E.S. Binnings, Inc. v. M/V Saudi Riyadh

• Citation: 815 F.2d 660
• Decision Date: 29 April 1987
• Docket Number: No. 86-8502,86-8502
• Parties: 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.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 660

815 F.2d 660

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., 249 U.S. 119, 125, 39 S.Ct. 221, 223, 63 L.Ed. 510 (1918); accord, Peralta Shipping Corp. v. Smith & Johnson (Shipping) Corp., 739 F.2d 798, 801 (2d Cir.1984), cert. denied, 470 U.S. 1031, 105 S.Ct. 1405, 84 L.Ed.2d 791 (1985). The mere fact a contract has some reference to a maritime matter, however, is not sufficient to bring it within admiralty jurisdiction:

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, 739 F.2d at 802 (agency contract calling for husbanding of vessel is not within admiralty jurisdiction). Therefore, actions to recover commissions due under such agreements have been held to be outside the admiralty jurisdiction, e.g., Minturn v. Maynard, 58 U.S. (17 How.) 476, 477, 15 L.Ed. 235 (1855) (action by general agent or broker to recover accounts due for advances and commissions on disbursements did not involve maritime contract); Brown v. West Hartlepool Steam Navigation Co., 112 F. 1018, 1018 (5th Cir.1902) (action by agent or broker based on contract in charter party to pay commission for procurement of charter party not maritime contract); and such agreements have been held incapable of giving rise to a maritime lien. E.g., The J.C. Williams, 15 F. 558, 560 (S.D.N.Y.1883) (commissions due agent or ship's husband for procuring charter and making advances do not give rise to maritime lien); The Crystal Stream, 25 F. 575, 576 (S.D.N.Y.1885) (action asserting lien for wages due agent for freight solicitation is not within admiralty jurisdiction because services are not maritime and therefore do not give rise to a lien); The Humboldt, 86 F. 351, 352 (N.D.Wash.1898) (action in rem would not lie for breach of contract making person general passenger and freight agent because contract was not a maritime contract and therefore could not be basis of maritime lien); The Atlanta, 82 F.Supp. 218, 238 (S.D.Ga.1948) (no maritime lien for commissions for securing charter party).

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., 582 F.Supp. 1136, 1141 (D.Md.1984). The efficacy of this rule is the relatively clear line of demarcation that it provides for drawing the boundaries of admiralty contract jurisdiction:

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...