Sealord Marine v. American Bureau

• Decision Date: 13 September 2002
• Docket Number: No. 00 CIV. 8197 JGK.,00 CIV. 8197 JGK.
• Citation: 220 F.Supp.2d 260
• Parties: SEALORD MARINE CO., LTD., and Tide Line, Inc., on their own behalf and as trustees for any party whose interests may be concerned, Plaintiffs, v. AMERICAN BUREAU OF SHIPPING Defendant.
• Court: U.S. District Court — Southern District of New York

220 F.Supp.2d 260

SEALORD MARINE CO., LTD., and Tide Line, Inc., on their own behalf and as trustees for any party whose interests may be concerned, Plaintiffs, v. AMERICAN BUREAU OF SHIPPING Defendant.

No. 00 CIV. 8197 JGK.

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

September 13, 2002.

Thomas L. Tisdale, Tisdale & Lennon, LLC, New York City, for Sealord Marine Co., Ltd.

Robert C. Clyne, Hill Rivkins & Hayden LLP, New York City, for American Bureau of Shipping.

OPINION AND ORDER

KOELTL, District Judge.

This is an action to recover damages that the plaintiffs, Sealord Marine Co., Ltd. ("Sealord") and Tide Line, Inc. ("Tide Line") allegedly sustained in purchasing a vessel known as the "M/V Amethyst" due to the conduct of the defendant, the American Bureau of Shipping ("ABS"), in allegedly performing negligent inspections of the vessel and issuing improper certifications relating to the condition of the vessel. The action was brought in this Court based on diversity of citizenship jurisdiction but it is clear and the parties agree that the substantive claims are alleged maritime torts and the substantive law to be applied is federal admiralty law. See Kermarec v. Compagnie Generale Transatlantique, 358 U.S. 625, 628, 79 S.Ct 406, 3 L.Ed.2d 550 (1959); Pope & Talbot v. Hawn, 346 U.S. 406, 410-11, 74 S.Ct. 202, 98 L.Ed. 143 (1953); Capozziello v. Brasileiro, 443 F.2d 1155, 1157 (2d Cir. 1971).

The defendant moves pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment dismissing the plaintiffs' claims.

I.

The standard for granting summary judgment is well established. Summary judgment may not be granted unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Gallo v. Prudential Residential Servs. Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir. 1994). "The trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution." Gallo, 22 F.3d at 1224.

The moving party, the defendant in this case, bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter that "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The substantive law governing the case will determine those facts that are material and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining whether summary judgment is appropriate, the Court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)); see also Gallo, 22 F.3d at 1223.

If the moving party meet its burden, the burden shifts to the nonmoving parties, the plaintiffs in this case, to come forward with "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). With respect to the issues on which summary judgment is sought, if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving parties, summary judgment is improper. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir.1994).

Unless otherwise indicated, the following facts are either undisputed or are matter of public record. The plaintiff Sealord is a corporation organized and existing under the laws of Cyprus with its principal place of business in Cyprus. (Def.'s Rule 56.1 St. ¶ 1.) During all of the times relevant to this case, Sealord was managed by Tide Line, who acted as Sealord's agent in all of the transactions relevant to this case. (Def.'s Rule 56.1 St. ¶ 2; Pl.'s Rule 56.1 St. ¶¶ 1, 9-10.) Tide Line is a Liberian corporation with its principal place of business in Piraeus, Greece. (Def.'s Rule 56.1 St. ¶ 2; Tr. dated 8/29/02.)

The defendant, ABS, is a classification society. (Def.'s Rule 56.1 St. ¶ 3.) ABS is a not-for-profit organized and existing by special act of the New York State legislature with its headquarters and principal place of business in Houston, Texas (Def.'s Rule 56.1 St. ¶ 3.) Classification societies generally develop rules, guides, standards and other criteria for the design and construction of ships. When requested, a classification society reviews the design and surveys a ship before, during, and after construction to verify compliance with the relevant international conventions and applicable rules of the classification society. See generally Sundance Cruises Corp. v. The American Bureau of Shipping, 7 F.3d 1077, 1078 (2d Cir.1993); see also Def.'s Rule 56.1 St. ¶¶ 12-14.

The M/V Amethyst, a vessel that was under the flag of Cyprus, was originally owned by Amethyst Maritime Co. ("Amethyst"), a Cyprus corporation, and managed by Combine Marine, Inc. ("Combine"), a company with its principal place of business in Greece. (See Affirmation of Thomas L. Tisdale served October 29, 2001 ("Tisdale Aff.") ¶ 3.) In August 1999, while under this ownership, the defendant performed an annual survey of the vessel in Piraeus, Greece. (See ABS Survey Status Report dated December 2, 1999 ("Status Report"), at 1, attached as Ex. 5 to Tisdale Aff.) The plaintiffs allege that serious defects existed in the cargo holds at this time, and that the defendant would have identified these defects if it had conducted a proper survey and had properly followed its own ABS rules and guidelines. (See Tisdale Aff. ¶¶ 3-4.) The inspection concluded with no recommendations. See generally Status Report.

In early February 2000, the plaintiffs allege that they first became aware that the M/V Amethyst was for sale through their London broker, Frank Cordell. (See Tisdale Aff. ¶ 5.) The plaintiffs allege that they asked for an ABS Survey Status Report during these early negotiations, and that Tideline was provided with such a report from the defendant's Piraeus Office, where the Survey Status Report was reviewed. (Pl.'s Rule 56.1 St. ¶ 6; Tr. dated 8/29/0; Tisdale Aff. ¶ 5.) This Status Report indicated that the defendant had conducted the annual survey in Piraeus, Greece in August 1999, and that the defendant had conducted a subsequent Damage/Repair Survey in Lagos in October 1999. See Status Report at 4. The Report stated that "No open Substantial Corrosion information is available for this vessel," id. at 4, and identified some damages that were repaired but needed to be "further dealt with to the satisfaction of an attending surveyor not later than 30 JUN 2000." Id. at 3. The plaintiffs allege that the fact that the Report contained no finding of excessive corrosion was "an important factor in Plaintiffs' decision to further consider purchasing of this vessel." (Tisdale Aff. ¶ 5; Linas Dep. at 52-54; Daskalakis Dep. at 20-21.)

The plaintiffs were subsequently permitted to perform an independent inspection of the vessel, which occurred in Silvertown, England, on March 4 and 5, 2000. (Def.'s Rule 56.1 St. ¶ 9.) The plaintiffs claim that at the time this inspection was performed the vessel's cargo holds were loaded with cargo and bulldozers were in operation, so an inspection of the cargo holds was not possible. (Tisdale Aff. ¶ 6.) The plaintiffs' surveyor issued a report indicating that there was no apparent frame damage to the upper 2/3ds of the frames, but that he could not observe the lower parts; and that overall the vessel was "strong" but "needs `love'". Report dated March 5, 2000, at 2, 4, attached as Ex. 8 to Tisdale Aff.

On or about March 23, 2000, Amethyst entered into a Memorandum of Agreement (the "MOA") with Tide Line for the purchase of the M/V Amethyst by Tide Line or a company to be nominated by Tide Line in its discretion. (Def.'s Rule 56.1 St. ¶ 4; Memorandum of Agreement, attached as Ex. 9 to Tisdale Aff., at 1.) The Agreement states that "[t]he Buyers have accepted the vessel after superficial inspection at Silvertown on the 4th and 5th March, 2000 and this transaction is outright subject to the conditions of this agreement. The Buyers have waived their right to inspect the Vessel's records." Memorandum of Agreement ¶ 4. The Agreement also states that:

the vessel shall be delivered with present class free of recommendations. The Sellers shall notify the Classification Society of any matters coming to their knowledge prior to delivery which upon being reported to the Classification Society would lead to the withdrawal of the vessel's class or to the imposition of a recommendation relating to her class.... If the cost of repairs to rectify above recommendations is in excess of U.S. $5,000 ... the Sellers are to rectify such deficiencies and deliver the vessel free of Class recommendations in accordance with the requirements of this contract.

Id. ¶ 11 (original emphases omitted).

The Agreement contains an arbitration clause, which states that "[i]f any dispute should arise in connection with the interpretation and fulfillment of this contract, same shall be decided by arbitration in the city of London, Law of England to Apply." Id. ¶ 15 (original emphases omitted). The Agreement states that "[t]his contract shall be subject to the law of the country agreed as place of arbitration." Id.

After the MOA had been executed, two agents of the plaintiffs allegedly went on...