto, arranging for fuel, water, provisions, emergency repairs, port charges and other similar matters, and for stevedoring, storage and other cargo handling; arranging for tugs ...; assisting in the procuring/repatriating necessary ship's personnel as requested by the Master; hospitalization of officers and other crew members; and shall issue bills of lading to shippers and passenger tickets to passengers as Agents as required; and shall use its best efforts in soliciting and securing cargoes in developing traffic and passengers for [Bangladesh's] vessels.

[S & J shall appoint sub-agents] in all ports where S & J does not have its own offices ....

S & J will arrange for all services necessary for the prompt turnaround of vessels, including all matters of a ship husbanding nature, and will have qualified superintendents in attendance as necessary so as to at all times insure adequate supervision and the efficient working of the vessel, the cost of which is to be borne by S & J.

At a deposition Robert Johnson, President of S & J, summarized S & J's responsibilities more broadly--"to handle [Bangladesh's] vessels at [the Gulf] ports, to shift cargo, enter and clear the vessels, ¹ supervise the loading of the vessels and account for the disbursements and expenditures and to collect and remit freights."

Two years later, on September 10, 1981, Peralta commenced the present action. Although not specifically grounding jurisdiction on 28 U.S.C. Sec. 1333 (1982), which grants the district courts jurisdiction over suits in admiralty, Peralta alleged the maritime nature of its suit: "This is an admiralty and maritime claim within the meaning of F.R.Civ.P. 9(h)." Peralta claimed that S & J had breached the "Agency Agreement" and sought an accounting and recovery of monies wrongfully retained by S & J--(i) freight collected on Bangladesh vessels in S & J's agency, and (ii) monies advanced by Peralta to pay Bangladesh's vessels' suppliers and vendors but improperly diverted by S & J. In its answer S & J contested admiralty jurisdiction, but the issue was not presented for a ruling by a motion to dismiss.

Peralta subsequently moved for summary judgment, alleging as undisputed S & J's debt in the amount of $112,831.27. S & J did not challenge the amount of the sum claimed, but maintained that it was entitled to summary judgment on the ground that its sister corporation, Smith & Johnson (Gulf), Inc., a bankrupt Louisiana corporation, had assumed, with Peralta's consent, sole responsibility for S & J's obligations under the Agency Agreement.

Judge Broderick initially granted Peralta's motion for summary judgment and found S & J liable in the amount of $112,831.27. The District Judge rejected S & J's contention that it had been relieved of its contractual obligations. Prior to the entry of final judgment, however, the District Court, on its own motion, questioned its jurisdiction over this action. After the parties briefed the issue, Judge Broderick concluded that the sub-agency contract under which S & J acted as local port agent for Bangladesh's vessels was not a maritime contract within the Court's admiralty jurisdiction. He relied upon our opinion in CTI-Container Leasing Corp. v. Oceanic Operators Corp., 682 F.2d 377, 380 n. 4 (2d Cir.1982), and Judge Weinfeld's opinion in P.D. Marchessini & Co. v. Pacific Marine Corp., 227 F.Supp. 17 (S.D.N.Y.1964). Since S & J did not advance any other basis for federal jurisdiction, Judge Broderick dismissed the complaint pursuant to Fed.R.Civ.P. 12(h)(3). This appeal followed.

In support of the District Court's decision, S & J invokes the authority of venerable precedents establishing the general rule that general agency contracts are not cognizable in admiralty. Peralta invites us to distinguish the cited authorities on the ground that S & J's contractual obligations went beyond those of a general agency agreement or, in the alternative, to expand the jurisdictional boundaries to incorporate general agency contracts such as the one at issue.

Discussion

As the Supreme Court has recognized, "[t]he boundaries of admiralty jurisdiction over contracts--as opposed to torts or crimes--being conceptual rather than spatial, have always been difficult to draw." Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 890, 6 L.Ed.2d 56 (1961). Neither the Constitution nor applicable statutes lay down criteria for drawing the boundary between maritime and non-maritime jurisdiction. The framers of the Constitution did not undertake to mark the limits of admiralty jurisdiction; Article 3, Section 2 of the Constitution simply extends the judicial power of the United States "to all Cases of admiralty and maritime jurisdiction." And although Congress has expressly included certain transactions or events within admiralty, ² it has not sought to outline a general demarcation between maritime and non-maritime concerns. ³

In the absence of express guidance, courts and commentators have struggled to determine how to vindicate the purpose underlying the grant of jurisdiction--protecting the national interest in uniform judicial supervision of the concerns of maritime shipping. With respect to maritime contracts, courts' and commentators' competing jurisdictional "definitions" share a common focus--the relationship between the subject matter of the contract and the concerns of the maritime industry. Under Justice Story's formulation admiralty jurisdiction "extends over all contracts, (wheresoever they may be made or executed, or whatsoever may be the form of the stipulations,) which relate to the navigation, business or commerce of the sea." De Lovio v. Boit, 2 Gall. 398, 7 F.Cas. 425, 444 (C.C.D.Mass.1815) (No. 3,776). In North Pacific S.S. Co. v. Hall Brothers Marine Ry. & S. Co., 249 U.S. 119, 125, 39 S.Ct. 221, 222, 63 L.Ed. 510 (1918), the Supreme Court described the inquiry as follows: "in matters of contract it depends upon the subject-matter, the nature and character of the contract ... the true criterion being the nature of the contract, as to whether it have reference to maritime service or maritime transactions." Kossick v. United Fruit Co., supra, 365 U.S. at 736, 81 S.Ct. at 890, adopted Benedict's approach: " 'The only question is whether the transaction related to ships and vessels, masters and mariners as agents of commerce ...' " (quoting 1 E. Benedict, The Law of Admiralty 131 (6th ed. 1940)). Other commentators define a maritime contract as one "for the furnishing of services, suppliers or facilities to vessels ... in maritime commerce or navigation," 7A J. Moore, Moore's Federal Practice p .230 (2d ed. 1983), or "principally connected with maritime transportation," Gilmore & Black, The Law of Admiralty 31 (2d ed. 1975).

These broad guiding principles have proven difficult to apply. While the resulting conception of maritime jurisdiction "has been one of fairly complete coverage of the primary operational and service concerns of the shipping industry," some "anomalous exceptions" abound. See Gilmore & Black, The Law of Admiralty, supra, at 22. The lack of a clear line is not surprising. Obviously, not all contracts with any maritime connection warrant invocation of admiralty jurisdiction. Application of the broad verbal formulations cited above requires some limiting recognition "that the actual concerns of the shipping industry...